Bitong vs.

Court of Appeals (Fifth Division), 292 SCRA 503 , July 13, 1998 Case Title : NORA A. BITONG, petitioner, vs. COURT OF APPEALS (FIFTH DIVISION), EUGENIA D. APOSTOL, JOSE A. APOSTOL, MR. & MS. PUBLISHING CO., LETTY J. MAGSANOC, AND ADORACION G. NUYDA, respondents., NORA A. BITONG, petitioner, vs. COURT OF APPEALS (FIFTH DIVISION) and EDGARDO B. ESPIRITU, respondents. Case Nature : PETITIONS for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions| Corporation Law| Pleadings and Practice| Evidence| Admissions| Words and Phrases| Interlocutory Orders| Stock Certificates| Stock and Transfer Books| Parol Evidence| Trusts| Dividends| Actions| Derivative Suits| Syllabi: 1. Actions; Pleadings and Practice; Evidence; Admissions; A party whose pleading is admitted as an admission against interest is entitled to overcome by evidence the apparent inconsistency, and it is competent for the party against whom the pleading is offered to show that the statements were inadvertently made or were made under a mistake of fact.+ 2. Same; Same; Same; A stockholders suit cannot prosper without first complying with the legal requisites for its institution, the most important being the bona fide ownership by a stockholder of a stock in his own right at the time of the transaction complained of which invests him with standing to institute a derivative action for the benefit of the corporation.+ 3. Same; Same; Same; The stockholders right to institute a derivative suit is not based on any express provision of the Corporation Code but is impliedly recognized when the law makes corporate directors or officers liable for damages suffered by the corporation and its stockholders for violation of their fiduciary duties.+ 4. Same; Actions; Derivative Suits; The power to sue and be sued in any court by a corporation even as a stockholder is lodged in the board of directors that exercises its corporate powers and not in the president or officer thereof.+ 5. Same; Same; Dividends; When a dividend is declared, it belongs to the person who is the substantial and beneficial owner of the stock at the time regardless of when the distribution profit was earned.+ 6. Same; Same; Considering that the requirements provided under Sec. 63 of the Corporation Code should be mandatorily complied with, the rule on presumption of regularity cannot apply.+ 7. Same; Same; Requirements for a Valid Transfer of Stocks.+ 8. Same; Same; Trusts; It is a settled rule that the trustee should endorse the stock certificate to validate the cancellation of her share and to have the transfer recorded in the books of the corporation.+ 9. Same; Same; Same; When a Certificate of Stock was admittedly signed and issued only on 17 March 1989 and not on 25 July 1983, the certificate has no evidentiary value for the purpose of proving that a stockholder was such since 1983 up to 1989.+ 10. Same; Same; Same; A formal certificate of stock could not be considered issued in contemplation of law unless signed by the president or vice-president and countersigned by the secretary or assistant secretary.+ 11. Same; Same; Same; Stock issued without authority and in violation of law is void and confers no rights on the person to whom it is issued and subjects him to no liabilities.+ 12. Same; Same; Same; Same; Parol Evidence; The books and records of a corporation are not conclusive even against the corporation but are prima facie evidence only+

13. Same; Same; Stock and Transfer Books; Evidence; Books and records of a corporation which include even the stock and transfer book are generally admissible in evidence in favor of or against the corporation and its members to prove the corporate acts, its financial status and other matters including ones status as a stockholder.+ 14. Corporation Law; Stock Certificates; A mere typewritten statement advising a stockholder of the extent of his ownership in a corporation without qualification and/or authentication cannot be considered as a formal certificate of stock.+ 15. Same; Same; Same; Words and Phrases; Interlocutory Orders; An interlocutory order refers to something between the commencement and end of the suit which decides some point or matter but it is not the final decision of the whole controversy.+ 16. Same; Same; Same; Same; Where part of a statement of a party is used against him as an admission, the court should weigh any other portion connected with the statement, which tends to neutralize the portion which is against interest+ 17. Same; Same; Same; Same; Where the statements of a party were qualified with phrases such as, insof ar as they are limited, qualified and/or expanded by, the truth be ing as stated in the Affirmative Allegations/Defenses of this Answer they cannot be considered definite and certain enough and cannot be construed as judicial admissions.+

Bitong vs. CA [292 SCRA 503 (July 13 1998)] Ownership of Corporate Shares/ Stock Certificates: Valid Issuance Facts: Bitong was the treasurer and member of the BoD of Mr. & Mrs. Corporation. She filed a complaint with the SEC to hold respondent spouses Apostol liable for fraud, misrepresentation, disloyalty, evident bad faith, conflict of interest and mismanagement in directing the affairs of the corporation to the prejudice of the stockholders. She alleges that certain transactions entered into by the corporation were not supported by any stockholders resolution. The complaint sought to enjoin Apostol from further acting as president-director of the corporation and from disbursing any money or funds. Apostol contends that Bitong was merely a holder-in-trust of the JAKA shares of the corporation, hence, not entitled to the relief she prays for. SEC Hearing Panel issued a writ enjoining Apostol. After hearing the evidence, SEC Hearing Panel dissolved the writ and dismissed the complaint filed by Bitong. Bitong appealed to the SEC en banc. The latter reversed SEC Hearing Panel decision. Apostol filed petition for review with the CA. CA reversed SEC en banc ruling holding that Bitong was not the owner of any share of stock in the corporation and therefore, not a real party in interest to prosecute the complaint. Hence, this petition with the SC. Issue: Whether or not Bitong was the real party in interest. Held: Based on the evidence presented, it could be gleaned that Bitong was not a bona fide stockholder of the corporation. Several corporate documents disclose that the true party in interest was JAKA. Although her buying of the shares were recorded in the Stock and Transfer Book of the corporation, and as provided by Sec. 63 of the Corp Code that no transfer shall be valid except as between the parties until the transfer is recorded in the books of the corporation, and upon its recording the corporation is bound by it and is estopped to deny the fact of transfer of said

shares, this provision is not conclusive even against the corporation but are prima facie evidence only. Parol evidence may be admitted to supply the omissions in the records, explain ambiguities, or show what transpired where no records were kept, or in some cases where such records were contradicted. Besides, the provision envisions a formal certificate of stock which can be issued only upon compliance with certain requisites: (1) certificates must be signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation, (2) delivery of the certificate; (3) the par value, as to par value shares, or the full subscription as to no par value shares, must be first fully paid; (4) the original certificate must be surrendered where the person requesting the issuance of a certificate is a transferee from a stockholder. These considerations are founded on the basic principle that stock issued without authority and in violation of the law is void and confers no rights on the person to whom it is issued and subjects him to no liabilities. Where there is an inherent lack of power in the corporation to issue the stock, neither the corporation nor the person to whom the stock is issued is estopped to question its validity since an estoppel cannot operate to create stock which under the law cannot have existence.

Rural Bank of Lipa City, Inc. vs. Court of Appeals, 366 SCRA 188 , September 28, 2001 Case Title : THE RURAL BANK OF LIPA CITY, INC., THE OFFICERS AND DIRECTORS, BERNARDO BAUTISTA, JAIME CUSTODIO, OCTAVIO KATIGBAK, FRANCISCO CUSTODIO, and JUANITA BAUTISTA OF THE RURAL BANK OF LIPA CITY, INC., petitioners, vs. HONORABLE COURT OF APPEALS, HONORABLE COMMISSION EN BANC, SECURITIES AND EXCHANGE COMMISSION, HONORABLE ENRIQUE L. FLORES, JR., in his capacity as Hearing Officer, REYNALDO VILLANUEVA, SR., AVELINA M. VILLANUEVA, CATALINO VILLANUEVA, ANDRES GONZALES, AURORA LACERNA, CELSO LAYGO, EDGARDO REYES, ALEJANDRA TONOGAN and ELENA USI, respondents. Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Corporation Law| | Syllabi: 1. Corporation Law; The rule is that the delivery of the stock certificate duly endorsed by the owner is the operative act of transfer of shares from the lawful owner to the transferee.+ 2. Corporation Law; Requirements to Have a Valid Transfer of Stocks.We have uniformly held that for a valid transfer of stocks, there must be strict compliance with the mode of transfer prescribed by law. The requirements are: (a) There must be delivery of the stock certificate; (b) The certificate must be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and (c) To be valid against third parties, the transfer must be recorded in the books of the corporation.

Rural Bank of Lipa City vs CA Case Digest

The Rural Bank of Lipa City Inc., etc. vs. Court of Appeals [GR 124535, 28 September 2001] Facts: Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of Lipa City, executed a Deed of Assignment, wherein he assigned his shares, as well as those of 8 other shareholders under his control with a total of 10,467 shares, in favor of the stockholders of the Bank represented by its directors Bernardo Bautista, Jaime Custodio and Octavio Katigbak. Sometime thereafter, Reynaldo Villanueva, Sr. and his wife, Avelina, executed an Agreement wherein they acknowledged their indebtedness to the Bank in the amount of P4,000,000.00, and stipulated that said debt will be paid out of the proceeds of the sale of their real property described in the Agreement. At a meeting of the Board of Directors of the Bank on 15 November 1993, the Villanueva spouses assured the Board that their debt would be paid on or before December 31 of that same year; otherwise, the Bank would be entitled to liquidate their shareholdings, including those under their control. In such an event, should the proceeds of the sale of said shares fail to satisfy in full the obligation, the unpaid balance shall be secured by other collateral sufficient therefor. When the Villanueva spouses failed to settle their obligation to the Bank on the due date, the Board sent them a letter demanding: (1) the surrender of all the stock certificates issued to them; and (2) the delivery of sufficient collateral to secure the balance of their debt amounting to P3,346,898.54.

The Villanuevas ignored the bank's demands, whereupon their shares of stock were converted into Treasury Stocks. Later, the Villanuevas, through their counsel, questioned the legality of the conversion of their shares. On 15 January 1994, the stockholders of the Bank met to elect the new directors and set of officers for the year 1994. The Villanuevas were not notified of said meeting. In a letter dated 19 January 1994, Atty. Amado Ignacio, counsel for the Villanueva spouses, questioned the legality of the said stockholders' meeting and the validity of all the proceedings therein. In reply, the new set of officers of the Bank informed Atty. Ignacio that the Villanuevas were no longer entitled to notice of the said meeting since they had relinquished their rights as stockholders in favor of the Bank. Consequently, the Villanueva spouses filed with the Securities and Exchange Commission (SEC), a petition for annulment of the stockholders' meeting and election of directors and officers on 15 January 1994, with damages and prayer for preliminary injunction (SEC Case 02-94-4683_. Joining them as co-petitioners were Catalino Villanueva, Andres Gonzales, Aurora Lacerna, Celso Laygo, Edgardo Reyes, Alejandro Tonogan, and Elena Usi. Named respondents were the newly-elected officers and directors of the Rural Bank, namely: Bernardo Bautista, Jaime Custodio, Octavio Katigbak, Francisco Custodio and Juanita Bautista. On 6 April 1994, the Villanuevas' application for the issuance of a writ of preliminary injunction was denied by the SEC Hearing Officer on the ground of lack of sufficient basis for the issuance thereof. However, a motion for reconsideration was granted on 16 December 1994, upon finding that since the Villanuevas' have not disposed of their shares, whether voluntarily or involuntarily, they were still stockholders entitled to notice of the annual stockholders' meeting was sustained by the SEC. Accordingly, a writ of preliminary injunction was issued enjoining Bautista, et. al. from acting as directors and officers of the bank. Thereafter, Bautista, et al. filed an urgent motion to quash the writ of preliminary injunction, challenging the propriety of the said writ considering that they had not yet received a copy of the order granting the application for the writ of preliminary injunction. With the impending 1995 annual stockholders' meeting only 9 days away, the Villanuevas filed an Omnibus Motion praying that the said meeting and election of officers scheduled on 14 January 1995 be suspended or held in abeyance, and that the 1993 Board of Directors be allowed, in the meantime, to act as such. 1 day before the scheduled stockholders meeting, the SEC Hearing Officer granted the Omnibus Motion by issuing a temporary restraining order preventing Bautista, et al. from holding the stockholders meeting and electing the board of directors and officers of the Bank. A petition for Certiorari and Annulment with Damages was filed by the Rural Bank, its directors and officers before the SEC en banc. On 7 June 1995, the SEC en banc denied the petition for certiorari. A subsequent motion for reconsideration was likewise denied by the SEC en banc in a Resolution dated 29 September 1995. A petition for review was filed before the Court of Appeals (CA-GR SP 38861), assailing the Order dated 7 June 1995 and the Resolution dated 29 September 1995 of the SEC en banc in SEC EB 440. The appellate court upheld the ruling of the SEC. Bautista, et al.'s motion for reconsideration was likewise denied by the Court of Appeals in an Order dated 29 March 1996. The bank, Bautista, et al. filed the instant petition for review.

Issue: Whether there was valid transfer of the shares to the Bank. Held: For a valid transfer of stocks, there must be strict compliance with the mode of transfer prescribed by law. The requirements are: (a) There must be delivery of the stock certificate: (b) The certificate must be endorsed by the owner or his attorney-infact or other persons legally authorized to make the transfer; and (c) To be valid against third parties, the transfer must be recorded in the books of the corporation. As it is, compliance with any of these requisites has not been clearly and sufficiently shown. Still, while the assignment may be valid and binding on the bank, et al. and the Villanuevas, it does not necessarily make the transfer effective. Consequently, the bank et al., as mere assignees, cannot enjoy the status of a stockholder, cannot vote nor be voted for, and will not be entitled to dividends, insofar as the assigned shares are concerned. Parenthetically, the Villanuevas cannot, as yet, be deprived of their rights as stockholders, until and unless the issue of ownership and transfer of the shares in question is resolved with finality.

Chua Guan vs. Samahang Magsasaka, Inc., 62 Phil. 472 , November 02, 1935 Case Title : GONZALO CHUA GUAN, plaintiff and appellant, vs. SAMAHANG MAGSASAKA, INC., and SIMPLICIO OCAMPO, ADRIANO G. SOTTO, and EMILIO VERGARA, as president, secretary and treasurer respectively of the same, defendants and appellees. Case Nature : APPEAL from a judgment of the Court of First Instance of Nueva Ecija. Platon, J. Syllabi Class : CORPORATIONS| ID| ID| Syllabi: 1. CORPORATIONS; MORTGAGE OF SHARES OF STOCK.The registration of the chattel mortgage in the office of the corporation was not necessary and had no legal effect. (Monserrat vs. Ceron, 58 Phil., 469.) The long mooted question as to whether or not shares of a corporation could be hypothecated by placing a chattel mortgage on the certificate representing such shares we now regard as settled by the case above cited of Monserrat vs. Ceron. 2. CORPORATIONS; ID; SITUS OF SHARES.It is a common but not accurate generalization that the situs of shares of stock is at the domicile of the owner. The term situs is not one of fixed or invariable meaning or usage. The situs of shares of stock for some purposes may be at the domicile of the owner and for others at the domicile of the corporation; and even elsewhere. (Cf. Vidal vs. South American Securities Co., 276 Fed., 855; Black Eagle Min. Co. vs. Conroy, 94 Okla., 199; 221 Pac., 425; Norrie vs. Kansas City Southern Ry. Co., 7 Fed. [2d], 158.) 3. ID; ID; ID; DOMICILE.+ 4. ID; ID; ID; ACT No. 1508, SECTION 4, CONSTRUED.+ 5. ID; ID; ASSIGNMENT AND DELIVERY OF CERTIFICATE.The only safe way to accomplish the hypothecation of shares of stock of a Philippine corporation is for the creditor to insist on the assignment and delivery of the certificate and to obtain the transfer of the legal title to him on the books of the corporation by the cancellation of the certificate and the issuance of a new one to him. 6. ID; ID; ACT No. 1459, SECTION 35, CONSTRUED.Section 35 of the Corporation Law (Act No. 1459) enacts that shares of stock "may be transferred by delivery of the certificate endorsed by the owner or his attorney in fact or other person legally authorized to make the transfer." The use of the verb "may" does not exclude the possibility that a transfer may be made in a different manner, thus leaving the creditor in an insecure position even though he has the certificate in his possession. The shares still standing in the name of the debtor on the books of the corporation will be liable to seizure by attachment or levy on execution at the instance of other creditors. (Cf. Uy Piaoco vs. McMicking, 10 Phil., 286, and Uson vs. Diosomito, 61 Phil., 535.) This unsatisfactory state of our law is well known to the bench and bar. (Cf. Fisher, The Philippine Law of Stock Corporations, pages 163-168.) Case Digest on CHUA GAN V. SAMAHANG MAGSASAKA, INC. 62 PHIL 473 (1935) Facts: A certain Co Toco was the owner of 5,894 shares of Samahang Magsasaka, Inc. which he mortgaged to Chua Chiu to guarantee the payment of a P20,000.00 debt. The corresponding certificates were delivered to Chua Chiu and was duly registered in the office of the register of

deeds of Manila and in the office of the said corporation. About five months after, Chua Chui assigned all his rights and interest in said mortgage to the plaintiff, Chua Gan which was also duly recorded. Co Toco defaulted. The plaintiff foreclosed on the mortgage. In the public auction he won as the highest bidder. However, upon presenting the certificates to the corporation for registration, the officers refused because they and the plaintiff could not agree on the noting of nine other attachments that had been issued, served and noted on the books of the corporation against the shares of Co Toco. Issue: Whether or not the said mortgage takes priority over the already noted writs of attachment. Decision: The Supreme Court ruled that the attaching creditors are entitled to priority over the defectively registered mortgage of the appellant. The court argues that the registration in the register of deeds must be done both at the place where the owner is domiciled and at the place where the principal office of the corporation is located. The purpose of this is to give sufficient constructive of any claim or encumbrance over the recorded shares to third persons. Furthermore, any share still standing in the name of the debtor on the books of the corporation will be liable to seizure by attachment or levy on execution at the instance of other creditors. Thus, the game here is to have the highest or most preferred priority over any pledged or mortgaged shares. Comment: The pledge of stocks is better than a chattel mortgage since the former requires the surrender of the object of pledge to the pledgee. NON-TRANSFERABILITY AND TERMINATION OF MEMBERSHIP IN NON-STOCK CORPORATION Membership in a non-stock corporation is considered personal to the member and he cannot transfer his rights as such, unless the articles of incorporation or by-laws otherwise provide. The pertinent provisions are: 90. Non-Transferability of membership. Membership in a non-stock corporation, and all rights arising therefrom, are personal and non-transferable, unless the articles of incorporation or the by-laws otherwise provide. 91. Termination of Membership. Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the by-laws. Termination of membership shall have the effect of extinguishing all rights of a member in the corporation or in its property, unless otherwise provided in the articles of incorporation or the by-laws.

Datu Tagoranao Benito vs. Securities & Exchange Commission, 123 SCRA 722 , July 25, 1983 Case Title : DATU TAGORANAO BENITO, petitioner, vs. SECURITIES AND EXCHANGE COMMISSION and JAMIATUL PHILIPPINE-AL ISLAMIA, INC., respondents. Case Nature : PETITION to review the decision of the Securities and Exchange Commission. Syllabi Class : Corporation Law| Administrative Law| Division: FIRST DIVISION FACTS:

February 6, 1959: Articles of Incorporation (AIC) of Jamiatul Philippine-Al Islamia, Inc. (Jamiatul) (originally Kamilol Islam Institute, Inc.) were filed with the SEC December 14, 1962: approved AIC The corporation had an authorized capital stock of P200K divided into 20K shares at a par value of P10 each. Of the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for Datu Tagoranao Benito subscribed to 460 shares worth P4,600 October 28, 1975: filed a certificate of increase of its capital stock from P200K to P1M November 25, 1975: stockholders meeting was held were P191,560.00 worth of shares were represented o P110,980 worth of shares were subsequently issued by the corporation from the unissued portion of the authorized capital stock of P200,000 Of the increased capital stock of P1M0, P160K worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto. November 18, 1976: Datu Tagoranao filed with SEC a petition alleging that the additional issue (worth P110,980) was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital stock was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda SEC: o issuance by the corporation of its unissued shares was validly made and was not subject to the pre-emptive rights of stockholders o directed Jamiatul to allow petitioner to subscribe thereto, at par value, proportionate to his present shareholdings, adding thereto the 2,540 shares transferred to him by Mr. Domocao Alonto and Mrs. Moki-in Alonto

ISSUES: 1. W/N the issuance of the P110,980 of authorized capital stock of P200,000 is in violation of pre-emptive right - NO 2. W/N the issuance of the increase in the authorized capital stock is in violation of preemptive right HELD: Dismissed for lack of merit 1. NO

GR: pre-emptive right is recognized only with respect to new issue of shares, and not with respect to additional issues of originally authorized shares o Theory: when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares When the shares left unsubscribed are later re-offered, he cannot therefore claim a dilution of interest.

2. NO

stockholders' meeting was held which included the increase of its capital stock from P200,000.00 to P1,000,000.00 o he was not notified of said meeting and that he never attended the same as he was out of the country at the time administrative bodies will not be interfered with by the courts in the absence of grave abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by substantial evidence

Nestl Philippines, Inc. vs. Court of Appeals, 203 SCRA 504 , November 13, 1991 Case Title : NESTL PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS and SECURITIES AND EXCHANGE COMMISSION, respondents. Case Nature : PETITION for review on certiorari from the decision of the Court of Appeals. Syllabi Class : Statutory Construction| Revised Securities Act| | Syllabi: 1. Statutory Construction; Interpretation given by administrative agency entitled to great respect.+ 2. Revised Securities Act; Issuance of previously authorized but unissued capital stock to existing stockholders; Registration requirement; Exempt transactions.Consideration of the underlying statutory purpose of Section 6(a) (4) compels us to sustain the view taken by the SEC and the Court of Appeals. The reading by the SEC of the scope of application of Section 6(a) (4) permits greater opportunity for the SEC to implement the statutory objective of protecting the investing public by requiring proposed issuers of capital stock to inform such public of the true financial conditions and prospects of the corporation. By limiting the class of exempt transactions contemplated by the last clause of Section 6(a) (4) to issuances of stock done in the course of and as part of the process of increasing the authorized capital stock of a corporation, the SEC is enabled to examine issuances by a corporation of previously authorized but theretofore unissued capital stock, on a case-to-case basis, under Section 6(b); and thereunder, to grant or withhold exemption from the normal registration requirements depending upon the perceived level of need for protection by the investing public in particular cases. 3. Revised Securities Act; Same.+ FELICIANO, J.:p Sometime in February 1983, the authorized capital stock of petitioner Nestle Philippines Inc. ("Nestle") was increased from P300 million divided into 3 million shares with a par value of P100.00 per share, to P600 million divided into 6 million shares with a par value of P100.00 per share. Nestle underwent the necessary procedures involving Board and stockholders approvals and effected the necessary filings to secure the approval of the increase of authorized capital stock by respondent Securities and Exchange Commission ("SEC"), which approval was in fact granted. Nestle also paid to the SEC the amount of P50,000.00 as filing fee in accordance with the Schedule of Fees and Charges being implemented by the SEC under the Corporation Code. 1 Nestle has only two (2) principal stockholders: San Miguel Corporation and Nestle S.A. The other stockholders, who are individual natural persons, own only one (1) share each, for qualifying purposes, i.e., to qualify them as members of the Board of Directors being elected thereto on the strength of the votes of one or the other principal shareholder. On 16 December 1983, the Board of Directors and stockholders of Nestle approved resolutions authorizing the issuance of 344,500 shares out of the previously authorized but unissued capital stock of Nestle, exclusively to San Miguel Corporation and to Nestle S.A. San Miguel Corporation subscribed to and completely paid up 168,800

shares, while Nestle S.A. subscribed to and paid up the balance of 175,700 shares of stock. On 28 March 1985, petitioner Nestle filed a letter signed by its Corporate Secretary, M.L. Antonio, with the SEC seeking exemption of its proposed issuance of additional shares to its existing principal shareholders, from the registration requirement of Section 4 of the Revised Securities Act and from payment of the fee referred to in Section 6(c) of the same Act. In that letter, Nestle requested confirmation of the correctness of two (2) propositions submitted by it:
1. That there is no need to file a petition for exemption under Section 6(b) of the Revised Securities Act with respect to the issuance of the said 344,600 additional shares to our existing stockholders out of our unissued capital stock; and 2. That the fee provided in Section 6(c) of [the Revised Securities] Act is not applicable to the said issuance of additional shares. 2

The principal, indeed the only, argument presented by Nestlewas that Section 6(a) (4) of the Revised Securities Act which provides as follows:
Sec. 6. Exempt transactions. a) The requirement of registration under subsection (a) of Section four of this Act shall not apply to the sale of any security in any of the following transactions: xxx xxx xxx (4) The distribution by a corporation, actively engaged in the business authorized by its articles of incorporation, of securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus; or the issuance of securities to the security holder or other creditors of a corporation in the process of a bona fide reorganization of such corporation made in good faith and not for the purpose of avoiding the provisions of this Act, either in exchange for the securities of such security holders or claims of such creditors or partly for cash and partly in exchange for the securities or claims of such security holders or creditors; or the issuance of additional capital stock of a corporation sold or distributed by it among its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale or distribution of such increased capital stock. (Emphasis supplied)

embraces "not only an increase in the authorized capital stock but also the issuance of additional shares to existing stockholders of the unissued portion of the unissued capital stock". 3 Nestle urged that interpretation upon the following argument.
The use of the term "increased capital stock" should be interpreted to refer to additional capital stock or equity participation of the existing stockholders as a consequence of either an increase of the authorized capital stock or the issuance of unissued capital stock. If the intention of the pertinent legal provision [were] to limit the exemption to subscription to proposed increases in the authorized capital stock of a corporation, we see no reason why the law should not have been more specific or accurate about it. It certainly should have mentioned "increase in the authorized capital stock of the corporation" rather than merely the expression "the issuance of additional capital stock 4 (Emphasis supplied)

Nestle expressly represented in the same letter that all the additional shares proposed to be issued would be issued only to San Miguel Corporation and Nestle S.A. and that no commission or other form of remuneration had been given, directly or indirectly, in connection with the issuance or distribution of such additional shares of stock. In respect of its claimed exemption from the fee provided for in Section 6(c) of the Revised Securities Act, Nestle contended that since Section 6 (a) (4) of the statute declares (in Nestle's view) the proposed issuance of 344,500 previously authorized but unissued shares of Nestle's capital stock to its existing shareholders as an exempt transaction, the SEC could not collect fees for "the same transaction" twice. Nestle adverted to its payment back in 21 February 1983 of the amount of P50,000.00 as filing fees to the SEC when it applied for and eventually received approval of the increase of its authorized capital stock effected by Board and shareholder action last 16 December 1983. In a letter dated 26 June 1986, the SEC through its then Chairman Julio A. Sulit, Jr. responded adversely to petitioner's requests and ruled that the proposed issuance of shares did not fall under Section 6 (a) (4) of the Revised Securities Act, since Section 6 (a) (4) is applicable only where there is an increase in the authorized capital stock of a corporation. Chairman Sulit held, however, that the proposed transaction could be considered by the Commission under the provisions of Section 6 (b) of the Revised Securities Act which reads as follows:
(b) The Commission may, from time to time and subject to such terms and conditions as it may prescribe, exempt transactions other than those provided in the preceding paragraph, if it finds that the enforcement of the requirements of registration under this Act with respect to such transactions is not necessary in the public interest and for the protection of the investors by reason of the small amount involved or the limited character of the public offering.

The Commission then advised petitioner to file the appropriate request for exemption and to pay the fee required under Section 6 (c) of the statute, which provides:
(c) A fee equivalent to one-tenth of one per centum of the maximum aggregate price or issued value of the securities shall be collected by the Commission for granting a general or particular exemption from the registration requirements of this Act.

Petitioner moved for reconsideration of the SEC ruling, without success. On 3 July 1987, petitioner sought review of the SEC ruling before this Court which, however, referred the petition to the Court of Appeals. In a decision dated 13 January 1989, the Court of Appeals sustained the ruling of the SEC. Dissatisfied with the Decision of the Court of Appeals, Nestle is now before this Court on a Petition for Review, raising the very same issues that it had raised before the SEC and the Court of Appeals.

Examining the words actually used in Section 6 (a) (4) of the Revised Securities Act, and bearing in mind common corporate usage in this jurisdiction, it will be seen that the statutory phrase "issuance of additional capital stock" is indeed infected with a certain degree of ambiguity. This phrase may refer either to: a) the issuance of capital stock as part of and in the course of increasing the authorized capital stock of a corporation; or (b) issuance of already authorized but still unissued capital stock. By the same token, the phrase "increased capital stock" found at the end of Section 6 (a) (4), may refer either: 1) to newly or contemporaneously authorized capital stock issued in the course of increasing the authorized capital stock of a corporation; or 2) to previously authorized but unissued capital stock. Under Section 38 of the Corporation Code, a corporation engaged in increasing its authorized capital stock, with the required vote of its Board of Directors and of its stockholders, must file a sworn statement of the treasurer of the corporation showing that at least twenty-five percent (25%) of "such increased capital stock" has been subscribed and that at least twenty-five percent (25%) of the amount subscribed has been paid either in actual cash or in property transferred to the corporation. In other words, the corporation must issue at least twenty-five percent (25%) of the newly or contemporaneously authorized capital stock in the course of complying with the requirements of the Corporation Code for increasing its authorized capital stock. In contrast, after approval by the SEC of the increase of its authorized capital stock, and from time to time thereafter, the corporation, by a vote of its Board of Directors, and without need of either stockholder or SEC approval, may issue and sell shares of its already authorized but still unissued capital stock to existing shareholders or to members of the general public. 5 Both the SEC and the Court of Appeals resolved the ambiguity by construing Section 6 (a) (4) as referring only to the issuance of shares of stock as part of and in the course of increasing the authorized capital stock of Nestle. In the case at bar, since the 344,500 shares of Nestle capital stock are proposed to be issued from already authorized but still unissued capital stock and since the present authorized capital stock of 6,000,000 shares with a par value of P100.00 per share is not proposed to be further increased, the SEC and the Court of Appeals rejected Nestle's petition. We believe and so hold that the construction thus given by the SEC and the Court of Appeals to Section 6 (a) (4) of the Revised Securities Act must be upheld. In the first place, it is a principle too well established to require extensive documentation that the construction given to a statute by an administrative agency charged with the interpretation and application of that statute is entitled to great respect and should be accorded great weight by the courts, unless such construction is clearly shown to be in sharp conflict with the governing statute or the Constitution and other laws. As long ago as 1903, this Court said in In re Allen 6 that
[t]he principle that the contemporaneous construction of a statute by the executive officers of the government, whose duty is to execute it, is entitled to great respect, and

should ordinarily control the construction of the statute by the courts, is so firmly embedded in our jurisdiction that no authorities need be cited to support it. 7

The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to accumulation of experience and growth of specialized capabilities by the administrative agency charged with implementing a particular statute. 8 In Asturias Sugar Central, Inc. v. Commissioner of Customs 9 the Court stressed that executive officials are presumed to have familiarized themselves with all the considerations pertinent to the meaning and purpose of the law, and to have formed an independent, conscientious and competent expert opinion thereon. The courts give much weight to contemporaneous construction because of the respect due the government agency or officials charged with the implementation of the law, their competence, expertness, experience and informed judgment, and the fact that they frequently are the drafters of the law they interpret. 10 In the second place, and more importantly, consideration of the underlying statutory purpose of Section 6(a) (4) compels us to sustain the view taken by the SEC and the Court of Appeals. The reading by the SEC of the scope of application of Section 6(a) (4) permits greater opportunity for the SEC to implement the statutory objective of protecting the investing public by requiring proposed issuers of capital stock to inform such public of the true financial conditions and prospects of the corporation. By limiting the class of exempt transactions contemplated by the last clause of Section 6(a) (4) to issuances of stock done in the course of and as part of the process of increasing the authorized capital stock of a corporation, the SEC is enabled to examine issuances by a corporation of previously authorized but theretofore unissued capital stock, on a caseto-case basis, under Section 6(b); and thereunder, to grant or withhold exemption from the normal registration requirements depending upon the perceived level of need for protection by the investing public in particular cases. When capital stock is issued in the course of and in compliance with the requirements of increasing its authorized capital stock under Section 38 of the Corporation Code, the SEC as a matter of course examines the financial condition of the corporation, and hence there is no real need for exercise of SEC authority under the Revised Securities Act. Thus, one of the multiple documentation requirements under the current regulations of the SEC in respect of filing a certificate of increase of authorized capital stock, is submission of "a financial statement duly certified by an independent Certified Public Accountant (CPA) as of the latest date possible or as of the date of the meeting when stockholders approved the increase/decrease in capital stock or thereabouts. 11 When all or part of the newly authorized capital stock is proposed to be issued as stock dividends, the SEC requirements are even more exacting; they require, in addition to the regular audited financial statements, the submission by the corporation of a "detailed or Long Form Report of the certifying Auditor." Moreover, since approval of an increase in authorized capital stock by the stockholders holding two-thirds (2/3) of the outstanding capital stock is required by Section 38 of the Corporation Code, at a stockholders meeting held for that purpose, the directors and officers of the corporation may be expected to take pains to inform the shareholders of the financial condition and

prospects of the corporation and of the proposed utilization of the fresh capital sought to be raised. Upon the other hand, as already noted, issuance of previously authorized but theretofore unissued capital stock by the corporation requires only Board of Directors approval. Neither notice to nor approval by the shareholders or the SEC is required for such issuance. There would, accordingly, under the view taken by petitioner Nestle, no opportunity for the SEC to see to it that shareholders (especially the small stockholders) have a reasonable opportunity to inform themselves about the very fact of such issuance and about the condition of the corporation and the potential value of the shares of stock being offered. Under the reading urged by petitioner Nestle of the reach and scope of the third clause of Section 6(a) (4), the issuance of previously authorized but unissued capital stock would automatically constitute an exempt transaction, without regard to the length of time which may have intervened between the last increase in authorized capital stock and the proposed issuance during which time the condition of the corporation may have substantially changed, and without regard to whether the existing stockholders to whom the shares are proposed to be issued are only two giant corporations as in the instant case, or are individuals numbering in the hundreds or thousands. In contrast, under the ruling issued by the SEC, an issuance of previously authorized but still unissued capital stock may, in a particular instance, be held to be an exempt transaction by the SEC under Section 6(b) so long as the SEC finds that the requirements of registration under the Revised Securities Act are "not necessary in the public interest and for the protection of the investors" by reason, inter alia, of the small amount of stock that is proposed to be issued or because the potential buyers are very limited in number and are in a position to protect themselves. In fine, petitioner Nestle's proposed construction of Section 6(a) (4) would establish an inflexible rule of automatic exemption of issuances of additional, previously authorized but unissued, capital stock. We must reject an interpretation which may disable the SEC from rendering protection to investors, in the public interest, precisely when such protection may be most needed. Petitioner Nestle's second claim for exemption is from payment of the fee provided for in Section 6 (c) of the Revised Securities Act, a claim based upon petitioner's contention that Section 6 (a) (4) covers both issuance of stock in the course of complying with the statutory requirements of increase of authorized capital stock and issuance of previously authorized and unissued capital stock. Petitioner claims that to require it now to pay one-tenth of one percent (1%) of the issued value of the 344,500 shares of stock proposed to be issued, is to require it to pay a second time for the same service on the part of the SEC. Since we have above rejected petitioner's reading of Section 6 (a) (4), last clause, petitioner's claim about the additional fee of one-tenth of one percent (1%) of the issue value of the proposed issuance of stock (amounting to P34,450 plus P344.50 for other fees or a total of P37,794.50) need not detain us for long. We think it clear that the fee collected in 21 February 1983 by the SEC was assessed in connection with the examination and approval of the certificate of increase of authorized capital

stock then submitted by petitioner. The fee, upon the other hand, provided for in Section 6 (c) which petitioner will be required to pay if it does file an application for exemption under Section 6 (b), is quite different; this is a fee specifically authorized by the Revised Securities Act, (not the Corporation Code) in connection with the grant of an exemption from normal registration requirements imposed by that Act. We do not find such fee either unreasonable or exorbitant. WHEREFORE, for all the foregoing, the Petition for Review on Certiorari is hereby DENIED for lack of merit and the Decision of the Court of Appeals dated 13 January 1989 in C.A.-G.R. No. SP-13522, is hereby AFFIRMED. Costs against petitioner. SO ORDERED.

TCL Sales Corporation vs. Court of Appeals, 349 SCRA 35 , January 05, 2001 Case Title : TCL SALES CORPORATION and ANNA TENG, petitioners, vs. HON. COURT OF APPEALS and TING PING LAY, respondents. Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Remedial Law| Pleadings and Practice| Mandamus| Corporation Law| Securities and Exchange Commission| Syllabi: 1. Remedial Law; Pleadings and Practice; When a party is represented by counsel, service of process must be made on counsel and not on the party; Rule applies to proceedings before the Securities and Exchange Commission.+ 2. Same; Same; Same; While it is a rule that a jurisdictional question may be raised at any time, this, however, admits of an exception where, as in this case, estoppel has supervened.+ 3. Same; Same; Same; Jurisdiction of the Securities and Exchange Commission should be construed in relation to its power of control and supervision over all corporations to encourage active public participation in the affairs of private corporations by way of investments.+ 4. Same; Corporation Law; Securities and Exchange Commission; Determination of whether or not a shareholder is entitled to exercise the rights of a stockholder is within the jurisdiction of the Securities and Exchange Commission.+ 5. Same; Mandamus; Jurisdiction over an action for mandamus lies with the Securities and Exchange Commission even if the proponent thereof is not yet a stockholder of record.+ TCL Sales Corporation v. CA & Ting Ping Lay [349 SCRA 35 (Jan.5, 2001)] Jurisdiction of the SEC Rights of a Shareholder Duty of Corporate Secretary to enter transfer of Shares in Corporate Books Facts: Ting Ping Lay, not one of the original subscribers of the shares of stock of TCL Sales Corporation, acquired his shares by purchasing those of some of the original subscribers. In order to protect his shareholdings with TCL, Lay requested Anna Teng, TCL Corporate Secretary to enter the transfer of shares of stock for proper recording of his acquisitions in the Stock & Transfer Book of TCL. He too demanded issuance of new certificates of stock in his favor. TCL, however, even after repeated demands, refused. Lay filed a case with the SEC for mandamus against TCL and Teng. This was in turn granted by the SEC denying a later MR as well. The CA dismissed TCLs petition as well for being filed out of time. Issues: (1) WON SEC has jurisdiction over the petition for mandamus filed by Lay. (2) WON the alleged transfer of shares in favor of Lay are valid and can be ordered recorded. Held: Denied and CA decision affirmed. Even if Lay were not a Share Holder, he is still a member of the public whose investment in the corporate the law seeks to protect and encourage, as his purchase of shares of stock has been established. Principal function of SEC is supervision and control of corps, partnerships, assoc with the view of protecting and encouraging investments for the protection of economic development. SEC has power of control & supervision over all corps to encourage active public participation in the affairs of private corps through investments. Jurisdiction over an action for mandamus lies with the SEC even if the proponent is not yet a SH

of record, as in the case of Abejo v. de la Cruz. SEC by express mandate has absolute jurisdiction to enforce the provisions of the Corp Code among which is the stock purchasers right to secure the corresponding certificate of stock in his name. Determination of whether or not a Share Holder is entitled to exercise the rights of a Share Holder is within jurisdiction of the SEC. The SEC en banc found that TCL did not refute the validity of the transfers of the shares of stock they conceded that they could not assail the documents evincing the transfer of the shares to Lay. Lay was able to establish prima facie ownership through the deeds of transfer of shares of stock of TCL. A listing of TCLs Share Holders & their respective shares before & after the execution of a certain deed of assignment shows that Lay is indeed listed as a Share Holder of TCL. The dispute is an intra-corp controversy involving Share Holders of TCL. As held in Lim Tay v. CA, the duty of the corporate secretary to record transfers of stocks is ministerial. It however, cannot be compelled when the transferees title has no prima facie validity or is uncertain. Mandamus will not issue to establish a right but only to enforce one already established. Although during the trial before the SEC, TCL admitted that they ignored Lays request was based simply on the fact that they did not want to grant it. Having been capricious, whimsical & unwarranted, it constitutes bad faith. However, the SEC en banc modified & deleted the said award for damages imposed on the corp. The matter of damages now concerns only Teng, the corporate secretary. It was Tengs refusal as corp secretary to record the transfer of the shares, without evidence that such refusal was authorized by TCLs BOD, that caused damage. No error was committed by the respondent court in refusing to disturb the SECs findings.

Batangas Laguna Tayabas Bus Company, Inc. vs. Bitanga, 362 SCRA 635 , August 10, 2001 Case Title : BATANGAS LAGUNA TAYABAS BUS COMPANY, INC., DOLORES A. POTENCIANO, MAX JOSEPH A. POTENCIANO, MERCEDELIN A. POTENCIANO, and DELFIN C. YORRO, petitioners, vs. BENJAMIN M. BITANGA, RENATO L. LEVERIZA, LAUREANO A. SIY, JAMES A. OLAYVAR, EDUARDO A. AZUCENA, MONINA GRACE S. LIM, and GEMMA M. SANTOS, respondents., DANILO L. CONCEPCION, FE ELOISA GLORIA and EDIJER A. MARTINEZ, in their capacities as ASSOCIATE COMMISSIONERS OF THE SECURITIES AND EXCHANGE COMMISSION, BATANGAS LAGUNA TAYABAS BUS COMPANY, INC., MICHAEL A. POTENCIANO, CANDIDO A. POTENCIANO, HENRY JOHN A. POTENCIANO, REYNALDO MAGTIBAY, LORNA NAVARRO and RESTITUTO BAYLON, petitioners, vs. THE COURT OF APPEALS, BATANGAS LAGUNA TAYABAS BUS COMPANY, INC., BENJAMIN M. BITANGA, RENATO L. LEVERIZA, LAUREANO A. SIY, JAMES A. OLAYVAR, EDUARDO A. AZUCENA, MONINA GRACE S. LIM, and GEMMA M. SANTOS, respondents. Case Nature : PETITIONS for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Due Process| Injunctions| Corporation Law| Administrative Law| Injunctions| Judgments| Words and Phrases| Shares of Stocks| Two-Fold Purpose of Registration of Transfer of Shares| Judicial Review| Certiorari| Syllabi: 1. Due Process; Due process, in essence, is simply an opportunity to be heard.+ 2. Due Process; Injunctions; In applications for preliminary injunction, the requirement of hearing and prior notice before injunction may issue has been relaxed to the point that not all petitions for preliminary injunction must undergo a trial-type hearing, it being hornbook doctrine that a formal or trial-type hearing is not at all times and in all instances essential to due process.+ 3. Injunctions; The Rules of Court do not require that issues be joined before preliminary injunction may issueit may be granted at any stage of an action or proceeding prior to the judgment or final order, ordering a party or a court, agency or a person to refrain from a particular act or acts.+ 4. Injunctions; Judgments; Words and Phrases; Final Orders and Interlocutory Orders, Distinguished; Generally, injunction is a preservative remedy for the protection of ones substantive right or interestit is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit.+ 5. Corporation Law; Shares of Stocks; A transfer of shares is not valid unless recorded in the books of the corporation.+ 6. Corporation Law; Shares of Stocks; Two-Fold Purpose of Registration of Transfer of Shares;+ 7. Administrative Law; Judicial Review; Certiorari; For the Supreme Court or the Court of Appeals to properly exercise the power of judicial review over a decision of an administrative agency, such as the Securities and Exchange Commission, it must first be shown that the tribunal, board or officer exercising judicial or quasi-judicial functions has indeed acted without or in excess of its or his jurisdiction, and that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law.+ 8. Administrative Law; Judicial Review; Certiorari; It is a fundamental rule that factual findings of quasi-judicial agencies like the Securities and Exchange Commission, if supported by substantial evidence, are generally accorded not only great respect but even finality, and are

binding upon the Supreme Court, unless the petitioner is able to show that it had arbitrarily disregarded evidence before it or had misapprehended evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated.+ 9. Injunctions; The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law.+ 10. Corporation Law; Shares of Stocks; Under Section 63 of the Corporation Code, the sale of the stocks shall not be recognized as valid unless registered in the books of the corporation, but only insofar as third persons, including the corporation, are concernedas between the parties to the sale, the transfer shall be valid even if not recorded in the books of the corporation.+ YNARES-SANTIAGO, J.: These cases involve the Batangas Laguna Tayabas Bus Company, Inc., which has been owned by four generations of the Potenciano family. Immediately prior to the events leading to this controversy, the Potencianos owned 87.5% of the outstanding capital stock of BLTB.1 On October 28, 1997, Dolores A. Potenciano, Max Joseph A. Potenciano, Mercedelin A. Potenciano, Delfin C. Yorro, and Maya Industries, Inc., entered into a Sale and Purchase Agreement,2 whereby they sold to BMB Property Holdings, Inc., represented by its President, Benjamin Bitanga, their 21,071,114 shares of stock in BLTB. The said shares represented 47.98% of the total outstanding capital stock of BLTB. The purchase price for the shares of stock was P72,076,425.00, the downpayment of which, in the sum of P44,354,723.00, was made payable upon signing of Agreement, while the balance of P27,721,702.00 was payable on November 26, 1997. The contracting parties stipulated that the downpayment was conditioned upon receipt by the buyer of certain documents upon signing of the Agreement, namely, the Secretary's Certificate stating that the Board of Directors of Maya Industries, Inc. authorized the sale of its shares in BLTB and the execution of the Agreement, and designating Dolores A. Potenciano as its Attorney-in-Fact; the Special Power of Attorney executed by each of the sellers in favor of Dolores A. Potenciano for purposes of the Agreement; the undated written resignation letters of the Directors of BLTB, except Henry John A. Potenciano, Michael A. Potericiano and Candido A. Potenciano); a revocable proxy to vote the subject shares made by the sellers in favor of the buyer; a Declaration of Trust made by the sellers in favor of the buyer acknowledging that the subject shares shall be held in trust by the sellers for the buyer pending their transfer to the latter's name; and the duly executed capital gains tax return forms covering the sale, indicating no taxable gain on the same.3 Furthermore, the buyer guaranteed that it shall take over the management and operations of BLTB but shall immediately surrender the same to the sellers in case it fails to pay the balance of the purchase price on November 26, 1997.4 Barely a month after the Agreement was executed, on November 21, 1997, at a meeting of the stockholders of BLTB, Benjamin Bitanga and Monina Grace Lim were elected as directors of the corporation, replacing Dolores and Max Joseph Potenciano. Subsequently, on November 28,

1997, another stockholders' meeting was held, wherein Laureano A. Siy and Renato L. Leveriza were elected as directors, replacing Candido Potenciano and Delfin Yorro who had both resigned as such. At the same meeting, the Board of Directors of BLTB elected the following officers: Benjamin Bitanga as Chairman of the Board, President and Chief Executive Officer; Monina Grace Lim as Vice President for Finance and Supply and Treasurer; James Olayvar as Vice President for Operations and Maintenance: Eduardo Azucena as Vice President for Administration; Evelio Custodia as Corporate Secretary; and Gemma Santos as Assistant Corporate Secretary.5 During a meeting of the Board of Directors on April 14, 1998, the newly elected directors of BLTB scheduled the annual stockholders' meeting on May 19, 1998, to be held at the principal office of BLTB in San Pablo, Laguna. Before the scheduled meeting, on May 16, 1998, Michael Potenciano wrote Benjamin Bitanga, requesting for a postponement of the stockholders' meeting due to the absence of a thirty-day advance notice. However, there was no response from Bitanga on whether or not the request for postponement was favorably acted upon. On the scheduled date of the meeting, May 19, 1998, a notice of postponement of the stockholders' meeting was published in the Manila Bulletin. Inasmuch as there was no notice of postponement prior to that, a total of two hundred eighty six stockholders, representing 87% of the shares of stock of BLTB, arrived and attended the meeting. The majority of the stockholders present rejected the postponement and voted to proceed with the meeting. The Potenciano group was re-elected to the Board of Directors,6 and a new set of officers was thereafter elected.7 However, the Bitanga group refused to relinquish their positions and continued to act as directors and officers of BLTB. The conflict between the Potencianos and the Bitanga group escalated to levels of unrest and even violence among laborers and employees of the bus company. On May 21, 1998, the Bitanga group filed with the Securities and Exchange Commission a Complaint for Damages and Injunction, docketed as SEC Case No. 05-98-5973.8 Their prayer for the issuance of a temporary restraining order was, however, denied at the ex-parte summary hearing conducted by SEC Chairman Perfecto Yasay, Jr. Likewise, the Potenciano group filed on May 25, 1998, a Complaint for Injunction and Damages with Preliminary Injunction and Temporary Restraining Order with the SEC, docketed as SEC Case No. 05-98-5978.9 SEC Chairman Perfecto Yasay, Jr. issued a temporary restraining order enjoining the Bitanga group from acting as officers and directors of BLTB. On June 8, 1998, the Bitanga group filed another complaint with application for a writ of preliminary injunction and prayer for temporary restraining order, seeking to annul the May 19, 1998 stockholders' meeting. The complaint was docketed as SEC Case No. 06-98-5994. A Hearing Panel of the SEC conducted joint hearings of SEC Cases Nos. 05-98-5973 and 05-985978. On June 17, 1998, the SEC Hearing Panel granted the Bitanga group's application for a writ of preliminary injunction upon the posting of a bond in the amount of P20,000,000.00.10 It declared that the May 19, 1998 stockholders' meeting was void on the grounds that, first, Michael Potenciano had himself asked for its postponement due to improper notice; and, second,

there was no quorum, since BMB Holdings, Inc., represented by the Bitanga group, which then owned 50.26% of BLTB's shares having purchased the same from the Potenciano group, was not present at the said meeting. The Hearing Panel further held that the Bitanga Board remains the legitimate Board in a hold-over capacity. The Potenciano group filed a petition for certiorari11 with the SEC En Banc on June 29, 1998, seeking a writ of preliminary injunction to restrain the implementation of the Hearing Panel's assailed Order. On July 21, 1998, the SEC En Banc set aside the June 17, 1998 Order of the Hearing Panel and issued the writ of preliminary injunction prayed for.12 The Bitanga group immediately filed a petition for certiorari13 with the Court of Appeals on July 22, 1998, followed by a Supplemental Petition on August 10, 1998. The petition was docketed as CA-G.R. SP No. 48374. Meanwhile, on July 29, 1998, the SEC En Banc issued a writ of preliminary injunction against the Bitanga group, after the Potencianos posted the required bond of P20,000,000.00.14 On November 23, 1998, the Court of Appeals rendered the now assailed Decision, reversing the assailed Orders of the SEC En Banc and reinstating the Order of the Hearing Panel ordered dated June 17, 1998.15 The Court of Appeals denied the Motions for Reconsideration in a Resolution dated March 25, 1999.16 Petitioners Batangas Laguna Tayabas Bus Company, Inc., Dolores A. Potenciano, Max Joseph A. Potenciano, Mercedelin A. Potenciano and Delfin C. Yorro filed the instant petition for review, docketed as G.R. No. 137934, against respondents Benjamin M. Bitanga, Renato L. Leveriza, Laureano A. Siy, James A. Olayvar, Eduardo A. Azucena, Monina Grace S. Lim and Gemma M. Santos. Petitioners contend that I WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT DISREGARDED, CONTRARY TO WELL-ESTABLISHED JURISPRUDENCE, THE FACTUAL FINDINGS OF THE SEC WHICH IS A SPECIALIZED QUASI-JUDICIAL AGENCY, AND INVALIDATED THE PRELIMINARY INJUNCTION ISSUED BY THE LATTER. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BECAUSE THERE IS NO SHOWING THAT THE SEC MADE ANY ERROR IN EITHER JURISDICTION OR JUDGMENT. II WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS WERE DEPRIVED OF THEIR RIGHT TO DUE PROCESS BECAUSE: (1) A FULL-BLOWN HEARING WAS

CONDUCTED ON 6 JULY 1998 WHERE THE PARTIES FULLY ARGUED THEIR POSITIONS AND WERE HEARD BY THE SEC EN BANC; (2) THE LAW DOES NOT REQUIRE A SEPARATE HEARING FOR THE FIXING OF THE AMOUNT OF THE INJUNCTION BOND; AND (3) IN ANY CASE, THE ALLEGED FAILURE OF THE SEC TO FIX THE AMOUNT OF THE INJUNCTION BOND IN ITS 21 JULY 1998 ORDER AND SUBSEQUENT FIXING THEREOF IN ITS 26 JULY 1998 ORDER IS NOT A FATAL ERROR. III WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE 21 JULY 1998 ORDER OF THE SEC RESOLVED THE MAIN CASE. THE SEC, ACTING WITHIN THE BOUNDS OF ITS JURISDICTION, MERELY MADE A PRELIMINARY EVALUATION TO RESOLVE THE PRAYER FOR PRELIMINARY INJUNCTION, WHICH, BY ITS VERY NATURE, IS AN ANCILLARY REMEDY. THE MAIN PETITION REMAINS PENDING BEFORE THE SEC FOR THE RESOLUTION OF ITS MERITS.17 Another petition for review, docketed as G.R. No. 137936, was filed by petitioners Danilo L. Concepcion, Fe Eloisa Gloria and Edijer A. Martinez, in their capacities as Associate Commissioners of the Securities and Exchange Commission, Batangas Laguna Tayabas Bus Company, Inc., Dolores A. Potenciano, Max Joseph A. Potenciano, Michael A. Potenciano, Mercedelin A. Potenciano, Candido A. Potenciano, Henry John A. Potenciano, Delfin C. Yorro, Reynaldo Magtibay, Lorna Navarro and Restituto Baylon based on the following grounds: I THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT THE JULY 21, 1998 ORDER OF THE SEC IN SEC EN BANC CASE NO. 611 RESOLVED THE MAIN CASE. II THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT THE PRIVATE RESPONDENTS WERE DENIED THEIR RIGHT TO DUE PROCESS. III THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE SEC ORDER OF JULY 21, 1998 IS VALID AND IN DISREGARDING THE FACTUAL FINDINGS OF THE SEC.18 The two petitions for review were consolidated.

We find that the petitions are impressed with merit. Contrary to the findings of the Court of Appeals, the Bitanga group was not deprived of due process when the SEC En Banc issued its Order dated July 21, 1998. Due process, in essence, is simply an opportunity to be heard.19 It cannot be denied that in the case at bar, a hearing on the prayer for injunction was held on July 9, 1998. Both parties were represented at the said hearing, and the Bitanga group presented its arguments in opposition to the injunctive relief. This alone negates any proposition that the Bitanga group was denied due process. In applications for preliminary injunction, the requirement of hearing and prior notice before injunction may issue has been relaxed to the point that not all petitions for preliminary injunction must undergo a trial-type hearing, it being hornbook doctrine that a formal or trial-type is not at all times and in all instances essential to due process. Due process simply means giving every contending party the opportunity to be heard and the court to consider every piece of evidence presented in their favor. Accordingly, this Court has recently rejected a claim of denial of due process where such claimant was given the opportunity to be heard, having submitted his counter-affidavit and memorandum in support of his position.20 Much ado has been made over the fact that the injunction order was issued with "deliberate speed" even before the Bitanga group filed its Comment to the Potenciano group's Petition. However, the said Comment is rather directed to the petition of the Potenciano group; it is not essential to the resolution of the prayer for injunction. The Rules of Court do not require that issues be joined before preliminary injunction may issue. Preliminary injunction may be granted at any stage of an action or proceeding prior to the judgment or final order, ordering a party or a court, agency or a person to refrain from a particular act or acts. For as long as the requisites for its issuance are present in the case, the injunctive writ was properly issued.21 Respondents argue that the SEC En Banc's July 21, 1998 Order amounted to a ruling on the main case. We disagree. A reading of the said Order readily reveals that it merely delved on the propriety of granting a writ of preliminary injunction against the Bitanga group. The main case is far from being disposed of as there are several issues still awaiting resolution, including, whether or not the Bitanga group has taken funds and assets of BLTB and if so, in what amount and consisting of what assets; and whether or not the Potenciano group is entitled to the payment of exemplary damages, attorney's fees and costs of suit. There is no merit, therefore, in the statement that the SEC En Banc's ruling is a prejudgment of the main case, as several matters need yet to be addressed. The fact that the aforesaid Order was merely provisional in character may be gleaned from the very nature of the injunctive writ granted. Generally, injunction is a preservative remedy for the protection of one's substantive right or interest. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit.22 Thus, it has been held that an order granting a writ of preliminary injunction is an interlocutory order.23 As distinguished from a final order which disposes of the subject matter in its entirety or terminates a particular proceeding or

action, leaving nothing else to be done but to enforce by execution what has been determined by the court, an interlocutory order does not dispose of a case completely, but leaves something more to be adjudicated upon.24 In the case at bar, it cannot be said that the July 21, 1998 Order of the SEC En Banc terminated the Potenciano group's petition in its entirety. As mentioned above, there remain several issues which have yet to be resolved and adjudicated upon by the SEC. The next issue whether or not the SEC En Banc committed error in jurisdiction as to entitle the Bitanga group to the extraordinary remedy of certiorari should likewise be resolved in the negative. In the July 21, 1998 Order of the SEC En Banc, the validity of the BLTB stockholders' meeting held on May 19, 1998 was sustained, in light of the time-honored doctrine in corporation law that a transfer of shares is not valid unless recorded in the books of the corporation. The SEC En Banc went on to rule that It is not disputed that the transfer of the shares of the group of Dolores Potenciano to the Bitanga group has not yet been recorded in the books of the corporation. Hence, the group of Dolores Potenciano, in whose names those shares still stand, were the ones entitled to attend and vote at the stockholders' meeting of the BLTB on 19 May 1998. This being the case, the Hearing Panel committed grave abuse of discretion in holding otherwise and in concluding that there was no quorum in said meeting.25 Based on the foregoing premises, the SEC En Banc issued a writ of preliminary injunction against the Bitanga group. In so ruling, the SEC En Banc merely exercised its wisdom and competence as a specialized administrative agency specifically tasked to deal with corporate law issues. We are in full accord with the SEC En Banc on this matter. Indeed, until registration is accomplished, the transfer, though valid between the parties, cannot be effective as against the corporation. Thus, the unrecorded transferee, the Bitanga group in this case, cannot vote nor be voted for. The purpose of registration, therefore, is two-fold: to enable the transferee to exercise all the rights of a stockholder, including the right to vote and to be voted for, and to inform the corporation of any change in share ownership so that it can ascertain the persons entitled to the rights and subject to the liabilities of a stockholder.26 Until challenged in a proper proceeding, a stockholder of record has a right to participate in any meeting;27 his vote can be properly counted to determine whether a stockholders' resolution was approved, despite the claim of the alleged transferee.28 On the other hand, a person who has purchased stock, and who desires to be recognized as a stockholder for the purpose of voting, must secure such a standing by having the transfer recorded on the corporate books.29 Until the transfer is registered, the transferee is not a stockholder but an outsider.30 We find no error either in jurisdiction or judgment on the part of the SEC En Banc, since its conclusions of law were anchored on established principles and jurisprudence. Indeed, nowhere in the Bitanga group's petition for certiorari before the Court of Appeals was it shown that the SEC En Banc committed such patent, gross and prejudicial errors of law or fact,

or a capricious disregard of settled law and jurisprudence, as to amount to a grave abuse of discretion or lack of jurisdiction on its part. Absent such showing, neither the Court of Appeals nor this Court should engage in a review of the facts found nor even of the law as interpreted or applied by the SEC En Banc, for the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. The main thrust of a petition for certiorari under Rule 65 of the Rules of Court is only the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction. However, for this Court or the Court of Appeals to properly exercise the power of judicial review over a decision of an administrative agency, such as the SEC, it must first be shown that the tribunal, board or officer exercising judicial or quasi judicial functions has indeed acted without or in excess of its or his jurisdiction, and that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law. In the absence of any showing of lack of jurisdiction or grave abuse tantamount to lack or excess of jurisdiction, judicial review may not be had over an administrative agency's decision.31 We have gone over the records of the case at bar and we see no cogent reason to hold that the SEC En Banc had abused its discretion. Moreover, it is a fundamental rule that factual findings of quasi-judicial agencies like the SEC, if supported by substantial evidence, are generally accorded not only great respect but even finality, and are binding upon this Court, unless petitioner is able to show that it had arbitrarily disregarded evidence before it or had misapprehended evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated. This rule is rooted in the doctrine that this Court is not a trier of facts, as well as in the respect to be accorded the determinations made by administrative bodies in general on matters falling within their respective fields of specialization or expertise.32 In light of all the foregoing, we find that the Court of Appeals erred in granting the extraordinary remedy of certiorari to the Bitanga group. It is elementary that a special civil action for certiorari is limited to correcting errors of jurisdiction or grave abuse of discretion.33 None of these have been found to obtain in the petition before the Court of Appeals. What is more, it is also settled that the issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law. The exercise of sound judicial discretion by the lower court in injunctive matters should not be interfered with except in cases of manifest abuse.34 WHEREFORE, in view of all the foregoing, the instant petitions for review are GRANTED. The Decision of the Court of Appeals dated November 23, 1998 in CA-G.R. SP No. 48374 and its resolution dated March 25, 1999 are SET ASIDE. The Orders of the SEC En Banc dated July 21, 1998 and July 27, 1998 in SEC Case No. EB 611 are ordered REINSTATED. SO ORDERED.

Fua Cun vs. Summers and China, Banking Corporation, 44 Phil. 705 , March 27, 1923 Case Title : FUA CUN (alias Tua Cun), plaintiff and appellee, vs. RICARDO SUMMERS, in his capacity as Sheriff ex-oficio of the City of Manila, and the CHINA BANKING CORPORATION, defendants and appellants. Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Imperial, J. Syllabi Class : BANKING CORPORATION| SHARES OF STOCK| EFFECT OF PART PAYMENT OF SUBSCRIPTION| Syllabi: 1. BANKING CORPORATION; SHARES OF STOCK; LIEN OF CORPORATION UPON THE SAME.A banking corporation has no lien upon its own stock for the indebtedness of the stockholders even when the by-laws provide that the shares shall be transferable only upon the books of the corporation and that no such transfer shall be made if the holder of the shares is indebted to the corporation. 2. BANKING CORPORATION; SHARES OF STOCK; EFFECT OF PART PAYMENT OF SUBSCRIPTION; SPECIAL AGREEMENT.In the absence of special agreement to the contrary, a subscriber for a certain number of shares of stock does not, upon payment of one-half of the subscription price, become entitled to the issuance of certificates for one-half the number of shares subscribed for; the subscriber's right consists only in an equity entitling him to a certificate for the total number of shares subscribed for by him upon payment of the remaining portion of the subscription price. 3. BANKING CORPORATION; SHARES OF STOCK; ASSIGNMENT OF EQUITY.An equity in shares of stock may be assigned, the assignment becoming effective as between the parties and as to third parties with notice. 4. BANKING CORPORATION; SHARES OF STOCK; PRIORITY OF LIEN.An attachment levied upon assigned rights or interests in an action against the assignor after the attaching creditor has received notice of the assignment creates no lien as against the assignee. 5. BANKING CORPORATION; SHARES OF STOCK; CHATTEL MORTGAGE.+ OSTRAND, J.: It appears from the evidence that on August 26, 1920, one Chua Soco subscribed for five hundred shares of stock of the defendant Banking Corporation at a par value of P100 per share, paying the sum of P25,000, one-half of the subscription price, in cash, for which a receipt was issued in the following terms: This is to certify, That Chua Soco, a subscriber for five hundred shares of the capital stock of the China Banking Corporation at its par value of P100 per share, has paid into the Treasury of the Corporation, on account of said subscription and in accordance with its terms, the sum of twenty-five thousand pesos (P25,000), Philippine currency. Upon receipt of the balance of said subscription in accordance with the terms of the calls of the Board of Directors, and surrender of this certificate, duly executed certificates for said five hundred shares of stock will be issued to the order of the subscriber.

It is expressly understood that the total number of shares specified in this receipt is subject to sale by the China Banking Corporation for the payment of any unpaid subscriptions, should the subscriber fail to pay the whole or any part of the balance of his subscription upon 30 days' notice issued therefor by the Board of Directors. Witness our official signatures at Manila, P. I., this 25th day of August, 1920. (Sgd.) MERVIN WEBSTER Cashier (Sgd.) DEE C. CHUAN President On May 18, 1921, Chua Soco executed a promissory note in favor of the plaintiff Fua Cun for the sum of P25,000 payable in ninety days and drawing interest at the rate of 1 per cent per month, securing the note with a chattel mortgage on the shares of stock subscribed for by Chua Soco, who also endorsed the receipt above mentioned and delivered it to the mortgagee. The plaintiff thereupon took the receipt to the manager of the defendant Bank and informed him of the transaction with Chua Soco, but was told to await action upon the matter by the Board of Directors. In the meantime Chua Soco appears to have become indebted to the China Banking Corporation in the sum of P37,731.68 for dishonored acceptances of commercial paper and in an action brought against him to recover this amount, Chua Soco's interest in the five hundred shares subscribed for was attached and the receipt seized by the sheriff. The attachment was levied after the defendant bank had received notice of the facts that the receipt had been endorsed over to the plaintiff. Fua Cun thereupon brought the present action maintaining that by virtue of the payment of the one-half of the subscription price of five hundred shares Chua Soco in effect became the owner of two hundred and fifty shares and praying that his, the plaintiff's, lien on said shares, by virtue of the chattel mortgage, be declared to hold priority over the claim of the defendant Banking Corporation; that the defendants be ordered to deliver the receipt in question to him; and that he be awarded the sum of P5,000 in damages for wrongful attachment. The trial court rendered judgment in favor of the plaintiff declaring that Chua Soco, through the payment of the P25,000, acquired the right to two hundred and fifty shares fully paid up, upon which shares the plaintiff holds a lien superior to that of the defendant Banking Corporation and ordering that the receipt be returned to said plaintiff. From this judgment the defendants appeal. Though the court below erred in holding that Chua Soco, by paying one-half of the subscription price of five hundred shares, in effect became the owner of two hundred and fifty shares, the judgment appealed from is in the main correct. The claim of the defendant Banking Corporation upon which it brought the action in which the writ of attachment was issued, was for the non-payment of drafts accepted by Chua Soco and had

no direct connection with the shares of stock in question. At common law a corporation has no lien upon the shares of stockholders for any indebtedness to the corporation (Jones on Liens, 3d ed., sec. 375) and our attention has not been called to any statute creating such lien here. On the contrary, section 120 of the Corporation Act provides that "no bank organized under this Act shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith, and stock so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale, or, in default thereof, a receiver may be appointed to close up the business of the bank in accordance with law." Section 35 of the United States National Banking Act of 1864 contains a similar provision and it has been held in various decisions of the United States Supreme Court that a bank organized under that Act can have no lien on its own stock for the indebtedness of the stockholders even when the by-laws provide that the shares shall be transferable only on the books of the corporation and that no such transfer shall be made if the holder of the shares is indebted to the corporation. (Jones on Liens, 3d ed., sec. 384; First National Bank of South Bend vs. Lanier and Handy, 11 Wall., 369; Bullard vs. National Eagle Bank, 18 Wall., 589; First National Bank of Xenia vs. Stewart and McMillan, 107 U.S., 676.) The reasons for this doctrine are obvious; if banking corporations were given a lien on their own stock for the indebtedness of the stockholders, the prohibition against granting loans or discounts upon the security of the stock would become largely ineffective. Turning now to the rights of the plaintiff in the stock in question, it is argued that the interest held by Chua Soco was merely an equity which could not be made the subject of a chattel mortgage. Though the courts have uniformly held that chattel mortgages on shares of stock and other choses in action are valid as between the parties, there is still much to be said in favor of the defendants' contention that the chattel mortgage here in question would not prevail over liens of third parties without notice; an equity in shares of stock is of such an intangible character that it is somewhat difficult to see how it can be treated as a chattel and mortgaged in such a manner that the recording of the mortgage will furnish constructive notice to third parties. As said by the court in the case of Spalding vs. Paine's Adm'r. (81 Ky., 416), in regard to a chattel mortgage of shares of stock: These certificates of stock are in the pockets of the owner, and go with him where he may happen to locate, as choses in action, or evidence of his right, without any means on the part of those with whom he proposes to deal on the faith of such a security of ascertaining whether or not this stock is in pledge or mortgaged to others. He finds the name of the owner on the books of the company as a subscriber of paid-up stock, amounting to 180 shares, with the certificates in his possession, pays for these certificates their full value, and has the transfer to him made on the books of the company, thereby obtaining a perfect title. What other inquiry is he to make, so as to make his investment certain and secure? Where is he to look, in order to ascertain whether or not this stock has been mortgaged? The chief office of the company may be at one place to-day and at another tomorrow. The owner may have no fixed or permanent abode, and with his notes in one pocket and his certificates of stock in the other the one evidencing the extent of his

interest in the stock of the corporation, the other his right to money owing him by his debtor, we are asked to say that the mortgage is effectual as to the one and inoperative as to the other. But a determination of this question is not essential in the present case. There can be no doubt that an equity in shares of stock may be assigned and that the assignment is valid as between the parties and as to persons to whom notice is brought home. Such an assignment exists here, though it was made for the purpose of securing a debt. The endorsement to the plaintiff of the receipt above mentioned reads: For value received, I assign all my rights in these shares in favor of Mr. Tua Cun. Manila, P. I., May 18, 1921. (Sgd.) CHUA SOCO This endorsement was accompanied by the delivery of the receipt to the plaintiff and further strengthened by the execution of the chattel mortgage, which mortgage, at least, operated as a conditional equitable assignment. As against the rights of the plaintiff the defendant bank had, as we have seen, no lien unless by virtue of the attachment. But the attachment was levied after the bank had received notice of the assignment of Chua Soco's interests to the plaintiff and was therefore subject to the rights of the latter. It follows that as against these rights the defendant bank holds no lien whatever. As we have already stated, the court erred in holding the plaintiff as the owner of two hundred and fifty shares of stock; "the plaintiff's rights consist in an equity in five hundred shares and upon payment of the unpaid portion of the subscription price he becomes entitled to the issuance of certificate for said five hundred shares in his favor." The judgment appealed from is modified accordingly, and in all other respects it is affirmed, with the costs against the appellants Banking Corporation. So ordered.

Baltazar vs. Lingayen Gulf Electric Power Co., Inc., 14 SCRA 522 , June 30, 1965 Case Title : IRINEO S. BALTAZAR, plaintiff-appellee, vs. LINGAYEN GULF ELECTRIC POWER CO., INC., DOMINADOR C. UNGSON, BRIGIDO G. ESTRADA, MANUEL L. FERNANDEZ, BENEDICTO C. YUSON and BERNARDO ACENA, defendantsappellants., MARVIN O. ROSE, plaintiff-appellee, vs. LINGAYEN GULF ELECTRIC Co., INC., DOMINADOR C. UNGSON, BRIGIDO G. ESTRADA, MANUEL L. FERNANDEZ, BENEDICTO C. YUSON and BERNARDO C. ACENA, defendants-appellants., IRINEO S. BALTAZAR and MARVIN O. ROSE, plaintiffs-appellees, vs. BERNARDO ACENA, defendant-appellant. Case Nature : APPEAL from an order of the Court of First Instance of Pangasinan. Morfe, J. Syllabi Class : Corporations| Estoppel| | Syllabi: 1. Corporations; Stockholders right to vote issued stocks although balance of subscription unpaid.+ 2. Corporations; Previous payments applied to capital may not later be applied to interest on unpaid balance of subscription.+ 3. Estoppel; Cannot be based on acts prohibited by law.+ PAREDES, J.: In Civil Case G.R. No. L-16236 (CFI No. 13211), Irineo S. Baltazar, filed the complaint against Lingayen Gulf Electric Power Co., Inc., Dominador C. Ungson, Brigido G. Estrada, Manuel L. Fernandez, Benedicto C. Yuson and Bernardo Acena. In Civil Case G.R. No. L-16237 (CFI No. 13212), Marvin O. Rose filed the complaint against the same defendants. In Civil Case G.R. No. L-16238 (CFI No. 13340), Baltazar and Rose filed their complaint against Bernardo Acena alone. The Lingayen Gulf Electric Power Co., Inc., hereinafter referred to as Corporation, was doing business in the Philippines, with principal offices at Lingayen, Pangasinan, and with an authorized capital stock of P300.000.00 divided into 3,000 shares of voting stock at P100.00 par value, per share. Plaintiffs Baltazar and Rose were among the incorporators, having subscribed to 600 and 400 shares of the capital stock, or a total par value of P60,000.00 and P40.000.00, respectively. It is alleged that it has always been the practice and procedure of the Corporation to issue certificates of stock to its individual subscribers for unpaid shares of stock. Of the 600 shares of capital stock subscribed by Baltazar, he had fully paid 535 shares of stock, and the Corporation issued to him several fully paid up and non-assessable certificates of stock, corresponding to the 535 shares. After having made transfers to third persons and acquired new ones, Baltazar had to his credit, on the filing of the complaint 341 shares fully paid and nonassessable. He had also 65 shares with par value of P6,500.00, for which no certificate was issued to him. Of the 400 shares of stock subscribed by Rose, he had 375 shares of fully paid stock, duly covered by certificates of stock issued to him.

The respondents Ungson, Estrada, Fernandez and Yuson were small stockholders of the Corporation, all holding a total number of fully paid-up shares of stock, of not more than 100 shares, with a par value of P10,000.00 and the defendant Acena, was likewise an incorporator and stockholder, holding 600 shares of stock, for which certificate of stock were issued to him and as such, was the largest individual stockholder thereof. Defendants Ungson, Estrada, Fernandez and Yuzon, constituted the majority of the holdover seven-member Board of Directors of the Corporation, in 1955, two (2) of said defendants having been elected as members of the Board in the annual stockholders' meeting held in May 1954, largely on the vote of their co-defendant Acena, while the other two (2) were elected mainly on the vote of the plaintiffs and their group of stockholders. Let the first group be called the Ungson group and the second, the Baltazar group. The date of the annual stockholders' meeting of the Corporation had been fixed, under its bylaws, on the first Tuesday of February of every year, but for one reason or another, the meeting was to be held on May 1, 1955, principally for the purpose of electing new officers and Board of Directors for the calendar year 1955. In connection with said meeting since January 1, 1955, there was a realignment effected, and the fight for control of the management and property of the corporation was close and keen. The total number of fully paid-up shares held by stockholders of one group, was almost equal the number of fully paid-up shares held by the other group. The Ungson group (specially defendant Acena), which had been in complete control of the management and property of the Corporation since January 1, 1955, in order to continue retaining such control, over the objection oil three majority members of the Board, in the regular meeting of the Board of Directors, held on January 30, 1955, passed three (3) resolutions (Exhs. A, B, C). Resolution No. 2 (Exh. A), declared all watered stocks issued to Acena, Baltazar, Rose and Jubenville, "of no value and consequently cancelled from the books of the Corporation. Resolution No. 3 (Exh. B) resolved that "... all unpaid subscriptions should bear interest annually from the year of subscription on the basis of quarterly payment, and any or all payments already made on said unpaid subscriptions should be credited to pay interest first, then the capital debt after all interest is fully paid. All shares of stock issued to and in favor of any stockholder or stockholders of the Lingayen Gulf Electric Power Co., Inc., on account of payments on unpaid subscriptions without the interest thereon accrued and collectible having been fully paid from the date of subscription as required by the Corporation Law, shall be declared of no value and cancelled from its books, and if the payments already made exceeded the interest accrued and collectible by virtue of the provision of law and the previous resolution of its board of directors, the excess should be applied to the payment of the unpaid subscription. For this purpose, the accountant of the corporation is directed to make and report the proper computation of the interest.

Resolution No. 4 (Exh. C) resolved that "any and all shares of stock of the Lingayen Gulf Electric Power Co., Inc., issued as fully paid-up to stockholders whose subscription to a number of shares have been declared delinquent with the accrued interest on the unpaid thereof per Resolution No. 42, S. 1954, of the Board of Directors which has been duly published in the "Manila Chronicle," are hereby incapacitated to utilize or avail of the voting power until such delinquency with the accrued interest is fully paid up as indicated in Resolution No. 3, S. 1955. On the authority of these resolutions, the Ungson group was threatening and procuring to expel and oust the plaintiffs and their companion stockholders, for the ultimate purpose of depriving them of their right to vote in the said annual stockholders' meeting scheduled for May 1, 1955. In their complaint, Baltazar and Rose prayed that a writ of preliminary injunction be issued against the defendants, enjoining them to desist and refrain from carrying out the objects and purposes of the three resolutions aforestated, and commanding them to allow plaintiffs and companions to vote in the stockholders' meeting, on May 1, 1955, their fully paid up shares of stocks, as evidenced by stock certificates issued to them and outstanding on the stock book of the defendant Corporation, on or before January 30, 1955, to declare said three resolutions illegal and invalid, and to pay plaintiffs the sum of P10,000.00 each, as damages. On April 29, 1955, the trial court, after due hearing, issued Preliminary Injunction, as prayed for. The defendants, in their answers, allege that during the years that plaintiffs and their allies were in control of the Corporation, no serious effort was attempted to retrieve it from its financial collapse, caused by accumulated indebtedness and by poor and inefficient management, resulting in losses of big sums of money from vicious manipulation of funds, nepotism, unconscionable grant of big salaries and allowances, illegal payments, unaccounted funds of Caltex business and sales department store, etc.; that during the time the management was in the hands of plaintiffs (Rose, as manager); attempts were made to release themselves from liability of their unpaid subscriptions; that the three resolutions were merely functional instruments to bolster the faith in the assets of the defendant Corporation and did not deprive the plaintiffs of their property without due process of law; that the issuance of a writ of injunction for the purpose of arresting the holding of the election of the Board, was beyond the jurisdiction of the court. They set up counterclaims. They prayed that the resolutions be declared legal and valid, thus invalidating the "watered stocks" of plaintiffs, if not paid, and disqualifying the delinquent subscribers, among whom were the plaintiffs, from voting totally or partially, their subscriptions; to order plaintiffs to pay the defendant Corporation first, the interest due and payable quarterly at 6% per annum from January 11, 1946 to December 31, 1954, on their liability under their delinquent subscriptions, out of the installment made therein; to pay defendant entity damages under the counterclaims and expenses for the enforcement of the collection; and that after complete payment of the interests and the balance of their unpaid subscriptions, the defendant Corporation should issue the shares of stock to plaintiffs for their full subscription. Plaintiffs filed their answer to defendants' counterclaims, with counterclaims against defendants. On August 8, 1955, the lower court issued an order dismissing plaintiffs' counterclaims against Acena, Ungson and Fernandez "without prejudice to filing the proper separate actions therefor by the parties." Consequently, and as heretofore mentioned, Baltazar and Rose filed Case No. 13340 (supra).

The following tentative amicable settlement, dated September 13, 1958, formulated and entered into by some of the parties and their respective attorneys, before presiding Judge Jesus P. Morfe, in the three cases, was submitted: 1. As to the so-called water stocks P30,000.00 each of the holders of said stock, namely, Irineo Baltazar, Marvin Rose, and Bernardo Acena, will return to the corporation P3,500 each of said stocks, thereby retaining P6,500 worth of stocks to be considered as valid for each under this compromise; 2. With respect to Dr. Bernardo Acena, of the certificates of stock allegedly representing, his profit, he will return to the corporation P3,500 of said share of stock and retain P7,500 worth thereof ; 3. With respect to the interest on unpaid balance of subscription it is agreed that the subscribers with unpaid subscription be given the opportunity to pay in two installments, the first installment to cover one-half of the unpaid balance to be paid in three months, and the second installment will be for the remaining unpaid half payable in another three months, from the time of the approval of this agreements, with the understanding that those who comply with this arrangement will not pay interest on the balance of their subscription, for the date of incorporation up to the grant of franchise on February 24, 1948, which shall be deemed as condoned, and from 1948 they will pay only as interest 3% compounded annually, it being understood that failure of any subscriber to pay any of the installment here provided will subject the stockholders concerned to the provision of the corporation law of the payment of 6% interest compounded quarterly. 4. All claims and counterclaims other than those covered by the preceding paragraph of stipulation will be deemed dismissed without prejudice, in all these three cases; 5. All the resolutions of the Board and the stockholders involved in these instant cases will be deemed modified in accordance with this agreement. On February 20, 1959, the lower court rendered a decision, approving the agreement and requiring the parties to comply with the same, and dissolved the writ of preliminary injunction, with costs. The pertinent portions of the decision are: In view of the agreement of the parties transcribed above, this Court is called upon to decide whether or not any of the agreements of the parties as above transcribed is contrary to law or public policy. First, as regards pars. 1 and 2, of said agreement, the legal capacity of the parties to sue and be sued carries with it the power to enter into an amicable settlement of pending litigations and to expressly or impliedly make admissions of facts; and they could, therefore, agree and recognize as fully paid for and valid the shares of stocks mentioned in said paragraphs of their agreement, which agreement must be held valid and binding among the parties, and even as against their persons who have no proof that said agreement was entered into in fraud of creditors.

The next question for decision is whether or not a corporation may validly condone interest on unpaid subscriptions to its capital stock. The fact that our Corporation Law authorizes provisions in the by-laws of a corporation different from that set out in Sec. 37 of said law, shows that the provision of said law is to interest of unpaid stock subscriptions is merely directory, so that a corporation may fix a different interest rate, or condone the payment of interest altogether if such condonation would, as in the instant cases, serve as inducement for early payment of stock subscriptions. The condonation and reduction of interest agreed upon in par. 3 of the aforequoted agreement is, therefore, valid in the absence of proof that said agreement was entered into in fraud of creditors. In connection with par. 5 of the aforequoted agreement, in relation to par. 3 thereof, this, Court is of the opinion, and so holds, that the periods of time allowed for making payments under par. 3 of said agreement, must be counted from date of receipt of a copy of this decision by counsel of the parties, this decision constituting the final approval of said agreement, and as to stockholders who are not parties to these cases, from date of notice of the said time extension. The extension of time to pay, as granted in par. 3 of the repealing previous declaration of delinquency of the corresponding shares of stock, and all subscribed shares of stock, except those ordered to be returned as provided in pars. 1 and 2 of said agreement, will therefore be entitled to vote until once again declared delinquent after the expiration of the periods of time set out in par. 3 of said agreement. Defendants on March 14, 1959 filed a motion for reconsideration, alleging that the decision was partly against the spirit and intention of the parties to the agreement and portions of the decision, carried "prejudicial eventualities," and asking that the same be amended in the sense that "the payment of obligations of delinquent incorporators has been reduced by the agreement as stated in paragraphs 3 and 5" of said agreement; that delinquent stocks cannot be voted until fully paid in accordance with the agreement and that if the plaintiffs in the above entitled cases could not pay in full their obligations within the periods stated in the agreement, the resolutions of delinquency would automatically stand. On March 18, 1959, plaintiffs, in cases Nos. 13211 and 13212, filed a petition for immediate execution and for preliminary injunction and/or mandamus, praying that a writ be issued, ordering the defendants, as controlling majority of hold-over board of directors, to hold immediately the long delayed stockholders' meeting, and to allow the plaintiffs and all the stockholders, with still unpaid subscriptions, to vote all their stocks and subscriptions at said stockholders' meeting, as directed in the decision. On March 25, 1959, the Court issued an amending decision, pertinent portions of which are hereunder reproduced ... . After hearing the parties in extensive oral argument, this Court agrees with the defendants that par. 5 of the compromise agreement of the parties, dated September 13, 1958, contemplates a modification and not a repeal of the resolutions of the Board of Directors and of the Stockholders referred to in said agreement. The question is, therefore, to what extent has said resolutions been modified? Considering that the primary intention of each of said resolutions was to effect an early collection of unpaid

balance of stock subscriptions and interest thereon, and the moving consideration for a compromise settlement of the instant cases is likewise the early collection of the obligations of stockholders of the defendant corporation, the extension of time to pay, as granted in par. 3 of said agreement, was clearly intended to cover not only the accrued interest but also the unpaid stock subscription of the stockholders, for to hold otherwise would be to defeat the primary purpose of early collection of said obligations. Considering the same paramount intention of said resolution, and of the aforesaid compromise agreement, it likewise follows that the extension of time to pay and the reduction of interest embodied in the said agreement must apply to all stockholders similarly situated. Regarding the right to vote, this Court likewise agrees with the defends its that the facts considered during the negotiations for settlement effected by the parties in the Chambers of the presiding judge do not warrant repeal of the declaration of delinquency and complete restoration of voting rights until full payment of the unpaid stock subscriptions and interest within the time and to the extent mentioned in par. 3 of the aforesaid compromise agreement. To rule otherwise would be to encourage non-payment of the balance of stock subscriptions and thus defeat the paramount intention of the compromise agreement. Stated differently, this Court now holds that the extension of time to pay, as granted in par. 3 of the aforesaid compromise agreement, has the effect of lifting the previous declaration of delinquency effective as of full payment of the balance of said stock subscriptions and interest within the periods of time mentioned in par. 3 of said compromise agreement. In view of the uncertainty brought about by the motion for reconsideration and the motion for execution aforementioned, it would be unjust to count the periods of time mentioned in the aforesaid compromise agreement from the date of receipt of the original decision of this Court in these cases. The extension of time to pay should, therefore, be counted from receipt by counsel for the parties of a copy of this amending decision, and from receipt by the other stockholders of notice of said extension of time; and the injunction in the instant case should be deemed in force for the duration of said extension of time to pay. WHEREFORE, the decision of this Court rendered in these cases on February 20, 1959 is hereby modified in the manner set out above, maintaining said decision in all other respects. On April 4, 1959 , plaintiffs filed a motion for reconsideration and/or new trial, praying that the amending decision dated March 25, 1959, be reconsidered and/or further clarified. On July 16, 1959, the trial court reversed its amending decision in an order, the relevant parts thereof follow: WHEREFORE, by way of amendment to both the original and amending decisions of this Court in the instant case, this Court hereby expressly rules that all shares of the capital stock of the defendant corporation covered by fully paid capital stock shares certificates are entitled to vote in all meetings of the stockholders of this corporation, and

Resolutions Nos. 2, 3 and 4 (Exhs. C, C-1 and C-2) of defendant's corporation's Board of Directors are hereby nullified insofar as they are inconsistent the this ruling. The extensions of time to pay, referred to in par. 3 of the settlement agreement of the parties, will start to run from the date of receipt by counsel for the parties of a copy of this Order, and from receipt by the other stockholders of notice of said extension of time. The injunction granted in the instant case is hereby dissolved, and the injunction bond filed by the plaintiffs is hereby cancelled and released. Defendants on August 14, 1959 perfected their appeal against the above ruling, on purely questions of law. Plaintiffs-appellees did not file any brief, manifesting that they were relying on their arguments contained in their motion for reconsideration, dated April 4, 1959 filed with the trial court. (pp. 213 to 218, rec. on appeal) and on the reasons set forth in the trial court's order, dated July 16, 1959, third decision (pp. 219 to 230 R.A.). Pending decision, the parties were required to show cause why the cases should not be dismissed for having become moot or academic, in view of the fact that the appellees, taking advantage of the decision of the trial court, "had paid all other delinquencies and interest thereon," but the appellants manifested that these cases should be decided on the issues raised, to determine, once and for all, the voting rights of the other delinquent subscribers, in the election of the company's Board of Directors which had been suspended since May 1, 1955, because of the litigation. The questions posted in the appeal, in view of the above facts would, therefore, be: 1. If a stockholder, in a stock corporation, subscribes to a certain number of shares of stock, and he pays only partially, for which he is issued certificates of stock, is he entitled to vote the latter, notwithstanding the fact that he has not paid the balance of his subscription, which has been called for payment or declared delinquent? 2. If a stockholder subscribes to a certain number of shares of stock and makes partial payment only and declared delinquent as to the rest, with interest, should previous payments on account of the capital, be first applied to interest, thus diminishing the voting power of the shares of stock already paid? In other words, if the entire subscribed shares of stock are not paid, will the paid shares of stock be deprived of the right to vote, until the entire subscribed shares of stock are fully paid, including interest? 3. Has estoppel or waiver, by virtue of the settlement agreement, set in? Defendants-appellants claim that resolution No. 4 (Exh. C-2), withdrawing or nullifying the voting power of all the aforesaid shares of stock is valid, notwithstanding the existence of partial payments, evidenced by certificates duly issued therefor. They invoke the ruling laid down by the Court in the Fua Cun v. Summers case (44 Phil, 705, March 27, 1923) pertinent portion of which states:

In the absence of special agreement to the contrary, a subscriber for a certain number of shares of stock does not, upon payment of one-half of the subscription price, become entitled to the issuance of certificates for one-half of the number of shares subscribed for; the subscriber's right consists only in equity entitling him to a certificate for the total number of shares subscribed for by him upon payment of the remaining portion of the subscription price. The cited case connotes the principle that a partial payment of a subscription does not entitle the stockholder to a certificate for the total number of shares subscribed by him; his right consists only in equity to a certificate of the total number of shares subscribed for, upon payment of the remaining portion of the subscription price. In other words, it is contended, as in the present case, that if Baltazar subscribed to 600 shares of stock in a single subscription, and he merely paid for 300 shares, for which he was given fully paid certificates for 300 shares, he cannot vote said 300 shares, in any meeting of the Corporation, until he shall have paid the remaining 300 shares of stock. The saving clause in the quoted pronouncement, "in the absence of special agreement to the contrary," reveals that the doctrine is not mandatory, but merely directory, which is not violative of law, the rigor of the pronouncement may be relaxed. The plaintiffs-appellees seem to sustain an adverse concept, postulating that once a stockholder has subscribed to a certain number of shares, although he has made partial payments only, but is issued a certificate for the paid-up shares of stock, he is entitled to vote the whole number of shares subscribed by him, paid or not, until the said unpaid shares shall have been called for payment or declared delinquent. The cases at bar do not come under the aegis of the principle enunciated in the Fua Cun v. Summers case, because it was the practice and procedure, since the inception of the corporation, to issue certificates of stock to its individual subscribers for unpaid shares of stock and gave voting power to shares of stock fully paid. And even though no agreement existed, the ruling in said case, does not now reflect the correct view on the matter, for better than an agreement or practice, there is the law, which renders the said case of Fua Cun-Summers, obsolescent. Section 37 of the Corporation Law, as amended by Act No. 3518, approved on March 1, 1929, six (6) years after the promulgation of the Fua-Summers case (decided in 1923), provides: SEC. 37. ... . No certificate of stock shall be issued to a subscriber as fully paid up until the full par value thereof, or the full subscription in the case of no par stock, has been paid by him to the corporation. Subscribed shares not fully paid up may be voted provided no subscription is unpaid and delinquent. The law just quoted was originally section 36 of the Corporation Law of 1906, which reads as follows: SEC. 36. ... . No certificate of stock shall be issued to a subscriber as fully paid up until the full par value thereof has been paid by him to the corporation. Subscribed shares not fully paid up may be voted provided no subscription is unpaid and delinquent. As may readily be seen, said Section 37 makes payment of the "par value" as prerequisite for the issuance of certificates of par value stocks, and makes payment of the "full subscription" as

prerequisite for the issuance of certificates of no par value stocks. No such distinction was contained in section 36 of our Corporation Law of 1906, corresponding to section 37 now. The present law could have simply provided that no certificate of par value and no par value stock shall be issued to a subscriber, as fully paid up, until the full subscription has been paid by him to the corporation, if full payment of subscription were intended is the criterion in the issuance of certificates, for both the par value and no par value stocks. Stated in another way, the present law requires as a condition before a share holder can vote his shares, that his full subscription be paid in the case of no par value stock; and in case of stock corporation with par value, the stockholder can vote the shares fully paid by him only, irrespective of the unpaid delinquent shares. As well-observed by the trial court, a corporation may now, in the absence of provisions in their by-laws to the contrary, apply payment made by , subscribers-stockholders, either as: "(a) full payment for the corresponding number of shares of stock, the par value of each of which is covered by such payment; or (b) as payment pro-rata to each and all the entire number of shares subscribed for" (amended decision). In the cases at bar, the defendant-corporation had chosen to apply payments by its stockholders to definite shares of the capital stock of the corporation and had fully paid capital stock shares certificates for said payments; its call for payment of unpaid subscription and its declaration of delinquency for non-payment of said call affecting only the remaining number of shares of its capital stock for which no fully paid capital stock shares certificates have been issued, "and only these have been legally shorn of their voting rights by said declaration of delinquency" (amended decision). The third paragraph of the settlement agreement relates to interest on the unpaid balance of subscription to the capital stock. The second paragraph of resolution No. 3 (Exh. C-1), unilaterally declared as of no value and cancelled all capital stock shares certificates issued as fully paid up, upon payments made by stockholders, when interests on unpaid subscription from date of subscription were not previously and/or then and there paid. Defendants-appellants, invoking Art. 1253 NCC (Art. 1173 of the Old Civil Code) which provides that "if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered," and relying on an opinion of the Securities and Exchange Commission, claim that said unilateral nullification and/or cancellation of previously issued capital stock shares certificates was valid. This provision of law only applies in the absence of verbal or written agreement, to the contrary (8 Manresa, p. 317); it is likewise merely directory, and not mandatory. (Art. 1252 NCC). In the present case, the defendant-corporation had applied the payments made by the stockholders to the full par value of the shares of stock subscribed by them, instead of the accepted interest, as shown by the capital stock shares certificate issued for the payments made, and the stockholders had accepted such certificates issued for such payments. This being the case, the said application of payments must be deemed to have been agreed upon by the Corporation and the stockholders, and the same cannot now be changed without the consent of the stockholders concerned. The Corporation Law and the by-laws of the defendant Corporation do not contain any provision, prohibiting the application of stockholders' payments to the full par value of a corporation's capital stock, ahead of the payment of accrued interest for unpaid subscriptions. It would, therefore, result that a corporation may, upon request of an interested stockholder, as his option, apply payment by them to the full par value of shares of capital leaving its collection later of the accrued interest on unpaid subscriptions, and that once such option has been exercised and the corresponding stock certificates have been issued,

the corporation cannot, by a unilateral act, legally nullify and cancel the capital stock certificates so issued. It is finally argued by defendants-appellants that the plaintiffs-appellees waived, under the agreement heretofore quoted, the right to enforce the voting power they were claiming to exercise, and upon the principle of estoppel, they are now prohibited from insisting on the existence of such power, ending with the exhortation, that "they should lie upon the bed they helped built, for a lasting peace in the interest of the corporation." It should, however, be stated as heretofore exposed, that certain clauses of the agreement are contrary to law and public policy and would cause injury to plaintiffs-appellees and other stockholders similarly situated. Estoppel cannot be predicated on acts which are prohibited by law or are against public policy (Benguet Cons. Mining Co. v. Pineda, 52 Off. Gaz. 1961, L-7231, March 28, 1956; Eugenio v. Perdido L7083, May 19, 1955; III Rep. of the Philippines Digest, p. 269-270). WHEREFORE, the order of the trial court of July 16, 1959, (1) Expressly ruling "that all shares of the capital stocks of the defendant corporation covered by fully paid capital stock shares of certificates are entitled to vote in all meetings of the stockholders of this corporation and resolutions Nos. 2, 3 and 4 (Exhs. C, C-1 and C-2) of defendant corporation's Board of Directors are hereby nullified insofar as they are inconsistent with this ruling"; and (2) Dissolving the injunction granted in the cases and releasing the injunction bond filed by the plaintiffs-appellees, is correct and the same should be, as it is hereby affirmed. Costs taxed against the defendantsappellants.

Tam Wing Tak vs. Makasiar, 350 SCRA 475 , January 29, 2001 Case Title : TAM WING TAK, petitioner, vs. HON. RAMON P. MAKASIAR (in his Capacity as Presiding Judge of the Regional Trial Court of Manila, Branch 35) and ZENON DE GUIA (in his capacity as Chief State Prosecutor), respondents. Case Nature : PETITION for review on certiorari of a decision of the Regional Trial Court of Manila, Br. 35. Syllabi Class : Actions| Preliminary Investigation| Pleadings and Practice| Procedural Rules| Preliminary Investigation| Mandamus| Alternative Dispute Settlement| Corporation Law| Parties| Bouncing Checks| Derivative Suits| Public Prosecutors| Syllabi: 1. Actions; Pleadings and Practice; There is no generally accepted practice in the service of orders, resolutions, and processes, which allows service upon either the litigant or his lawyer as a rule, notice or service made upon a party who is represented by counsel is a nullity.+ 2. Actions; Pleadings and Practice; Procedural Rules; Preliminary Investigation; The Rules of Court were meant to govern court procedures and pleadings, and a preliminary investigation, notwithstanding its judicial nature, is not a court proceeding, thus, the rule on service of resolutions by public prosecutors, especially as the agency concerned, the Department of Justice, has its own procedural rules governing said service.+ 3. Actions; Pleadings and Practice; Procedural Rules; Preliminary Investigation; A plain reading of Section 2 of DOJ Order No. 223 clearly shows that in preliminary investigation, service can be made upon the party himself or through his counsel.+ 4. Actions; Mandamus; In general, mandamus may be resorted to only where ones right is founded clearly in law and not when it is doubtful.+ 5. Actions; Alternative Dispute Settlement; Efforts of parties to solve their disputes outside of the courts are looked on with favor, in view of the clogged dockets of the judiciary.+ 6. Actions; Corporation Law; Parties; Bouncing Checks; A person who is neither the payee nor a holder of a bad check has neither the personality to sue nor a cause of action against the drawer; A minority stockholder and member of the board of directors has no power or authority to sue on behalf of the corporation.+ 7. Actions; Corporation Law; Derivative Suits; Pleadings and Practice; For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the suit.+ 8. Preliminary Investigation; Public Prosecutors; A public prosecutor, by the nature of his office, is under no compulsion to file a criminal information where no clear legal justification has been shown, and no sufficient evidence of guilt nor prima facie case has been presented by the petitioner.+

Tam Wing Tak vs Ramon Makasiar

On February 22, 2013

Business Organization Corporation Law Ultra Vires Acts of Corporate Officers Derivative Suit

Sometime before November 1992, Vic Ang Siong issued a check to Concord-World Proeprties, Inc. The check amounted to P83.5 million. The check however bounced. In November 1992, Tam Wing Tak filed an affidavit-complaint for violation of the Anti-Bouncing Checks Law against Ang Siong. The fiscal did not file a criminal information against Ang Siong because apparently Concord-World and Ang Siong are settling out of court (in fact Ang Siong already paid P19 million); and that Tam Wing Tak was not authorized by the Board of Directors of Concord-World to sue Ang Siong. Tam Wing Tak then filed a petition for mandamus to compel the fiscal to file the information. Judge Ramon Makasiar dismissed the petition. ISSUE: Whether or not the petition should be granted. HELD: No. The petition for mandamus shall not lie. There was no grave abuse of discretion when the fiscal refused to file the information. Concord-World is the named payee in the check that bounced. As payee Concord-World is the injured party hence only Concord-World can file the criminal case against Ang Siong but it did not do so because it chose to amicably settle the issue with Ang Siong. Where a corporation is an injured party, its power to sue is lodged with its board of directors or trustees. This can be delegated but Tam Wing Tak never proved that he was authorized by the Board of Concord-World. But may the suit be considered a derivative suit where the Boards authorization may not be had? No. For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the suit. In this case, this was not complied with hence, Tam Wing Tak cannot sue Ang Siong. QUISUMBING, J.: This is a petition for review on certiorari of the decision of the Regional Trial Court of Manila, Branch 35, dated September 14, 1995, which dismissed herein petitioner's special civil action for mandamus and sustained the Letter-Order of respondent Chief State Prosecutor. The latter dismissed petitioner's appeal from the resolution of the City Prosecutor of Quezon City, which, in turn, dismissed petitioner's complaint against Vic Ang Siong for violation of the Bouncing Checks Law or B.P. Blg. 22. The factual background of this case is as follows: On November 11, 1992, petitioner, in his capacity as director of Concord-World Properties, Inc., (Concord for brevity), a domestic corporation, filed an affidavit-complaint with the Quezon City Prosecutor's Office, charging Vic Ang Siong with violation of B.P. Blg. 22. Docketed by the Prosecutor as I.S. No. 93-15886, the complaint alleged that a check for the amount of P83,550,000.00, issued by Vic Ang Siong in favor of Concord, was dishonored when presented for encashment.

Vic Ang Siong sought the dismissal of the case on two grounds: First, that petitioner had no authority to file the case on behalf of Concord, the payee of the dishonored check, since the firm's board of directors had not empowered him to act on its behalf. Second, he and Concord had already agreed to amicably settle the issue after he made a partial payment of P19,000,000.00 on the dishonored check.1wphi1.nt On March 23, 1994, the City Prosecutor dismissed I.S. No. 93-15886 on the following grounds: (1) that petitioner lacked the requisite authority to initiate the criminal complaint for and on Concord's behalf; and (2) that Concord and Vic Ang Siong had already agreed upon the payment of the latter's balance on the dishonored check. A copy of the City Prosecutor's resolution was sent by registered mail to petitioner in the address he indicated in his complaint-affidavit. Notwithstanding that petitioner was represented by counsel, the latter was not furnished a copy of the resolution. On June 27, 1994, petitioner's counsel was able to secure a copy of the resolution dismissing I.S. No. 93-15886. Counting his 15-day appeal period from said date, petitioner moved for reconsideration on July 7, 1994. On October 21, 1994, the City Prosecutor denied petitioner's motion for reconsideration. Petitioner's counsel received a copy of the denial order on November 3, 1994. On November 7, 1994, petitioner's lawyer filed a motion to extend the period to appeal by an additional 15 days counted from November 3, 1994 with the Chief State Prosecutor. He manifested that it would take time to communicate with petitioner who is a Hong Kong resident and enable the latter to verify the appeal as procedurally required. On November 8, 1994, petitioner appealed the dismissal of his complaint by the City Prosecutor to the Chief State Prosecutor. The appeal was signed by petitioner's attorney only and was not verified by petitioner until November 23, 1994. On December 8, 1994, the Chief State Prosecutor dismissed the appeal for having been filed out of time. Petitioner's lawyer received a copy of the letter-resolution dismissing the appeal on January 20, 1995. On January 30, 1995, petitioner moved for reconsideration. On March 9, 1995, respondent Chief State Prosecutor denied the motion for reconsideration. Petitioner then filed Civil Case No. 95-74394 for mandamus with the Regional Trial Court of Quezon City to compel the Chief State Prosecutor to file or cause the filing of an information charging Vic Ang Siong with violation of B.P. Blg. 22. On September 14, 1995, the trial court disposed of the action as follows:

WHEREFORE, for utter lack of merit, the petition for mandamus of petitioner is DENIED and DISMISSED. SO ORDERED.1 Petitioner moved for reconsideration, but the trial court denied this motion in its order dated October 24, 1995. Hence, the instant petition. Before this Court, petitioner claims respondent judge committed grave errors of law in sustaining respondent Chief State Prosecutor whose action flagrantly contravenes: (1) the established rule on service of pleadings and orders upon parties represented by counsel; (b) the basic principle that except in private crimes, any competent person may initiate a criminal case; and (3) the B.P. Blg. 22 requirement that arrangement for full payment of a bounced check must be made by the drawer with the drawee within five (5) banking days from notification of the check's dishonor.2 We find pertinent for our resolution the following issues: (1) Was there valid service of the City Prosecutor's resolution upon petitioner? (2) Will mandamus lie to compel the City Prosecutor to file the necessary information in court? In upholding respondent Chief State Prosecutor, the court a quo held: It is generally accepted principle in the service of orders, resolutions, processes and other papers to serve them on the party or his counsel, either in his office, if known, or else in the residence, also if known. As the party or his counsel is not expected to be present at all times in his office or residence, service is allowed to be made with a person in charge of the office, or with a person of sufficient discretion to receive the same in the residence. In the case under consideration, it is not disputed that the controverted Resolution dismissing the complaint of the petitioner against Vic Ang Siong was served on the former by registered mail and was actually delivered by the postmaster on April 9, 1994 at said petitioner's given address in the record at No. 5 Kayumanggi Street, West Triangle, Quezon City. The registered mail was in fact received by S. Ferraro. The service then was complete and the period for filing a motion for reconsideration or appeal began to toll from that date. It expired on April 24, 1994. Considering that his motion for reconsideration was filed only on July 7, 1994, the same was filed beyond the prescribed period, thereby precluding further appeal to the Office of the respondent.3 Petitioner, before us, submits that there is no such "generally accepted practice" which gives a tribunal the option of serving pleadings, orders, resolutions, and other papers to either the opposing party himself or his counsel. Petitioner insists that the fundamental rule in this jurisdiction is that if a party appears by counsel, then service can only be validly made upon

counsel and service upon the party himself becomes invalid and without effect. Petitioner relies upon Rule 13, Section 2 of the Rules of Court4 and our ruling in J.M. Javier Logging Corp. v. Mardo, 24 SCRA 776 (1968) to support his stand. In the J.M. Javier case, we held: [W]here a party appears by attorney, notice to the former is not a notice in law, unless service upon the party himself is ordered by the court5 The Solicitor General, for respondents, contends that the applicable rule on service in the present case is Section 2 of the Department of Justice (DOJ) Order No. 223,6 which allows service to be made upon either party or his counsel. Respondents argue that while a preliminary investigation has been considered as partaking of the nature of a judicial proceeding,7 nonetheless, it is not a court proceeding and hence, falls outside of the ambit of the Rules of Court. We agree with petitioner that there is no "generally accepted practice" in the service of orders, resolutions, and processes, which allows service upon either the litigant or his lawyer. As a rule, notice or service made upon a party who is represented by counsel is a nullity,8 However, said rule admits of exceptions, as when the court or tribunal order service upon the party9 or when the technical defect is waived.10 To resolve the issue on validity of service, we must make a determination as to which is the applicable rule the on service in the Rules of Court, as petitioner insists or the rule on service in DOJ Order No. 223? The Rules of Court were promulgated by this Court pursuant to Section 13, Article VII of the 1935 Constitution11 (now Section 5 [5], Article VIII of the Constitution)12 to govern "pleadings, practice and procedure in all courts of the Philippines." The purpose of the Rules is clear and does not need any interpretation. The Rules were meant to govern court (stress supplied) procedures and pleadings. As correctly pointed out by the Solicitor General, a preliminary investigation, notwithstanding its judicial nature, is not a court proceeding. The holding of a preliminary investigation is a function of the Executive Department and not of the Judiciary.13 Thus, the rule on service provided for in the Rules of Court cannot be made to apply to the service of resolutions by public prosecutors, especially as the agency concerned, in this case, the Department of Justice, has its own procedural rules governing said service. A plain reading of Section 2 of DOJ Order No. 223 clearly shows that in preliminary investigation, service can be made upon the party himself or through his counsel. It must be assumed that when the Justice Department crafted the said section, it was done with knowledge of the pertinent rule in the Rules of Court and of jurisprudence interpreting it. The DOJ could have just adopted the rule on service provided for in the Rules of Court, but did not. Instead, it opted to word Section 2 of DOJ Order No. 223 in such a way as to leave no doubt that in preliminary investigations, service of resolutions of public prosecutors could be made upon either the party or his counsel. Moreover, the Constitution provides that "Rules of procedure of special courts and quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court."14 There is naught in the

records to show that we have disapproved and nullified Section 2 of DOJ Order No. 223 and since its validity is not an issue in the instant case, we shall refrain from ruling upon its validity. We hold that there was valid service upon petitioner pursuant to Section 2 of DOJ Order No. 223. On the issue of whether mandamus will lie. In general, mandamus may be resorted to only where one's right is founded clearly in law and not when it is doubtful.15 The exception is to be found in criminal cases where mandamus is available to compel the performance by the public prosecutor of an ostensibly discretionary function, where by reason of grave abuse of discretion on his part, he willfully refuses to perform a duty mandated by law.16 Thus, mandamus may issue to compel a prosecutor to file an information when he refused to do so in spite of the prima facie evidence of guilt.17 Petitioner takes the stance that it was grave abuse for discretion on the part of respondent Chief State Prosecutor to sustain the dismissal of I.S. No. 93-15886 on the grounds that: (1) Vic Ang Siong's obligation which gave rise to the bounced check had already been extinguished by partial payment and agreement to amicably settle balance, and (2) petitioner had no standing to file the criminal complaint since he was neither the payee nor holder of the bad check. Petitioner opines that neither ground justifies dismissal of his complaint. Petitioner's stand is unavailing. Respondent Chief State Prosecutor in refusing to order the filing of an information for violation of B.P. Blg. 22 against Vic Ang Siong did not act without or in excess of jurisdiction or with grave abuse of discretion. First, with respect to the agreement between Concord and Victor Ang Siong to amicably settle their difference, we find this resort to an alternative dispute settlement mechanism as not contrary to law, public policy, or public order. Efforts of parties to solve their disputes outside of the courts are looked on with favor, in view of the clogged dockets of the judiciary. Second, it is not disputed in the instant case that Concord, a domestic corporation, was the payee of the bum check, not petitioner. Therefore, it is Concord, as payee of the bounced check, which is the injured party. Since petitioner was neither a payee nor a holder of the bad check, he had neither the personality to sue nor a cause of action against Vic Ang Siong. Under Section 36 of the Corporation Code18, read in relation to Section 23,19 it is clear that where a corporation is an injured party, its power to sue is lodged with its board of directors or turstees.20 Note that petitioner failed to show any proof that he was authorized or deputized or granted specific powers by Concord's board of director to sue Victor And Siong for and on behalf of the firm. Clearly, petitioner as a minority stockholder and member of the board of directors had no such power or authority to sue on Concord's behalf. Nor can we uphold his act as a derivative suit. For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the suit.21 There is no showing that petitioner has complied with the foregoing requisites. It is obvious that petitioner has not shown any clear legal right which would warrant the overturning of the decision of public respondents to dismiss the complaint against Vic Ang Siong. A public

prosecutor, by the nature of his office, is under no compulsion to file a criminal information where no clear legal justification has been shown, and no sufficient evidence of guilt nor prima facie case has been presented by the petitioner.22 No reversible error may be attributed to the court a quo when it dismissed petitioner's special civil action for mandamus.1wphi1.nt WHEREFORE, the instant petition is DISMISSED for lack of merit. Costs against petitioner. SO ORDERED.

R.N. Symaco Trading Corporation vs. Santos, 467 SCRA 312 , August 18, 2005 Case Title : R.N. SYMACO TRADING CORPORATION and/or NORMA SYMACO, ESTATE OF MARIANO GUISON, petitioners, vs. LUISITO T. SANTOS, for and in behalf of the MALABON FISH BROKERS ASSOCIATION, INC., respondent. Case Nature : PETITION for review on certiorari of the decision of the Court of Appeals. Syllabi Class : Corporation Law| Actions| Derivative Suits| Syllabi: 1. Corporation Law; Actions; Derivative Suits; The whole purpose of the law authorizing a derivative suit is to allow the stockholder/member to enforce rights which are derivative (secondary) in nature. A derivative action is a suit by a shareholder/member to enforce a corporate cause of action.+ 2. Corporation Law; Actions; Derivative Suits; All the Malabon Fish Brokers Association, Inc. (MFBAI) members are not indispensable parties in a derivative suitit is enough that a member or a minority of such members file a derivative suit for and in behalf of the corporation, after all, the members/stockholders who file a derivative suit are merely nominal parties, the real partyin-interest being the corporation itself for and in whose behalf the suit is filed. Any monetary benefits under the decision of the court shall pertain to the corporation.+ Respondent Malabon Fish Brokers Association, Inc. (MFBAI) was a non-stock corporation established to erect and operate the Malabon Fish Brokers Association Fish Market, aimed at promoting the economic welfare of its members in their business of buying and selling fish and other marine products.1 Linda Sioson was elected as treasurer of the corporation. On April 30, 1980, Mariano Guison, as lessor, and the MFBAI, as lessee, executed a contract of lease over a portion of five parcels of land located in Malabon, Metro Manila. Included in the lease agreement was a portion of his property occupied by Rudy Symaco along Estrella Street, Malabon, Metro Manila. The lease was for a period of ten years from the execution of the contract, renewable on such terms as agreed upon by the parties, provided that the rentals shall not be increased in excess of 500% of the monthly rate agreed upon. As provided in the contract, the lessee paid P28,000.00 upon its execution as advance rentals for four years, and a monthly rental of P600.00 to be paid thereafter.2 The MFBAI, thus, constructed the market on the leased property where its members installed their respective stalls. On August 13, 1983, a group of MFBAI members, led by Marcos Valle, Jr., approved the corporations By-Laws. On August 18, 1983, another set of MFBAI members, led by Lino Buhain, met and amended the By-Laws which the Securities and Exchange Commission (SEC) approved on September 7, 1983. However, Valle, Jr. and ten others filed a petition with the SEC against Buhain, et al. for the nullification of the amended By-Laws; to give due course to the By-Laws approved on August 13, 1983; and to declare them (Valle, Jr., et al.) as the duly-established members of the corporations Board of Directors.3 The case was docketed as SEC Case No. 2521.

On May 8, 1987, the SEC Hearing Officer rendered a Decision4 ordering the dismissal of the petition, and directing the hold-over officers to call for a membership meeting to elect the new Board of Directors and Officers of the Malabon Fish Brokers Association, Inc. within 30 days from finality of the decision. According to the hearing officer, from its incorporation, the MFBAI had only 35 legitimate members,5 and respondent Luisito T. Santos was not listed as one of them. The decision was appealed to the SEC, docketed as SEC-AC No. 205, which was, however, dismissed on November 2, 1988.6 This prompted Valle, Jr., et al. to elevate the decision to the Court of Appeals (CA) via petition for review. Meanwhile, Mariano Guison died intestate. On April 30, 1990, the Heirs of Mariano Guison and petitioner Norma Symaco, then President and Chairman of the Board of Directors of petitioner R.N. Symaco Trading Corporation (Symaco Corporation), executed an unnotarized contract of lease over a portion of the property previously leased to MFBAI. Two rows of 25 stalls each, with a path in between, had been installed on the leased premises; there was also another perpendicular road which intersected with Estrella Street. This latter area, consisting of about 5,978 square meters, was then occupied by the MFBAI.7 The contract, which took effect on May 1, 1990, was for a four-year period, renewable under the same terms and conditions, except as to the amount of rentals.8 The parties also agreed on the following: "2. The monthly rental of the premises shall be TWENTY FIVE THOUSAND (P25,000.00) PESOS, PROVIDED that upon signing of this Agreement, the LESSEE shall pay the LESSOR an advance rental equivalent to the First (1st) year, or THREE HUNDRED THOUSAND (P300,000.00) PESOS, and PROVIDED furthermore, that on May 1, 1990, the LESSEE shall again pay the LESSOR in advance, the rental for the second (2nd) year or another sum of THREE HUNDRED THOUSAND (P300,000.00) PESOS less the ONE HUNDRED THOUSAND (P100,000.00) PESOS, which the LESSEE had advanced to the LESSOR on March 14, 1987.9 Norma Symaco was then also a member of the MFBAI Board of Directors. Symaco Corporation had the stallholders evicted from the market, and filed a complaint for forcible entry against them with the Metropolitan Trial Court (MeTC) of Malabon, Branch 55. On October 4, 1990, the MeTC issued a writ of preliminary mandatory injunction against the defendants. It rendered judgment in favor of the plaintiff corporation on October 11, 1990.10 On May 31, 1990, the CA rendered judgment affirming the SEC decision in SEC Case No. 2521. The decision became final and executory.11 On October 29, 1990, respondent Santos, for and in behalf of the MFBAI, filed a complaint for the annulment of the April 30, 1990 Contract of Lease between the Heirs of Mariano Guison and defendant Symaco Corporation, with injunctive relief, against petitioners Estate of Mariano Guison, Symaco Corporation, and Norma Symaco in the Regional Trial Court (RTC) of Malabon.

Respondent Santos alleged, inter alia, that as an MFBAI member, he was a nominal party; he filed the derivative suit for and in behalf of MFBAI. He further alleged that the April 30, 1990 Contract of Lease executed by the defendants was null and void since it was executed by Symaco Corporation, through Norma Symaco, who was the president and chairman of the Board of Directors of the said corporation and still a member of the MFBAI Board of Directors; hence, the contract was executed in violation of the principle of corporate opportunity under Sections 31 and 34 of the Corporation Code of the Philippines. It was also pointed out that Symaco Corporation was actually owned by Norma Symacos family. It was, likewise, stated that the MFBAI failed to provide market stalls for its members on account of the April 30, 1990 Contract of Lease between Symaco Corporation and the Heirs of Mariano Guison. Moreover, the complaint was filed since the officials of the corporation, by their pronouncements and actions, had virtually accepted the April 30, 1990 Contract of Lease, thereby leaving no room for redress within the corporation itself. The complaint contained the following prayer: WHEREFORE, it is most respectfully prayed that: 1. The second lease contract between the Defendant Corporation and the Defendant Estate, which is evidenced by Annex B hereof, be annulled and set aside; 2. The Defendant Estate be directed to execute a new contract over the aforesaid leased premises in favor of the Plaintiff Corporation; 3. In the meantime that this action is pending, a temporary restraining order or a writ of preliminary injunction be issued stopping the Defendants or any other person acting under them from enforcing, in any manner, the second lease contract (Annex B hereof), and, after hearing, to make this injunction permanent. Plaintiff prays for such other just and equitable remedies proper under the premises.12 The petitioner Estate opposed the respondents plea for injunctive relief, alleging that Santos had filed the complaint simply because Patricinio Gaddi and spouses Emmanuel and Angelina Cruz, the sublessees of his stall in the fish market, had been evicted based on the MTC decision in Civil Case No. 057-90. During the hearing of the MFBAIs plea for injunction, Santos testified and declared that he was a member of the said corporation. A market was constructed on the leased property, where he leased Stall No. 39, but Symaco Corporation had him evicted. When the contract of lease between Mariano Guison and MFBAI expired, he asked the corporate secretary, Brigida Bautista, why it was not renewed, and he was told that nothing could be done about it. He also inquired from other officers, to no avail. He admitted that he was not aware of any meeting of the MFBAI Board of Directors regarding the renewal of the contract of lease. He thus decided to file the complaint in behalf of MFBAI.

Restituto Santos testified that Lino Buhain even issued a certification that his son, Luisito T. Santos, was member of MFBAI.13 In opposition to the motion for a writ of preliminary injunction, the petitioners presented Linda Sioson, MFBAI treasurer since 1979 to 1990. She testified that although Santos had been a member of the MFBAI, he was able to pay his membership fee and monthly dues only from August 1983 to February 1984, and a part of March 1984, and never offered to pay his dues despite reminders.14 Lino Buhain testified that the MFBAI failed to pay its rentals over the subject property for four years because of a dispute (between his group and that of Marcos Valle, Jr.) as to who were its legitimate members and officers; its members likewise failed to pay their membership dues. Nonetheless, the MFBAI was able to build a fish market on the property and leased the stalls therein to its members. On July 9, 1985, a Deed of Assignment over its leasehold rights under its contract of lease was executed by Mariano Guison to the MFBAI, represented by its president, Luzviminda Francisco. On April 9, 1990, the corporation received a letter from the Heirs of Mariano Guison informing it that the contract of lease would not be renewed. Petitioner Norma Symaco testified that the defendant corporation was established in 1986 to engage in the business of leasing stalls. She further stated that MFBAI could not renew its contract of lease with Mariano Guison because it had failed to pay rentals over the property for six years, since its members were not paying their monthly dues. The corporate secretary, Brigida Bautista, tried to collect the dues from the members, to no avail. Moreover, there was an internal struggle between two factions of its members. She clarified that Symaco Corporation leased a portion of the property from the petitioner Estate only after it decided not to renew the lease contract with the MFBAI upon its expiry, and that the said corporation had likewise paid advance rentals of P100,000.00 to the Heirs of Mariano Guison. In the meantime, 22 stallholders of the fish market, some of whom were MFBAI members, sought to intervene, seeking the same reliefs prayed for by the latter. The petitioner Estate opposed the intervention on the ground that, the plaintiff had earlier filed a complaint with the RTC of Malabon City, docketed as Civil Case No. 1571, against the same defendants (Lino Buhain and Linda Sioson), praying for the same reliefs, plus damages; hence, the intervention filed for harassment purposes. Nevertheless, the court allowed the intervenors to intervene, and admitted the complaint-in-intervention.15 On their evidence-in-chief, petitioners Norma Symaco and Symaco Corporation offered in evidence the decisions of the Hearing Officer in SEC Case No. 2521, the SEC in SEC-AC No. 205, and that of the CA.16 The petitioners also offered in evidence the testimonies of Guison, Buhain, Bautista and Norma Symaco during the hearing of the plea for a writ of preliminary injunction, as well as the letters of the petitioner Estates counsel, dated April 9 and 16, 1990, addressed to Lino Buhain, as evidence.17 The defendants Norma Symaco and Symaco Corporation adduced in evidence the Deed of Assignment dated July 9, 1985, where the leasehold rights over the property were turned over to Tony Francisco,18 and the letters of the counsel of Mariano Guisons Estate addressed to the

plaintiff, through Lino Buhain, informing the latter that the Estate had decided not to renew the contract of lease after its expiry.19 The court admitted all the documentary exhibits of the petitioners. The parties did not adduce any other further evidence on evidence-in-chief. In their answer to the complaint, the petitioners specifically denied the allegation that (a) Luisito T. Santos was a member of MFBAI and as such, had no standing to file the complaint for and in its behalf; (b) the petitioner Estate could not be compelled to execute a contract of lease in favor of MFBAI after the expiry of the 1980 Contract of Lease; and (c) petitioner Norma Symaco was not personally liable for the execution of the 1990 Contract of Lease. On September 27, 1993, the trial court rendered judgment in favor of the petitioners. The fallo of the decision reads: WHEREFORE, in view of the foregoing, the complaint and complaint-in-intervention are hereby dismissed for lack of merit. On defendants compulsory counterclaim, the plaintiffs are ordered to pay the sum of Ten Thousand (P10,000.00) Pesos to each counsel for the defendants for and as attorneys fees and the costs of suit. SO ORDERED.20 The court ruled that, based on the decisions of the SEC Hearing Officer, the SEC and the CA on appeal, Santos and most of the intervenors were not bona fide members of the MFBAI; hence, they had no cause of action against the petitioners. It also ruled that Norma Symaco did not violate the doctrine of corporate opportunity. The private respondent and intervenors appealed the decision to the CA, wherein it averred that I. THE COURT A QUO ERRED IN HOLDING THAT THE DEFENDANTS NORMA SYMACO AND/OR R.N. SYMACO TRADING CORP. DID NOT VIOLATE THE DOCTRINE OF CORPORATE OPPORTUNITY. II. THE COURT A QUO, WHILE HOLDING THAT THE CONTRACT OF LEASE BETWEEN DEFENDANTS R.N. SYMACO TRADING WITH DEFENDANT ESTATE IS VALID, ERRED IN NOT ORDERING SYMACO TO PAY THE PLAINTIFFS DAMAGES. III. THE COURT A QUO ERRED IN HOLDING THAT THE PLAINTIFF LUISITO SANTOS AND THE INTERVENORS CANNOT BRING A DERIVATIVE SUIT FOR AND IN BEHALF OF THE MALABON FISH BROKERS ASSOCIATION, INC.21 The intervenors failed to file their respective briefs as appellees before the CA. As a consequence, the appellate court dismissed the intervenors appeal.22

On May 21, 1997, the CA rendered judgment reversing the decision of the RTC. The fallo of the decision reads: WHEREFORE, the Decision dated December 27, 1993, of the court a quo is hereby reversed and SET ASIDE and a new judgment is entered ordering appellee Norma T. Symaco to render an accounting to [the] appellant of all the profits acquired by [the] appellees during the five years that appellee R.N. Symaco Trading was the lessee of the subject property from 1990 to 1995. The records of the case are remanded to the court a quo which is directed to hear the accounting proceedings and thereafter to decide the case on the basis of the results of the accounting.23 The CA held that as early as 1987, Norma Symaco had negotiated with the Heirs of Mariano Guison for the lease of the property; hence, she was guilty of violating the doctrine of corporate opportunity. The appellate court failed to rule on the issue of whether Santos was a member of MFBAI or not. The petitioners then filed a motion for the reconsideration of the decision, alleging that: a.) The Honorable Court, with all due respects, erred in giving due course to the appeal, despite the lack of personality and authority of Luisito Santos to initiate the same as a derivative suit, being a non-member of MFBAI and the abandonment and dismissal of the appeal of the intervenors; b.) The Honorable Court, with all due respects, erred in its findings that defendant-appellee Norma Symaco negotiated for the lease of the subject property for RN Symaco in 1987, while the lease with MFBAI was still subsisting; c.) The Honorable Court, with all due respects, erred in holding defendant-appellee Norma T. Symaco liable for violation of the doctrine of corporate opportunity.24 They also alleged that Santos was not a member of the MFBAI; hence, he "had no legal personality" and "no authority" to appeal the RTC decision. They averred that petitioner Norma Symaco did not violate the doctrine of corporate opportunity because: a) As early as 1985, the MFBAI is (sic) already in shambles. It is (sic) in total disarray, with the members feuding, with two sets of officers, and with two persons claiming to be President of the corporation leading to several cases filed by the officers against each other. (TSN, Lino Buhain, March 1, 1991, Pages 56-60) b) MFBAI has NOT paid its rentals from 1984 up to the expiration of the contract in 1990. Stated otherwise, the MFBAI was only able to pay for 4 years out of a 10-year contract. (TSN, Norma Symaco, January 15, 1992, Pages 18, 35, 38 & 39) Although the President of MFBAI, Lino Buhain insists that MFBAI failed to pay rentals only for a period of 4 years. (TSN, Lino Buhain, March 1, 1991, Pages 38, 50 & 51)

c) Defendant-appellant Norma T. Symaco leased only a PORTION of the original property leased by MFBAI, while the other half is being leased by a certain Tony Francisco of New Malabon Corporation, who is not even a member of MFBAI. (TSN, Norma T. Symaco, January 15, 1992, Pages 23, 43 & 44) (TSN, Lino Buhain, March 1, 1991, Pages 77 & 78) d) Guizon (sic) Estate, through counsel, sent a letter to the MFBAI President Lino Buhain on April 9, 1990, notifying MFBAI that they are no longer interested in renewing their contract. (Exh. 2-Guizon Injunction; Exh. 3-Symaco Injunction and TSN, Lino Buhain, Mar. 1, 1991, P. 52)25 On March 20, 1998, the CA issued a Resolution26 granting the motion for reconsideration; it set aside its decision and affirmed that of the RTC. The appellate court declared that when it rendered its initial ruling, it had no full view of the appeal because of the respondents failure to file their Brief. Relying on the decisions of the SEC Hearing Officer and the SEC, the appellate court ruled that Santos was not a member of MFBAI; hence, he had no standing to file a complaint for and in behalf of the said corporation. This time, the respondent filed a motion for reconsideration of the CA Resolution. On February 21, 2000, the CA granted the motion and rendered an Amended Decision, this time, in favor of the respondent. The fallo of the amended decision reads: WHEREFORE, the Motion for Reconsideration filed by plaintiff-appellant is hereby given due course, the Resolution dated March 20, 1998 is hereby REVERSED AND/OR REVIVING Our Decision dated May 21, 1997 with modification which reversed and SET ASIDE the Decision dated September 27, 1993 of the court a quo. Accordingly, defendant-appellee Norma T. Symaco is hereby ordered to render an accounting to this Court of all the profits acquired by appellees during the five years that appellee RN Symaco Trading was the lessee of the subject property from 1990 to 1995 and thereafter to turn over said profits to herein plaintiffs-appellants. SO ORDERED.27 The appellate court ruled that based on the respondents claim in SEC Case No. 2521, the MFBAI had 42 legitimate members, including the 35 original members and respondent Santos; moreover, the RTC resolved that Santos was a member. The petitioners were bound by the said evidence and were estopped from claiming that Santos was not a member. Hence, Santos had the standing to file the complaint with the RTC "for and in behalf of the appellant". The CA further held that Norma Symaco violated the principle of corporate opportunity, and that the other members/stockholders of MFBAI should be impleaded as parties to the suit. The petitioners filed the instant petition for review on certiorari under Rule 45 of the Rules of Court, as amended, raising the following issues: 1. Whether respondent Luisito T. Santos was a bona fide member of the respondent corporation;

2. Whether the petitioners are estopped from assailing the membership of Luisito T. Santos in the respondent corporation; 3. Whether the case filed by Luisito T. Santos is a derivative suit, for and in behalf of the respondent corporation; 4. Whether the other members of the respondent corporation should be impleaded as partiesrespondents; and 5. Whether the petitioners violated the principle of corporate opportunity. On the first three issues, the petitioners aver that, as gleaned from the Hearing Officers Decision in SEC Case No. 2521, the Decision in SEC-AC No. 205, and the CA ruling, Santos was not a member of MFBAI. Any admission made by Lino Buhain in the SEC could not bind it, unless approved by its board of directors or majority of its members. The petitioners insist that estoppel will apply only when the party who relied on the admissions of another seeks only to enforce a purely private right or private interest, and not when an action is to enforce a corporate right. They claim that respondent Santos action was not a derivative suit, and that the complaint he filed was premature, considering that he failed to seek redress from MFBAI first before filing the complaint. For his part, respondent Santos avers that the petitioners are estopped from claiming in the CA, and in this case, that he is not a member of the respondent MFBAI. He insists that the RTC declared in its decision that, based on the petitioners (therein defendants) evidence, he was such a member. The ruling of the CA is erroneous. As gleaned from the decision of the Hearing Officer in SEC Case No. 2521, there were 35 original members of the respondent MFBAI, including petitioner Norma Symaco. Respondent Luisito Santos is not one of them, and failed to testify for or against any of the parties therein. While it is true that Lino Buhain and the other respondents therein claimed that the MFBAI had 42 members, including the original members, the Hearing Officer declared that such claim was not proven: On the other hand, while the respondents claimed that MFBAI has forty-two (42) members, including the thirty-five (35) original members therein, this fact was, likewise, not proven during the trial. As regards Virgilio Sarmiento, who is one of the incorporators/directors of MFBAI whose name does not appear in the aforesaid list of members, there was no showing that his membership therein has been terminated in one way or another. Hence, We find that since its incorporation, MFBAI has not accepted any new member and, therefore, it has only thirty-five (35) legitimate members including that of Virgilio Sarmiento. The second and third issues are quite interrelated and thus can be resolved jointly.

From the evidence on hand, it appears that there was but one meeting for the election of the members of the board of directors and officers of MFBAI that took place in 1983 and that was the alleged membership meeting conducted by the petitioners group held on August 13, 1983. Said meeting, however, was not attended by the majority of the aforesaid thirty-five (35) legitimate members of MFBAI; hence, there was no quorum (Section 52, Code). In fact, most of those present then were non-members. Therefore, since there was no quorum, it follows that all actions taken in said meeting, including the alleged adoption of the by-laws by the petitioners group, are not valid. On the contrary, the respondents have categorically stated, in their answer, that the organizational meeting for the election of the members of the Board of Directors and Officers of MFBAI, which was supposed to be held on September 17, 1983, did not proceed. Accordingly, We hold that since there were no legally elected directors and officers of MFBAI for the year 1983, and the by-laws purportedly adopted on August 13, 1983, filed by the petitioners, has not been legally adopted and approved by the general membership of MFBAI since the meeting of the sixty-four (64) alleged members held on August 13, 1983 was not valid. Anent the fourth issue, our records show that the By-Laws of MFBAI was adopted by the majority of its members on August 18, 1983, certified to by a majority of the original members of its Board of Directors and countersigned by its Corporate Secretary, Brigida Bautista. Said By-Laws was filed with, and approved by, the Commission on September 7, 1983 pursuant to the provisions of Section 46 of the Code. We do not agree with petitioners claim that MFBAIs By-Laws which was filed by the respondents has not been approved and adopted by the affirmative vote of at least a majority of all the members of MFBAI. Petitioners would have been correct in their contention had there been either sixty-four (64) or forty-two (42) MFBAI members at the time of the adoption of the said By-Laws. That is so since the signatories in said By-Laws are only twenty-one (21) members. But that is not the case. The Commission has already ruled that from the time of its inception up to this moment, MFBAI has only thirty-five (35) legitimate members and the clear majority of which is eighteen (18) members. Besides, the presumption of the validity and regularity in the adoption of the said By-Laws lies in favor of the respondents. The petitioners failed to disprove said presumption.28 The SEC Hearing Officer concluded that from its inception, the MFBAI had not accepted any new member and, therefore, it had only 35 legitimate members, including Virgilio Sarmiento.29 The Hearing Officer also ruled that: Consistent with our rulings, the Members of the Board of Directors appearing in the Articles of Incorporation of MFBAI shall hold office until their successors are elected and qualified. As regards the officers of MFBAI, respondents Lino Buhain and Brigida Bautista shall act as President and Secretary of MFBAI, respectively, since they were duly recognized by the majority of the said members of the Board of Directors appearing in the Articles of Incorporation as shown by the Certification accompanying MFBAIs By-Laws and the Minutes of the Meeting held on August 18, 1983, the date when the By-Laws of MFBAI was adopted by the majority of its members. Respondent Erlinda Sioson shall act as Treasurer, being the designated Treasurer

whose name appears in the Articles of Incorporation. These three (3) officers shall, likewise, hold their respective offices until their successors are elected and qualified.30 This ruling was affirmed by the SEC on appeal. For its part, the CA affirmed the rulings of the Hearing Officer and the SEC on appeal, as follows: The thirty (30) alleged members were not original members of the association. They showed up later on, i.e., long after the incorporation, and they failed to comply with the requirements laid down in the by-laws aforementioned. They were never accepted as members even informally by the association. Their acceptance as members could not be done by the president alone, let alone by Marcos Valle whose position as president has been successfully assailed here. There was no quorum in the said meeting held on August 13, 1983 because those thirty (30) persons who attended were non-members; and whatever was agreed upon in said meeting was null and void.31 In its Amended Decision, the appellate court relied on the statement in the RTC decision, that the petitioners (defendants therein) adduced evidence that Santos was an MFBAI member. This reliance is misplaced. The CA failed to consider the RTC decision in its entirety and the ratio decidendi of the ruling. As gleaned from the said decision, the RTC ruled in favor of the petitioners (defendants therein), and relied on the decisions of the Hearing Officer, the SEC on appeal and the CA; the trial court did not rely on the parties evidence aliunde.32 In fine, the RTC correctly considered the decisions of the Hearing Officer, the SEC and the CA on appeal as conclusive and binding on it, prescinding from the parties evidence aliunde. Indeed, the testimonial and documentary evidence of the petitioners and the respondent cannot prevail over the decisions of the Hearing Officer, the SEC and the CA. The respondent was proscribed from attacking the said decision either directly or collaterally in the RTC. It may not be amiss to observe that the erroneous amended decision of the CA was precipitated in part by the petitioners, when they adduced testimonial and documentary evidence that Santos was a member of the respondent, but that he failed to pay his monthly dues from March 1984. The evidence on record showing that Santos paid the membership fee and his monthly dues up to March 1984 and was certified as a member by Lino Buhain is not sufficient to qualify him as such member under the By-laws of respondent MFBAI. The Court also agrees with the petitioners contention that as respondent Santos was not a legitimate MFBAI member, he had no standing to file a derivative suit for and in its behalf. One of the requisites of a derivative suit is that the party bringing the suit should be a stockholder/member at the time of the action or transaction complained of.33 The right to sue derivatively is an attribute of corporate ownership which, to be exercised, requires that the injury alleged be indirect as far as the stockholders/members are concerned, and direct only insofar as the corporation is concerned. The whole purpose of the law authorizing a derivative suit is to allow the stockholder/member to enforce rights which are derivative (secondary) in nature.34 A derivative action is a suit by a shareholder/member to enforce a corporate cause of action.35

The Court notes that several MFBAI members, like Brigida Baustista, Jose Cruz, Constantino Lopez, Eduardo del Rosario, Rogelio Vicente, Araceli Banaag and Rosalinda Reyes, intervened as plaintiffs. However, they failed to file their Brief in the CA, which impelled the appellate court to dismiss their appeal. The resolution of the court, likewise, became final and executory. The Court also agrees with the petitioners contention that the CA erred in ordering that all the original members of the MFBAI should be impleaded as parties in respondent Santos complaint. Contrary to the CA ruling, all the MFBAI members are not indispensable parties in a derivative suit. It is enough that a member or a minority of such members file a derivative suit for and in behalf of the corporation. After all, the members/stockholders who filed a derivative suit are merely nominal parties, the real party-in-interest being the corporation itself for and in whose behalf the suit is filed.36 Any monetary benefits under the decision of the court shall pertain to the corporation.37 In light of the foregoing, there is no longer a need for the Court to still resolve the other issues that were raised in the petition. WHEREFORE, PREMISES CONSIDERED, the petition is GRANTED. The Amended Decision of the Court of Appeals in CA-G.R. CV No. 43425 dated February 21, 2000 is REVERSED AND SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 51 in Civil Case No. 90-54960, as affirmed by the CA in its Resolution dated March 20, 1998, is AFFIRMED. No costs. SO ORDERED.

Republic vs. Estate of Hans Menzi, 476 SCRA 20 , November 23, 2005 Case Title : REPUBLIC OF THE PHILIPPINES, Represented by the Presidential Commission on Good Government, petitioner, vs. ESTATE OF HANS MENZI (Through its Executor, MANUEL G. MONTECILLO), EMILIO T. YAP, EDUARDO M. COJUANGCO, JR., ESTATE OF FERDINAND MARCOS, SR., and IMELDA R. MARCOS, respondents., EDUARDO M. COJUANGCO, JR., petitioner, vs. REPUBLIC OF THE PHILIPPINES, respondent., ESTATE OF HANS M. MENZI (Through its Executor, MANUEL G. MONTECILLO), and HANS M. MENZI HOLDINGS AND MANAGEMENT, INC. (HMHMI), petitioners, vs. REPUBLIC OF THE PHILIPPINES, (represented by the PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT), respondents. Case Nature : PETITIONS for review on certiorari of a decision of the Sandiganbayan. Syllabi Class : Corporation Law| Appeals| Evidence| Ill-Gotten Wealth| Damages| Stock Certificates| Transfer of Ownership| Burden of Proof| Affirmative Defenses| Pleadings and Practice| Words and Phrases| Corporation Code| Presidential Commission on Good Government (PCGG)| Sequestration| Exception| Syllabi: 1. Corporation Law; Stock Certificates; Transfer of Ownership; The delivery of a duly indorsed stock certificate is sufficient to transfer ownership of shares of stock in stock corporations; The absence of a deed of assignment is not a fatal flaw which renders the transfer invalid.+ 2. Appeals; It is not the function of the Supreme Court to examine and weigh all over again the evidence presented by the parties in the proceedings before the Sandiganbayan.+ 3. Evidence; Burden of Proof; Affirmative Defenses; Pleadings and Practice; It is procedurally required for each party in a case to prove his own affirmative allegations by the degree of evidence required by law; While it is incumbent upon the plaintiff who is claiming a right to prove his case, the defendant must likewise prove his own allega-tions to buttress its claim that it is not liable.+ 4. Evidence; Burden of Proof; Affirmative Defenses; The burden of proof may be on the plaintiff or defendantit is on the defendant if he alleges affirmative defense which is not a denial of an essential ingredient in the plaintiffs cause of action, but is one which, if established, will be a good defense, i.e., an avoidance of the claim.+ 5. Ill-Gotten Wealth; Words and Phrases; Ill-gotten wealth is any asset, property, business enterprise or material possession of persons within the purview of Executive Orders Nos. 1 and 2, acquired by them directly, or indirectly thru dummies, nominees, agents, subordinates and/or business associates by any of the means or similar schemes set out under the Rules and Regulations of the Presidential Commission on Good Government (PCGG).+ 6. Ill-Gotten Wealth; Corporation Code; Stock Certificates; A stock certificate is merely a tangible evidence of ownership of shares of stockits presence or absence does not affect the right of the registered owner to dispose of the shares covered by the stock certificate.+ 7. Ill-Gotten Wealth; Presidential Commission on Good Government (PCGG); Sequestration; Exception; While it is true that PCGG is not empowered to sell sequestered assets without prior Sandiganbayan approval, this case clearly presents an exception because the Supreme Court itself directed PCGG to accept the cash deposit offered by Bulletin in payment for the Cojuangco and Zalamea sequestered shares subject to the alternatives mentioned therein and the outcome of the remand to the Sandiganbayan on question of ownership of these sequestered shares.+ 8. Damages; An award of actual or compensatory damages requires proof of pecuniary lossin this case, the Republic has not proven with a reasonable degree of certainty, premised on

competent proof and the best evidence obtainable, that it has suffered any actual pecuniary loss by reason of the acts of the defendants.+ 9. Damages; While no proof of pecuniary loss is necessary in order that moral, temperate, nominal and exemplary damages may be adjudicated, proof of damage or injury should nonetheless be adduced.+ Division: EN BANC Tinga, J.: In the hope-filled but problem-laden aftermath of the EDSA Revolution, President Corazon C. Aquino issued Executive Order (EO) No. 1, creating the Presidential Commission on Good Government (PCGG) tasked with, among others, the recovery of all ill-gotten wealth accumulated by former President Ferdinand Marcos, his immediate family, relatives, subordinates and close associates. This was followed by EO Nos. 2 and 14, respectively freezing all assets and properties in the Philippines in which the former President, his wife, their close relatives, subordinates, business associates, dummies, agents or nominees have any interest or participation, and defining the jurisdiction over cases involving the ill-gotten wealth. Pursuant to the executive orders, several writs of sequestration were issued by the PCGG in pursuit of the reputedly vast Marcos fortune. Following a lead that Marcos had substantial holdings in Bulletin Publishing Corporation (Bulletin), the PCGG issued a Writ of Sequestration dated April 22, 1986, sequestering the shares of Marcos, Emilio T. Yap (Yap), Eduardo M. Cojuangco, Jr. (Cojuangco), and their nominees and agents in Bulletin. This was followed by another Writ of Sequestration issued on February 12, 1987, this time sequestering the shares of stock, assets, properties, records and documents of Hans Menzi Holdings and Management, Inc. (HMHMI). The Republic then instituted before the Sandiganbayan on July 29, 1987, a complaint for reconveyance, reversion, accounting, restitution and damages entitled "Republic of the Philippines v. Emilio T. Yap, Manuel G. Montecillo, Eduardo M. Cojuangco, Jr., Cesar C. Zalamea, Ferdinand E. Marcos and Imelda R. Marcos" and docketed as Civil Case No. 0022. The complaint substantially averred that Yap knowingly and willingly acted as the dummy, nominee or agent of the Marcos spouses in appropriating shares of stock in domestic corporations such as the Bulletin, and for the purpose of preventing disclosure and recovery of illegally obtained assets. It also averred that Cesar Zalamea (Zalamea) acted, together with Cojuangco, as dummies, nominees and/or agents of the Marcos spouses in acquiring substantial shares in Bulletin in order to prevent disclosure and recovery of illegally obtained assets, and that Zalamea established, together with third persons, HMHMI which acquired Bulletin. On March 10, 1988, the complaint was amended joining Cojuangco as Zalameas co-actor instead of mere collaborator. The complaint was amended for the second time on October 17, 1990. The amendment consisted of dropping Zalamea as defendant in view of the Deed of Assignment dated October 15, 1987 which he executed, assigning, transferring and ceding to the

Government the 121,178 Bulletin shares registered in his name. These shares, as will be explained forthwith, formed part of the 214,424.5 shares (214 block) which became the subject of a case1 that reached this Court. The Second Amended Complaint also included the Estate of Hans M. Menzi (Estate of Menzi), through its executor, Atty. Manuel G. Montecillo (Atty. Montecillo), as one of the defendants. The issues presented for resolution as stated in the Sandiganbayans Pre-Trial Order dated November 11, 1991 were: 1) Whether or not the sale of 154,470 shares of stock of Bulletin Publishing Co., Inc., subject of this case by the late Hans M. Menzi to the U.S. Automotive Co. Inc. is valid and legal; and 2) Whether or not the shares of stock of Bulletin Publishing Co. Inc. registered and/or issued in the name of defendants Emilio T. Yap, Eduardo Cojuangco, Jr., Cesar Zalamea and the late Hans M. Menzi (and/or his estate and/or his holding company, HM Holding & Investment Corp.) are ill-gotten wealth of the defendants Marcos spouses. Make of record the oral manifestation of Atty. Estelito Mendoza, counsel for defendant Eduardo Cojuangco. That: (a) whether or not the said 154,470 shares of stock of Bulletin Publishing Co. Inc. legally belonged to the late Hans Menzi before he sold the same to U.S. Automotive Co. Inc. and (b) whether or not plaintiff Republic is entitled to the same, should also be threshed out during the trial on the merits.2 After protracted proceedings which spawned a number of cases3 that went up to this Court, the Sandiganbayan rendered a Decision4 dated March 14, 2002,5 the dispositive portion of which states: WHEREFORE, judgment is hereby rendered: 1. Declaring that the following Bulletin shares are the ill-gotten wealth of the defendant Marcos spouses: A. The 46,626 Bulletin shares in the name of defendant Eduardo M. Cojuangco, Jr., subject of the Resolution of the Supreme Court dated April 15, 1988 in G.R. No. 79126. Pursuant to alternative "A" mentioned therein, plaintiff Republic of the Philippines through the PCGG is hereby declared the legal owner of these shares, and is further directed to execute, in accordance with the Agreement which is entered into with Bulletin Publishing Corporation on June 9, 1988, the necessary documents in order to effect transfer of ownership over these shares to the Bulletin Publishing Corporation. B. The 198,052.5 Bulletin shares in the names of: No. of Shares

Jose Y. Campos 90,866.5 Eduardo M. Cojuangco, Jr. 90,877 Cesar C. Zalamea 16,309 Total 198,052.5 which they transferred to HM Holdings and Management, Inc. on August 17, 1983, and which the latter sold to Bulletin Publishing Corporation on February 21, 1986. The proceeds from this sale are frozen pursuant to PCGGs Writ of Sequestration dated February 12, 1987, and this writ is the subject of the Decision of the Supreme Court dated January 31, 2002 in G.R. No. 135789. Accordingly, the proceeds from the sale of these 198,052.5 Bulletin shares, under Philtrust Bank Time Deposit Certificate No. 136301 dated March 3, 1986 in the amount of P19,390,156.68 plus interest earned, in the amount of P104,967,112.62 as of February 28, 2002, per Philtrust Banks Motion for Leave to Intervene and to consign the Proceeds of Time Deposits of HMHMI, filed on February 28, 2002 with the Supreme Court in G.R. No. 135789, are hereby declared forfeited in favor of the plaintiff Republic of the Philippines. 2. Ordering the defendant Estate of Hans M. Menzi through its Executor, Manuel G. Montecillo, to surrender for cancellation the original eight Bulletin certificates of stock in its possession, which were presented in court as Exhibits ., which are part of the 212,424.5 Bulletin shares subject of the Resolution of the Supreme Court dated April 15, 1988 in G.R. No. 79126. 3. Declaring that the following Bulletin shares are not the ill-gotten wealth of the defendant Marcos spouses: a. The 154,472 Bulletin shares sold by the late Hans M. Menzi to U.S. Automotive Co., Inc., the sale thereof being valid and legal; b. The 2,617 Bulletin shares in the name of defendant Emilio T. Yap which he owns in his own right; and c. The 1 Bulletin share in the name of the Estate of Hans M. Menzi which it owns in its own right. 4. Dismissing, for lack of sufficient evidence, plaintiffs claim for damages, and defendants respective counterclaims. SO ORDERED.6 In the present consolidated petitions, the foregoing Sandiganbayan Decision is assailed on different grounds.

The Republic, in G.R. No. 152758, assails the afore-quoted Decision insofar as it declared as not ill-gotten wealth of the Marcos spouses the 154,472 shares (154 block) sold by Menzi to U.S. Automotive Co., Inc. (US Automotive) and dismissed the Republics claim for damages. In G.R. No. 154487, Cojuangco questions paragraphs 1 and 2 of the Sandiganbayan Decision. In G.R. No. 154518, on the other hand, the Estate of Menzi imputes grave error and misinterpretation of facts and evidence against the Sandiganbayan in declaring that the 46,626 Bulletin shares in the name of Cojuangco, and the 198,052.5 shares (198 block) in the names of Jose Campos (Campos), Cojuangco and Zalamea are ill-gotten wealth of the Marcoses. The three blocks of Bulletin shares of stock subject of these consolidated petitions are: 1. 154,472 shares (154 block) sold by the late Menzi and/or Atty. Montecillo to US Automotive on May 15, 1985 for P24,969,200.09; 2. 198,052.50 (198 block) issued and registered in the names of Campos, Cojuangco, and Zalamea which were transferred to HMHMI and subsequently sold by HMHMI (through Atty. Montecillo) to Bulletin on February 21, 1986 for P23,675,195.85; and 3. 214,424.5 shares (214 block) issued and registered in the names of Campos, Cojuangco, and Zalamea which were the subject of the unanimous Resolution of this Court, through Mr. Chief Justice Claudio Teehankee, in Bulletin v. PCGG7 (Teehankee Resolution) dated April 15, 1988 and the Sandiganbayan Resolutions dated January 2, 1995 and April 25, 1996 in Civil Case No. 0022. For clarity of presentation, the 154 block, which is the subject of the Republics petition in G.R. No. 152578, is treated separately from the 198 and 214 blocks, which are the subjects of the petitions in G.R. No. 154487 and G.R. No. 154518. 154 Block In 1957, Menzi purchased the entire interest in Bulletin from its founder and owner, Mr. Carson Taylor. In 1961, Yap, owner of US Automotive, purchased Bulletin shares from Menzi and became one of the corporations major stockholders. On April 2, 1968, a stock option was executed by and between Menzi and Menzi and Co. on the one hand, and Yap and US Automotive on the other, whereby the parties gave the each other preferential right to buy the others Bulletin shares. On April 22, 1968, the stockholders of Bulletin approved certain amendments to Bulletins Articles of Incorporation, consisting of some restrictions on the transfer of Bulletin shares to non-stockholders.8 The amendments were approved by the Board of Directors of Bulletin and by the Securities and Exchange Commission (SEC).

Several years later, on June 5, 1984, Atty. Amorsolo V. Mendoza (Atty. Mendoza), Vice President of US Automotive, executed a promissory note with his personal guarantee in favor of Menzi, promising to pay the latter the sum of P21,304,921.16 with interest at 18% per annum as consideration for Menzis sale of his 154 block on or before December 31, 1984. One day after Menzis death on June 27, 1984, a petition for the probate of his last will and testament was filed in the Regional Trial Court (RTC) of Manila, Branch 29, by the named executor, Atty. Montecillo, and docketed as Special Proceeding No. 84-25244. On January 10, 1985, Atty. Montecillo filed a motion praying for the confirmation of the sale to US Automotive of Menzis 154 block. The probate court confirmed the sale in its Order dated February 1, 1985. Accordingly, on May 15, 1985, Atty. Montecillo received from US Automotive two (2) checks in the amounts of P21,304,778.24 and P3,664,421.85 in full payment of the agreed purchase price and interest for the sale of the 154 block. On the same day, Atty. Montecillo signed a company voucher acknowledging receipt of the payment for the shares, indicating on the dorsal portion thereof the certificate numbers of the 12 stock certificates covering the 154 block, the number of shares covered by each certificate and the date of issuance thereof. Atty. Montecillo also wrote on the lower portion of the promissory note executed by Atty. Mendoza the words "Paid May 15, 1985 (signed) M.G. Montecillo, Executor of the Estate of Hans M. Menzi." Upon these facts, the Sandiganbayan ruled that the sale of the 154 block to US Automotive is valid and legal. According to the Sandiganbayan, the sale was made pursuant to the stock option executed in 1968 between the parties to the sale. Negotiations took place and were concluded before Menzis death, and full payment was made only after the probate court had judicially confirmed the sale. The Sandiganbayan dismissed the Republics claim, based on the affidavit of Mariano B. Quimson, Jr. (Quimson) dated October 9, 1986, that the sale should be nullified because US Automotive only acted as a dummy of Marcos who was the real buyer of the shares. According to the court, the Republic failed to overcome its burden of proof since Quimsons affidavit was not corroborated by other evidence and was, in fact, refuted by Atty. Montecillo. In its Memorandum9 dated July 7, 2003 in G.R. No. 152578, the Republic argues that the Sandiganbayan failed to take into account the fact that despite Menzis claim that he acquired Bulletin in 1957, he did not include any Bulletin shares in his Last Will and Testament executed in 1977. Atty. Montecillo, the executor of Menzis estate, likewise did not include any Bulletin share in the initial inventory of Menzis properties filed on May 15, 1985. Neither were any Bulletin shares declared by Atty. Montecillo even after the probate court issued an Order dated November 17, 1992 for the submission of an updated inventory of Menzis assets. The Republic claims that despite these circumstances, coupled with Quimsons affidavit detailing how Marcos used his dummies to conceal his control over Bulletin, as well as the

letters and correspondence between Marcos and Menzi indicating that Menzi consistently updated Marcos on the affairs of Bulletin, the Sandiganbayan ruled that the 154 block was not ill-gotten wealth of the Marcoses. The Sandiganbayans erroneous inference allegedly warrants a review of its findings. Moreover, the Republic disputes the Sandiganbayans ruling that it heavily leaned on the affidavit of Quimson without presenting any other corroborating evidence.10 It argues that in the proceedings before the PCGG, Quimson was subjected to cross-examination by the lawyers of Bulletin which is controlled by Yap. Further, the evidence it presented before the PCGG purportedly showing that the transfer of Bulletin shares from Menzi to US Automotive was undertaken due to pressure exerted by Marcos on Menzi should have been taken into account. The Republic insists that the sale between Menzi and U.S. Automotive was a sham because the parties failed to comply with the basic requirement of a deed of sale in the transfer of the subject shares. Further, a number of questions were allegedly not resolved, such as: (a) Who was the seller of the subject sharesthe late Menzi as the alleged owner or Atty. Montecillo as then special administrator and later executor of Menzis estate; (b) If Menzi sold the shares, was there a need to confirm the sale? If Atty. Montecillo was the one who sold them, what was his authority to sell the said shares? The Republic also contends that Menzi and Yap were both dummies of the late President Marcos, used by the latter in order to conceal his interest in Bulletin. Hence, the 154 block should also have been declared ill-gotten wealth and forfeited in favor the Government. The foregoing allegedly warrants the award of damages in favor of the Republic which the Sandiganbayan erroneously failed to do. The Republic, therefore, prays that the Sandiganbayan Decision, insofar as it declares the sale of the 154 block to be valid and legal, be reconsidered and judgment accordingly rendered declaring the 154 block as ill-gotten wealth, forfeiting the same or the proceeds thereof in favor of the Republic, and awarding actual, temperate and nominal damages in the Courts discretion, moral damages in the amount of 50 Billion Pesos, exemplary damages of 1 Billion Pesos, attorneys fees, litigation expenses and treble judicial costs. The Estate of Menzi and HMHMI filed a Memorandum11 dated March 10, 2005, averring that the Republic failed to adduce evidence of any kind that the 154 block was ill-gotten wealth of the Marcoses. They claim that the requirements for a valid transfer of stocks, namely: (1) there must be delivery of the stock certificate; (2) the certificate must be indorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and (3) the transfer must be recorded in the books of the corporation in order to be valid against third parties, have all been met. The parties to the sale allegedly confirm the indorsement and delivery of the Bulletin shares of stock representing the 154 block. The requirement that the transfer be recorded in the books of the corporation was also met because US Automotive exercised its rights as shareholder.

It is also allegedly immaterial whether it was Menzi or Atty. Montecillo who indorsed the stock certificates. If it was Menzi, then his indorsement was an act of ownership; if it was Montecillo, then the indorsement was pursuant to the duly executed General Power of Attorney filed with the SEC and, subsequently, on the basis of his authority as Special Administrator and Executor of Menzis estate. In his Memorandum12 dated May 10, 2005, Yap also maintains that the sale of the 154 block was valid and legal. The non-inclusion of the said block of shares in the inventory of Menzis estate was purportedly due to the fact that the same had, by then, been sold to US Automotive. Yap also claims that Atty. Montecillo was duly authorized to effect the sale by virtue of the General Power of Authority and the Last Will and Testament executed by Menzi. The absence of a deed of sale evidencing the sale is allegedly not irregular because the law itself does not require any deed for the validity of the transfer of shares of stock, it being sufficient that such transfer be effected by delivery of the stock certificates duly indorsed. At any rate, a duly notarized Receipt covering the sale was executed.13 Moreover, the BIR certified that the Estate of Menzi paid the final tax on capital gains derived from the sale of the 154 block and authorized the Corporate Secretary to register the transfer of the said shares in the name of US Automotive. Further, a stock certificate covering the 154 block was issued to US Automotive by Quimson himself as Corporate Secretary. Sec. 63 of the Corporation Code provides the requisites for a valid transfer of shares: Sec. 63. Certificate of stock and transfer of shares.The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. [Emphasis supplied] The Corporation Code acknowledges that the delivery of a duly indorsed stock certificate is sufficient to transfer ownership of shares of stock in stock corporations. Such mode of transfer is valid between the parties. In order to bind third persons, however, the transfer must be recorded in the books of the corporation. Clearly then, the absence of a deed of assignment is not a fatal flaw which renders the transfer invalid as the Republic posits. In fact, as has been held in Rural Bank of Lipa City, Inc. v. Court of Appeals,14 the execution of a deed of sale does not necessarily make the transfer effective.

In that case, petitioners argued that by virtue of the deed of assignment, private respondents had relinquished to them all their rights as stockholders of the bank. This Court, however, ruled that the delivery of the stock certificate duly indorsed by the owner is the operative act that transfers the shares. The absence of delivery is a fatal defect which is not cured by mere execution of a deed of assignment. Consequently, petitioners, as mere assignees, cannot enjoy the status of a stockholder, cannot vote nor be voted for, and will not be entitled to dividends, insofar as the assigned shares are concerned. There appears to be no dispute in this case that the stock certificates covering the 154 block were duly indorsed and delivered to the buyer, US Automotive. The parties to the sale, in fact, do not question the validity and legality of the transfer. The objection raised by the Republic actually concerns the authority of Atty. Montecillo, the executor of Menzis estate, to indorse the said certificates. However, Atty. Montecillos authority to negotiate the transfer and execute the necessary documents for the sale of the 154 block is found in the General Power of Attorney executed by Menzi on May 23, 1984, which specifically authorizes Atty. Montecillo "[T]o sell, assign, transfer, convey and set over upon such consideration and under such terms and conditions as he may deem proper, any and all stocks or shares of stock, now standing or which may thereafter stand in my name on the books of any and all company or corporation, and for that purpose to make, sign and execute all necessary instruments, contracts, documents or acts of assignment or transfer."15 Atty. Montecillos authority to accept payment of the purchase price for the 154 block sold to US Automotive after Menzis death springs from the latters Last Will and Testament and the Order of the probate court confirming the sale and authorizing Atty. Montecillo to accept payment therefor. Hence, before and after Menzis death, Atty. Montecillo was vested with ample authority to effect the sale of the 154 block to US Automotive. That the 154 block was not included in the inventory is plausibly explained by the fact that at the time the inventory of the assets of Menzis estate was taken, the sale of the 154 block had already been consummated. Besides, the non-inclusion of the proceeds of the sale in the inventory does not affect the validity and legality of the sale itself. At any rate, the Sandiganbayans factual findings that the 154 block was sold to US Automotive while Menzi was still alive, and that Atty. Montecillo merely accepted payment by virtue of the authority conferred upon him by Menzi himself are conclusive upon this Court, supported, as they are, by the evidence on record.16 As held by the Sandiganbayan: The sale was made pursuant to the Stock Option executed in 1968 between the parties to the sale, considering the restrictions contained in Bulletins Articles of Incorporation as amended in 1968 limiting the transferability of its shares. Negotiations for the sale took place and were concluded before the death of Menzi. After his death, full payment of the entire consideration of the sale, principal and interest, was made only after judicial confirmation thereof in the Probate Case. The transaction was duly supported by the corresponding receipt, voucher, cancelled checks, cancelled promissory note, and BIR certification of payment of the corresponding taxes due thereon.17

The Supreme Court is not a trier of facts. It is not our function to examine and weigh all over again the evidence presented by the parties in the proceedings before the Sandiganbayan.18 It is also significant that even Quimsons affidavit does not state, in a categorical manner, that Yap was a Marcos dummy used by the latter to conceal his Bulletin shareholdings. In contrast, Quimson unqualifiedly declared that Campos, Cojuangco and Zalamea were the former dictators nominees to Bulletin.19 We, therefore, agree with the Sandiganbayan that the sale of the 154 block to US Automotive was valid and legal. 198 and 214 blocks HMHMI was incorporated on May 20, 1982 by Menzi, Campos, Cojuangco, Rolando C. Gapud (Gapud) and Zalamea, with an authorized capital stock of P1,000,000.00 divided into 100,000 shares with par value of P10.00 each. A Deed of Transfer and Conveyance was executed by Menzi, Campos, Cojuangco and Zalamea on August 17, 1983, transferring the shares of stock registered in their names in various corporations to HMHMI in exchange for 6,000,000 shares of the latters capital stock, subject to the approval by the SEC of HMHMIs Certificate of Increase of Capital Stock. The shares of stock transferred included the 198 block of Bulletin shares, 90,866.5 of which were registered in the name of Campos; 90,877 in the name of Cojuangco; and 16,309 in the name of Zalamea. On February 14, 1984, HMHMI amended its Articles of Incorporation by increasing its authorized capital stock to P100,000,000.00 divided into 10,000,000 shares with par value of P10.00 per share. On January 15, 1986, the law firm of Siguion Reyna, Montecillo & Ongsiako wrote a letter to Bulletins corporate secretary, Atty. Mendoza, requesting that three (3) certificates of stock representing 90,866.5, 90,877, and 16,309 Bulletin shares be issued in favor of HMHMI in exchange for 21 certificates of stock in HMHMI. Atty. Mendoza acknowledged receipt of the 21 certificates of stock but replied that the transfer by Campos, Cojuangco and Zalamea of their Bulletin shares to HMHMI cannot be recorded in the books of Bulletin because it was made in violation of Bulletins Articles of Incorporation which provides restrictions and limitations on the transferability of the shares of the company by its stockholders. Bulletin, however, offered to buy the shares at the price fixed in the Articles of Incorporation. The offer appears to have been accepted by HMHMI through its President, Atty. Montecillo. Thus, on January 30, 1986, HMHMIs Board of Directors passed a resolution approving the sale to Bulletin of the 198 block and authorizing its President or Corporate Secretary to sign and execute the corresponding deed of sale. Accordingly, a Deed of Sale was executed on February 21, 1986 by Atty. Montecillo whereby HMHMI sold the 198 block to Bulletin for the amount of P23,675,195.85.

On April 22, 1986, the shares of Marcos, Yap, Cojuangco and their nominees or agents in the Bulletin were sequestered by virtue of a Sequestration Order issued by the PCGG. The SEC issued a certification to the effect that as of February 21, 1986, the total subscribed shares of Bulletin was 756,861. Of these, 198,052.5 were treasury shares, leaving the total outstanding shares at 567,808.5. The stockholders of Bulletin and the shares of stock held by each of them were listed as follows: Name Emilio T. Yap Menzi Trust Fund Estate of Hans M. Menzi U.S. Automotive Co. Inc. xxx Cesar Zalamea Jose Campos Eduardo Cojuangco Xxx Total No. of Shares 2,617 28,977 1 318,084 xxx 121,178 46,620.5 46,626 xxx 567,808.5

On February 12, 1987, another Writ of Sequestration was issued by the PCGG, sequestering all the shares of stock, as well as the assets, properties, records and documents of HMHMI. Because of this Sequestration Order, the proceeds from the sale of the 198 block which were deposited with Philtrust Bank were frozen.20 On March 16, 1987, the sequestration of the 2,617 Bulletin shares of Yap was lifted upon the latters motion. On April 14, 1987, the PCGG wrote a letter/order to the Corporate Secretary of Bulletin, asking for the schedule of the annual stockholders meeting of the corporation because the sequestered shares consisting of the 214 block will be voted by the Commission. This letter became the subject of a petition21 filed by Bulletin with this Court questioning the validity of the PCGGs letter/order and seeking to compel PCGG to accept Bulletins offer of a cash deposit in the amount of P34,592,903.34 representing the value of the 214 block of sequestered Bulletin shares. The Court issued a temporary restraining order. On July 31, 1987, the PCGG received from Bulletin the amount of P8,173,506.06 as full payment of 46,620.5 Bulletin shares registered in the name of Campos. The receipt stated that "Mr. Jose Y. Campos has waived the ownership of said shares in favor of the Republic of the Philippines through the Presidential Commission on Good Government." A Deed of Assignment was likewise executed by Zalamea on October 15, 1987, assigning and waiving in favor of the Republic his rights to 121,178 Bulletin shares registered in his name. On the same day, Bulletin issued in favor of PCGG a check in the amount of P21,244,926.96 as full payment of Zalameas shares.

This Court, on April 15, 1988, issued the Teehankee Resolution, the dispositive portion of which pertinently states: 2. Directing the Commission to accept the cash deposit of P8,174,470.32 offered by petitioner for the 46,626 sequestered shares in the name of Mr. Eduardo M. Cojuangco, Jr. expressly subject to the alternative conditions (A and B) hereinabove set forth, and likewise directing the Commission to accept the cash deposit, if it has not actually sold the Cesar C. Zalamea Bulletin shares to petitioner (supra, p. 13, par [2]) of P21,244,926.96 for the sequestered shares of Bulletin in the name of Mr. Cesar Zalamea under the same alternatives already mentioned; and 3. Remanding the case regarding the issue of ownership of the said sequestered Bulletin shares for determination and adjudication to the Sandiganbayan.22 An agreement was thereafter executed between PCGG and Bulletin on June 9, 1988 regarding the 46,626 Bulletin shares of Cojuangco whereby PCGG accepted Bulletins deposit in the amount of P8,174,470.32, subject to the alternatives set forth in the Teehankee Resolution, as follows: Alternative "A"To standby as full payment plus whatever interest earnings thereon upon final judgment of the Court declaring the Republic of the Philippines as owners of the 46,626 shares, accompanied by the corresponding original stock certificates, issued in the name of the government, duly endorsed in favor of the Bulletin Publishing Corporation, free from liens and encumbrances; or Alternative "B"To immediately return to Bulletin Publishing Corporation the cash deposit in the amount of P8,174,470.32 plus whatever interest earnings thereon upon final judgment by the Court declaring that Mr. Eduardo Cojuangco, Jr. is the true owner of the 46,626 shares.23 With this factual backdrop, the Sandiganbayan ruled that Campos, Cojuangco and Zalamea were nominees and dummies of Marcos. Hence, the 198 block which these nominees transferred to HMHMI and which, in turn, were sold to Bulletin are ill-gotten wealth. The Sandiganbayan anchored its finding on the Deposition of Campos taken on November 25, 1994 before the Philippine Consulate General in Vancouver, British Columbia, Canada, that he held shares in Bulletin and HMHMI "per instruction of President Marcos;" that the beneficial owner of these shares "must be President Marcos;" and that he received three (3) dividend checks from Bulletin "for the benefit of President Marcos." Based on the Deed of Assignment executed by Zalamea on October 15, 1987, wherein he manifested that he "does not claim true and beneficial ownership" of the 121,178 Bulletin shares registered in his name and that he voluntarily waived and assigned these shares in favor of PCGG, the Sandiganbayan concluded that Zalamea could not have been a nominee of Menzi, as the latters estate claims, but of Marcos. The Sandiganbayan likewise rejected Cojuangcos contention that the Bulletin and HMHMI shares registered in his name "were not acquired and held by him as dummy, nominee and/or

agent of defendants Ferdinand E. Marcos and Imelda Romualdez Marcos, but upon the request, and as nominee, of the late Hans Menzi who owned and delivered to him said shares." According to the Sandiganbayan, Cojuangco failed to present evidence necessary to establish his affirmative defense. As regards the 214 block, the Sandiganbayan ruled that there is no longer any dispute concerning the ownership of the 46,620.5 shares held by Campos and the 121,178 shares held by Zalamea in view of the Teehankee Resolution and the fact that these shares have been waived and assigned to PCGG. The Sandiganbayan went on to declare that the only remaining issue pertaining to Cojuangcos claim to his alleged portion of the 214 block should be resolved in favor of the Republic because of Cojuangcos consistent disavowal of any "proprietary interest in the shares which are the subject matter of the instant case" and his claim that he held the shares as nominee of Menzi. The Sandiganbayan further ruled that Yaps shares, which were acquired by him in 1961 before Marcos became President, are not ill-gotten wealth of the Marcoses. Moreover, the one (1) Bulletin share for which dividend checks were issued to and received by the Estate of Menzi was deemed to belong to the latter. In G.R. No. 154487, petitioner Cojuangco assails paragraphs 1 and 2 of the Sandiganbayan Decision. Allegedly, the Government does not claim that in acquiring the Bulletin shares registered in Cojuangcos name, the late President Marcos used government funds or resources. Cojuangco raises several issues, namely: (a) Were the Bulletin shares, at any time, of government ownership? (b) Were the Bulletin shares acquired by Marcos and, if so, did he use government funds to acquire them? (c) Did petitioner Cojuangco act as the "dummy" or "nominee" of Marcos to acquire, or to conceal the acquisition of the shares by the latter? In the Memorandum for Eduardo M. Cojuangco, Jr.24 dated May 6, 2005, Cojuangco argues that the Republic neither alleged nor presented evidence to prove that that the Bulletin shares registered in his name were owned by the Republic but were taken by the Marcoses "by taking advantage of their public office and/or using their powers, authority, influence, connections or relationship" or that they were acquired by the Marcoses from Menzi with the use of government or public funds. Hence, the conclusion should be sustained that the shares were owned by Menzi and never by the Republic, and no public funds were used in their acquisition. Cojuangco attacks the Sandiganbayans reliance on Quimsons affidavit saying that it is hearsay because Quimson was not presented in court to affirm the contents of his affidavit and was not subjected to cross-examination as he had already passed away when Civil Case No. 0022 was tried. Quimsons affidavit is allegedly double hearsay insofar as it alleges that Marcos owned the Bulletin shares and that Cojuangco was merely Marcos nominee because Quimson had no contact with Marcos and his knowledge of the latters purported ownership of the Bulletin shares was merely relayed to him by Menzi.

Even the supposed corroborating evidence, consisting of the affidavits of Pedro Teodoro, Evelyn S. Singson, Gapud, and Angelita Reyes, have allegedly been declared as having no probative value inasmuch as the affiants did not take the witness stand and could not be cross-examined. The Republic likewise allegedly failed to prove its contention that Bulletin issued checks in favor of Campos, Cojuangco and Zalamea which were deposited into numbered accounts in Security Bank & Trust Company owned by the Marcoses. Moreover, the dividend checks supposedly indorsed by Cojuangco in blank do not conclusively demonstrate that they were indorsed in favor of the Marcoses. On the other hand, there is allegedly sufficient evidence on record to prove that Cojuangco was a nominee of Menzi. These documents consist of the testimony of Atty. Montecillo to the effect that, as far as he knew, Cojuangco "really acted as nominee for the General," and the originals of the stock certificates covering the Bulletin shares registered in Cojuangcos name. Cojuangco further avers that the allegation that the Bulletin shares were registered in his name upon the request, and as nominee, of Menzi is a specific denial and not an affirmative defense as the Sandiganbayan declared. As a specific denial, the allegation need not be proven unless the Republic presents adequate evidence proving the allegations in its complaint which, Cojuangco insists, the Republic failed to do. He likewise argues that the Republic is not entitled to damages of any kind because it failed to establish that it has any proprietary interest in the Bulletin shares registered in his name; that the said shares are owned by the Marcoses; and that it suffered any pecuniary loss by reason of such ownership. Based on these allegations, Cojuangco prays that he be declared the owner of the 46,626 Bulletin shares registered in his name, together with all cash and stock dividends which have accrued in favor of said shares from October 15, 1987, and ordering the PCGG to return the cash deposit of P8,174,470.32 plus interest to Bulletin. In its Memorandum25 dated March 17, 2005, the Republic maintains that Cojuangco has consistently denied any proprietary interest in the Bulletin shares. Hence, he cannot claim ownership of the Bulletin shares registered in his name. His allegation that that he was a nominee of Menzi was pleaded by way of defense. Thus, he has the burden of proving this material allegation, set up as new matter, that the shares were not his but Menzis. Since the Bulletin shares were not included in the inventory of Menzis assets, it allegedly follows that Cojuangco could not have been a nominee of Menzi who did not own the subject Bulletin shares. As regards the contention that the Republic failed to show that the shares belong to the Government or were acquired using public funds, the Republic maintains that Marcos acquired the Bulletin shares using his political clout. His very act of participating in a business enterprise using nominees to conceal his ownership of Bulletin shares is already a violation of the Constitution.

Furthermore, Campos and Zalamea, who, like Cojuangco, held shares in the 198 and 214 blocks, have already surrendered and assigned their respective shares to the Government and acknowledged the right of the Government over the Bulletin registered in their names. Such is allegedly a clear indication that they acted as dummies of Marcos. The admission of Campos and Zalamea that their shares in the 214 block belonged to Marcos may allegedly be used to prove that the 198 block was likewise held by them as dummies of the former dictator. The Sandiganbayan also allegedly did not rely on the Teehankee Resolution to support its conclusion that the 198 and 214 blocks are ill-gotten wealth but made its own finding after a fullblown trial at which all the parties, except Cojuangco, presented their respective evidence. Moreover, the evidence presented by the Republic allegedly preponderates in favor of its theory that the Bulletin shares in the names of Campos, Cojuangco and Zalamea were actually held in trust for the benefit of the Marcoses. Notably, the PCGG Resolution dated May 22, 1987, presented by the Republic as its Exhibit "I" declares that Quimson and Teodoro, close associates of Menzi, stated under oath that when Marcos allowed the Bulletin to reopen during Martial Law, Menzi was allowed only 20% participation, and that Marcos put his shares in the names of Campos, Cojuangco and Zalamea. Besides, Menzi did not execute any deed of trust in his favor as trustor and Campos, Cojuangco and Zalamea as trustees. Neither did the Estate of Menzi claim that Campos, Cojuangco and Zalamea were nominees of Menzi as no cross-claim was filed by the Estate of Menzi even as it claimed ownership of the 198 and 214 blocks. In their Memorandum26 dated March 10, 2005 in G.R. Nos. 154487 and 154518, the Estate of Menzi and HMHMI argue that the Sandiganbayan erred in not resolving the issue of the ownership of the 198 and 214 blocks. The Sandiganbayan instead allegedly relied on its misinterpretation of the Teehankee Resolution to the effect that there is no longer any controversy as regards the ownership of the portion of the 214 block held by Zalamea. According to said respondents, the Teehankee Resolution clearly directed the Sandiganbayan to resolve the issue of ownership of both the Zalamea and Cojuangco portions of the 214 block. Respondents Estate of Menzi and HMHMI also contend that the Quimson affidavit should have been treated as having no probative value with respect to the 154 block and the 198 and 214 blocks alike. The affidavit was allegedly not at all corroborated by the other documents presented by the Republic and cited in the assailed Decision. They insist that Campos, Cojuangco and Zalamea were nominees of Menzi, not dummies of Marcos, because, as allegedly established during trial, the stock certificates covering the contested blocks of shares were indorsed in blank and remained in Menzis possession. Even Campos allegedly testified that he was never in possession of the stock certificates. Assuming that Campos was indeed a Marcos dummy, his admission should apply solely to the Bulletin shares registered in his name. Likewise, Zalamea allegedly never declared himself to be a Marcos nominee, only that he does not claim true and beneficial ownership of the Bulletin

shares recorded in his name. The dividend checks for Zalameas shareholdings, in fact, allegedly indicate the Estate of Menzi as the payee, proving that Zalamea was Menzis nominee. Respondents Estate of Menzi and HMHMI further claim that the 198 and 214 blocks were not mentioned in Menzis Last Will and Testament because Menzi knew of the impending promulgation of a decree which would limit to only 20% the ownership of media enterprises by one person or family. Allegedly, in order to get around this restriction, Menzi devised the nominee structure whereby he used three (3) nominees to enable him to retain his 80% stake in Bulletin. Besides, there was allegedly a legal question as to whether sequestered shares need to be declared for estate tax purposes in the meantime that a case involving these shares was pending. Said respondents finally posit that assuming that the 198 and 214 blocks are ill-gotten, the shares themselves, and not merely the proceeds, should be forfeited in favor of the Government. Yap, on the other hand, claims in his Memorandum27 dated May 10, 2005 filed in G.R. Nos. 154487 and 154518 that Cojuangco may not raise in his petition a new specific relief consisting of the prayer that he be declared the owner of the 46,626 Bulletin shares registered in his name which Cojuangco never asked for during the proceedings before the Sandiganbayan. Cojuangco is allegedly bound by his judicial admission that he has no proprietary interest over the said Bulletin shares. Purportedly, because of this judicial admission, Alternative B mentioned in the Teehankee Resolution was eliminated. The only option which remained was, as held by the Sandiganbayan, to declare that the Government is the legal owner of the shares and direct the PCGG to execute the necessary documents to effect the transfer thereof in accordance with Alternative A. As regards the prayer that the shares themselves be forfeited in favor of the Government, Yap contends that this cannot be done because the Government is barred by the Constitution from acquiring ownership of private mass media. The Estate of Menzi and HMHMI should also not be allowed to claim the portion of the 214 block held by Campos and Zalamea whose ownership has allegedly been settled by this Court in the Teehankee Resolution. Yap also claims that the Estate of Menzi and HMHMI have unlawfully concealed the stock certificates representing a portion of the shares held by Campos and Zalamea. Their lawyers, specifically Atty. Montecillo, have also allegedly staked an unfounded claim on the Bulletin shares in violation of their duty, as lawyers of Bulletin for several years, to protect the latters interests. Cojuangco filed a Reply Memorandum28 dated October 17, 2005, substantially reiterating his argument that the Sandiganbayan failed to make a finding that the Bulletin shares are ill-gotten as defined by the pertinent executive orders and that they were owned by the Marcoses. Consequently, he insists that there is no basis for the Sandiganbayans conclusion that the Republic is the legal owner of the said shares.

The Republic also filed a Memorandum29 dated March 17, 2005 in G.R. No. 154518, averring that the petition raises factual issues not proper in a petition for review under Rule 45 of the Rules of Court. The Republic insists that the Decision of the Sandiganbayan relative to the 198 and 214 blocks was not based on Quimsons affidavit alone but on the totality of the evidence presented to support the complaint. Quimsons affidavit was allegedly given prominence because it related in detail how Campos, Cojuangco and Zalamea came to be nominees of Marcos. The allegations in Quimsons affidavit were allegedly confirmed by Menzis Last Will and Testament, the initial inventory of his assets, the letters and correspondence between Marcos and Menzi, Campos deposition, and the dividend checks issued to Campos, Cojuangco and Zalamea even after they have supposedly transferred their Bulletin shares to HMHMI. Moreover, Atty. Montecillo did not institute any action against Campos, Cojuangco and Zalamea to recover the shares. This allegedly indicates that the shares were not owned by Menzi and that Campos, Cojuangco and Zalamea did not act as Menzis nominees. As regards the claim that Menzi owned the shares registered in the names of Campos, Cojuangco and Zalamea because the stock certificates covering them were in Menzis possession, the Republic maintains that mere possession of the stock certificates does not operate to vest ownership on Menzi considering that Campos already declared that Marcos owned those shares and Zalamea surrendered his shares to the Government. Furthermore, the Republic alleges that the Sandiganbayan had already ruled with finality that the Estate of Menzi and HMHMI cannot recover the Campos and Zalamea portions of the 214 block. Specifically, in the Resolution dated January 2, 1995, the Sandiganbayan declared that the Estate of Menzi cannot recover the Campos shares because the latter, who was not a co-defendant in the case, had already voluntarily surrendered the same to the PCGG. Zalameas shares could likewise not be recovered because he was also not a party, either as defendant, cross-defendant or third-party defendant. Moreover, in another Resolution dated July 10, 1993, the Sandiganbayan held that the Estate of Menzi has not pleaded any claim of ownership over the Bulletin shares in the names of Campos, Cojuangco and Zalamea, much less has it intervened to express any prejudice to it should any judgment be rendered for or against Campos, Cojuangco and Zalamea. We again affirm the ruling of the Sandiganbayan. It should be noted at the outset that there is no more dispute as regards the Bulletin shares registered in the name of Campos. In fact, Campos was not included as a defendant in Civil Case No. 0022. The Bulletin shares registered in his name have been voluntarily surrendered to the PCGG and the proceeds thereof have accordingly been forfeited in favor of the Government. The Pre-Trial Order of the Sandiganbayan dated November 11, 1991 likewise does not mention as an issue the ownership of the Campos-held Bulletin shares.

The same cannot be said, however, of the Bulletin shares registered in the name of Zalamea. Although he was dropped as a party-defendant in the Second Amended Complaint dated October 17, 1990 purportedly by reason of the Deed of Assignment he executed on October 15, 1987, the Zalamea-held shares are clearly still covered by the Teehankee Resolution remanding the issue on the ownership of the sequestered Cojuangco and Zalamea shares for determination and adjudication by the Sandiganbayan. Having said that, we now proceed to determine whether the Sandiganbayan committed reversible error in rendering the assailed Decision. As with the 154 block, the issues raised by the petitioners assailing the Sandiganbayans disposition of the 198 and 214 blocks are largely factual and, therefore, generally beyond the scope of our review under Rule 45 of the Rules of Court. Nonetheless, as will be shown in the following disquisition, there is no cause for this Court to reverse the Sandiganbayan because the evidence on record amply supports its findings and conclusions. The 46,626 shares registered in the name of Cojuangco which formed part of the 214 block were declared to be ill-gotten wealth based on the evidence presented by the Republic to show that Cojuangco acted as a nominee of Marcos and on Cojuangcos unsubstantiated allegation that he acted as a nominee not of Marcos but of Menzi. Cojuangco counters, however, that the allegation that he acted as Menzis nominee is a specific denial which he does not have the burden of proving. Notably, in the Answer of Defendant Eduardo M. Cojuangco, Jr. dated March 16, 1989, Cojuangco claimed as part of his denial that "whatever shares of stock he may have in Bulletin Publishing Corporation and/or H.M. Holdings and Management, Inc. were not acquired and held by him as dummy, nominee and/or agent of defendants Ferdinand E. Marcos and Imelda Romualdez Marcos, but upon the request, and as nominee, of the late Hans Menzi who owned and delivered to him said shares."30 Likewise, in his Pre-Trial Brief dated January 15, 1992, Cojuangco stated that "[I]n regard shares of stock in the name of defendant Cojuangco in Bulletin Publishing Corporation and/or HM Holdings & Management, Inc., he was never, and is not, a nominee of any other person but the late Brig. Gen. Hans M. Menzi. Defendant Cojuangco therefore reiterates that he has no proprietary interest in the shares which are the subject matter of the instant case. They properly belong to the estate of the late Hans Menzi."31 It is procedurally required for each party in a case to prove his own affirmative allegations by the degree of evidence required by law. In civil cases such as this one, the degree of evidence required of a party in order to support his claim is preponderance of evidence, or that evidence adduced by one party which is more conclusive and credible than that of the other party. It is therefore incumbent upon the plaintiff who is claiming a right to prove his case. Corollarily, the defendant must likewise prove its own allegations to buttress its claim that it is not liable.32

The party who alleges a fact has the burden of proving it. The burden of proof33 may be on the plaintiff or the defendant. It is on the defendant if he alleges an affirmative defense which is not a denial of an essential ingredient in the plaintiffs cause of action, but is one which, if established, will be a good defense i.e., an "avoidance" of the claim.34 In the instant case, Cojuangcos allegations are in the nature of affirmative defenses which should be adequately substantiated. He did not deny that Bulletin shares were registered in his name but alleged that he held these shares not as nominee of Marcos, as the Republic claimed, but as nominee of Menzi. He did not, however, present any evidence to support his claim and, in fact, filed a Manifestation dated July 20, 1999 stating that he "sees no need to present any evidence in his behalf."35 In contrast to Cojuangcos consistent, albeit unsupported, disclaimer, the Sandiganbayan found the Republics evidence to be preponderant. These pieces of evidence consist of: the affidavit of Quimson detailing how Campos, Cojuangco and Zalamea became Marcos nominees in Bulletin; the affidavit Teodoro relative to the circumstances surrounding the sale of Menzis substantial shares in Bulletin to Marcos nominees and Menzis retention of only 20% of the corporation; the sworn statement of Gapud describing the business interests and associates of Marcos and stating that Bulletin checks were periodically issued to Campos, Cojuangco and Zalamea but were deposited after indorsement to Security Bank numbered accounts owned by the Marcoses dividend checks issued to Campos, Cojuangco and Zalamea even after their shares have been transferred to HMHMI; the Certificate of Incorporation, Articles of Incorporation and Amended Articles of Incorporation of HMHMI showing that Bulletin shares held by Campos, Cojuangco and Zalamea were used to set up HMHMI; Deed of Transfer and Conveyance showing that Campos, Cojuangco, Zalamea and Menzi transferred several shares, including Bulletin shares, to HMHMI in exchange for shares of stock in the latter which shares were not issued; the Inventory of Menzis assets as of May 15, 1985 which does not include Bulletin shares; notes written by Marcos regarding Menzis resignation as aide-de-camp to devote his time to run Bulletins operations and the reduction of his shares in the corporation to 12%; and letters and correspondence between Marcos and Menzi regarding the affairs of Bulletin. These pieces of uncontradicted evidence suffice to establish that the 198 and 214 blocks are indeed ill-gotten wealth as defined under the Rules and Regulations of the PCGG, viz: Sec. 1. Definition.(A) "Ill-gotten wealth is hereby defined as any asset, property, business enterprise or material possession of persons within the purview of Executive Orders Nos. 1 and 2, acquired by them directly, or indirectly thru dummies, nominees, agents, subordinates and/or business associates by any of the following means or similar schemes: (1) Through misappropriation, conversion, misuse or malversation of public funds or raids on the public treasury; (2) Through the receipt, directly or indirectly, of any commission, gift, share, percentage, kickbacks or any other form of pecuniary benefit from any person and/or entity in connection with any government contract or project or by reason of the office or position of the official concerned;

(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the government or any of its subdivisions, agencies or instrumentalities or government-owned or controlled corporations; (4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other form of interest or participation in any business enterprise or undertaking; (5) Through the establishment of agricultural, industrial or commercial monopolies or other combination and/or by the issuance, promulgation and/or implementation of decrees and orders intended to benefit particular persons or special interests; and (6) By taking undue advantage of official position, authority, relationship or influence for personal gain or benefit. Cojuangcos disavowal of any proprietary interest in the Bulletin shares is conclusive upon him. His prayer that he be declared the owner of the said shares, together with all the cash and stock dividends which have accrued thereto since October 15, 1987, and that the PCGG be ordered to return the cash deposit of P8,174,470.32 to Bulletin, therefore, has no legal basis and should perforce be denied. In this connection, it should be said that Cojuangco apparently desisted from presenting evidence and chose instead to stake his claim with the Estate of Menzi and HMHMI. As found by the Sandiganbayan, however, the Estate of Menzi and HMHMI failed to prove their allegation that Campos, Cojuangco and Zalamea were Menzis nominees. Neither did the Estate of Menzi and HMHMI institute an action to recover the shares from Menzis nominees. Significantly, even as they claimed ownership of the Bulletin shares in their Answer to the Republics Second Amended Complaint, the Estate of Menzi and HMHMI did not file any crossclaim against the purported Menzi nominees. Quite revealing, too, is the fact that Campos, in his Answers to Direct Interrogatories36 taken before the Consul General at the Philippine Consulate General in Vancouver, British Columbia, Canada on November 25, 1994, repeatedly declared that he owned a portion of the 198 block "per instruction of President Marcos"37 and that he "became the shareholder, per instruction of President Marcos."38 Likewise, in his Deed of Assignment dated October 15, 1987, Zalamea manifested that he "does not claim true and beneficial ownership" of the Bulletin shares registered in his name and that he voluntarily waived and assigned the same in favor of the PCGG. These declarations should have alerted the Estate of Menzi and HMHMI to file cross-claims against Campos and Zalamea. The fact that they did not enfeebles their claim of ownership. It is also important to note that the Estate of Menzi did not include the 198 and 214 blocks in the inventory of the estates assets dated May 15, 1985. If, as it claims, the Bulletin shares of Campos, Cojuangco and Zalamea were held by them as nominees of Menzi, then these shares

should have been included in the inventory. The justification advanced for the said noninclusion, which is that the stock certificates covering them were not in the possession of Atty. Montecillo, is nothing but a hollow pretext given the fact that even after the certificates came to Atty. Montecillos possession in 1987, an updated inventory declaring the said shares as part of Menzis estate was not filed pursuant to the Order of the probate court dated November 17, 1992. Further, the claim that Menzi would need dummies because of the impending promulgation of a decree which would limit to 20% the ownership of media enterprises by one person or family is incredulous since no such decree was ever issued. Parenthetically, the fact that the stock certificates covering the shares registered under the names of Campos, Cojuangco and Zalamea were found in Menzis possession does not necessarily prove that the latter owned the shares. A stock certificate is merely a tangible evidence of ownership of shares of stock.39 Its presence or absence does not affect the right of the registered owner to dispose of the shares covered by the stock certificate. Hence, as registered owners, Campos and Zalamea validly ceded their shares in favor of the Government. This assignment is now a fait accompli for the benefit of the entire nation. The contention that the sale of the 214 block to the Bulletin was null and void as the PCGG failed to obtain approval from the Sandiganbayan is likewise unmeritorious. While it is true that the PCGG is not empowered to sell sequestered assets without prior Sandiganbayan approval,40 this case presents a clear exception because this Court itself, in the Teehankee Resolution, directed the PCGG to accept the cash deposit offered by Bulletin in payment for the Cojuangco and Zalamea sequestered shares subject to the alternatives mentioned therein and the outcome of the remand to the Sandiganbayan on the question of ownership of these sequestered shares. In light of the foregoing, we are not inclined to disturb the Sandiganbayans evaluation of the weight and sufficiency of the evidence presented by the Republic and its finding that the evidence adduced by the Estate of Menzi and HMHMI do not prove their allegation that Campos, Cojuangco and Zalamea are Menzis nominees, taking into account the express admission of Campos that he owned the shares upon Marcos instruction, the declaration of Zalamea that he does not claim true and beneficial ownership of the shares, and the absolute dearth of evidence regarding Cojuangcos assertion that he is Menzis nominee. With regard to the Republics prayer for damages, we find the same not supported by sufficient evidence. An award of actual or compensatory damages requires proof of pecuniary loss. In this case, the Republic has not proven with a reasonable degree of certainty, premised on competent proof and the best evidence obtainable, that it has suffered any actual pecuniary loss by reason of the acts of the defendants. Hence, actual or compensatory damages may not be awarded.41 On the other hand, while no proof of pecuniary loss is necessary in order that moral, temperate, nominal and exemplary damages may be adjudicated, proof of damage or injury should nonetheless be adduced. As found by the Sandiganbayan, however, the Republic failed to show the factual basis for the award of moral damages and its causal connection to defendants acts.

Thus, moral damages, which are designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer,42 may not be awarded. Temperate, nominal, and exemplary damages, attorneys fees, litigation expenses and judicial costs may likewise not be adjudicated for failure to present sufficient evidence to establish entitlement to these awards. WHEREFORE, the petitions in G.R. No. 152578, G.R. No. 154487 and G.R. No. 154518 are DENIED. The Decision of the Sandiganbayan dated March 14, 2002 is AFFIRMED. SO ORDERED. DANTE O. TINGA

CMH Agricultural Corporation vs. Court of Appeals, 378 SCRA 545 , March 07, 2002 Case Title : CMH AGRICULTURAL CORPORATION, CARLOS M. HOJILLA, CESAR M. HOJILLA, CLAUDIO M. HOJILLA, CORA M. HOJILLA AND CORNELIO M. HOJILLA, petitioners, vs. HON. COURT OF APPEALS AND CRISTOBAL M. HOJILLA, respondents. Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions| Corporation Law| Jurisdiction| Forum Shopping| Judgments| Res Judicata| Ownership| Possession| Ejectment| Pleadings and Practice| Syllabi: 1. Actions; Corporation Law; Jurisdiction; The relationship of the parties to a suit has formerly been the lone indicia for its classification as an intra-corporate controversy within the jurisdiction of the Securities and Exchange Commission or a civil dispute within the jurisdiction of the regular courts, but recent jurisprudence has established that in determining which body has jurisdiction over a case, the better policy would be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of the controversy.+ 2. Actions; Corporation Law; Jurisdiction; Where a partys position, as a stockholder of a corporation and his relationship to the other stockholders, became incidental only to the issue of ownership over certain properties, the same does not convert the action into an intra-corporate controversy within the exclusive jurisdiction of the SEC but remains a civil action cognizable by the regular courts.+ 3. Actions; Corporation Law; Forum Shopping; The filing of SEC case does not bar the subsequent filing of a civil case where the two refer to different causes of action with distinct reliefs prayed for.+ 4. Actions; Judgments; Res Judicata; Requisites.+ 5. Actions; Ownership; Possession; Ejectment; A judgment rendered by a municipal or metropolitan trial court in an action for forcible entry or detainer is effective with respect to possession only and in no wise does it affect or bind the title of ownership of the land or building.+ 6. Actions; Corporation Law; Authorization from the board of directors of a corporation is not necessary where a stockholder is not acting on behalf of the corporation but in his own personal capacity.+ 7. Actions; Pleadings and Practice; The requirement of notice and hearing in a partys pleading is necessary only to appraise the other party of the actions of the former, and where the other party has timely filed his opposition, any defect regarding such notice had been cured.+

DE LEON, JR., J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court which seeks to review and set aside the Decision1 of the Court of Appeals in CA-G.R. SP No. 28893 promulgated on October 25, 1993 holding that the Regional Trial Court (RTC) of Bacolod City, Branch 45, did not commit grave abuse of discretion in reconsidering its Order dated November 22, 1991 dismissing Civil Case No. 6256 for lack of jurisdiction.2

The antecedent facts show that the private respondent, Cristobal M. Hojilla, filed a complaint for "Disregarding and Piercing the Veil of Corporate Fiction, Formal Declaration or Recognition of Successional Rights and Recovery of Title with Damages"3 with the RTC of Bacolod City, Branch 45, docketed as Civil Case No. 6256 against his siblings namely: Carlos M. Hojilla, Cesar M. Hojilla,Cornelio M. Hojilla, Claudio M. Hojilla and Corazon M. Hojilla (with the latter two (2) impleaded as unwilling co-plaintiffs), and CMH Agricultural Corporation (CMH for brevity). Cristobal alleged in his complaint that CMH was a dummy corporation created to be the alter-ego of their mother, the late Concepcion Montelibano-Hojilla, who purposely organized the same in 1975 to shield her paraphernal properties from taxes by fictitiously assigning them to CMH, with her children acting as dummy stockholders. Immediately upon its incorporation, the following properties of his mother were assigned to CMH: Hacienda Manayosayao, Hacienda Nangka and a house and lots on 23rd Street, Bacolod City, consisting of Lot Nos. 240, 241, 242, 246, 247 and 248. After their mother's death, Cristobal and his siblings extrajudicially partitioned the properties with Carlos, Cesar and Cornelio taking Hacienda Nangka and the commercial lots of their late father, Mattias J. Hojilla, situated in Silay City, while Corazon, Claudio and Cristobal were apportioned Hacienda Manayaosayao, the house and lots on 23rd Street, Bacolod City, and some lots which were not assigned to CMH. Thereafter, with the promise that the title over the property would be delivered to them, Corazon, Claudio and Cristobal took possession of the subject house and lots. However, Cristobal claimed that the title over the said property had not been turned over to them and on several occasions Carlos, Cesar and Cornelio had, without his and his co-owners' knowledge, mortgaged the said lots comprising the 23rd Street property in Bacolod City to several banking institutions and even leased the same to Pilipinas Shell Petroleum Corporation, which, however, was only curtailed by court action. Thus, Cristobal prayed that the veil of corporate fiction be pierced as CMH was being used to deprive and defraud him of his successional rights over the house and lots on 23rd Street, Bacolod City. Carlos, Cesar, Cornelio, Claudio and Corazon, as defendants therein, countered, by way of special and affirmative defenses:4 first, regular courts had no jurisdiction over the subject matter of the complaint since it involved an intra-corporate controversy - the complaint being instituted by Cristobal who is a stockholder and incorporator of CMH against his siblings, who are likewise stockholders of the same corporation, and as such within the exclusive and original jurisdiction of the Securities and Exchange Commission (SEC for brevity); second, the creation of CMH as an alleged dummy corporation was a device or scheme amounting to fraud, thus falling under the original and exclusive jurisdiction of the SEC; third, the claim of ownership over the house and lots by Cristobal which was ventilated in the ejectment case filed by the said defendants against Cristobal in the Municipal Trial Court in Cities (MTCC) of Bacolod City, Branch III and docketed therein as Civil Case No. 17698, was resolved in favor of CMH; fourth, Cristobal committed forum-shopping since he had previously filed a case against CMH, its incorporators and stockholders before the SEC, docketed as SEC Case No. 03559; fifth, Cristobal had no cause of action since the power to sue and be sued was vested alone in the board of directors of the corporation, CMH in particular, and not on a mere stockholder. Finding the arguments meritorious, the trial court issued on November 22, 1991, an order5 dismissing the complaint in Civil Case No. 6256. However, upon filing by Cristobal of a motion for reconsideration6 dated December 6, 1991, the court a quo in its order7 dated April 20, 1992 reversed itself and set aside its previous order dismissing the complaint. Thereafter, the

defendant filed a motion for reconsideration8 but it was denied in the order9 dated August 17, 1992 of the trial court. Carlos, Cesar, Cornelio, Claudio and Corazon elevated the case to the Court of Appeals through a petition for certiorari10 alleging that the trial court committed grave abuse of discretion amounting to lack of jurisdiction in taking cognizance of Cristobal's motion for reconsideration despite the absence of notice of time and place of hearing in violation of procedural rules and in reconsidering its extensive and exhaustive order dated November 22, 1991 with a minute resolution denying their motion to dismiss.1wphi1.nt Finding no abuse of discretion on the part of the court a quo, the appellate court resolved on October 25, 1993 that the filing of the opposition to Cristobal's motion for reconsideration cured the defect of lack of notice and hearing; and that the complaint in Civil Case No. 6256 did not involve an intra-corporate controversy but Cristobal's successional rights which is within the jurisdiction of the court.11 Hence, the instant petition which is anchored on the following grounds: I THE HON. COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN OBVIOUS DEFIANCE OF THE DECISION OF THE SUPREME COURT, IN NOT DISMISSING A CASE WHICH IS PURELY AN INTRA-CORPORATE CONTROVERSY AND THEREFORE, FALLS UNDER THE EXCLUSIVE JURISDICTION OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO P.D. 902-A; II THE HON. COURT OF APPEALS HAS AGAIN DECIDED A QUESTION OF SUBSTANCE, CONTRARY TO THE DECISIONS OF THE SUPREME COURT, IN NOT DISMISSING THE CASE FILED BY THE PRIVATE RESPONDENT WHO PURSUED SIMULTANEOUS REMEDIES IN TWO (2) DIFFERENT FORA, AND IS THEREFORE GUILTY OF FORUM SHOPPING; III THE HON. COURT OF APPEALS HAS DECIDED THE CASE NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT, IN NOT DISMISSING THE COMPLAINT FILED BY THE PRIVATE RESPONDENT ON THE GROUND OF PENDENCY OF ANOTHER ACTION; IV THE HON. COURT OF APPEALS HAS DECIDED THE CASE NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT, IN NOT

DISMISSING THE COMPLAINT OF A MERE STOCKHOLDER, WITHOUT BEING AUTHORIZED BY THE BOARD OF DIRECTORS; V THE HON. COURT OF APPEALS HAS DECIDED THE CASE NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT, IN TAKING COGNIZANCE OF A "MERE SCRAP OF PAPER", A MOTION FOR RECONSIDERATION, WHICH DOES NOT CONTAIN THE NOTICE OF TIME AND PLACE OF HEARING, IN VIOLATION OF THE MANDATORY REQUIREMENTS OF THE RULES OF COURT. At the outset, we note that the alleged errors attributed on the part of the Court of Appeals by the petitioners are mere reiteration of those already raised in the court below but which we will nonetheless consider to put an end to this dispute. First, petitioners argue that the trial court has no jurisdiction over the complaint in Civil Case No. 6256 as it involves a suit filed by a stockholder against other stockholders and the corporation itself; thus, it is an intra-corporate controversy within the jurisdiction of the SEC and not of the regular courts. Likewise, petitioners argue that the allegation of fictitious creation of CMH as an alter-ego of the late Concepcion M. Hojilla and the concomitant prayer to pierce the veil of corporate fiction falls within the category of a device or scheme employed by corporate officers cognizable by the SEC alone. The relationship of the parties to a suit has formerly been the lone indicia for its classification either as an intra-corporate controversy within the jurisdiction of the SEC or a civil dispute within the jurisdiction of the regular courts. Thus, a dispute arising between a stockholder and the corporation, without distinction, qualification or exemption, was previously considered an intra-corporate controversy within the jurisdiction of the SEC and not of the regular courts. Recent jurisprudence, however, has established that in determining which body has jurisdiction over a case, the better policy would be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of the controversy.12 A reading of the complaint filed by private respondent shows that its primary objective is to protect his successional rights as an heir of his late mother, Concepcion M. Hojilla, whose paraphernal properties he claimed were fictitiously assigned to CMH to evade payment of taxes. He alleged therein that the properties had already been the subject of extra-judicial partition between the heirs with the house and lots on 23rd Street, Bacolod City, being bestowed upon him and his co-heirs Corazon and Claudia. He claimed that the failure of his other siblings, Carlos, Cesar and Cornelio, to turn over the title to him and his co-heirs allowed CMH to continue claiming the house and lots as its own and even attempted to lease a few of the lots to other persons without the knowledge of private respondent and his co-heirs. Thus, private respondent filed the complaint to consolidate his claim over the subject properties and forestall any further intrusive act from the CMH which would place his and his co-heirs/co-owners' rights over the properties in constant peril. Private respondent's position as a stockholder of CMH and his relationship to the other stockholders, became incidental only to the issue of ownership over the

subject properties and did not convert the action into an intra-corporate controversy within the exclusive jurisdiction of the SEC but remained a civil action cognizable by the regular courts. Neither does the allegation about CMH's formation as an alleged dummy corporation designed to be the alter-ego of the late Concepcion M. Hojilla and the prayer for piercing the corporate veil convert the action into an intra-corporate controversy as the former is merely cited as the ground relied upon by private respondent to prove his claim of ownership over the said house and lots whereas through the said prayer, he in effect exhorts the court to confirm his allegations and thus, protect his successional rights. Thus, in Cease v. CA13 this Court took cognizance of the civil case filed by respondents against their siblings (petitioners therein) and the Tiaong Milling and Plantation Company, Inc. praying that the corporation be declared identical to their deceased father, Forrest L. Cease, and that its properties be divided among his children as his intestate heirs. The Court treated the case as an action for partition and, applying the doctrine of piercing the corporate veil, disregarded the separate personality of the corporation from that of its stockholders reasoning that if the legal fiction of separate corporate personality were sustained, then it would be used to delay and ultimately deprive and defraud respondents of their successional rights over the estate of their deceased father. Second, petitioners argue that the appellate court erred in entertaining the complaint in Civil Case No. 6256 despite the existence of a similar complaint filed by Cristobal before the SEC, docketed as SEC Case No. 0355914 involving the same parties and the same issues raised in Civil Case No. 6256. We do not agree. As properly resolved by the appellate court, the filing of SEC Case No. 03559 does not bar the subsequent filing of Civil Case No. 6256 because they refer to different causes of action with distinct reliefs prayed for. The private respondent in the SEC case prayed for the appointment of a receiver, dissolution and liquidation of CMH, and to enjoin petitioners from leasing the house and lots at 23rd Street, Bacolod City. However, in Civil Case No. 6256, he sought to preserve his successional rights as heir of his deceased mother by piercing the veil of corporate fiction to recover the title of the house and lots on 23rd Street, Bacolod City, and claim payment of damages for the injury he has suffered. Neither does the resolution of SEC Case No. 03559 dismissing the petition of private respondent during the pendency of Civil Case No. 6256 constitute res judicata on the matter since the cause of action and issues raised and resolved in the former are different from those cited in the latter. The requirements of res judicata are: (a) the former judgment must be final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) it must be a judgment on the merits; and (d) there must be, between the first and second actions, identity of parties, subject matter, and causes of action.15 Notably, in the SEC case, the private respondent averred that petitioner stockholders and CMH committed acts to defraud the public such as the lack of accounting, lack of records, lack of proper notice of meetings, and prayed for the dissolution of the corporation; whereas, in Civil Case No. 6256, the private respondent contended that CMH was a mere dummy corporation and an alter-ego of his deceased mother and thus, sought the

delivery of the title over the house and lots in question as his share of inheritance from his deceased mother. Third, petitioners argue that the MTCC's adverse decision in the ejectment case, Civil Case No. 17698, which they had filed against private respondent Cristobal M. Hojilla, is already final and conclusive with regard to latter's claim of ownership over the house and lots in question. Hence, petitioners contend that Civil Case No. 6256 of the RTC should have been dismissed as it allegedly involves the same subject matter and the same issue. The record shows that the MTCC rendered a decision in the ejectment case, Civil Case No. 17698, ordering private respondent to vacate the premises; and that decision was affirmed by the Court of Appeals. However, under Sec. 7, Rule 70 of the Rules of Court, the judgment rendered by a municipal or metropolitan trial court in an action for forcible entry or detainer shall be effective with respect to possession only and in no wise shall affect or bind the title of ownership of the land or building. Such judgment shall not bar an action between the same parties respecting the title to the land or building nor shall the facts found therein be held conclusive in another case between the same parties upon a different cause of action not involving possession.16 Thus, the filing of Civil Case No. 6256 in the RTC was not barred by the adverse decision of the MTCC in the ejectment case, Civil Case No. 17698, inasmuch as the issue raised in the former was one regarding ownership while the issue resolved in the ejectment case was priority of possession alone.17 Fourth, petitioners contend that the complaint should have been dismissed as it was filed by a mere stockholder in behalf of the corporation without being authorized by its board of directors. On the contrary, authorization from the board of directors of the CMH in the case at bar was not necessary inasmuch as private respondent was not acting on behalf of the corporation but in his own personal capacity; and precisely he was suing the corporation itself (CMH) to preserve his successional rights. Finally, petitioners point out that the lower court erred in granting the motion for reconsideration of herein private respondent despite the lack of notice of time and place of hearing in violation of the mandatory provision of the Rules of Court. However, as correctly ruled by the appellate court, the requirement of notice of time and hearing in a party's pleading is necessary only to appraise the other party of the actions of the former. Inasmuch as petitioners have timely filed their Opposition18 on January 7, 1992 to private respondent's motion for reconsideration, any defect regarding such notice had been cured.1wphi1.nt In view of the foregoing, the Court of Appeals did not commit any reversible error in its challenged decision. WHEREFORE, the assailed Decision dated October 25, 1993 of the Court of Appeals in CAG.R. SP No. 28893 holding that the RTC of Bacolod City, Branch 45, did not commit grave abuse of discretion in reconsidering its Order, dated November 22, 1991, in Civil Case No. 6256 is AFFIRMED. The Regional Trial Court of Bacolod City, Branch 45, is hereby ordered to resume forthwith the trial of Civil Case No. 6256 and to resolve the same with utmost dispatch.

SO ORDERED.