BULACAN STATE UNIVERSITY

COLLEGE OF LAW
2ND SEMESTER 2018

CORPORATION LAW

COMPILATION OF CASE DIGESTS

JURISPRUDENCE
YEAR 2015-2018

SUBMITTED TO:
DR. ARTHUR S. VELASCO, DCL
PROFESSOR

SUBMITTED BY:
JUSTINE GUTIERREZ
REINA MARIA MARTIN
MA.SOCORRO S. SABALLA
JD-2A
DATE SUBMITTED: 16 August 2018
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1. NARRA NICKEL MINING V. REDMONT CONSOLIDATED MINES
G.R. NO. 195580 JANUARY 28, 2015 J. VELASCO,J.

2. SEC V. SUBIC BAY GOLF

G.R. NO. 179047 MARCH 11, 2015 LEONEN, J.

3. HACIENDA CATAYWA V. ROSARIO LOREZO

GR NO. 179640 MAR 18, 2015 PERALTA, J

4. PHIL. COMMUNICATIONS SATELLITE CORP VS.

SANDIGANBAYAN
G.R. NO. 203023 JUNE 17, 2015 CARPIO, J.:

5. BERNAS, ET AL. V. CINCO, ET AL.,

G.R. NOS. 163356-57 JULY 10, 2015 PEREZ, J.

6. INSIGNE, ET AL V. ABRA VALLEY COLLEGES, INC.

G.R. NO. 204089 JULY 29, 2015 BERSAMIN, J.

7. TERELAY INVESTMENT AND DEVELOPMENT CORP. V.

G.R. NO. 160924 AUGUST 05, 2015 BERSAMIN, J.

8. SEC V. BAGUIO COUNTRY CLUB CORP.

G.R. NOS. 165146 AUGUST 12, 2015 JARDELEZA, J

9. PNCC V. ASIANVEST MERCHANT BANKERS

G.R. NO. 172301 AUGUST 19, 2015 LEONEN, J.

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10. Y-I LEISURE PHILS., INC. V. YU
G.R. NO. 207161 SEPTEMBER 08,2015 MENDOZA,

11. MICROSOFT CORPORATION VS. ROLANDO MANANSALA

G.R. NO. 166391 OCTOBER 21, 2015 BERSAMIN, J.

12. MARGARITA M. BENEDICTO-MUÑOZ V. MARIA ANGELES

CACHO- OLIVARES
G.R. NO. 17912 NOVEMBER 09, 2015 JARDELEZA,J.

13. F & S VELASCO CO., INC. V. MADRID

G.R. NO. 208844 NOVEMBER 10, 2015 PERLAS-BERNABE, J.

14. PHILIPPINE RACE HORSE V PIEDRAS NEGRAS

G.R. NO. 192659 DECEMBER 02, 2015 PERALTA, J.

15. CAPITAL INSURANCE AND SURETY CO. VS. DEL MONTE

MOTOR WORKS
G.R. NO. 159979 DECEMBER 9, 2015 BERSAMIN, J.

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NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND
DEVELOPMENT, INC., and McARTHUR MINING, INC., vs. REDMONT
CONCOLIDATED MINES CORP.

Narra Nickel Mining. v. Redmont

G.R. No. 195580 January 28, 2015 Velasco,Jr., J.
TOPIC: NATIONALITY OF CORPORATION/GRANDFATHER RULE

FACTS:

Petitioner Narra Nickel and Mining Development Corp. (Narra) filed this Motion for
Reconsideration of the Supreme Court's April 21, 2014 Decision wherein it affirmed
the appellate court's ruling that petitioners, being foreign corporations, are not
entitled to Mineral Production Sharing Agreements (MPSAs ). In reaching the assailed
decision, the Court upheld with approval the appellate court's finding that there was
doubt as to petitioners' nationality since a 100% Canadian-owned firm, MBMI
Resources, Inc. (MBMI), effectively owns 60% of the common stocks of the
petitioners by owning equity interest of petitioners' other majority corporate
shareholders. To petitioners, the Court’s application of the Grandfather Rule to
determine their nationality is erroneous and allegedly without basis in the
Constitution, the Foreign Investments Act of 1991 (FIA), the Philippine Mining Act of
1995, and the Rules issued by the Securities and Exchange Commission (SEC). These
laws and rules supposedly espouse the application of the Control Test in verifying the
Philippine nationality of corporate entities for purposes of determining compliance
with Sec. 2, Art. XII of the Constitution that only “corporations or associations at
least sixty per centum of whose capital is owned by such [Filipino] citizens” may
enjoy certain rights and privileges, like the exploration and development of natural
resources

ISSUE:

Whether the Court erred in using the Grandfather rule and not the control test in
determining the nationality of the petitioners.

RULING:

No. The Grandfather Rule is “the method by which the percentage of Filipino equity
in a corporation engaged in nationalized and/or partly nationalized areas of activities,
provided for under the Constitution and other nationalization laws, is computed, in
cases where corporate shareholders are present, by attributing the nationality of the
second or even subsequent tier of ownership to determine the nationality of the
corporate shareholder.” Thus, to arrive at the actual Filipino ownership and control

5
in a corporation, both the direct and indirect shareholdings in the corporation are
determined. In other words, if there are layers of intervening corporations investing
in a mining joint venture, we must delve into the citizenship of the individual
stockholders of each corporation. As explained in the April 21, 2012 Decision, the
“doubt” that demands the application of the Grandfather Rule in addition to or in
tandem with the Control Test is not confined to, or more bluntly, does not refer to
the fact that the apparent Filipino ownership of the corporation’s equity falls below
the 60% threshold. Rather, “doubt” refers to various indicia that the “beneficial
ownership” and “control” of the corporation do not in fact reside in Filipino
shareholders but in foreign stakeholders. Even if at first glance the petitioners comply
with the 60-40 Filipino to foreign equity ratio, doubt exists in the present case that
gives rise to a reasonable suspicion that the Filipino shareholders do not actually have
the requisite number of control and beneficial ownership in petitioners Narra, Tesoro,
and McArthur.

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SECURITIES AND EXCHANGE COMMISSION v. SUBIC BAY GOLF AND
COUNTRY CLUB, INC. AND UNIVERSAL INTERNATIONAL GROUP
DEVELOPMENT CORPORATION

SEC v. Subic Bay Golf and Country Club

G.R. No. 179047 March 11, 2015 LEONEN, J.
INTRA-CORPORATE CONTROVERSIES

FACTS:

Subic Bay Golf Course operated by Subic Bay Metropolitan Authority (SBMA) and
Universal International Group of Taiwan (UIG) entered into a Lease and Development
Agreement. SBMA agreed to lease the golf course to UIG for 50 years while UIG
agreed to develop, manage and maintain the golf course and other related facilities
within the complex. Later, Universal International Group Development Corporation
(UIGDC) which succeeded to the interests of UIG executed a Deed of Assignment in
favor of Subic Bay Golf and Country Club, Inc. (SBGCCI). SBGCCI and UIGDC entered
into a Development Agreement. After application, SBGCCI was issued by SEC a
Certificate of Permit to Offer Securities for Sale to the Public of its propriety
shares.Regina Filart and Margarita Villareal informed the SEC that they had been
asking UIGDC for the refund of their payment for their SBGCCI shares claiming that
there was failure to deliver the promised amenities. SEC's Corporation Finance
Department gave due course to Villareal and Filart's letter-complaint. Due to UIGDC’s
failure to comply with undertakings in the Registration Statement and Prospectus,
tantamount to misrepresentation, and in violation of the provisions of the Securities
Regulation Code, and its implementing rules and regulation, the Certificate of
Registration and Permit toSell Securities to the Public issued to respondent Subic Bay
Golf and Country Club, Inc., were suspended.SBGCCI and UIGDC filed a Petition for
Review arguing that the letter-complaint filed by Villareal and Filart involved an intra-
corporate dispute that was under the jurisdiction of the RTC and not the SEC.

ISSUE:

Whether the SEC has jurisdiction over the case

RULING:

No. Actions pertaining to intra-corporate disputes should be filed directly before

designated Regional Trial Courts. Intra-corporate disputes brought before other
courts or tribunals are dismissible for lack of jurisdiction. The relationship test
requires that the dispute be between a corporation/partnership/association and the
public; a corporation/partnership/association and the state regarding the entity's

7
franchise, permit, or license to operate; a corporation/partnership/association and its
stockholders, partners, members, or officers; and among stockholders, partners, or
associates of the entity.The nature of the controversy test requires that the action
involves the enforcement of corporate rights and obligations. This case is an intra-
corporate dispute, over which the RTC has jurisdiction. It is a dispute between the
corporation, SBGCCI, and its shareholders, Villareal and Filart.

8
HACIENDA CATAYWA/MANUEL VILLANUEVA, OWNER, JOEMARIE
VILLANUEVA, MANAGER, MANCY AND SONS ENTERPRISES,
INC., PETITIONERS, VS. ROSARIO LOREZO, RESPONDENT.

Hacienda Cataywa v. Lorezo

GR NO. 179640 MAR 18, 2015 PERALTA, J
PIERCING THE CORPORATE VEIL
FACTS:

Rosario Lorezo received, upon inquiry, a letter from the Social Security System,
informing her that she cannot avail of their retirement benefits since per their record
she has only paid 16 months. Such is 104 months short of the minimum requirement
of 120 months payment to be entitled to the benefit. Aggrieved, Lorezo then filed her
Amended Petition before the SSC, alleging that she was employed as laborer in Hda.
Cataywa managed by Jose Marie Villanueva in 1970 but was reported to the SSS only
in 1978. She alleged that SSS contributions were deducted from her wages from
1970 to 1995, but not all were remitted to the SSS which, subsequently, caused the
rejection of her claim. She also impleaded Talisay Farms, Inc. by virtue of its
Investment Agreement with Mancy and Sons Enterprises. She also prayed that the
veil of corporate fiction be pierced since she alleged that Mancy and Sons Enterprises
and Manuel and Jose Marie Villanueva are one and the same.Petitioners Manuel and
Jose Villanueva refuted in their answer, the allegation that not all contributions of
respondent were remitted. Petitioners alleged that all farm workers of Hda. Cataywa
were reported and their contributions were duly paid and remitted to SSS. It was the
late Domingo Lizares, Jr. who managed and administered the hacienda. While, Talisay
Farms, Inc. filed a motion to dismiss on the ground of lack of cause of action in the
absence of an allegation that there was an employer-employee relationship between
Talisay Farms and respondent.

The SSC found that Lorezo was a regular employee subject to compulsory coverage
of Hda. Cataywa/Manuel Villanueva/ Mancy and Sons Enterprises, Inc. within the
period of 1970 to February 25, 1990. The SSC denied petitioners' Motion for
Reconsideration. The petitioners, then, elevated the case before the CA where the
case was dismissed outright because the signatory to the Verification failed to attach
his authority to sign for and in behalf of the other Petitioners and the certified true
copies of pleadings and documents relevant and pertinent to the petition are
incomplete.

ISSUE:

Whether or not the corporate veil should be pierced

RULING:
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No. It was held in Rivera v. United Laboratories, Inc. that –While a corporation may
exist for any lawful purpose, the law will regard it as an association of persons or, in
case of two corporations, merge them into one, when its corporate legal entity is
used as a cloak for fraud or illegality. This is the doctrine ofpiercing the veil of
corporate fiction. The doctrine applies only when such corporate fiction is used to
defeat public convenience, justify wrong, protect fraud, or defend crime, or when it
is made as a shield to confuse the legitimate issues, or where a corporation is the
mere alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation. To disregard the
separate juridical personality of a corporation, the wrongdoing must be established
clearly and convincingly. It cannot be presumed. This Court agrees with the
petitioners that there is no need to pierce the corporate veil. Respondent failed to
substantiate her claim that Mancy and Sons Enterprises, Inc. and Manuel and Jose
Marie Villanueva are one and the same. She based her claim on the SSS form wherein
Manuel Villanueva appeared as employer. However, this does not prove, in any way,
that the corporation is used to defeat public convenience, justify wrong, protect fraud,
or defend crime, or when it is made as a shield to confuse the legitimate issues,
warranting that its separate and distinct personality be set aside. Also, it was not
alleged nor proven that Mancy and Sons Enterprises, Inc. functions only for the
benefit of Manuel, one cannot be an alter ego of the other.

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 PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION and
PHILCOMSAT HOLDINGS CORPORATION, Petitioners, vs.
SANDIGANBAYAN 5th DIVISION and PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT, Respondents.

Phil. Communications Satellite Corp vs. Sandiganbayan

G.R. No. 203023 June 17, 2015 CARPIO, J.:
FACTS:

PHILCOMSAT Holdings Corporation (PHC) (formerly Liberty Mines, Inc. (LMI)) is a

domestic corporation engaged in the discovery, exploitation, development and
exploration of oils. LMI and PHILCOMSAT, signed a Memorandum of Agreement for
the latter to gain controlling interest in LMI through an increase in its authorized
capital stock. In 1997, LMI changed its name to PHC. It declassified its shares and
amended its primary purpose to become a holding company. Pending the PSE's Final
approval of PHC's application for listing of the shares, the PCGG made a written
request to suspend the listing of the increase in PHC's capital stock due to conflicting
claims of the two sets of board of directors of the Philippine Overseas
Telecommunication Corporation (POTC) and PHILCOMSAT. In 2007, then President
Gloria Macapagal-Arroyo appointed new government nominees to the POTC and
PHILCOMSAT boards. POTC owns 100% of PHILCOMSAT. On 7 May 2008, the PCGG
issued a resolution recognizing the validity of the POTC's and PHILCOMSAT's
respective stockholders' meetings and elections. PHILCOMSAT sent a final demand
letter reiterating its demand for PCGG to withdraw its objection to the listing of the
increase in PHC's capital stock. On 1 February 2012, PHILCOMSAT filed a complaint
before the Sandiganbayan against PCGG to compel the latter to withdraw its
opposition to the listing of the increase in PHC's capital stock. The Sandiganbayan
dismissed the complaint for lack of jurisdiction. Petitioners insist that the PCGG is not
a stockholder, partner, member or officers of the corporation.

ISSUE:

Whether or not Sandiganbayan lack of jurisdiction on the ground that the action
allegedly involves an intra-corporate controversy?

RULING:

YES, Sandiganbayan has no jurisdiction but on regular courts as this involved a intra-
corporate dispute. The PCGG, acting as representative of the Republic, was exercising
a duty of a stockholder to ensure the proper and lawful exercise of corporate acts.
On Relationship Test As it stands today, the Republic of the Philippines owns 34.9%
of POTC, which wholly owns PHILCOMSAT, which in turn owns 81% of PHC. The
Republic, then, has an interest in the proper operations of the PHC, however indirect
11
this interest may seem to be. On the nature of the Controversy Test The act of
Chairman Sabio in asking the SEC to suspend the listing of PHC's shares was done in
pursuit of protecting the interest of the Republic of the Philippines, a legitimate
stockholder in PHC's controlling parent company, POTC. Any shareholder, harboring
any apprehensions or concerns, could have done the same or posed the same
objection. It was an act that had no relation to any proceeding or question of ill-
gotten wealth or sequestration.

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JOSE A. BERNAS, CECILE H. CHENG, VICTOR AFRICA, JESUS B. MARAMARA,
JOSE T. FRONDOSO, IGNACIO T. MACROHON, JR., AND PAULINO T. LIM,
ACTING IN THEIR CAP A CITY AS INDIVIDUAL DIRECTORS OF MAKATI
SPORTS CLUB, INC., AND ON BEHALF OF THE BOARD OF DIRECTORS OF
MAKATI SPORTS CLUB, Petitioners, vs. JOVENCIO F. CINCO, VICENTE R.
AYLLON, RICARDO G. LIBREA, SAMUEL L. ESGUERRA, ROLANDO P.
DELA CUESTA, RUBEN L. TORRES, ALEX Y. PARDO, MA. CRISTINA
SIM, ROGER T. AGUILING, JOSE B. QUIMSON, CELESTINO L. ANG,
ELISEO V. VILLAMOR, FELIPE L. GOZON, CLAUDIO B. ALTURA,
ROGELIO G. VILLAROSA, MANUEL R. SANTIAGO, BENJAMIN A.
CARANDANG, REGINA DE LEON-HERLIHY, CARLOS Y. RAMOS, JR.,
ALEJANDRO Z. BARIN, EFRENILO M. CAYANGA AND JOHN
DOES, Respondents.

Bernas, et al. v. Cinco, et al.,

G.R. Nos. 163356-57 July 10, 2015 PEREZ, J.

FACTS:

BERNAS GROUP were among the Members of the Board of Directors and Officers of
the Makati Sports Club corporation whose terms were to expire either in 1998 or
1999. CINCO GROUP are the members and stockholders of the corporation who were
elected Members of the Board of Directors and Officers of the club during the
17 December 1997 Special Stockholders Meeting. Alarmed with the rumored
anomalies in handling the corporate funds, the MSC Oversight
Committee (MSCOC), composed of the past presidents of the club, demanded from
the Bernas Group to resign from their respective positions to pave the way for the
election of new set of officers. MSCOC called a Special Stockholders' meeting where
in that meeting proceeded wherein the Bernas Group were removed from office and,
in their place and stead, Cinco Group were elected. Subsequently, the removal was
ratified during the Annual Stockholder’s Meeting.

ISSUE:

Whether or not the 17 December 1997 Special stockholders’ meeting is valid

RULING:

NO, invalid On authority of MSCOC: The removal of the Bernas Group, as well as the
election of the Cinco Group, effected by the assembly in that improperly called
meeting is void. The MSCOC is neither empowered by law nor did the MSC by-laws

13
to call a meeting and the subsequent ratification made by the stockholders not cure
the substantive infirmity, the defect having set in at the time the void act was done.
The defect goes into the very authority of the persons who made the call for the
meeting. Being void, it cannot be validated through ratification. The power to call a
special meeting, solely vested by law and the MSC by-laws on the President or the
Board of Directors. Sec. 28. Removal of directors or trustees. A special meeting of
the stockholders or members of a corporation for the purpose of removal of directors
or trustees, or any of them, must be called by the secretary on order of the president
OR on the written demand of the stockholders representing or holding at least
a majority of the outstanding capital stock.

14
GRACE BORGONA INSIGNE, DIOSDADO BORGONA, OSBOURNE BORGONA,
IMELDA BORGONA RIVERA, AND ARISTOTLE BORGONA, Petitioners,
vs.ABRA VALLEY COLLEGES, INC. AND FRANCIS BORGONA, Respondent.

Insigne, et al v. Abra Valley Colleges, Inc.

G.R. No. 204089 July 29, 2015 BERSAMIN, J.

FACTS:

A stock certificate is prima facie evidence that the holder is a shareholder of the
corporation, but the possession of the certificate is not the sole determining factor of
one's stock ownership. Petitioners are siblings of the full blood. Respondent Francis
s their older half-blood brother. In his lifetime, Pedro was the founder, president and
majority stockholder of respondent Abra Valley Colleges, Inc. (Abra Valley), a stock
corporation. After Pedro's death, Francis succeeded him as the president of Abra
Valley. On March 26, 2002, the petitioners Filed a complaint in the RTC to direct Abra
Valley to allow them to inspect its corporate books and records, and the minutes of
meetings, and to provide them with its Financial statements. At the hearing set on
March 8, 2010, the RTC ordered the petitioners to present the stock certificates issued
by Abra Valley under their names. On June 28, 2010, the RTC dismissed the case
because the plaintiffs failed to comply with the order of the Court.

ISSUE:

Is the presentation of a stock certificate a condition sine qua non for proving one's
shareholding in a corporation?

RULING:

NO. The dismissal of Special Civil Action Case No. 2070 by virtue of Section 3, Rule
17 of the Rules of Court should be undone because the petitioners' production of the
stock certificates was rendered superfluous by their submission of other competent
means of establishing their shareholdings in Abra Valley. To establish their stock
ownership, the petitioners actually turned over various documents showing their
ownership of Abra Valley's shares, specifically: • the official receipts of their payments
for their subscriptions of the shares of Abra Valley; • and the copies duly certified by
the Securities and Exchange Commission (SEC) stating that Abra Valley had issued
shares in favor of the petitioners, such as the issuance of part of authorized and
unissued capital stock; the letter dated June 17, 1987; the secretary's certificate
dated June 17, 1987; and the general information sheet.

15
A stock certificate is prima facie evidence that the holder is a shareholder of the
corporation, but the possession of the certificate is not the sole determining factor of
one's stock ownership. A certificate of stock is merely: — . . . the paper representative
or tangible evidence of the stock itself and of the various interests therein. The
certificate is not stock in the corporation but is merely evidence of the holder's
interest and status in the corporation, his ownership of the share represented
thereby, but is not in law the equivalent of such ownership.

16
TERELAY INVESTMENT AND DEVELOPMENT CORPORATION, Petitioner,
v. CECILIA TERESITA J. YULO, Respondent.

Terelay Investment and Development Corp. v.

G.R. No. 160924 August 05, 2015 BERSAMIN, J.

FACTS:

The Corporation Code has granted to ALL stockholders the right to inspect the
corporate books and records, and in so doing has not required any speciAic amount
of interest for the exercise of the right to inspect. Asserting her right as a stockholder,
Cecilia Teresita Yulo requested Terelay Investment and Development Corporation
(TERELAY) that she be allowed to examine its books and records however, TERELAY
denied the request for inspection and instead demanded that she show proof that
she was a bona Uide stockholder.

ISSUE:

WON the respondent stockholder is entitled to inspect its books and records, and
allowing her to inspect its corporate records despite her shareholding being a measly
.001% interest;

RULING:

YES The Corporation Code has granted to ALL stockholders the right to inspect the
corporate books and records, and in so doing has not required any specific amount
of interest for the exercise of the right to inspect. Under Section 74, third paragraph,
of the Corporation Code, the only time when the demand to examine and copy the
corporation's records and minutes could be refused is when the corporation puts up
as a defense to any action that "the person demanding" had • "improperly used any
information secured through any prior examination of the records or minutes of such
corporation or of any other corporation, or • was not acting in good faith or for a
legitimate purpose in making his demand.” The right of the shareholder to inspect
the books and records of the petitioner should not be made subject to the condition
of a showing of any particular dispute or of proving any mismanagement or other
occasion rendering an examination proper, but if the right is to be denied, the burden
of proof is upon the corporation to show that the purpose of the shareholder is
improper, by way of defense.

17
SECURITIES AND EXCHANGE COMMISSION AND VERNETTE G.
UMALI, Petitioners, v. BAGUIO COUNTRY CLUB CORPORATION, Respondent.

RAMON K. ILUSORIO AND ERLINDA K. ILUSORIO, Petitioners, v. BAGUIO

COUNTRY CLUB CORPORATION, Respondent

SEC v. Baguio Country Club Corp.

G.R. Nos. 165146 & 165209 August 12, 2015 JARDELEZA, J

FACTS:
On December 17, 1998, the Securities and Exchange Commission (SEC) approved
the amended by-laws submitted by the Baguio Country Club Corporation (BCCC).
On September 27, 2002, the Ilusorios requested the SEC, via a letter-complaint, to
compel BCCC to hold the annual election of the board of directors for 2002 in view
of the nullity of the above-quoted provision in the amended by-laws. He informed
the SEC that sometime in 2001, a stockholder of BCCC requested for the opinion of
the SEC on the validity of the amendment, particularly the two (2) year term of the
board of directors; The SEC opined that the amendment increasing the term of
ofUice to two (2) years is contrary to law, particularly Section 23 of the Corporation
Code which limits the term of ofaice to only one (1) year. Also, SEC ordered BCCC
to conduct the annual election of members of the board.

ISSUE:

Whether or not the SEC can call a stockholders' meeting for the purpose of
conducting an election of the BCCC board of directors.

RULING:

MOOT The petitions have been rendered moot by the 2005 amendment of the by-
laws. The validity of the two (2) year term provision and the calling of meeting for
the election of members of the board of directors to replace those holding a two (2)
year term should no longer be in issue. The Ilusorios merely invoked the SEC to
exercise what it perceived to be the latter's power to compel BCCC to comply with
the law pertaining to the term limits of the board of directors. With the amendment
restoring the term of the board to one (1) year, there is no more illegal provision to
speak of. Any discussion by the Court of the SEC's power to call for an election of the
board in case of a void term prescribed by the by-laws, as well as on the nature of
the controversy, and the other issues which are mere offshoots of the void provision
of the by-laws would be merely academic, opinions that would neither adjudicate the
rights of the parties, nor grant them reliefs.

18
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner,
v. ASIAVEST MERCHANT BANKERS (M) BERHAD, Respondent.

PNCC v. Asianvest
G.R. No. 172301 August 19, 2015 LEONEN, J.

FACTS:

In 1985, the High Court of Malaysia ordered the Philippine National ConstructionCor
poration (PNCC) to pay $5.1 million to Asiavest Merchant Bankers (M) Berhad. This
was the result of a recovery suit filed by Asiavest against PNCC in Malaysia for PNCC’s
failure to complete a construction project there despite due payment from Asiavest.
Despite demand, PNCC failed to comply with the judgment in Malaysia hence Asiavest
filed a complaint for the enforcement of Malaysian ruling against PNCC in the
Philippines. The case was filed with the Pasig RTC which eventually denied the
complaint. The Court of Appeals affirmed the decision of RTC.

Asiavest appealed. In its defense, PNCC alleged that the foreign judgment cannot b
e enforced here because of want of jurisdiction, want of notice to PNCC, collusion
and/ or fraud, and there is a clear mistake of law or fact. Asiavest assailed the
arguments of PNCC on the ground that PNCC’s counsel participated in all the
proceedings in the Malaysian Court.

ISSUE:

Whether or not the Malaysian Court judgment should be enforced against PNCC in
the Philippines.

RULING:

Yes. PNCC failed to prove and substantiate its bare allegations of want of jurisdiction,
want of notice, Collusion and/or fraud, and mistake of fact. On the contrary, Asiavest
to present evidence as to the validity of the proceedings that took place in Malaysia.
Asiavest presented the certified and authenticated copies of and the order issued by
the Malaysian Court. It also presented correspondences between Asiavest’s lawyers
and PNCC’s lawyers in and out of court which belied PNCC’s allegation that the
Malaysian court never acquired jurisdiction over it. PNCC’s allegation of fraud is not
sufficient too, further, it never invoked the same in the Malaysian Court.

The Supreme Court notes, to assail a foreign judgment the party must present
evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact. Otherwise, the judgment enjoys the presumption of

19
validity so long as it was duly certified and authenticated! In this case, PNCC failed
to present the required evidence.

20
Y-I LEISURE PHILIPPINES, INC., YATS INTERNATIONAL LTD. AND Y-I
CLUBS AND RESORTS, INC., Petitioners, v. JAMES YU, Respondent.

Y-I Leisure Phils., Inc. v. Yu

G.R. No. 207161, September 08, 2015 MENDOZA, J
FACTS:

Business-Enterprise Transfer: Given that the transferee corporation acquired not only
the assets but also the business of the transferor corporation, then the liabilities of
the latter are inevitably assigned to the former. FACTS: Respondent Yu bought
several golf and country club shares from MADCI. Regrettably, the latter did not
develop the supposed project. Yu then demanded the return of his payment, but
MADCI could not return it anymore because all its assets had been transferred.
Through the acts of YIL, MADCI sold all its lands to YILPI and, subsequently to YICRI.
Thus, Yu now claims that the petitioners inherited the obligations of MADCI. On the
other hand, the petitioners counter that they did not assume such liabilities because
the transfer of assets was not committed in fraud of the MADCI's creditors.

ISSUE:

a. Whether fraud must exist in the transfer of all the corporate assets in order for the
transferee to assume the liabilities of the transferor.
b. Whether the petitioners indeed became a continuation of MADCI's business.
c. Whether the petitioners must also be held solidarily liable to Yu.
d. WON MOA, which contains a provision that Sangil undertook to redeem MADCI
proprietary shares sold to third persons or settle in full all their claims for refund of
payments, valid?

RULING:

a. NO, fraud is not required in Business-Transfer Enterprise. The exception of the Nell
doctrine(see discussion below), which Uinds its legal basis under Section 40, provides
that the transferee corporation assumes the debts and liabilities of the transferor
corporation because it is merely a continuation of the latter's business. A cursory
reading of the exception shows that it does not require the existence of fraud against
the creditors before it takes full force and effect. Indeed, under the Nell Doctrine, the
transferee corporation may inherit the liabilities of the transferor despite the lack of
fraud due to the continuity of the latter's business. In Caltex Philippines, Inc. v. PNOC
Shipping and Transport Corporation(2006): The Court emphasizes in the said case,
even without the agreement, PSTC was still liable to Caltex, Inc. under Section 40,
due to the transfer of all or substantially all of the corporate assets. At best, transfers
of all or substantially all of the assets to a transferee corporation without the consent

21
of the transferor corporation's creditor gives rise to a presumption of fraud against
the said creditors. The transfer of all its business, properties and assets without the
consent of its creditors must certainly include the liabilities; or else, the assignment
will place the assignor's assets beyond the reach of its creditors.

b. YES The business-enterprise transfer rule applies when two requisites concur: (a)
the transferor corporation sells all or substantially all of its assets to another entity;
and (b) the transferee corporation continues the business of the transferor
corporation. Both requisites are present in this case. MADCI had an entire asset
consisting of 120 hectares of land, and that its sale to the petitioners rendered it
incapable of continuing its intended golf and country club business. Because of its
alleged violation of the MOA, however, MADCI was made to transfer all its assets to
the petitioners. No evidence existed that MADCI subsequently acquired other lands
for its development projects. Thus, MADCI, as a real estate development corporation,
was left without any property to develop eventually rendering it incapable of
continuing the business or accomplishing the purpose for which it was incorporated.

c. YES While the Corporation Code allows the transfer of all or substantially all of the
assets of a corporation, the transfer should not prejudice the creditors of the assignor
corporation. Under the business-enterprise transfer, the petitioners have
consequently inherited the liabilities of MADCI because they acquired all the assets
of the latter corporation. The continuity of MADCI's land developments is now in the
hands of the petitioners, with all its assets and liabilities. There is absolutely no
certainty that Yu can still claim its refund from MADCI with the latter losing all its
assets. To allow an assignor to transfer all its business, properties and assets without
the consent of its creditors will place the assignor's assets beyond the reach of its
creditors. Thus, the only way for Yu to recover his money would be to assert his claim
against the petitioners as transferees of the assets.

d. No, it cannot prejudice the respondent Yu The CA correctly ruled that such
provision constituted novation under Article 1293 of the Civil Code. When there is a
substitution of debtors, the creditor must consent to the same; otherwise, it shall not
in any way affect the creditor. In this case, it was established that Yu's consent was
not secured in the execution of the MOA. Thus, insofar as the respondent was
concerned, the debtor remained to be MADCI. And given that the assets and business
of MADCI have been transferred to the petitioners, then the latter shall be liable.

22
MICROSOFT CORPORATION, Petitioner, v. ROLANDO D. MANANSALA AND/OR
MEL MANANSALA, DOING BUSINESS AS DATAMAN TRADING COMPANY
AND/OR COMIC ALLEY, Respondent.

Microsoft Corporation vs. Rolando Manansala

G.R. No. 166391 October 21, 2015 BERSAMIN, J.

FACTS:
Petitioner is the copyright and trademark owner of all rights relating to all versions
and editions of Microsoft software (computer programs). Private Respondent-Rolando
Manansala is doing business under the name of DATAMAN TRADING COMPANY and/or
COMIC ALLEY with business address at 3rd Floor, University Mall Building, Taft Ave.,
Manila. Private Respondent Manansala, without authority from petitioner, was
engaged in distributing and selling Microsoft computer software programs. Mr. John
Benedict A. Sacriz, a private investigator accompanied by an agent from the National
Bureau of Investigation (NBI) was able to purchase six (6) CD-ROMs containing
various computer programs belonging to petitioner. Search Warrant was issued
against the premises of the private respondent. The search warrant was served on
the private respondent’s premises and yielded several illegal copies of Microsoft
programs. Petitioner, through Atty. Teodoro Kalaw IV filed an Affidavit-Complaint in
the DOJ based on the results of the search and seizure operation conducted on private
respondent’s premises.

ISSUE:

Whether or not the mere selling of pirated computer software constituted copyright
infringement.

RULING:

Sec. 5 of PD 49 specifically defined copyright as an exclusive right in the following

manner: A. To print, reprint, publish, copy, distribute, multiply, sell and make
photographs, photo-engravings and pictorial illustrations of the works; B. To make
any translation or other version or extracts or arrangements or adaptations thereof;
to dramatize it if it be a non-dramatic work; to convert it into a non-dramatic work if
it be a drama; to complete or execute if it be a model or design; C. To exhibit,
perform, represent, produce, or reproduce, the work in any manner or by any method
whatever for profit or otherwise; it not reproduced in copies for sale, to sell any
manuscript or any record whatsoever thereof; D. To make any other use or
disposition of the work consistent with the laws of the land. The gravamen of
copyright infringement is not merely the authorized manufacturing of intellectual
works but rather the unauthorized performance of any of the acts covered by Sec. 5.
Accordingly, the commission of any of the acts mentioned in Sec. 5 of PD 49 without

23
copyright owner’s consent constituted actionable copyright infringement. Presidential
Decree No. 49 thereby already acknowledged the existence of computer programs as
works or creations protected by copyright. To hold, as the CA incorrectly did, that the
legislative intent was to require that the computer programs be first photographed,
photoengraved, or pictorially illustrated as a condition for the commission of
copyright infringement invites ridicule. Such interpretation of Section 5(a) of
Presidential Decree No. 49 defied logic and common sense because it focused on
terms like “copy,” “multiply,” and “sell,” but blatantly ignored terms like
“photographs,” “photo-engravings,” and “pictorial illustrations.” In this case, the
mere sale of the illicit copies of the software programs was enough
by itself to show the existence of probable cause for copyright infringement. There
was no need for the petitioner to still prove who copied, replicated or reproduced the
software programs.

24
MARGARITA M. BENEDICTO-MUÑOZ v. MARIA ANGELES CACHO-OLIVARES,
EDGARDO P. OLIVARES, PETER C. OLIVARES, CARMELA Q. OLIVARES,
MICHAEL C. OLIVARES, ALEXANDRA B. OLIVARES, AND MELISSA C.
OLIVARES

MARGARITA M. BENEDICTO-MUÑOZ V. MARIA ANGELES CACHO-OLIVARES

G.R. No. 17912 November 09, 2015 JARDELEZA,J.
PROHIBITIONS ON FRAUD, MANIPULATION AND INSIDER TRADING

FACTS:

Olivares filed a complaint for stock market fraud against Cuaycong and other
defendant stock market brokerage firms such as Abacus Securities Corporation, and
Sapphire Securities, Inc., among others. Later on, the Cuaycong brothers and
Olivares manifested to the RTC that they had amicably settled their differences and
entered into a Compromise Agreement. Olivares also agreed to drop the Cuaycong
brothers as defendants in the Case. Thereafter the RTC dismissed the complaint,
holding that the Cuaycong brothers were indispensable parties sued with the other
defendants, under a common cause of action, and that by reason of the dismissal of
the complaint against the Cuaycongs, it had lost competency to act on the instant
complaint for lack of sufficient legal basis, the benefits of dismissal having been
extended to the other defendants.

ISSUE:

Whether the dismissal of the case as against the Cuaycong brothers benefits the
other defendants in the stock market fraud case

RULING:

Yes. The dismissal of the case as against the Cuaycong brothers inures to the benefit
of other defendants because they were sued under a single and/or common cause of
action with the Cuaycong brothers; and the Cuaycong brothers are indispensable
parties, without whom no final determination can be had on the case. The allegations
plead the substantive unity in the alleged fraud and deceit that the Cuaycong brothers
and the brokerage firms committed against Olivares. The indispensable parties are
not only the Cuaycong brothers but also the petitioners. As indispensable parties,
since they had played various interconnected roles that led to the singular injury and
loss of the Olivares, their liabilities cannot be separately determined. The dismissal
of the action against the Cuaycong brothers also warrants the dismissal of the suit
against the other defendants. The
SRC punishes the persons primarily liable for fraudulent transactions under Section

25
58 and their aiders or abettors under Section 51.5, by making their liability for
damages joint and solidary. Thus, one cannot condone the liability of the person
primarily liable and proceed only against his aiders or abettors because the liability
of the latter is tied up with the former. Liability attaches to the aider or abettor
precisely because of the existence of the liability of the person primarily liable.

26
F & S VELASCO COMPANY, INC., IRWIN J. SEVA, ROSINA B. VELASCO-
SCRIBNER, MERCEDEZ SUNICO, AND JOSE SATURNINO O.
VELASCO , Petitioners, v. DR. ROMMEL L. MADRID, PETER PAUL L. DANAO,
*

MANUEL L. ARIMADO, AND MAUREEN R. LABALAN, Respondents.

F & S Velasco Co., Inc. v. Madrid

G.R. No. 208844 November 10, 2015 PERLAS-BERNABE, J.

FACTS:

All transfers of shares of stock must be registered in the corporate books in order to
be binding on the corporation. F & S Velasco Co., Inc. was duly organized and
registered as a corporation with Francisco O. Velasco (Francisco), Simona J. Velasco
(Simona), Angela V. Madrid (Angela), herein respondent Dr. Rommel L. Madrid
(Madrid), and petitioner Saturnino O. Velasco (Saturnino) as its incorporators. When
Sps. Simona and Francisco died on June 12, 1998 and June 22, 1999, respectively,
their daughter, Angela, inherited their shares, thereby giving her control of 70.82%
of FSVCI's total shares of stock. On September 20, 2009 and during her tenure as
Chairman of the Board of Directors of FSVCI (the other members of the Board of
Directors being Madrid, Scribner, Seva, and Sunico), Angela died intestate and
without issue. On October 8, 2009, MADRID, as Angela's spouse, executed an
Afaidavit of Self-Adjudication covering the latter's estate which includes her 70.82%
ownership of FSVCI's shares of stock. Believing that he is already the controlling
stockholder of FSVCI by virtue of such selfadjudication, Madrid called for a Special
Stockholders' and Re-Organizational Meeting to be held on November 18, 2009. On
November 10, 2009 and in preparation for said meeting, Madrid executed separate
deeds of assignment transferring one share each to Vitaliano B. Ricafort and to
respondents Peter Paul L. Danao (Danao), Maureen R. Labalan (Labalan), and Manuel
L. Arimado (Arimado; collectively, MADRID GROUP). Meanwhile, another meeting
was held on November 6, 2009 which was attended by Saturnino, Seva, and Sunico
(November 6, 2009 Meeting), during which, Saturnino was recognized as a member
of the FSVCI Board of Directors and thereafter, as FSVCI President, while Scribner
was elected FSVCI Vice-President (SATURNINO GROUP). In view of the November
18, 2009 Meeting, the Saturnino Group Uiled a petition for Declaration of Nullity of
Corporate Election against the Madrid Group before the RTC.

ISSUES:

(a) WON November 18, 2009 Meeting organized by Madrid is legal and valid; and

(b) WON a Management Committee should be appointed or constituted to take over

the corporate and business affairs of FSVCI.

27
RULING:

(a) NO. At the time Madrid called for the November 18, 2009 Meeting, as well as the
actual conduct thereof, he was already the owner of 74.98% shares of stock of FSVCI
as a result of his inheritance of Angela's 70.82% ownership thereof. However, records
are bereft of any showing that the transfer of Angela's shares of stock to Madrid had
been registered in FSVCI's Stock and Transfer Book when he made such call and
when the November 18, 2009 Meeting was held. The Court is constrained to view
that Madrid is indeed Angela's sole heir and her death caused the immediate transfer
of her properties, including her 70.82% ownership of FSVCI's shares of stock, to
Madrid. Be that as it may, it must be clariUied that Madrid's inheritance of Angela's
shares of stock does not ipso facto afford him the rights accorded to such majority
ownership of FSVCI's shares of stock. Section 63 of the Corporation Code xxx No
transfer, however, shall be valid, except as between the parties, until the transfer is
recorded in the books of the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or certificates and
the number of shares transferred. Verily, all transfers of shares of stock must be
registered in the corporate books in order to be binding on the corporation. (b) NO
Absent any actual evidence from the records showing such imminent danger, the
CA's Findings have no legal or factual basis to support the appointment/constitution
of a Management Committee for FSVCI. The creation and appointment of a
management committee . . . is an extraordinary and drastic remedy to be exercised
with care and caution; and only when the requirements under the Interim Rules [of
Procedure Governing Intra-Corporate Controversies] are shown. It is a drastic course
for the benefit of the minority stockholders, the parties-litigants or the general public
[and is] allowed only under pressing circumstances and when there is inadequacy,
ineffectual or exhaustion of legal or other remedies. Requisites: (1) Dissipation, loss,
wastage or destruction of assets or other properties; and (2) Paralyzation of its
business operations which may be prejudicial to the interest of the minority
stockholders, parties-litigants or the general public.

28
PHILIPPINE RACE HORSE TRAINERS’ ASSOCIATION, INC. v.
PIEDRAS NEGRAS CONSTRUCTION AND DEVELOPMENT CORPORATION

Philippine Race Horse Trainers’ Assn. V Negras

G.R. No. 192659, December 02, 2015, PERALTA, J.
CORPORATE POWERS:
HOW EXERCISED GENERAL POWERS, THEORY OF GENERAL CAPACITY

FACTS:

Through its president, Rogelio Catajan, and pursuant to a Resolution itissued,

Philippine Race Horse Trainer’s Association (PRHTC) entered into an agreement with
Fil-Estate Properties Inc., (FEPI) whereby the latter would render construction
services for the former. Through a Deed of Assignment, all the rights and obligations
of FEPI were transferred to Piedras Negras Construction and Development
Corporation (PNCDC) for the continuation of the construction works. However, when
the obligation of PRHTC became due, it refused to pay PNCDC for the construction on
the ground that it was suffering from financial difficulties. Meanwhile, there was a
change in the composition of the Board of Directors of PRHTC. PNCDC was prompted
to bring the case before the Construction Industry Arbitration Commission (CIAC) for
satisfaction of PRHTC’s obligation.

ISSUE:

Whether the contract between PRHTC and PNCDC is enforceable

RULING:
No. The Resolution by the Board of Directors of PRHTC cannot be construed to
authorize Catajan to enter into a contract with PNCDC since the Resolution provides
that Catajan’s authority is limited only to dealing with FEPI and not with PNCDC. The
doctrine of apparent authority finds no application in this case. The board of directors,
not the president, exercises corporate power. While in the absence of a charter or
bylaw provision to the contrary the president is presumed to have authority, the
questioned act should still be within the domain of the general objectives of the
company's business and within the scope of his or her usual duties. Here, PRHTAI is
an association of professional horse trainers in the Philippine horse racing industry
organized as a non-stock corporation and it is committed to the uplifting of the
economic condition of the working sector of the racing industry. It is not in its ordinary
course of business to enter into housing projects, especially not in such scale and
magnitude so massive as to amount to P101,150,000.00.

29
CAPITAL INSURANCE AND SURETY CO., INC., Petitioner, v. DEL MONTE
MOTOR WORKS, INC., Respondent.

Capital Insurance vs. Del Monte Motor Works

G.R. No. 159979 December 9, 2015 BERSAMIN, J.

FACTS:

Respondent sued Vilfran Liner, Inc., Hilaria F. Villegas and Maura F. Villegas in the
Regional Trial Court in Quezon City (RTC) to recover the unpaid billings related to the
fabrication and construction of 35 passenger bus bodies. It applied for the issuance
of a writ of preliminary attachment. Branch 221 of the RTC, to which the case was
assigned, issued the writ of preliminary attachment, which the sheriff served on the
defendants, resulting in the levy of 10 buses and three parcels of land belonging to
the defendants. The sheriff also sent notices of garnishment of the defendants funds
in the Quezon City branches of BPI Family Bank, China. Bank, Asia Trust Bank, City
Trust Bank, and Bank of the Philippine Island. The levy and garnishment prompted
defendant Maura F. Villegas to file an Extremely Urgent Motion 'to Discharge Upon
Filing of a Counterbond. On July 2, 1997, the RTC approved the counterbond and
discharged the writ of preliminary attachment. On January 15, 2002, the RTC
rendered its decision in favor of the respondent.

ISSUE:

Are the securities deposited by1 the insurance company pursuant to I Section 203 of
the Insurance Code 1subject of levy by a creditor?

RULING:

The petitioner cannot evade liability under the counterbond by hiding behind its own
internal rules. Although a prospective applicant seeking insurance coverage is
expected to exercise prudence and diligence in selecting the insurance provider, such
responsibility does not require the prospective applicant to know and be aware of the
insurer's internal rules, policies and procedure adopted for the conduct of its
business. Considering that the petitioner has been a duly accredited bonding
company, the officers who signed the bonds were presumed to be acting within the
scope of their authority in behalf of the company, and the courts were not expected
to verify the limits of the authority of the , signatories of the bonds submitted in the
regular course of judicial business, in the same manner that the applicants for the
bonds were not expected to know the limits of the authority of the signatories. To
insist otherwise is absurd. It is reasonable to hold here, therefore, that as between
the petitioner and the respondent, the one who employed and gave character to the

30
third person as its agent should be the one to bear the loss. That party was the
petitioner. Likewise, the petitioner's argument that the counterbond was invalid
because the counterbond was unaccounted for and missing from its custody was
implausible. The argument totally overlooks a simple tenet that honesty, good faith,
and fair dealing required it a's the insurer to communicate such an important fact to
the assured, or at least keep the latter updated on the relevant facts.

A contrary view would place every person seeking insurance at the insurer's mercy
because the latter would simply claim so just to escape liability, thus causing
uncertainty to the public and defeating the very purpose for which the insurance was
contracted. An insurer or bonding company like thepetitioner that seeks to defeat a
claim on the ground that the counterbond was invalidly issued has the burden of
proving such defense. However, the petitioner did not discharge the burden herein.
No less than the officers charged with the responsibility of making sure that all forms
and records of the petitioner were audited admitted that the missing counterbond as
in fact a valid pre-approved form of the Insurance Commission, so that the absence
or lack of the signature of the president did not render the bond invalid. Moreover,
Laxa knew that as a matter of long practice both Ancheta and Alub normally signed
and approved the counterbonds, regardless' of the amounts thereof. She further I
knew of no rule that limited the authority of Ancheta and Alub to issue and I sign
counterbonds only up to P5,000,000.00

31
1. MARCELINO FLORETE, JR. ET. AL. V. ROGELIO FLORENTE, ET. AL. GR.
NO. 174909 JANUARY 20, 2016 LEONEN, J:

2. TENG V. SEC

G.R. NO. 184332 FEBRUARY 17, 2016 REYES, J.

3. JOSE EMMANUEL P. GUILLERMO V. CRISANTO P. USON

GR NO. 198967 MARCH 07, 2016 PERALTA, J.:

4. ESTATE OF DR. JUVENCIO P. ORTAÑEZ V. JOSE C. LEE, ET. AL.

GR. NO. 184251 MARCH 9, 2016 PEREZ, J:

5. OLIVER V. PHILIPPINE SAVINGS BANK AND CASTRO

G.R. NO. 214567 APRIL 4, 2016 MENDOZA, J:

6. SIMNY G. GUY VS. GILBERT G. GUY

G.R. NO. 184068 APRIL 19, 2016 SERENO, C.J

7. INTERPORT RESOURCES CORP. VS. SECURITIES SPECIALIST

G.R. NO. 154069 JUNE 6, 2016 BERSAMIN, J.:

8. LOZADA V. MENDOZA

G.R. NO. 196134 12 OCTOBER 2016 BERSAMIN, J.

32
MARCELINO M. FLORETE, JR., MARIA ELENA F. MUYCO and RAUL A.
MUYCO, Petitioners, vs.ROGELIO M. FLORETE, IMELDA C. FLORETE, DIAMEL
CORPORATION, ROGELIO C. FLORETE JR., and MARGARET RUTH C.
FLORETE, Respondents.
GR. No. 174909
x-----------------------x
ROGELIO M. FLORETE SR., Petitioner, vs. MARCELINO M. FLORETE, JR., MARIA
ELENA F. MUYCO AND RAUL A. MUYCO, Respondents.
G.R. No. 177275
Marcelino Florete, Jr. et. al. v. Rogelio Florente, et. al.
GR. No. 174909 January 20, 2016 Leonen, J:
DERIVATIVE SUIT
FACTS:

Spouses Marcelino Florete, Sr. and Salome Florete had four (4) children: Marcelino
Jr., Maria Elena, Rogelio Florete, Sr. and Teresita Menchavez .People’s Broadcasting
Service, Inc. (People’s Broadcasting) is a private corporation authorized to operate,
own, maintain, install, and construct radio and television stations in the Philippines.
In 1967, Berlin and Sudario resigned from their positions as General Manager and
Station Supervisor, respectively. Berlin and Sudario each transferred 20 shares to
Raul Muyco and Estrella Mirasol.Salome died in 1980. Marcelino, Sr. suffered in 1982,
which left him paralyzed and bedridden until his death in 1990. After Marcelino, Sr.’s
stroke, their son, Rogelio, Sr. started managing the affairs of People’s
Broadcasting.In October 1993, People’s Broadcasting sought the services of the
accounting and auditing firm Sycip Gorres Velayo and Co. in order to determine the
ownership of equity in the corporation. Sycip Gorres Velayo and Co. submitted a
report detailing the movements of the corporation’s shares from November 23, 1967
to December 8, 1989. Even as it tracked the movements of shares, Sycip Gorres
Velayo and Co. declined to give a categorical statement on equity ownership as
People’s Broadcasting’s corporate records were incomplete.

On June 23, 2003, Marcelino, Jr., Ma. Elena, and Raul Muyco (Marcelino, Jr. Group)
filed before the Regional Trial Court a Complaint for Declaration of Nullity of
Issuances, Transfers and Sale of Shares in People’s Broadcasting Service, Inc. and
All Posterior Subscriptions and Increases thereto with Damages against Diamel
Corporation, Rogelio, Sr., Imelda Florete, Margaret Florete, and Rogelio Florete, Jr.
(Rogelio, Sr. Group).The Marcelino, Jr. Group filed before the Court of Appeals a
Petition for Review with a prayer for the issuance of a temporary restraining order
and/or writ of preliminary injunction to deter the immediate execution of the trial
court Decision awarding damages to Rogelio, Sr. The Court of Appeals issued a
temporary restraining order and, subsequently, a writ of preliminary injunction.The
Court of Appeals denied the Marcelino, Jr. Group’s Petition and affirmed the trial court
Decision. It also lifted the temporary restraining order and writ of preliminary

33
injunction. The Court of Appeals ruled that the Marcelino, Jr. Group did not have a
cause of action against those whom they have impleaded as defendants. It also noted
that the principal obligors in or perpetrators of the assailed transactions were persons
other than those in the Rogelio, Sr. Group who have not been impleaded as parties.
Thus, the Court of Appeals emphasized that the following parties were indispensable
to the case: People’s Broadcasting; Marcelino, Sr.; Consolidated Broadcasting
System, Inc.;Salome; Divinagracia; Teresita; and "other stockholders of [People’s
Broadcasting] to whom the shares were transferred or the nominees of the
stockholders." Hence, this petition.

ISSUE:

Whether the CA erred in dismissing the complaint filed by the petitioners

RULING:

No. A stockholder may suffer from a wrong done to or involving a corporation, but this
does not vest in the aggrieved stockholder a sweeping license to sue in his or her own
capacity. The determination of the stockholder’s appropriate remedy—whether it is an
individual suit, a class suit, or a derivative suit—hinges on the object of the wrong done.
When the object of the wrong done is the corporation itself or "the whole body of its stock
and property without any severance or distribution among individual holders,"1 it is
a derivative suit, not an individual suit or class/representative suit, that a stockholder
must resort to. Among the basic requirements for a derivative suit to prosper is that the
minority shareholder who is suing for and on behalf of the corporation must allege in his
complaint before the proper forum that he is suing on a derivative cause of action on
behalf of the corporation and all other shareholders similarly situated who wish to join
him. Moreover, it is important that the corporation be made a party to the case.

34
ANNA TENG, Petitioner,vs. SECURITIES AND EXCHANGE COMMISSION
(SEC) and TING PING LAY, Respondents
Teng v. SEC
G.R. No. 184332 February 17, 2016 REYES, J.

FACTS:
Herein respondent Ting Ping purchased: 1. 480 shares of TCL Sales Corporation (TCL)
2. 1,400 shares from his brother Teng Ching Lay (Teng Ching), who was also the
president and operations manager of TCL; and 3. 1,440 shares from Ismaelita Maluto.
Upon Teng Ching's death, to protect his shareholdings with TCL, Ting Ping requested
TCL's Corporate Secretary, herein petitioner Teng, to enter the transfer in the Stock
and Transfer Book of TCL for the proper recording of his acquisition. He also
demanded the issuance of new certificates of stock in his favor. TCL and Teng,
however, refused despite repeated demands. Because of their refusal, Ting Ping filed
a petition for mandamus.

ISSUE:

Whether the surrender of the certificates of stock is a requisite before registration of

the transfer may be made in the corporate books AND for the issuance of new
certificates in its stead.

RULING:

For Registration, NO; For Issuance, YES. On registration: Teng's position — that Ting
Ping must first surrender Chiu's and Maluto's respective certificates of stock before
the transfer to Ting Ping may be registered in the books of the corporation — does
not have legal basis. The delivery or surrender adverted to by Teng, i.e., from Ting
Ping to TCL, is not a requisite before the conveyance may be recorded in its books.
To compel Ting Ping to deliver to the corporation the certificates as a condition for
the registration of the transfer would amount to a restriction on the right of Ting Ping
to have the stocks transferred to his name, which is not sanctioned by law. The only
limitation imposed by Section 63 is when the corporation holds any unpaid claim
against the shares intended to be transferred. The Court stressed that a corporation,
either by its board, its by-laws, or the act of its officers, cannot create restrictions in
stock transfers. In transferring stock, the secretary of a corporation acts in purely
ministerial capacity, and does not try to decide the question of ownership.

On issuance of new certificates: First, the certificates must be signed by the president
or vice-president, countersigned by the secretary or assistant secretary, and sealed
with the seal of the corporation. Second, delivery of the certificates is an essential
element of its issuance. Third, the par value, as to par value shares, or the full
subscription as to no par value shares, must first be fully paid. Fourth, the original

35
certificate must be surrendered where the person requesting the issuance of a
certificate is a transferee from a stockholder. The surrender of the original certificate
of stock is necessary before the issuance of a new one so that the old certificates
may be cancelled. A corporation is not bound and cannot be required to issue a new
certificates unless the original certificates is produced and surrendered. Surrender
and cancellation of the old certificates serve to protect not only the corporation but
the legitimate shareholder and the public as well, as it ensures that there is only one
document covering a particular share of stock.

36
DRA. MERCEDES OLIVER, Petitioner, vs. PHILIPPINE SAVINGS BANK
and LILIA CASTRO, Respondents.
Oliver v. Philippine Savings Bank and Castro
G.R. No. 214567 April 4, 2016 Mendoza, J:

FACTS:
Mercedes Oliver (Oliver) was a depositor Philippine Savings Bank (PSBank). Lilia
Castro (Castro) was the Acting Manager of PSBank San Pedro, Laguna. Castro
convinced Oliver to loan out her deposit as interim or bridge financing for the
approved loans of bank borrowers who were waiting for the actual release of their
loan proceeds. Their arrangement went on smoothly for months. Due to the
frequency of bank transactions, Oliver even entrusted her passbook to Castro. Castro
then suddenly stopped rendering an accounting for Oliver. When her transaction
history register was shown to her, Oliver was surprised to discover that the amount
estimated at P4.5 million was entered into her account while a total of P7 million was
withdrawn from her account on the same day.Oliver asserted that she neither applied
for an additional loan of P4.5 million nor authorized the withdrawal of P7 million. A
final demand letter was sent to Oliver by PSBank, requiring her to pay the unpaid
loans. As a result, Oliver filed the subject complaint against PSBank and Castro.

ISSUES:

1. Whether Castro is liable for damages for having defrauded Oliver

2. Whether the bank may be held liable for the withdrawal made on Oliver’s bank
account

RULING:

1. Yes. Although the Court declared that there was an agency relationship between
Castro and Oliver (and that the additional loans were properly made as Oliver did not
dispute her signatures on the promissory notes), Castro exceeded her authority as
an agent when a PhP7 million withdrawal was made from Oliver’s account. The Court
noted that there was nothing in the records which proved that she also allowed the
withdrawal of P7 million from her bank account.

Verily, Castro, as agent of Oliver and as branch manager of PS Bank, utterly failed to
secure the authorization of Oliver to withdraw such substantial amount. As a standard
banking practice intended precisely to prevent unauthorized and fraudulent
withdrawals, a bank manager must verify with the client-depositor to authenticate
and confirm that he or she has validly authorized such withdrawal. Castro’s lack of
authority to withdraw the P7 million on behalf of Oliver became more apparent when
she altered the passbook to hide such transaction.

37
2. PSBank failed to exercise the highest degree of diligence required of banking
institutions. Aside from Castro, PSBank must also be held liable because it failed to
exercise utmost diligence in the improper withdrawal of the P7 million from Oliver’s
bank account. In the case of banks, the degree of diligence required is more than
that of a good father of a family. Considering the fiduciary nature of their relationship
with their depositors, banks are duty bound to treat the accounts of their clients with
the highest degree of care. The point is that as a business affected with public interest
and because of the nature of its functions, the bank is under obligation to treat the
accounts of its depositors with meticulous care, always having in mind the fiduciary
nature of their relationship.

38
SIMNY G. GUY, AS MINORITY STOCKHOLDER AND FOR AND IN BEHALF
OF GOODLAND COMPANY, INC., Petitioner, v. GILBERT G. GUY, ALVIN
AGUSTIN T. IGNACIO AND JOHN AND/OR JANE DOES, Respondents.
SIMNY G. GUY vs. GILBERT G. GUY
G.R. No. 184068 April 19, 2016 SERENO, C.J

FACTS:

Sending/mailing is different from Ailing or service under the Rules of Court. Had the
lawmakers intended to include the stockholder's receipt of the notice, they would
have clearly reelected such requirement in the law. Absent that requirement, the
word "send" should be understood in its plain meaning.
Petitioner Simny G. Guy (Simny) is a stockholder of record and member of the board
of directors of the Goodland Company, Inc. (GCI). Respondents are also GCI
stockholders of record who were allegedly elected as NEW directors by virtue of the
assailed stockholders' meeting held on 7 September 2004. On 30 September 2004,
petitioner and Grace Guy Cheu (Cheu), Filed a Complaint for the "Nullification of
Stockholders' Meeting and Election of Directors, Nullification of Acts and Resolutions,
Injunction and Damages with Prayer for Temporary Restraining Order and/or Writ of
Preliminary Injunction." Petitioner assailed the election held on 7 September 2004 on
the following grounds: (1) there was no or proper previous notice to petitioner and
Cheu when although the notice was sent by registered mail on 2 September 2004,
the registry return card shows that he received it only on 22 September 2004 or
Fifteen (15) days after ; (2) the meeting was not called by the proper person when
it was not issued by the corporate secretary of GCI pursuant to its by-laws;; and (3)
lack of due notice to Grace Cheu, allegedly a stockholder of record of GCI as having
in possession stock certificates

ISSUE:

a. Whether or not the notice of the stockholders’ meeting was properly sent?
b. WON the meeting was called by the proper person?
c. WON Grace Cheu is entitled to notice of the meeting?

RULING:

a.YES .Date of Sending: September 2 Date of Meeting: September 7 or 5 days after

Date of Receipt: September 22 .The provisions only require the sending/mailing of
the notice of a stockholders' meeting to the stockholders of the corporation.
Sending/mailing is different from ailing or service under the Rules of Court. Had the
lawmakers intended to include the stockholder's receipt of the notice, they would
have clearly reflected such requirement in the law. Absent that requirement, the word

39
"send" should be understood in its plain meaning. For a stockholders' special meeting
to be valid, certain requirements must be met with respect to notice, quorum and
place. In relation to the above provision of B.P. 68, one of the requirements is a
previous written notice sent to all stockholders at least one (1) week prior to the
scheduled meeting, unless otherwise provided in the by laws. Under the by-laws of
GCI, the notice of meeting shall be mailed not less than five (5) days prior to the
date set for the special meeting.

b. YES under Section 3, Article IV of the By-laws of Goodland, respondent Gilbert G.

Guy as Vice-president of the corporation is qualified to act as president. Section 3
which provides that "the Vice President, if qualified, shall exercise all of the functions
and perform all the duties of the President, in the absence or disability, for any cause,
of the latter." As correctly pointed out by defendants [respondents], the applicable
provisions of the by-laws of Goodland are Article II, Sec. 2 which provides that the
"special meeting of the stockholders may be called . . . by order of the President and
must be called upon the written request of stockholders registered as the owners of
one-third (1/3). Defendant Gilbert [respondent Guy] is the owner of more than one-
third (1/3) of the outstanding stock of Goodland. In fact, it is around 79.99%. Thus,
pursuant to Art. II, Sec. 2 of the By-laws of Goodland, defendant Gilbert [respondent
Guy] may validly call such special stockholders' meeting.

c. NO Cheu was not a stockholder of record of GCI and was therefore not entitled to
any notice of meeting. Section 63 of the Corporation Code provides: xxxNo transfer,
however, shall be valid, except as between the parties, until the transfer is recorded
in the books of the corporation so as to show the names of the parties to the
transaction, the date of the transfer, the number of the certificate or certificates and
the number of shares transferred.

The evidence presented by Cheu to prove that she was a stockholder of record —
valid, existing and uncancelled Goodland Stock Certificate does not satisfy the
requirements imposed by the Corporation Code and the by-laws of GCI. A
"stockholder of record" is defined as follows: A person who desires to be recognized
as stockholder for the purpose of exercising stockholders' right must secure standing
by having his ownership of share recorded on the stock and transfer book. Thus, only
those whose ownership of shares are duly registered in the stock and transfer book
are considered stockholders of record and are entitled to all rights of a stockholder.

"Send" means to deposit in the mail or deliver for transmission by any other usual
means of communication with postage or cost of transmission provided for and
properly addressed and in the case of an instrument to an address specified thereon
or otherwise agreed, or if there be none, to any address reasonable under the
circumstances. The receipt of any writing or notice within the time at which it would
have arrived if properly sent has the effect of a proper sending.

40
41
 JOSE EMMANUEL GUILLERMO, Petitioner, v.
CRISANTO P. USON, Respondent.
GUILLERMO v. USON
G.R. No. 198967 March 07, 2016 PERALTA, J.:

FACTS:

Respondent Uson was an accounting supervisor in Royal Class Venture Phils., Inc.
(RCVPI) until Dec. 20, 2000 when he was allegedly dismissed by petitioner Guillermo,
the company’s president/general manager, for having exposed the latter’s practice
of dictating and undervaluing the shares of stocks of the corporation. Thereafter he
filed a complaint for illegal dismissal against the corporation, RCVPI. The Labor
Arbiter rendered a decision in favor of Uson, ordering respondent to reinstate him to
his former position and pay his backwages, 13th month pay as well as moral
damages, exemplary damages and attorney’s fees. RCVPI did not file an appeal but
repeated issuances of Writs of Execution against the same remained unsatisfied.

ISSUE:

Whether an officer of a corporation may be included as judgment obligor in a labor

case for the first time only after the decision of the Labor Arbiter had become final
and executory.

RULING:

The Petition is denied. In earlier labor cases, the Court held that persons who were
not originally impleaded in the case were, even during execution, held to be solidarity
liable with the employer corporation for the latter's unpaid obligations to
complainant-employees. Personal liability attaches only when, as enumerated by the
said Section 31 of the Corporation Code, there is a wilful and knowing assent to
patently unlawful acts of the corporation, there is gross negligence or bad faith in
directing the affairs of the corporation, or there is a conflict of interest resulting in
damages to the corporation. The conferment of liability on officers for a corporation's
obligations to labor is held to be an exception to the general doctrine of separate
personality of a corporation.

The veil of corporate fiction can be pierced, and responsible corporate directors and
officers or even a separate but related corporation, may be impleaded and held
answerable solidarily in a labor case, even after final judgment and on execution, so
long as it is established that such persons have deliberately used the corporate
vehicle to unjustly evade the judgment obligation, or have resorted to fraud, bad
faith or malice in doing so.

42
In the case at hand, respondent Uson’s sworn allegations stating that Guillermo was
the responsible officer in charge of running the company as well as the one who
maliciously and illegally dismissed Uson from employment was uncontroverted. The
SC denied the petition.

43
ESTATE OF DR. JUVENCIO P. ORTAÑEZ, REPRESENTED BY DIVINA ORTAÑEZ-
ENDERES, LIGAYA NOVICIO, AND CESAR ORTAÑEZ, Petitioners, v. JOSE C.
LEE, BENJAMIN C. LEE, CARMENCITA TAN, ANGEL ONG, MA. PAZ CASAL-LEE,
JOHN OLIVER PASCUAL, CONRADO CRUZ, JR., BRENDA ORTAÑEZ, AND JULIE
ANN PARADO AND JOHN DOES, Respondents.
Estate of Dr. Juvencio P. Ortañez v. Jose C. Lee, et. al.
GR. No. 184251 March 9, 2016 Perez, J:
ELECTIONS OF BOARD OF DIRECTORS AND TRUSTEES

FACTS:

On 6 July 1956, Dr. Ortañez organized and founded the Philippine International Life
Insurance Company, Inc. (Philinterlife). At the time of its incorporation, Dr. Ortañ ez
owned ninety percent (90%) of the subscribed capital stock of Philinterlife.Upon his
death on 21 July 1980, Dr. Ortañ ez left behind an estate consisting of, among others,
2,029 shares of stock in Philinterlife, then representing at least 50.725% of the
outstanding capital stock of Philinterlife In 2006, petitioners filed a Complaint for
Election Contest before the RTC of Quezon City. The complaint challenged the
lawfulness and validity of the meeting and election conducted by the group of Jose C.
Lee (respondents) et. al. on 15 March 2006. During the assailed meeting, Jose C. Lee
(Lee) et. al. were elected as members of the Board of Directors of Philinterlife.

Petitioners, who insisted that they represented at least 51% of the outstanding capital
stock of 5,000 shares of Philinterlife, conducted on the same day and in the same venue
but in a different room, their own annual stockholders’ meeting and proceeded to elect
their own set of directors. According to the petitioners, the sale of the shares of the estate
to the respondents through the Filipino Loan Assistance Group (FLAG), as well as the
increases in the authorized capita stock of the corporation, was declared null and void
by the court, which decision was affirmed by no longer than the Supreme Court. They
further submitted that the exercise of pre-emptive right of the Estate to acquire 51% of
the additional 1,000 paid up shares of stock, raising the total outstanding capital stock
to 5,000 shares, was recognized by the RTC of Quezon City. Respondents, for their
part, categorically denied the material allegations of the complaint and raised the
defense that the stockholders’ meeting they conducted on 15 March 2006was valid.

ISSUE:

Whether the respondents were validly elected as directors of Philinterlife

RULING:

Yes. The Court agreed with the lower courts that the petitioners failed to present
credible and convincing evidence that Philinterlife’s outstanding capital stock during
the 15 March 2006 annual stockholders’ meeting was 5,000 and that they own more

44
than 2,550 shares or 51% thereof. The unrebutted presumption is that respondents,
were duly elected as directors-officers of Philinterlife. In the absence of evidence to the
contrary, the presumption is that the respondents were duly elected as
directors/officers of Philinterlife during the aforesaid annual stockholders’ meeting.
Petitioners cannot, in the instant election contest case, question the increases in the
capital stocks of the corporation.

45
INTERPORT RESOURCES CORPORATION, Petitioner, v. SECURITIES
SPECIALIST, INC., AND R.C. LEE SECURITIES INC., Respondents.
Interport Resources Corp. vs. Securities Specialist
G.R. No. 154069 June 6, 2016 BERSAMIN, J.:
DISPOSITION AND ENCUMBRANCES OF SHARES

FACTS:

In January 1977, Oceanic Oil & Mineral Resources, Inc. entered into a subscription
agreement with R.C. Lee, a domestic corporation engaged in the trading of stocks
and other securities, covering 5,000,000 of its shares with par value of P0.01 per
share, for a total of P50,000.00. Thereupon, R.C. Lee paid 25% of the subscription,
leaving 75% unpaid. Consequently, Oceanic issued Subscription Agreements Nos.
1805, 1808, 1809, 1810, and 1811 to R.C. Lee. Oceanic merged with Interport, with
the latter as the surviving corporation. Interport was a publicly-listed domestic
corporation whose shares of stocks were traded in the stock exchange. Under the
terms of the merger, each share of Oceanic was exchanged for a share of lnterport.
SSI, a domestic corporation registered as a dealer in securities, received in the
ordinary course of business Oceanic Subscription Agreements Nos. 1805, 1808 to
1811, all outstanding in the name of R.C. Lee, and Oceanic official receipts showing
that 25% of the subscriptions had been paid. The Oceanic subscription agreements
were duly delivered to SSI through stock assignments indorsed in blank by R.C. Lee.
Later on, R.C. Lee requested Interport for a list of subscription agreements and stock
certificates issued in the name of R.C. Lee and other individuals named in the request.
Upon finding no record showing any transfer or assignment of the Oceanic
subscription agreements and stock certificates of Interport as contained in the list,
R.C. Lee paid its unpaid subscriptions and was accordingly issued stock certificates
corresponding thereto. SSI directly tendered payment to lnterport for the balance of
the 5,000,000 shares covered by the Oceanic subscription agreements, some of
which were in the name of R.C. Lee and indorsed in blank. Interport originally rejected
the tender of payment for all unpaid subscriptions on the ground that the Oceanic
subscription agreements should have been previously converted to shares in
lnterport.

ISSUE:

Whether or not Interport was liable to deliver the Oceanic shares of stock, or the
value thereof

RULING:

Yes The SEC correctly categorized the assignment of the subscription agreements as
a form of novation by substitution of a new debtor and which required the consent of

46
or notice to the creditor. Under the Civil Code, obligations may be modified by: (1)
changing their object or principal conditions; or (2) substituting the person of the
debtor; or (3) subrogating a third person in the rights of the creditor. Novation, which
consists in substituting a new debtor in the place of the original one, may be made
even without the knowledge or against the will of the latter, but not without the
consent of the creditor. In this case, the change of debtor took place when R.C. Lee
assigned the Oceanic shares under Subscription Agreement Nos. 1805, and 1808 to
1811 to SSI so that the latter became obliged to settle the 75% unpaid balance on
the subscription. The SEC likewise did not err in appreciating the fact that Interport
was duly notified of the assignment when SSI tendered its payment for the 75%
unpaid balance, and that it could not anymore refuse to recognize the transfer of the
subscription that SSI sufficiently established by documentary evidence. The effect of
the assignment of the subscription agreements to SSI was to extinguish the
obligation of R.C. Lee to Oceanic, now Interport, to settle the unpaid balance on the
subscription. As a result of the assignment, Interport was no longer obliged to accept
any payment from R.C. Lee because the latter had ceased to be privy to Subscription
Agreements Nos. 1805, and 1808 to 1811 for having been extinguished insofar as it
was concerned. On the other hand, Interport was legally bound to accept SSI's tender
of payment for the 75% balance on the subscription price because SSI had become
the new debtor under Subscription Agreements Nos. 1805, and 1808 to 1811. As
such, the issuance of the stock certificates in the name of R.C. Lee had no legal basis
in the absence of a contractual agreement between R. C. Lee and Interport. Under
Section 63 of the Corporation Code, no transfer of shares of stock shall be valid,
except as between the parties, until the transfer is recorded in the books of the
corporation so as to show the names of the parties to the transaction, the date of the
transfer, the number of the certificate or certificates and the number of shares
transferred. This statutory rule cannot be strictly applied herein, however, because
lnterport had unduly refused to recognize the assignment of the shares between R.C.
Lee and SSL. Subscription Agreements Nos. 1805, and 1808 to 1811 were now
binding between Interport and SSI only, and only such parties were expected to
comply with the terms thereof.

Under Section 63 of the Corporation Code, no transfer of shares of stock shall be

valid, except as between the parties, until the transfer is recorded in the books of the
corporation so as to show the names of the parties to the transaction, the date of the
transfer, the number of the certificate or certificates and the number of shares
transferred.

47
 VALENTIN S. LOZADA, Petitioner, v.
MAGTANGGOL MENDOZA, Respondent.
Lozada v. Mendoza
G.R. No. 196134 12 October 2016 BERSAMIN, J.

FACTS:

Respondent Magtanggol Mendoza was employed as a technician by VSL Service

Center (VSL), a single proprietorship owned and managed by petitioner Valentin
Lozada. When (VSL) renamed to LB&C Services Corporation (LB&C),respondent was
asked to sign a new employment contract, to which he did not accede and was later
on advised by LB&C Executive Officer not to report for work and wait for a call from
the company regarding his work schedule; however, he did not receive any call.
Mendoza filed a complaint against LB&C for illegal dismissal which the Labor Arbiter
upheld and ordered the satisfaction of the monetary award which includes the levy
of petitioner’s real property or family home. LB&C moved for the lifting of the levy
because the real property levied upon is petitioner’s family home and that the Labor
Arbiter did not adjudge the petitioner as jointly and solidarily liable for the obligation
of LB&C in favor of Magtanggol.

ISSUE:

May the petitioner be made jointly and solidarily liable for the obligation of LB and C
as owner thereof.

RULING:

No. The Court explained the doctrine laid down in AC Ransom relative to the personal
liability of the officers and agents of the employer based on the strength of the
definition of an employer in Article 212(c) (now Article 212[e]) of the Labor Code,
however, the governing law on personal liability of directors or officers for debts of
the corporation is still Section 31 of the Corporation Code. The latter provides for the
application of the doctrine of piercing the corporate veil. In the absence of malice,
bad faith, or a specific provision of law making a corporate officer liable, such
corporate officer cannot be made personally liable for corporate liabilities.

The petitioner may have acted in behalf of LB&C Services Corporation but the
corporation’s failure to operate could not be hastily equated to bad faith on his part.
Unless the closure is clearly demonstrated to be deliberate, malicious, and in bad
faith, the general rule that a corporation has, by law, a personality separate and
distinct from its owners should hold sway. In view of the dearth of evidence indicating
that the petitioner had acted deliberately, maliciously, or in bad faith in handling the

48
affairs of LB&C Service Corporation, and such acts had eventually resulted in the
closure of its business, he could not be validly held to be jointly and solidarily liable
with LB&C Services Corporation.

49
1) STATUS MARITIME V. DOCTOLERO
G.R. NO. 198968 JANUARY 18, 2017 BERSAMIN, J.

2) KABISIG V. YBC

G.R. NO. 21 2375 JANUARY 25, 2017 PERALTA, J.:

3) RENE H. IMPERIAL V. HON. EDGAR L. ARMES

G.R. NO. 178842 JANUARY 30, 2017 JARDELEZA, J.:

4) SUMIFRU V BAYA
G.R. NO. 188269 APRIL 17, 2017 PERLAS-BERNABE, J:

5) ZAMBRANO V. PHILIPPINE CARPET MANUFACTURING

G.R. NO. 224099 JUNE 21, 2017 MENDOZA, J.

6) I/AME V. LITTON AND COMPANY

G.R. NO. 191525 DECEMBER 13, 2017 SERENO, CJ.:

50
STATUS MARITIME CORPORATION and ADMINBROS
SHIPMANAGEMENT CO., LTD., Petitioners vs. RODRIGO C.
DOCTOLERO, Respondent
STATUS MARITIME v. DOCTOLERO
G.R. No. 198968 January 18, 2017 BERSAMIN, J.

FACTS:

Petitioners Status Maritime Corporation (Status Maritime) hired Doctolero as

Chief Officer on board the vessel M/V Dimitris Manios II for a period of nine
months Doctolero underwent the required Pre-Employment Medical
Examination (PEME) prior to his embarkation, and was declared "fit to work.".
Allegedly, respondent wanted to speed up the process, which gave his
attending physician shorter time to examine him properly. While M/V Dimitris
Manios II was in Mexico, Doctolero experienced chest and abdominal pains.
He was then diagnosed to be suffering from "Esophago-Gastritis-Duodenitis."
on account of the illness suffered while working on board the M/V Dimitris
Manios II, Doctolero filed in the NLRC his complaint demanding payment of
total and permanent disability benefits against the Corporation . Labor arbiter
dismissed the complaint for lack of merit. On appeal, the NLRC affirmed the
Labor Arbiter's finding. On appeal to CA, the CA ruled in favor of Doctolero.

ISSUE:

WON the Corporation should be held liable for respondent’s degrading health

RULING:

No. Under the Corporation Code in consonance with the labor code,
corporation will only be liable if the disability was suffered during the term of
his contract . In the case, however, While the fact that Doctolero suffered the
disability during the term of his contract was undisputed, it was evident that
he had filed his complaint for disability benefits before the company
designated physician could determine the nature and extent of his disability,
or before even the lapse of the initial 120-day period. With Doctolero still
undergoing further tests, the company-designated physician had no occasion
to determine the nature and extent of his disability upon which to base

51
Doctolero's "fit to work" certification or disability grading. Consequently, the
petitioners correctly argued that Doctolero had no cause of action for disability
pay and sickness allowance at the time of the filing of his complaint. The SC
reversed the finding of the CA.

52
KABISIG REAL WEALTH DEV., INC. AND FERNANDO C. TIO, v.
YOUNG CORPORATION BUILDERS
Kabisig v. YBC
G.R. No. 212375 January 25, 2017 PERALTA, J.:

FACTS:

Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand

Tio (Tio), contracted the services of Young Builders Corporation (Young
Builders) to supply labor, tools, equipment, and materials for the renovation
of its building in Cebu City. Young Builders then finished the work in
September 2001 and billed Kabisig accordingly. However, despite numerous
demands, Kabisig failed to pay. It contended that no written contract was ever
entered into between the parties Thus, Young Builders filed an action for
Collection of Sum of Money against Kabisig.the RTC of Cebu City rendered a
Decision finding for Young Builders. The CA affirmed the decision. Hence, this
case.

ISSUE:

Whether or not the petitioner Corporation is liable to Young Builders for the
damages claimed

RULING:

Yes. The SC ruled that under the Corporation Code of the Ph, a Corporation
incurs liability when it breached performance of a contract. Under the Civil
Code, a contract is a meeting of minds, with respect to the other, to give
something or to render some service. There is nothing in the law that requires
a written contract for the agreement in question to be valid and enforceable.
Also, the Court notes that neither Kabisig nor Tio had objected to the
renovation work, until it was already time to settle the bill. The Supreme Court
dismissed the petition.

53
RENE H. IMPERIAL and NIDSLAND RESOURCES AND DEVELOPMENT
CORPORATION, Petitioners, vs.HON. EDGAR L. ARMES, Presiding
Judge of Branch 4, Regional Trial Court, 5th Judicial Region, Legazpi
City and ALFONSO B. CRUZ, JR., Respondents.
G.R. No. 178842
x-----------------------x
ALFONSO B. CRUZ, Petitioner, vs.RENE IMPERIAL and NIDSLAND
RESOURCES AND DEVELOPMENT CORPORATION, Respondents.
G.R. No. 195509
RENE H. IMPERIAL v. HON. EDGAR L. ARMES
G.R. No. 178842 January 30, 2017 JARDELEZA, J.:

FACTS:

On March 24, 2011, Cruz filed a Petition for Review on Certiorari (Second
Petition) challenging the Second Assailed Decision. Cruz raised the following
arguments: first, Cruz claimed that he is the registered owner of the Subject
Property. He was thus an indispensable party to the SEC Case and as such,
should have been impleaded. Since the SEC Case was a personal action and
he was never impleaded, Cruz argues that the SEC never acquired jurisdiction
over him. Thus, any decision cannot prejudice his property rights over the
Subject Property. Further, as an indispensable party, any judgment obtained
by Imperial and NIDSLAND in the SEC Case has no binding effect on Cruz.
Second, Cruz also claims that since the property was already registered in his
name, any deed of conveyance which Napal executed pursuant to the SEC
Decision transfers no rights since Napal no longer had rights over the Subject
Property at the time. Third, Cruz states that the CA erred when it held that he
is already estopped from challenging the cancellation of his TCT. He explains
that he could not have participated in the SEC Case to protect his rights. The
SEC Case pertained to an intra- corporate dispute. As he was obviously not a
stockholder of NIDSLAND, he had no basis to intervene. He also emphasizes
that Imperial and NIDSLAND never prayed for the cancellation of his TCT in
the SEC Case and thus, had no real reason to interfere until SEC Hearing
Officer Gonzales ruled that his TCT should be cancelled. Cruz also raises the
argument that he could not have filed a separate action to protect his rights
over the property since Imperial and NIDSLAND had already filed the
Annulment of Sale action against him for the annulment of the sale and
cancellation of his TCT before RTC Legazpi City. Cruz claims that he actively
participated in this case which attained finality only in 2003. According to Cruz,

54
filing another case while this case was pending would have amounted to
multiplicity of suits.

ISSUE:

The core issue is whether RTC Legazpi City has jurisdiction to declare the
nullity of the Decision of the SEC.

RULING:

The RTC Petition should have been dismissed for lack of jurisdiction. We
likewise rule that the SEC Decision was issued with grave abuse of discretion
amounting to an excess of jurisdiction.

Nature of a void judgment.A void judgment is no judgment at all in legal

contemplation. In Calero v. University of the Philippines we held that- A void
judgment is not entitled to the respect accorded to a valid judgment, but may
be entirely disregarded or declared inoperative by any tribunal in which effect
is sought to be given to it. It has no legal or binding effect or efficacy for any
purpose or at any place. It cannot affect, impair or create rights. It is not
entitled to enforcement and is, ordinarily, no protection to those who seek to
enforce. In other words, a void judgment is regarded as a nullity, and the
situation is the same as it would be if there was no judgment.

A judgment rendered without jurisdiction is a void judgment. This want of

jurisdiction may pertain to lack of jurisdiction over the subject matter or over
the person of one of the parties.A void judgment may also arise from the
tribunal's act constituting grave abuse of discretion amounting to lack or
excess of jurisdiction. In Yu v. Judge Reyes-Carpio, we explained- The term
"grave abuse of discretion" has a specific meaning. An act of a court or tribunal
can only be considered as with grave abuse of discretion when such act is
done in a "capricious or whimsical exercise of judgment as is equivalent to
lack of jurisdiction." The use of a petition for certiorari is restricted only to
"truly extraordinary cases wherein the act of the lower court or quasi-judicial
body is wholly void"

55
SUMIFRU (PHILIPPINES) CORPORATION (SURVIVING ENTITY IN A
MERGER WITH DAVAO FRUITS CORPORATION AND OTHER
COMPANIES), PETITIONER V. BERNABE BAYA, RESPONDENT
Sumifru v Baya
G.R. NO. 188269 April 17, 2017 PERLAS-BERNABE, J:

FACTS:
Baya filed an illegal/constructive dismissal against AMS Farming Corporation
(AMSFC) and Davao Fruits Corporation (DFC), before the NLRC. Baya was
employed as a supervisor and joined the union of supervisors, and eventually,
formed AMS Kapalong Agrarian Reform Beneficiaries Multipurpose
Cooperative (AMSKARBEMCO), the basic agrarian reform organization of the
regular employees of AMSFC. Baya was reassigned to a series of supervisory
positions in AMSFC’s sister company also joined the supervisory positions and
became a member of the latter’s supervisory union. Later on and upon
AMSKARBEMCO’s petition before the Department of Agrarian Reform (DAR),
some 220 hectares of AMSFC’s 513-hectare banana plantation were covered
by the Comprehensive Agrarian Reform Law. Eventually, said portion was
transferred to AMSFC’s regular employees as Agrarian Reform Beneficiaries
(ARBs), including Baya.ARBs held a referendum in order to choose as to which
group between AMSKARBEMCO or SAFFPAI, an association of pro-company
beneficiaries, they wanted to belong. 280 went to AMSKARBEMCO while 85
joined SAFFPAI.

When AMSFC learned that AMSKARBEMCO entered into an export agreement

with another company, it summoned AMSKARBEMCO officers, including Baya,
to lash out at them and even threatened them that the ARBs’ takeover of the
lands would not push through. Thereafter, Baya was again summoned, this
time by a DFC manager, who told the former that he would be putting himself
in a “difficult situation” if he will not shift his loyalty to SAFFPAI; this
notwithstanding, Baya politely refused to betray his cooperative. A few days
later, Baya received a letter stating that his secondment with DFC has ended,
thus, ordering his return to AMSFC. However, upon Baya’s return to AMSFC
on August 30, 2002, he was informed that there were no supervisory
positions available; thus, he was assigned to different rank-and-file
positions instead. Baya filed a Complaint. LA ruled in Baya’s favor.

NLRC found that the termination of Baya’s employment was not caused by
illegal/ constructive dismissal, but by the cessation of AMSFC’s business

56
operation or undertaking in large portions of its banana plantation due to the
implementation of the agrarian reform program. Thus, the NLRC opined that
Baya is not entitled to separation pay as such cessation was not voluntary,
but rather involuntary, on the part of AMSFC as it was an act of the State, i.e.,
the agrarian reform program, that caused the same.

ISSUE:

Whether or not Sumifru should be held solidarily liable with AMSFC’s for Baya’s
monetary awards.

RULING:

Yes. Finally, Sumifru’s contention that it should only be held liable for the
period when Baya stayed with DFC as it only merged with the latter and not
with AMSFC is untenable. Section 80 of the Corporation Code of the Philippines
clearly states that one of the effects of a merger is that the surviving company
shall inherit not only the assets, but also the liabilities of the corporation it
merged with, to wit:

Section 80. Effects of merger or consolidation. – The merger or consolidation

shall have the following effects:

The constituent corporations shall become a single corporation which, in case

of merger, shall be the surviving corporation designated in the plan of merger;
and, in case of consolidation, shall be the consolidated corporation designated
in the plan of consolidation;

The separate existence of the constituent corporations shall cease, except that
of the surviving or the consolidated corporation;

The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;

The surviving or the consolidated corporation shall thereupon and thereafter

possess all the rights, privileges, immunities and franchises of each of the
constituent corporations; and all property, real or personal, and all receivables
due on whatever account, including subscriptions to shares and other choses
in action, and all and every other interest of, or belonging to, or due to each
constituent corporation, shall be deemed transferred to and vested in such
surviving or consolidated corporation without further act or deed; and

57
The surviving or consolidated corporation shall be responsible and liable for
all the liabilities and obligations of each of the constituent corporations in the
same manner as if such surviving or consolidated corporation had itself
incurred such liabilities or obligations; and any pending claim, action or
proceeding brought by or against any of such constituent corporations may be
prosecuted by or against the surviving or consolidated corporation. The rights
of creditors or liens upon the property of any of such constituent corporations
shall not be impaired by such merger or consolidation.

58
ROMMEL M. ZAMBRANO, ROMEO O. CALIPAY, JESUS L. CHIN, LYNDON B.
APOSAGA, BONIFACIO A. CASTANEDA, ROSEMARIE P. FALCUNIT, ROMEO
A. FINALLA, LUISITO G. GELLIDO, JOSE ALLI L. MABUHAY, VICENTE A.
MORALES, RAUL L. REANZARES, DIODITO I. TACUD, ERNAN D. TERCERO,
LARRY V. MUTIA, ROMEO A. GURON, DIOSDADO S. AZUSANO,
BENEDICTO D. GIDAYAWAN, LOWIS M. LANDRITO, NARCISO R. ASI,
TEODULO BORAC, SANTOS J. CRUZADO, JR., ROLANDO DELA CRUZ,
RAYMUNDO, MILA Y. ABLAY, ERMITY F. GABUCAY, PABLITO M.
LACANARIA, MELCHOR PENAFLOR, ARSENIO B. PICART III, ROMEO M.
SISON, JOSE VELASCO JR., ERWIN M. VICTORIA, PRISCO J. ABILO,
WILFREDO D. ARANDIA, ALEXANDER Y. HILADO, JAIME M. CORALES,
GERALDINE C. MAUHAY, MAURO P. MARQUEZ, JONATHAN T. BARQUIN,
RICARDO M. CALDERON JR., RENA TO R. RAMIREZ, VIVIAN P. VIRTUDES,
DOMINGO P. COSTANTINO JR., RENATO A. MANAIG, RAFAEL
D.CARILLO, Petitioners vs. PHILIPPINE CARPET MANUFACTURING
CORPORATION/ PACIFIC CARPET MANUFACTURING CORPORATION,
DAVIDE. T. LIM, and EVELYN LIM FORBES, Respondents
Zambrano v. Philippine Carpet Manufacturing
G.R. No. 224099 June 21, 2017 MENDOZA, J.
FACTS:

On January 3, 2011,petitioners, who were employees of private respondent

Philippine Carpet Manufacturing Corporation, were notified of the termination
of their employment effective February 3, 2011 on the ground of cessation of
operation due to serious business losses. They were of the belief that their
dismissal was without just cause and in violation of due process because the
closure of Phil Carpet was a mere pretense to transfer its operations to its
wholly owned and controlled corporation, Pacific Carpet Manufacturing
Corporation (PacificCarpet). They asserted that their dismissal constituted
unfair labor practice as it involved the mass dismissal of all union officers and
members of the Philippine Carpet Manufacturing Employees Association
(PHILCEA).In its defense, Phil Carpet countered that it permanently closed
and totally ceased its operations because there had been a steady decline in
the demand for its products due to global recession, stiffer competition, and
the effects of a changing market. Thus, in order to stem the bleeding, the
company implemented several cost-cutting measures, including voluntary
redundancy and early retirement programs. Phil Carpet likewise faithfully
complied with the requisites for closure or cessation of business under the
Labor Code. The petitioners and the Department of Labor and Employment
were served written notices one (1) month before the intended closure of the
company. The petitioners’ were also paid their separation pay and they

59
voluntarily executed their respective Release and Quitclaim before the DOLE
officials. In the September 29, 2014 Decision, the Labor Arbiter dismissed the
complaints for illegal dismissal and unfair labor practice. The NLRC affirmed
the findings of the LA, which was subsequently affirmed by the CA.

ISSUE:

Whether or not piercing of the veil should be applied.

RULING:

No. A corporation is an artificial being created by operation of law. It possesses

the right of succession and such powers, attributes, and properties expressly
authorized by law or incident to its existence. It has a personality separate
and distinct from the persons composing it, as well as from any other legal
entity to which it may be related.

In this connection, case law lays down a three-pronged test to determine the
application of the alter ego theory, which is also known as the instrumentality
theory, namely:

(1) Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice in respect
to the transaction attacked so that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its own;

(2) Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty,
or dishonest and unjust act in contravention of plaintiff's legal right; and

(3) The aforesaid control and breach of duty must have proximately caused
the injury or unjust loss complained of.

To summarize, piercing the corporate veil based on the alter ego theory
requires the concurrence of three elements: control of the corporation by the
stockholder or parent corporation, fraud or fundamental unfairness imposed
on the plaintiff, and harm or damage caused to the plaintiff by the fraudulent
or unfair act of the corporation. The absence of any of these elements prevents
piercing the corporate veil. The Court finds that none of the tests has been
satisfactorily met in this case.

60
INTERNATIONAL ACADEMY OF MANAGEMENT AND ECONOMICS
(I/AME), Petitioner vs. LITTON AND COMPANY, INC., Respondent
I/AME v. LITTON AND COMPANY
G.R. No. 191525 December 13, 2017 SERENO, CJ.:

FACTS:

Atty. Emmanuel T. Santos (Santos), a lessee to two (2) buildings owned by

Litton, owed the latter rental arrears as well as his share of the payment of
realty taxes. Consequently, Litton filed a complaint for unlawful detainer
against Santos before the MeTC of Manila. The MeTC ruled in Litton's favor
and ordered Santos to vacate A.I.D. Building and Litton Apartments and to
pay various sums of money representing unpaid arrears, realty taxes, penalty,
and attorney’s fees.

It appears however that the judgment was not executed. Litton subsequently
filed an action for revival of judgment, which was granted by the RTC. Santos
then appealed the RTC decision to the CA, which nevertheless affirmed the
RTC. The said CA decision became final and executory on 22 March 1994.

On 11 November 1996, the sheriff of the MeTC of Manila levied on a piece of

real property covered by Transfer Certificate of Title (TCT) No. 187565 and
registered in the name of International Academy of Management and
Economics Incorporated (I/AME), in order to execute the judgment against
Santos. The annotations on TCT No. 187565 indicated that such was “only up
to the extent of the share of Emmanuel T. Santos."

I/AME filed with MeTC a “Motion to Lift or Remove Annotations Inscribed in

TCT No. 187565 of the Register of Deeds of Makati City.” I/AME claimed that
it has a separate and distinct personality from Santos; hence, its properties
should not be made to answer for the latter's liabilities. The motion was denied
in an Order dated 29 October 2004.

ISSUE:

The issues boil down to the alleged denial of due process when the court
pierced the corporate veil of I/AME and its property was made to answer for
the liability of Santos.

RULING:

61
No. There was no violation of due process against I/AME. The piercing of the
corporate veil is premised on the fact that the corporation concerned must
have been properly served with summons or properly subjected to the
jurisdiction of the court a quo. Corollary thereto, it cannot be subjected to a
writ of execution meant for another in violation of its right to due process.

There exists, however, an exception to this rule: if it is shown “by clear and
convincing proof that the separate and distinct personality of the corporation
was purposefully employed to evade a legitimate and binding commitment
and perpetuate a fraud or like wrongdoings.”

The resistance of the Court to offend the right to due process of a corporation
that is a nonparty in a main case, may disintegrate not only when its director,
officer, shareholder, trustee or member is a party to the main case, but when
it finds facts which show that piercing of the corporate veil is merited. Thus,
as the Court has already ruled, a party whose corporation is vulnerable to
piercing of its corporate veil cannot argue violation of due process.

In this case, the Court confirms the lower courts’ findings that Santos had an
existing obligation based on a court judgment that he owed monthly rentals
and unpaid realty taxes under a lease contract he entered into as lessee with
the Littons as lessor. He was not able to comply with this particular obligation,
and in fact, refused to comply therewith.

62
1. MACTAN ROCK INDUSTRIES VS. GERMO
G.R. NO. 228799 JANUARY 10, 2018 PERLAS-BERNABE, J.

2. DE LA SALLE MONTESSORI INTERNATIONAL OF MALOLOS , INC.

VS. DE LA SALLE BROTHERS, INC., ET AL.
G.R. NO. 205548 FEBRUARY 07, 2018 JARDELEZA, J.:

3. TEE LING KIAT VS. AYALA CORPORATION

G.R. NO. 192530 MARCH 7, 2018 CAGUIOA, J.

4. MARSMAN AND COMPANY VS. RODIL C. STA. RITA

GR NO. 194765 APRIL 23, 2018 LEONARDO-DE
CASTRO, J.

5. EXCELLENT ESSENTIALS. VS. EXTRA EXCEL

GR. NO. 192797 MAY 25, 2018 MARTIRES,J.:

6. STRADCOM VS. ORPILLA

G.R. NO. 206800 JULY 2,2018 TIJAM,J.:

63
MACTAN ROCK INDUSTRIES, INC. and ANTONIO TOMPAR, Petitioners, v
BENFREI S.GERMO, Respondent.
Mactan Rock Industries v. Benfrei S. Germo
G.R. No. 228799 January 10, 2018 Perlas-Bernabe, J.

FACTS:

This case stemmed from a Complaint for sum of money and damages filed by
Germo against MRII - a domestic corporation engaged in supplying water,
selling industrial maintenance chemicals, and water treatment and chemical
cleaning services - and its President/Chief Executive Officer (CEO), Tompar.
Alleging that MRII, through Tompar, entered into a Technical Consultancy
Agreement (TCA) with Germo, whereby the parties agreed, inter alia, that:
(a) Germo shall stand as MRII's marketing consultant who shall take charge
of negotiating, perfecting sales, orders, contracts, or services of MRII, but
there shall be no employer-employee relationship between them; and ( b)
Germo shall be paid on a purely commission basis, including a monthly
allowance of P5,000.00. During the effectivity of TCA, Germo successfully
negotiated and closed with International Container Terminal Services Inc.,
(ICTSI), a supplied contract for purified water per day. Accordingly, MRII
commenced supplying water to ICTSI and in turn, the latter religiously paid
MRII the corresponding monthly fees. Despite the foregoing, MRII allegedly
never paid Germo his rightful commissions, inclusive of interest.

Germo filed a complaint on NLRC, but the same was dismissed for lack of
jurisdiction due to the absence of employer-employee relationship between
him and MRII. He then filed a civil case before the RTC. Hence, Germo filed
the instant complaint praying that MRII and Tompar be made to pay him the
unpaid commissions with legal interest, moral damages and exemplary
damages. MRII and Tompar averred , among others, that: (a) there was no
employer-employee relationship between MRII and Germo as the latter was
hired as a mere consultant; (b) Germo failed to prove that the ICTSI account
materialized through his efforts as he did not submit the required periodic
reports of his negotiations with prospective clients; and (c) ICTSI became
MRII's client through the efforts of a certain Ed Fomes.

64
The RTC ruled in Germo’s favor and accordingly, ordered MRII and Tompar to
solidary pay him the said commissions, moral damages and exemplary
damages.

ISSUE:

Whether or not MRII and Tompar are solidarily liable.

RULING:

Yes. The court finds that Tompar, in his capacity as then-President/CEO of

MRII, should be held solidarily liable with MRII for the latter's obligations to
Germo.

It is a basic rule that a corporation is a juridical entity which is vested with

legal and personality separate and distinct from those acting for and in behalf
of, and from the people comprising it. As a general rule, directors, officers, or
employees of a corporation cannot be

held personally liable for the obligations incurred by the corporation, unless it
can be shown that such director/officer/employee is guilty of negligence or
bad faith, and that the same was clearly and convincingly proven.

Thus, before a director or officer of a corporation can be held personally liable

for corporate obligations, the following requisites must concur: (1) the
complainant must allege in the complaint that the director or officer assented
to patently unlawful acts of the corporation, or that the officer was guilty of
gross negligence or bad faith; and (2) the complainant must clearly and
convincingly prove such unlawful acts, negligence or bad faith. In this case,
Tompar's assent to patently unlawful acts of the MRII or that his acts were
tainted by gross negligence or bad faith was not alleged in Germo's complaint,
much less proven in the course of trial. Therefore, the deletion of Tompar's
solidary liability with MRII is in order.

65
DE LA SALLE MONTESSORI INTERNATIONAL OF MALOLOS, INC.,
Petitioner, - versus - DE LA SALLE BROTHERS, INC., Present: DE LA
SALLE UNIVERSITY, INC., LA SALLE ACADEMY, INC., DE LA SALLE-
SANTIAGO ZOBEL SCHOOL, INC. (formerly named De La Salle-South
Inc.), DE LA SALLE CANLUBANG, INC. (formerly named De La Salle
University-Canlubang
De La Salle Montessori International of Malolos , Inc. ., v
De La Salle Brothers, Inc., et al.
G.R. No. 205548 February 07, 2018 JARDELEZA, J.:

FACTS:

Petitioner reserved with the SEC its corporate name De La Salle Montessori
International Malolos, Inc. from June 4 to August 3, 2007, after which the SEC
indorsed petitioner's AOI and by-laws to the DepEd for comments and
recommendation. The DepEd returned the indorsement without objections.
Consequently, the SEC issued a certificate of incorporation to petitioner.
DepEd Reg. III granted it’s petitioner government recognition for its pre-
elementary up to its secondary courses.

Respondent De La Salle Brothers, Inc., et. al., filed a petition with the SEC
seeking to compel petitioner to change its corporate name. Respondents claim
that petitioner's corporate name is misleading or confusingly similar to that
which respondents have acquired a prior right to use, and that respondents'
consent to use such name was not obtained. According to respondents,
petitioner's use of the dominant phrases "La Salle" and "De La Salle" gives an
erroneous impression that De La Salle Montessori International of Malolos,
Inc. is part of the "La Salle" group, which violates Section 18 of the
Corporation Code of the Philippines. Moreover, being the prior registrant,
respondents have acquired the use of said phrases as part of their corporate
names and have freedom from infringement of the same.

The SEC OGC issued an Order directing petitioner to change or modify its
corporate name. Petitioner filed an appeal before the SEC En Banc, which
rendered a decision affirming the Order of the SEC OSG. Petitioner
consequently filed a petition for review with the CA. The CA rendered its
Decision affirming the Order of the SEC OGC and the Decision of the SEC En
Banc in toto. Hence, this petition.

66
ISSUE:

Whether or not the CA erred in not applying the ruling in the Lyceum of the
Philippines case which petitioner argues have "the same facts and events" as
in this case.

RULING:

No, the Court's ruling in Lyceum of the Philippines does not apply. In that
case, the Lyceum of the Philippines, Inc., an educational institution registered
with the SEC, commenced proceedings before the SEC to compel therein
private respondents who were all educational institutions, to delete the word
"Lyceum" from their corporate names and permanently enjoin them from
using the word as part of their respective names.

The Court there held that the word "Lyceum" today generally refers to a school
or institution of learning. It is as generic in character as the word "university."
Since "Lyceum" denotes a school or institution of learning, it is not unnatural
to use this word to designate an entity which is organized and operating as an
educational institution. Moreover, the Lyceum of the Philippines, Inc.'s use of
the word "Lyceum" for a long period of time did not amount to mean that the
word had acquired secondary meaning in its favor because it failed to prove
that it had been using the word all by itself to the exclusion of others.

Here, the phrase "De La Salle" is not generic in relation to respondents. It is

not descriptive of respondent's business as institutes of learning, unlike the
meaning ascribed to "Lyceum." Moreover, respondent De La Salle Brothers,
Inc. was registered in 1961 and the De La Salle group had been using the
name decades before petitioner's corporate registration. In contrast, there
was no evidence of the Lyceum of the Philippines, Inc.'s exclusive use of the
word "Lyceum," as in fact another educational institution had used the word
1 7 years before the former registered its corporate name with the SEC.

67
TEE LING KIAT v AYALA CORPORATION (Substituted herein by its
Assignee And Successor-in-Interest, BIENVENIDO B.M. AMORA, JR.)

Tee Ling Kiat Vs. Ayala Corporation

G.R. No. 192530 March 7, 2018 Caguioa, J.

FACTS:

In 1981, Ayala Corporation instituted a Complaint for Sum of Money with an

application for a writ of attachment against the Spouses Dee. RTC Branch 149
ruled in favor of Ayala Corporation and forthwith issued a Writ of Execution
against the Spouses Dee. Tee Ling Kiat filed a Third-Party Claim, alleging that
the aforesaid levy was made based on the information that Mr. Dewey Dee
was one of the incorporators of VIP. Apparently, the Sheriff who caused the
levy made the assumption that since Mr. Dewey is one of the incorporators of
VIP, then it follows that he is a stockholder thereof. Consequently, as such
stockholder, he would have rights, claims, shares, interest, title and
participation in the real properties belonging to VIP. However, while Mr. Dewey
Dee was indeed one of the incorporators of VIP, he is no longer a stockholder
thereof. He no longer has any rights, claims, shares, interest, title and
participation in VIP or any of its properties. As early as December 1980, Mr.
Dewey Dee has already sold to Mr. Tee Ling Kiat all his stocks in VIP, as
evidenced by a cancelled check which he issued in Mr. Tee Ling Kiat's favor.

Tee Ling Kiat filed a Third-Party Claim, alleging that the aforesaid levy was
made based on the information that Mr. Dewey Dee was one of the
incorporators of Vonnel Industrial Park, Inc.

ISSUE:

Whether or not the sale of shares of stock to Tee Ling Kiat is valid

RULING:

No. This argument is off tangent. Meaning, even if it could be assumed that
the sale of shares of stock contained in the photocopies had indeed transpired,
such transfer is only valid as to the parties thereto, but is not binding on the
corporation if the same is not recorded in the books of the corporation. Section
63 of the Corporation Code of the Philippines provides that: "No transfer, shall
be valid, except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the transaction,

68
the date of the transfer, the number of the certificate or certificates and the
number of shares transferred." Here, the records show that the purported
transaction between Tee Ling Kiat and Dewey Dee has never been recorded
in VIP's corporate books. Thus, the transfer, not having been recorded in the
corporate books in accordance with law, is not valid or binding as to the
corporation or as to third persons.

69
 MARSMAN & COMPANY, INC., Petitioner, vs RODIL C. STA.
RITA, Respondent.
Marsman vs Rodil C. Sta. Rita
GR No. 194765 April 23, 2018 Leonardo-De Castro, J.

FACTS:

Marsman, a domestic corporation, was formerly engaged in the distribution

and sale of pharmaceutical and consumer products. It purchased Consumer
Products Distribution Services, Inc (CPDSI). The similarity in Marsman’s and
CPDSI’s business led to the integration of their employees which was
formalized in a Memorandum of Agreement. Sta. Rita, previously an employee
of Marsman, was then transferred to CPDSI. In the meantime, the latter
contracted its logistic services to EAC Distributors. A letter issued by Marsman
confirmed the appointment of Sta. Rita to the EAC-Libis Warrhouse. However,
EAC’s operations were affected when Valiant terminated the lease contract
between them. Hence, EAC ended its logistic service agreement with CPDSI.
The latter was left with no other option but to terminate the employment of
those assigned in the EAC-Libis Warehouse, including Sta. Rita. Aggrieved,
Sta. Rita filed a case before the NLRC for illegal dismissal against Marsman.
Labor Arbiter: Found Marsman guilty of illegal dismissal NLRC: Reversed: No
employer-employee relationship CA: Reversed NLRC’s decision

ISSUE:
Whether or not Marsman remained as Sta. Rita’s Employer

RULING:

NO. To assert that Marsman remained as Sta. Rita's employer even after the
corporate spin-off disregards the separate personality of Marsman and CPDSI. It is a
fundamental principle of law that a corporation has a personality that is separate and
distinct from that composing it as well as from that of any other legal entity to which
it may be related. Other than Sta. Rita's bare allegation that Michael Leo T. Luna was
Marsman's and CPDSI's Vice-President and General Manager, Sta. Rita failed to
support his claim that both companies were managed and operated by the same
persons, or that Marsman still had complete control over CPDSI's operations.
Moreover, the existence of interlocking directors, corporate officers and shareholders

70
without more, is not enough justification to pierce the veil of corporate fiction in the
absence of fraud or other public policy consideration. Verily, the doctrine of piercing
the corporate veil also finds no application in this case because bad faith cannot be
imputed to Marsman. GRANTED.

71
EXCELLENT ESSENTIALS INTERNATIONAL Petitioner, -versus -EXTRA
EXCEL INTERNATIONAL PHILIPPINES, INC., Respondent.
Excellent Essentials. Vs. Extra Excel
Gr. No. 192797 May 25, 2018 MARTIRES,J.:

FACTS:
Case was for petition for review on certiorari assailing the 28 June 2010
Decision of the Court of Appeals (CA) in CA-G.R. CV No. 88388. The CA
decision, in effect, reversed the Regional Trial Court, Branch 138, Makati City
(RTC, Branch 138), by ordering petitioner Excellent Essentials International
Corporation (Excellent Essentials) to pay respondent Extra Excel International
Philippines, Inc. (Excel Philippines) damages, attorney's fees, and costs of
suit.

Excel Philippines and Excellent International had a distributorship agreement

wherein it designated the later as the exclusive of its products in the
Philippines. Excellent essentials then experience intra corporate struggles in
its management, until Stewart successfully gained control of the
management. She then, removed the authority of Excel Philippines its
distributive rights and appointed Excellent Essentials as its distributor. Despite
the removal, Excel Philippines continued to distribute E.Essentials products.
Excellent International and Excellent Essentials file a complaint for injunction
against Excel Philippines. Respondent then filed its answer with counterclaim,
averring that the petitioner had no right to unilaterally rescind its contract.

The RTC ruled in favor the respondent. However, prior to it the parties entered
into compromise and the trial court dismissed the claims and counterclaims of
both parties. C.A reversed the decision, because it alleged that it is tainted
with grave abuse of discretion, hence the present petition.

ISSUE:

Whether Excellent Essentials' corporate existence and its business operations

caused damage to Excel Philippines.

RULING:

The Court DENY Excellent Essentials' petition. Under the principle of relativity
of contracts, only those who are parties to a contract are liable to its breach.
Under Article 1314 of the Civil Code, however, any third person who induces

72
another to violate his contract shall be liable to damages to the other
contracting party. Said provision of law embodies what we often refer to as
tortuous or contractual interference. [n So Ping Bun v. CA,33 we laid out the
elements of tortuous interference: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of contract; and
(3) interference of the third person is without legal justification or excuse.
Prior to the revocation of its exclusive distributorship, Excel International had
an existing contract with Bright Vision wherein they agreed to set up the
corporation to exclusively distribute E. Excel products within the Philippines.
This corporation, eventually, turned out to be Excel Philippines who was given
the irrevocable and exclusive right to distribute, market, and/or sell. Under its
agreement with Bright Vision, Excel Philippines' exclusive distributorship right
was irrevocable and may only be modified, transferred, or terminated upon
the mutual consent of both parties. This agreement was effective from 22 May
1995 until 21May2005.Under these circumstances, the court concludes that
those behind Excellent_ Essentials not only had knowledge that Excel
International had the obligation to honor Excel Philippines' exclusive right, but
also conspired with Stewart to undermine Excel Philippines. Thus, the Court
agrees with the CA when it said: It does not escape this Court's attention the
stealthy manoeuvrings that [Excellent Essentials'] incorporators did while still
working for [Excel Philippines]. As narrated above, they anticipated the
revocation of [Excel Philippines'] exclusive right contract and the award to
[Excellent Essentials] of the same gratuity while the latter has yet to be
organized. 35 The exclusive right contract of Excellent Essentials is dated I
December 2000 but Excellent Essentials was organized and registered only on
8 December 2000.Decision 14 G.R. No. 192797.With this expectation comes
not a foreknowledge of divine origin but a conspiracy to rig existing contractual
obligations so they could swaddle themselves with the benefits that go along
with such manoeuvrings. TheUtah Court made same observations as this
Court now does because the coincidence of the revocation of the exclusive
rights contract and its conferment later appears so surreal if they were not
planned at all. It is in this sequence of events that this Court finds bad faith
in [Excellent Essentials'] actuations. Contrary to its assertions, it did not just
stand as an innocent bystander but a conspirator in the manner by which
[Excel International's] corporate structure and contracts were skewed to fit
the best interests of some.

73
STRADCOM CORPORATION AND JOSE A. CHUA, Petitioners, vs. JOYCE
ANNABELLE L. ORPILLA, Respondent.
Stradcom vs. Orpilla
G.R. No. 206800 July 2,2018 TIJAM,J.:
FACTS:

Joyce Anabelle L. Orpilla (respondent) was employed by Stradcom as Human

Resources Administration Department (HRAD) Head. In 2003, Jose Chua, the
President and Chief Executive Officer (CEO) of Stradcom reorganized the HRAD. After
the tum-over of the documents and equipment of HRAD, respondent inquired from
Chua as to her status in the light of the said reorganization. Chua, on the other hand,
replied that the management has lost its trust and confidence in her and it would be
better if she resigned. Respondent protested the resignation and insisted that if there
were charges against her, she was open for formal investigation. Chua, however, was
not able to come up with any charges. meeting was held wherein the Chief Legal
Officer (CLO) offered a settlement to respondent in exchange for her employment,
otherwise, respondent would have to undergo the burden of litigation in pursuing the
retention of her employment. On January 13, 2003, per advice of Atty. Pilapil,
respondent reported for work but the guards refused her entry and advised her to
take a leave of absence. Respondent claimed that she was informed by Accounting
Manager was her last and final salary was already deposited in her bank account .
Respondent filed a complaint for constructive dismissal with monetary claims of back
wages, attorney's fees and damages. Both LA and NLRC decision were favorable to
Orpilla.

ISSUE

Whether or not , Jose Chua as the President and (CEO) is solidarily liable with
Stradcom

RULING:

Here, the cause for termination was loss of trust and confidence, thus due to the
employee or respondent's fault, but Stradcom failed to comply with the twin-notice
requirement, thus, as a measure of equity, the SC ordered Stradcom pay respondent
nominal damages .The solidary liability of Chua as a corporate officer is not proper
and must be recalled. It is well-settled that a corporation has its own legal personality
separate and distinct from those of its stockholders, directors or officers. Absence of
any evidence that a corporate officer and/or director has exceeded their authority, or
their acts are tainted with malice or bad faith, they cannot be held personally liable
for their official acts. Here, there was neither any proof that Chua acted without or in
excess of his authority nor was motivated by personal ill-will towards respondent to
be solidarily liable with the company.

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