Huasing Hardware petitioner vs.

Honorable Rafael Mendoza and Pilla Dolla respondents

Facts
- Juasing Hardware (JH) is a sole proprietorship business organization
- JH filed a complaint against Pilar Dolla for her failure and refusal to pay for purchased goods.
- Dolla stated through a Motion of Dismissal of Action, that she had no knowledge of the legal capacity
of JH to sue as it is only a single proprietorship therefore the it is not a juridical person with legal
capacity to bring to action in court.
- Judge did not allow the amendment of the complaint to correct the designation of the plaintiff (JH) in
the lower court.
- Judge ruled that the complaint in the court below should have been filed in the name of the owner of
Juasing Hardware. The allegations in the body of the complaint would show that the suit is brought by
such person as proprietor or owner of the business conducted under the name and style Juasing
Hardware". The descriptive words "doing business as Juasing Hardware' " may be added in the title of
the case, as is customarily done.
Issue
- Can Juasing Hardware acquire the legal capacity to bring to action in court given that it is a single
proprietorship?
- Did the judge, Honorable Rafael Mendoza err in not allowing the amendment of the complaint to
correct the designation of the plaintiff (JH) in the lower court?
Decision
- The case is dismissed with costs de facto
- The lower court is hereby ordered to admit the Amended Complaint in conformity with the
pronouncements in this Decision.
Ratio Decidendi (rationale why the court ruled in such a way)
- There is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely
recognizes the existence of a sole proprietorship as a form of business organization conducted for profit
by a single individual, and requires the proprietor or owner thereof to secure licenses and permits,
register the business name, and pay taxes to the national government. It does not vest juridical or legal
personality upon the sole proprietorship nor empower it to file or defend an action in court.
Rule 3 of the Revised Rules of Court provides as follows:
Sec. 1. Who may be parties.-Only natural or juridical persons or entities authorized by law may be
parties in a civil action.
Petitioner is definitely not a natural person; nor is it a juridical person as defined in the New Civil Code
of the Philippines thus:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;
 (2) Other corporations, institutions and entities for public interest or purpose, created by law; their
personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants
a juridical personality, separate and distinct from that of each shareholder, partner or member.
- Although such an amendment is authorized by Rule 10 of the Revised Rules of Court which provides
thus:
Sec. 4. Formal Amendments. — A defect in the designation of the parties may be summarily
corrected at any stage of the action provided no prejudice is caused thereby to the adverse party.
Contrary to the ruling of respondent Judge, the defect of the complaint in the instant case is merely
formal, not substantial. Substitution of the party plaintiff would not constitute a change in the Identity
of the parties. No unfairness or surprise to private respondent Dolla, defendant in the court a quo,
would result by allowing the amendment, the purpose of which is merely to conform to procedural
rules or to correct a technical error. No one has been misled by the error in the name of the party
plaintiff. If we should by reason of this error send this case back for amendment and new trial, there
would be on the retrial the same complaint, the same answer, the same defense, the same interests, the
same witnesses, and the same evidence. The name of the plaintiff would constitute the only difference
between the old trial and the new. In our judgment there is not enough in a name to justify such action.
Cooperative Development Authority (CDA) petitioner vs. DOLEFIL Agrarian Reform Beneficiaries
Cooperative Inc. (DARBCI) respondents
Facts
- CDA received complaints about the mismanagement of a DARBCI officer
- DARBCI is an agrarian reform cooperative that owns 8,860 hectares of land in Polomolok, South
Cotabato
- CDA executive director directed private respondent to fie answer within 10 working days from receipt
thereof.
- CDA created a management committee and froze funds before private respondent could file the
petition
- Private respondent then filed a petition of certiorari, questioning the authority of CDA over DARBCI
- CDA created an ad hoc to manage election of DARBCI
- Private respondent questioned the initiative and files a petition of prohibition to restrain CDA from
continuing on with their initiative.
Issue
- Whether or not petitioner Cooperative Development Authority (CDA) is vested with quasi-judicial
authority to adjudicate intra-cooperative disputes.
Decision
The orders, resolutions, memoranda and any other acts rendered by petitioner Cooperative
Development Authority are hereby declared null and void ab initio;
 - and the petitioner is hereby ordered to cease and desist from taking any further proceedings therein
- the elections of the members of the Board of Directors and Officers of DARBCI held during the general
assembly of the DARBCI members is nullified.

Ratio Decidendi (rationale why the court ruled in such a way)

- CDA is devoid of any quasi-judicial authority to adjudicate intra-cooperative disputes and more
particularly disputes as regards the election of the members of the Board of Directors and officers of
cooperatives. The authority to conduct hearings or inquiries and the power to hold any person in
contempt may be exercised by the CDA only in the performance of its administrative functions under
R.A. No. 6939.
- Article 121 of the Cooperative Code is explicit on how the dispute should be resolved; thus:

ART. 121. Settlement of Disputes. Disputes among members, officers, directors, and
committee members, and intra-cooperative disputes shall, as far as practicable, be settled
amicably in accordance with the conciliation or mediation mechanisms embodied in the by-
laws of the cooperative, and in applicable laws.

- Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent
jurisdiction.
Complementing this Article is Section 8 of R.A. No. 6939, which provides:
SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties, the [CDA] shall
mediate and conciliate disputes with the cooperative or between cooperatives: Provided, That if no
mediation or conciliation succeeds within three (3) months from request thereof, a certificate of non-
resolution shall be issued by the request thereof, a certificate of non-resolution shall be issued by the
commission prior to the filing of appropriate action before the proper courts.
”Pascual and Dragon v. CIR, G.R. No. 78133, October 18, 1988”
FACTS:
Pascual and Dragon; the petitioners bought two (2) parcels of land. After one year, they bought another
three (3) parcels of land. In the years 1968 and 1970, the petitioners subsequently sold the lots and realized
profit from it. The corresponding capital gains taxes were paid by petitioners in 1973 and 1974 by availing of
the tax amnesties granted in the said years. However, the Acting BIR Commissioner assessed and required
Petitioners to pay a total amount of P107,101.70 as alleged deficiency corporate income taxes for the years
1968 and 1970. Petitioners protested the said assessment asserting that they had availed of tax amnesties way
back in 1974. In a reply, respondent Commissioner informed petitioners that in the years 1968 and 1970,
petitioners as co-owners in the real estate transactions formed an unregistered partnership or joint venture
taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed under Section
24, both of the National Internal Revenue Code that the unregistered partnership was subject to corporate
income tax as distinguished from profits derived from the partnership by them which is subject to individual
income tax; and that the availment of tax amnesty under P.D. No. 23, as amended, by petitioners relieved
petitioners of their individual income tax liabilities but did not relieve them from the tax liability of the
unregistered partnership. Hence, the petitioners were required to pay the deficiency income tax assessed.

ISSUE:
Whether the Petitioners should be treated as an unregistered partnership or a co-ownership for the
purposes of income tax.
RULING:
In order to constitute a partnership in the sense that there must be: (a) An intent to form the same; (b)
generally participating in both profits and losses; (c) and such a community of interest, as far as third persons
are concerned as enables each party to make contract, manage the business, and dispose of the whole property.
In this case, there is no evidence that petitioners entered into an agreement to contribute money,
property or industry to a common fund, and that they intended to divide the profits among themselves. The
sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a
joint or common right or interest in the property. There must be a clear intent to form a partnership, the
existence of a juridical personality different from the individual partners, and the freedom of each party to
transfer or assign the whole property. Hence, there is no adequate basis to support the proposition that they
thereby formed an unregistered partnership. The two isolated transactions whereby they purchased properties
and sold the same a few years thereafter did not thereby make them partners. They shared in the gross profits
as co- owners and paid their capital gains taxes on their net profits and availed of the tax amnesty thereby.
Under the circumstances, they cannot be considered to have formed an unregistered partnership which is
thereby liable for corporate income tax, as the respondent commissioner proposes.
Thus, the Petitioners are simply under the regime of co-ownership and not under unregistered
partnership.
LIM TONG LIM, petitioner vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., defendant
CLASS TOPIC: Obligation of Partners
FACTS:
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated
February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries,
Inc. They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however
was not a signatory to the agreement. The total price of the nets amounted to P532,045. Four hundred pieces
of floats worth P68,000 were also sold to the Corporation The buyers failed to pay for the fishing nets and the
floats; hence, private respondent filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with
a prayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as
general partners because Ocean Quest Fishing Corporation was a nonexistent corporation as shown by a
Certification from the SEC. On November 18, 1992, the trial court rendered its Decision, ruling that Philippine
Fishing Gear Industries was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general
partners, were jointly liable to pay respondent. The trial court ruled that a partnership among Lim, Chua and
Yao existed based (1) on the testimonies of the witnesses presented and (2) on a Compromise Agreement
executed by the three. The trial court noted that the Compromise Agreement was silent as to the nature of their
obligations, but that joint liability could be presumed from the equal distribution of the profit and loss.
ISSUES: Whether by their acts, Lim, Chua and Yao could be deemed to have entered into a partnership.
Whether or not the petitioner may be held liable for the fishing nets and floats purchased from the respondent.
Whether Lim Tong Lim is a partner or a lessor and be .held jointly liable with Yao and Chua
DECISION: Wherefore, the petition is denied and the assailed decision affirmed. Costs against petitioner.
RATIO DECIDENDI: The facts as found by the two lower courts clearly showed that there existed a
partnership among Chua, Yao and him, pursuant to
Article 1767 of the Civil Code which provides: Article 1767 - By the contract of partnership, two or more
persons bind themselves to contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.
From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a
fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from
Jesus Lim who was petitioners brother. In their Compromise Agreement, they subsequently revealed their
intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the
excess or loss. These boats, the purchase and the repair of which were financed with borrowed money, fell
under the term common fund under Article 1767. The contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or industry. That the parties agreed that any loss or profit from the
sale and operation of the boats would be divided equally among them also shows that they had indeed formed
a partnership. Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also
to that of the nets and the floats. The fishing nets and the floats, both essential to fishing, were obviously
acquired in furtherance of their business. It would have been inconceivable for Lim to involve himself so
much in buying the boat but not in the acquisition of the aforesaid equipment, without which the business
could not have proceeded. It is clear that there was, among Lim Tong Lim, Chua and Yao, a partnership
engaged in the fishing business. They purchased the boats, which constituted the main assets of the
partnership, and they agreed that the proceeds from the sales and operations thereof would be divided among
them.
Petitioner entered into a business agreement with Chua and Yao, in which debts were undertaken in order to
finance the acquisition and the upgrading of the vessels which would be used in their fishing business. The
sale of the boats, as well as the division among the three of the balance remaining after the payment of their
loans, proves beyond cavil that F/B Lourdes, though registered in his name, was not his own property but an
asset of the partnership. It is not uncommon to register the properties acquired from a loan in the name of the
person the lender trusts, who in this case is the petitioner himself.
PALAY, INC. and ALBERT ONSTOTT, petitioner, vs.
 JACOBO C. CLAVE, Presidential Executive Assistant NATIONAL HOUSING AUTHORITY and
NAZARIO DUMPIT, respondents
[G.R. No. L-56076. September 21, 1983]
FACTS:
On March 28, 1965, petitioner Palay, Inc., through its President, Albert Onstott, entered into a Contract to Sell
a parcel of Land of the Crestview Heights Subdivision in Antipolo, Rizal, which the said corporation owned,
with the private respondent, Nazario Dumpit. The sale price was P23, 000 with 9% interest per annum, payable
with a down payment of P4, 660 and monthly installments of P246.42 until fully paid. Furthermore, Paragraph
6 of the Contract to Sell provided for automatic extrajudicial rescission upon default in payment of any
monthly installment after the lapse of 90 days from the expiration of the grace period of one month, without
need of notice and with forfeiture of all installments paid.
Respondent Dumpit defaulted. He paid the down payment and only several installments amounting to P13,
722.50. His last payment was made on December 5, 1967 for installments up to September 1967.

On May 10, 1973, almost 6 years later, private respondent wrote petitioner asking to update all his overdue
accounts with interest, and requesting its written consent to the assignment of his rights to a certain Lourdes
Dizon. On June 20, 1973, more than one month after, he wrote another letter reiterating the same request.
Eventually, petitioner replied and informed respondent that his Contract to Sell had long been rescinded
pursuant to Paragraph 6 of the Contract, and that the parcel of land had already been resold.
Respondent questioned if the rescission was valid and filed a letter complaint with the National Housing
Authority (NHA) for reconveyance, hoping for a refund. NHA found the rescission void in the absence of
either judicial or notarial demand and ordered Palay, Inc. and Alberto Onstott, in his capacity as President of
the corporation, jointly and severally, to refund immediately to Nazario Dumpit the amount of P13, 722.50
with 12% interest from the filing of the complaint.
ISSUE:
1. Whether Palay, Inc. was justified in rescinding the Contract to Sell without notice

2. Whether the refund of the installment payments is proper

3. Whether the doctrine of piercing the veil of corporate fiction has application to the case

4. Whether petitioner Onstott may be held jointly and severally liable with Palay, Inc.
DECISION:
1. NO.
Even if the petitioners maintain that it was justified in cancelling the contract to sell without prior notice or
demand to respondent pursuant to Paragraph 6 of the contract, the act of a party in treating a contract as
cancelled should be made known to the other. It is only the final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or was not correct in law.
2. YES.
Article 1385 of the Civil Code provides:
ART. 1385. Rescission creates the obligation to return the things which were the object of the contract,
together with their fruits, and the price with its interest; consequently, it can be carried out only when he who
demands rescission can return whatever he may be obliged to restore.
3. No.
The doctrine of piercing of the veil of corporate fiction, which is a legal decision to treat the rights or duties
of a corporation as the rights or liabilities of its shareholders, has no application to the case since it will only
be applied when there is fraud or other moral turpitude. There were no badges of fraud on petitioners' part.
They had literally relied, although mistakenly, on paragraph 6 of the contract with respondent when they
rescinded the contract to sell extra judicially.
4. NO.
Petitioner Onstott, the president of the corporation, cannot be made personally liable since there is no sufficient
proof that exists on record that said petitioner used the corporation to defraud private respondent.
RATIO DECIDENDI:
A corporation is invested by law with a personality separate and distinct from those of the persons composing
it. As a general rule, a corporation may not be made to answer for acts or liabilities of its stockholders or those
of the legal entities to which it may be connected and vice versa. However, the veil of corporate fiction may
be pierced when: it is used as a shield to further an end subversive of justice; or for purposes that could not
have been intended by the law that created it; or to defeat public convenience, justify wrong, protect fraud, or
defend crime; or to perpetrate fraud or confuse legitimate issues; or to circumvent the law or perpetuate
deception; or as an alter ego, adjunct or business conduit for the sole benefit of the stockholders.
Furthermore, the mere ownership by a single stockholder or by another corporation is not of itself sufficient
ground for disregarding the separate corporate personality
FERMIN Z. CARAM, JR. and ROSA O. DE CARAM, petitioners vs. THE HONORABLE COURT
OF APPEALS and ALBERTO V. ARELLANO, respondents
151 SCRA 372 (June 30, 1987)
FACTS:
- Petitioners’ co-defendant Barretto contracted the services of a third party, Arellano, to conduct a project
study prior to the creation of a planned corporation.

- The results of the feasibility study conducted by Arellano was presented by co-defendants Barretto and
Garcia to would-be incorporators and investors.

- The results of the project study led Fermin Caram Jr. and Rose Caram to agree to be incorporators of the
Filipinas Orient Airways (FOA).

- Later, Arellano filed a collection lawsuit against FOA, Barretto, Garcia, and the Carams, claiming that he
was not being properly for the conduct of the project study.
- The respondent court ruled that the Carams should be jointly liable, along with the defendant corporation
and other defendants, to pay Arellano P50,000 for his pre-operational services, plus an amount of P10,000 for
attorney’s fees

It was upon the defendants Barretto and Garcia that the plaintiff handled the preparation of the project study
which was presented to defendant Caram which caused the latter to invest in the proposed airline business.

The project study was revised for purposes of presentation to financiers and the banks.

It was on the basis of the study that defendant corporation was actually organized and rendered operational.

Defendants Garcia and Caram, and Barretto became members of the Board and/or officers of the defendant
corporation.

All the other defendants who were involved in the preparatory stages of the incorporation, who caused the
preparation and/or benefited from the project study and the technical services of plaintiff must be liable.

- Petitioners argue that the said order has no support based on the fact that they had no involvement in the
initial steps that led to the incorporation of FOA, including the services contracted with private respondent
Arellano.
ISSUE:
- Whether petitioners are personally liable for expenses incurred prior to the incorporation of FOA and, if so,
to what extent?
DECISION:
- The petition is granted. The petitioners cannot be held personally liable for the compensation claimed by
the private respondent.
RATIO DECIDENDI:
- The Carams were not involved in contracting such services, and it was only based on the results which was
presented by Barretto and Garcia that caused them to invest in the proposed airline. Yes, the services benefited
them, but that fact alone does not warrant them for personal liability. Otherwise, with that reasoning, all other
would-be stockholders of the corporation, regardless of the amount of shares that they hold, would be equally
and personally liable together with the petitioners for the claims of private respondent Arellano.

- Significantly, Filipinas Orient Airways did not show any characteristic that would deem it to be a fictitious
corporation, causing it to not have a separate juridical personality, that would justify making the petitioners
responsible for its obligations as principal stockholder. As a bona fide corporation, the sole liability should be
charged to Filipinas Orient Airways for any of its corporate acts as duly authorized by the officers and directors
of the corporation.
Berris Agricultural Co., Inc. Vs. Norvy Abyadang, G.R. No. 183404, October 13, 2010
Case Facts:
On January 16, 2004, respondent and owner of NS Northern Organic Fertilizer, Norvy A. Abyadang filed with
the Intellectual Property Office (IPO) a trademark application for the mark NS D-10 PLUS for use in
connection with Fungicide (Class 5) with active ingredient 80% Mancozeb. However, on August 17, 2005,
petitioner Berris Agricultural Co., Inc. filed with the IPO Bureau of Legal Affairs (IPO-BLA) a Verified
Notice of Opposition against the mark under application, because NS D-10 PLUS is similar and/or confusingly
similar to its registered trademark D-10 80 WP which also has the same product classification. The opposition
was sustained and Abyadang’s trademark application was rejected. He then filed a motion for reconsideration,
although this was soon after denied. Abyadang then filed an appeal with the Office of the Director General,
Intellectual Property Philippines, however it was denied as well.
Abyadang continued on to file a petition for review upon the CA and on April 14, 2008, the CA reversed the
IPPDG decision, stating that the trademarks are not confusingly similar, Berris failed to establish ownership
of the mark and the mark “D-10 80 WP” may be cancelled in the present case to avoid multiplicity of suits.
Berris filed a motion for reconsideration but was denied by the CA. Berris then filed a petition for review on
this resolution wherein both Abyadang and Berris presented evidences such as trademark application,
packaging with its trademark, photocopies of sales invoices and their notarized DAU (Declaration of Actual
Use). The petition was granted and the CA’s initial resolution was reversed and set aside, with the rights to
the trademark granted in favor of Berris.
Issue:
I. Whether the names “D-10 80 WP” and “NS D-10 PLUS” are confusingly similar

II. Whether it is Berris who have the rights of the trademark

Ruling:
I. Yes, the names are considered confusingly similar.
II. Yes, Berris has the rights to the trademark.
Rationale:
In determining similarity and likelihood of confusion, jurisprudence has developed the Dominancy Test which
focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause
confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not
necessary and given more consideration are the aural and visual impressions created by the marks on the
buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments.
Comparing Berris mark D-10 80 WP with Abyadangs mark NS D-10 PLUS, as appearing on their respective
packages, one cannot but notice that both have a common component and dominant feature which is “D-10”.
This likelihood of confusion and mistake is made more manifest when the Holistic Test is applied, which
necessitates a consideration of the entirety of the marks as applied to the products, taking into consideration
the packaging, for both use the same type of material (foil type) and have identical color schemes (red, green,
and white); and the marks are both predominantly red in color, with the same phrase BROAD SPECTRUM
FUNGICIDE written underneath.
Section 122 of R.A. No. 8293 provides that the rights in a mark shall be acquired by means of its valid
registration with the IPO. However, RA No. 8293 requires the applicant for registration or the registrant to
file a declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3) years from the
filing of the application for registration; otherwise, the application shall be refused or the mark shall be
removed from the register. In other words, the prima facie presumption brought about by the registration of a
mark may be challenged and overcome, in an appropriate action, by proof of the nullity of the registration or
of non-use of the mark, except when excused. This is because a trademark is a creation of use and belongs to
one who first used it in trade or commerce. Berris was able to establish that it was using its mark D-10 80 WP
since June 20, 2002, even before it filed for its registration with the IPO on November 29, 2002, as shown by
its DAU which was under oath and notarized, bearing the stamp of the Bureau of Trademarks of the IPO on
April 25, 2003, and which stated that it had an attachment as Annex B sales invoices and official receipts of
goods bearing the mark. Indeed, the DAU, being a notarized document, especially when received in due course
by the IPO, is evidence of the facts it stated and has the presumption of regularity, entitled to full faith and
credit upon its face.
Hi-Yield Realty, Incorporated petitioner vs Court of Appeals respondent
Facts
- On July 31, 2003, Roberto H. Torres, for and on behalf of Honorio Torres & Sons, Inc. (HTSI), filed a
Petition for Petition for Annulment of Real Estate Mortgage and Foreclosure Sale over two parcels of land
located in Marikina and Quezon City.
- The suit was filed against Leonora, Ma. Theresa, Glenn and Stephanie, all surnamed Torres, the Register of
Deeds of Marikina and Quezon City, and petitioner Hi-Yield Realty, Inc.
- The case was docketed as Civil Case No. 03-892 with Branch 148 of the Regional Trial Court (RTC) of
Makati City
- On September 15, 2003, petitioner moved to dismiss the petition on grounds of improper venue and payment
of insufficient docket fees.
- The RTC denied said motion in an Order dated January 22, 2004.
- The trial court held that the case was, in nature, a real action in the form of a derivative suit.
- Thereafter, petitioner filed a petition for certiorari and prohibition before the Court of Appeals.
- In a Decision dated March 10, 2005, the appellate court agreed with the RTC that the case was a derivative
suit.
- CoA further ruled that the prayer for annulment of mortgage and foreclosure proceedings was merely
incidental to the main action.
- Petitioner imputes grave abuse of discretion on the Court of Appeals for not dismissing the case against it
even as the trial court found the same to be real action. It explains that the rule on venue under the Rules of
Court prevails over the rule prescribing the venue for intra-corporate controversies: hence, HTSI erred when
it filed its suit only in Makati when the lands subjects of the case are in Marikina and Quezon City.
- Petitioner argues that the appellate court erred in ruling that the actions is mainly a derivative suit and the
annulment of real estate mortgage and foreclosure sale is merely incidental thereto.
- It points out that the caption of the case, substance of the allegations, and relief prayed for revealed that the
main thrust of the action is to recover the lands.
- Petitioner asserts that it should be dropped as a party to the case for it has been wrongly impleaded as a non-
stockholder defendant in the intra-corporate dispute.
- Respondents, on the other hand, maintain that the action is primarily a derivative suit to redress the alleged
unauthorized acts of its corporate officers and major stockholders in connection with the lands.
- Respondents postulate that the nullification of the mortgage and foreclosure sale would just be a logical
consequence of a decision adverse to said officers and stockholders.
Issue
- Whether the CoA gravely abused its discretion in not dismissing the case against Hi-Yield for improper
venue despite findings by the trial court that the action is a real action
- Whether the CoA erred in not dismissing the complaint as against Hi-Yield even if the joinder of parties in
the complaint violated the rules on venue
- Whether the CoA erred in holding that the annulment of real estate mortgage and foreclosure sale in the
complaint is merely incidental to the derivative suit
Decision
- The petition is dismissed.
- No grave abuse of discretion on the part on the part of the Court of Appeals.
- CoA did not commit any grave abuse of discretion when it found that respondents correctly filled the
derivative suit before the Makati RTC where HTSI had its principal office located.
- CoA did not abuse its discretion so the other alleged errors will no longer be passed upon as mere errors of
judgment are not proper subjects of a petition for certiorari.
Ratio Decidendi (rationale why the court ruled in such a way)
- A petition for certiorari is proper if a tribunal, board or officer exercising judicial or quasi-judicial functions
acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction and there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law.
- In rendering the assailed decision and resolution, the Court of Appeals was acting under its concurrent
jurisdiction to entertain petitions for certiorari under paragraph 2, Section 4 of Rule 65 of the Rules of Court.
- The distinction is clear: a petition for certiorari seeks to correct errors of jurisdiction while a petition for
review on certiorari seeks to correct errors of judgement committed by the court a quo.
- Petitioner impetuously filed a petition for certiorari before the Supreme Court when a petition for review
was available as a speedy and adequate remedy. Notably, petitioner filed the present petition days after it
received a copy of the assailed resolution dated May 26, 2005. This belated action evidences petitioner’s effort
to substitute for a lost appeal this petition for certiorari.
- For extraordinary remedy of certiorari to lie by reason of grave abuse of discretion, the abuse of discretion
must be so patent and gross as to amount of an evasion of positive duty, or a virtual refusal to perform the
duty enjoined or to act in contemplation of law, or where the power is exercised in an arbitrary and despotic
manner by reason of passion and personal hostility.
- A derivative action is a suit by a shareholder to enforce corporate cause of action. 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 on behalf of the corporation in
order to protect or vindicate corporate rights whenever the officials of the corporation refuse to sue, or are the
ones to be sued, or hold control of the corporation. In such actions, the corporation is the real party-in-interest
while the suing stockholder, on behalf of the corporation is only a nominal party.
- Not every suit filed on behalf of the corporation is a derivative suit. For a derivative suit to prosper, the
minority stockholder suing for and on behalf of the corporation must allege
in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other
stockholders similarly situated who may wish to join him in the suit. Roberto Torres had satisfied this
requirement.
- Sec. 5. Venue- All actions covered by these Rules shall be commenced and tried in the Regional Trial Court
which has jurisdiction over the principal office of the corporation, partnership, or association concerned.
Where the principal office of the corporation, partnership or association is registered, in the Securities and
Exchange Commission as Metro Manila, the action must be filed in the city or municipality where the head
office is located.
Heirs of Santiago C. Divinagracia Vs. Respondent: Hon. J. Cedrick O. Ruiz
[G.R. No. 172508, January 12, 2011]
FACTS:
On February 25,1999, Santiago Divinagracia, as a stockholder, filed a derivative suit on behalf of
People’s Broadcasting Service Incorporated (PBS) to complain about a management contract entered into by
PBS and Bombo Radyo Holdings Incorporated and Rogelio Florete, Sr. As a protest to the suit filed, Bombo
Radyo and Florete, Sr. filed a counterclaim against the petitioner, saying that the suit filed by Divinagracia
was unfounded and only aims to harass and molest them.
The derivative suit was transferred to the Regional Trial Court (RTC) of Iloilo City, but during the
pendency of the case, Divinagracia died, and was, thus, substituted by his six heirs. On July 28, 2004, the RTC
rendered a decision that dismissed the derivative case filed by the late Divinagracia due to lack of merit, thus,
granting the counterclaims of Bombo Radyo and Florete, Sr. Therefore, the Heirs of Divinagracia are ordered
to jointly pay each of the respondents of Bombo Radyo and Florete, Sr. the following: 1) the sum of
P500,000.00 as moral damages, 2) the sum of P200,000.00 for exemplary damages, 3) the sum of P100,000.00
for attorney’s fees; and 4) the costs of suit.
On August 11, 2004, the Heirs of Divinagracia filed a Notice of Appeal with the RTC. But on the next
day, Bombo Radyo and Florete filed with the RTC a Motion for Immediate Execution, and the RTC Clerk of
Court issued a Writ of Execution. Aggrieved by the issuance of the Writ of Execution, the Heirs of
Divinagracia filed a petition for certiorari with the CA. Arguing that the issuance of the writ of execution by
the RTC was improper, since they had already appealed the decision to the CA. Also, the Heirs of Divinagracia
claimed that the RTC erred in granting the writ of execution for a counterclaim consisting of moral damages,
exemplary damages, and attorney’s fees even though said damages under the counterclaim consisted of an
ordinary action and was not an intra-corporate controversy. On October 5, 2005, the CA issued a Decision
dismissing the petition for certiorari.
ISSUE: Whether or not moral damages, exemplary damages, and attorney’s fees, awarded as a result of a
counterclaim in an intra-corporate case, are immediately executory despite the pendency of the Notice of
Appeal filed by the Heirs.
RULING:
No. Said petition was meritorious.
CA held that the RTC did not err when it granted Bombo Radyo and Floretes’ motion for immediate execution
on the grant of moral damages, exemplary damages and attorney’s fees. Furthermore, the CA also ruled that
since the Heirs of Divinagracia had already filed a notice of appeal, such act barred them from availing of the
remedy of certiorari.
The issue is not novel since it has been resolved in another petition filed by the Heirs of Divinagracia in G.R
No. 172023
RATIO DECIDENDI:
The CA ruled that Section 4 of Rule 1 of the Interim Rules of Procedure for Intra-Corporate Controversies as
very explicit in providing that all decisions rendered in intra-corporate controversies shall be immediately
executory. Said section provides that:
“All decisions and orders issued under these Rules shall immediately be executory. No appeal or
petition taken therefrom shall stay the enforcement or implementation of the decision or order, unless
restrained by an appellate court. Interlocutory orders shall not be subject to appeal.”