Harden vs.

Benguet Mining
GR No. L-37331
March 18, 1933

FACTS
 BENGUET CONSOLIDATED MINING was organized in June 1903 as a sociedad anonima in conformity with Spanish Law. BALATOC
MINING CO. was organized in December 1925 as corporation in conformity with Act. 1459 (Corporation Law). Harden et al. are
stockholders of Balatoc Mining.

 When Balatoc Mining first organized the properties it acquired were largely undeveloped and the original stockholders were unable
to supply the means needed for profitable operation. (In short, naglisud ang corporation). In order to solve such problem, the
company’s stockholders appointed a committee for the purpose of interesting outside capital in the mine. By authority of a
resolution of the board of directors, the committee approached A.W. Beam, president & general manager of Benguet Company in
order to secure capital necessary to the development of the Balatoc property.

 A contract was signed between the 2 companies which provide that BENGUET COMPANY was to proceed with the development of
the Balatoc property and in return BENGUET COMPANY would receive from BALATOC COMPANY shares of par value of P600,000 in
payment for the first P600,000 be thus advanced to it by Benguet company.

 The total cost incurred by BENGUET COMPANY in developing the Balatoc property was P1,417,952.15. In compensation for this
work, a certificate for P600,000 shares of stock of BALATOC COMPANY was given to BENGUET COMPANY and the excess value was
paid to Benguet by Balatoc in cash.

 Due to the improvements made on the company’s property, the value of the shares of BALATOC increased in the market (from
P1.00 to P11.00) and the dividends of the company enriched its stockholders. As soon as the success of the company became
apparent, Harden (owner of thousands of shares of Balatoc) questioned the transfer of 600,000 shares to Benguet. Harden seeks
to annul the certificate covering the 600,000 shares of stock transferred to Benguet.

 Main argument of Harden: It is unlawful for the Benguet Company to hold any interest in a mining corporation because in the
former Corporation Law (Act of Congress 1916) there is a provision referring to mining corporations: “it shall be unlawful for any
member of a corporation engaged in agriculture or mining and for any corporation organized for any purpose except irrigation to
be in any wise interested in any other corporation engaged in agriculture or in mining.”

ISSUES

WON Harden et al can maintain an action based upon the violation of law supposedly committed by Benguet Company

If Benguet Company committed a violation, WON Benguet Company (sociedad anonima) is a corporation within the meaning of the language
used by US Congress and later by Philippine Congress, prohibiting mining corporations from becoming interested in another mining
corporation

RULING

1. WON Harden et al can maintain an action based upon the violation of law supposedly committed by Benguet Company

BENGUET COMPANY committed NO CIVIL WRONG against the plaintiffs, and if a public wrong has been committed, the directors of the
Balatoc Company, and Harden himself were the active inducers of the commission of that wrong. THE CONTRACT WAS PERFORMED ON BOTH
SIDES: by the building of the Balatoc plant by the Benguet Company and the delivery to the latter of the certificate of 600,000 shares of the
Balatoc Company.

The penalties imposed on what is now Sec. 190 (A) of the Corporation Law for the violation of the prohibition in question are of such nature
that they can be enforced only by a criminal prosecution or by an action of quo warranto. However these proceedings can be maintained
only by the Attorney General in representation of the government.

2. If Benguet Company committed a violation, WON Benguet Company (sociedad anonima) is a corporation within the meaning of the
language used by US Congress and later by Philippine Congress, prohibiting mining corporations from becoming interested in another
mining corporation

Since the plaintiffs have no right of action against Benguet Company, the COURT REFUSED TO GO FURTHER INTO THE QUESTION AS TO
WHETHER A SOCIEDAD ANONIMA CREATED UNDER SPANISH LAW (Bengeut Company) IS A CORPORATION WITHIN THE PROHIBITORY
PROVISION,

Sociedad Anonima is much like the English joint stock company with features resembling those of a partnership. Since it was the intention
of Congress to simulate the introduction of American Corporation into Philippine law in place of sociedad anonima, it was necessary to
make certain adjustments resulting from the continued co-existence for a time, of the 2 forms of commercial entities. Accordingly, in
section 75 of the Corporation Law, a provision is found making the Sociedad anonima subject to the provisions of the Corporation Law "so
far as such provisions may be applicable", and giving to the sociedades anonimas previously created in the Islands the option to continue
business as such or to reform and organize under the provisions of the Corporation Law. Again, in section 191 of the Corporation Law, the
Code of Commerce is repealed in so far as it relates to sociedades anonimas. The purpose of the commission in repealing this part of the
Code of Commerce was to compel commercial entities thereafter organized to incorporate under the Corporation Law, unless they should
prefer to adopt some form or other of the partnership.

The provision in Section 75 of the Act Congress of July 1, 1902 (Philippine Bill), generally prohibiting corporations engaged in mining and
members of such from being interested in any other corporation engaged in mining, was amended by section 7 of Act No. 3518 of the
Philippine Legislature, approved by Congress March 1, 1929.

As originally drawn, our Corporation Law (Act No. 1459) did not contain any appropriate clause directly penalizing the act of a
corporation, a member of a corporation, in acquiring an interest contrary to paragraph (5) of section 13 of the Act. The Philippine
Legislature undertook to remedy this situation in section 3 of Act No. 2792 of the Philippine Legislature, approved on February 18, 1919,
but this provision was declared invalid by this court in Government of the Philippine Islands vs. El Hogar Filipino (50 Phil., 399), for lack of
an adequate title to the Act. Subsequently the Legislature reenacted substantially the same penal provision in section 21 of Act No. 3518,
under a title sufficiently broad to comprehend the subject matter. This part of Act No. 3518 became effective upon approval by the
Governor-General, on December 3, 1928, and it was therefore in full force when the contract now in question was made.

This provision was inserted as a new section in the Corporation Law, forming section 190 (A) of said Act as it now stands. Omitting the
proviso, which seems not to be pertinent to the present controversy, said provision reads as follows:
SEC. 190 (A). Penalties. — The violation of any of the provisions of this Act and its amendments not otherwise penalized
therein, shall be punished by a fine of not more than five thousand pesos and by imprisonment for not more than five
years, in the discretion of the court. If the violation is committed by a corporation, the same shall, upon such violation
being proved, be dissolved by quo warranto proceedings instituted by the Attorney-General or by any provincial fiscal
by order of said Attorney-General: . . . .

Sort of Historical Background of Introduction of “Corporations” into the Philippines:

 When the Philippines passed to the sovereignty of the US, Philippine Commission was drawn to the fact that there is no entity in
Spanish law which exactly corresponded to the notion of corporation in English and American law.

 Philippine Congress thus enacted a general law authorizing the creation of Corporation Law (Act No. 1459). The purpose of the
commission was to introduce the American corporation into the Philippines as a standard of commercial entity. The statute is a
codification of American corporate law.

SOCIEDAD ANONIMA-joint stock company with limited personal to shareholders.

Quo warranto- is a special form of legal action used to resolve a dispute over whether a specific person has the legal right to hold the
public office that he or she occupies.

CASTILLO vs. BALINGHASAY 440 scra 442 G.R. No. 150976 (2004)

FACTS: Petitioners and the respondents are stockholders of Medical Center Parañaque, Inc (MCPI), with the
former holding Class "B" shares and the latter owning Class "A" shares. MCPI is a domestic corporation. At the
time of its incorporation, Act No. 1459, the old Corporation Law was still in force and effect. On September 9,
1992, Article VII was again amended. It states that “Except when otherwise provided by law, only holders of
Class "A" shares have the right to vote and the right to be elected as directors or as corporate officers.” The SEC
approved the foregoing amendment on September 22, 1993. On February 9, 2001, the shareholders of MCPI
held their annual stockholders’ meeting and election for directors. During the course of the proceedings,
respondent Rustico Jimenez, citing Article VII, as amended, and notwithstanding MCPI’s history, declared over
the objections of herein petitioners, that no Class "B" shareholder was qualified to run or be voted upon as a
director. In the past, MCPI had seen holders of Class "B" shares voted for and serve as members of the corporate
board and some Class "B" share owners were in fact nominated for election as board members. Nonetheless,
Jimenez went on to announce that the candidates holding Class "A" shares were the winners of all seats in the
corporate board. The petitioners protested, claiming that Article VII was null and void for depriving them, as Class
"B" shareholders, of their right to vote and to be voted upon, in violation of the Corporation Code (Batas
Pambansa Blg. 68), as amended. On March 22, 2001, after their protest was given short shrift, herein petitioners
filed a Complaint for Injunction, Accounting and Damages before the RTC. In finding for the respondents, the
trial court ruled that corporations had the power to classify their shares of stocks, such as "voting and non-voting"
shares, conformably with Section 67 of the Corporation Code of the Philippines. Hence this petition.

ISSUE: Whether or not holders of Class "B" shares of the MCPI may be deprived of the right to vote and be
voted for as directors in MCPI.

RULING: NO.

Since the Class “B” shareholders are not classified as holders of either preferred or redeemable shares,
then it necessarily follows that they are entitled to vote and to be voted for as directors or officers The law referred
to in the amendment to Article VII refers to the Corporation Code and no other law. At the time of the incorporation
of MCPI in 1977, the right of a corporation to classify its shares of stock was sanctioned by Section 5 of Act No.
1459. The law repealing Act No. 1459, B.P. Blg. 68, retained the same grant of right of classification of stock
shares to corporations, but with a significant change. Under Section 6 of B.P. Blg. 68, the requirements and
restrictions on voting rights were explicitly provided for, such that "no share may be deprived of voting rights
except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in this
Code" and that "there shall always be a class or series of shares which have complete voting rights." Section 6
of the Corporation Code being deemed written into Article VII of the Articles of Incorporation of MCPI, it
necessarily follows that unless Class "B" shares of MCPI stocks are clearly categorized to be "preferred" or
"redeemable" shares, the holders of said Class "B" shares may not be deprived of their voting rights. Note that
there is nothing in the Articles of Incorporation nor an iota of evidence on record to show that Class "B" shares
were categorized as either "preferred" or "redeemable" shares. The only possible conclusion is that Class "B"
shares fall under neither category and thus, under the law, are allowed to exercise voting rights.
CASTILLO vs. BALINGHASAY 440 scra 442 G.R. No. 150976 (2004)

For review on certiorari is the Partial Judgment[1] dated November 26, 2001 in Civil Case No. 01-0140, of the Regional Trial Court (RTC)
of Parañaque City, Branch 258. The trial court declared the February 9, 2001, election of the board of directors of the Medical Center
Parañaque, Inc. (MCPI) valid. The Partial Judgment dismissed petitioners’ first cause of action, specifically, to annul said election for
depriving petitioners their voting rights and to be voted on as members of the board.

The facts, as culled from records, are as follows:

Petitioners and the respondents are stockholders of MCPI, with the former holding Class “B” shares and the latter owning Class “A”
shares.

MCPI is a domestic corporation with offices at Dr. A. Santos Avenue, Sucat, Parañaque City. It was organized sometime in September
1977. At the time of its incorporation, Act No. 1459, the old Corporation Law was still in force and effect. Article VII of MCPI’s original
Articles of Incorporation, as approved by the Securities and Exchange Commission (SEC) on October 26, 1977, reads as follows:

SEVENTH. That the authorized capital stock of the corporation is TWO MILLION (P2,000,000.00) PESOS, Philippine Currency, divided
into TWO THOUSAND (2,000) SHARES at a par value of P100 each share, whereby the ONE THOUSAND SHARES issued to, and
subscribed by, the incorporating stockholders shall be classified as Class A shares while the other ONE THOUSAND unissued shares
shall be considered as Class B shares. Only holders of Class A shares can have the right to vote and the right to be elected as directors
or as corporate officers.[2] (Stress supplied)

On July 31, 1981, Article VII of the Articles of Incorporation of MCPI was amended, to read thus:

SEVENTH. That the authorized capital stock of the corporation is FIVE MILLION (P5,000,000.00) PESOS, divided as follows:

CLASS NO. OF SHARES PAR VALUE

“A” 1,000 P1,000.00

“B” 4,000 P1,000.00

Only holders of Class A shares have the right to vote and the right to be elected as directors or as corporate officers.[3] (Emphasis
supplied)

The foregoing amendment was approved by the SEC on June 7, 1983. While the amendment granted the right to vote and to be elected
as directors or corporate officers only to holders of Class “A” shares, holders of Class “B” stocks were granted the same rights and
privileges as holders of Class “A” stocks with respect to the payment of dividends.

On September 9, 1992, Article VII was again amended to provide as follows:

SEVENTH: That the authorized capital stock of the corporation is THIRTY TWO MILLION PESOS (P32,000,000.00) divided as follows:

CLASS NO. OF SHARES PAR VALUE

“A” 1,000 P1,000.00

“B” 31,000 1,000.00

Except when otherwise provided by law, only holders of Class “A” shares have the right to vote and the right to be elected as directors or
as corporate officers[4] (Stress and underscoring supplied).

The SEC approved the foregoing amendment on September 22, 1993.

On February 9, 2001, the shareholders of MCPI held their annual stockholders’ meeting and election for directors. During the course of
the proceedings, respondent Rustico Jimenez, citing Article VII, as amended, and notwithstanding MCPI’s history, declared over the
objections of herein petitioners, that no Class “B” shareholder was qualified to run or be voted upon as a director. In the past, MCPI had
seen holders of Class “B” shares voted for and serve as members of the corporate board and some Class “B” share owners were in fact
nominated for election as board members. Nonetheless, Jimenez went on to announce that the candidates holding Class “A” shares
were the winners of all seats in the corporate board. The petitioners protested, claiming that Article VII was null and void for depriving
them, as Class “B” shareholders, of their right to vote and to be voted upon, in violation of the Corporation Code (Batas Pambansa Blg.
68), as amended.

On March 22, 2001, after their protest was given short shrift, herein petitioners filed a Complaint for Injunction, Accounting and Damages,
docketed as Civil Case No. CV-01-0140 before the RTC of Parañaque City, Branch 258. Said complaint was founded on two (2) principal
causes of action, namely:

a. Annulment of the declaration of directors of the MCPI made during the February 9, 2001 Annual Stockholders’ Meeting, and for the
conduct of an election whereat all stockholders, irrespective of the classification of the shares they hold, should be afforded their right to
vote and be voted for; and

b. Stockholders’ derivative suit challenging the validity of a contract entered into by the Board of Directors of MCPI for the operation
of the ultrasound unit.[5]

Subsequently, the complaint was amended to implead MCPI as party-plaintiff for purposes only of the second cause of action.
Before the trial court, the herein petitioners alleged that they were deprived of their right to vote and to be voted on as d irectors at the
annual stockholders’ meeting held on February 9, 2001, because respondents had erroneously relied on Article VII of the Articles of
Incorporation of MCPI, despite Article VII being contrary to the Corporation Code, thus null and void. Additionally, respondents were in
estoppel, because in the past, petitioners were allowed to vote and to be elected as members of the board. They further claimed that the
privilege granted to the Class “A” shareholders was more in the nature of a right granted to founder’s shares.

In their Answer, the respondents averred that the provisions of Article VII clearly and categorically state that only holders of Class “A”
shares have the exclusive right to vote and be elected as directors and officers of the corporation. They denied that the exclusivity was
intended only as a privilege granted to founder’s shares, as no such proviso is found in the Articles of Incorporation. The respondents
further claimed that the exclusivity of the right granted to Class “A” holders cannot be defeated or impaired by any subsequent legislative
enactment, e.g. the New Corporation Code, as the Articles of Incorporation is an intra-corporate contract between the corporation and its
members; between the corporation and its stockholders; and among the stockholders. They submit that to allow Class “B” shareholders
to vote and be elected as directors would constitute a violation of MCPI’s franchise or charter as granted by the State.

At the pre-trial, the trial court ruled that a partial judgment could be rendered on the first cause of action and required the parties to submit
their respective position papers or memoranda.

On November 26, 2001, the RTC rendered the Partial Judgment, the dispositive portion of which reads:

WHEREFORE, viewed in the light of the foregoing, the election held on February 9, 2001 is VALID as the holders of CLASS “B” shares
are not entitled to vote and be voted for and this case based on the First Cause of Action is DISMISSED.

SO ORDERED.[6]

In finding for the respondents, the trial court ruled that corporations had the power to classify their shares of stocks, such as “voting and
non-voting” shares, conformably with Section 6[7] of the Corporation Code of the Philippines. It pointed out that Article VII of both the
original and amended Articles of Incorporation clearly provided that only Class “A” shareholders could vote and be voted for to the
exclusion of Class “B” shareholders, the exception being in instances provided by law, such as those enumerated in Section 6, paragraph
6 of the Corporation Code. The RTC found merit in the respondents’ theory that the Articles of Incorporation, which defines the rights
and limitations of all its shareholders, is a contract between MCPI and its shareholders. It is thus the law between the parties and should
be strictly enforced as to them. It brushed aside the petitioners’ claim that the Class “A” shareholders were in estoppel, as the election
of Class “B” shareholders to the corporate board may be deemed as a mere act of benevolence on the part of the officers. Finally, the
court brushed aside the “founder’s shares” theory of the petitioners for lack of factual basis.

Hence, this petition submitting the sole legal issue of whether or not the Court a quo, in rendering the Partial Judgment dated November
26, 2001, has decided a question of substance in a way not in accord with law and jurisprudence considering that:

1. Under the Corporation Code, the exclusive voting right and right to be voted granted by the Articles of Incorporation of the MCPI to
Class A shareholders is null and void, or already extinguished;

2. Hence, the declaration of directors made during the February 9, 2001 Annual Stockholders’ Meeting on the basis of the purported
exclusive voting rights is null and void for having been done without the benefit of an election and in violation of the rights of plaintiffs and
Class B shareholders; and

3. Perforce, another election should be conducted to elect the directors of the MCPI, this time affording the holders of Class B shares
full voting right and the right to be voted.[8]

The issue for our resolution is whether or not holders of Class “B” shares of the MCPI may be deprived of the right to vote and be voted
for as directors in MCPI.

Before us, petitioners assert that Article VII of the Articles of Incorporation of MCPI, which denied them voting rights, is null and void for
being contrary to Section 6 of the Corporation Code. They point out that Section 6 prohibits the deprivation of voting rights except as to
preferred and redeemable shares only. Hence, under the present law on corporations, all shareholders, regardless of classification, other
than holders of preferred or redeemable shares, are entitled to vote and to be elected as corporate directors or officers. Since the Class
“B” shareholders are not classified as holders of either preferred or redeemable shares, then it necessarily follows that they are entitled
to vote and to be voted for as directors or officers.

The respondents, in turn, maintain that the grant of exclusive voting rights to Class “A” shares is clearly provided in the Articles of
Incorporation and is in accord with Section 5[9] of the Corporation Law (Act No. 1459), which was the prevailing law when MCPI was
incorporated in 1977. They likewise submit that as the Articles of Incorporation of MCPI is in the nature of a contract between the
corporation and its shareholders and Section 6 of the Corporation Code could not retroactively apply to it without violating the non-
impairment clause[10] of the Constitution.

We find merit in the petition.

When Article VII of the Articles of Incorporation of MCPI was amended in 1992, the phrase “except when otherwise provided by law” was
inserted in the provision governing the grant of voting powers to Class “A” shareholders. This particular amendment is relevant for it
speaks of a law providing for exceptions to the exclusive grant of voting rights to Class “A” stockholders. Which law was the amendment
referring to? The determination of which law to apply is necessary. There are two laws being cited and relied upon by the parties in this
case. In this instance, the law in force at the time of the 1992 amendment was the Corporation Code (B.P. Blg. 68), not the Corporation
Law (Act No. 1459), which had been repealed by then.

We find and so hold that the law referred to in the amendment to Article VII refers to the Corporation Code and no other law. At the time
of the incorporation of MCPI in 1977, the right of a corporation to classify its shares of stock was sanctioned by Section 5 of Act No. 1459.
The law repealing Act No. 1459, B.P. Blg. 68, retained the same grant of right of classification of stock shares to corporations, but with a
significant change. Under Section 6 of B.P. Blg. 68, the requirements and restrictions on voting rights were explicitly provided for, such
that “no share may be deprived of voting rights except those classified and issued as “preferred” or “redeemable” shares, unless otherwise
provided in this Code” and that “there shall always be a class or series of shares which have complete voting rights.” Section 6 of the
Corporation Code being deemed written into Article VII of the Articles of Incorporation of MCPI, it necessarily follows that unless Class
“B” shares of MCPI stocks are clearly categorized to be “preferred” or “redeemable” shares, the holders of said Class “B” shares may not
be deprived of their voting rights. Note that there is nothing in the Articles of Incorporation nor an iota of evidence on record to show that
Class “B” shares were categorized as either “preferred” or “redeemable” shares. The only possible conclusion is that Class “B” shares
fall under neither category and thus, under the law, are allowed to exercise voting rights.

One of the rights of a stockholder is the right to participate in the control and management of the corporation that is exercised through his
vote. The right to vote is a right inherent in and incidental to the ownership of corporate stock, and as such is a property right. The
stockholder cannot be deprived of the right to vote his stock nor may the right be essentially impaired, either by the legislature or by the
corporation, without his consent, through amending the charter, or the by-laws.[11]

Neither do we find merit in respondents’ position that Section 6 of the Corporation Code cannot apply to MCPI without running afoul of
the non-impairment clause of the Bill of Rights. Section 148[12] of the Corporation Code expressly provides that it shall apply to
corporations in existence at the time of the effectivity of the Code. Hence, the non-impairment clause is inapplicable in this instance.
When Article VII of the Articles of Incorporation of MCPI were amended in 1992, the board of directors and stockholders must have been
aware of Section 6 of the Corporation Code and intended that Article VII be construed in harmony with the Code, which was then already
in force and effect. Since Section 6 of the Corporation Code expressly prohibits the deprivation of voting rights, except as to “preferred”
and “redeemable” shares, then Article VII of the Articles of Incorporation cannot be construed as granting exclusive voting rights to Class
“A” shareholders, to the prejudice of Class “B” shareholders, without running afoul of the letter and spirit of the Corporation Code.

The respondents then take the tack that the phrase “except when otherwise provided by law” found in the amended Articles is only a
handwritten insertion and could have been inserted by anybody and that no board resolution was ever passed authorizing or approving
said amendment.

Said contention is not for this Court to pass upon, involving as it does a factual question, which is not proper in this petition. In an appeal
via certiorari, only questions of law may be reviewed.[13] Besides, respondents did not adduce persuasive evidence, but only bare
allegations, to support their suspicion. The presumption that in the amendment process, the ordinary course of business has been
followed[14] and that official duty has been regularly performed[15] on the part of the SEC, applies in this case.

WHEREFORE, the petition is GRANTED. The Partial Judgment dated November 26, 2001 of the Regional Trial Court of Parañaque
City, Branch 258, in Civil Case No. 01-0140 is REVERSED AND SET ASIDE. No pronouncement as to costs.

PNB vs. Andrada Electric & Engineering Co.Case Digest

Philippine National Bank vs. Andrada Electric & Engineering Co.

[GR 142936, 17 April 2002]

Facts: On 26 August 1975, the Philippine national Bank (PNB) acquired the assets of the Pampanga Sugar Mills (PASUMIL) that were
earlier foreclosed by the Development Bank of the Philippines (DBP) under LOI 311. The PNB organized the ational Sugar Development
Corporation (NASUDECO) in September 1975, to take ownership and possession of the assets and ultimately to nationalize and
consolidate its interest in other PNB controlled sugar mills. Prior to 29 October 1971, PASUMIL engaged the services of the Andrada
Electric & Engineering Company (AEEC) for electrical rewinding and repair, most of which were partially paid by PASUMIL, leaving
several unpaid accounts with AEEC. On 29 October 1971, AEEC and PASUMIL entered into a contract for AEEC to perform the (a)
Construction of a power house building; 3 reinforced concrete foundation for 3 units 350 KW diesel engine generating sets, 3 reinforced
concrete foundation for the 5,000 KW and 1,250 KW turbo generator sets, among others. Aside from the work contract, PASUMIL required
AEEC to perform extra work, and provide electrical equipment and spare parts. Out of the total obligation of P777,263.80, PASUMIL had
paid only P250,000.00, leaving an unpaid balance, as of 27 June 1973, amounting to P527,263.80. Out of said unpaid balance of
P527,263.80, PASUMIL made a partial payment to AEEC of P14,000.00, in broken amounts, covering the period from 5 January 1974
up to 23 May 1974, leaving an unpaid balance of P513,263.80. PASUMIL and PNB, and now NASUDECO, allegedly failed and refused
to pay AEEC their just, valid and demandable obligation (The President of the NASUDECO is also the Vice-President of the PNB. AEEC
besought said official to pay the outstanding obligation of PASUMIL, inasmuch as PNB and NASUDECO now owned and possessed the
assets of PASUMIL, and these defendants all benefited from the works, and the electrical, as well as the engineering and repairs,
performed by AEEC).

Because of the failure and refusal of PNB, PASUMIL and/or NASUDECO to pay their obligations, AEEC allegedly suffered actual
damages in the total amount of P513,263.80; and that in order to recover these sums, AEEC was compelled to engage the professional
services of counsel, to whom AEEC agreed to pay a sum equivalent to 25% of the amount of the obligation due by way of attorney's fees.
PNB and NASUDECO filed a joint motion to dismiss on the ground that the complaint failed to state sufficient allegations to establish a
cause of action against PNB and NASUDECO, inasmuch as there is lack or want of privity of contract between the them and AEEC. Said
motion was denied by the trial court in its 27 November order, and ordered PNB nad NASUDECO to file their answers within 15 days.
After due proceedings, the Trial Court rendered judgment in favor of AEEC and against PNB, NASUDECO and PASUMIL; the latter being
ordered to pay jointly and severally the former (1) the sum of P513,623.80 plus interest thereon at the rate of 14% per annum as claimed
from 25 September 1980 until fully paid; (2) the sum of P102,724.76 as attorney's fees; and, (3) Costs. PNB and NASUDECO appealed.
The Court of Appeals affirmed the decision of the trial court in its decision of 17 April 2000 (CA-GR CV 57610. PNB and NASUDECO
filed the petition for review.
Issue: Whether PNB and NASUDECO may be held liable for PASUMIL’s liability to AEEC.

Held: Basic is the rule that a corporation has a legal personality distinct and separate from the persons and entities owning it. The
corporate veil may be lifted only if it has been used to shield fraud, defend crime, justify a wrong, defeat public convenience, insulate bad
faith or perpetuate injustice. Thus, the mere fact that the Philippine National Bank (PNB) acquired ownership or management of some
assets of the Pampanga Sugar Mill (PASUMIL), which had earlier been foreclosed and purchased at the resulting public auction by the
Development Bank of the Philippines (DBP), will not make PNB liable for the PASUMIL's contractual debts to Andrada Electric &
Engineering Company (AEEC). Piercing the veil of corporate fiction may be allowed only if the following elements concur: (1) control —
not mere stock control, but complete domination — not only of finances, but of policy and business practice in respect to the transaction
attacked, must have been such that the corporate entity as to this transaction had at the time no separate mind, will or existence of its
own; (2) such control must have been used by the defendant to commit a fraud or a wrong to perpetuate the violation of a statutory or
other positive legal duty, or a dishonest and an unjust act in contravention of plaintiff's legal right; and (3) the said control and breach of
duty must have proximately caused the injury or unjust loss complained of. The absence of the foregoing elements in the present case
precludes the piercing of the corporate veil. First, other than the fact that PNB and NASUDECO acquired the assets of PASUMIL, there
is no showing that their control over it warrants the disregard of corporate personalities. Second, there is no evidence that their juridical
personality was used to commit a fraud or to do a wrong; or that the separate corporate entity was farcically used as a mere alter ego,
business conduit or instrumentality of another entity or person. Third, AEEC was not defrauded or injured when PNB and NASUDECO
acquired the assets of PASUMIL. Hence, although the assets of NASUDECO can be easily traced to PASUMIL, the transfer of the latter's
assets to PNB and NASUDECO was not fraudulently entered into in order to escape liability for its debt to AEEC. Neither was there any
merger or consolidation with respect to PASUMIL and PNB. The procedure prescribed under Title IX of the Corporation Code 59 was not
followed. In fact, PASUMIL's corporate existence had not been legally extinguished or terminated. Further, prior to PNB's acquisition of
the foreclosed assets, PASUMIL had previously made partial payments to AEEC for the former's obligation in the amount of P777,263.80.
As of 27 June 1973, PASUMIL had paid P250,000 to AEEC and, from 5 January 1974 to 23 May 1974, another P14,000. Neither did
PNB expressly or impliedly agree to assume the debt of PASUMIL to AEEC. LOI 11 explicitly provides that PNB shall study and submit
recommendations on the claims of PASUMIL's creditors. Clearly, the corporate separateness between PASUMIL and PNB remains,
despite AEEC's insistence to the contrary.

PASCUAL and SANTOS, INC. v. THE MEMBERS OF THE TRAMO WAKAS NEIGHBORHOOD ASSOCIATION, INC.

The Director of the Land Managment Bureau (LMB) granted the petition of respondent, The Members of the Tramo Wakas Neighborhood
Association, Inc. (TRAMO WAKAS) which prayed for the grant of ownership over 3 parcels of land situated in Paranaque City. The same
property is being claimed by petitioner Pascual and Santos Inc. (PSI). PSI appealed the said decision to higher adjudicatory bodies but
was denied and dismissed for lack of merit.The Court of Appeals (CA) likewise dismissed the petition on the ground of Infirm Verification
and Certification of Non-forum Shopping for the same does not show proof that the persons who signed therein were duly authorized by
the corporation. The Court further ruled that the petition has not been filed on time.

ISSUE:

Whether or not the persons who executed the verification and certification of non-forum shopping attached to PSI‘s petition were
authorized to do so

HELD:

Section 6 (d) of Rule 43 in relation to Section 2 of Rule 42 of the Rules of Court mandates that a petition for review shall contain a sworn
certification against forum shopping in which the Pascual and Santos Inc. shall attest that he has not commenced any other action
involving the same issues in this Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such
other action or proceeding, he must state the status of the same; and if he should thereafter learn that a similar action or proceeding has
been filed or is pending before this Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes
to promptly inform the aforesaid courts and other tribunal or agency thereof within five days therefrom.

For failure to comply with this mandate, Section 7 of Rule 43 provides that the failure of the petitioner to comply with any of the foregoing
requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the
contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof.The Court has
ruled that the subsequent submission of proof of authority to act on behalf of a petitioner corporation justifies the relaxation of the Rules
for the purpose of allowing its petition to be given due course.It must also be kept in mind that while the requirement of the certificate of
non-forum shopping is mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the objective of
preventing the undesirable practice of forum shopping.

G.R. No. 142316 November 22, 2001

FRANCISCO A.G. DE LIANO, ALBERTO O. VILLA-ABRILLE, JR., and SAN MIGUEL CORPORATION, petitioners,
vs.
HON. COURT OF APPEALS and BENJAMIN A. TANGO, respondents.

FACTS:

This case involves the cancellation of two (2) real estate mortgages in favor of petitioner San Miguel Corporation (SMC) executed by
private respondent Benjamin A. Tango over his house and lot in Quezon City. The mortgages were third party or accommodation
mortgages on behalf of the spouses Bernardino and Carmelita Ibarra who were dealers of SMC products in Aparri, Cagayan. Other
defendants in the case were Francisco A.G. De Liano and Alberto O. Villa-Abrille, Jr., who are senior executives of petitioner SMC.
SMC, De Liano and Abrille appealed the aforesaid decision to the Court of Appeals. In due time, their counsel, Atty. Edgar B. Afable, filed
an Appellants' Brief which failed to comply with Section 13, Rule 44 of the Rules of Court. The appellee (herein private respondent) was
quick to notice these deficiencies, and accordingly filed a "Motion to Dismiss Appeal” dated March 8, 1999.

The appellants averred that their brief had substantially complied with the contents as set forth in the rules. They proffered the excuse
that the omissions were only the result of oversight or inadvertence and as such could be considered "harmless" errors. They prayed for
liberality in the application of technical rules, adding that they have a meritorious defense.

The Court of Appeals dismissed the appeal and ruled that the Brief does not contain a Subject Index nor a Table of Cases and Authorities,
with page references. Moreover, the Statement of the Case, Statement of Facts, and Arguments in the Brief has no page reference to
the record. These procedural lapses justify the dismissal of the appeal, pursuant to Section 1 (f), Rule 50 of 1997 Rules of Civil Procedure.

From the denial of their motion for reconsideration, only petitioner SMC interposed the instant petition.

ISSUE:

Whether or not the Court of Appeals erred in dismissing SMC’s appeal.

RULING:

The petition has no merit.

The premise that underlies all appeals is that they are merely rights which arise from statute; therefore, they must be exercised in the
manner prescribed by law. It is to this end that rules governing pleadings and practice before appellate courts were imposed. These rules
were designed to assist the appellate court in the accomplishment of its tasks, and overall, to enhance the orderly administration of justice.

Petitioner's contention that the appellate court should have considered the substance of the appeal prior to dismissing it due to
technicalities does not gain our favor.

Generally, the negligence of counsel binds his client. Actually, Atty. Afable is also an employee of petitioner San Miguel
Corporation. Yet even this detail will not operate in petitioner's favor. A corporation, it should be recalled, is an artificial being
whose juridical personality is only a fiction created by law. It can only exercise its powers and transact its business through
the instrumentalities of its board of directors, and through its officers and agents, when authorized by resolution or its by-laws.

Moreover, a corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent
that authority to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and
also such powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent, and such
apparent powers as the corporation has caused persons dealing with the officer or agent to believe that it has conferred.

That Atty. Afable was clothed with sufficient authority to bind petitioner SMC is undisputable. Petitioner SMC's board resolution of May 5,
1999 attests to that. Coupled with the provision of law that a lawyer has authority to bind his client in taking appeals and in all matters of
ordinary judicial procedure, a fortiori then, petitioner SMC must be held bound by the actuations of its counsel of record, Atty. Afable.

1. Tayag v Benguet Consolidated 26 SCRA 242

Facts:

Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among others, two stock certificates covering 33,002 shares of
appellant, the certificates being in the possession of the County Trust Company of New York, which as noted, is the domiciliary
administrator of the estate of the deceased.2 Then came this portion of the appellant's brief: "On August 12, 1960, Prospero Sanidad
instituted ancillary administration proceedings in the Court of First Instance of Manila; Lazaro A. Marquez was appointed ancillary
administrator, and on January 22, 1963, he was substituted by the appellee Renato D. Tayag. A dispute arose between the domiciary
administrator in New York and the ancillary administrator in the Philippines as to which of them was entitled to the possession of the stock
certificates in question. On January 27, 1964, the Court of First Instance of Manila ordered the domiciliary administrator, County Trust
Company, to "produce and deposit" them with the ancillary administrator or with the Clerk of Court. The domiciliary administrator did not
comply with the order, and on February 11, 1964, the ancillary administrator petitioned the court to "issue an order declaring the certificate
or certificates of stocks covering the 33,002 shares issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be
declared [or] considered as lost."

It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as far as it is concerned as to "who is
entitled to the possession of the stock certificates in question; appellant opposed the petition of the ancillary administrator because the
said stock certificates are in existence, they are today in the possession of the domiciliary administrator, the County Trust Company, in
New York, U.S.A...."

It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or considered as lost. Moreover, it would
allege that there was a failure to observe certain requirements of its by-laws before new stock certificates could be issued. Hence, its
appeal.

Issue:

Whether or not the order of the lower court is proper and should be followed by the BCI (appellant)

Ruling:
The view adopted by appellant Benguet Consolidated, Inc. is fraught with implications at war with the basic postulates of corporate theory,

"A corporation is not in fact and in reality a person, but the law treats it as though it were a person by process of fiction or by regarding it
as an artificial person distinct and separate from its individual stockholders.... It owes its existence to law. It is an artificial person created
by law for certain specific purposes, the extent of whose existence, powers and liberties is fixed by its charter."

A corporation as known to Philippine jurisprudence is a creature without any existence until it has received the imprimatur of the state
according to law. It is logically inconceivable therefore that it will have rights and privileges of a higher priority than that of its creator. More
than that, it cannot legitimately refuse to yield obedience to acts of its state organs, certainly not excluding the judiciary, whenever called
upon to do so.

To assert that it can choose which court order to follow and which to disregard is to confer upon it not autonomy which may be conceded
but license which cannot be tolerated. It is to argue that it may, when so minded, overrule the state, the source of its very existence; it is
to contend that what any of its governmental organs may lawfully require could be ignored at will. So extravagant a claim cannot possibly
merit approval.

WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of First Instance, dated May 18, 1964, is
affirmed.