111.

Lopez vs Ericta

Facts:

The case is about the ad interim appointment of the Dean of the College of
Education in the UP. Pursuant thereto Dr. Blanco assumed office as ad
interim Dean on May 1, 1970. The Board of Regents met and President Lopez
submitted to it the ad interim appointment of Dr. Blanco for reconsideration.
The Board voted to defer action on the matter in view of the objections cited
by Regent Kalaw based on the petition against the appointment, addressed to
the Board, from a majority of the faculty and from a number of alumni.
President Lopez extended another ad interim appointment to her with the
same conditions as the first, namely, unless sooner terminated, and subject
to the approval of the Board of Regents and to pertinent University
regulations. Then, the election was held. The roll-call voting on which the
Chairman of the Board of Regents based his ruling aforesaid gave the
following results: five (5) votes in favor of Dr. Blancos ad
interim appointment, three (3) votes against, and four (4) abstentions all
the twelve constituting the total membership of the Board of the time. The
next day Dr. Blanco addressed a letter to the Board requesting a
reconsideration of the interpretation made by the Board as to the legal effect
of the vote of five in favor, three against and four abstentions on my ad
interim appointment. Dr. Blanco wrote the President of the University,
protesting the appointment of Oseas A. del Rosario as Officer-in-Charge of the
College of Education. Neither communication having elicited any official
reply, Dr. Blanco went to the Court of First Instance of Quezon City.

Issue:

What is the legal effect of abstention in the board meetings?

Held:

In case of abstention in board meeting on vote taken on any issue, the general
rule is that the abstention is counted in favour of the issue that won a
majority vote; since their act of abstention, the abstaining directors are
deemed to abide the rule of majority.
112. G.R. No. L-34192 June 30, 1988
NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION,
EUSEBIO VILLATUYA MARIO Y. CONSING and ROBERTO S.
BENEDICTO, petitioners,
vs.
HON. BENJAMIN AQUINO, in his official capacity as Presiding
Judge of Branch VIII of the Court of First Instance of Rizal, BATJAK
INC., GRACIANO A. GARCIA and MARCELINO CALINAWAN
JR., respondents.

G.R. No. L-34213 June 30, 1988

PHILIPPINE NATIONAL BANK, petitioner,
vs.
HON. BENJAMIN H. AQUINO, in his capacity as Presiding Judge of
the Court of First Instance of Rizal, Branch VIII and BATJAK
INCORPORATED, respondents

(Affiliate companies si NIDC and si PNB)

(Sorry Mahaba, madetail talaga yung case e.)

Facts: Batjak, (Basic Agricultural Traders Jointly Administered

Kasamahan) is a Filipino-American corporation organized under the laws of
the Philippines, primarily engaged in the manufacture of coconut oil and
copra cake for export. In 1965, Batjak's financial condition deteriorated to the
point of bankruptcy. As of that year, Batjak's indebtedness to some private
banks and to the Philippine National Bank (PNB) amounted to
P11,915,000.00.

As security for the payment of its obligations and advances against

shipments, Batjak mortgaged its three (3) coco-processing oil mills to Manila
Banking Corporation (Manila Bank), Republic Bank (RB), and Philippine
Commercial and Industrial Bank (PCIB), respectively. In need for additional
operating capital to place the three (3) coco-processing mills at their optimum
capacity and maximum efficiency and to settle, pay or otherwise liquidate
pending financial obligations with the different private banks, Batjak applied
to PNB for additional financial assistance. On 5 October 1965, a Financial
Agreement was submitted by PNB to Batjak for acceptance.

The 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 pay for 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.

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.

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

extrajudicial foreclosure proceedings against the oil mills of Batjak.
The properties were sold to PNB as the highest bidder. One year
thereafter, or in September 1968, final Certificates of Sale were issued.
Subsequently, PNB transferred the ownership of the two (2) oil mills to NIDC
which, as aforestated, was a wholly-owned PNB subsidiary.

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

majority stockholders, through Atty. Amado Duran, legal counsel of private
respondent Batjak, wrote a letter to NIDC inquiring if the latter was still
interested in negotiating the renewal of the Voting Trust Agreement. On 22
September 1970, legal counsel of Batjak wrote another letter to NIDC
informing the latter that Batjak would now safely assume that NIDC was no
longer interested in the renewal of said Voting Trust Agreement and, in view
thereof, requested for the turn-over and transfer of all Batjak assets,
properties, management and operations.

NIDC replied, confirming the fact that it had no intention whatsoever to

comply with the demands of Batjak.

Batjak filed a case to recover such assets, properties, management, and

operations.

Respondent judge issued a restraining order "prohibiting petitioners

from removing any record, books, commercial papers or cash, and
leasing, renting out, disposing of or otherwise transferring any or all
of the properties, machineries, raw materials and finished products
and/or by-products thereof now in the factory sites of the three (3)
modem coco milling plants.

On 24 April 1971, NIDC and PNB filed an opposition to the ex

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

On 8 May 1971., NIDC and PNB filed a motion to dismiss Batjak's

complaints. On 16 August 1971, respondent judge issued the now assailed
order denying petitioners' motion to dismiss and appointing a set of three (3)
receivers.

Issue/s: Is PNB/NIDC entitled to the properties?

Held:

Doctrine: A VTA transfers only voting or other rights pertaining to the

shares subject of the agreement, or control over the stock. Stockholders of a
corp. that lost all its assets through foreclosures cannot go after those
properties. PNB-NIDC acquired those properties not as trustees but as
creditors.
Yes. Batjak premises its right to the possession of the three (3) off mills on
the Voting Trust Agreement, claiming that under said agreement, NIDC was
constituted as trustee of the assets, management and operations of Batjak,
that due to the expiration of the Voting Trust Agreement, on 26 October 1970,
NIDC should turn over the assets of the three (3) oil mills to Batjak.

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

However, the Batjak argues that the Voting Trust Agreement states that:

Upon termination of this Agreement as heretofore provided, the certificates

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

Under the aforecited provision, what was to be returned by NIDC as trustee

to Batjak's stockholders, upon the termination of the agreement, are
the certificates of shares of stock belonging to Batjak's stockholders,
not the properties or assets of Batjak itself which were never
delivered, in the first place to NIDC, under the terms of said Voting
Trust Agreement.

In any event, a voting trust transfers only voting or other rights pertaining to
the shares subject of the agreement or control over the stock.
The acquisition by PNB-NIDC of the properties in question was not
made or effected under the capacity of a trustee but as a foreclosing
creditor for the purpose of recovering on a just and valid obligation
of Batjak.

113. Bayla V. Silang Traffic Co. (1942)

Subject: Purchase Agreement

FACTS:

Petitioners purchased the following:

Sofronio T.
8 shares P360
Bayla.......

Venancio
8 shares 375
Toledo........

Josefa
15 shares 675
Naval..............
purchase price to be paid 5% upon the execution of the contract and the
remainder in installments of 5%, payable within the 1st month of each and
every quarter startingJuly 1, 1935, w/ interest on deferred payments at
6%/annum until paid. They also agreed to forfeit in favor of seller in case of
default w/o court proceedings. BOD resolution Aug 1, 1937: rescinding the
agreement

Petitoners filed an action in the CFI against Silang Traffic Co. Inc to recover
certain sum of money w/c they had paid severally to the corp. on account of
shares of stock they indiv. agreed to take and pay for under certain
conditions.

Defenses:
 1. That the resolution is not applicable to the petitioners Sofronio T.
Bayla, Josefa Naval, and Paz Toledo because on the date thereof "their
subscribed shares of stock had already automatically reverted to the
defendant, and the installments paid by them had already been
forfeited"
2. that said resolution of August 1, 1937, was revoked and cancelled by a
subsequent resolution

RTC: absolved defendant. BOD resolution cancelled

Petitioners appealed.

ISSUES:

1. W/N the subsequent BOD resolution is valid

2. W/N under the contract between the parties the failure of the
purchaser to pay any of the quarterly installments on the purchase price
automatically gave rise to the forfeiture of the amounts already paid and
the reversion of the shares to the corporation

HELD:

NO. CA reversed. Silang Traffic to pay petitioners.

1. NO, noted agreement is entitled "Agreement for Installment Sale of

Shares in the Silang Traffic Company, Inc.,"; that while the purchaser is
designated as "subscriber," the corporation is described as "seller".
Whether a particular contract is a subscription or a sale of stock is a
matter of construction and depends upon its terms and the intention of
the parties. Subscription - mutual agreement of the subscribers to take
and pay for the stock of a corporation. Purchase - independent
agreement bet. the individual and the corp. to buy shares of stock from
it at stipulated price. Rules governing subscriptions and sales of shares
are different.

 Corporation Law regarding calls for unpaid subscription and

assessment of stock (sections 37-50) do not apply to a purchase of stock
corporation has no legal capacity to release an original subscriber to its
capital stock from the obligation to pay for his shares, is inapplicable to a
contract of purchase of shares.The contract in question being one of
purchase and not subscription as we have heretofore pointed out, we see
no legal impediment to its rescission by agreement of the parties.

We may add that there is no intimation in this case that the

corporation was insolvent, or that the right of any creditor of the same
was in any way prejudiced by the rescission. The attempted revocation of
said rescission by the resolution of August 22, 1937, was invalid, it not
having been agreed to by the petitioners.

2. NO
The provision regarding interest on deferred payments would not have
been inserted if it had been the intention of the parties to provide for
automatic forfeiture and cancelation of the contract. Contract did not
expressly provide that the failure of the purchaser to pay any instalment
would give rise to forfeiture and cancelation without the necessity of any
demand from the seller
Art. 1100 of the Civil Code: persons obliged to deliver or do
something are not in default until the moment the creditor demands of
them judicially or extrajudicially the fulfillment of their obligation,
unless
(1) the obligation or the law expressly provides that demand shall not be
necessary in order that default may arise
(2) by reason of the nature and circumstances of the obligation it shall
appear that the designation of the time at which that thing was to be
delivered or the service rendered was the principal inducement to the
creation of the obligation.