Topic: STOCKHOLDERS AND MEMBERS- Remedial Rights (Derivative Suits)

Case No. 392

FILIPINAS PORT SERVICES, INC. vs. VICTORIANO S. GO et. al.

G.R. No. 161886, March 16, 2007
Facts:

On September 4, 1992, petitioner Eliodoro C. Cruz, former president of Filport wrote a letter to the
corporation’s Board of Directors questioning the boards creation of a new positions with a monthly
remuneration of P13,050.00 each. In his aforesaid letter, Cruz requested the board to take necessary
action to recover from those elected the salaries they have received. On 15 September 1992,
however, the board did not make any action with the letter of Cruz.

On 14 June 1993, Cruz, purportedly in representation of Filport and its stockholders filed with the SEC
a petition which he describes as a derivative suit against the respondents who were then the
incumbent members of Filports Board of Directors, for alleged acts of mismanagement detrimental
to the interest of the corporation and its shareholders at large.

In the same petition, Cruz alleged that despite demands made upon the respondent members of the
board of directors to desist from creating the positions in question and to account for the amounts
incurred in creating the same, the demands were unheeded. In their common Answer with
Counterclaim, the respondents denied the allegations of mismanagement. In the same Answer,
respondents further averred that Cruz and his co-petitioner Minterbro, while admittedly
stockholders of Filport, have no authority nor standing to bring the so-called derivative suit for and in
behalf of the corporation.

On 10 December 2001, RTC-Davao City rendered its decision in favor of the petitioners. However, on
appeal it was reversed.

Issue:

Was the case filed by Cruz, on behalf of Filipinas Port Services Inc., a derivative suit?

Held:

Yes. Under the Corporation Code, where a corporation is an injured party, its power to sue is lodged
with its board of directors or trustees. But an individual stockholder may be permitted to institute a
derivative suit in behalf of the corporation in order to protect or vindicate corporate rights whenever
the officials of the corporation refuse to sue, or when a demand upon them to file the necessary
action would be futile because they are the ones to be sued, or because they hold control of the
corporation. In such actions, the corporation is the real party-in-interest while the suing stockholder,
in behalf of the corporation, is only a nominal party.

Here, the action below is principally for damages resulting from alleged mismanagement of the
affairs of Filport by its directors/officers, it being alleged that the acts of mismanagement are
detrimental to the interests of Filport. Thus, the injury complained of primarily pertains to the
corporation so that the suit for relief should be by the corporation. However, since the ones to be
sued are the directors/officers of the corporation itself, a stockholder, like petitioner Cruz, may
validly institute a derivative suit to vindicate the alleged corporate injury, in which case Cruz is only a
nominal party while Filport is the real party-in-interest. For sure, in the prayer portion of petitioners
petition before the SEC, the reliefs prayed were asked to be made in favor of Filport.

Besides, the requisites before a derivative suit can be filed by a stockholder are present in this case,
to wit:

a) the party bringing suit should be a shareholder as of the time of the act or transaction
complained of, the number of his shares not being material;

b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of
directors for the appropriate relief but the latter has failed or refused to heed his plea; and

c) the cause of action actually devolves on the corporation, the wrongdoing or harm having
been, or being caused to the corporation and not to the particular stockholder bringing the
suit.

Indisputably, petitioner Cruz (1) is a stockholder of Filport; (2) he sought without success to
have its board of directors remedy what he perceived as wrong when he wrote a letter requesting
the board to do the necessary action in his complaint; and (3) the alleged wrong was in truth a wrong
against the stockholders of the corporation generally, and not against Cruz or Minterbro, in
particular. In the end, it is Filport, not Cruz which directly stands to benefit from the suit. And while it
is true that the complaining stockholder must show to the satisfaction of the court that he has
exhausted all the means within his reach to attain within the corporation itself the redress for his
grievances, or actions in conformity to his wishes, nonetheless, where the corporation is under the
complete control of the principal defendants, as here, there is no necessity of making a demand
upon the directors.
Topic: STOCKHOLDERS AND MEMBERS- Voting (Who may exercise)

Case No. 411

WILSON P. GAMBOA vs. FINANCE SECRETARY MARGARITO B. TEVES et. al

G.R. No. 176579, June 28, 2011
Facts:

This is a petition to nullify the sale of shares of stock of Philippine Telecommunications Investment
Corporation (PTIC) by the government of the Republic of the Philippines, acting through the Inter-
Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First
Pacific Company Limited (First Pacific), a Hong Kong-based investment management and holding
company and a shareholder of the Philippine Long Distance Telephone Company (PLDT).

The petitioner questioned the sale on the ground that it also involved an indirect sale of 12 million
shares (or about 6.3 percent of the outstanding common shares) of PLDT owned by PTIC to First
Pacific. With this sale, First Pacific’s common shareholdings in PLDT increased from 30.7 percent to
37 percent, thereby increasing the total common shareholdings of foreigners in PLDT to about
81.47%. This, according to the petitioner, violates Section 11, Article XII of the 1987 Philippine
Constitution which limits foreign ownership of the capital of a public utility to not more than 40%,
thus: Section 11. No franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by
such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a
longer period than fifty years.

Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so requires.
The State shall encourage equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public utility enterprise shall be
limited to their proportionate share in its capital, and all the executive and managing officers of such
corporation or association must be citizens of the Philippines.

Issue:

Whether or not the term “capital” in Section 11, Article XII of the Constitution refer to the total
common shares only, or to the total outstanding capital stock (combined total of common and non-
voting preferred shares) of PLDT, a public utility.

Held:

Yes. Considering that common shares have voting rights which translate to control, as opposed to
preferred shares which usually have no voting rights, the term “capital” in Section 11, Article XII of
the Constitution refers only to common shares. However, if the preferred shares also have the right
to vote in the election of directors, then the term “capital” shall include such preferred shares
because the right to participate in the control or management of the corporation is exercised
through the right to vote in the election of directors. In short, the term “capital” in Section 11, Article
XII of the Constitution refers only to shares of stock that can vote in the election of directors.
To construe broadly the term “capital” as the total outstanding capital stock, including both
common and non-voting preferred shares, grossly contravenes the intent and letter of the
Constitution that the “State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.” A broad definition unjustifiably disregards who owns the
all-important voting stock, which necessarily equates to control of the public utility.

Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors.
PLDT’s Articles of Incorporation expressly state that “the holders of Serial Preferred Stock shall not
be entitled to vote at any meeting of the stockholders for the election of directors or for any other
purpose or otherwise participate in any action taken by the corporation or its stockholders, or to
receive notice of any meeting of stockholders.” On the other hand, holders of common shares are
granted the exclusive right to vote in the election of directors. PLDT’s Articles of Incorporation state
that “each holder of Common Capital Stock shall have one vote in respect of each share of such
stock held by him on all matters voted upon by the stockholders, and the holders of Common Capital
Stock shall have the exclusive right to vote for the election of directors and for all other purposes.”

It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common
shares of PLDT. In fact, based on PLDT’s 2010 General Information Sheet (GIS), which is a document
required to be submitted annually to the Securities and Exchange Commission, foreigners hold
120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares. In
other words, foreigners hold 64.27% of the total number of PLDT’s common shares, while Filipinos
hold only 35.73%. Since holding a majority of the common shares equates to control, it is clear that
foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the allowable
40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII
of the Constitution.

As shown in PLDT’s 2010 GIS, as submitted to the SEC, the par value of PLDT common shares is P5.00
per share, whereas the par value of preferred shares is P10.00 per share. In other words, preferred
shares have twice the par value of common shares but cannot elect directors and have only 1/70 of
the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos
while foreigners own only a minuscule 0.56% of the preferred shares. Worse, preferred shares
constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only
22.15%. This undeniably shows that beneficial interest in PLDT is not with the non-voting preferred
shares but with the common shares, blatantly violating the constitutional requirement of 60 percent
Filipino control and Filipino beneficial ownership in a public utility.
Topic: CAPITAL AFFAIRS- Consolidation for stocks

Case No. 430

NIELSON & COMPANY, INC. vs. LEPANTO CONSOLIDATED MINING COMPANY

G.R. No. L-21601, December 28, 1968
Facts:

An operating agreement was executed before World War II (on 30 January 1937) between Nielson &
Co. Inc. and the Lepanto Consolidated Mining Co. whereby the former operated and managed the
mining properties owned by the latter for a management fee of P2,500.00 a month and a 10%
participation in the net profits resulting from the operation of the mining properties, for a period of 5
years. In 1940, a dispute arose regarding the computation of the 10% share of Nielson in the profits.
The Board of Directors of Lepanto, realizing that the mechanics of the contract was unfair to Nielson,
authorized its President to enter into an agreement with Nielson modifying the pertinent provision
of the contract effective January 1, 1940 in such a way that Nielson shall receive (1) 10% of the
dividends declared and paid, when and as paid, during the period of the contract and at the end of
each year, (2) 10% of any depletion reserve that may be set up, and (3) 10% of any amount expended
during the year out of surplus earnings for capital account. In the latter part of 1941, the parties
agreed to renew the contract for another period of 5 years, but in the meantime, the Pacific War
broke out in December 1941.

In January 1942 operation of the mining properties was disrupted on account of the war. In February
1942, the mill, power plant, supplies on hand, equipment, concentrates on hand and mines, were
destroyed upon orders of the United States Army, to prevent their utilization by the invading
Japanese Army. The Japanese forces thereafter occupied the mining properties, operated the mines
during the continuance of the war, and who were ousted from the mining properties only in August
1945. Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement
arose between NIELSON and LEPANTO over the status of the operating contract which as renewed
expired in 1947.

Issue:

Whether or not Nielson is entitled to receive shares of stock forming part of the stock dividend of
Lepanto in lieu of the cash value of the dividends declared by Lepanto during the Japanese
occupation.

Held:

No. Stock dividends cannot be issued to a person who is not a stockholder in payment of services
rendered.

Section 16 of the Corporation Law, in part, provides as follows:

No corporation organized under this Act shall create or issue bills, notes or other
evidence of debt, for circulation as money, and no corporation shall issue stock or bonds
except in exchange for actual cash paid to the corporation or for: (1) property actually
received by it at a fair valuation equal to the par or issued value of the stock or bonds so
 issued; and in case of disagreement as to their value, the same shall be presumed to be
the assessed value or the value appearing in invoices or other commercial documents, as
the case may be; and the burden or proof that the real present value of the property is
greater than the assessed value or value appearing in invoices or other commercial
documents, as the case may be, shall be upon the corporation, or for (2) profits earned by
it but not distributed among its stockholders or members; Provided, however, That no
stock or bond dividend shall be issued without the approval of stockholders representing
not less than two-thirds of all stock then outstanding and entitled to vote at a general
meeting of the corporation or at a special meeting duly called for the purpose.

Shares of stock are given the special name "stock dividends" only if they are issued in lieu of
undistributed profits. If shares of stocks are issued in exchange of cash or property then those
shares do not fall under the category of "stock dividends".

A corporation may legally issue shares of stock in consideration of services rendered to it by a person
not a stockholder, or in payment of its indebtedness. A share of stock issued to pay for services
rendered is equivalent to a stock issued in exchange of property, because services are equivalent to
property. Likewise, a share of stock issued in payment of indebtedness is equivalent to issuing a
stock in exchange for cash.

In other words, it is the shares of stock that are originally issued by the corporation and forming part
of the capital that can be exchanged for cash or services rendered, or property; that is, if the
corporation has original shares of stock unsold or unsubscribed, either coming from the original
capitalization or from the increased capitalization. Those shares of stock may be issued to a person
who is not a stockholder, or to a person already a stockholder in exchange for services rendered or
for cash or property. But a share of stock coming from stock dividends declared cannot be issued to
one who is not a stockholder of a corporation.

Thus, stock dividends cannot be issued to a person who is not a stockholder in payment of services
rendered. And so, in the case at bar, Nielson cannot be paid in shares of stock which form part of the
stock dividends of Lepanto for services it rendered under the management contract.

In the case at bar Nielson cannot be paid in shares of stock which form part of the stock dividends of
Lepanto for services it rendered under the management contract. We sustain the contention of
Lepanto that the understanding between Lepanto and Nielson was simply to make the cash value of
the stock dividends declared as the basis for determining the amount of compensation that should
be paid to Nielson, in the proportion of 10% of the cash value of the stock dividends declared. In
other words, Nielson must still be paid his 10% fee using as the basis for computation the cash value
of the stock dividends declared.
Topic: CAPITAL AFFAIRS- Right to transfer share / Validity on restriction on right

Case No. 449

MARSH THOMSON vs. COURT OF APPEALS and THE AMERICAN CHAMBER OF COMMERCE OF THE
PHILIPPINES, INC.
G.R. No. 116631, October 28, 1998
Facts:

A. Lewis Burridge, retired as AmCham's President while petitioner was still working with private
respondent, his superior. Before Burridge decided to return to his home country, he wanted to
transfer his proprietary share in the Manila Polo Club (MPC) to petitioner. However, through the
intercession of Burridge, private respondent paid for the share but had it listed in petitioner's name.
This was made clear in an employment advice dated January 13, 1986, wherein petitioner was
informed by private respondent.

Burridge transferred said proprietary share to petitioner, as confirmed in a letter of notification to

the Manila Polo Club. Upon his admission as a new member of the MPC, petitioner paid the transfer
fee of P40,000.00 from his own funds; but private respondent subsequently reimbursed this
amount.

MPC issued Proprietary Membership Certificate Number 3398 in favor of petitioner. But petitioner,
however, failed to execute a document recognizing private respondent's beneficial ownership over
said share.

When petitioner's contract of employment was up for renewal in 1989, he notified private
respondent that he would no longer be available as Executive Vice President after September 30,
1989. Still, the private respondent asked the petitioner to stay on for another six (6) months.

Issue:

Whether or not private respondent is the beneficial owner of the disputed share.

Held:

Yes. Petitioner claims ownership of the MPC share, asserting that he merely incurred a debt to
respondent when the latter advanced the funds for the purchase of the share. On the other hand,
private respondent asserts beneficial ownership whereby petitioner only holds the share in his name,
but the beneficial title belongs to private respondent. To resolve the first issue, we must clearly
distinguish a debt from a trust.

The beneficiary of a trust has beneficial interest in the trust property, while a creditor has merely a
personal claim against the debtor. In trust, there is a fiduciary relation between a trustee and a
beneficiary, but there is no such relation between a debtor and creditor. While a debt implies merely
an obligation to pay a certain sum of money, a trust refers to a duty to deal with a specific property
for the benefit of another. If a creditor-debtor relationship exists, but not a fiduciary relationship
between the parties, there is no express trust. However, it is understood that when the purported
trustee of funds is entitled to use them as his or her own (and commingle them with his or her own
money), a debtor-creditor relationship exists, not a trust.

In the present case, as the Executive Vice-President of AmCham, petitioner occupied a fiduciary
position in the business of Amcham. AmCham released the funds to acquire a share in the Club for
the use of petitioner but obliged him to execute such document as necessary to acknowledge
beneficial ownership thereof by the Chamber. A trust relationship is, therefore, manifestly indicated.

Moreover, petitioner failed to present evidence to support his allegation of being merely a debtor
when the private respondent paid the purchase price of the MPC share. Applicable here is the rule
that a trust arises in favor of one who pays the purchase money of property in the name of another,
because of the presumption that he who pays for a thing intends a beneficial interest therein for
himself.

Although petitioner initiated the acquisition of the share, evidence on record shows that private
respondent acquired said share with its funds. Petitioner did not pay for said share, although he later
wanted to, but according to his own terms, particularly the price thereof.
Topic: CAPITAL AFFAIRS- Transfer of shares of stock and registration

Case No. 469

AQUILINO RIVERA vs. ALFREDO C. FLORENDO

GR No. L-57586, Oct 08, 1986
Facts:

Petitioner corporation was organized and register under Philippine laws with a capital stock of
P1,000,000.00 divided into 10,000 shares of P100.00 par value each by the herein petitioner Rivera
and four (4) other incorporators. Sometime thereafter petitioner Rivera increased his subscription
from the original 1,250 to a total of 4899 shares.

Subsequently, Isamu Akasako, a Japanese national and co-petitioner who is allegedly the real owner
of the shares of stock in the name of petitioner Aquilino Rivera, sold 2550 shares of the same to
private respondent Milagros Tsuchiya for a consideration of P440,000.00 with the assurance that
Milagros Tsuchiya will be made the President and Lourdes Jureidini a director after the purchase.
Aquilino Rivera who was in Japan also assured private respondents by overseas call that he will sign
the stock certificates because Isamu Akasako is the real owner. However, after the sale was
consummated and the consideration was paid with a receipt of payment therefor shown, Aquilino
Rivera refused to make the indorsement unless he is also paid.

Issue:

Whether or not it is the regular court or the Securities and Exchange Commission that has jurisdiction
over the present controversy.

Held:

Yes. Presidential Decree No. 902-A provides:

"Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and
Exchange Commission over corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and decrees, it shall have original
and exclusive jurisdiction to hear and decide cases involving:

(a) xxx xxx xxx

(b) Controversies arising out of intra-corporate or partnership relations and among

stockholders, members, or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members, or associates,
respectively and between such corporations, partnership or association and the state insofar
as it concerns their individual franchise or right to exist as such entity."

It has already been settled that an intra-corporate controversy would call for the jurisdiction of the
Securities and Exchange Commission. On the other hand, an intra-corporate controversy has been
defined as "one which arises between a stockholder and the corporation. There is no distinction,
qualification, nor any exemption whatsoever.". This Court has also ruled that cases of private
respondents who are not shareholders of the corporation, cannot be a "controversy arising out of
intra-corporate or partnership relations between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or association, of which they are
stockholders, members or associates, respectively."

Under Batas Pambansa Blg. 68 otherwise known as "The Corporation Code of the Philippines",
shares of stock are transferred as follows:

"SEC. 63. Certificate of stock and transfer of shares. - The capital stock of stock corporations
shall be divided into shares for which certificates signed by the president or vice-president,
countersigned by the secretary or assistant secretary, and sealed with the seal of the
corporation shall be issued in accordance with the by laws. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate or certificates
indorsed by the owner or his attorney-in-fact or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as between the parties, until the
transfer is recorded in the book 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: xxx."

As confirmed by this Court, "shares of stock may be transferred by delivery to the transferee of the
certificate properly indorsed. 'Title may be vested in the transferee by delivery of the certificate with
a written assignment or indorsement thereof'. There should be compliance with the mode of
transfer prescribed by law.

As the bone of contention in this case, is the refusal of petitioner Rivera to indorse the shares of
stock in question and the refusal of the Corporation to register private respondents' shares in its
books, there is merit in the findings of the lower court that the present controversy is not an intra-
corporate controversy; private respondents are not yet stockholders; they are only seeking to be
registered as stockholders because of an alleged sale of shares of stock to them.
Topic: CAPITAL AFFAIRS- Payment of balance of subscription

Case No. 487

EDWARD A. KELLER & CO., LTD. vs. COB GROUP MARKETING, INC., et. Al.
G.R. No. L-68097, January 16, 1986
Facts:

Edward A. Keller & Co., Ltd. appointed COB Group Marketing, Inc. as exclusive distributor of its
household products, Brite and Nuvan in Panay and Negros, as shown in the sales agreement dated
March 14, 1970. Under that agreement Keller sold on credit its products to COB Group Marketing.

As security for COB Group Marketing's credit purchases up to the amount of P35,000, one Asuncion
Manahan mortgaged her land to Keller. Manahan assumed solidarily with COB Group Marketing the
faithful performance of all the terms and conditions of the sales agreement.

In July 1970 the parties executed a second sales agreement whereby COB Group Marketing's
territory was extended to Northern and Southern Luzon. As security for the credit purchases up to
P25,000 of COB Group Marketing for that area, Tomas C. Lorenzo, Jr. and his father Tomas, Sr. (now
deceased) executed a mortgage on their land in Nueva Ecija. Like Manahan, the Lorenzos were
solidarily liable with COB Group Marketing for its obligations under the sales agreement.

The credit purchases of COB Group Marketing, which started on October 15, 1969, limited up to
January 22, 1971. On May 8, the board of directors of COB Group Marketing were apprised by Jose E.
Bax the firm's president and general manager, that the firm owed Keller about P179,000. Bax was
authorized to negotiate with Keller for the settlement of his firm's liability. On the same day, May 8,
Bax and R. Oefeli of Keller signed the conditions for the settlement of COB Group Marketing's
liability. Twelve days later, or on May 20, COB Group Marketing, through Bax executed two second
chattel mortgages over its 12 trucks (already mortgaged to Northern Motors, Inc.) as security for its
obligation to Keller amounting to P179,185.16 as of April 30, 1971.

Issue:

Whether or not the lower courts erred in nullifying the admissions of liability made in 1971 by Bax as
president and general manager of COB Group Marketing and in giving credence to the alleged
overpayment computed by Bax.

Held:

Yes. The lower courts not only allowed Bax to nullify his admissions as to the liability of COB Group
Marketing but they also erroneously rendered judgment in its favor in the amount of its supposed
overpayment in the sum of P100,596.72, in spite of the fact that COB Group Marketing was declared
in default and did not file any counterclaim for the supposed overpayment. The lower courts harped
on Keller's alleged failure to thresh out with representatives of COB Group Marketing their "diverse
statements of credits and payments". This contention has no factual basis. That means that there
was a conference on the COB Group Marketing's liability. Bax in that discussion did not present his
reconciliation statements to show overpayment.
Bax admitted that Keller sent his company monthly statements of accounts but he could not
produce any formal protest against the supposed inaccuracy of the said statements. He lamely
explained that he would have to dig up his company's records for the formal protest. He did not
make any written demand for reconciliation of accounts.

As to the liability of the stockholders, it is settled that a stockholder is personally liable for the
financial obligations of a corporation to the extent of his unpaid subscription.
Topic: CORPORATE BOOKS AND RECORDS- Right to financial statements

Case No. 506

W. G. PHILPOTTS vs. PHILIPPINE MANUFACTURING COMPANY AND F. N. BERRY

G.R. No. 15568, November 08, 1919
Facts:

W. G. Philpotts, a stockholder in the Philippine Manufacturing Company, one of the respondents

herein, seeks by this proceeding to obtain a writ of mandamus to compel the respondents to permit
the plaintiff, in person or by some authorized agent or attorney, to inspect and examine the records
of the business transacted by said company since January 1, 1918. The petition is filed originally in this
court under the authority of section 515 of the Code of Civil Procedure, which gives to this tribunal
concurrent jurisdiction with the Court of First Instance in cases, among others, where any
corporation or person unlawfully excludes the plaintiff from the use and enjoyment of some right to
which he is entitled. The respondents interposed a demurrer, and the controversy is now before us
for the determination of the questions thus presented.

Issue:

Whether or not the right to inspect records and transactions of the corporation is permitted.

Held:

Yes. Now it is our opinion, and we accordingly hold, that the right of inspection given to a
stockholder in the provision above quoted can be exercised either by himself or by any proper
representative or attorney in fact, and either with or without the attendance of the stockholder. This
is in conformity with the general rule that what a man may do in person he may do through another;
and we find nothing in the statute that would justify us in qualifying the right in the manner
suggested by the respondents.

This conclusion is supported by the undoubted weight of authority in the United States, where it is
generally held that the provisions of law conceding the right of inspection to stockholders of
corporations are to be liberally construed and that said right may be exercised through any other
properly authorized person. As was said in Foster vs. White (86 Ala., 467), "The right may be
regarded as personal, in the sense that only a stockholder may enjoy it; but the inspection and
examination may be made by another.

In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable
to say that there are some things which a corporation may undoubtedly keep secret,
notwithstanding the right of inspection given by law to the stockholder; as for instance, where a
corporation, engaged in the business of manufacture, has acquired a formula or process, not
generally known, which has proved of utility to it in the manufacture of its products. It is not our
intention to declare that the authorities of the corporation, and more particularly the Board of
Directors, might not adopt measures for the protection of such process form publicity. There is,
however, nothing in the petition which would indicate that the petitioner in this case is seeking to
discover anything which the corporation is entitled to keep secret; and if anything of the sort is
involved in the case it may be brought out at a more advanced stage of the proceedings.
Topic: DISSSOLUTION AND LIQUIDATION- Modes of Dissolution (Involuntary)

Case No. 525

IN RE: PETITION FOR ASSISTANCE IN THE LIQUIDATION OF THE RURAL BANK OF BOKOD
(BENGUET), INC., PHILIPPINE DEPOSIT INSURANCE CORPORATION vs. BUREAU OF INTERNAL
REVENUE
G.R. NO. 158261, December 18, 2006
Facts:

In 1986, a special examination of RBBI was conducted by the Supervision and Examination Sector
(SES) of what is now the Bangko Sentral ng Pilipinas(BSP), wherein various loan irregularities were
uncovered. In a letter, the SES Department III required the RBBI management to infuse fresh capital
into the bank, within 30 days from date of the advice, and to correct all the exceptions noted.
However, up to the termination of the subsequent general examination conducted by the SES
Department III, no concrete action was taken by the RBBI management. In view of the irregularities
noted and the insolvent condition of RBBI, the members of the RBBI Board of Directors were called
for a conference at the BSP on August 4, 1986. Only one RBBI Director, Mr. Wakit, attended the
conference, and the examination findings and related recommendations were discussed with him. In
a letter, dated 4 August 1986, receipt of which was acknowledged by Mr. Wakit, the SES Department
III warned the RBBI Board of Directors that, unless substantial remedial measures are taken to
rehabilitate the bank, it will recommend that the bank be placed under receivership. In a subsequent
letter, a copy of which was sent to every member of the RBBI Board of Directors via registered mail,
the SES Department III reiterated its warning that it would recommend the closure of the bank,
unless the needed fresh capital was immediately infused. Despite these notices, the SES Department
III received no word from RBBI or from any of its Directors as of 28 November 1986.

In a meeting held on 9 January 1987, the Monetary Board of the BSP decided that Rural Bank of
Bokod is place under receivership. A memorandum and report, dated 28 August 1990, were
submitted by the Director of the SES Department III concluding that the RBBI remained in insolvent
financial condition and it can no longer safely resume business with the depositors, creditors, and
the general public. On 10 April 1991, the designated BSP liquidator of RBBI caused the filing with the
RTC of a Petition for Assistance in the Liquidation of RBBI.

Issue:

Whether or not RBBI, as represented by its liquidator, PDIC, still needs to secure a tax clearance from
the BIR before the RTC could approve the Project of Distribution of the assets of RBBI.

Held:

No. Section 52(C) of the Tax Code of 1997 and the BIR-SEC Regulations No. 1 regulate the relations
only as between the SEC and the BIR, making a certificate of tax clearance a prior requirement
before the SEC could approve the dissolution of a corporation. In Spec. Proc. No. 91-SP-0060 pending
before the RTC, RBBI was placed under receivership and ordered liquidated by the BSP, not the SEC;
and the SEC is not even a party in the said case, although the BIR is. This Court cannot find any basis
to extend the SEC requirements for dissolution of a corporation to the liquidation proceedings of
RBBI before the RTC when the SEC is not even involved therein.
It is conceded that the SEC has the authority to order the dissolution of a corporation pursuant to
Section 121 of Batas Pambansa Blg. 68, otherwise known as the Corporation Code of the Philippines,
which reads

Sec. 121. Involuntary dissolution. A corporation may be dissolved by the Securities and
Exchange Commission upon filing of a verified complaint and after proper notice and hearing
on the grounds provided by existing laws, rules and regulations.

The Corporation Code, however, is a general law applying to all types of corporations, while the New
Central Bank Act regulates specifically banks and other financial institutions, including the dissolution
and liquidation thereof. As between a general and special law, the latter shall prevail generalia
specialibus non derogant.

The liquidation of RBBI is undertaken according to Sections 30 of the New Central Bank Act, viz

Sec. 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of
the supervising or examining department, the Monetary Board finds that a bank or quasi-
bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of business:
Provided, That this shall not include inability to pay caused by extraordinary demands
induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its
liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or
creditors; or

(d) has wilfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.

It should be noted that there are substantial differences in the procedure for involuntary dissolution
and liquidation of a corporation under the Corporation Code, and that of a banking corporation
under the New Central Bank Act, so that the requirements in one cannot simply be imposed in the
other.

Under the Corporation Code, the SEC may dissolve a corporation, upon the filing of a verified
complaint and after proper notice and hearing, on grounds provided by existing laws, rules, and
regulations. Upon receipt by the corporation of the order of suspension from the SEC, it is required
to notify and submit a copy of the said order, together with its final tax return, to the BIR. The SEC is
also required to furnish the BIR a copy of its order of suspension. The BIR is supposed to issue a tax
clearance to the corporation within 30 days from receipt of the foregoing documentary
requirements. The SEC shall issue the final order of dissolution only after the corporation has
submitted its tax clearance; or in case of involuntary dissolution, the SEC may proceed with the
dissolution after 30 days from receipt by the BIR of the documentary requirements without a tax
clearance having been issued. The corporation is allowed to continue as a body corporate forthree
years after its dissolution, for the purpose of prosecuting and defending suits by or against it, to
settle and close its affairs, and to dispose of and convey its property and distribute its assets, but not
for the purpose of continuing its business. The corporation may undertake its own liquidation, or at
any time during the said three years, it may convey all of its property to trustees for the benefit of its
stockholders, members, creditors, and other persons in interest.

In contrast, the Monetary Board may summarily and without need for prior hearing, forbid the
banking corporation from doing business in the Philippines, for causes enumerated in Section 30 of
the New Central Bank Act; and appoint the PDIC as receiver of the bank. PDIC shall immediately
gather and take charge of all the assets and liabilities of the closed bank and administer the same for
the benefit of its creditors. The summary nature of the procedure for the involuntary closure of a
bank is especially stressed in Section 30 of the New Central Bank Act, which explicitly states that the
actions of the Monetary Board under the said Section or Section 29 shall be final and executory, and
may not be restrained or set aside by the court except on a Petition for Certiorari filed by the
stockholders of record of the bank representing a majority of the capital stock. PDIC, as the
appointed receiver, shall file ex parte with the proper RTC, and without requirement of prior notice
or any other action, a petition for assistance in the liquidation of the bank. The bank is not given the
option to undertake its own liquidation.
Topic: DISSSOLUTION AND LIQUIDATION- Liquidation

Case No. 544

CATMON SALES INTERNATIONAL CORPORATION vs. ATTY. MANUEL D. YNGSON, JR., AS

LIQUIDATOR OF CATMON SALES INTERNATIONAL CORPORATION
G.R. No. 179761, January 15, 2010
Facts:

On February 8, 1999, petitioner Catmon Sales International Corporation filed a Petition for
Declaration in a State of Suspension of Payments with the SEC. On May 10, 2000, the SEC declared
petitioner technically insolvent considering that there was no settlement reached with its creditors
and that its inability to pay its creditors had lasted for a period longer than one year from the filing of
the petition. In the same Order, the SEC appointed respondent Manuel D. Yngson, Jr. of Receivers
and Liquidators, Inc. as petitioner’s liquidator.

On May 31, 2001, the SEC terminated the services of respondent. Respondent, in turn, submitted his
Accomplishment Report summarizing all the activities he had undertaken and billed the SEC the total
sum of P623,214.35, representing his liquidator’s fee and reimbursement of out-of-pocket expenses.
On December 18, 2001, the SEC ordered that an audit be conducted to determine the proper amount
to be paid to respondent. The Corporation Finance Department noted a slight difference in the
liquidator’s computation. On September 23, 2004, respondent manifested to the SEC that he was
willing to reduce his liquidator’s fee provided that his request for administrative expenses be settled
in full. On June 23, 2005, the SEC, through its General Counsel, ordered the members of the Board of
Directors of petitioner to pay respondent his claim for reimbursement of the expenses incurred in
the performance of his duties as liquidator, together with his liquidator’s fee, for a total amount of
P398,284.40

Issue:

Whether or not the Securities and Exchange Commission has the power to fix the amount of the
liquidator’s fee.

Held:

Yes. However, to countenance petitioner’s posturing would be to unduly delimit the broad powers
granted to the SEC under Presidential Decree No. 902-A, specifically the all-encompassing provision
in Section 3 that the SEC has "absolute jurisdiction, supervision and control" over all corporations
who are the grantees of primary franchises and/or license or permit issued by the government to
operate in the Philippines. There is no gainsaying, therefore, that the SEC is authorized to determine
the fees of receivers and liquidators not only when there is "failure of agreement" between the
parties but also in the absence thereof. A contrary ruling would give license to corporations under
liquidation or receivership to refuse to participate in negotiations for the fixing of the compensation
of their liquidators or receivers so as to evade their obligation to pay the same.

Petitioner may not have been given the chance to meet face to face with respondent for the purpose
of determining the latter’s fee. But this fact alone should not invalidate the amount fixed by the SEC.
What matters is the reasonableness of the fee in light of the services rendered by the liquidator. It is
the policy of the SEC to provide uniform/fair and reasonable compensation or fees for the
comparable services rendered by the duly designated members of the Management Committee
(MANCOM), rehabilitation receivers and liquidators in corporations or partnerships placed under
MANCOM/receivership or liquidation, pursuant to Section 6(d) of Presidential Decree No. 902-A, the
SEC Rules on Corporate Recovery, the Corporation Code of the Philippines, the Securities Regulation
Code, and other related laws enforced by the SEC.

Clearly, the fee fixed by the SEC was not without basis. Besides, as correctly held by the CA,
"respondent actually rendered services in accordance with his oath of office as liquidator for which
he is entitled to be compensated by petitioner."
Topic: OTHER CORPORATIONS- Religious Corporation

Case No. 563

EXALTACION CAÑETE, SOFIA CAVITE and FATHER MANUEL V. GOMEZ vs. COURT OF APPEALS
G.R. No. 45330, March 7, 1989
Facts:

Inocenta de Veyra from Tanauan, Leyte founded the "Cofradia de Nuestra Senora de Belen", a
voluntary religious group of hermanas mayores. In 1919 and 1930, Inocenta donated to the Cofradia
the disputed images of the Holy Infant Jesus and of the Blessed Virgin (de Belen), respectively. Said
religious group has been largely governed through the years by customs and traditions. It is not
known if there are by-laws within the association. It was the unbroken practice in the Cofradia that
the hermana mayor, during her incumbency, would keep in her custody as trustee, the two images,
the investments, garments and standarte, including the cash contributions of its members, with the
tacit understanding that the said religious images and the unspent funds would be turned over to
the next hermana mayoron the first day of the succeeding year.

In January of 1972, petitioner Exaltacion Canete was elected as the hermana mayor and as such she
took possession of the subject religious articles and funds of the Cofradia. Because of the quarrel
between the parish priest of Tanauan, Fr. Manuel Gomez and Bishop Salvador of the Diocese,
resulting in the suspension and relief of the former, the Cofradia, an erstwhile cohesive group of
women devotees, had been drawn into the controversy and was now split into two camps: one loyal
to the ex-parish priest Fr. Gomez, and the other, identified with the newly-designated parish priest
Fr. Parilla. The Cofradia members with Fr. Gomez elected Sofia Cavite as the hermana mayor for 1973,
replacing Exaltacion Canete, while the group with Fr. Parilla chose Bienvenida Casas. Exaltacion
Canete surrendered the images to Sofia Cavite.

Claiming to be members of the Cofradia and owners in common of its properties including the
disputed images of the Blessed Virgin (de Belen) and the Holy Infant Jesus, respondents brought an
action against Exaltacion Cañete and Sofia Cavite for the "Recovery of Personal Properties with Writ
of Attachment and Damages" before the Court of First Instance of Leyte.

Issue:

Whether or not Cofradia de Nuestra Senora de Belen is governed by the Corporation Code.

Held:

No. As correctly ruled by the trial court, the question which came before it concerns rights of
property held by a religious society, strictly independent of the church. Hence, the rights of such an
organization to the use of its property must accordingly be determined by the ordinary principles
which govern voluntary association.

Citing Watson v. Jones , in a similar case, this Court ruled that the use of properties of a "religious
congregation" in case of schism, is controlled by the numerical majority of the members. The
minority in choosing to separate themselves into a distinct body and refusing to recognize the
authority of the government body, can claim no rights in the property from the fact that they once
had been members.
Topic: OTHER CORPORATIONS- Foreign Corporation

Case No. 582

THE MENTHOLATUM CO., INC., ET AL. vs. ANACLETO MANGALIMAN ET AL.

G.R. No. 47701, June 27, 1941
Facts:

On October 1, 1935, the Mentholatum Co., Inc., and the Philippine-American Drug Co., Inc. instituted
an action in the Court of First Instance of Manila against Anacleto Mangaliman, Florencio
Mangaliman and the Director of the Bureau of Commerce for infringement of trade mark and unfair
competition. Plaintiffs prayed for the issuance of an order restraining Anacleto and Florencio
Mangaliman from selling their product "Mentholiman," and directing them to render an accounting
of their sales and profits and to pay damages. The complaint stated, among other particulars, that
the Mentholatum Co., Inc., is a Kansas corporation which manufactures "Mentholiman," a
medicament and salve adapted for the treatment of colds, nasal irritations, chapped skin, insect
bites, rectal irritation and other external ailments of the body and that the Philippine-American Drug
Co., Inc. is its exclusive distributing agent in the Philippines authorized by it to look, alter and protect
its interests.

On June 26, 1919 and on January 21, 1921, the Mentholatum Co., inc., registered with the Bureau of
Commerce and Industry the word, "Mentholatum," as trade mark for its products and that the
Mangaliman brothers prepared a medicament and salve named "Mentholiman" which they sold to
the public packed in a container of the same size, color and shape as "Mentholatum". As a
consequence of these acts of the defendants, plaintiffs suffered damages from the diminution of
their sales and the loss of goodwill and reputation of their product in the market.

Issues:

(1) Is Mentholatum Co. Inc. “doing business” in the Philippines?

(2) Is Mentholatum Co. Inc. allowed to prosecute its action?

Held:

1.) Yes. No general rule or governing principle can be laid down as to what constitutes "doing" or
"engaging in" or "transacting" business. Indeed, each case must be judged in the light of its
peculiar environmental circumstances. The true test, however, seems to be whether the foreign
corporation is continuing the body or substance of the business or enterprise for which it was
organized or whether it has substantially retired from it and turned it over to another. The term
implies a continuity of commercial dealings and arrangements, and contemplates, to that extent,
the performance of acts or works or the exercise of some of the functions normally incident to,
and in progressive prosecution of, the purpose and object of its organization.

Philippine-American Drug Co., Inc., is the exclusive distributing agent in the Philippine Islands of
the Mentholatum Co., Inc., in the sale and distribution of its product known as the
Mentholatum." The object of the pleadings being to draw the lines of battle between litigants
and to indicate fairly the nature of the claims or defenses of both. A party cannot subsequently
take a position contradictory to, or inconsistent with, his pleadings, as the facts therein admitted
 are to be taken as true for the purpose of the action. It follows that whatever transactions the
Philippine-American Drug Co., Inc., had executed in view of the law, the Mentholatum Co., Inc.,
did it itself.

2.) No. Section 69 of Act No. 1459 reads:

"Sec. 69. No foreign corporation or corporation formed, organized, or existing under any laws
other than those of the Philippine Islands shall be permitted to transact business in the Philippine
Islands or maintain by itself or assignee any suit for the recovery of any debt, claim, or demand
whatever, unless it shall have the license prescribed in the section immediately preceding. Xxx”

The Mentholatum Co., Inc., being a foreign corporation doing business in the Philippines without
the license required by section 68 of the Corporation Law, it may not prosecute this action for
violation of trade mark and unfair competition. Neither may the Philippine-American Drug Co.,
Inc., maintain the action here for the reason that the distinguishing features of the agent being
his representative character and derivative authority, it cannot now, to the advantage of its
principal, claim an independent standing in court.
Topic: OTHER CORPORATIONS- Other cases

Case No. 619

PHILIP MORRIS, INC. vs. FORTUNE TOBACCO CORPORATION

G.R. No. 158589, June 27, 2006
Facts:

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United
States of America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the
Philippine Patents Office (PPO), the registered owner of the trademark “MARK VII” for cigarettes.
Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the
registered owner of the trademark “MARK TEN” for cigarettes as evidenced by PPO Certificate of
Registration No. 11147. And as can be seen in Trademark Certificate of Registration No. 19053,
another subsidiary of Philip Morris, Inc., the Swiss company Fabriques de Tabac Reunies, S.A., is the
assignee of the trademark “LARK,” which was originally registered in 1964 by Ligget and Myers
Tobacco Company.

On the other hand, respondent Fortune Tobacco Corporation, a company organized in the
Philippines, manufactures and sells cigarettes using the trademark “MARK.” Petitioners then filed a
Complaint for Infringement of Trademark and Damages against respondent Fortune Tobacco
Corporation. In the Complaint with prayer for the issuance of a preliminary injunction, petitioners
alleged that they are foreign corporations not doing business in the Philippines and are suing on an
isolated transaction.

They averred that the countries in which they are domiciled grant to corporate or juristic persons of
the Philippines the privilege to bring action for infringement, without need of a license to do
business in those countries. Petitioners likewise manifested being registered owners of the
trademark “MARK VII” and “MARK TEN” for cigarettes as evidenced by the corresponding
certificates of registration and an applicant for the registration of the trademark “LARK MILDS”.

Issue:

Whether or not Petitioner has the legal capacity to sue the respondent for alleged infringement.

Held:

Yes. A “trademark” is any distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof adopted and used by a manufacturer or merchant on his goods to identify and
distinguish them from those manufactured, sold, or dealt in by others. Inarguably, a trademark
deserves protection. A foreign corporation may have the capacity to sue for infringement but the
question of whether they have an exclusive right over their symbol as to justify issuance of the
controversial writ will depend on actual use of their trademarks in the Philippines in line with
Sections 2 and 2-A of RA116.

It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do
business in the Philippines files a complaint for infringement, the entity need not be actually using its
trademark in commerce in the Philippines. Such a foreign corporation may have the personality to
file a suit for infringement but it may not necessarily be entitled to protection due to absence of
actual use of the emblem in the local market.

Hence, it may be stated right off that the registration of a trademark unaccompanied by actual use
thereof in the country accords the registrant only the standing to sue for infringement in Philippine
courts. Entitlement to protection of such trademark in the country is entirely a different matter.
Topic: SECURITIES AND EXCHANGE COMMISSION LAW- Devices or Schemes amounting to Fraud or
misrepresentation

Case No. 637

A & A CONTINENTAL COMMODITIES PHILIPPINES, INC. vs. SEC and ROLANDO G. AGUILA
G.R. No. L-55343, August 16, 1993
Facts:

Petitioner is a domestic corporation engaged in the commodities brokerage business. On August 3,

1979, petitioner and private respondent entered into a contract for the purchase or sale of
commodities. On January 21, 1980, private respondent bought, through petitioner, 7 contracts of
copper. The margin requirement: for the 7 contracts was P18,750 per contract or a total amount of
P131,250.00, which amount was earmarked from private respondent's cash deposit with petitioner of
P306,326.46. On January 23, 1980, petitioner, allegedly "without valid and justifiable cause,
maliciously, arbitrarily, wantonly, fraudulently, and recklessly" ordered private respondent to
increase his margin requirements per contract and gave private respondent up to 5 P.M. of the same
day w/in which to deposit with petitioner the additional amount of.

Private respondent requested additional time within which to raise the amount, but petitioner
informed him that it would immediately sell his 7 copper contracts should he fail to deposit the
additional amount by 5 P.M. that same day. Private respondent then requested that should
petitioner proceed with the sale, the same be not effected immediately upon the opening of trading
if prices were low but at a later time. However, petitioner did not accede to the request and sold 5
contracts immediately upon the opening of trading on January 24, 1980 and the other two at a later
time.

Issue:

Whether or not the Securities and Exchange Commission has jurisdiction over the case.

Held:

Yes. Poring over the complaint filed by private respondent, the court find that the complaint is
praying for two reliefs based on the same set of facts. One is for the revocation of the certificate of
registration of petitioner; the other is for a sum of money.
On the action to revoke the certificate of registration of petitioner, there is no doubt that the SEC
has jurisdiction over the same. Section 6(L) of Presidential Decree No. 902-A clearly provides that the
SEC shall possess the power to suspend or revoke, after proper notice and hearing, the franchise or
certificate registration of corporations, partnerships or associations.

On the other aspect of the SEC's jurisdiction over the action for a sum of money, we likewise rule
that the Commission has the legal competence to decide said issue. It is axiomatic that jurisdiction
over the subject matter of a case is conferred by law and is determined by the allegations of the
complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the
claims asserted therein.
Considering that Petitioners' Complaints sufficiently allege acts amounting to fraud and
misrepresentation committed by Respondent Corporation, the SEC must be held to retain its original
and exclusive jurisdiction over these five (5) cases notwithstanding the revocation by the Central
Bank of Respondent Corporation's license or permit to operate as a financing company and despite
the fact that the suits involve collections of sums of money paid to said corporation, the recovery of
which would ordinarily fall within the jurisdiction of regular Courts. The fraud committed is
detrimental to the interest of the public and, therefore, encompasses a category of relationship
within the SEC jurisdiction.
Topic: SECURITIES AND EXCHANGE COMMISSION LAW- Controversies in the election or appointment /
dismissal of corporate officers

Case No. 655

RENATO REAL vs. SANGU PHILIPPINES

GR No. 168757, January 19, 2011
Facts:

Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a
corporation engaged in the business of providing manpower for general services, like janitors,
janitresses and other maintenance personnel, to various clients. In 2001, petitioner, together with 29
others who were either janitors, janitresses, leadmen and maintenance men, all employed by
respondent corporation, filed their respective Complaints for illegal dismissal against the latter and
respondent Kiichi Abe, the corporation’s Vice-President and General Manager. These complaints
were later on consolidated.

With regard to petitioner, he was removed from his position as Manager through Board Resolution
2001-033 adopted by respondent corporation’s Board of Directors. Petitioner complained that he was
neither notified of the Board Meeting during which said board resolution was passed nor formally
charged with any infraction. He just received from respondents a letter4 dated March 26, 2001 stating
that he has been terminated from service effective March 25, 2001 for the following reasons: (1)
continuous absences at his post at Ogino Philippines Inc. for several months which was detrimental
to the corporation’s operation; (2) loss of trust and confidence; and, (3) to cut down operational
expenses to reduce further losses being experienced by respondent corporation.

Issue:

Whether or not petitioner’s complaint for illegal dismissal constitutes an intra-corporate controversy
and thus, beyond the jurisdiction of the Labor Arbiter.

Held:

No. With the elements of intra-corporate controversy being absent in this case, we thus hold that
petitioner’s complaint for illegal dismissal against respondents is not intra-corporate. Rather, it is a
termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter pursuant to
Section 217 of the Labor Code.

With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which dismissed
petitioner’s complaint for lack of jurisdiction. In cases such as this, the Court normally remands the
case to the NLRC and directs it to properly dispose of the case on the merits. "However, when there
is enough bases on which a proper evaluation of the merits of petitioner’s case may be had, the
Court may dispense with the time-consuming procedure of remand in order to prevent further delays
in the disposition of the case." ‘It is already an accepted rule of procedure for us to strive to settle
the entire controversy in a single proceeding, leaving no root or branch to bear the seeds of
litigation. If, based on the records, the pleadings, and other evidence, the dispute can be resolved by
us, we will do so to serve the ends of justice instead of remanding the case to the lower court for
further proceedings." We have gone over the records before us and we are convinced that we can
now altogether resolve the issue of the validity of petitioner’s dismissal and hence, we shall proceed
to do so.

A review of relevant jurisprudence shows a development in the Court's approach in classifying what
constitutes an intra-corporate controversy. Initially, the main consideration in determining whether
a dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-
corporate relationship existing between or among the parties. The types of relationships embraced
under Section 5(b) x x x were as follows:

a) between the corporation, partnership or association and the public;

b) between the corporation, partnership or association and its stockholders, partners, members
or officers;
c) between the corporation, partnership or association and the State as far as its franchise,
permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves.

The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the
SEC (now the RTC), regardless of the subject matter of the dispute. This came to be known as the
relationship test.
Topic: SECURITIES AND EXCHANGE COMMISSION LAW- Petition for declaration in the state of suspension
of payments

Case No. 674

RICARDO V. CASTILLO vs. UNIWIDE WAREHOUSE CLUB, INC. AND/OR JIMMY GOW
G.R. No. 169725, April 30, 2010
Facts:

Petitioner filed for illegal dismissal against respondents Uniwide Warehouse Club, Inc. and its
president, Jimmy N. Gow. The complaint contained a prayer for the payment of worked Saturdays
for the year 2001; holiday pay; separation pay; actual, moral and exemplary damages; and attorney's
fees. However, almost two months from the filing of the Complaint, respondents submitted a
Motion to Suspend Proceedings on the ground that in June 1999, the Uniwide Group of Companies
had petitioned the Securities and Exchange Commission for suspension of payments and for
approval of its proposed rehabilitation plan. It appears that on June 29, 1999, the SEC had ruled
favorably on the petition and ordered that all claims, actions and proceedings against herein
respondents pending before any court, tribunal, board, office, body or commission be suspended,
and that following the appointment of an interim receiver, the suspension order had been extended
to until February 7, 2000. On April 11, 2000, the SEC declared the Uniwide Group of Companies to be
in a state of suspension of payments and approved its rehabilitation plan. Labor Arbiter Lilia S. Savari
denied the Motion to Suspend Proceedings in the present case. Respondents lodged an appeal with
the NLRC which sustained the Labor Arbiter and held that as early as February 7, 2000 the
suspension order of the SEC should be considered lifted already and that with the approval of the
rehabilitation plan, the suspension of the proceedings in the instant labor case would no longer be
necessary.

Issue:

Whether or not the illegal dismissal case proceedings should be suspended.

Held:

No. Corporate rehabilitation connotes the restoration of the debtor to a position of successful
operation and solvency, if it is shown that its continued operation is economically feasible and its
creditors can recover by way of the present value of payments projected in the rehabilitation plan,
more if the corporation continues as a going concern than if it is immediately liquidated. It
contemplates a continuance of corporate life and activities in an effort to restore and reinstate the
corporation to its former position of successful operation and solvency, the purpose being to enable
the company to gain a new lease on life and allow its creditors to be paid their claims out of its
earnings.

An essential function of corporate rehabilitation is the mechanism of suspension of all actions and
claims against the distressed corporation, which operates upon the due appointment of a
management committee or rehabilitation receiver. Jurisprudence is settled that the suspension of
proceedings referred to in the law uniformly applies to "all actions for claims" filed against a
corporation, partnership or association under management or receivership, without distinction,
except only those expenses incurred in the ordinary course of business. The reason behind the
imperative nature of a suspension or stay order in relation to the creditors' claims cannot be
downplayed, for indeed the indiscriminate suspension of actions for claims intends to expedite the
rehabilitation of the distressed corporation by enabling the management committee or the
rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial
interference that might unduly hinder or prevent the rescue of the debtor company. To allow such
other actions to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims
against the corporation, instead of being directed toward its restructuring and rehabilitation.

Jurisprudence is settled that the suspension of proceedings referred to in the law uniformly applies
to "all actions for claims" filed against a corporation, partnership or association under management
or receivership, without distinction, except only those expenses incurred in the ordinary course of
business. In the oft-cited case of Rubberworld (Phils.) Inc. v. NLRC, the Court noted that aside from
the given exception, the law is clear and makes no distinction as to the claims that are suspended
once a management committee is created or a rehabilitation receiver is appointed. Since the law
makes no distinction or exemptions, neither should this Court.
Topic: SECURITIES AND EXCHANGE COMMISSION- Registration of Securities

Case No. 693

MANUEL V. BAVIERA vs. ESPERANZA PAGLINAWAN et. al

G.R. No. 168380, February 8, 2007
Facts:

Manuel Baviera was the former head of the HR Service Delivery and Industrial Relations of Standard
Chartered Bank-Philippines (SCB), one of herein respondents. SCB is a foreign banking corporation
duly licensed to engage in banking, trust, and other fiduciary business in the Philippines which is
subject conditions under Resolution No. 1142. Apparently, SCB did not comply with the above
conditions. Instead, as early as 1996, it acted as a stock broker, soliciting from local residents foreign
securities called GLOBAL THIRD PARTY MUTUAL FUNDS (GTPMF), denominated in US dollars. These
securities were not registered with the Securities and Exchange Commission (SEC). These were then
remitted outwardly to SCB-Hong Kong and SCB-Singapore.

SCBs counsel advised the bank to proceed with the selling of the foreign securities although
unregistered with the SEC, under the guise of a custodianship agreement; and should it be
questioned, it shall invoke Section 72 of the General Banking Act (Republic Act No.337). In sum, SCB
was able to sell GTPMF securities worth around P6 billion to some 645 investors.

However, SCBs operations did not remain unchallenged. On July 18, 1997, the Investment Capital
Association of the Philippines (ICAP) filed with the SEC a complaint alleging that SCB violated the
Revised Securities Act, particularly the provision prohibiting the selling of securities without prior
registration with the SEC; and that its actions are potentially damaging to the local mutual fund
industry.

On September 2, 1997, the SEC issued a Cease and Desist Order against SCB, holding that its services
violated the Revised Securities Act. on August 17, 1998, the BSP directed SCB not to include
investments in global mutual funds issued abroad in its trust investments portfolio without prior
registration with the SEC and it was confirmed by SCB. However, notwithstanding its commitment
and the BSP directive, SCB continued to offer and sell GTPMF securities in this country. This
prompted petitioner to enter into an Investment Trust Agreement with SCB.

The trend in the securities market, however, was bearish and the worth of petitioners investment
went down further to only US$3,000.00. On October 26, 2001, petitioner learned from Marivel
Gonzales, head of the SCB Legal and Compliance Department, that the latter had been prohibited by
the BSP to sell GPTMF securities. Petitioner then filed with the BSP a letter-complaint demanding
compensation for his lost investment. But SCB denied his demand on the ground that his investment
is regular.

On July 15, 2003, petitioner filed with the Department of Justice (DOJ), represented herein by its
prosecutors, public respondents, a complaint charging the above-named officers and members of
the SCB Board of Directors and other SCB officials, private respondents, with syndicated estafa.

Issue:
Whether or not criminal complaint for violation of any law or rule administered by the SEC must first
be filed with the latter.

Held:

Yes. Section 53.1 of the Securities Regulation Code provides:

SEC. 53. Investigations, Injunctions and Prosecution of Offenses.

53. 1. The Commission may, in its discretion, make such investigation as it deems necessary to
determine whether any person has violated or is about to violate any provision of this Code,
any rule, regulation or order thereunder, or any rule of an Exchange, registered securities
association, clearing agency, other self-regulatory organization, and may require or permit
any person to file with it a statement in writing, under oath or otherwise, as the Commission
shall determine, as to all facts and circumstances concerning the matter to be investigated.
The Commission may publish information concerning any such violations and to investigate
any fact, condition, practice or matter which it may deem necessary or proper to aid in the
enforcement of the provisions of this Code, in the prescribing of rules and regulations
thereunder, or in securing information to serve as a basis for recommending further
legislation concerning the matters to which this Code relates: Provided, however, That any
person requested or subpoenaed to produce documents or testify in any investigation shall
simultaneously be notified in writing of the purpose of such investigation: Provided,
further,That all criminal complaints for violations of this Code and the implementing rules
and regulations enforced or administered by the Commission shall be referred to the
Department of Justice for preliminary investigation and prosecution before the proper
court: Provided, furthermore, That in instances where the law allows independent civil or
criminal proceedings of violations arising from the act, the Commission shall take appropriate
action to implement the same: Provided, finally; That the investigation, prosecution, and trial
of such cases shall be given priority.

The Court of Appeals held that under the above provision, a criminal complaint for violation of any
law or rule administered by the SEC must first be filed with the latter. If the Commission finds that
there is probable cause, then it should refer the case to the DOJ.

A criminal charge for violation of the Securities Regulation Code is a specialized dispute. Hence, it
must first be referred to an administrative agency of special competence, i.e., the SEC. Under the
doctrine of primary jurisdiction, courts will not determine a controversy involving a question within
the jurisdiction of the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the specialized knowledge and expertise of said administrative
tribunal to determine technical and intricate matters of fact. The Securities Regulation Code is a
special law. Its enforcement is particularly vested in the SEC. Hence, all complaints for any violation
of the Code and its implementing rules and regulations should be filed with the SEC. Where the
complaint is criminal in nature, the SEC shall indorse the complaint to the DOJ for preliminary
investigation and prosecution as provided in Section 53.1 earlier quoted.
Topic: SECURITIES AND EXCHANGE COMMISSION- Trading in securities (Fraudulent Transactions)

Case No. 711

SECURITIES AND EXCHANGE COMMISSION vs. COURT OF APPEALS

GR No. 106425 & 106431-32, July 21, 1995
Facts:

On or about the first half of 1988, certificates of stock of PHILEX representing 1,400,000 shares were
stolen from the premises of FIDELITY. These stock certificates consisting of stock dividends of
certain PHILEX shareholders had been returned to FIDELITY for lack of forwarding addresses of the
shareholders concerned. Later, the stolen stock certificates ended in the hands of a certain Agustin
Lopez, a messenger of New World Security, Inc., an entirely different stock brokerage firm. In the
first half of 1989, Agustin Lopez brought the stolen stock certificates to CUALOPING for trading and
sale with the stock exchange. When the said stocks were brought to CUALOPING, all of the said
stock certificates bore the 'apparent' indorsement (signature) in blank of the owners thereof. At the
side of these indorsements (signatures), the words ‘Signature Verified' apparently of FIDELITY were
stamped on each and every certificate. Further, on the words 'Signature Verified' showed the usual
initials of the officers of FIDELITY.

Upon receipt of the said certificates from Agustin Lopez, CUALOPING stamped each and every
certificate with the words `Indorsement Guaranteed,' and thereafter, traded the same with the stock
exchange. After the stock exchange awarded and confirmed the sale of the stocks represented by
said certificates to different buyers, the same were delivered to FIDELITY for the cancellation of the
stocks certificates and for issuance of new certificates in the name of the new buyers. Agustin Lopez
on the other hand was paid by CUALOPING with several checks for P400,000.00 for the value of the
stocks.

After acquiring knowledge of the pilferage, FIDELITY conducted an investigation with assistance of
the National Bureau of Investigation (NBI) and found that two of its employees were involved and
signed the certificates. After two (2) months from receipt of said stock certificates, FIDELITY rejected
the issuance of new certificates in favor of the buyers for reasons that the signatures of the owners
of the certificates were allegedly forged and thus the cancellation and new issuance thereof cannot
be effected. On 11 August 1988, FIDELITY sought an opinion on the matter from SEC, which, on 06
October 1988, summoned FIDELITY and CUALOPING to a conference.

Issue:

Whether or not the question on the legal propriety of the imposition by the SEC of a P50,000 fine on
each of FIDELITY and CUALOPING, is an entirely different matter.

Held:

Yes. It is the regulatory power of the SEC which is involved. When, on appeal to the Court of
Appeals, the latter set aside the fines imposed by the SEC, the latter, in its instant petition, can no
longer be deemed just a nominal party but a real party in interest sufficient to pursue an appeal to
this Court.
The Revised Securities Act (Batas Pambansa Blg. 178) is designed, in main, to protect public investors
from fraudulent schemes by regulating the sale and disposition of securities, creating, for this
purpose, a Securities and Exchange Commission to ensure proper compliance with the law. Here,
the SEC has aptly invoked the provisions of Section 29, in relation to Section 46, of the Revised
Securities Act. This law provides:

"Sec. 29. Fraudulent transactions. - (a) It shall be unlawful for any person, directly or
indirectly, in connection with the purchase or sale of any securities?

"x x x xxx xxx

"(3) To engage in any act, transaction, practice, or course of business which operates or
would operate as a fraud or deceit upon any person."

"Sec. 46. Administrative sanctions. If, after proper notice and hearing, the Commission finds
that there is a violation of this Act, its rules, or its orders or that any registrant has, in a
registration statement and its supporting papers and other reports required by law or rules
to be filed with the Commission, made any untrue statement of a material fact, or omitted to
state any material fact required to be stated therein or necessary to make the statements
therein not misleading, or refused to permit any unlawful examination into its affairs, it shall,
in its discretion, impose any or all of the following sanctions:

"(a) Suspension, or revocation of its certificate of registration and permit to offer

securities;

"(b) A fine of no less than two hundred (P200.00) pesos nor more than fifty thousand
(P50,000.00) pesos plus not more than five hundred (P500.00) pesos for each day of
continuing violation." (Italics supplied.)

There is, to our mind, no question that both FIDELITY and CUALOPING have been guilty of
negligence in the conduct of their affairs involving the questioned certificates of stock. To
constitute, however, a violation of the Revised Securities Act that can warrant an imposition of a fine
under Section 29(3), in relation to Section 46 of the Act, fraud or deceit, not mere negligence, on the
part of the offender must be established. Fraud here is akin to bad faith which implies a conscious
and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it is unlike
that of the negative idea of negligence in that fraud or bad faith contemplates a state of mind
affirmatively operating with furtive objectives. Given the factual circumstances found by the
appellate court, neither, FIDELITY nor CUALOPING, albeit indeed remiss in the observance of due
diligence, can be held liable under the above provisions of the Revised Securities Act. We do not
imply, however, that the negligence committed by private respondents would not at all be
actionable; upon the other hand, as we have earlier intimated, such an action belongs not to the SEC
but to those whose rights have been injured.