Beruflich Dokumente
Kultur Dokumente
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48237 June 30, 1987
MADRIGAL & COMPANY, INC., petitioner,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL
ASSISTANT FOR LEGAL AFFAIRS, THE HON.
SECRETARY OF LABOR, and MADRIGAL CENTRAL
OFFICE EMPLOYEES UNION, respondents.
No. L-49023 June 30, 1987
MADRIGAL & COMPANY, INC., petitioner,
vs.
HON. MINISTER OF LABOR and MADRIGAL
CENTRAL OFFICE EMPLOYEES UNION, respondents.
SARMIENTO, J.:
These are two petitions for certiorari and prohibition filed by
the petitioner, the Madrigal & Co., Inc. The facts are
undisputed.
The petitioner was engaged, among several other corporate
objectives, in the management of Rizal Cement Co.,
Inc. 1 Admittedly, the petitioner and Rizal Cement Co., Inc.
are sister companies. 2 Both are owned by the same or
practically the same stockholders. 3 On December 28, 1973,
the respondent, the Madrigal Central Office Employees Union,
sought for the renewal of its collective bargaining agreement
with the petitioner, which was due to expire on February 28,
1974. 4Specifically, it proposed a wage increase of P200.00 a
month, an allowance of P100.00 a month, and other economic
benefits. 5 The petitioner, however, requested for a deferment
in the negotiations.
On July 29, 1974, by an alleged resolution of its stockholders,
the petitioner reduced its capital stock from 765,000 shares to
267,366 shares. 6 This was effected through the distribution of
the marketable securities owned by the petitioner to its
stockholders in exchange for their shares in an equivalent
amount in the corporation. 7
On August 22, 1975, by yet another alleged stockholders'
action, the petitioner reduced its authorized capitalization from
Yet, at the same tune, the petitioner would claim that "the
phasing out of its operations which brought about the
retrenchment of the affected employees was mainly dictated
be the necessity of its stockholders in their capacity as heirs of
the late Don Vicente Madrigal to partition the estate left by
him." 46 It must be noted, however, that the labor cases were
tried on the theory of losses the petitioner was supposed to
have incurred to justify retrenchment. The petitioner cannot
change its theory in the Supreme Court. Moreover, there is
nothing in the records that will substantiate this claim. But
what is more important is the fact that it is not impossible to
partition the Madrigal estate assuming that the estate is up
for partition without the petitioner's business closing shop
and inevitably, without the petitioner laying off its employees.
As regards the question whether or not the petitioner's letter
dated November 17, 1975 47 was in substantial compliance
with legal clearance requirements, suffice it to state that apart
from the Secretary of Labor's valid observation that the same
"did not constitute a sufficient clearance as contemplated by
law, " 48 the factual circumstances show that the letter in
question was itself a part of the "systematic and deliberate
attempt to get rid of [the union members] because of their
union activities." 49 Hence, whether or not the said letter
complied with the legal formalities is beside the point since
under the circumstances, retrenchment was, in all events,
unjustified. Parenthetically, the clearance required under
Presidential Decree No. 850 has been done away with by
Batas Blg. 130, approved on August 21, 1981.
SO ORDERED.
Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Feliciano
and Gancayco, JJ., concur.
Footnotes
1 Rollo, G.R. No. 48237, 10, 18, 20-21.
2 Id., 10.
3 Id.. 20.
4 Id., 21.
5 Id., 29.
6 Id., 18, 30.
7 Id.
8 Id.
9 Rollo, G. R. No. 49023, 4.
10 Id., 25-29.
14 Id.
15 Id.
16 Id.
17 Id.
18 Id., G.R. No. 49023, 32-37.
19 Id., 34.
20 Id., G.R. No. 48237, 3, 84.
21 Id.
22 Id., 20-28.
23 Id., 27.
24 Id., 28.
25 Id., 29-36.
26 Id., 60-61.
27 Id., G.R. No. 49023, 64-76.
28 Id., 78-80.
29 Id., 86-Al.
45 Supra, 25-26.
47 Id., 18-19.
48 Id., 25.
49 Id., 26.
50 Id., 118-122,141-145.
51 No. L-23557, April 30, 1974, 56 SCRA 694
(1974).
52 Manila Hotel Corporation v. NLRC, No. L-53453,
January 22, 1986, 141 SCRA 169 (1986); Akay
Printing Press v. Minister of Labor and Employment,
No. L-59651, December 6, 1985, 140 SCRA 381
(1985); Magtoto v. National Labor Relations
Commission, No. L-63370, November 18, 1985, 140
SCRA 58 (1985); Panay Railways, Inc. v. National
Labor Relations Commission, No. L-69416, July 1 1,
In this connection, although it is true that Civil Case No. Q90-6937, which gave rise to G.R. No. 107751, was entitled,
"Iglesia Ni Kristo, Plaintiff v. Islamic Directorate of the
Philippines, Defendant," 31 the IDP can not be considered
essentially a formal party thereto for the simple reason that it
was not duly represented by a legitimate Board of Trustees in
that case. As a necessary consequence, Civil Case No. Q-906937, a case for Specific Performance with Damages, a mere
action in personam, did not become final and executory
insofar as the true IDP is concerned since petitioner
corporation, for want of legitimate representation, was
effectively deprived of its day in court in said case. Res
inter alios judicatae nullum allis praejudicium faciunt.
Matters adjudged in a cause do not prejudice those who were
not parties to it. 32 Elsewise put, no person (natural or
juridical) shall be affected by a proceeding to which he is a
stranger. 33
5 Now deceased.
6 Rollo, p. 99.
7 IDP-Carpizo Group.
8 Hadja Potri Zorayda Tamano, et. al.
9 Rollo, p. 45.
P243,415.62
585,918.17
Associated Sugar
463,860.36
General Securities
86,743.65
Bacolod Murcia
501,030.61
97,884.42
Talisay-Silay
4,365.90
The Court found that sums were taken out of the funds of the
Ma-ao Sugar Central Co., Inc. and delivered to these affiliated
companies, and vice versa, without the approval of the Ma-ao
Board of Directors, in violation of Sec. III, Art. 6-A of the bylaws.
The errors assigned in the appeal of the plaintiffs, as
appellants, are as follows:
I.
THE LOWER COURT ERRED IN HOLDING
THAT THE INVESTMENT OF CORPORATE
FUNDS OF THE MA-AO SUGAR CENTRAL CO.,
INC., IN THE PHILIPPINE FIBER PROCESSING
CO., INC. WAS NOT A VIOLATION OF SEC. 17-
OF THE CORPORATION LAW.
II.
xxx
xxx
(2) "On the other hand, the Court has noted against
plaintiffs that their contention that Ma-ao Sugar is on
the verge of bankruptcy has not been clearly shown;
against this are Exh. C to Exh. C-3 perhaps the best
proof that insolvency is still far is that this action was
filed in 1953 and almost seven years have passed
since then without the company apparently getting
worse than it was before; ..." (Decision, pp. 243244,supra.)
xxx
xxx
xxx
xxx
xxx
(4) "...; for the Court must admit its limitations and
confess that it cannot pretend to know better than the
Board in matters where the Board has not
transgressed any positive statute or by-law especially
where as here, there is the circumstance that
presumably, an impartial representative in the Board
of Directors, the one from the Philippine National
Bank, against whom apparently plaintiffs have no
quarrel, does not appear to have made any protest
against the same; the net result will be to hold that the
culpable acts proved are not enough to secure a
dissolution; the Court will only order the correction
of abuses, proved as already mentioned; nor will the
Court grant any more damages one way or the other.
(Decision, p. 244,supra.)
On the other hand, the errors assigned in the appeal of the
defendants as appellants are as follows:
I.
THE LOWER COURT ERRED IN ADJUDGING J.
AMADO ARANETA TO PAY TO MA-AO SUGAR
CENTRAL CO., INC., THE AMOUNT OF
P46,270.00, WITH 8% INTEREST FROM THE
DATE OF FILING OF THE COMPLAINT.
II.
THE LOWER COURT ERRED IN NOT
ORDERING THE PLAINTIFFS TO PAY THE
DEFENDANTS, PARTICULARLY J. AMADO
ARANETA, THE DAMAGES PRAYED FOR IN
THE COUNTERCLAIM OF SAID DEFENDANTS.
The portions of the Decision of the Lower Court assailed by
the defendants as appellants are as follows:
(1) "As to the alleged juggling of books in that the
personal account of J. Amado Araneta of P46,270.00
was closed on October 31, 1947 by charges
transferred to loans receivable nor was interest paid
on this amount, the Court finds that this is related to
charge No. 1, namely, the granting of personal loans
to J. Amado Araneta; it is really true that according to
the books, and as admitted by defendants, J. Amado
Araneta secured personal loans; in 1947, the cash
advance to him was P132,082.00 (Exh. A); the Court
has no doubt that this was against the By-Laws which
provided that:
The Directors shall not in any case borrow
money from the Company. (Sec. III, Art. 7);
the Court therefore finds this count to be duly proved;
worse, the Court also finds that as plaintiffs contend,
while the books of the Corporation would show that
the last balance of P46,270.00 was written off as
xxx
xxx
To the stockholders
xxx
xxx
Yours
very
truly,
(Sgd.) L. R. Nielson
xxx
xxx
Messrs.
Present
Cookes
and
xxx
xxx
xxx
xxx
(1) a dividend, and (2) the enforced use of the dividend money
to purchase additional shares of stock at par.16 When a
corporation issues stock dividends, it shows that the
corporation's accumulated profits have been capitalized
instead of distributed to the stockholders or retained as surplus
available for distribution, in money or kind, should
opportunity offer. Far from being a realization of profits for
the stockholder, it tends rather to postpone said realization, in
that the fund represented by the new stock has been
transferred from surplus to assets and no longer available for
actual distribution.17 Thus, it is apparent that stock dividends
are issued only to stockholders. This is so because only
stockholders are entitled to dividends. They are the only ones
who have a right to a proportional share in that part of the
surplus which is declared as dividends. A stock dividend really
adds nothing to the interest of the stockholder; the
proportional interest of each stockholder remains the same. 18If
a stockholder is deprived of his stock dividends - and this
happens if the shares of stock forming part of the stock
dividends are issued to a non-stockholder then the
proportion of the stockholder's interest changes radically.
Stock dividends are civil fruits of the original investment, and
to the owners of the shares belong the civil fruits.19
The term "dividend" both in the technical sense and its
ordinary acceptation, is that part or portion of the profits of the
enterprise which the corporation, by its governing agents, sets
apart for ratable division among the holders of the capital
stock. It means the fund actually set aside, and declared by the
directors of the corporation as dividends and duly ordered by
the director, or by the stockholders at a corporate meeting, to
be divided or distributed among the stockholders according to
their respective interests.20
It is Our considered view, therefore, that under Section 16 of
the Corporation Law stock dividends can not be issued to a
person who is not a stockholder in payment of services
rendered. And so, in the case at bar Nielson can not be paid in
shares of stock which form part of the stock dividends of
Lepanto for services it rendered under the management
contract. We sustain the contention of Lepanto that the
understanding between Lepanto and Nielson was simply to
make the cash value of the stock dividends declared as the
basis for determining the amount of compensation that should
be paid to Nielson, in the proportion of 10% of the cash value
of the stock dividends declared. And this conclusion of Ours
finds support in the record.
We had adverted to in Our decision that in 1940 there was
some dispute between Lepanto and Nielson regarding the
application and interpretation of certain provisions of the
original contract particularly with regard to the 10%
participation of Nielson in the net profits, so that some
adjustments had to be made. In the minutes of the meeting of
the Board of Directors of Lepanto on August 21, 1940, We
read the following:
The Chairman stated that he believed that it would be
better to tie the computation of the 10% participation
of Nielson & Company, Inc. to the dividend, because
Nielson will then be able to definitely compute its net
participation by the amount of the dividends
declared. In addition to the dividend, we have been
setting up a depletion reserve and it does not seem
November 28, 1949 and August 20, 1950, with legal interest
thereon from the date of the filing of the complaint;
(6) Fifty three thousand nine hundred twenty eight pesos and
eighty eight centavos (P53,928.88), equivalent to 10% of the
depletion reserve set up during the period of extension, with
legal interest thereon from the date of the filing of the
complaint;
(7) Six hundred ninety four thousand three hundred sixty four
pesos and seventy six centavos (P694,364.76), equivalent to
10% of the expenses for capital account during the period of
extension, with legal interest thereon from the date of the
filing of the complaint;
(8) Fifty thousand pesos (P50,000.00) as attorney's fees; and
(9) The costs.
It is so ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez
and Castro, JJ., concur.
Footnotes
Exhibit A.
10
12
13
Exhibit 1.
14
16
17
18
19
20
21
RELOVA, J.:
On February 6, 1959, the Articles of Incorporation of
respondent Jamiatul Philippine-Al Islamia, Inc. (originally
Kamilol Islam Institute, Inc.) were filed with the Securities
and Exchange Commission (SEC) and were approved on
December 14, 1962. The corporation had an authorized capital
stock of P200,000.00 divided into 20,000 shares at a par value
of P10.00 each. Of the authorized capital stock, 8,058 shares
worth P80,580.00 were subscribed and fully paid for. Herein
petitioner Datu Tagoranao Benito subscribed to 460 shares
worth P4,600.00.
On October 28, 1975, the respondent corporation filed a
certificate of increase of its capital stock from P200,000.00 to
P1,000,000.00. It was shown in said certificate that
P191,560.00 worth of shares were represented in the
stockholders' meeting held on November 25, 1975 at which
time the increase was approved. Thus, P110,980.00 worth of
shares were subsequently issued by the corporation from the
unissued portion of the authorized capital stock of
P200,000.00. Of the increased capital stock of P1,000,000.00,
P160,000.00 worth of shares were subscribed by Mrs. Fatima
A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto.
On November 18, 1976, petitioner Datu Tagoranao filed with
respondent Securities and Exchange Commission a petition
alleging that the additional issue (worth P110,980.00) of
previously subscribed shares of the corporation was made in
violation of his pre-emptive right to said additional issue and
that the increase in the authorized capital stock of the
corporation from P200,000.00 to P1,000,000.00 was illegal
considering that the stockholders of record were not notified
of the meeting wherein the proposed increase was in the
agenda. Petitioner prayed that the additional issue of shares of
previously authorized capital stock as well as the shares issued
from the increase in capital stock of respondent corporation be
cancelled; that the secretary of respondent corporation be
ordered to register the 2,540 shares acquired by him
(petitioner) from Domocao Alonto and Moki-in Alonto; and
that the corporation be ordered to render an accounting of
funds to the stockholders.
1968, 26 SCRA 475, 496, citing Pajo vs. Ago, et al., L-15414,
June 30, 1960) and Genitano vs. Secretary of Agriculture and
Natural Resources, et al. (L-2ll67, March 31, 1966), the
Supreme Court held that:
... Findings of fact by an administrative board or
official, following a hearing, are binding upon the
courts and win not be disturbed except where the
board or official has gone beyond his statutory
authority, exercised unconstitutional powers or
clearly acted arbitrarily and without regard to his
duty or with grave abuse of discretion. ...
ACCORDINGLY, this petition is hereby dismissed for lack of
merit.
SO ORDERED.
Plana, Escolin and Gutierrez, Jr., JJ., concur.
Teehankee, J., concurs in the result.
Melencio-Herrera and Vasquez, JJ., are on leave.
Employee
Date Employed
Latest Salary
P1,090.00
Mila C. Refuerzo
08/02/68
930.00
Marcial C. Mamaril
09/01/51
560.00
Perfecto Bautista
12/01/54
540.00
Edward S. Mamaril
10/01/80
540.00
Marissa S. Pascual
02/01/81
540.00
Allan M. Pimentel
03/01/81
540.00
THIRD DIVISION
[G.R. No. 125778. June 10, 2003]
INTER-ASIA INVESTMENTS INDUSTRIES,
INC., petitioner, vs. COURT OF APPEALS and
ASIA INDUSTRIES, INC., respondents.
DECISION
CARPIO-MORALES, J.:
The present petition for review on certiorari assails the
Court of Appeals Decision[1] of January 25, 1996 and
Resolution[2] of July 11, 1996.
The material facts of the case are as follows:
On September 1, 1978, Inter-Asia Industries, Inc.
(petitioner), by a Stock Purchase Agreement [3] (the
Agreement), sold to Asia Industries, Inc. (private respondent)
for and in consideration of the sum of P19,500,000.00 all its
right, title and interest in and to all the outstanding shares of
stock of FARMACOR, INC. (FARMACOR).[4] The
Agreement was signed by Leonides P. Gonzales and Jesus J.
Vergara, presidents of petitioner and private respondent,
respectively.[5]
Under paragraph 7 of the Agreement, petitioner as seller
made warranties and representations among which were (iv.)
[t]he audited financial statements of FARMACOR at and for
the year ended December 31, 1977... and the audited financial
(a) SELLER
xxx
(iv)
[1]
Sandoval-
Rollo at 29-42.
Id. at 44-45.
[3]
Records at 9-23.
[4]
Id. at 10-11.
[5]
Id. at 22.
[6]
Id. at 16-17.
[7]
Exhibits G-1, G-2, G-3; Records at 586-593.
[8]
Ibid.
[9]
Records at 12.
[10]
Rollo, at 12 and 82.
[11]
Records at 322-327.
[12]
Id. at 324-325.
[13]
Exhibit G-6; Records at 598-604.
[14]
P4,853,503.00 is the amount prayed for in the complaint
but it is noted that the total amount of these figures is
P4,853,563.00.
[15]
Id. at 13; Records at 4.
[16]
Records at 1-25.
[17]
See footnote 14.
[18]
Id. at 757-760.
[19]
See footnote 14. Plaintiff did not move to reconsider the
amount adjudged to it.
[20]
Rollo at 14.
18
Id at 15.
19
297 SCRA 170 (1998).
[2]
[21]
Rollo at 92-93.
Id. at 21.
[23]
Records at 17-18.
[24]
Transcript of Stenographic Notes, July 27, 1988 at 5.
[25]
Central Azucarera de Bais v. CA, 188 SCRA 328 (1990).
[22]
III
THE LOWER COURT ERRED IN RULING THAT
PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO
PURCHASE THE SUBJECT PROPERTY WHEN IT
FAILED TO CONFORM WITH CONDITIONS SET FORTH
BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4
JUNE 1985.
IV
THE LOWER COURT ERRED IN DISREGARDING THE
FACT THAT IT WAS THE DEFENDANT-APPELLEE
WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE
FOR PLAINTIFF-APPELLANT TO COMPLETE THE
BALANCE OF THEIR PURCHASE PRICE.
V
THE LOWER COURT ERRED IN DISREGARDING THE
FACT THAT THERE WAS NO VALID RESCISSION OR
CANCELLATION OF SUBJECT CONTRACT OF
REPURCHASE.
VI
THE LOWER COURT ERRED IN DECLARING THAT
PLAINTIFF FAILED AND REFUSED TO SUBMIT THE
AMENDED REPURCHASE OFFER.
VII
THE LOWER COURT ERRED IN DISMISSING THE
AMENDED COMPLAINT OF PLAINTIFF-APPELLANT.
VIII
THE LOWER COURT ERRED IN NOT AWARDING
PLAINTIFF-APPELLANT ACTUAL, MORAL AND
EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND
LITIGATION EXPENSES.33
Meanwhile, on June 17, 1993, petitioner's Board of Directors
approved Resolution No. 3-004, where it waived, assigned and
transferred its rights over the property covered by TCT No.
33099 and TCT No. 37025 in favor of Bayani Gabriel, one of
its Directors.34 Thereafter, Bayani Gabriel executed a Deed of
Assignment over 51% of the ownership and management of
the property in favor of Reynaldo Tolentino, who later moved
for leave to intervene as plaintiff-appellant. On July 14, 1993,
the CA issued a resolution granting the motion, 35 and likewise
granted the motion of Reynaldo Tolentino substituting
petitioner MMCC, as plaintiff-appellant, and his motion to
withdraw as intervenor.36
The CA rendered judgment on May 11, 2000 affirming the
decision of the RTC.37 It declared that petitioner obviously
never agreed to the selling price proposed by respondent PNB
(P1,931,389.53) since petitioner had kept on insisting that the
selling price should be lowered to P1,574,560.47. Clearly
therefore, there was no meeting of the minds between the
parties as to the price or consideration of the sale.
The CA ratiocinated that petitioner's original offer to purchase
the subject property had not been accepted by respondent
PNB. In fact, it made a counter-offer through its June 4, 1985
letter specifically on the selling price; petitioner did not agree
to the counter-offer; and the negotiations did not prosper.
Moreover, petitioner did not pay the balance of the purchase
price within the sixty-day period set in the June 4, 1985 letter
of respondent PNB. Consequently, there was no perfected
contract of sale, and as such, there was no contract to rescind.
According to the appellate court, the claim for damages and
the counterclaim were correctly dismissed by the court a quo
for no evidence was presented to support it. Respondent PNB's
letter dated June 30, 1988 cannot revive the failed negotiations
between the parties. Respondent PNB merely asked petitioner
to submit an amended offer to repurchase. While petitioner
reiterated its request for a lower selling price and that the
balance of the repurchase be reduced, however, respondent
rejected the proposal in a letter dated August 1, 1989.
Petitioner filed a motion for reconsideration, which the CA
likewise denied.
Thus, petitioner filed the instant petition for review
on certiorari, alleging that:
I. THE COURT OF APPEALS ERRED ON A QUESTION
OF LAW WHEN IT RULED THAT THERE IS NO
PERFECTED CONTRACT OF SALE BETWEEN THE
PETITIONER AND RESPONDENT.
II. THE COURT OF APPEALS ERRED ON A QUESTION
OF LAW WHEN IT RULED THAT THE AMOUNT OF
PHP725,000.00 PAID BY THE PETITIONER IS NOT AN
EARNEST MONEY.
III. THE COURT OF APPEALS ERRED ON A QUESTION
OF LAW WHEN IT RULED THAT THE FAILURE OF THE
PETITIONER-APPELLANT
TO
SIGNIFY
ITS
CONFORMITY TO THE TERMS CONTAINED IN PNB'S
JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO
VALID AND LEGALLY ENFORCEABLE CONTRACT OF
SALE BETWEEN THE PARTIES.
IV. THE COURT OF APPEALS ERRED ON A QUESTION
OF LAW THAT NON-PAYMENT OF THE PETITIONERAPPELLANT OF THE BALANCE OF THE OFFERED
PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985,
WITHIN SIXTY (60) DAYS FROM NOTICE OF
APPROVAL CONSTITUTES NO VALID AND LEGALLY
ENFORCEABLE CONTRACT OF SALE BETWEEN THE
PARTIES.
V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN
IT HELD THAT THE LETTERS OF PETITIONERAPPELLANT DATED MARCH 18, 1993 AND JUNE 21,
1993, OFFERING TO BUY THE SUBJECT PROPERTY AT
DIFFERENT AMOUNT WERE PROOF THAT THERE IS
NO PERFECTED CONTRACT OF SALE.38
The threshold issue is whether or not petitioner and respondent
PNB had entered into a perfected contract for petitioner to
repurchase the property from respondent.
Petitioner maintains that it had accepted respondent's offer
made through the SAMD, to sell the property
forP1,574,560.00. When the acceptance was made in its letter
dated June 25, 1984; it then deposited P725,000.00 with the
SAMD as partial payment, evidenced by Receipt No. 978194
which respondent had issued. Petitioner avers that the
SAMD's acceptance of the deposit amounted to an acceptance
of its offer to repurchase. Moreover, as gleaned from the letter
of SAMD dated June 4, 1985, the PNB Board of Directors had
63
As earlier narrated, the derivative suit (SEC Case No. 06-934491) hibernated with the SEC for a long period of time. With
the enactment of R.A. No. 8799, the case was first turned over
to the RTC of Manila, Branch 14, sitting as a corporate court.
Thereafter, on respondents motion, it was eventually
transferred to the RTC of Davao City whereat it was docketed
as Civil Case No. 28,552-2001 and raffled to Branch 10
thereof.
On 10 December 2001, RTC-Davao City rendered its
decision5 in the case. Even as it found that (1) Filports Board
of Directors has the power to create positions not provided for
in the by-laws of the corporation since the board is the
governing body; and (2) the increases in the salaries of the
board chairman, vice-president, treasurer and assistant general
manager are reasonable, the trial court nonetheless rendered
judgment against the respondents by ordering the directors
holding the positions of Assistant Vice President for Corporate
Planning, Special Assistant to the President and Special
Assistant to the Board Chairman to refund to the corporation
the salaries they have received as such officers "considering
that Filipinas Port Services is not a big corporation requiring
multiple executive positions" and that said positions "were just
created for accommodation." We quote the fallo of the trial
courts decision.
WHEREFORE, judgment is rendered ordering:
Edgar C. Trinidad under the third and fourth causes of action
to restore to the corporation the total amount of salaries he
received as assistant vice president for corporate planning; and
likewise ordering Fortunato V. de Castro and Arsenio Lopez
Chua under the fourth cause of action to restore to the
corporation the salaries they each received as special assistants
respectively to the president and board chairman. In case of
insolvency of any or all of them, the members of the board
who created their positions are subsidiarily liable.
The counter claim is dismissed.
From the adverse decision of the trial court, herein
respondents went on appeal to the CA in CA-G.R. CV No.
73827.
In its decision6 of 19 January 2004, the CA, taking exceptions
to the findings of the trial court that the creation of the
positions of Assistant Vice President for Corporate Planning,
Special Assistant to the President and Special Assistant to the
Board Chairman was merely for accommodation purposes,
granted the respondents appeal, reversed and set aside the
appealed decision of the trial court and accordingly dismissed
the so-called derivative suit filed by Cruz, et al., thus:
21
13
15
Sec. 35. Executive committee. The by-laws of a corporation may create an executive
committee, composed of not less than three members of the board to be appointed by the
board. Said committee may act, by majority vote of all its members, on such specific
matters within the competence of the board, as may be delegated to it in the by-laws or on
a majority vote of the board, except with respect to: xxx
16
H. de Leon, The Corporation Code of the Phils., 2002 ed., pp. 310-311.
17
Board of Liquidators v. Heirs of Maximo M. Kalaw, et al., G.R. No. L-18805, August
15, 1967, 20 SCRA 987.
18
Philippine Stock Exchange v. CA, G.R. No. 125469, October 27, 1997, 281 SCRA 232.
19
Garcia v. De Vera, A.C. No. 6052, December 11, 2003, 418 SCRA 27.
20
Pastor v. PNB, G.R. No. 141316, November 20, 2003, 416 SCRA 283.
21
Supra.
22
Chua v. CA, G.R. No. 150793, November 19, 2004, 443 SCRA 259, 267.
23
24
San Miguel Corporation, represented by Eduardo De Los Angeles v. Ernest Khan, G.R.
No. 85339, August 11, 1989, 176 SCRA 447, 462.
EN BANC
1
Id. at 56-57.
Id. at 38-44.
Id. at 45-51.
Id. at 109-114.
Supra at note 1
Id. at 292-293.
Id. at 305-306.
10
Bank of the Philippine Islands v. Carlos Leobrero, G.R. No. 137147, November 18,
2003, 416 SCRA 15, 18.
11
Id.
12
court. The amended answer sets forth, furthermore, a crosscomplaint against the plaintiffs, and in behalf of the Paraaque
Rice Mill, Inc., based on the alleged failure of the plaintiff
Higinio Angeles to render a report of his administration of the
corporation from February 14 to June 30, 1928, during which
time the corporation is alleged to have accrued earnings of
approximately P3,000. In both the counter claim and crosscomplaint Paraaque Rice Mill, Inc. is joined as party
defendant.
On July 24, 1934, the plaintiffs-appellees renewed their
petition for the appointment of a receiver pendente
litealleging, among other things, that defendant Teodorico B.
Santos was using the funds of the corporation for purely
personal ends; that said Teodorico B. Santos was managing to
the interest of the Corporation and its stockholders; that said
defendant did not render any account of his management or
for the condition of the business of the corporation; that since
1932 said defendant called no meeting of the board of
directors or of the stockholders thus enabling him to continue
holding, without any election, the position of present and,
finally, that of manager; and that, without the knowledge and
consent of the stockholders and of the board of directors, the
said defendant installed a small rice mill for converting rice
husk into "tiqui-tiqui", the income of which was never turned
over or reported to the treasurer of the corporation.
The defendant-appellants objected to the petition for the
appointment of a receiver on the ground, among others, that
the court had no jurisdiction over the Paraaque Rice Mill,
Inc., because it had not been include as party defendant in this
case and that, therefore the court could not properly appoint a
receiver of the corporation pendente lite.
Promulgated:
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
PANGANIBAN, CJ.
For stock corporations, the quorum referred to in
Section 52 of the Corporation Code is based on the number
of outstanding voting stocks. For nonstock corporations, only
those who are actual, living members with voting rights shall be
counted in determining the existence of a quorum during
members meetings. Dead members shall not be counted.
The Case
The present Petition for Review on Certiorari [1] under
Rule 45 of the Rules of Court seeks the reversal of the January
23[2] and May 7, 2002,[3] Resolutions of the Court of Appeals
(CA) in CA-GR SP No. 68202. The first assailed Resolution
dismissed the appeal filed by petitioners with the
CA. Allegedly, without the proper authorization of the other
[15]
[16]
Main Issue:
6.
7.
8.
xxx
1.
Amendment of
incorporation;
the
articles
of
2.
3.
4.
Incurring, creating
bonded indebtedness;
5.
or
increasing
[1]
[2]
[3]
[4]
[14]
Section 52. Quorum in meetings. Unless otherwise provided for in this Code
or in the by-laws, a quorum shall consist of the stockholders representing a
majority of the outstanding capital stock or a majority of the members in the
case of non-stock corporations. (Underscoring supplied)
[15]
[16]
To resolve old cases, the Court created the Committee on Zero Backlog of Cases
on January 26, 2006. Consequently, the Court resolved to prioritize the
adjudication of long-pending cases by redistributing them among all the
justices. This case was recently re-raffled and assigned to the
undersigned ponente for study and report.
[17]
[18]
Petitioners James Tan, Paul Lee Tan, Andrew Liuson, Esther Wong, Stephen
Co; Respondents Paul Sycip and Merritto Lim and four others not parties in
this Petition John Tan, Claro Ben Lim, Wang Ta Peng and Anita
So. (Memorandum for petitioners, p. 2; rollo, p. 92.)
Ateneo De Naga University v. Manalo, 458 SCRA 325, May 9, 2005; Vicar
International Construction, Inc. v. FEB Leasing and Finance Corporation,
456 SCRA 588, April 22, 2005; Alternative Center for Organizational
Reforms and Development, Inc. (ACORD) v. Zamora, 459 SCRA 578, June
8, 2005.
[19]
Wang Ta Peng, Esther Wong, Stephen Co and James L. Tan, represented by Atty.
Sabino Padilla; Paul Lee Tan and Andrew Liuson, represented by Atty.
Eduardo P. Lizares; and Anita So, represented by Atty. Antonio C.
Pacis. (Id.; id. at 92-93)
Estares v. Court of Appeals, 459 SCRA 604, June 8, 2005; Torres v. Specialized
Packaging Development Corporation, 433 SCRA 455, July 6,
2004; National Steel Corp. v. CA, 436 Phil. 656, August 29, 2002; Sy Chin
v. Court of Appeals, 399 Phil. 442, November 23, 2000.
[20]
[21]
In certain exceptional circumstances, the Court has allowed the relaxation of the
rule requiring verification and certification of non-forum shopping. LDP
Marketing, Inc., v. Monter, GR No. 159653, January 25, 2006 citing Uy v.
Land Bank of the Philippines, 336 SCRA 419, July 24, 2000, Roadway
Express, Inc. v. Court of Appeals, et al., 264 SCRA 696, November 21,
1996, and Loyola v. Court of Appeals, et al., 245 SCRA 477, June 29,
1995; Ateneo De Naga University v. Manalo, 458 SCRA 325, May 9, 2005.
[22]
[23]
[24]
See CORPORATION CODE, Secs. 6, 16, 24, 28-30, 32, 34, 38, 40, 42-44, 46,
48, 77, 118-120.
[25]
[5]
[6]
[7]
See Decision dated June 21, 2000, SEC Case No. 08-98-6065, p. 2; rollo, p. 40.
[8]
[9]
[10]
Section 89. Right to vote. The right of the members of any class or classes to
vote may be limited, broadened or denied to the extent specified in the
articles of incorporation or the by-laws. Unless so limited, broadened or
denied, each member, regardless of class, shall be entitled to one vote.
[12]
[13]
Article III (2). Vacancies Any vacancy in the Board of Trustees shall be
filled by a majority vote of the remaining members of the Board. (Cited in
Decision, SEC Case No. 08-98-6065, p. 6; rollo, p. 43.)
Section 29. Vacancies in the office of director or trustee. Any vacancy
occurring in the board of directors or trustees other than by removal by the
stockholders or members or by expiration of term, may be filled by the vote
of at least a majority of the remaining directors or trustees, if still
constituting a quorum; otherwise, said vacancies must be filled by the
stockholders in a regular or special meeting called for that purpose. x x x.
(Underscoring supplied)
See SEC Order dated July 6, 2001, Annex D of Petition; rollo, pp. 46-51.
[26]
J. CAMPOS, JR. AND M.C. CAMPOS, THE CORPORATION CODE 341, Vol.
I (1990); see also Ramirez v. Orientalist Co., 38 Phil. 634 (1918).
[27]
[28]
5 FLETCHER
CYCLOPEDIA
CORPORATIONS 116 (1976).
[29]
[30]
5 FLETCHER
CYCLOPEDIA
CORPORATIONS 127 (1976).
OF
OF
THE
THE
LAW
LAW
OF
PRIVATE
OF
PRIVATE
[31]
Id.
[50]
[32]
Id.
[33]
[34]
[35]
[36]
Section 9. Treasury shares. Treasury shares are shares of stock which have
been issued and fully paid for but subsequently reacquired by the issuing
corporation by purchase, redemption, donation or through some other lawful
means. x x x.
Section 57. Voting right for treasury shares. Treasury shares shall have no
voting right as long as such stock remains in the Treasury.
[37]
90 ALR 316.
[38]
[39]
[40]
[41]
In Noremac, Inc. v. Centre Hill Court, Inc., (178 SE 877, March 14, 1935)
the management and control of the corporation were vested in lot owners
who were members of the corporation, by virtue of their ownership; and the
bylaws provided that a quorum should consist of members representing a
majority of the lots, numbered from 1 to 30, inclusive; but the number of lots
was later reduced to 29 so the Court said that the majority of members
representing actual number of lots was a quorum.
The landmark case Avelino v. Cuenca (83 Phil. 17, March 4, 1949) can be
used by analogy. In that case, the Supreme Court said that [t]here is a
difference between a majority of all the members of the House and a
majority of the House, which requires less number than the first.
In this case, the law refers to the majority of the members and not the
majority of all the members. Thus, we can use the same reasoning that the
majority of the members requires a lesser number than the majority of all
the members.
[42]
See the Decision dated June 21, 2000, SEC Case No. 08-98-6065, pp. 3-4; rollo,
pp. 41-42.
[43]
[44]
SEC Letter-Opinion to Ms. Rosevelinda E. Calingasan, et al., (R. Lopez) May 14,
1993; CORPORATION CODE, Sec. 55.
[45]
[46]
[47]
Excluding Atty. Antonio C. Pacis (proxy for Anita So), who left the meeting in
protest of the alleged lack of quorum.
[48]
SEC Letter-Opinion to Mr. Noe S. Andaya (R. Lopez) September 20, 1990.
[49]
Article III (2), By-laws of GCHS (cited in the Decision dated June 21, 2000, SEC
Case No. 08-98-6065, p. 6); rollo, p. 43.
EN BANC
G.R. No. L-18805
(i) October 28, 1947: Fairwood & Co., for 1,000 tons,
$210.00 per short ton, c.i.f., Pacific ports, delivery:
January, 1948. This contract was assigned to Pacific
Vegetable Co.
SANCHEZ, J.:
The National Coconut Corporation (NACOCO, for short) was
chartered as a non-profit governmental organization on May 7,
1940 by Commonwealth Act 518 avowedly for the protection,
preservation and development of the coconut industry in the
Philippines. On August 1, 1946, NACOCO's charter was
amended [Republic Act 5] to grant that corporation the express
power "to buy, sell, barter, export, and in any other manner
deal in, coconut, copra, and dessicated coconut, as well as
their by-products, and to act as agent, broker or commission
merchant of the producers, dealers or merchants" thereof. The
charter amendment was enacted to stabilize copra prices, to
serve coconut producers by securing advantageous prices for
them, to cut down to a minimum, if not altogether eliminate,
the margin of middlemen, mostly aliens.4
General manager and board chairman was Maximo M. Kalaw;
defendants Juan Bocar and Casimiro Garcia were members of
the Board; defendant Leonor Moll became director only on
December 22, 1947.
NACOCO, after the passage of Republic Act 5, embarked on
copra trading activities. Amongst the scores of contracts
executed by general manager Kalaw are the disputed
contracts, for the delivery of copra, viz:
(a) July 30, 1947: Alexander Adamson & Co., for
2,000 long tons, $167.00: per ton, f. o. b., delivery:
August and September, 1947. This contract was later
assigned to Louis Dreyfus & Co. (Overseas) Ltd.
Tons
Delivered
Undelivered
2,386.45
4,613.55
Spencer Kellog
None
1,000
Franklin Baker
1,000
500
Louis Dreyfus
800
2,200
850
245
T O TAL S
7,091.45
9,408.55
the
Board
of
Liquidators.
The
beneficial
interest remained with the sole stockholder the
government. At no time had the government withdrawn the
property, or the authority to continue the present suit, from the
Board of Liquidators. If for this reason alone, we cannot stay
the hand of the Board of Liquidators from prosecuting this
case to its final conclusion. 16 The provisions of Section 78 of
the Corporation Law the third method of winding up
corporate affairs find application.
We, accordingly, rule that the Board of Liquidators has
personality to proceed as: party-plaintiff in this case.
2. Defendants' second poser is that the action is unenforceable
against the heirs of Kalaw.
Appellee heirs of Kalaw raised in their motion to
dismiss, 17 which was overruled, and in their nineteenth special
defense, that plaintiff's action is personal to the deceased
Maximo M. Kalaw, and may not be deemed to have survived
after his death.18 They say that the controlling statute is
Section 5, Rule 87, of the 1940 Rules of Court. 19 which
provides that "[a]ll claims for money against the decedent,
arising from contract, express or implied", must be filed in the
estate proceedings of the deceased. We disagree.
The suit here revolves around the alleged negligent acts of
Kalaw for having entered into the questioned contracts
without prior approval of the board of directors, to the damage
and prejudice of plaintiff; and is against Kalaw and the other
directors for having subsequently approved the said contracts
in bad faith and/or breach of trust." Clearly then, the present
case is not a mere action for the recovery of money nor a
claim for money arising from contract. The suit involves
alleged tortious acts. And the action is embraced in suits filed
"to recover damages for an injury to person or property, real or
personal", which survive. 20
The leading expositor of the law on this point is Aguas vs.
Llemos, L-18107, August 30, 1962. There, plaintiffs sought to
recover damages from defendant Llemos. The complaint
averred that Llemos had served plaintiff by registered mail
with a copy of a petition for a writ of possession in Civil Case
4824 of the Court of First Instance at Catbalogan, Samar, with
notice that the same would be submitted to the Samar court on
February 23, 1960 at 8:00 a.m.; that in view of the copy and
notice served, plaintiffs proceeded to the said court of Samar
from their residence in Manila accompanied by their lawyers,
only to discover that no such petition had been filed; and that
defendant Llemos maliciously failed to appear in court, so that
plaintiffs' expenditure and trouble turned out to be in vain,
causing them mental anguish and undue embarrassment.
Defendant died before he could answer the complaint. Upon
leave of court, plaintiffs amended their complaint to include
the heirs of the deceased. The heirs moved to dismiss. The
court dismissed the complaint on the ground that the legal
representative, and not the heirs, should have been made the
party defendant; and that, anyway, the action being for
recovery of money, testate or intestate proceedings should be
initiated and the claim filed therein. This Court, thru Mr.
Justice Jose B. L. Reyes, there declared:
27
Van Denburgh vs. Tungsten Reef Mines Co., 67 P. (2d) 360, 361, citing First
National Fin. Corp. vs. Five-O Drilling Co., 289 P. 844, 845.
28
McIntosh vs. Dakota Trust Co., 204 N.W. 818. 824.
29
Murphy vs. W. H. & F. W. Cane, 82 Atl. 854, 856. See Martin vs. Webb, 110
U.S. 7, 14-15, 28 L. ed. 49, 52. See also Victory Investment Corporation vs.
Muskogee Electric T. CO., 150 F. 2d. 889, 893.
30
2 Fletcher, p. 858, citing cases.
31
Kridelbaugh vs. Aldrehn Theatres Co., 191 N.W. 803, 804, citing cases;
emphasis supplied.
32
Article 1313, old Civil Code; now Article 1396, new Civil Code.
33
Tagaytay Development Co. vs. Osorio, 69 Phil. 180, 184.
34
Spiegel vs. Beacon Participations, 8 N.E. (2d) 895, 907, citing cases.
35
See: 3 Fletcher, Sec. 850, pp. 162-165.
36
Air France vs. Carrascoso, L-21438, September 28, 1966.
37
R.A., pp. 234-235.
38
3 Fletcher, pp. 450-452, citing cases. Cf. Angeles vs. Santos, 64 Phil. 697,
707.
39
Tr., p. 30, August 29, 1960.
40
See Exhibit 29-Heirs, NACOCO's Second Amended Answer in Civil Case
4322, Court of First instance of Manila, entitled "Louis Dreyfus & Co.
(Overseas) Limited, plaintiff vs. National Coconut Corporation, defendant."
41
Section 2, Rule 129, Rules of Court; 20 Am. Jur., pp. 469-470.
42
The time for delivery of copra under the July 30, 1947 contract was
extended. Fifth Amended Complaint, R.A., P. 15. See also Exhibit 26- Heirs.
43
Churchill and Tait vs. Rafferty 32 Phil. 580, 605; Ladrera vs Secretary of
Agriculture and Natural Resources, L-13385, April 28, 1960.
44
Memorandum of Government Corporate Counsel Marcial P. Lichauco dated
February 9, 1949, addressed to the Secretary of Justice, 8 days after the
original complaint herein was filed in court. R.A., pp. 69, 90-112.
45
Tr., pp. 18, 29, August 29, 1960.
46
See Exhibit 20-Heirs.
47
Exhibit 25-Heirs.
48
Emphasis supplied.
49
3 Fletcher, pp. 450-452, supra.
2.
In applying its clear and reasonable standards on the
suitability for listing of shares, PSE has failed to justify why it
acted differently on the application of PALI, as compared to
the IPOs of other companies similarly that were allowed
listing in the Exchange;
3.
It appears that the claims and issues on the title to
PALIs properties were even less serious than the claims
against the assets of the other companies in that, the assertions
of the Marcoses that they are owners of the disputed properties
were not substantiated enough to overcome the strength of a
title to properties issued under the Torrens System as evidence
of ownership thereof;
4.
No action has been filed in any court of competent
jurisdiction seeking to nullify PALIs ownership over the
disputed properties, neither has the government instituted
recovery proceedings against these properties. Yet the import
of PSEs decision in denying PALIs application is that it
would be PALI, not the Marcoses, that must go to court to
prove the legality of its ownership on these properties before
its shares can be listed.
In addition, the argument that the PALI properties belong
to the Military/Naval Reservation does not inspire belief. The
point is, the PALI properties are now titled. A property losses
As has been pointed out, the effects of such an act are chiefly
(1) prevention of excesses and fraudulent transactions, merely
by requirement of that details be revealed; (2) placing the
market during the early stages of the offering of a security a
body of information, which operating indirectly through
investment services and expert investors, will tend to produce
a more accurate appraisal of a security. x x x. Thus, the
Commission may refuse to permit a registration statement to
become effective if it appears on its face to be incomplete or
inaccurate in any material respect, and empower the
Commission to issue a stop order suspending the effectiveness
of any registration statement which is found to include any
untrue statement of a material fact or to omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading. (Idem).
Also, as the primary market for securities, the PSE has
established its name and goodwill, and it has the right to
protect such goodwill by maintaining a reasonable standard of
propriety in the entities who choose to transact through its
facilities. It was reasonable for PSE, therefore, to exercise its
judgment in the manner it deems appropriate for its business
identity, as long as no rights are trampled upon, and public
welfare is safeguarded.
In this connection, it is proper to observe that the concept
of government absolutism in a thing of the past, and should
remain so.
The observation that the title of PALI over its properties
is absolute and can no longer be assailed is of no moment. At
this juncture, there is the claim that the properties were owned
by the TDC and MSDC and were transferred in violation of
sequestration orders, to Rebecco Panlilio and later on to PALI,
besides the claim of the Marcoses that such properties belong
to Marcos estate, and were held only in trust by Rebecco
Panlilio. It is also alleged by the petitioner that these
properties belong to naval and forest reserves, and therefore
beyond private dominion. If any of these claims is established
to be true, the certificates of title over the subject properties
now held by PALI may be disregarded, as it is an established
rule that a registration of a certificate of title does not confer
ownership over the properties described therein to the person
named as owner. The inscription in the registry, to be
effective, must be made in good faith. The defense of
indefeasibility of a Torrens Title does not extend to a
transferee who takes the certificate of title with notice of a
flaw.
In any case, for the purpose of determining whether PSE
acted correctly in refusing the application of PALI, the true
ownership of the properties of PALI need not be determined as
an absolute fact. What is material is that the uncertainty of the
properties ownership and alienability exists, and this puts to
question the qualification of PALIs public offering. In sum,
the Court finds that the SEC had acted arbitrarily in arrogating
unto itself the discretion of approving the application for
listing in the PSE of the private respondent PALI, since this is
a matter addressed to the sound discretion of the PSE, a
corporate entity, whose business judgments are respected in
the absence of bad faith.
The question as to what policy is, or should be relied
upon in approving the registration and sale of securities in the
SEC is not for the Court to determine, but is left to the sound
(3)
The enterprise or the business of the issuer is not
shown to be sound or to be based on sound business
principles;
(4)
An officer, member of the board of directors, or
principal stockholder of the issuer is disqualified to such
officer, director or principal stockholder; or
(5)
The issuer or registrant has not shown to the
satisfaction of the Commission that the sale of its security
would not work to the prejudice to the public interest or as a
fraud upon the purchaser or investors. (Emphasis Ours)
A reading of the foregoing grounds reveals the intention
of the lawmakers to make the registration and issuance of
securities dependent, to a certain extent, on the merits of the
securities themselves, and of the issuer, to be determined by
the Securities and Exchange Commission. This measure was
meant to protect the interest of the investing public against
fraudulent and worthless securities, and the SEC is mandated
by law to safeguard these interests, following the policies and
rules therefore provided. The absolute reliance on the full
disclosure method in the registration of securities is, therefore,
untenable. At it is, the Court finds that the private respondent
PALI, on at least two points (nos. 1 and 5) has failed to
support the propriety of the issue of its shares with unfailing
clarity, thereby lending support to the conclusion that the PSE
acted correctly in refusing the listing of PALI in its stock
exchange. This does not discount the effectivity of whatever
method the SEC, in the exercise of its vested authority,
chooses in setting the standard for public offerings of
corporations wishing to do so. However, the SEC must
recognize and implement the mandate of the law, particularly
the Revised Securities Act, the provisions of which cannot be
amended or supplanted my mere administrative issuance.
In resum, the Court finds that the PSE has acted with
justified circumspection, discounting, therefore, any
imputation of arbitrariness and whimsical animation on its
part. Its action in refusing to allow the listing of PALI in the
stock exchange is justified by the law and by the
circumstances attendant to this case.
ACCORDINGLY, in view of the foregoing
considerations, the Court hereby GRANTS the Petition for
Review on Certiorari. The decisions of the Court of Appeals
and the Securities and Exchage Commission dated July 27,
1996 and April 24, 1996, respectively, are hereby REVERSED
and SET ASIDE, and a new Judgment is hereby ENTERED,
affirming the decision of the Philippine Stock Exchange to
deny the application for listing of the private respondent
Puerto Azul Land, Inc.
SO ORDERED.
Regalado (Chairman) and Puno, JJ., concur.
Mendoza, J., in the result.
[1]
SECOND DIVISION
[G.R. No. 142435. April 30, 2003]
ESTELITA BURGOS LIPAT and ALFREDO
LIPAT, petitioners, vs. PACIFIC BANKING
CORPORATION, REGISTER OF DEEDS, RTC
EX-OFFICIO SHERIFF OF QUEZON CITY and
the Heirs of EUGENIO D.
TRINIDAD, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal
of the Decision[1] dated October 21, 1999 of the Court of
Appeals in CA-G.R. CV No. 41536 which dismissed herein
petitioners appeal from the Decision[2] dated February 10,
1993 of the Regional Trial Court (RTC) of Quezon City,
Branch 84, in Civil Case No. Q-89-4152. The trial court had
dismissed petitioners complaint for annulment of real estate
mortgage and the extra-judicial foreclosure thereof. Likewise
brought for our review is the Resolution[3] dated February 23,
2000 of the Court of Appeals which denied petitioners motion
for reconsideration.
The facts, as culled from records, are as follows:
Petitioners, the spouses Alfredo Lipat and Estelita
Burgos Lipat, owned Belas Export Trading (BET), a single
proprietorship with principal office at No. 814 Aurora
Boulevard, Cubao, Quezon City. BET was engaged in the
manufacture of garments for domestic and foreign
consumption. The Lipats also owned the Mystical Fashions
in the United States, which sells goods imported from the
Philippines through BET. Mrs. Lipat designated her daughter,
Teresita B. Lipat, to manage BET in the Philippines while she
was managing Mystical Fashions in the United States.
In order to facilitate the convenient operation of BET,
Estelita Lipat executed on December 14, 1978, a special
power of attorney appointing Teresita Lipat as her attorney-infact to obtain loans and other credit accommodations from
respondent Pacific Banking Corporation (Pacific Bank). She
IT IS SO ORDERED.[7]
The trial court ruled that there was convincing and
conclusive evidence proving that BEC was a family
corporation of the Lipats. As such, it was a mere extension of
petitioners personality and business and a mere alter ego or
business conduit of the Lipats established for their own
benefit. Hence, to allow petitioners to invoke the theory of
separate corporate personality would sanction its use as a
shield to further an end subversive of justice. [8] Thus, the trial
court pierced the veil of corporate fiction and held that Belas
Export Corporation and petitioners (Lipats) are one and the
same. Pacific Bank had transacted business with both BET
and BEC on the supposition that both are one and the
same. Hence, the Lipats were estopped from disclaiming any
obligations on the theory of separate personality of
corporations, which is contrary to principles of reason and
good faith.
The Lipats timely appealed the RTC decision to the
Court of Appeals in CA-G.R. CV No. 41536. Said appeal,
however, was dismissed by the appellate court for lack of
merit. The Court of Appeals found that there was ample
evidence on record to support the application of the doctrine
of piercing the veil of corporate fiction. In affirming the
findings of the RTC, the appellate court noted that Mrs. Lipat
had full control over the activities of the corporation and used
the same to further her business interests. [9] In fact, she had
benefited from the loans obtained by the corporation to
finance her business. It also found unnecessary a board
resolution authorizing Teresita Lipat to secure loans from
Pacific Bank on behalf of BEC because the corporations bylaws allowed such conduct even without a board
resolution. Finally, the Court of Appeals ruled that the
mortgage property was not only liable for the original loan
of P583,854.00 but likewise for the value of the promissory
notes, trust receipt, and export bills as the mortgage contract
equally applies to additional or new loans, discounting lines,
overdrafts, and credit accommodations which petitioners
subsequently obtained from Pacific Bank.
The Lipats then moved for reconsideration, but this was
denied by the appellate court in its Resolution of February 23,
2000.[10]
Hence, this petition, with petitioners submitting that the
court a quo erred
No costs.
2)
[1]
[2]
Id. at 65-74.
[3]
Id. at 63-64.
[4]
[5]
Id. at 77-85.
[6]
Id. at 81-82.
[7]
Rollo, p. 74.
[8]
Id. at 70.
[9]
Id. at 56.
[10]
Supra, note 3.
[11]
[12]
[13]
Concept Builders, Inc. v. NLRC, G.R. No. 108734, 29 May 1996, 257
SCRA 149, 158.
[14]
[15]
Id. at 16-17.
[16]
Rollo, p. 87.
[17]
[18]
[19]
Ibid.
[20]
Rollo, p. 50.
[21]
Id. at 51.
[22]
The Antecedents
[23]
[24]
Id. at 21.
[25]
[26]
Milestone Realty and Co., Inc. and William L. Perez v. CA, G.R. No.
135999, 19 April 2002, p. 8.
[27]
[28]
[29]
[30]
[31]
See Peoples Aircargo and Warehousing Co., Inc. v. Court of Appeals, G.R.
No. 117847, 7 October 1998, 297 SCRA 170, 182.
[32]
Id. at 183-184.
[33]
[34]
[35]
Orosa v. Court of Appeals, G.R. No. 111080, 5 April 2000, 329 SCRA 652,
661.
SECOND DIVISION
G.R. No. 140667
WOODCHILD HOLDINGS, INC., Petitioner,
- versus ROXAS ELECTRIC AND CONSTRUCTION
COMPANY, INC., Respondent.
Promulgated: August 12, 2004
x - - - - - - - -- - - - - - - - - - - - - - x
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the
Decision[1] of the Court of Appeals in CA-G.R. CV No. 56125
reversing the Decision[2] of the Regional Trial Court of Makati,
Branch 57, which ruled in favor of the petitioner.
8.
Moreover, defendant, likewise, failed
to eject all existing squatters and occupants of the
premises within the stipulated time frame and as a
consequence thereof, plaintiffs planned construction
has been considerably delayed for seven (7) months
due to the squatters who continue to trespass and
obstruct the subject property, thereby Woodchild
Holdings incurred substantial losses amounting
to P3,560,000.00 occasioned by the increased cost of
construction materials and labor.
9.
Owing further to Roxas Electrics
deliberate refusal to comply with its obligation under
Annex A, Woodchild Holdings suffered unrealized
income ofP300,000.00 a month or P2,100,000.00
supposed income from rentals of the subject property
for seven (7) months.
10.
On April 15, 1992, Woodchild
Holdings made a final demand to Roxas Electric to
comply with its obligations and warranties under the
Deed of Absolute Sale but notwithstanding such
demand, defendant Roxas Electric refused and failed
and continue to refuse and fail to heed plaintiffs
demand for compliance.
Copy of the demand letter dated April 15,
1992 is hereto attached as Annex B and made an
integral part hereof.
11.
Finally, on 29 May 1991, Woodchild
Holdings made a letter request addressed to Roxas
Electric to particularly annotate on Transfer
Certificate of Title No. N-78085 the agreement under
Annex A with respect to the beneficial use and
right of way, however, Roxas Electric unjustifiably
ignored and disregarded the same.
Copy of the letter request dated 29 May 1992
is hereto attached as Annex C and made an integral
part hereof.
12.
By reason of Roxas Electrics
continuous refusal and failure to comply with
Woodchild Holdings valid demand for compliance
under Annex A, the latter was constrained to
litigate, thereby incurring damages as and by way of
attorneys fees in the amount of P100,000.00 plus
costs of suit and expenses of litigation.[15]
The WHI prayed that, after due proceedings,
judgment be rendered in its favor, thus:
WHEREFORE, it is respectfully prayed that
judgment be rendered in favor of Woodchild
Holdings and ordering Roxas Electric the following:
a) to deliver to Woodchild Holdings the
beneficial use of the stipulated 25
square meters and 55 square meters;
b)
representing
[15]
[16]
Id. at 4-5.
[17]
Id. at 24-25.
[18]
Id. at 247.
[19]
Id. at 482.
[20]
[21]
[22]
Id. at 644-645.
[23]
SO ORDERED.
(1) Those entered into in the name of another person by
one who has been given no authority or legal representation,
or who has acted beyond his powers.
[1]
[3]
[4]
[5]
Ibid.
[6]
[7]
[8]
Id. at 193-194.
[9]
[10]
[11]
[12]
[13]
[14]
[24]
[25]
Records, p. 213.
[26]
[30]
[31]
[32]
Id. at 696.
[34]
[36]
[39]
[40]
Francisco
xxx
xxx
ACCEPTED
USUAL,
PROCEEDINGS.
COURSE
OF
JUDICIAL
9 Gokongwei vs. Securities and Exchange Commission, 89 SCRA 336 (1979), and cases
cited therein.
Yao Ka Sin
Tacloban City
10 Ibid.
Gentlemen:
11 308 U.S. 295-313, 84 L. Ed. 281, 291-292 (1939).
12 Ballantine on Corporations, pp. 167-178.
13 Annex "B" to the Complaint; Record on Appeal, p. 11.
14 Annex "C" to the Complaint; Record on Appeal, pp. 11-12.
15 Annex "D" to the Complaint; Record on Appeal, pp. 12-13.
SIN
TRADING
WITNESSES:
(SGD) T. CATINDIG (SGD) ERNESTO LIM
RECEIVED from Mr. Henry Yao of Yao Ka Sin Trading,
in pursuance of the above offer, the sum of Pesos: TWO
HUNDRED FORTY THREE THOUSAND ONLY
(P243,000.00) in the form of Producers' Bank of the
Philippines Check No. C-153576 dated June 7, 1973.
PRIME
BY:
WHITE
CEMENT
(SGD)
CONSTANCIO
President & Chairman 4
CORPORATION
B.
MAGLANA
SO ORDERED. 27
In disregarding PWCC's theory, the trial court interpreted the
provision of the By-Laws granting its Board of Directors
the power to enter into an agreement or contract of any kind
with any person through the President, to mean that the
latter may enter into such contract or agreement at any time
and that the same is not subject to the ratification of the board
of directors but "subject only to the declared objects and
purpose of the corporation and existing laws." It then
concluded:
It is obvious therefore, that it is not the whole
membership of the board of directors who actually
enters into any contract with any person in the name
and for and in behalf of the corporation, but only its
president. It is likewise crystal clear that this
automatic representation of the board by the president
is limited only by the "declared objects and purpose
of the corporation and existing provisions of law." 28
It likewise interpreted the provision on the power of the
president to "operate and conduct the business of the
corporation according to the orders, directives or resolutions
of the board of directors and according to his own judgment
and discretion whenever the same is not expressly limited by
such orders, directives and resolutions," to mean that the
president can operate and conduct the business of the
corporation according to his own judgment and discretion as
long as it is not expressly limited by the orders, directives or
resolutions of the board of directors. 29 The trial court found no
evidence that the board had set a prior limitation upon the
exercise of such judgment and discretion; it further ruled that
the By-Laws, does not require that Exhibit "A" be approved
by the Board of Directors. Finally, in the light of the
Chairman's power to "execute and sign for and in behalf of the
corporation all contracts or agreements which the corporation
may enter into" (Exhibit "I-1"), it concluded that Mr. Maglana
merely followed the By-Laws "presumably both as president
and chairman of the board thereof." 30 Hence, Exhibit "A" was
validly entered into by Maglana and thus binds the
corporation.
The trial court, however, ruled that the option to sell is not
valid because it is not supported by any consideration distinct
from the price; it was exercised before compliance with the
original contract by PWCC; and the repudiation of the original
contract by PWCC was deemed a withdrawal of the option
before acceptance by the petitioner.
Both parties appealed from the said decision to the respondent
Court of Appeals before which petitioner presented the
following Assignment of Errors:
SO ORDERED.
Such conclusion is based on its findings, to wit:
Before resolving the issue, it is helpful to bring out
some preliminary facts. First, the defendant
corporation is supervised and principally financed by
the National Investment and Development
Corporation (NIDC), a subsidiary investment of the
Philippine National Bank (PNB), with cash financial
exposure of some P10,000,000.00. PNB is a
government financial institution whose Board is
chairmaned (sic) by the Minister of National
Defense. This fact is very material to the issue of
whether defendant corporations president can bind
the corporation with his own act.
Second, for failure to deny under oath the following
actionable documents in support of defendant's
counterclaim:
1. The resolution contained in defendant's
letter to plaintiff dated July 5, 1973, on the
10,000 bags of white cement delivered to
plaintiff was not by reason of the letter
contract, Exhibit "A", which was totally
disapproved by defendant corporation's
board of directors, clearly stating that "If
within ten (10) days from date hereof, we
will not hear from you but you will
withdraw cement at P24.30 per bag from our
plant, then we will deposit your check of
P243,000.00 dated June 7, 1973 issued by
the Producers Bank of the Philippines, per
instruction of the Board." (Annex "I" to
defendant's Answer).
2. Letter of defendant to plaintiff dated
August 4, 1973 that defendant "only
committed to you and which you
accordingly paid 10,000 bags of white
cement of which 4,150 bags were already
delivered to you as of August 1, 1973"
(Annex "2" of defendant's Answer).
3. Letter dated August 21, 1973 to plaintiff
reiterating defendant's letter of August 4,
1973 (Annex "3" to defendant's Answer).
you will withdraw cement at P24.30 per bag from our plant,
then we will deposit your check of P243,000.00 dated June 7,
1973 issued by the Producers Bank of the Philippines, per
instruction of the Board." 57 Petitioner received the copy of
this notification and thereafter accepted without any protest
the Delivery Receipt covering the 10,000 bags and the Official
Receipt for the P243,000.00. The respondent Court thus
correctly ruled that petitioner had in fact agreed to a new
transaction involving only 10,000 bags of white cement.
The third ground must likewise fail. Exhibit "A" being
unenforceable, the option to renew it would have no leg to
stand on. The river cannot rise higher than its source. In any
event, the option granted in. this case is without any
consideration Article 1324 of the Civil Code expressly
provides that:
When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn at any
time before acceptance by communicating such
withdrawal, except when the option is founded upon
a consideration, as something paid or promised.
while Article 1749 of the same Code provides:
A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon
the promissor if the promise is supported by a
consideration distinct from the price.
Accordingly, even if it were accepted, it can not validly bind
the private respondent. 58
The fourth ground is, however, meritorious.
Section 8, Rule 8 of the Rules of Court provides:
Sec. 8. How to contest genuineness of such
documents When an action or defense is founded
upon a written instrument, copied in or attached in
the corresponding pleading as provided in the
preceding section, the genuineness and due execution
of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them,
and sets forth what he claims to be the facts; but this
provision does not apply when the adverse party does
not appear, to be a party to the instrument or when
compliance with an order for an inspection of the
original instrument is refused.
17 Id., 7-20.
42 Id., 2.
43 Id., 81.
45 At page 786.
24 Exhibit "8-A".
25 Exhibit "8-A".
54 19 C.J.S. 458.
Annex
"C"
of
57 Exhibit "1".
58 TOLENTINO, A., Civil Code of the Philippines, vol. IV,
1985 ed., 467.
34 Rollo, 118-120.
59 Gaw vs. Court of Appeals, 191 SCRA 77 [1990].
35 Rollo, 143.
36. Id., 6.
37 Id., 56.
38 Id., 145, et seq.
39 Id., 170, et seq.; 188, et seq.
40 Rollo, 17; 2.
41 Id., 18.
but
the
not
for
the
THIRD DIVISION
G.R. No. 148444
Promulgated: July 14, 200
ASSOCIATED BANK (now UNITED OVERSEAS BANK
[PHILS.]), Petitioner, - versus SPOUSES RAFAEL and MONALIZA PRONSTROLLER,
Respondents.
x------------------------------------------x
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court filed by petitioner Associated
Bank (now United Overseas Bank [Phils.]) assailing the Court
of Appeals (CA) Decision[1] dated February 27, 2001, which in
turn
affirmed
the
Regional
Trial
Court [2] (RTC)
[3]
Decision dated November 14, 1997 in Civil Case No. 943298 for Specific Performance. Likewise assailed is the
appellate courts Resolution[4] dated May 31, 2001 denying
petitioners motion for reconsideration.
The facts of the case are as follows:
On April 21, 1988, the spouses Eduardo and Ma.
Pilar Vaca (spouses Vaca) executed a Real Estate Mortgage
(REM) in favor of the petitioner [5] over their parcel of
residential land with an area of 953 sq. m. and the house
constructed thereon, located at No. 18, Lovebird Street, Green
Meadows Subdivision 1, Quezon City (herein referred to as
the subject property). For failure of the spouses Vaca to pay
their obligation, the subject property was sold at public
auction with the petitioner as the highest bidder. Transfer
Certificate of Title (TCT) No. 254504, in the name of spouses
Vaca, was cancelled and a new one --TCT No. 52593-- was
issued in the name of the petitioner.[6]
The spouses Vaca, however, commenced an action
for the nullification of the real estate mortgage and the
foreclosure sale. Petitioner, on the other hand, filed a petition
for the issuance of a writ of possession which was denied by
the RTC. Petitioner, thereafter, obtained a favorable judgment
when the CA granted its petition but the spouses Vaca
questioned the CA decision before this Court in the case
docketed as G.R. No. 109672.[7]
During the pendency of the aforesaid cases,
petitioner advertised the subject property for sale to interested
buyers
for P9,700,000.00.[8] Respondents
Rafael
and
1.
Selling price shall be at P7,500,000.00 payable as
follows:
a.
10% deposit and balance of P6,750,000.00 to be
deposited under escrow agreement. Said escrow deposit
shall be applied as payment upon delivery of the aforesaid
property to the buyers free from occupants.
b.
The deposit shall be made within ninety (90) days
from date hereof. Any interest earned on the aforesaid
investment shall be for the buyers account. However, the
10% deposit is non-interest earning.[11]
Prior to the expiration of the 90-day period within
which to make the escrow deposit, in view of the pendency of
the case between the spouses Vaca and petitioner involving the
subject property,[12] respondents requested that the balance of
the purchase price be made payable only upon service on them
of a final decision or resolution of this Court affirming
petitioners right to possess the subject property. Atty. Soluta
referred respondents proposal to petitioners Asset Recovery
and Remedial Management Committee (ARRMC) but the
latter deferred action thereon.[13]
On July 14, 1993, a month after they made the request
and after the payment deadline had lapsed, respondents and
Atty. Soluta, acting for the petitioner, executed another LetterAgreement allowing the former to pay the balance of the
purchase price upon receipt of a final order from this Court (in
the Vaca case) and/or the delivery of the property to them free
from occupants.[14]
Towards the end of 1993, or in early 1994, petitioner
reorganized its management. Atty. Braulio Dayday (Atty.
Dayday) became petitioners Assistant Vice-President and
Head of the Documentation Section, while Atty. Soluta was
relieved of his responsibilities. Atty. Dayday reviewed
petitioners records of its outstanding accounts and discovered
that respondents failed to deposit the balance of the purchase
price of the subject property. He, likewise, found that
respondents requested for an extension of time within which to
pay. The matter was then resubmitted to the ARRMC during
its
meeting
on March
4,
1994,
and
it
was
disapproved. ARRMC, thus, referred the matter to petitioners
Legal Department for rescission or cancellation of the contract
due to respondents breach thereof.[15]
On May 5, 1994, Atty. Dayday informed respondents
that their request for extension was disapproved by ARRMC
and, in view of their breach of the contract, petitioner was
rescinding the same and forfeiting their deposit. Petitioner
4.
The counterclaims of the Appellant are
dismissed.
SO ORDERED.[30]
Petitioners motion for reconsideration was denied
on May 31, 2001. Hence, the present petition raising the
following issues:
I.
II.
III.
IV.
V.
VI.
VII.
IX.
X.
XI.
only relied on the RTCs findings but made its own analysis of
the record of the case. The CA decision contains specific
details drawn from the contents of the pleadings filed by both
parties, from the testimonies of the witnesses and from the
documentary evidence submitted. It was from all these that
the appellate court drew its own conclusion using applicable
legal principles and jurisprudential rules.
The Court notes that the March 18, 1993 LetterAgreement was written on a paper with petitioners
letterhead. It was signed by Atty. Soluta with the conformity
of respondents. The authority of Atty. Soluta to act for and on
behalf of petitioner was not reflected in said letter or on a
separate paper attached to it. Yet, petitioner recognized Atty.
Solutas authority to sign the same and, thus, acknowledged its
binding effect. On the other hand, the July 14, 1993 letter was
written on the same type of paper with the same letterhead and
of the same form as the earlier letter. It was also signed by the
same person with the conformity of the same
respondents. Again, nowhere in said letter did petitioner
specifically authorize Atty. Soluta to sign it for and on its
behalf. This time, however, petitioner questioned the validity
and binding effect of the agreement, arguing that Atty. Soluta
was not authorized to modify the earlier terms of the contract
and could not in any way bind the petitioner.
We beg to differ.
The general rule is that, in the absence of authority from
the board of directors, no person, not even its officers, can
validly bind a corporation. The power and responsibility to
decide whether the corporation should enter into a contract
that will bind the corporation is lodged in the board of
directors. However, just as a natural person may authorize
another to do certain acts for and on his behalf, the board may
validly delegate some of its functions and powers to officers,
committees and agents. The authority of such individuals to
bind the corporation is generally derived from law, corporate
bylaws or authorization from the board, either expressly or
impliedly, by habit, custom, or acquiescence, in the general
course of business.[34]
The authority of a corporate officer or agent in dealing
with third persons may be actual or apparent. The doctrine of
apparent authority, with special reference to banks, had long
been recognized in this jurisdiction.[35] Apparent authority is
derived not merely from practice. Its existence may be
ascertained through 1) the general manner in which the
corporation holds out an officer or agent as having the power
to act, or in other words, the apparent authority to act in
general, with which it clothes him; or 2) the acquiescence in
his acts of a particular nature, with actual or constructive
knowledge thereof, within or beyond the scope of his ordinary
powers.[36]
Accordingly, the authority to act for and to bind a
corporation may be presumed from acts of recognition in other
instances, wherein the power was exercised without any
objection from its board or shareholders. Undoubtedly,
petitioner had previously allowed Atty. Soluta to enter into the
first agreement without a board resolution expressly
authorizing him; thus, it had clothed him with apparent
authority to modify the same via the second letter-agreement.
It is not the quantity of similar acts which establishes apparent
[1]
CA rollo, p. 601.
Payment was made on March 8, 1993; Exhibit D,
folder of exhibits, p. 4.
[11]
Exhibit B, folder of exhibits, pp. 2-3.
[12]
And, thus, petitioner will not be able to deliver the
same free from any occupants.
[13]
CA rollo, p. 602.
[10]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
Id. at 604.
Exhibit F, folder of exhibits, p. 6.
Exhibit G, folder of exhibits, p. 7.
Exhibit H, folder of exhibits, pp. 8-9.
Exhibit I, folder of exhibits, pp. 10-12.
Records, pp. 1-5.
[23]
Id. at 11-18.
CA rollo, p. 606.
[25]
Id.
[26]
Records, p. 463.
[27]
The doctrine states that although an officer or agent
acts without or in excess of his actual authority, if he acts
within the scope of an apparent authority with which the
corporation has clothed him by holding him out or permitting
him to appear as having such authority, the corporation is
bound thereby in favor of a person who deals with him in
good faith.
[28]
Records, pp. 461-462.
[29]
CA rollo, pp. 608-617.
[30]
Id. at 618.
[31]
Rollo, pp. 54-56.
[32]
Valdez v. Reyes, G.R. No. 152251, August 17, 2006,
499 SCRA 212, 214-215, citing Pleyto v. Lomboy, 432 SCRA
329, 336 (2004).
[24]
[33]
On July 18, 1988, the petitioners filed their answer to the third
party complaint.
On October 17, 1989, the trial court, not having been notified
of the pending petition for certiorari with public respondent
issued an Order declaring as final the Order dated April 25,
1989. The private respondents in the said Order were required
to take positive steps in prosecuting the third party complaint
in order that the court would not be constrained to dismiss the
same for failure to prosecute. Subsequently, on October 25,
1989 the private respondents filed a motion for
reconsideration on which the trial court took no further action.
On March 19, 1990, after the petitioners filed their answer to
the private respondents' petition for certiorari, the public
respondent rendered its decision, the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, the orders of
respondent judge dated April 25, 1989 and August 14, 1989
are hereby SET ASIDE and respondent corporation is ordered
to file its answer within the reglementary period. (CA
Decision, p. 8; Rollo, p. 24)
On April 11, 1990, the petitioners moved for a reconsideration
of the decision of the public respondent which resolved to
deny the same on May 10, 1990. Hence, the petitioners filed
this certiorari petition imputing grave abuse of discretion
amounting to lack of jurisdiction on the part of the public
respondent in reversing the questioned Orders dated April 25,
1989 and August 14, 1989 of the court a quo, thus, holding
that there was proper service of summons on ALFA through
the petitioners.
In the meantime, the public respondent inadvertently made an
entry of judgment on July 16, 1990 erroneously applying the
rule that the period during which a motion for reconsideration
has been pending must be deducted from the 15-day period to
appeal. However, in its Resolution dated January 3, 1991, the
public respondent set aside the aforestated entry of judgment
after further considering that the rule it relied on applies to
appeals from decisions of the Regional Trial Courts to the
Court of Appeals, not to appeals from its decision to us
pursuant to our ruling in the case of Refractories Corporation
of the Philippines v. Intermediate Appellate Court, 176 SCRA
539 [1989]. (CA Rollo, pp. 249-250)
In their memorandum, the petitioners present the following
arguments, to wit:
(1) that the execution of the voting trust agreement by a
stockholders whereby all his shares to the corporation have
been transferred to the trustee deprives the stockholders of his
position as director of the corporation; to rule otherwise, as the
respondent Court of Appeals did, would be violative of section
23 of the Corporation Code ( Rollo, pp. 270-3273); and
(2) that the petitioners were no longer acting or holding any of
the positions provided under Rule 14, Section 13 of the Rules
of Court authorized to receive service of summons for and in
behalf of the private domestic corporation so that the service
of summons on ALFA effected through the petitioners is not
valid and ineffective; to maintain the respondent Court of
Appeals' position that ALFA was properly served its summons
through the petitioners would be contrary to the general
principle that a corporation can only be bound by such acts
which are within the scope of its officers' or agents' authority
(Rollo, pp. 273-275)
Republic Bank
P 2,324,000.00
2,000,000.00
Manufacturers Bank
440,000.00
5) That a voting trust agreement for five (5) years over 60% of
the oustanding paid up and subscribed shares shall be executed
by your stockholders in favor of NIDC;
6) That this accomodation shall be secured by the joint and
several signatures of officers and directors;
7) That the number of the Board of Directors shall be
increased to seven (7), three (3) from your firm and the other
four (4) from the PNB-NIDC;
8) That a comptroller, at your expense, shall be appointed by
PNB-NIDC to supervise the financial management of your
firm;
9) That the past due accounts of P 5 million with the
International Department of the PNB shall be transferred to
the Loans & Discount Department and to be treated as a
Demand Loan;
10) That any excess of NIDC investment as required in
Condition 1 after payment of the obligations to three (3)
Banks (RB, MBTC, & PCIB) shall be applied to reduce the
above Demand Loan of P 5 million;
11) That we shall grant you an export advance of P3 million to
be used for copra purchases, subject to the following
conditions:
a) That the line shall expire on September 30, 1966 but
revocable at the Bank(s) option;
b) That drawings against the line shall be allowed only when
an irrevocable export L/C for coconut products has been
established or assigned in your favor and you shall assign to us
all proceeds of negotiations to be received from your letters of
credit;
c) That drawings against the line be limited to 60% of the peso
value of the export letters of credit computed at P3.50 per
$1.00 but total drawings shall not in any event exceed
P3,000,000.00;
d) That release or releases against the line shall be covered by
promissory note or notes for 90 days but not beyond the expiry
dates of the coveting L/C and proceeds of said L/C shall first
be applied to the correspondent drawings on the line;
e) That drawings against the line shall be charged interest at
the rate of 9% per annum and subject to 1/2% penalty charge
on all drawings not paid or extended on maturity date; and
f) That within 90 days from date of release against the line,
you shall negotiate with us on equivalent amount in export
bills, otherwise, the line shag be temporarily suspended until
the outstanding export advance is fully liquidated.
We are writing the National Investment & Development
Corporation, the Republic Bank, the Philippine Commercial &
Thank you.
Very truly yours,
(SGD.) JOSE B. SAMSON 3
The terms and conditions of the Financial Agreement were
duly accepted by Batjak. Under said Agreement, NIDC would,
as it actually did, invest P6,722,500.00 in Batjak in the form of
preferred shares of stock convertible within five (5) years at
par into common stock, to liquidate Batjak's obligations to
Republic Bank (RB), Manufacturers Bank and Trust Company
(MBTC) and Philippine Commercial & Industrial Bank
(PCIB), and the balance of the investment was to be applied to
Batjak's past due account of P 5 million with the PNB.
Upon receiving payment, RB, PCIB, and MBTC released in
favor of PNB the first and any mortgages they held on the
properties of Batjak.
As agreed, PNB also granted Batjak an export-advance line of
P 3 million, later increased to P 5million, and a standby letter
of credit facility in the amount of P5,850,000.00. As of 29
September 1966, the financial accomodation that had been
extended by PNB to Batjak amounted to a total of P
14,207,859.51.
As likewise agreed, Batjak executed a first mortgage in favor
of PNB on all its properties located at Jimenez, Misamis
Occidental and Tanauan, Leyte. Batjak's plant in Sasa, Davao
City was mortgaged to the Manila Bank which, in 1967,
instituted foreclosure proceedings against the same but which
were aborted by the payment by Batjak of the sum of
P2,400,000.00 to Manila Bank, and which amount was
advanced to Batjak by NIDC, a wholly-owned subsidiary of
PNB. To secure the advance, Batjak mortgaged the oil mill in
Sasa, Davao City to NIDC. 4
Next, a Voting Trust Agreement was executed on 26 October
1965 in favor of NIDC by the stockholders representing 60%
of the outstanding paid-up and subscribed shares of Batjak.
This agreement was for a period of five (5) years and, upon its
expiration, was to be subject to negotiation between the
parties. The voting Trust Agreement reads:
VOTING TRUST AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT made and executed by the undersigned
stockholders of BATJAK, INC., a corporation duly organized
and existing under the laws of the Philippines, whose names
are hereinbelow subscribed hereinafter caged the
SUBSCRIBERS, and the NATIONAL INVESTMENT AND
DEVELOPMENT CORPORATION, hereinafter referred to as
the trustee.
WITNESSETH:
WHEREAS, the SUBSCRIBERS are owners respectively of
the capital stock of the BATJAK, INC. (hereinafter called the
CORPORATION) in the amounts represented by the number
of shares set fort opposite their respective names hereunder;
AND WHEREAS, with a view or establishing a safe and
competent management to operate the corporation for the best
interest of all the stockholders thereof, and as mutually agreed
between the SUBSCRIBERS and the TRUSTEE, this Voting
Trust Agreement has been executed under the following terms
and conditions.
NOW THEREFORE, the undersigned stockholders, in
consideration of the premises and of the mutual covenants and
agreements herein contained and to carry out the foregoing
purposes in order to vest in the TRUSTEE the voting rights of
the shares of stock held by the undersigned in the
CORPORATION as hereinafter stated it is mutually agreed as
follows:
1. PERIOD OF DESIGNATION For a period of five (5)
years from and after date hereof, without power of revocation
on the part of the SUBSCRIBERS, the TRUSTEE designated
in the manner herein provided is hereby made, constituted and
appointed as a VOTING TRUSTEE to act for and in the name
of the SUBSCRIBERS, it being understood, however, that this
Voting Trust Agreement shall, upon its expiration be subject to
a re-negotiation between the parties, as may be warranted by
the balance and attending circumstance of the loan investment
of the TRUSTEE or otherwise in the CORPORATION.
2. ASSIGNMENT OF STOCK CERTIFICATES UPON
ISSUANCE The undersigned stockholders hereby transfer
and assign their common shares to the capital stock of the
CORPORATION to the extent shown hereunder:
JAMES A. KEISTER
21,500 shares
JOHNNY LIEUSON
20,300 shares
CBM FINANCE & INVESTMENT
CORP. (C.B. Mendoza, Pres.)
5,000 shares
ALEJANDRO G. BELTRAN
4,000 shares
ESPERANZA A. ZAMORA
3,000 shares
CIRIACO B. MENDOZA
2,000 shares
FIDELA DE GUZMAN
2,000 shares
LLOYD D. COMBS
2,000 shares
RENATO B. BEJAR
200 shares
TOTAL 60,000 shares
to the TRUSTEE by virtue of the provisions hereof and do
hereby authorize the Secretary of the CORPORATION to
issue the corresponding certificate directly in the name of the
TRUSTEE and on which certificates it shall appear that they
have been issued pursuant to this Voting Trust Agreement and
the said TRUSTEE shall hold in escrow all such certificates
during the term of the Agreement. In turn, the TRUSTEE shall
deliver to the undersigned stockholders the corresponding
Voting Trust certificates provided for in Sec. 36 of Act No.
1459.
3. VOTING POWER OF TRUSTEE The TRUSTEE and its
successors in trust, if anym shall have the power and it shall be
its duty to vote the shares of the undersigned subject hereof
PADILLA, J.:
This is a petition for a writ of certiorari to annul an order of
the respondent court granting Potenciano Gapol authority,
pursuant to section 26, Act No. 1459, otherwise known as the
Corporation Law, to call a meeting of the stockholders of the
Dagunoy Enterprises, Inc. and to preside at such meeting by
giving proper notice to the stockholders, as required by law or
by laws of the corporation, until after the majority of the
stockholders present and qualified to vote shall have chosen
one of them to act as presiding officer of the meeting; another
order denying a motion of the petitioners to have the previous
order set aside; and a third order denying a motion to the same
effect as the one previously filed.
The petitioners aver that the Daguhoy Enterprises, Inc., was
duly registered as such on 24 June 1948; that on 16 April 1951
at a meeting duly called, the voluntary dissolution of the
corporation and the appointment of Potenciano Gapol as
receiver were agreed upon and to that end a petitioner
Domingo Ponce; that instead of filing the petition for
voluntary dissolution of the of the corporation as agreed upon,
the respondent Potenciano Gapol, who is the largest
stockholder, charged his mind and filed a complaint in the
Court of First Instance of Manila (civil No. 13753) to compel
the petitioners to render an accounting of the funds and assets
of the corporation, to reimburse it, jointly and severally, in the
sum of P4,500, the purchase price of a parcel of land acquired
by the corporation; P6,190 loaned to the wife of petitioner
Domingo Ponce; and P8,000 spent by the latter in his trip to
the United States, or a total sum of P18,690, plus interest, or
such sum as may be found after the accounting shall have been
rendered to have been misspent, misapplied, missappropriated
and converted by the petitioner Domingo Ponce to his own use
and benefit; that on 18 May 1951 the plaintiff in that case, the
respondent Potenciano Gapol in this case, filed a motion