SECOND DIVISION

[G.R. No. 150283. April 16, 2008.]

RYUICHI YAMAMOTO, petitioner, vs. NISHINO LEATHER INDUSTRIES, INC. and IKUO NISHINO,
respondents.

DECISION

CARPIO-MORALES, J p:

In 1983, petitioner, Ryuichi Yamamoto (Yamamoto), a Japanese national, organized under Philippine
laws Wako Enterprises Manila, Incorporated (WAKO), a corporation engaged principally in leather
tanning, now known as Nishino Leather Industries, Inc. (NLII), one of herein respondents.

In 1987, Yamamoto and the other respondent, Ikuo Nishino (Nishino), also a Japanese national, forged a
Memorandum of Agreement under which they agreed to enter into a joint venture wherein Nishino
would acquire such number of shares of stock equivalent to 70% of the authorized capital stock of
WAKO. ADSTCa

Eventually, Nishino and his brother 1 Yoshinobu Nishino (Yoshinobu) acquired more than 70% of the
authorized capital stock of WAKO, reducing Yamamoto's investment therein to, by his claim, 10%, 2 less
than 10% according to Nishino. 3

The corporate name of WAKO was later changed to, as reflected earlier, its current name NLII.

Negotiations subsequently ensued in light of a planned takeover of NLII by Nishino who would buy-out
the shares of stock of Yamamoto. In the course of the negotiations, Yoshinobu and Nishino's counsel
Atty. Emmanuel G. Doce (Atty. Doce) advised Yamamoto by letter dated October 30, 1991, the pertinent
portions of which follow:

Hereunder is a simple memorandum of the subject matters discussed with me by Mr. Yoshinobu Nishino
yesterday, October 29th, based on the letter of Mr. Ikuo Nishino from Japan, and which I am now
transmitting to you. 4 SDHAcI

xxx xxx xxx

12. Machinery and Equipment:

The following machinery/equipment have been contributed by you to the company:

Splitting machine - 1 unit

Samming machine - 1 unit

Forklift - 1 unit

Drums - 4 units

Toggling machine - 2 units

Regarding the above machines, you may take them out with you (for your own use and sale) if you want,
provided, the value of such machines is deducted from your and Wako's capital contributions, which will
be paid to you.

Kindly let me know of your comments on all the above, soonest. DScTaC

xxx xxx xxx 5 (Emphasis and underscoring supplied)

On the basis of such letter, Yamamoto attempted to recover the machineries and equipment which
were, by Yamamoto's admission, part of his investment in the corporation, 6 but he was frustrated by
respondents, drawing Yamamoto to file on January 15, 1992 before the Regional Trial Court (RTC) of
Makati a complaint 7 against them for replevin.

Branch 45 of the Makati RTC issued a writ of replevin after Yamamoto filed a bond. 8

In their Answer with Counterclaim, 9 respondents claimed that the machineries and equipment subject
of replevin form part of Yamamoto's capital contributions in consideration of his equity in NLII and
should thus be treated as corporate property; and that the above-said letter of Atty. Doce to Yamamoto
was merely a proposal, "conditioned on [Yamamoto's] sell-out to . . . Nishino of his entire equity", 10
which proposal was yet to be authorized by the stockholders and Board of Directors of NLII. cAISTC

By way of Counterclaim, respondents, alleging that they suffered damage due to the seizure via the
implementation of the writ of replevin over the machineries and equipment, prayed for the award to
them of moral and exemplary damages, attorney's fees and litigation expenses, and costs of suit.

The trial court, by Decision of June 9, 1995, decided the case in favor of Yamamoto, 11 disposing thus:

WHEREFORE, judgment is hereby rendered: (1) declaring plaintiff as the rightful owner and possessor of
the machineries in question, and making the writ of seizure permanent; (2) ordering defendants to pay
plaintiff attorney's fees and expenses of litigation in the amount of Fifty Thousand Pesos (P50,000.00),
Philippine Currency; (3) dismissing defendants' counterclaims for lack of merit; and (4) ordering
defendants to pay the costs of suit.

SO ORDERED. 12 (Underscoring supplied) CHDAEc

On appeal, 13 the Court of Appeals held in favor of herein respondents and accordingly reversed the
RTC decision and dismissed the complaint. 14 In so holding, the appellate court found that the
machineries and equipment claimed by Yamamoto are corporate property of NLII and may not thus be
retrieved without the authority of the NLII Board of Directors; 15 and that petitioner's argument that
Nishino and Yamamoto cannot hide behind the shield of corporate fiction does not lie, 16 nor does
petitioner's invocation of the doctrine of promissory estoppel. 17 At the same time, the Court of Appeals
found no ground to support respondents' Counterclaim. 18

The Court of Appeals having denied 19 his Motion for Reconsideration, 20 Yamamoto filed the present
petition, 21 faulting the Court of Appeals:

A.

. . . IN HOLDING THAT THE VEIL OF CORPORATE FICTION SHOULD NOT BE PIERCED IN THE CASE AT BAR.
aDIHTE
B.

. . . IN HOLDING THAT THE DOCTRINE OF PROMISSORY ESTOPPEL DOES NOT APPLY TO THE CASE AT BAR.

C.

. . . IN HOLDING THAT RESPONDENTS ARE NOT LIABLE FOR ATTORNEY'S FEES. 22

The resolution of the petition hinges, in the main, on whether the advice in the letter of Atty. Doce that
Yamamoto may retrieve the machineries and equipment, which admittedly were part of his investment,
bound the corporation. The Court holds in the negative.

Indeed, without a Board Resolution authorizing respondent Nishino to act for and in behalf of the
corporation, he cannot bind the latter. Under the Corporation Law, unless otherwise provided,
corporate powers are exercised by the Board of Directors. 23 CaEATI

Urging this Court to pierce the veil of corporate fiction, Yamamoto argues, viz.:

During the negotiations, the issue as to the ownership of the Machiner[ies] never came up. Neither did
the issue on the proper procedure to be taken to execute the complete take-over of the Company come
up since Ikuo, Yoshinobu, and Yamamoto were the owners thereof, the presence of other stockholders
being only for the purpose of complying with the minimum requirements of the law.

What course of action the Company decides to do or not to do depends not on the "other members of
the Board of Directors". It depends on what Ikuo and Yoshinobu decide. The Company is but a mere
instrumentality of Ikuo [and] Yoshinobu. 24

xxx xxx xxx

. . . The Company hardly holds board meetings. It has an inactive board, the directors are directors in
name only and are there to do the bidding of the Nish[i]nos, nothing more. Its minutes are paper
minutes. . . . 25 DICcTa

xxx xxx xxx

The fact that the parties started at a 70-30 ratio and Yamamoto's percentage declined to 10% does not
mean the 20% went to others. . . . The 20% went to no one else but Ikuo himself. . . . Yoshinobu is the
younger brother of Ikuo and has no say at all in the business. Only Ikuo makes the decisions. There were,
therefore, no other members of the Board who have not given their approval. 26 (Emphasis and
underscoring supplied)

While the veil of separate corporate personality may be pierced when the corporation is merely an
adjunct, a business conduit, or alter ego of a person, 27 the mere ownership by a single stockholder of
even all or nearly all of the capital stocks of a corporation is not by itself a sufficient ground to disregard
the separate corporate personality. 28

The elements determinative of the applicability of the doctrine of piercing the veil of corporate fiction
follow: DTIaHE
"1. Control, not mere majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that the corporate
entity as to this transaction had at the time no separate mind, will or existence of its own;

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

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.

The absence of any one of these elements prevents "piercing the corporate veil." In applying the
'instrumentality' or 'alter ego' doctrine, the courts are concerned with reality and not form, with how
the corporation operated and the individual defendant's relationship to that operation." 29 (Italics in the
original; emphasis and underscoring supplied) ESTaHC

In relation to the second element, to disregard the separate juridical personality of a corporation, the
wrongdoing or unjust act in contravention of a plaintiff's legal rights must be clearly and convincingly
established; it cannot be presumed. 30 Without a demonstration that any of the evils sought to be
prevented by the doctrine is present, it does not apply. 31

In the case at bar, there is no showing that Nishino used the separate personality of NLII to unjustly act
or do wrong to Yamamoto in contravention of his legal rights.

Yamamoto argues, in another vein, that promissory estoppel lies against respondents, thus:

Under the doctrine of promissory estoppel, . . . estoppel may arise from the making of a promise, even
though without consideration, if it was intended that the promise should be relied upon and in fact it
was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or
would result in other injustice. HAIDcE

. . . Ikuo and Yoshinobu wanted Yamamoto out of the Company. For this purpose negotiations were had
between the parties. Having expressly given Yamamoto, through the Letter and through a subsequent
meeting at the Manila Peninsula where Ikuo himself confirmed that Yamamoto may take out the
Machinery from the Company anytime, respondents should not be allowed to turn around and do the
exact opposite of what they have represented they will do.

In paragraph twelve (12) of the Letter, Yamamoto was expressly advised that he could take out the
Machinery if he wanted to so, provided that the value of said machines would be deducted from his
capital contribution . . . .

xxx xxx xxx

Respondents cannot now argue that they did not intend for Yamamoto to rely upon the Letter. That was
the purpose of the Letter to begin with. Petitioner[s] in fact, relied upon said Letter and such reliance
was further strengthened during their meeting at the Manila Peninsula.

To sanction respondents' attempt to evade their obligation would be to sanction the perpetration of
fraud and injustice against petitioner. 32 (Underscoring supplied) ECSHID
It bears noting, however, that the aforementioned paragraph 12 of the letter is followed by a request
for Yamamoto to give his "comments on all the above, soonest." 33

What was thus proffered to Yamamoto was not a promise, but a mere offer, subject to his acceptance.
Without acceptance, a mere offer produces no obligation. 34

Thus, under Article 1181 of the Civil Code, "[i]n conditional obligations, the acquisition of rights, as well
as the extinguishment or loss of those already acquired, shall depend upon the happening of the event
which constitutes the condition." In the case at bar, there is no showing of compliance with the
condition for allowing Yamamoto to take the machineries and equipment, namely, his agreement to the
deduction of their value from his capital contribution due him in the buy-out of his interests in NLII.
Yamamoto's allegation that he agreed to the condition 35 remained just that, no proof thereof having
been presented. SEHTIc

The machineries and equipment, which comprised Yamamoto's investment in NLII, 36 thus remained
part of the capital property of the corporation. 37

It is settled that the property of a corporation is not the property of its stockholders or members. 38
Under the trust fund doctrine, the capital stock, property, and other assets of a corporation are
regarded as equity in trust for the payment of corporate creditors which are preferred over the
stockholders in the distribution of corporate assets. 39 The distribution of corporate assets and property
cannot be made to depend on the whims and caprices of the stockholders, officers, or directors of the
corporation unless the indispensable conditions and procedures for the protection of corporate
creditors are followed. 40 TcCSIa

WHEREFORE, the petition is DENIED.

Costs against petitioner.

SO ORDERED.

Tinga, Velasco, Jr. and Brion, JJ., concur.

Quisumbing, J., is on official leave.

Footnotes

SECOND DIVISION

[G.R. No. 150694. March 13, 2009.]

ZOMER DEVELOPMENT COMPANY, INC., petitioner, vs. INTERNATIONAL EXCHANGE BANK and SHERIFF
IV ARTHUR R. CABIGON, respondents.

DECISION

CARPIO MORALES, J p:

On August 25, 1997, the Board of Directors of Zomer Development Company, Inc. (petitioner) approved
a resolution authorizing it to apply for and obtain a credit line with respondent International Exchange
Bank (IEB) in the amount of P60,000,000 as well as temporary excesses or permanent increases thereon
as may be approved by IEB from time to time. 1 The Board of Directors also authorized petitioner to
assign, pledge, or mortgage its properties as security for this credit line; and to secure and guarantee the
term loan and other credit facility of IDHI Prime Aggregates Corporation (Prime Aggregates) with IEB. 2
AEIcTD

Prime Aggregates obtained on August 26, 1997 a term loan from IEB in the amount of P60,000,000. 3 On
September 2, 1997, petitioner, through its Treasurer Amparo Zosa (Amparo) and its General Manager
Manuel Zosa, Jr. (Zosa), executed a real estate mortgage covering three parcels of land (the real estate
mortgage) in favor of IEB to secure:

1. The payment of all loans, overdrafts, credit lines and other credit facilities or accommodations
obtained or hereinafter obtained by the MORTGAGOR and/or by IDHI Prime Aggregates Corporation
(hereinafter referred to as DEBTOR)

2. The payment of all interests, charges, penalties, reimbursements and other obligations owing by
the MORTGAGOR and/or DEBTOR to the MORTGAGEE whether direct or indirect, principal or secondary;
absolute or contingent as appearing in the accounts, books and records of the MORTGAGEE. IACDaS

3. The payment of all obligations of the MORTGAGOR and/or DEBTOR of whatever kind or nature
whether such obligations have been contracted before, during, or after the constitution of [the]
MORTGAGE.

4. In case the MORTGAGOR and/or DEBTOR incurs subsequent obligations of whatever kind or
nature whether such obligations, as extension thereof, or as new loans or is given any other kind of
accommodations, the payment of said obligations, and/or accommodations without the necessity of
executing new agreements.

5. The faithful and strict performance and compliance by the MORTGAGOR and/or DEBTOR of all
the terms and conditions of the MORTGAGE, the credit agreements, promissory notes and other loan
documents and agreements evidencing the loan, overdrafts, credit lines and other credit
accommodations granted to the MORTGAGOR and/or DEBTOR; including all amendments thereon, such
as but not limited to changes in the interest rates, penalties, charges, or fees; acceleration of payments;
and the like. cADaIH

xxx xxx xxx 4 (Emphasis, italics and underscoring supplied) 2009jur

Prime Aggregates subsequently obtained several loans from IEB from September 1997 until September
1998. 5

Prime Aggregates failed to settle its outstanding obligation which stood at P90,267,854.96 and
US$211,547.12 6 as of September 15, 2000, drawing IEB to file a petition for extra-judicial foreclosure of
mortgage before the Regional Trial Court (RTC) of Cebu City.

Respondent Sheriff IV Arthur R. Cabigon (Cabigon) having issued on October 18, 2000 a Notice of Extra-
Judicial Foreclosure and Sale 7 scheduled on November 28, 2000, petitioner filed a complaint 8 for
Injunction with application for writ of preliminary injunction/temporary restraining order before the
Cebu City RTC, alleging that the real estate mortgage was null and void because Amparo and Zosa were
authorized to execute it to secure only one obligation of Prime Aggregates. Petitioner thus prayed:
DaAETS

. . . that after due notice and hearing, judgment be rendered declaring the real estate mortgage and its
extrajudicial foreclosure sale as null and void and that defendant bank be sentenced to pay plaintiff the
sum of P100,000.00 as attorney's fees and P100,000.00 as litigation expenses.

In the meantime, it is most respectfully prayed that a writ of preliminary injunction/TRO be issued
enjoining the extrajudicial foreclosure sale of plaintiff's properties scheduled on November 28, 2000 or
December 5, 2000.

. . . that after trial, the writ of preliminary injunction be made permanent. . . . 9 (Emphasis and
underscoring supplied)

The complaint, docketed as Civil Case No. CEB-25762, was amended on November 15, 2000. cDHCAE

Branch 9 of the Cebu City RTC denied petitioner's prayer for a writ of preliminary injunction. 10
Petitioner filed a Motion for Reconsideration 11 and a Motion for Admission of a Second Amended
Complaint, 12 albeit it later filed a Motion to Withdraw Second Amended Complaint and to admit Third
Amended Complaint. 13 The trial court denied petitioner's Motion for Reconsideration. 14

Petitioner assailed the trial court's orders denying its prayer for the issuance of a writ of preliminary
injunction before the Court of Appeals via certiorari, 15 docketed as CA-G.R. SP No. 64390 (certiorari
case), alleging, in the main, that the real estate mortgage it executed was null and void for being ultra
vires 16 as it was not empowered to mortgage its properties as security for the payment of obligations
of third parties; and that Amparo and Zosa were authorized to mortgage its properties to secure only a
P60,000,000 term loan and one credit facility of Prime Aggregates. 17

In the meantime, Branch 15 of the Cebu City RTC to which Civil Case No. CEB-25762 was re-raffled after
the Presiding Judge of Branch 9 inhibited himself in the case, dismissed petitioner's Third Amended
Complaint 18 by Order of September 10, 2001. Petitioner appealed this Order to the Court of Appeals
which docketed it as CA-G.R. CV No. 73063. CaEIST

By Decision 19 of October 30, 2001, the appellate court, acting on the certiorari case filed by petitioners,
denied it due course as it found that the trial court committed no grave abuse of discretion in denying
petitioner's prayer for preliminary injunction. 20 It brushed aside petitioner's arguments that the real
estate mortgage was ultra vires and that Amparo and Zosa were only authorized to mortgage
petitioner's properties to secure the P60,000,000 term loan and one credit facility of Prime Aggregates.

Hence, the present petition 21 for review faulting the Court of Appeals in:

I. . . . NOT HOLDING THAT THE JUDGE WHO DENIED PETITIONER'S APPLICATION FOR INJUNCTION
WAS A BIASED AND PARTIAL JUDGE AS RESPONDENTS WERE GIVEN A COPY OF THE ORDER ON MARCH
2, 2001 WHEN IT WAS SIGNED BY THE JUDGE BUT BEFORE ITS OFFICIAL RELEASE ON MARCH 5, 2001.
aITECA

II. . . . USING THE DECISION OF THIS HONORABLE COURT IN THE CASE OF UNION BANK V. COURT
OF APPEALS, ET. AL., 311 SCRA 795 IN SAYING THAT PETITIONER IS NOT ENTITLED TO A WRIT OF
PRELIMINARY INJUNCTION INSTEAD OF USING THE CASE OF REPUBLIC V. COURT OF APPEALS, 324 SCRA
569 WHEREIN THIS HONORABLE COURT HELD THAT EVEN P.D. 385 CANNOT BE USED AS A SHIELD TO
STOP BY INJUNCTION THE FORECLOSURE OF A MORTGAGE WHERE THE VERY PROPRIETY OF SAID
FORECLOSURE IS IN SERIOUS DOUBT WHICH IS THE SAME ISSUE RAISED IN THE CASE AT BAR.

III. . . . HOLDING THAT [PRIME AGGREGATES] IS A SUBSIDIARY OF PETITIONER IN THE ABSENCE OF A

FINDING THAT PETITIONER OWNS ANY SHARE IN [PRIME AGGREGATES].

IV. . . . NOT HOLDING THAT THE SECRETARY'S CERTIFICATE OF PETITIONER WAS NULL AND VOID
FOR NOT PUTTING ANY LIMITATION OF THE AMOUNT OF THE OBLIGATION OF [PRIME AGGREGATES] TO
BE SECURED BY A THIRD PARTY MORTGAGE OF ITS PROPERTIES. DaCEIc

V. . . . NOT HOLDING THAT THE THIRD PARTY REAL ESTATE MORTGAGE EXECUTED BY THE AGENTS
OF PETITIONER IN FAVOR OF PRIVATE RESPONDENT IS NULL AND VOID BECAUSE THEY EXCEEDED THEIR
AUTHORITY IN SIGNING THE SAME.

VI. . . . NOT CONSTRUING STRICTLY AGAINST PRIVATE RESPONDENT THE SECRETARY'S CERTIFICATE
AND THIRD PARTY REAL ESTATE MORTGAGE WHICH WERE ALL DOCUMENTS OF ADHESION AND ALL
PREPARED BY IT AND TO EFFECT THE LEAST TRANSMISSION OF RIGHTS PURSUANT TO ARTICLE 1378 OF
THE NEW CIVIL CODE SINCE THE THIRD PARTY REAL ESTATE MORTGAGE IS A GRATUITOUS CONTRACT
WHICH WAS EXECUTED PURELY FOR ACCOMMODATION OF [PRIME AGGREGATES].

VII. . . . NOT LAYING THE BLAME ON PRIVATE RESPONDENT IN MAKING THE AGENTS OF PETITIONER
SIGN AN ILLEGAL CONTRACT SINCE IT WAS VERY WELL AWARE OF THEIR AUTHORITY AS ALL THE
DOCUMENTS WERE ITS FORMS, PRE-PRINTED AND PREPARED BY IT. cACEaI

VIII. . . . HOLDING THAT THE PETITIONER RATIFIED BY INACTION THE ILLEGAL CONTRACT EXECUTED
BY ITS AGENTS SINCE THE PRIVATE RESPONDENT WAS VERY WELL AWARE OF THE EXTENT OF THEIR
AUTHORITY.

IX. MAKING CONFLICTING FINDINGS OF FACTS. 22

Respondents, in their Comment 23 dated February 27, 2002, move for the dismissal of the petition for
being moot and academic, alleging that:

On October 8, 2001 [sic], [petitioner's] principal action for annulment of real estate mortgage was
dismissed by the trial court and that said action is now on appeal with the Court of Appeals . . . [.]

On November 19, 2001, [petitioner's] mortgaged properties were foreclosed by [IEB]. In fact, as the
highest bidder in the said foreclosure sale and in view of the passage of the new General Banking Law
(which allows banks to consolidate its [sic] title within a shorter period if the mortgagor of a foreclosed
property is a corporation), iBank had consolidated its title on the mortgaged properties. HcACTE

[Petitioner's] application for issuance of writ of preliminary injunction, the subject of the instant appeal
purportedly under Rule 45 of the Rules of Court, cannot survive the dismissal of its principal action as
well as the foreclosure and consolidation in [IEB] name of its mortgaged properties. 24 (Emphasis and
underscoring supplied)

In its Reply, 25 petitioner argues that when Branch 15 of the Cebu City RTC dismissed the Third
Amended Complaint in Civil Case No. CEB-25762 on September 10, 2001, it no longer had jurisdiction
over it because said Branch had on August 14, 2001 been designated as a drug court.
Petitioner goes on to argue that even if the acts sought to be restrained have already been committed,
since they are continuing in nature and in derogation of its rights at the outset, preliminary mandatory
injunction may still be availed of to restore the status quo, citing Manila Electric Railroad and Light
Company v. del Rosario and Jose. 26

Acting on petitioner's appeal from the dismissal by Branch 15 of its Third Amended Complaint, the
appellate court, by Decision of April 14, 2005, SET ASIDE the trial court's order of dismissal and ordered
the reinstatement of said complaint to the docket of Branch 15 of the Cebu City RTC. IaAEHD

The records show that, indeed, petitioner's mortgaged properties were already foreclosed, as shown by
the Certificate of Sale issued by Cabigon on November 19, 2001. 27 And they also show that ownership
of the lands-subject of the real estate mortgage had been consolidated and transfer certificates of title
had been issued in IEB's name. 28 It is on this score that the Court finds petitioner's prayer for a writ of
preliminary injunction moot and academic. This leaves it unnecessary for the Court to still dwell on
petitioner's argument that it was not, under its By-Laws, empowered to mortgage its properties to
secure the obligation of a third party. IN ANY EVENT, the Court finds well-taken the appellate court's
following disposition of such argument: 2009jur

We do agree that the Petitioner, under its "By-Laws", is not empowered to mortgage its properties as a
security for the payment of the obligations of third parties. This is on the general premise that the
properties of a corporation are regarded as held in trust for the payment of corporate creditors and not
for the creditors of third parties. However, the Petitioner is not proscribed from mortgaging its
properties as security for the payment of obligations of third parties. In an opinion of the Securities and
Exchange Commission, dated April 15, 1987, it declared that a private corporation, by way of exceptions,
may give a third party mortgage: HEISca

"1. When the mortgage of corporate assets/properties shall be done in the furtherance of the
interest of the corporation and in the usual and regular course of its business; and

2. To secure the debt of a subsidiary."

While admittedly, the "Opinion" of the Securities & Exchange Commission may not be conclusive on the
Respondent Court, however, admittedly the same is of persuasive effect.

In the present recourse, the Respondent Court found that not only is Prime Aggregates a subsidiary of
the Petitioner but that the Petitioner appeared to be a "family" corporation:

"a. The plaintiff appears to be a family corporation. The incorporators and stockholders and the
membership of the board of directors are Zosa family. . . . ADHaTC

b. Francis and Rolando Zosa are directors of [Prime Aggregates] and of plaintiff corporation . . .

c. The REM was executed by Amparo Zosa who was the treasurer of plaintiff and Manuel Zosa, the
General Manager, both are directors/stockholders of the plaintiff. Amparo Zosa is the biggest
stockholder and is the mother of practically all the other stockholders of plaintiff. Manuel Zosa, Jr. is the
General Manager and a son of Amparo.

d. The Corporate Secretary of plaintiff and [Prime Aggregates] are members of the Zosa family. The
Corporate Secretary of [Prime Aggregates] is also the daughter of Francis Zosa, president of plaintiff.
e. The President of plaintiff corporation, Francis Zosa and the president of [Prime Aggregates],
Rolando Zosa, are brothers (aside from being common directors of both corporations.) EcAISC

We agree with the Respondent Court.

The Petitioner's shrill incantations that the "Resolution", approved by its Board of Directors, authorizing
its Treasurer and General Manager to execute a "Real Estate Mortgage" as security for the payment of
the account of Prime Aggregates, a sister corporation, is not for its best interest, is a "puzzlement" . . . .
Since when is a private corporation, going to the aid of a sister corporation, not for the best interest of
both corporation? For in doing so, the two (2) corporations are enhancing, boosting and promoting a
common interest, the interest of "family" having ownership of both corporations. In the second place,
Courts are loathe to overturn decisions of the management of a corporation in the conduct of its
business via its Board of Directors . . . .

xxx xxx xxx

There is no evidence on record that the "Real Estate Mortgage" was executed by the Petitioner and the
Private Respondent to prejudice corporate creditors of the Petitioner or will result in the infringement of
the trust fund doctrine or hamper the continuous business operation of the Petitioner or that the Prime
Aggregates was insolvent or incapable of paying the Private Respondent. Indeed, the latter approved
Prime Aggregates' loan availments and credit facilities after its investigation of the financial capability of
Prime Aggregates and its capacity to pay its account to the Private respondent. 29 TaDAHE

xxx xxx xxx

[U]nder the "Resolution" of the Board of Directors, it authorized its Treasurer and General Manager to
execute a "Real Estate Mortgage" over its properties as security for the "term loan and credit facility" of
Prime Aggregates. The maximum amounts of such term loan and credit facility were not fixed in the
"Resolution". The term "credit facility" is a broad term in credit business transactions to denote loans,
pledges, mortgages, trust receipt transactions and credit agreements. And then, again, such term loan
and/or credit facility may be granted, by the Private Respondent, in favor of Prime Aggregates, in
trenches or in staggered basis, each disbursement evidenced by separate agreements depending upon
the needs of Prime Aggregates for the establishment of its sand and gravel plant and port facilities and
the purchase of equipments and machinery for said project. Hence, the "Long Term Agreements" and
"Credit Agreements" executed by Prime Aggregates and the Private Respondent, with the Petitioner's
properties, as collateral therefore, were envisaged in the terms "term loan and credit facility" in the
"Resolution" of the Board of Directors of the Petitioner. cSEDTC

The intention of the Members of the Board of Directors of the Petitioner, in approving the "Resolution",
may be ascertained . . . also from the contemporaneous and subsequent acts of the Petitioner, the
Private Respondent and Prime Aggregates. Given the factual milieu in the present recourse, as found
and declared by the Respondent Court, there can be no equivocation that, indeed the Petitioner
conformed to and ratified, and hence, is bound by the execution, by its Treasurer and General Manager,
of the "Real Estate Mortgage" in favor of the Private respondent, with its properties used as securities
for the payment of the credit and loan availments of Prime Aggregates from the Private Respondent on
the basis of the "Resolution" approved by its Board of Directors. As our Supreme Court declared,
ratification and/or approval by the corporation of the acts of its agents/officers may be ascertained
through . . . the acquiescence in his acts of a particular nature, with actual or constructive thereof,
whether within or beyond the scope of his ordinary powers. ETaSDc

As it was, the Petitioner finally awoke from its slumber when the Private Respondent filed its "Petition"
for the extra-judicial foreclosure of the "Real Estate Mortgage", with the Sheriff, and assailed the
authority of its Board of Directors to approve the said "Resolution" and of its Treasurer and General
Manager to execute the deed and brand the said "Resolution" and the said deed as "ultra vires" and
hence, not binding on the Petitioner, and hurried off to the Respondent Court and prayed for injunctive
relief. Before then, the Petitioner maintained a stoic silence and adopted a "hands off" stance. We find
the Petitioner's stance grossly inequitable. We must take heed and pay obeisance to the equity rule that
if one maintains silence when, in conscience he ought to speak, equity will debar him from speaking
when, in conscience, he ought to remain silent. He who remains silent when he ought to speak cannot
be heard to speak when he ought to be silent. More, the transactions between the Petitioner and the
Private Respondent over its properties are neither malum in se or malum prohibitum. Hence, the
Petitioner cannot hide behind the cloak of "ultra vires" for a defense.

xxx xxx xxx

The plea of "ultra vires" will not be allowed to prevail, whether interposed for or against a corporation,
when it will not advance justice but, on the contrary, will accomplish a legal wrong to the prejudice of
another who acted in good faith. 30 (Underscoring and emphasis in the original) TSIEAD

WHEREFORE, the petition is DISMISSED.

Costs against petitioner.

SO ORDERED.

Quisumbing, Tinga, Velasco, Jr. and Brion, JJ., concur. 2009jur