1993
purchasing public, the word or phrase has come to
LYCEUM VS CA
FACTS: Lyceum of the Philippines had commenced
before the SEC a proceeding against the Lyceum of
Baguio to change its corporate name alleging that the
2 names are substantially identical because of the word
‘Lyceum’. SEC denied the consequent appeal of
Lyceum of Baguio in a resolution. Petitioner then
basing its ground on the resolution, wrote to all
educational institutions which made use of the word
‘Lyceum’ as part of their corporate name to
discontinue their use. When this recourse failed,
petitioner moved before the SEC to enforce its
exclusive use of the word ‘Lyceum.’ Petitioner further
claimed that the word ‘Lyceum’ has acquired a
secondary meaning in its favor. The SEC Hearing Officer
found for petitioner. Both SEC En Banc and CA ruled
otherwise.
ISSUE:
(1) Whether or not ‘Lyceum’ is a generic word which
cannot be appropriated by petitioner to the exclusion
of others.
(2) Whether or not the word ‘Lyceum’ has acquired a
secondary meaning in favor of petitioner.
(3) Whether or not petitioner is infringed by
respondent institutions’ corporate names.
RULING
(1) YES. “Lyceum” is in fact as generic in character as
the word “university.” In the name of the petitioner,
“Lyceum” appears to be a substitute for “university;” in
other places, however, “Lyceum,” or “Liceo” or “Lycee”
frequently denotes a secondary school or a college. It
may be that the use of the word “Lyceum” may not yet
be as widespread as the use of “university,” but it is
clear that a not inconsiderable number of educational
institutions have adopted “Lyceum” or “Liceo” as part
of their corporate names. Since “Lyceum” or “Liceo”
denotes a school or institution of learning, it is not
unnatural to use this word to designate an entity which
is organized and operating as an educational
institution.
(2) NO. Under the doctrine of secondary meaning, a
word or phrase originally incapable of exclusive
appropriation with reference to an article in the
market, because geographical or otherwise descriptive
might nevertheless have been used so long and so
exclusively by one producer with reference to this
article that, in that trade and to that group of the
mean that the article was his produce. With the
foregoing as a yardstick, [we] believe the appellant
failed to satisfy the aforementioned requisites. While
the appellant may have proved that it had been using
the word ‘Lyceum’ for a long period of time, this fact
alone did not amount to mean that the said word had
acquired secondary meaning in its favor because the
appellant failed to prove that it had been using the
same word all by itself to the exclusion of others. More
so, there was no evidence presented to prove that
confusion will surely arise if the same word were to be
used by other educational institutions.
(3) NO. We do not consider that the corporate names
of private respondent institutions are “identical with,
or deceptively or confusingly similar” to that of the
petitioner institution. True enough, the corporate
names of private respondent entities all carry the word
“Lyceum” but confusion and deception are effectively
precluded by the appending of geographic names to
the word “Lyceum.” Thus, we do not believe that the
“Lyceum of Aparri” can be mistaken by the general
public for the Lyceum of the Philippines, or that the
“Lyceum of Camalaniugan” would be confused with
the Lyceum of the Philippines. We conclude and so
hold that petitioner institution is not entitled to a
legally enforceable exclusive right to use the word
“Lyceum” in its corporate name and that other
institutions may use “Lyceum” as part of their
corporate names.
CITIBANK NA VS CHUA
FACTS: Petitioner Citibank, a foreign commercial
banking corporation duly licensed to do business in the
Philippines. Private respondents spouses Cresencio
and Zenaida Velez, were good clients of petitioner
bank’s branch in Cebu until March 14, 1986 when they
filed a complaint for specific performance and
damages against it before the RTC of Cebu for failure
of petitioner bank to comply with this
restructuring agreement with real estate and
chattel mortgages on equipment. During the date
of the pre-trial conference, counsel for citibank
appeared, presenting a special power of attorney
executed by Citibank officer Florencia Tarriela in favor
of counsel, J.P. Garcia and Associates, to represent
and bind petitioner bank at the pre-trial conference of
the case at bar. Inspite of this special power of
attorney, counsel for private respondents orally moved
to declare petitioner bank as in default on the ground
that the special power of attorney was not executed by
the Board of Directors of Citibank.
ISSUE: Whether or not a resolution of the Board of
Directors of a corporation is always necessary for
granting authority to an agent to represent the
corporation in court cases.
RULING:
In the corporate hierarchy, there are three levels of
control: (1) the board of directors, which is responsible
for corporate policies and the general management of
the business affairs of the corporation; (2) the officers,
who in theory execute the policies laid down by the
board, but in practice often have wide latitude in
determining the course of business operations; and (3)
the stockholders who have the residual power over
fundamental corporate changes, like amendments of
the articles of incorporation. However, just as a natural
person may authorize another to do certain acts in his
behalf, so may the board of directors of a corporation
validly delegate some of its functions to individual
officers or agents appointed by it.
Corporate powers may be directly conferred upon
corporate officers or agents by statute, the articles of
incorporation, the by-laws or by resolution or other act
of the board of directors. In addition, an officer who is
not a director may also appoint other agents when so
authorized by the by-laws or by the board of directors.
Such are referred to as express powers. There are also
powers incidental to express powers conferred. It is a
fundamental principle in the law of agency that every
delegation of authority, whether general or special,
carries with it, unless the contrary be expressed,
implied authority to do all of those acts, naturally and
ordinarily done in such cases, which are reasonably
necessary and proper to be done in order to carry into
effect the main authority conferred. Since the by-laws
are a source of authority for corporate officers and
agents of the corporation, a resolution of the Board of
Directors of Citibank appointing an attorney in fact to
represent and bind it during the pre-trial conference of
the case at bar is not necessary because its by-laws
allow its officers, the Executing Officer and the
Secretary Pro-Tem, to execute a power of attorney to
a designated bank officer, William W. Ferguson in this
case, clothing him with authority to direct and manage
corporate affairs.
Section 125 of the same Code requires that a foreign
corporation applying for a license to transact business
in the Philippines must submit, among other
documents, to the SEC, a copy of its articles of
incorporation and by-laws, certified in accordance with
law. Unless these documents are submitted, the
application cannot be acted upon by the SEC. In the
following section, the Code specifies when the SEC can
grant the license applied for. Section 126 provides in
part: "SEC. 126. Issuance of a license. — If the
Securities and Exchange Commission is satisfied that
the applicant has complied with all the requirements of
this Code and other special laws, rules and regulations,
the Commission shall issue a license to the applicant to
transact business in the Philippines for the purpose or
purposes specified in such license . . ." Since the SEC
will grant a license only when the foreign corporation
has complied with all the requirements of law, it
follows that when it decides to issue such license, it is
satisfied that the applicant’s by-laws, among the other
documents, meet the legal requirements. This, in
effect, is an approval of the foreign corporations by-
laws. It may not have been made in express terms, still
it is clearly an approval. Therefore, petitioner bank’s
by-laws, though originating from a foreign jurisdiction,
are valid and effective in the Philippines.
PRIME WHITE CEMENT COPR V IAC
FACTS: Zosimo Falcon, president of Prime White
Cement Corporation (PWCC) and Justo Trazo, Board
member of PWCC entered into an agreement with
Alejandro Te, also a Board member of PWCC. They
agreed that the latter shall be the sole dealer of Prime
White cement in Mindanao. Te already made known to
the public that he is the sole dealer of cements in
Mindanao before the cement is to be delivered, thus
various hardware then approached him to be his sub-
dealers and consequently he entered into various
contracts with them.
Falcon and Trazo were not authorized by the Board of
PWCC to enter into such contract. Nevertheless, the
Board wished to retain the contract but they wanted
some amendment which includes the increase of the
selling price per bag, decrease of the total amount of
cement bags plus the contract shall only be effective
for a period of three months and not 6 years. They
refused the counter-offer. PWCC then awarded the
contract to someone else.
ISSUE: whether or not the "dealership agreement"
referred by the President and Chairman of the Board of
petitioner corporation is a valid and enforceable
contract.
RULING: We do not agree with the conclusion of the
respondent Court that it is.
Under the Corporation Law, which was then in force at
the time this case arose, as well as under the present
Corporation Code, all corporate powers shall be
exercised by the Board of Directors, except as
otherwise provided by law. Although it cannot
completely abdicate its power and responsibility to act
for the juridical entity, the Board may expressly
delegate specific powers to its President or any of its
officers. In the absence of such express delegation, a
contract entered into by its President, on behalf of the
corporation, may still bind the corporation if the board
should ratify the same expressly or impliedly. Implied
ratification may take various forms - like silence or
acquiescence; by acts showing approval or adoption of
the contract; or by acceptance and retention of
benefits flowing therefrom. Furthermore, even in the
absence of express or implied authority by ratification,
the President as such may, as a general rule, bind the
corporation by a contract in the ordinary course of
business, provided the same is reasonable under the
circumstances. These rules are basic, but are
all general and thus quite flexible. They apply where
the President or other officer, purportedly acting for
the corporation, is dealing with a third person, i. e., a
person outside the situation is quite different where a
director or officer is dealing with his own corporation.
In the instant case respondent was not an ordinary
stockholder; he was a member of the Board of
Directors and Auditor of the corporation as well. He
was what is often referred to as a "self-dealing"
A director of a corporation holds a position of trust and
as such, he owes a duty of loyalty to his corporation. In
case his interests conflict with those of the
corporation, he cannot sacrifice the latter to his own
advantage and benefit. As corporate managers,
directors are committed to seek the maximum amount
of profits for the corporation. This trust relationship "is
not a matter of statutory or technical law. It springs
from the fact that directors have the control and
guidance of corporate affairs and property and hence
of the property interests of the stockholders.
MANUEL R DULAY ENTERPRISES V CA
FACTS: Manuel R. Dulay Enterprises, Inc, a domestic
corporation obtained various loans for the
construction of its hotel project, Dulay Continental
Hotel (now Frederick Hotel). Manuel Dulay by virtue of
Board Resolution No 18 sold the subject property to
spouses Maria Theresa and Castrense Veloso. Maria
Veloso (buyer), without the knowledge of Manuel
Dulay, mortgaged the subject property to private
respondent Manuel A. Torres. Upon the failure of
Maria Veloso to pay Torres, the property was sold to
Torres in an extrajudicial foreclosure sale. Torres filed
an action against the corporation, Virgilio Dulay and
against the tenants of the apartment.
RTC ordered the corporation and the tenants to vacate
the building.
Petitioners: RTC had acted with GAD when it applied
the doctrine of piercing the veil of
corporate entity considering that the sale has no
binding effect on corporation as Board Resolution No.
18 which authorized the sale of the subject property
was resolved without the approval of all the members
of the board of directors and said Board Resolution was
prepared by a person not designated by the
corporation to be its secretary.
ISSUE: WON the sale to Veloso is valid notwithstanding
that it was resolved without the approval of all the
members of the board of directors. (YES)
RULING: Section 101 of the Corporation Code of the
Philippines provides:
Sec. 101. When board meeting is unnecessary or
improperly held. Unless the by-laws provide otherwise,
any action by the directors of a close corporation
without a meeting shall nevertheless be deemed valid
if:
Before or after such action is taken, written consent
thereto is signed by all the directors, or
All the stockholders have actual or implied knowledge
of the action and make no prompt objection thereto in
writing; or
The directors are accustomed to take informal action
with the express or implied acquiese of all the
stockholders, or
All the directors have express or implied knowledge of
the action in question and none of them makes prompt
objection thereto in writing.
If a directors' meeting is held without call or notice, an
action taken therein within the corporate powers is
deemed ratified by a director who failed to attend,
unless he promptly files his written objection with the
secretary of the corporation after having knowledge
thereof.
Dulay Inc. is classified as a close corporation and
consequently a board resolution authorizing the sale or
mortgage is not necessary to bind the corporation for
the action of its president. At any rate, corporate
action taken at a board meeting without proper call or
notice in a close corporation is deemed ratified by the
absent director unless the latter promptly files his
written objection with the secretary of the
corporation after having knowledge of the meeting
which, in his case, Virgilio Dulay failed to do.
Although a corporation is an entity which has a
personality distinct and separate from its individual
stockholders or members, the veil of corporate fiction
may be pierced when it is used to defeat public
convenience justify wrong, protect fraud or defend
crime.
1992
AFRICA V PCGG
FACTS: Victor Africa, vice-president, filed directly with
the Court a petition for injunction seeking to enjoin the
PCGG and its nominees/designees to the board of
directors and the newly-installed officers from
implementing their alleged illegal, invalid and immoral
act of ousting him from his offices. He sought the
issuance of a writ of preliminary injunction or a
temporary restraining order to enjoin the PCGG from
ousting him from his positions and offices.
ISSUE: (1) whether or not the Securities and Exchange
Commission gravely abused its discretion and acted in
excess of jurisdiction in SEC Case No. 3297 when it
restrained the PCGG from holding the special
stockholders meeting of the ETPI on March 4, 1988;
and (2) whether or not the Sandiganbayan gravely
abused its discretion and acted in excess of jurisdiction
when it restrained the PCGG, its nominated directors
and/or corporate officers, employees, nominees,
agents and/or representatives at ETPI from calling
and/or holding a stockholders meeting and voting the
sequestered shares thereat for the purpose of
amending the articles of incorporation or by-laws of
ETPI, or otherwise effecting substantial changes in
policy, programs or practices of said corporation.
RULING: In upholding therein the right of a stockholder
of a sequestered company to inspect and/or examine
the records of a corporation pursuant to Section 74 of
the Corporation Code, the Court found nothing in
Executive Orders Nos. 1, 2 and 14, as well as in BASECO,
to indicate an implied amendment of the Corporation
Code, much less an implied modification of a
stockholder's right of inspection as guaranteed by
Section 74 thereof. The only express limitation on the
right of inspection, according to the Court, is that (1)
the right of inspection should be exercised at
reasonable hours on business days; (2) the person
demanding the right to examine and copy excerpts
from the corporate records and minutes has not
improperly used any information secured through any
previous examination of the records of such
corporation; and (3) the demand is made in good faith
or for a legitimate purpose.
The issues raised in G.R. No. 83831, an original petition
filed by Victor Africa with this Court, including the
motion for contempt filed by Eduardo M. Villanueva
against Jose L. Africa, Manuel Nieto and Victor Africa
for having made unwarranted comments to the news
media on matters involved in the pending petitions, are
factual in nature and are best ventilated before the
Sandiganbayan — the proper forum where both
parties can substantiate their respective claims. This
Court is not a trier of facts.
LEE VS CA
FACTS: November 15, 1985: a complaint for a sum of
money was filed by the International Corporate Bank,
Inc. (ICB) against the SACOBA MANUFACTURING
CORP., PABLO GONZALES, JR. and THOMAS GONZALES.
Private respondents, in turn, filed a 3rd-party
complaint against Alfa Integrated Textile Mills and ICB.
petitioners filed a motion to dismiss the third party
complaint – denied. trial court issued an order
requiring the issuance of an alias summons upon ALFA
through the DBP.
Consequence of the petitioner's letter that
ALFA management was transferred to DBP.
DBP claimed that it was not authorized to receive
summons on behalf of ALFA. Trial court issued an order
advising the private respondents to take the
appropriate steps to serve the summons to ALFA.
petitioners filed a motion for reconsideration
submitting that Rule 14, section 13 of the Revised Rules
of Court is not applicable since they were no longer
officers of ALFA and that the private respondents
should have availed of another mode of service under
Rule 14, Section 16 of the said Rules, i.e., through
publication to effect proper service upon ALFA –
denied. 2nd motion for reconsideration was filed by
the petitioners reiterating their stand that by virtue of
the voting trust agreement they ceased to be officers
and directors of ALFA. Attached a copy of the voting
trust agreement between all the stockholders of ALFA
and the DBP whereby the management and control of
ALFA became vested upon the DBP. trial court reversed
itself by setting aside its previous Order dated January
2, 1989 and declared that service upon the petitioners
who were no longer corporate officers of ALFA cannot
be considered as proper service of summons on ALFA.
Trial court (NOT notified of the petition for certiorari)
declared final its decision on April 25, 1989
ISSUE: W/N the voting trust agreement is valid
despite being contrary to the general principle that a
corporation can only be bound by such acts which are
within the scope of its officers' or agents' authority
RULING: trust created by an agreement between a
group of the stockholders of a corporation and the
trustee or by a group of identical agreements between
individual stockholders and a common trustee,
whereby it is provided that for a term of years, or for a
period contingent upon a certain event, or until the
agreement is terminated, control over the stock owned
by such stockholders, either for certain purposes or for
all purposes, is to be lodged in the trustee, either with
or without a reservation to the owners, or persons
designated by them, of the power to direct how such
control shall be used (Ballentine's Law Dictionary)
Sec. 59. Voting Trusts — One or more stockholders of
a stock corporation may create a voting trust for the
purpose of conferring upon a trustee or trustees the
right to vote and other rights pertaining to the share
for a period rights pertaining to the shares for a period
not exceeding 5 years at any one time: Provided, that
in the case of a voting trust specifically required as a
condition in a loan agreement, said voting trust may be
for a period exceeding 5 years but shall automatically
expire upon full payment of the loan. A voting trust
agreement must be in writing and notarized, and shall
specify the terms and conditions thereof. A certified
copy of such agreement shall be filed with the
corporation and with the Securities and Exchange
Commission; otherwise, said agreement is ineffective
and unenforceable. The certificate or certificates of
stock covered by the voting trust agreement shall be
cancelled and new ones shall be issued in the name of
the trustee or trustees stating that they are issued
pursuant to said agreement. In the books of the
corporation, it shall be noted that the transfer in the
name of the trustee or trustees is made pursuant to
said voting trust agreement.
PHILIPS EXPORT BV V CA
FACTS:
Petitioner Philips Export B.V. (PEBV), a foreign
corporation organized under the laws of the
Netherlands, although not engaged in business here, is
the registered owner of the trademarks PHILIPS
and PHILIPS SHIELD EMBLEM .
Respondent Standard Philips Corporation (Standard
Philips), on the other hand, was issued a Certificate of
Registration by respondent Commission on 19 May
1982.
Petitioners filed a letter complaint with the Securities
& Exchange Commission (SEC) asking for the
cancellation of the word “PHILIPS” from Private
Respondent’s corporate name.
As a result of Private Respondent’s refusal to amend its
Articles of Incorporation, Petitioners filed with the SEC.
Alleging, among others, that Private Respondent’s use
of the word PHILIPS amounts to an infringement and
clear violation of Petitioners’ exclusive right to use the
same considering that both parties engage in the same
business.
Private Respondent countered that Petitioner PEBV
has no legal capacity to sue; that its use of its corporate
name is not at all similar to Petitioners’ trademark
PHILIPS when considered in its entirety; and that its
products consisting of chain rollers, belts, bearings and
cutting saw are grossly different from Petitioners’
electrical products.
ISSUE: WON petitioner may sue private respondent.
HELD: YES.
The Court declared that a corporation’s right to use its
corporate and trade name is a property right, a right in
rem, which it may assert and protect against the world
in the same manner as it may protect its tangible
property, real or personal, against trespass or
conversion. It is regarded, to a certain extent, as a
property right and one which cannot be impaired or
defeated by subsequent appropriation by another
corporation in the same field.
A name is peculiarly important as necessary to the very
existence of a corporation. Its name is one of its
attributes, an element of its existence, and essential to
its identity.
A corporation acquires its name by choice and need not
select a name identical with or similar to one already
appropriated by a senior corporation while an
individual’s name is thrust upon him. A corporation can
no more use a corporate name in violation of the rights
of others than an individual can use his name legally
acquired so as to mislead the public and injure another
Our own Corporation Code, in its Section 18, expressly
provides that:
No corporate name may be allowed by the Securities
and Exchange Commission if the proposed name
is identical or deceptively or confusingly similar to that
of any existing corporation or to any other name
already protected by law or is patently deceptive,
confusing or contrary to existing law.Where a change
in a corporate name is approved, the commission shall
issue an amended certificate of incorporation under
the amended name.
The statutory prohibition cannot be any clearer. To
come within its scope, two requisites must be proven,
namely:
(1) that the complainant corporation acquired a prior
right over the use of such corporate name; and
(2) the proposed name is either:
(a) identical; or
(b) deceptively or confusingly similar
to that of any existing corporation or to any other
name already protected by law; or
(c) patently deceptive, confusing or contrary to existing
law.
In this regard, there is no doubt with respect to
Petitioners’ prior adoption of’ the name ”PHILIPS” as
part of its corporate name. Petitioners Philips Electrical
and Philips Industrial were incorporated on 29 August
1956 and 25 May 1956, respectively, while Respondent
Standard Philips was issued a Certificate of Registration
on 12 April 1982, twenty-six (26) years later (Rollo, p.
16). Petitioner PEBV has also used the trademark
“PHILIPS” on electrical lamps of all types and their
accessories since 30 September 1922.
The second requisite no less exists in this case. In
determining the existence of confusing similarity in
corporate names, the test is whether the similarity is
such as to mislead a person, using ordinary care and
discrimination. In so doing, the Court must look to the
record as well as the names themselves. While the
corporate names of Petitioners and Private
Respondent are not identical, a reading of Petitioner’s
corporate names, to wit: PHILIPS EXPORT B.V., PHILIPS
ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL
DEVELOPMENT, INC., inevitably leads one to conclude
that “PHILIPS” is, indeed, the dominant word in that all
the companies affiliated or associated with the
principal corporation, PEBV, are known in the
Philippines and abroad as the PHILIPS Group of
Companies.
What is lost sight of, however, is that PHILIPS is a
trademark or trade name which was registered as far
back as 1922. Petitioners, therefore, have the exclusive
right to its use which must be free from any
infringement by similarity. A corporation has an
exclusive right to the use of its name, which may be
protected by injunction upon a principle similar to that
upon which persons are protected in the use of
trademarks and tradenames (18 C.J.S. 574). Such
principle proceeds upon the theory that it is a fraud on
the corporation which has acquired a right to that
name and perhaps carried on its business thereunder,
that another should attempt to use the same name, or
the same name with a slight variation in such a way as
to induce persons to deal with it in the belief that they
are dealing with the corporation which has given a
reputation to the name.
TAN vs SEC
FACTS: October 1, 1979: Visayan Educational
Supply Corp was registered. As incorporator, Alfonso
S. Tan had 400 shares of the capital stock at the par
value of P100/share, evidenced by Certificate of Stock
No. 2. elected as President until 1982
Board of Directors as director until April 19, 1983
January 31, 1981: incorporators Antonia Y. Young and
Teresita Y. Ong, withdrew by assigning to the corp.
their shares, represented by certificate of stock No. 4
and 5, they were paid 40% corporate stock-in-trade
Certificate of stock No. 2 was cancelled by the
corporate secretary and Patricia Aguilar by virtue of
Resolution No. 1981 which was passed and approved
while he was still a member of the BOD
Due to the withdrawal of the 2 incorporators and in
order to complete the membership of the 5 directors
of the board, he sold 50 shares out of his 400 shares of
capital stock to his brother Angel S. Tan
Another incorporator, Alfredo B. Uy, also sold 50 of his
400 shares of capital stock to Teodora S. Tan
March 27, 1981: Angel Tan was elected director and on
March 27, 1981
Certificate of Stock No. 2 was cancelled and the
Certificates Nos. 6 in the name of Angel S. Tan and 8 in
the name of Alfonso S. Tan, Mr. Buzon were issued and
delivered (stock split), signed by the newly elected fifth
member of the Board, Angel S. Tan as VP, upon
instruction of Alfonso S. Tan who was then the
president
Alfonso S. Tan was given back Stock Certificate No. 2
for him to endorse and he deliberately withheld it for
reasons of his own - so as if no delivery
Certificate of Stock No. 8 was delivered to Tan Su Ching
January 29, 1983: Tan Su Ching was elected as
President, Tan as VP but did not sign the minutes
February 27, 1983: dislodged from his position as
president, he withdrew from the corporation paid with
stock-in-trade corresponding to 33.3% par value of
P35,000.00
April 19, 1983: Board meeting cancelled Stock
Certificate Nos. 2 and 8 and minutes submitted to SEC
December 3, 1983: Alfonso S. Tan filed the SEC
case questioning for the first time, the cancellation
of Stock Certificates Nos. 2 and 8
No transfer, however, shall be valid, except as between
the parties, until the transfer is recorded to the books
of the corporation so as to show the names of the
parties to the transaction, the date of the transfer, the
number of the certificate or certificates and the
number of shares transferred.
SEC. 63. Certificate of stock and transfer of shares. —
The capital stock and stock and corporations shall be
divided into shares for which certificates signed by the
president and 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 stocks 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 books of the corporation so
as to show the names of the parties to the transaction,
the date of the transfer, the number of the certificate
or certificates and the number of shares transferred.
No shares of stocks against which the corporation
holds any unpaid claim shall be transferable in the
books of the corporations.
SEC: held cancellation of the shares of stock - void
SEC en banc: overturned - nullity of the sale of 350
shares represented under stock certification No. 8,
pursuant to the "in pari delicto" doctrine.
ISSUE: W/N transfer is valid w/o delivery
HELD: YES. Affirmed.
Alfonso S. Tan devised the scheme of not returning the
cancelled Stock Certificate No. 2 which was returned to
him for his endorsement, to skim off the largesse of the
corporation as shown by the trading of his Stock
Certificate No. 8 for goods of the corporation valued at
P2M when the par value of the same was only worth
P35K
He also used this scheme to renege on his
indebtedness to respondent Tan Su Ching in the
amount of P1 million
valid transfer even if no delivery
certificate of stock is not a negotiable instrument
Although it is sometimes regarded as quasi-negotiable,
in the sense that it may be transferred by
endorsement, coupled with delivery, it is well-settled
that it is non-negotiable, because the holder thereof
takes it without prejudice to such rights or defenses as
the registered owner/s or transferror's creditor may
have under the law, except insofar as such rights or
defenses are subject to the limitations imposed by the
principles governing estoppel.
negotiable instrument
either indorsement + delivery or delivery = holder in
due course = better right than real owner
certificate of stock = owner better right
transfer
valid between parties
recorded in the books - to bind others including the
corporation
NOTE: Although there are 4 types of transactions, only
transfer is recorded in the stocks and transfer books.
paper representative or tangible evidence of the stock
itself and of the various interests therein
not necessary to render one a stockholder in
corporation
since stocks were already cancelled and reported to
the respondent Commission, there was no necessity to
endorse
All the acts required for the transferee to exercise its
rights over the acquired stocks were attendant and
even the corporation was protected from other
parties, considering that said transfer was earlier
recorded or registered in the corporate stock and
transfer book
PNB vs CFI
Facts: Private respondents are the registered owners
of three parcels of land in Pasig. They entered into a
contract of lease with Philippine Blooming Mills, Co.,
Inc. PBM introduced on the land, buildings,
machineries and other useful improvements. These
constructions and improvements were registered with
the Registry of Deeds of Rizal. PBM executed in favor
of Philippine National Bank (PNB for brevity) petitioner
herein, a deed of assignment, conveying and
transferring all its rights and interests under the
contract of lease which it executed with private
respondents. The assignment was for and in
consideration of the loans granted by PNB to PBM.
PBM filed a petition for registration of improvements
in the titles of real property owned by private
respondents. private respondents filed a motion in the
same proceedings. The motion sought to cancel the
annotations on respondents' certificates of title
pertaining to the assignment by PBM to PNB of the
former's leasehold rights, inclusion of improvements
and the real estate mortgages made by PBM in favor of
PNB, on the ground that the contract of lease entered
into between PBM and respondents-movants had
already expired by the failure of PBM and/or its
assignee to exercise the option to renew the second
20-year lease commencing on March 1, 1974 and also
by the failure of PBM to extend its corporate existence
in accordance with law. The court issued an order
directing the cancellation of the inscriptions on
respondents' certificates of title. NB filed an omnibus
motion to set aside the entry of judgment as ordered
by the respondent court on the ground that it has no
prior notice or knowledge of the order of respondent
court.
ISSUE whether the cancellation of the entries on
respondent's certificates of title is valid and proper
RULING The contract of lease expressly provides that
the term of the lease shall be twenty years from the
execution of the contract but can be extended for
another period of twenty years at the option of the
lessee should the corporate term be extended in
accordance with law. Clearly, the option of the lessee
to extend the lease for another period of twenty years
can be exercised only if the lessee as corporation
renews or extends its corporate term of
existence in accordance with the Corporation Code
which is the applicable law. Contracts are to be
interpreted according to their literal meaning and
should not be interpreted beyond their obvious
intendment. Thus, in the instant case, the initial term
of the contract of lease which commenced on March 1,
1954 ended on March 1, 1974. PBM as lessee
continued to occupy the leased premises beyond that
date with the acquiescence and consent of the
respondents as lessor. Records show however, that
PBM as a corporation had a corporate life of only
twenty-five (25) years which ended on January 19,
1977. It should be noted however that PBM allowed its
corporate term to expire without complying with the January 19,1980, the option of extending the lease was
requirements provided by law for the extension of its likewise terminated on January 19, 1977 because PBM
corporate term of existence. failed to renew or extend its corporate life in
accordance with law. From then on, the respondents
Section 11 of Corporation Code provides that a
can exercise their right to terminate the lease pursuant
corporation shall exist for a period not exceeding fifty
to the stipulations in the contract.
(50) years from the date of incorporation unless sooner
dissolved or unless said period is extended. Upon the Yao KA SIN TRADING VS CA
expiration of the period fixed in the articles of
PWCC wrote a letter (Exhibit "1") to YKS informing it of
incorporation in the absence of compliance with the
the disapproval of Exhibit "A." Pursuant, however, to
legal requisites for the extension of the period, the
its decision with respect to the 10,000 bags of cement,
corporation ceases to exist and is
it issued the corresponding delivery Order (Exhibit "4")
dissolved ipso facto (16 Fletcher 671 cited by Aguedo
and Official Receipt No. 0394 (Exhibit "5") for the
F. Agbayani, Commercial Laws of the Philippines, Vol.
payment of the same in the amount of P243,000.00.
3, 1988 Edition p. 617). When the period of corporate
This is the same amount received and acknowledged
life expires, the corporation ceases to be a body
by Maglana in Exhibit "A."
corporate for the purpose of continuing the business
for which it was organized. But it shall nevertheless be
YKS accepted without protest both the Delivery and
continued as a body corporate for three years after the
Official Receipts.
time when it would have been so dissolved, for the
purpose of prosecuting and defending suits by or
While YKS denied having received a copy of Exhibit "1",
against it and of enabling it gradually to settle and close
it was established that the original thereof was shown
its affairs, to dispose of and convey its property and to
to Mr. Henry Yao; since no one would sign a receipt for
divide its assets (Sec. 122, Corporation Code). There is
it, the original was left at the latter’s office and this,
no need for the institution of a proceeding
fact was duly noted in Exhibit "1" (Exhibit "1-A").
for quo warranto to determine the time or date of the
dissolution of a corporation because the period of
On 4 August 1973, PWCC wrote a letter (Exhibit "2") to
corporate existence is provided in the articles of
YKS in answer to the latter’s 4 August 1973 letter
incorporation. When such period expires and without
stating that it is "withdrawing or taking delivery of not
any extension having been made pursuant to law, the
less than 10,000 bags of white cement on August 6-7,
corporation is dissolve automatically insofar as the
1973 at Asturias, Cebu, thru M/V Taurus." In said reply,
continuation of its business is concerned.
PWCC reminded YKS of its (PWCC’s) 5 July 1973 letter
The quo warranto proceeding under Rule 66 of the
(Exhibit "1") and told the latter that PWCC "only
Rules of Court, as amended, may be instituted by the
committed to you and which you correspondingly paid
Solicitor General only for the involuntary dissolution of
10,000 bags of white cement of which 4,150 bags were
a corporation on the following grounds: a) when the
already delivered to you as of August 1, 1973." 6
corporation has offended against a provision of an Act
Unfortunately, no copy of the said 4 August 1973 letter
for its creation or renewal; b) when it has forfeited its
of YKS was presented in evidence.
privileges and franchises by non-user; c) when it has
committed or omitted an act which amounts to a
On 21 August 1973, PWCC wrote another letter (Exhibit
surrender of its corporate rights, privileges or
"3") 7 to YKS in reply to the latter’s letter of 15 August
franchises; d) when it has misused a right, privilege or
1973. Enclosed in the reply was a copy of Exhibit "2."
franchise conferred upon it by law, or when it has
While the records reveal that YKS received this reply
exercised a right, privilege or franchise in
also on 21 August 1973 (Exhibit "3-A"), 8 it still denied
contravention of law. Hence, there is no need for the
having received it. Likewise, no copy of the so-called 15
SEC to make an involuntary dissolution of a corporation
August 1973 letter was presented in evidence.
whose corporate term had ended because its articles
of incorporation had in effect expired by its own
On 10 September 1973, YKS, through Henry Yao, wrote
limitation.
a letter 9 to PWCC as a follow-up to the letter of 15
Considering the foregoing in relation to the contract of August 1973; YKS insisted on the delivery of 45,000
lease between the parties herein, when PBM's bags of white cement. 10
corporate life ended on January 19, 1977 and its 3-year
period for winding up and liquidation expired on On 12 September 1973, Henry Yao sent a letter (Exhibit
"G") to PWCC calling the latter’s attention to the
statement of delivery dated 24 August 1973,
particularly the price change from P23.30 to P24.30 per
94 lbs. bag net FOB Asturias, Cebu. 11
On 2 November 1973, YKS sent a telegram (Exhibit "C")
12 to PWCC insisting on the full compliance with the
terms of Exhibit "A" and informing the letter that it is
exercising the option therein stipulated.
On 3 November 1973, YKS sent to PWCC a letter
(Exhibit "D") as a follow-up to the 2 November 1973
telegram, but this was returned to sender as
unclaimed. 13
As of 7 December 1973, PWCC had delivered only 9,775
bags of white cement.
On 9 February 1974, YKS wrote PWCC a letter (Exhibit
"H") requesting, for the last time, compliance by the
latter with its obligation under Exhibit "A." 14
On 27 February 1974, PWCC sent an answer (Exhibit
"7") to the aforementioned letter of 9 February 1974;
PWCC reiterated the unenforceability of Exhibit "A."
15
On 4 March 1974, YKS filed with the then Court of First
Instance of Leyte a complaint for Specific Performance
with Damages against PWCC. The complaint 16 was
based on Exhibit "A" and was docketed as Civil Case No.
5064.
RULING A corporation, such as the private respondent,
can act only through its officers and agents, "all acts
within the powers of said corporation may be
performed by agents of its selection; and, except so far
as limitations or restrictions may be imposed by special
charter, by-law, or statutory provisions, the same
general principles of law which govern the relation of
agency for a natural person govern the officer or agent
of a corporation, of whatever status or rank, in respect
to his power to act for the corporation; and agents
when once appointed, or members acting in their
stead, are subject to the same rules, liabilities and
incapacities as are agents of individuals and private
persons." (19 C.J.S. 455)
Since a corporation, such as the private respondent,
can act only through its officers and agents, "all acts
within the powers of said corporation may be
performed by agents of its selection; and, except so far
as limitations or restrictions may be imposed by special
charter, by-law, or statutory provisions, the same
general principles of law which govern the relation of
agency for a natural person govern the officer or agent
of a corporation, of whatever status or rank, in respect
to his power to act for the corporation; and agents
when once appointed, or members acting in their
stead, are subject to the same rules, liabilities and
incapacities as are agents of individuals and private
persons." 51 Moreover,." . . a corporate officer or
agent may represent and bind the corporation in
transactions with third persons to the extent that
authority to do so has been conferred upon him, and
this includes powers which have been intentionally
conferred, and also such powers as, in the usual course
of the particular business, are incidental to, or may be
implied from, the powers intentionally conferred,
powers added by custom and usage, as usually
pertaining to the particular officer or agent, and such
apparent powers as the corporation has caused
persons dealing with the officer or agent to believe that
it has conferred." 52
RURAL BANK OF SALINAS INC VS CA
FACTS: Clemente Guerrero, President of the Rural Bank
of Salinas, Inc., executed a Special Power of Attorney in
favor of his wife, Melania, giving and granting the latter
full power of authority to sell or otherwise dispose of
and/or mortgage 473 shares of stock of the Bank
registered in his name. Before the death of Clemente,
Melania, pursuant to the said SPA, executed Deed of
Assignments for the shares of stock in favor of private
respondents. After the death of Clemente, Melania
proceeded in presenting the said Deeds and for
registration with a request for the transfer in the
Bank’s stock and transfer book of the 473 shares of
stock so assigned, the cancelation of stock certificates
in the name of Clemente and the issuance of new stock
certificates in the name of the new owners thereof.
The Bank however denied the request. Melania then
filed with SEC an action for Mandamus against Rural
Bank of Salinas, its President and Secretary. The latter
bank contended in its answer that the shares of
Guerrero became the property of his estate and thus
must be first settled and liquidated before distribution.
ISSUES:
1. Whether SEC has jurisdiction over the matter.
2. Whether petitioner may restrict the registration of
shares of stock or its transfer.
RULING:
1. YES. Sec. 5 (b) of PD 902-A grants to the SEC the
original and exclusive jurisdiction to hear and decide
cases involving intracorporate controversies. An
intracorporate controversy has been defined as one
which arises between a stockholder and the
corporation. There is no distinction, qualification, not
any exception whatsoever. The case at bar involves
shares of stock, their registration, cancellation and
issuances thereof by petitioner.
2. NO. Sec. 63 of the Corporation Code provides that
the shares of stock 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. A corporation either by its Board, its by-laws,
or the act of its officers, cannot create restrictions in
stock transfer. The Restrictions in the transfer of stock
must have their source in legislative enactment, as the
corporation itself cannot create such impediment. By-
laws are intended merely for the protection of the
corporation, and prescribe regulation, not restriction;
they are always subject to the charter of the
corporation. The corporation, in the absence of such
power, cannot ordinarily inquire into or pass upon the
legality of the transactions by which its stock passes
from one person to another, nor can it question the
consideration upon which a sale is based. The right to
transfer shares is inherent from the stockholders
ownership of the same, thus whenever a corporation
refuses to transfer and register stocks, mandamus will
lie to compel the officers of the corporation to transfer
said stocks to the books of the corporation.
BOYER – ROXAS VS. COURT OF APPEALS
FACTS : When Eugenia V. Roxas died, her heirs formed
a corporation under the name and style of Heirs of
Eugenia V. Roxas, Inc. using her estate as the capital of
the corporation, the private respondent herein. It was
primarily engaged in agriculture business, however it
amended its purpose to enable it to engage in resort
and restaurant business. Petitioners are stockholders
of the corporation and two of the heirs of Eugenia. By
tolerance, they were allowed to occupy some of the
properties of the corporation as their residence.
However, the board of directors of the corporation
passed a resolution evicting the petitioners from the
property of the corporation because the same will be
needed for expansion.
At the RTC, private respondent presented its evidence
averring that the subject premises are owned by the
corporation. Petitioners failed to present their
evidence due to alleged negligence of their counsel.
RTC handed a decision in favor of private respondent.
Petitioners appealed to the Court of Appeals but the
latter denied the petition and affirmed the ruling of the
RTC. Hence, they appealed to the Supreme Court. In
their appeal, petitioners argues that the CA made a
mistake in upholding the decision of the RTC, and that
their occupancy of the subject premises should be
respected because they own an aliquot part of the
corporation as stockholders, and that the veil of
corporate fiction must be pierced by virtue thereof.
ISSUE
1. Whether petitioner’s contention were correct as
regards the piercing of the corporate veil.
2. Whether petitioners were correct in their contention
that they should be respected as regards their
occupancy since they own an aliquot part of the
corporation.
RULING
1.Petitioner’s contention to pierce the veil of corporate
fiction is untenable. As aptly held by the court: “..The
separate personality of a corporation may ONLY be
disregarded when the corporation is used as a cloak or
cover for fraud or illegality, or to work injustice, or
when necessary to achieve equity or when necessary
for the protection of creditors.”
2. As regards petitioners contention that they should
be respected on their occupancy by virtue of an aliquot
part they own on the corporation as stockholders, it
also fails to hold water. The court held that “properties
owned by a corporation are owned by it as an entity
separate and distinct from its members. While shares
of stocks are personal property, they do not represent
property of the corporation. A share of stock only
typifies an aliquot part of the corporation’s property,
or the right to share in its proceeds to that extent when
distributed according to law and equity, but its holder
is not the owner of any part of the capital of the
corporation. Nor is he entitled to the possession of any
definite portion of its property or assets. The holder is
not a co-owner or a tenant in common of the corporate
property.”
ARCILLA VS CA
FACTS: EMILIO RODOLFO filed with the Regional Trial
Court (RTC) of Catanduanes a complaint for a sum of
money against ARCILLA. In his Answer, 3 petitioner
does not deny having had business transactions with
the private respondent but alleges that the
professional relationship began only in August of 1982
when he "was looking for a "pro-forma" invoice to
support his loan with the Kilusang Kabuhayan at
Kaunlaran (KKK for short) under the Ministry of Human
Settlement (sic)." 4 He explicitly admits that "(H)is loan
was in the same of his family corporation, CSAR Marine
Resources,
Inc.;" 5 however, the "vales", more specifically
Annexes "A" to "DD" of the complaint, "were
liquidated in the bank loan releases." 6 It is thus clear
that his main defense is payment; he did not interpose
any other affirmative defense.
RULING: the pleadings lead Us to the inescapable
conclusion that the petitioner, who is himself a lawyer,
is merely taking advantage of the use of the innocuous
phrase "in his capacity as President" found in the
dispositive portion of the challenged Amended
Decision — making the same a sanctuary for a defense
which he, as hereinafter discussed, had long since
abandoned or waived either deliberately or through his
obliviscence. His sole purpose, of course, is to avoid
complying with the liability adjudged against him by
the public respondent; such avoidance is premiered on
the so-called newly discovered evidence offered after
the public respondent had bent over backwards to
grant him a new trial despite the availability of such
evidence during pendency of the proceedings before
the trial court. It is to be noted that he failed to assign
as error in his Brief the denial by the said court of his
motion for new trial on the basis thereof.
SIBAGAT TIMBER CORP V GARCIA
FACTS: Respondent Sheriff Adolfo B. Garcia, who was
entrusted with the implementation of the writ of
execution issued by the Regional Trial Court
On the day, levy was made by the sheriff, the petitioner
herein, through Mariano Rana, filed a third-party claim
alleging that it is the lawful owner of the levied
machinery and equipment, by virtue of deeds of sale
executed in its favor by Del Rosario & Sons Logging
Enterprises, Inc.
Petitioner filed in the Regional Trial Court of Butuan
City, a petition for "Certiorari, Prohibition and
Injunction with Restraining Order & Writ of Preliminary
Injunction and Damages" and TRO was issued.
The petitioner appealed the order of dismissal to the
Court of Appeals (CA G.R. No. 20799). On February 15,
1991, the Court of Appeals dismissed the appeal.
ISSUE: The main issue raised by the petitioner is the
supposed error of the Court of Appeals in piercing the
veil of corporate entity and in holding that the third-
party claimant, herein petitioner Sibagat Corporation,
is not a separate and distinct entity from the judgment
debtor, Del Rosario & Sons Logging Enterprises, Inc.
RULING: The circumstances that: (1) petitioner and Del
Rosario & Sons Logging Enterprises, Inc. hold office in
the same building; (2) the officers and directors of both
corporations are practically the same; and (3) the Del
Rosarios assumed management and control of Sibagat
and have been acting for and managing its business (p.
30, Rollo), bolster the conclusion that petitioner is an
alter ego of the Del Rosario & Sons Logging Enterprises,
Inc.
The rule is that the veil of corporate fiction may be
pierced when made as a shield to perpetrate fraud
and/or confuse legitimate issues (Jacinto vs. CA, 198
SCRA 211). The theory of corporate entity was not
meant to promote unfair objectives or otherwise, to
shield them (Villanueva vs. Adre, 172 SCRA 876).
Likewise, where it appears that two business
enterprises are owned, conducted, and controlled by
the same parties, both law and equity will, when
necessary to protect the rights of third persons,
disregard the legal fiction that two corporations are
distinct entities, and treat them as identical (Phil.
Veterans Investment Development Corp. vs. CA, 181
SCRA 669).
REPUBLIC PLANTERS BANK VS CA
FACTS: Yamaguchi and Canlas are officers of the
Worldwide Garment Manufacturing, which later
changed its name to Pinch Manufacturing. They were
authorized to apply for credit facilities with the
petitioner bank. The two officers signed the
promissory notes issued to secure the payment of the
obligations. Later, the bank instituted an action f
or collection of
money, impleading also the two officers.
The trial court held the two officers personally liable
also.
RULING:
Canlass is solidarily liable on each of the promisso
ry notes to which his
signature appears. The promissory notes in questi
on are negotiable instruments and thus, governed by
the Negotiable Instruments Law.
Under the Negotiable Instruments
Law, persons who write their names in the instru personally liable to take holder of the instrument and
ment are makers are liable as such. By signing the cannot be permitted to prove that he was merely
note, the maker promises to pay to the order of the acting
payee or any holder the tenor of the obligation. Based
on the above provisions of the law, there is no denying
that Canlass is one of the co-makers of the promissory
note.

Finally, the respondent Court made a grave error in

holding that an amendment in a corporation's Articles
of Incorporation effecting a change of corporate name,
in this case from Worldwide Garment manufacturing
Inc to Pinch Manufacturing Corporation extinguished
the personality of the original corporation.

The corporation, upon such change in its name, is in no

sense a new corporation, nor the successor of the
original corporation. It is the same corporation with a
different name, and its character is in no respect
changed.

A change in the corporate name does not make a new

corporation, and whether effected by special act or
under a general law, has no effect on the identity of the
corporation, or on its property, rights, or liabilities.

The corporation continues, as before, responsible in its

new name for all debts or other liabilities which it had
previously contracted or incurred.

As a general rule, officers or directors under the old

corporate name bear no personal liability for acts done
or contracts entered into by officers of the corporation,
if duly authorized. Inasmuch as such officers acted in
their capacity as agent of the old corporation and the
change of name meant only the continuation of the old
juridical entity, the corporation bearing the same name
is still bound by the acts of its agents if authorized by
the Board. Under the Negotiable Instruments Law, the
liability of a person signing as an agent is specifically
provided for as follows:

Sec. 20. Liability of a person signing as agent and so

forth. Where the instrument contains or a person adds
to his signature words indicating that he signs for or on
behalf of a principal , or in a representative capacity, he
is not liable on the instrument if he was duly
authorized; but the mere addition of words describing
him as an agent, or as filling a representative character,
without disclosing his principal, does not exempt him
from personal liability.

Where the agent signs his name but nowhere in the

instrument has he disclosed the fact that he is acting in
a representative capacity or the name of the third party
for whom he might have acted as agent, the agent is
1991
SAW VS CA
Facts: collection suit with preliminary attachment filed
by Equitable Banking Corporation against Freeman,
Inc. and Saw Chiao Lian, its President and General
Manager... petitioners moved to intervene... denied...
petitioners appealed to the Court of Appeals.
Equitable and Saw Chiao Lian entered into a
compromise agreement which they submitted to and
was approved by the lower court.
it was not complied with, Equitable secured a writ of
execution... two lots owned by Freeman, Inc. were
levied upon and... sold at public auction to Freeman
Management and Development Corp.
Court of Appeals[1] sustained the denial of the
petitioners' motion for intervention, holding that "the
compromise agreement... will not necessarily
prejudice petitioners
It also ruled against the petitioners' argument that
because they had already filed a notice of appeal, the
trial judge had lost jurisdiction over the case and could
no longer issue the writ of execution.
The petitioners base their right to intervene for the
protection of their interests as stockholders on Everett
v. Asia Banking Corp.
The well-known rule that shareholders cannot
ordinarily sue in equity to redress wrongs done to the
corporation, but that the action must be brought by
the Board of Directors, x x x has its exceptions.
[If] the corporation [were] under the complete control
of the principal... defendants
Equitable... ontending that the collection suit against
Freeman, Inc. and Saw Chiao Lian is essentially in
personam and, as an action against defendants in their
personal capacities, will not prejudice the petitioners
as stockholders of the corporation.
Equitable also argues that the subject matter of the
intervention falls properly within the original and
exclusive jurisdiction of the Securities and Exchange
Commission
Equitable maintains that the petitioners' appeal could
only apply to the denial of their motion for intervention
and not to the main case because their personality as
party litigants had not been recognized by the trial
court.
Issues: The Honorable Court of Appeals erred in
holding that the petitioners cannot intervene...
because their rights as stockholders of Freeman are
merely inchoate and not actual, material, direct and
immediate prior to the dissolution of the... corporation
The Honorable Court of Appeals erred in holding that
the appeal of the petitioners... was confined only to the
order denying their motion to intervene and did not
divest the trial court of its jurisdiction over the whole
case.
Ruling: The Court finds that the respondent court
committed no reversible error in sustaining the denial
by the trial court of the petitioners' motion for
intervention.
To allow intervention, [a] it must be shown that the
movant has legal interest in the matter in litigation, or
otherwise qualified; and [b] consideration must be
given as to whether the adjudication of the rights of the
original parties may be delayed or prejudiced, or
whether... the intervenor's rights may be protected in
a separate proceeding or not.
The interest which entitles a person to intervene in a
suit between other parties must be in the matter in
litigation and of such direct and immediate character
that the intervenor will either gain or lose by the direct
legal operation and effect of the judgment.
The words "an interest in the subject" mean a direct
interest in the cause of action as pleaded, and which
would put the intervenor in a legal position to litigate a
fact alleged in the complaint, without the
establishment of which plaintiff could not recover.
Here, the interest, if it exists at all, of petitioners-
movants is indirect, contingent, remote, conjectural,
consequential and collateral. At the very least, their
interest is purely inchoate, or in sheer expectancy of a
right in the management of the corporation and to...
share in the profits thereof and in the properties and
assets thereof on dissolution, after payment of the
corporate debts and obligations.
While a share of stock represents a proportionate or
aliquot interest in the property of the corporation, it
does not vest the owner thereof with any legal right or
title to any of the property, his interest in the corporate
property being equitable or beneficial in...
nature. Shareholders are in no legal sense the owners
of corporate property, which is owned by the
corporation as a distinct legal person.
The petitioners' appeal could not have concerned the
"whole" case (referring to the decision) because the
petitioners "did not appeal the decision as indeed they
cannot because they are not parties to the case despite
their being stockholders of respondent Freeman, Inc."
They... could only appeal the denial of their motion for
intervention as they were never recognized by the trial
court as party litigants in the main case.
In the case at bar, there is no more principal action to
be resolved as a writ of execution had already been
issued by the lower court and the claim of Equitable
had already been satisfied. The decision of the lower
court had already become final and in fact had
already... been enforced. There is therefore no more
principal proceeding in which the petitioners may
intervene.
COJUANGCO V ROXAS
FACTS: Petitioners are stockholders of record of SMC.
the annual meeting of shareholders of SMC was held.
Among the matters taken up was the election of fifteen
(15) members of the board of directors for the ensuing
year. Representatives of the corporate shares present
at the meeting claimed that the shares are not under
sequestration; or that if they are under sequestration,
the PCGG had no right to vote the same. They were
overruled. The fifteen individuals who received the
highest number of votes were declared elected.
petitioners filed with the Sandiganbayan a petition
for quo warranto impleading as respondents the
fifteen (15) candidates who were declared elected
members of the board of directors of SMC for the year
1989-1990. In due course, a resolution was rendered
by the Sandiganbayan on November 16, 1989,
affirming its jurisdiction over the petition but
dismissing it for lack of cause of action on the ground
that the PCGG has the right to vote sequestered shares.
ISSUE: whether or not the Presidential Commission on
Good Government (PCGG) may vote the sequestered
shares of stock of San Miguel Corporation (SMC) and
elect its members of the board of directors.
RULING: In the light of the foregoing discussion, the
Court finds and so holds that the PCGG has no right to
vote the sequestered shares of petitioners including
the sequestered corporate shares. Only their owners,
duly authorized representatives or proxies may vote
the said shares. Consequently, the election of private
respondents Adolfo Azcuna, Edison Coseteng and
Patricio Pineda as members of the board of directors of
SMC for 1990-1991 should be set aside.
Nevertheless, the right of the Government,
represented by the PCGG, as conservator of
sequestered assets must be adequately protected. The
important rights of stockholders are the following: a)
the right to vote; b) the right to receive dividends; c)
the right to receive distributions upon liquidation of
the corporation; and d) the right to inspect the books
of the corporation. It is through the right to vote that
the stockholder participates in the management of the
corporation. The right to vote, unlike the rights to
receive dividends and liquidating distributions, is not a
passive thing because management or administration
is, under the Corporation Code, vested in the board of
directors, with certain reserved powers residing in the
stockholders directly. The board of directors and
executive committee (or management committee) and
the corporate officers selected by the board may make
it very difficult if not impossible for the PCGG to carry
out its duties as conservator if the Board or officers do
not cooperate, are hostile or antagonistic to the
conservator’s objectives.
COMMART VS CA
FACTS: Commart (Phils.), Inc., (Commart for short) is a
corporation organized by two brothers, Jesus and
Mariano Maglutac, to engage in the brokerage
business for the importation of fertilizers and other
products/commodities. Sometime in June 1984, the
two brothers agreed to go their separate ways, with
Mariano being persuaded to sell to Jesus his
shareholdings in Commart amounting to 25% of the
outstanding capital stock. As part of the deal, a
"Cooperative Agreement" was signed, between
Commart (represented by Jesus) and Mariano, in
which, among others, Commart ceded to Mariano or to
an "acceptable entity" he may create, a portion of its
business, with a pledge of mutual cooperation for a
certain period so as to enable Mariano to get his own
corporation off the ground, so to speak. Mariano's
wife, Alice M. Maglutac, has been for years a
stockholder and director of Commart, did not dispose
of her shareholdings, and thus continued as such even
after the sale of Mariano's equity. As broker and
indentor, Commart's principal income came from
commissions paid to it in U.S. dollars by foreign
suppliers of fertilizers and other commodities
imported by Planters Products, Inc. and other local
importers. ISSUE: Whether or not Alice has the legal
standing to file the derivative suit. RULING: YES. A
derivative suit has been the principal defense of the
minority shareholder against abuses by the majority. It
is a remedy designed by equity for those situations
where the management, through fraud, neglect of
duty, or other cause, declines to take the proper and
necessary steps to assert the corporation's rights.
Indeed, to grant to Commart the light of withdrawing
or dismissing the suit, at the instance of majority
stockholders and directors who themselves are the
persons alleged to have committed breaches of trust
against the interest of the corporation, would be to
emasculate the right of minority stockholders to seek
redress for the corporation. To consider the Notice of
Dismissal filed by Commart as quashing the complaint
filed by Alice Maglutac in favor of the corporation
would be to defeat the very nature and function of a
derivative suit and render the right to institute the
action illusory.
1990
WESTERN AGRO INDUSTRIAL CORP V RODRIGUEZ
FACTS: SIA Automotive and Diesel Parts, Inc. (SIA) filed
with the Regional Trial Court of Caloocan city a
complaint for "sum of money and damages" against
petitioners Western Agro Industrial Corporation
(WESGRO) and/or Antonio Rodriguez. The complaint
alleged that WESGRO is doing business through
Antonio Rodriguez and on different occasions in 1980,
1981 and 1982, Rodriguez, representing WESGRO
bought on credit different automotive spare parts from
the private respondent amounting to P100,753.80;
that the said amount has long become over due and
yet the petitioners refused to pay despite repeated
demands. He alleged that he is a director and officer of
WESGRO and that he entered into the purchase
contract with the respondent corporation in his
capacity as officer or agent of WESGRO and therefore
such contract was with WESGRO as a distinct legal
entity and did not confer rights much less liabilities on
him.
The trial court denied the motion to dismiss in its order
ISSUE: whether or not petitioner Antonio Rodriguez
can be made solidarily liable with the petitioner
corporation for debts incurred by the latter
RULING: In the case at bar, there is no showing that
Antonio Rodriguez, a director and officer of WESGRO
was not authorized by the corporation to enter into
purchase contracts with SIA. Moreover, the
respondent corporation has not shown any
circumstances which would necessitate the piercing of
the corporate veil so as to make Rodriguez personally
liable for the obligations incurred by the petitioner.
Hence, the inevitable conclusion is that he was acting
in behalf of the corporation when he executed the
purchase contracts with the respondent corporation,
In other words, Rodriguez' acts in representing the
petitioner corporation in its dealings with the
respondent corporation are corporate acts for which
only the corporation should be made liable for any
obligations arising from them.
REYNOLDS PH CORP VS CA
FACTS: petitioner sought to recover from the private
respondent Serg’s Products, Inc. the sum of P32,565.62
representing the unpaid price of aluminum foils and
cores sold and delivered by it to the latter.
The private respondent denied liability for payment of
the account on the ground that the aluminum foils and
cores were ordered or purchased by Serg’s Chocolate
Products, a partnership of Antonio Goquiolay and Luis
Sequia Mendoza, not Serg’s Products, Inc., a
corporation managed and controlled by Antonio
Goquiolay and his wife Conchita Goquiolay, as majority
stockholders and principal officers.
On July 31, 1968, the trial court rendered judgment
finding the private respondent liable and ordered it—
“to pay ‘Reynolds Philippine Corporation’
ISSUE: Who is the real debtor of the petitioner? Is it
the partnership of Goquiolay and Mendoza, doing
business under the trade name of “Serg’s Chocolate
Products,” or the respondent corporation, Serg’s
Products, Inc.?
RULING: In this case, the trial court which heard the
witnesses testify, hence was in a superior position to
assess the probative worth of their evidence, found
that although the commercial documents were indeed
in the name of “Serg’s Chocolate Products,” the facts
proved that the true Purchaser of the aluminum foils
and cores from the petitioner, was “Serg’s Products,
Inc. not the partnership denominated “Serg’s
Chocolate Products.”
The trial court noted that “Serg’s Products, Inc.” “acted
in such a manner that third persons dealing with it
were led to believe that ‘Serg’s Products, Inc.’ and
‘Serg’s Chocolate Products’ were one and the same
party. Serg’s Products, Inc. has its address at 109
Cordillera St., Quezon City, which is also the address of
Serg’s Chocolate Products (see Exhibit ‘NN'), and the
managing partner of the partnership doing business
under the name ‘Serg’s Chocolate Products’ is Antonio
Goquiolay who is also the manager of Serg’s Products,
Inc.”
Serg’s Chocolate Products ceased to exist in 1959 for
under the partnership Agreement between Goquiolay
and Mendoza (Exh. “2") the partnership which they
formed on March 17, 1954 had a term of five (5) years,
or up to 1959 only. While that term was renewable for
the same period upon agreement of the parties, no
evidence was adduced that it was renewed after it
expired in 1959. Having ceased to exist since 1959, the
partnership has no more juridical personality nor
capacity to sue and be sued. “Serg’s Chocolate
Products” is nothing but a name now which the
manager of Serg’s Products, Inc. appears to have used
to confuse, deceive, and delay, if not completely evade,
the payment of the corporation’s just debt to the
petitioner.
In La Campana Coffee Factory, Inc. vs. Kaisahan ng mga
Manggagawa sa La Campana, 93 Phil. 160, where a
somewhat similar situation existed as in this case, We
ruled: “The attempt to make the two factories appear
as two separate businesses, when in reality they are
but one, is but a devise to defeat the ends of the law
and should not be permitted to prevail. Although the
coffee factory is a corporation and, by legal fiction, an
entity existing separate and apart from persons
composing it, T and his family, it is settled that this
fiction of law, which had been introduced as a matter
of convenience and to subserve the ends of justice
cannot be invoked to further an end subversive of that
purpose.”
APODECA VS NLRC
Facts: Petitioner was employed in respondent
corporation. Respondent Jose M. Mirasol persuaded
petitioner to subscribe to 1,500 shares of respondent
corporation at P100.00 per share or a total of
P150,000.00. He made an initial payment of
P37,500.00. Petitioner was appointed President and
General Manager of the respondent corporation.
However, he resigned. Petitioner instituted with the
NLRC a complaint against private respondents for the
payment of his unpaid wages, his cost of living
allowance, the balance of his gasoline and
representation expenses and his bonus compensation.
Private respondents admitted that there is due to
petitioner the amount of P17,060.07 but this was
applied to the unpaid balance of his subscription in the
amount of P95,439.93. Petitioner questioned the set-
off alleging that there was no call or notice for the
payment of the unpaid subscription and that,
accordingly, the alleged obligation is not enforceable.
The labor arbiter ruled in favor of the petitioner. Then,
NLRC held that a stockholder who fails to pay his
unpaid subscription on call becomes a debtor of the
corporation and that the set-off of said obligation
against the wages and others due to petitioner is not
contrary to law, morals and public policy.
ISSUE: WON the corporation can validly offset the
unpaid shared in lieu of the wages?
RULING: No. The unpaid subscriptions are not due and
payable until a call is made by the corporation for
payment. Private respondents have not presented a
resolution of the board of directors of respondent
corporation calling for the payment of the unpaid
subscriptions. It does not even appear that a notice of
such call has been sent to petitioner by the respondent
corporation. No doubt such set-off was without lawful
basis, if not premature. As there was no notice or call
for the payment of unpaid subscriptions, the same is
not yet due and payable. Lastly, the NLRC has no
jurisdiction to determine such intra-corporate dispute
between the stockholder and the corporation as in the
matter of unpaid subscriptions. This controversy is
within the exclusive jurisdiction of the Securities and
Exchange Commission.
CAGAYAN VALLEY ENTERPRISES INC VS CA
FACTS: La Tondeña, Inc. (hereafter, LTI for short)
registered with the Philippine Patent Office pursuant
to Republic Act No. 6231 the 350 c.c. white flint bottles
it has been using for its gin popularly known as
“Ginebra San Miguel”. This registration was
subsequently renewed on December 4, 1974.2
LTI filed Civil Case No. 2668 for injunction and damages
in the then Branch I, Court of First Instance of Isabela
against Cagayan Valley Enterprises, Inc. (Cagayan, for
brevity) for using the 350 c.c., white flint bottles with
the mark “La Tondeña, Inc.” and “Ginebra San Miguel”
stamped or blown-in therein by filling the same with
Cagayan’s liquor product bearing the label “Sonny Boy”
for commercial sale and distribution, without LTI’s
written consent and in violation of Section 2 of
Republic Act No. 623, as amended by Republic Act No.
5700.
ISSUE: WHETHER OR NO CAGAYAN CAN USE THE
BOTTLE
RULING: When the corporation is the mere alter ego or
business conduit of a person, the law will regard the
corporation as an association of persons, or in the case
of two corporations, merge them into one.—Petitioner
cannot avoid the effect of the admission and/or
acknowledgment made by Diego Lim in the said case.
While a corporation is an entity separate and distinct
from its stockholders and from other corporations with
which it may be connected, where the discreteness of
its personality is used to defeat public convenience,
justify wrong, protect fraud, or defend crime, the law
will regard the corporation as an association of
persons, or in the case of two corporations, merge
them into one. When the corporation is the mere alter
egoor business conduit of a person, it may be
disregarded.
petitioner is a mere continuation and successor of
Cagayan Valley District; The corporation, in the case at
bar, has no separate and distinct personality from its
members; Reasons.—It is thus clear that herein
petitioner is a mere continuation and successor of
Cagayan Valley Distillery. It is likewise indubitable that
the admission made in the former case, as earlier
explained, is binding on it as cogent proof that even
before the filing of this case it had actual knowledge
that the bottles in dispute were registered containers
of LTI. As held in La Campana Coffee Factory, Inc., et al.
vs. Kaisahan Ng Mga Manggagawa sa La Campana
(KKM), et al., where the main purpose in forming the
corporation was to evade one’s subsidiary liability for
damages in a criminal case, the corporation may not be
heard to say that it has a personality separate and
distinct from its members, because to allow it to do so
would be to sanction the use of the fiction of corporate
entity as a shield to further an end subversive of
justice.
RAMOS VS CA
FACTS: On August 14 and 26, 1969, CMS Stock
Brokerage, Inc. (or CMS) sold to Lopez, Locsin, Ledesma
& Co., Inc. (or LLL) on the floor of the Makati Stock
Exchange (or MSE) 2,650 shares of Benguet
Consolidated Corporation for P297,650 on a delayed
delivery basis of 10 to 20 days, evidenced by Exchange
Contracts Nos. B-11807 and B-11814 both dated
August 14, 1969 and B-13084 dated August 26, 1969.
LLL bought the shares for the account of its clients, the
third-party defendants, Rene Ledesma, Jose Maria
Lopez, Cesar A. Lopez, Jr. and Alfredo Ramos. CMS
failed to deliver the shares of stocks within the agreed
period, but LLL did not demand delivery.
On January 6, 1970, CMS informed LLL that it would
deliver the shares the next day. LLL wrote CMS that it
would not accept the shares because its principals had
cancelled their orders. In its reply, CMS insisted that LLL
take delivery of the Benguet shares.
In CMS’s Clearing House Report of January 9, 1970, the
disposition of the shares in favor of LLL appeared, but
the latter refused to acknowledge receipt of the
covering disposal letter. CMS then deposited the letter
in the Office of the Exchange Executive, Secretary with
the notation “Refused acceptance pending decision of
the Exchange" (p. 7, Record on Appeal).
When the controversy was submitted to the Board of
Governors of the Exchange for determination, the
Board issued Resolution No. 523 on August 10, 1970
advising the parties to litigate the matter in court.
Accordingly, CMS filed in the Court of First Instance of
Rizal a complaint to compel LLL to accept the Benguet
shares, to pay the price of P297,650, as well as P25,000
as attorney’s fees and costs. LLL’s motion to dismiss the
complaint was denied. On June 17, 1971, LLL filed an
answer alleging that CMS was in pari delicto for failing
to deliver the shares within the stipulated period; that
CMS was in estoppel for submitting the dispute to the
Board of Governors of the Exchange; and that LLL did
not violate the contracts nor the rules and regulations
of the Exchange. LLL filed a counterclaim for P25,000 as
attorney’s fees.
On July 7, 1971, LLL impleaded its four principals:
Alfredo Ramos, Jose Ma. Lopez, Rene Ledesma and
Cesar Lopez, Jr. as third-party defendants. With respect
to Ramos, LLL alleged that as a result of CMS’s failure
to deliver the shares within the agreed time frame,
Ramos cancelled his order, disauthorized LLL from
accepting a subsequent delivery by CMS, and agreed to
hold LLL free from any liability for his non-acceptance
of the shares.
RULING: In the case at bar, the stock purchases of LLL
were on a 10-20 day delayed delivery basis.
Accordingly, after that period lapsed, the Buying
Members (LLL) should have advised the Selling
Member (CMS) in writing, giving CMS one (1) full
business day from receipt of said letter of demand to
comply. Since the selling member was unable to make
delivery within the stated one (1) full business day from
receipt of the demand letter, the buying member
should have delivered a copy of his letter of demand to
the Chairman of the Floor Trading and Arbitration
Committee who would have purchased the shares for
the selling member’s account. Facts:
These consolidated petitions seek the review of the
amended decision of the Court of Appeals in CA-G.R. SP
Nos. 05604 and 05617 which set aside the earlier
decision dated June 5, 1986, of the then Intermediate
Appellate Court and directed that in all subsequent...
elections for directors of Sanitary Wares
Manufacturing Corporation (Saniwares), American
Standard Inc. (ASI) cannot nominate more than three
(3) directors; that the Filipino stockholders shall not
interfere in ASI's choice of its three (3) nominees;...
that, on the other hand, the Filipino stockholders can
nominate only six (6) candidates and in the event they
cannot agree on the six (6) nominees, they shall vote
only among themselves to determine who the six (6)
nominees will be, with cumulative voting to be allowed
but... without interference from ASI.
The antecedent facts can be summarized as follows:
In 1961, Saniwares, a domestic corporation was
incorporated for the primary purpose of
manufacturing and marketing sanitary wares. One of
the incorporators, Mr. Baldwin Young went abroad to
look for foreign partners, European or American... who
could help in its expansion plans. On August 15, 1962,
ASI, a foreign corporation domiciled in Delaware,
United States entered into an Agreement with
Saniwares and some Filipino investors whereby ASI and
the Filipino investors agreed to... participate in the
ownership of an enterprise which would engage
primarily in the business of manufacturing in the
Philippines and selling here and abroad vitreous china
and sanitary wares. The parties agreed that the
business operations in the
Philippines shall be carried on by an incorporated
enterprise and that the name of the corporation shall
initially be "Sanitary Wares Manufacturing
Corporation."
The Agreement has the following provisions relevant to
the issues in these cases on the nomination and
election of the directors of the corporation:
"3. Articles of Incorporation
(a) The Articles of Incorporation of the Corporation
shall be substantially in the form annexed hereto as
Exhibit A and, insofar as permitted under Philippine
law, shall specifically provide for
(1) Cumulative voting for directors:... x x x xx
x x... x x
"5. Management
(a) The management of the Corporation shall be vested
in a Board of Directors, which shall consist of nine
individuals. As long as American-Standard shall own at
least 30% of the outstanding stock of the Corporation,
three of the nine directors... shall be designated by
American-Standard, and the other six shall be
designated by the other stockholders of the
Corporation. (pp. 51 & 53, Rollo of 75875)
At the request of ASI, the agreement contained
provisions designed to protect it as a minority group,
including the grant of veto powers over a number of
corporate acts and the right to designate certain
officers, such as a member of the Executive Committee
whose... vote was required for important corporate
transactions.
Later, the 30% capital stock of ASI was increased to
40%. The corporation was also registered with the
Board of Investments for availment of incentives with
the condition that at least 60% of the capital stock of
the corporation shall be owned... by Philippine
nationals.
The joint enterprise thus entered into by the Filipino
investors and the American corporation
prospered. Unfortunately, with the business
successes, there came a deterioration of the initially
harmonious relations between the two groups.
According to the Filipino group, a basic disagreement
was due to their desire to expand the export
operations of the company to which ASI objected as it
apparently had other subsidiaries or joint venture
groups in the countries where Philippine exports
were... contemplated. On March 8, 1983, the annual
stockholders' meeting was held. The meeting was
presided by Baldwin Young. The minutes were taken
by the Secretary, Avelino Cruz.
After disposing of the preliminary items in the agenda,
the stockholders then proceeded to the election of the
members of the board of directors. The ASI group
nominated three persons namely; Wolfgang
Aurbach, John Griffin and David P. Whittingham. The
Philippine investors nominated six, namely; Ernesto
Lagdameo, Sr., Raul A. Boncan, Ernesto R. Lagdameo,
Jr., George F. Lee, and Baldwin
Young. Mr. Eduardo R. Ceniza then nominated Mr.
Luciano E. Salazar, who in turn nominated Mr. Charles
Chamsay. The chairman, Baldwin Young ruled the last
two nominations out of order on the basis of... section
5 (a) of the Agreement, the consistent practice of the
parties during the past annual stockholders' meetings
to nominate only nine persons as nominees for the
nine-member board of directors, and the legal advice
of Saniwares' legal... counsel. The following events
then, transpired:... x x x. There were protests against
the action of the Chairman and heated arguments
ensued. An appeal was made by the ASI representative
to the body of stockholders present that a vote be...
taken on the ruling of the Chairman. The Chairman,
Baldwin Young, declared the appeal out of order and
no vote on the ruling was taken. The Chairman then
instructed the Corporate Secretary to cast all the votes
present and represented by... proxy equally for the 6
nominees of the Philippine Investors and the 3
nominees of ASI, thus effectively excluding the 2
additional persons nominated, namely, Luciano E.
Salazar and Charles Chamsay. The ASI reprentative,...
Mr. Jaqua, protested the decision of the Chairman and
announced that all votes accruing to ASI shares, a total
of 1,329,695 (p. 27, Rollo, AC-G.R. SP No. 05617) were
being cumulatively voted for the three ASI nominees
and Charles Chamsay,... and instructed the Secretary to
so vote. Luciano E. Salazar and other proxy holders
announced that all the votes owned by and or
represented by them 467,197 shares (p. 27, Rollo, AC-
G.R. SP No.05617) were being voted... cumulatively in
favor of Luciano E. Salazar. The Chairman, Baldwin
Young, nevertheless instructed the Secretary to cast all
votes equally in favor of the three ASI nominees,
namely, Wolfgang Aurbach, John Griffin and David
Whittingham, and the six originally nominated by
Rogelio Vinluan, namely, Ernesto Lagdameo, Sr., Raul
Boncan, Ernesto Lagdameo, Jr., Enrique Lagdameo,
George F. Lee, and Baldwin
Young. The Secretary then certified for the election of
the following -- Wolfgang Aurbach, John Griffin, David
Whittingham, Ernesto Lagdameo, Sr., Ernesto
Lagdameo, Jr., Enrique Lagdameo, George
F. Lee, Raul A. Boncan, Baldwin Young. The
representative of ASI then moved to recess the
meeting which was duly seconded. There was also a
motion to adjourn (p. 28, Rollo, Ac-G.R. SP No.
05617). This motion to adjourn was accepted by the
Chairman, Baldwin Young, who announced that the
motion was carried and declared the meeting
adjourned. Protests against the adjournment were
registered and having been ignored, Mr.
Jaqua, the ASI representative, stated that the meeting
was not adjourned but only recessed and that the
meeting would be reconvened in the next room. The
Chairman then threatened to have the stockholders
who did not agree to the decision of the
Chairman on the casting of votes bodily thrown
out. The ASI Group, Luciano E. Salazar and other
stockholders, allegedly representing 53 or 54% of the
shares of Saniwares, decided to continue the meeting
at the elevator lobby of the
American Standard Building. The continued meeting
was presided by Luciano E. Salazar, while Andres
Gatmaitan acted as Secretary. On the basis of the
cumulative votes cast earlier in the meeting, the ASI
Group nominated its four nominees: Wolfgang
Aurbach, John Griffin, David Whittingham and Charles
Chamsay. Luciano E. Salazar voted for himself, thus the
said five directors... were certified as elected directors
by the Acting Secretary, Andres Gatmaitan, with the
explanation that there was a tie among the other six (6)
nominees for the four (4) remaining positions of
directors and that the body decided not to break the
tie." (pp. 37-39,... Rollo of 75975-76)
These incidents triggered off the filing of separate
petitions by the parties with the Securities and
Exchange Commission (SEC). The first petition filed
was for preliminary injunction by Saniwares, Ernesto
V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto
R. Lagdameo, Jr., Enrique Lagdameo and George F. Lee
against Luciano Salazar and Charles Chamsay. The case
was denominated... as SEC Case No. 2417. The second
petition was for quo warranto and application for
receivership by Wolfgang Aurbach, John Griffin, David
Whittingham, Luciano E. Salazar and Charles
Chamsay... against the group of Young and Lagdameo
(petitioners in SEC Case No. 2417) and Avelino F.
Cruz. The case was docketed as SEC Case No.
2718. Both sets of parties except for Avelino Cruz
claimed to be the... legitimate directors of the
corporation.
The two petitions were consolidated and tried jointly
by a hearing officer who rendered a decision upholding
the election of the Lagdameo Group and dismissing the
quo warranto petition of Salazar and Chamsay. The ASI
Group and Salazar appealed the decision to the SEC en
banc which affirmed the hearing officer's decision.
The SEC decision led to the filing of two separate
appeals with the Intermediate Appellate Court by
Wolfgang Aurbach, John Griffin, David Whittingham
and Charles Chamsay (docketed as AC-G.R. SP No.
05604) and by Luciano E.
Salazar (docketed as AC-G.R. SP No.05617). The
petitions were consolidated and the appellate court in
its decision ordered the remand of the case to the
Securities and Exchange Commission with the directive
that a new stockholders' meeting of Saniwares... be
ordered convoked as soon as possible, under the
supervision of the Commission.
Upon a motion for reconsideration filed by the
appellees (Lagdameo Group) the appellate court (Court
of Appeals) rendered the questioned amended
decision.
Petitioners Wolfgang Aurbach, John Griffin, David P.
Whittingham and Charles Chamsay in G.R. No. 75875
assign the following errors:
I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE
ALLEGED ELECTION OF PRIVATE RESPONDENTS AS
MEMBERS OF THE BOARD OF DIRECTORS OF
SANIWARES WHEN IN FACT THERE WAS NO ELECTION
AT ALL.
II. THE COURT OF APPEALS PROHIBITS THE
STOCKHOLDERS FROM EXERCISING THEIR FULL
VOTING RIGHTS REPRESENTED BY THE NUMBER OF
SHARES IN SANIWARES, THUS DEPRIVING PETITIONERS
AND THE CORPORATION THEY REPRESENT OF THEIR
PROPERTY RIGHTS WITHOUT DUE
PROCESS OF LAW.
III. THE COURT OF APPEALS IMPOSES CONDITIONS
AND READS PROVISIONS INTO THE AGREEMENT OF
THE PARTIES WHICH WERE NOT THERE, WHICH
ACTION IT CANNOT LEGALLY DO. (p. 17, Rollo - 75875)
Petitioner Luciano E. Salazar in G.R. Nos.75975-76
assails the amended decision on the following grounds:
"11.1 That Amended Decision would sanction the CA's
disregard of binding contractual agreements entered
into by stockholders and the replacement of the
conditions of such agreements with terms never...
contemplated by the stockholders but merely dictated
by the CA.
"11.2 The Amended decision would likewise sanction
the unlawful deprivation of the property rights of
stockholders without due process of law in order that
a favored group of stockholders may be illegally
benefitted and... guaranteed a continuing monopoly of
the control of a corporation." (pp. 14-15, Rollo -75975-
76)
On the other hand, the petitioners in G.R. No. 75951
contend that:
I
"THE AMENDED DECISION OF THE RESPONDENT
COURT, WHILE RECOGNIZING THAT THE
STOCKHOLDERS OF SANIWARES ARE DIVIDED INTO
TWO BLOCS, FAILS TO FULLY ENFORCE THE BASIC
INTENT OF THE AGREEMENT AND THE LAW.
II
"THE AMENDED DECISION DOES NOT CATEGORICALLY
RULE THAT PRIVATE PETITIONERS HEREIN WERE THE
DULY ELECTED DIRECTORS DURING THE 8 MARCH 1983
ANNUAL STOCKHOLDERS MEETING OF SANIWARES."
(P. 24, Rollo - 75951)
The issues raised in the petitions are interrelated,
hence, they are discussed Jointly.
The main issue hinges on who were the duly elected
directors of Saniwares for the year 1983 during its
annual stockholders' meeting held on March 8,
1983. To answer this... question the following factors
should be determined: (1) the nature of the business
established by the parties - whether it was a joint
venture or a corporation and (2) whether or not the ASI
Group may vote their additional 10% equity during...
elections of Saniwares' board of directors.
The rule is that whether the parties to a particular
contract have thereby established among themselves a
joint venture or some other relation depends upon
their actual intention which is determined in
accordance with the rules governing the interpretation
and... construction of contracts. (Terminal Shares, Inc.
v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp 678;
Universal Sales Corp. v. California Press Mfg. Co. 20 Cal.
2nd 751, 128 P 2nd 668)
Co. (DC MO) 65 F Supp 678; Universal Sales Corp. v.
California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd
668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-
76) contend that the actual intention of the parties
should be viewed strictly on the "Agreement" dated
August 15, 1962 wherein it is clearly stated that the
parties' intention was to form a... corporation and not
a joint venture.
They specifically mention number 16 under
Miscellaneous Provisions which states:

The ASI Group and petitioner Salazar (G.R. Nos. 75975-

76) contend that the actual intention of the parties
should be viewed strictly on the "Agreement" dated
August 15, 1962 wherein it is clearly stated that the
parties' intention was to form a... corporation and not
a joint venture.

They specifically mention number 16 under

Miscellaneous Provisions which states:...
xxx xxx xxx

Issues:

The issues raised in the petitions are interrelated,

hence, they are discussed Jointly.

The main issue hinges on who were the duly elected

directors of Saniwares for the year 1983 during its
annual stockholders' meeting held on March 8,
1983. To answer this... question the following factors
should be determined: (1) the nature of the business
established by the parties - whether it was a joint
venture or a corporation and (2) whether or not the ASI
Group may vote their additional 10% equity during...
elections of Saniwares' board of directors.

The ASI Group and petitioner Salazar (G.R. Nos. 75975-

76) contend that the actual intention of the parties
should be viewed strictly on the "Agreement" dated
August 15, 1962 wherein it is clearly stated that the
parties' intention was to form a... corporation and not
a joint venture.

Ruling: The rule is that whether the parties to a

particular contract have thereby established among
themselves a joint venture or some other relation
depends upon their actual intention which is
determined in accordance with the rules governing the
interpretation and... construction of
contracts. (Terminal Shares, Inc. v. Chicago, B. and Q.R.