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BUS. ORG.-CASES (1

INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC.,

petitioner,
vs.
HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL
FEDERATION, respondents.
FACTS:
International Express Travel and Tour Services, Inc., offered its services
as a travel agency to the Philippine Football Federation through its
president private respondent HENRI KHAN.
Petitioner secured the airline tickets for the trips of the athletes and
officials of the Federation to the South East Asian Games in Kuala Lumpur
as well as various other trips to the People's Republic of China and
Brisbane. The total cost of the tickets amounted to P449,654.83.
Petitioner filed a civil case before the RTC for sum of money, suing
HENRI KHAN in his personal capacity and as President of the Federation.
Respondent averred that the petitioner has no cause of action against him
either in his personal capacity or in his official capacity as president of the
Federation. He maintained that he did not guarantee payment but merely
acted as an agent of the Federation which has a separate and distinct
juridical personality.

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Affiliate with international or regional sports associations after

due consultation with the Department;
xxx

13. Perform such other functions as may be provided by law.

The above powers and functions granted to national sports associations
clearly indicate that these entities may acquire a juridical personality.
However, while we agree with the appellate court that national sports
associations may be accorded corporate status, such does not
automatically take place by the mere passage of these laws.
It is a basic postulate that before a corporation may acquire juridical
personality, the State must give its consent either in the form of a special
law or a general enabling act.
Under the law, before an entity may be considered as a national sports
association, such entity must be recognized by the accrediting
organization, the Philippine Amateur Athletic Federation under RA 3135,
and the Department of Youth and Sports Development under PD 604. This
fact of recognition, however, Henri Khan failed to substantiate.
We rule that the Philippine Football Federation is not a national sports
association within the purview of the aforementioned laws and does not
have corporate existence of its own.

RULING:
As correctly observed by the appellate court, both R.A. 3135 and P.D. No.
604 recognized the juridical existence of national sports associations.
This may be gleaned from the powers and functions granted to these
associations. Section 14 of R.A. 3135 provides:
SEC. 14. Functions, powers and duties of Associations. - The National
Sports' Association shall have the following functions, powers and duties:
1.
2.
3.
4.

To adopt a constitution and by-laws for their internal

organization and government;
To raise funds by donations, benefits, and other means for their
purposes.
To purchase, sell, lease or otherwise encumber property both
real and personal, for the accomplishment of their purpose;
To affiliate with international or regional sports' Associations
after due consultation with the executive committee;
xxx

13. To perform such other acts as may be necessary for the proper
accomplishment of their purposes and not inconsistent with this
Act.
Section 8 of P.D. 604, grants similar functions to these sports
associations:
SEC. 8. Functions, Powers, and Duties of National Sports Association. The National sports associations shall have the following functions,
powers, and duties:
1.

2.
3.
4.

1. Adopt a Constitution and By-Laws for their internal

organization and government which shall be submitted to the
Department and any amendment thereto shall take effect upon
approval by the Department: Provided, however, That no team,
school, club, organization, or entity shall be admitted as a
voting member of an association unless 60 per cent of the
athletes composing said team, school, club, organization, or
entity are Filipino citizens;
Raise funds by donations, benefits, and other means for their
purpose subject to the approval of the Department;
Purchase, sell, lease, or otherwise encumber property, both
real and personal, for the accomplishment of their purpose;
Conduct local, interport, and international competitions, other
than the Olympic and Asian Games, for the promotion of their
sport;

ENGR. RANULFO C. FELICIANO, in his capacity as General Manager

of the Leyte Metropolitan Water District (LMWD), Tacloban City,
Petitioner,
NAPOLEON G. ARANEZ, in his capacity as President and Chairman
of "No Tax, No Impairment of Contracts Coalition, Inc.," Petitioner-inintervention,
vs.
HON. CORNELIO C. GISON, Undersecretary, Department of Finance,
Respondent.
FACTS:
Leyte Metropolitan Water District (LWMD) filed with the DOF a petition
requesting that certain water supply equipment and a motor vehicle be
exempted from tax. These properties were given to LWMD through a grant
by the Japanese Government for the rehabilitation of its typhoon-damaged
water supply system.
DOF granted the tax exemption on the water supply but assessed a
corresponding tax on the MOTOR VEHICLE.
DOF denied the request for tax exemption on the ground that EO 93
granting tax exemption privileges on government agencies and
government owned and controlled corporations had already been
withdrawn.
LWMD argued that it is a private corporation or entity and not a GOCC.
Feliciano argues that PD No. 198 which created LWMD is a general law
similar to the Corporation Law.
ISSUE:
Whether or not LMWD is a GOCC with original charter?
RULING:
The Constitution recognizes two classes of corporations. The first refers to
private corporations created under a general law. The second refers to
government-owned or controlled corporations created by special charters.
The Constitution emphatically prohibits the creation of private corporations
except by a general law applicable to all citizens. The purpose of this
constitutional provision is to ban private corporations created by special
charters, which historically gave certain individuals, families or groups
special privileges denied to other citizens.

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BUS. ORG.-CASES (1

The Constitution authorizes Congress to create government-owned or

controlled corporations through special charters. Since private
corporations cannot have special charters, it follows that Congress can
create corporations with special charters only if such corporations are
government-owned or controlled.
Obviously, LWDs [referring to local water districts] are not private
corporations because they are not created under the Corporation Code.
LWDs are not registered with the Securities and Exchange Commission.
Section 14 of the Corporation Code states that "[A]ll corporations
organized under this code shall file with the Securities and Exchange
Commission articles of incorporation x x x." LWDs have no articles of
incorporation, no incorporators and no stockholders or members. There
are no stockholders or members to elect the board directors of LWDs as in
the case of all corporations registered with the Securities and Exchange
Commission. The local mayor or the provincial governor appoints the
directors of LWDs for a fixed term of office.

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Based on the foregoing provisions, when an injury is caused by the

negligence of an employee, there instantly arises a presumption that there
was negligence on the part of the employer either in the selection of his
employee or in the supervision over him after such selection.
The presumption, however, may be rebutted by a clear showing on the
part of the employer that it exercised the care and diligence of a good
father of a family in the selection and supervision of his employee.
The employer must not merely present testimonial evidence to prove that
he observed the diligence of a good father of a family in the selection and
supervision of his employee, but he must also support such testimonial
evidence with concrete or documentary evidence. The reason for this is to
obviate the biased nature of the employers testimony or that of his
witnesses.
SOLIDARILY LIABLE
El Buenasenso Sy cannot be held solidarily liable with his co-petitioners.

RAYMUNDO ODANI SECOSA, EL BUENASENSO SY and DASSAD

WAREHOUSING and PORT SERVICES, INCORPORATED, petitioners,
vs. HEIRS OF ERWIN SUAREZ FRANCISCO, respondents.
FACTS:
On June 27, 1996, one Erwin Suarez Francisco, eighteen year old, rode a
motorcycle along Radial 10 Avenue, Manila. At the same time petitioner
Raymundo Secosa, was driving an ISUZU Cargo Truck owned by Dassad
Warehousing and Port Services, Inc.
Traveling behind the motorcycle driven by Francisco was a sand and
gravel truck, which in turn was being tailed by the Isuzu truck driven by
Secosa. The three vehicles were traversing the southbound lane at a
fairly high speed. When Secosa overtook the sand and gravel truck, he
bumped the motorcycle causing Francisco to fall. The rear wheels of the
Isuzu truck then ran over Francisco, which resulted in his instantaneous
death. Fearing for his life, petitioner Secosa left his truck and fled the
scene of the collision.
Respondents, the parents of Erwin Francisco, thus filed an action for
damages against Raymond Odani Secosa, Dassad Warehousing and Port
Services, Inc. and Dassads president, El Buenasucenso Sy.
ISSUE:
Whether petitioner Dassad Warehousing and Port Services, Inc. exercised
the diligence of a good father of a family in the selection and supervision
of its employees?
Whether El Buenasucensco Sy is solidarily liable with his co-petitioners?
RULING:
DILIGENCE
Article 2176 of the Civil Code provides:
Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter.
On the other hand, Article 2180, in pertinent part, states:

While it may be true that Sy is the president of petitioner Dassad

Warehousing and Port Services, Inc., such fact is not by itself sufficient to
hold him solidarily liable for the liabilities adjudged against his copetitioners.
It is a settled precept in this jurisdiction that a corporation is invested by
law with a personality separate from that of its stockholders or members. It
has a personality separate and distinct from those of the persons
composing it as well as from that of any other entity to which it may be
related. Mere ownership by a single stockholder or by another corporation
of all or nearly all of the capital stock of a corporation is not in itself
sufficient ground for disregarding the separate corporate personality. A
corporations authority to act and its liability for its actions are separate
and apart from the individuals who own it.
The so-called veil of corporation fiction treats as separate and distinct the
affairs of a corporation and its officers and stockholders. As a general rule,
a corporation will be looked upon as a legal entity, unless and until
sufficient reason to the contrary appears.
STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitionersappellants,
vs.
REGISTER OF DEEDS OF MANILA, respondent-appellee.
Facts:
On September 17, 1960, a resolution was made by the stockholders
dissolving the corporation.
On September 19, 1960, the 5 stockholders of F. Guanzon and Sons, Inc.
executed a certificate of liquidation of the assets. They have distributed
among themselves in proportion to their shareholdings, as liquidating
dividends, the assets of said corporation, including real properties located
in Manila.
When presented to the Register of Deeds of Manila, the certificate of
liquidation was denied on the following grounds:

The number of parcels of land were not certified to in the

acknowledgement
Registration fees had to be paid
Documentary stamps need to be attached to the document

The obligation imposed by article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is
responsible x x x.

Appellants contend that the certificate of liquidation is not a conveyance or

transfer but merely a distribution of the assets of the corporation which
has ceased to exist for having been dissolved.

Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry x x x.

The COMMISSIONER OF LAND REGISTRATION, avers that though it

involves a distribution of the corporation's assets, in the last analysis

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BUS. ORG.-CASES (1

represents a transfer of said assets from the corporation to the

stockholders. Hence, in substance it is a transfer or conveyance.

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ISSUE:

Glanville followed it up with a Letter dated May 7, 1987, confirming that he

had been instructed by his principal to inform Marquez that "the decision
has been taken at a Board Meeting not to sell the properties on which
Eternit Corporation is situated.

Whether or not the CERTIFICATE OF LIQUIDATION merely involves a

distribution of the corporations assets or should be considered as a
transfer or conveyance?

The Litonjuas then filed a complaint for specific performance and

damages against EC (now the Eterton Multi-Resources Corporation) and
the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City.

RULING:

Petitioners assert that there was no need for a written authority from the
Board of Directors of EC for Marquez to validly act as
broker/middleman/intermediary. As broker, Marquez was not an ordinary
agent because his authority was of a special and limited character in most
respects.

A corporation is a juridical person distinct from the members composing it.

Properties registered in the name of the corporation are owned by it as an
entity separate and distinct from its members. While shares of stock
constitute personal property they do not represent property of the
corporation.

ISSUE:

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.

Whether or not MARQUEZ needed a written authority from respondent

ETERNIT before the sale can be perfected?

The stockholder is not a co-owner or tenant in common of the corporate

property.

It was the duty of the petitioners to prove that respondent EC had decided
to sell its properties and that it had empowered Adams, Glanville and
Delsaux or Marquez to offer the properties for sale to prospective buyers
and to accept any counter-offer.

On the basis of the foregoing authorities, it is clear that the act of

liquidation made by the stockholders of the F. Guanzon and Sons, Inc. of
the latter's assets is not and cannot be considered a partition of
community property, but rather a transfer or conveyance of the title of its
assets to the individual stockholders.
EDUARDO V. LINTONJUA, JR. and ANTONIO K.
LITONJUA, Petitioners,
vs.
ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES
CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK &
TRUST COMPANY, Respondents.
FACTS:
The Eternit Corporation (EC) is a corporation duly organized and
registered under Philippine laws. Its manufacturing operations were
conducted on eight parcels of land with a total area of 47,233 square
meters. Ninety (90%) percent of the shares of stocks of EC were owned
by Eteroutremer S.A. Corporation (ESAC), a corporation organized and
registered under the laws of Belgium.
Jack Glanville, an Australian citizen, was the General Manager and
President of EC, while Claude Frederick Delsaux was the Regional
Director for Asia of ESAC. Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned about the political
situation in the Philippines and wanted to stop its operations in the
country. The Committee for Asia of ESAC instructed Michael Adams, a
member of ECs Board of Directors, to dispose of the eight parcels of land.
Adams engaged the services of realtor/broker Lauro G. Marquez so that
the properties could be offered for sale to prospective buyers.
Marquez thereafter offered the parcels of land and the improvements
thereon to Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc.
In a Letter dated September 12, 1986, Marquez declared that he was
authorized to sell the properties for P27,000,000.00 and that the terms of
the sale were subject to negotiation.
With the assumption of CORAZON C. AQUINO, as President of the
Republic of the Philippines, the political situation in the Philippines had
improved. Marquez received a telephone call from Glanville, advising that
the sale would no longer proceed.

RULING:

It must be stressed that when specific performance is sought of a contract

made with an agent, the agency must be established by clear, certain and
specific proof.
Section 23 of Batas Pambansa Bilang 68, otherwise known as the
Corporation Code of the Philippines, provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided
in this Code, the corporate powers of all corporations formed under this
Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be
elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1)
year and until their successors are elected and qualified.
A corporation is a juridical person separate and distinct from its members
or stockholders and is not affected by the personal rights, obligations and
transactions of the latter.
It may act only through its board of directors or, when authorized either by
its by-laws or by its board resolution, through its officers or agents in the
normal course of business. The general principles of agency govern the
relation between the corporation and its officers or agents, subject to the
articles of incorporation, by-laws, or relevant provisions of law.
The property of a corporation is not the property of the stockholders or its
members, and as such, may not be sold without express authority form
the board of directors.
While a corporation may appoint agents to negotiate for the sale of its real
properties, the final say will have to be with the board of directors through
its officers and agents as authorized by a board resolution or by its bylaws.
While Glanville was the President and General Manager of respondent
EC, and Adams and Delsaux were members of its Board of Directors, the
three acted for and in behalf of respondent ESAC, and not as duly
authorized agents of respondent EC.

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BUS. ORG.-CASES (1

SULO NG BAYAN INC., plaintiff-appellant,

vs.
GREGORIO ARANETA, INC., PARADISE FARMS, INC., NATIONAL
WATERWORKS & SEWERAGE AUTHORITY, HACIENDA CARETAS,
INC, and REGISTER OF DEEDS OF BULACAN, defendants-appellees.
FACTS:
On April 26, 1966, plaintiff-appellant Sulo ng Bayan, Inc. filed an accion de
revindicacion with the Court of First Instance of Bulacan, Fifth Judicial
District, Valenzuela, Bulacan, against defendants-appellees to recover the
ownership and possession of a large tract of land in San Jose del Monte,
Bulacan, containing an area of 27,982,250 square meters, more or less,
registered under the Torrens System in the name of defendants-appellees'
predecessors-in-interest.
Plaintiff is a corporation organized and existing under the laws of the
Philippines with its principal office and place of business at San Jose del
Monte, Bulacan.
Members of the plaintiff corporation pioneered in the clearing of the
aforementioned land, cultivated the same since the Spanish regime and
continuously possessed the property under a concept of ownership.

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Arbie Mae R. Magale

cover for fraud or illegality, or to work -an injustice, or where necessary to

achieve equity.
RUFINA LUY LIM petitioner,
vs.
COURT OF APPEALS, AUTO TRUCK TBA CORPORATION, SPEED
DISTRIBUTING, INC., ACTIVE DISTRIBUTORS, ALLIANCE
MARKETING CORPORATION, ACTION COMPANY, INC. respondents.
FACTS:
Petitioner Rufina Luy Lim is the surviving spouse of the late Pastor Y. Lim
whose estate is the subject of probate proceedings in Special Proceedings
Q-95-23334.
Private respondents Auto Truck Corporation, Alliance Marketing
Corporation, Speed Distributing, Inc., Active Distributing, Inc. and Action
Company are corporations formed, organized and existing under
Philippine laws and which owned real properties covered under the
Torrens system.
On June 11, 1994, Pastor Y. Lim died intestate. Certain properties of
private respondent corporations where included in the inventory of the
estate of the deceased, prompting the corporations to file for the exclusion
of certain properties from the estate of the decedent.

Sometime in 1958, defendant Araneta Inc, ejected the members of the

plaintiff corporation of their possession of the said land. In 1961, the land
in question was included in the Original Certificate of Title No. 466 of the
Land of Records.

ISSUE:

ISSUE:

RULING:

Whether or not Plaintiff Corporation may institute an action in behalf of its

individual members for the recovery of certain parcels of land allegedly
owned by said members?

It is settled that a corporation is clothed with personality separate and

distinct from that of the persons composing it. It may not generally be held
liable for that of the persons composing it. It may not be held liable for the
personal indebtedness of its stockholders or those of the entities
connected with it.

RULING:
The term CAUSE OF ACTION is composed of two elements:
1.
2.

The right of the plaintiff

The violation of such right by the defendant

For these reasons, the rules require that every action must be prosecuted
and defended in the name of the real party in interest and that all persons
having an interest in the subject of the action and in obtaining the relief
demanded shall be joined as plaintiffs (Sec. 2, Rule 3).
In the amended complaint, the people whose rights were alleged to have
been violated by being deprived and dispossessed of their land are the
members of the corporation and not the corporation itself.
The corporation has a separate and distinct personality from its members,
and this is not a mere technicality but a matter of substantive law.
There is no allegation that the members have assigned their rights to the
corporation or any showing that the corporation has in any way or manner
succeeded to such rights.
It is a doctrine well-established and obtains both at law and in equity that a
corporation is a distinct legal entity to be considered as separate and apart
from the individual stockholders or members who compose it, and is not
affected by the personal rights, obligations and transactions of its
stockholders or members.
It must be noted, however, that the juridical personality of the corporation,
as separate and distinct from the persons composing it, is but a legal
fiction introduced for the purpose of convenience and to subserve the
ends of justice.
This separate personality of the corporation may be disregarded, or the
veil of corporate fiction pierced, in cases where it is used as a cloak or

Whether or not a corporation be the proper subject of and be included in

the inventory of the estate of a deceased person?

Rudimentary is the rule that a corporation is invested by law with a

personality distinct and separate from its stockholders or members. In the
same vein, a corporation by legal fiction and convenience is an entity
shielded by a protective mantle and imbued by law with a character alien
to the persons comprising it.
The corporate mask may be lifted and the corporate veil may be pierced
when a corporation is just but the alter ego of a person or of another
corporation. Where badges of fraud exist, where public convenience is
defeated; where a wrong is sought to be justified thereby, the corporate
fiction or the notion of legal entity should come to naught.
Further, the test in determining the applicability of the doctrine of piercing
the veil of corporate fiction is as follows: 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 plaintiffs legal right; and (3) The aforesaid control and
breach of duty must proximately cause the injury or unjust loss
complained of.
UNION
BANK
OF
THE
PHILIPPINES, Petitioner,
vs.
SPS. ALFREDO ONG AND SUSANA ONG and JACKSON
LEE, Respondents.
FACTS:
The respondent spouses own the majority capital stock of Baliwag
Mahogany Corporation (BMC).

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BUS. ORG.-CASES (1

On October 10, 1990, the spouses executed a Continuing Surety

Agreement in favor of Union Bank to secure a P40,000,000.00-credit line
facility made available to BMC. The agreement expressly stipulated a
solidary liability undertaking.

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Susan Gois filed a THIRD PARTY CLAIM alleging that the attachment of
the vehicle was irregular because said vehicle was registered in her name
and not of the CORPORATION.
ISSUE:

On October 22, 1991, or about a year after the execution of the surety
agreement, the spouses Ong, for P12,500,000.00, sold their 974-square
meter lot located in Greenhills, San Juan, Metro Manila, together with the
house and other improvements standing thereon, to their co-respondent,
Jackson Lee (Lee, for short). The following day, Lee registered the sale
and was then issued Transfer Certificate of Title (TCT) No. 4746-R. At
about this time, BMC had already availed itself of the credit facilities, and
had in fact executed a total of twenty-two (22) promissory notes in favor of
Union Bank.
On November 22, 1991, BMC filed a Petition for Rehabilitation and for
Declaration of Suspension of Payments with the Securities and Exchange
Commission (SEC). To protect its interest, Union Bank lost no time in filing
with the RTC of Pasig City an action for rescission of the sale between the
spouses Ong and Jackson Lee for purportedly being in fraud of creditors.
Union Bank assailed the validity of the sale, alleging that the spouses Ong
and Lee entered into the transaction in question for the lone purpose of
fraudulently removing the property from the reach of Union Bank and other
creditors.
Petitioner avers that the Ong-Lee sales contract partakes of a fraudulent
transfer and is null and void in contemplation of Sec. 70 of the Insolvency
Law, the sale having occurred on October 22, 1991 or within thirty (30)
days before BMC filed a petition for suspension of payments on November
22, 1991.
ISSUE:
Whether or not the Ong-Lee contract of sale partakes of a conveyance to
defraud Union Bank?
RULING:
Contracts in fraud of creditors are those executed with the intention to
prejudice the rights of creditors. They should not be confused with those
entered into without such mal-intent, even if, as a direct consequence
thereof, the creditor may suffer some damage.
The basis of the liability of the appellant spouses in their personal capacity
to Union Bank is the Continuing Surety Agreement they have signed on
October 10, 1990. However, the real debtor of Union Bank is BMC, which
has a separate juridical personality from appellants Ong.
The Continuing Surety Agreement, it ought to be particularly pointed out,
was never recorded nor annotated on the title of spouses Ong.
It may be that BMC had filed a petition for rehabilitation and suspension of
payments with the SEC. The nagging fact, however is that BMC is a
different juridical person from the respondent spouses. Their seventy
percent (70%) ownership of BMCs capital stock does not change the legal
situation.
VIRGILIO S. DELIMA
v.
SUSAN MERCAIDA GOIS
FACTS:
A case for illegal dismissal was filed by petitioner VIRGILIO S. DELIMA
against GOLDEN UNION AQUAMARINE CORPORATION, Prospero Gois
and Susan Gois before the NLRC which resulted to a favourable decision
to petitioner.
The decision having become final and executory, a writ of execution was
issued and an ISUZU JEEP with plate number PGE-531 was attached.

Whether or not the judgment ordering the corporation to pay the petitioner
could be satisfied out of the personal assets of the respondent who is a
mere stockholder of the corporation?
RULING:
A corporation has a personality distinct and separate from its individual
stockholders or members and from that of its officers who manage and run
its affairs. The rule is that obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole liabilities. Thus,
property belonging to a corporation cannot be attached to satisfy the debt
of a stockholder and vice versa, the latter having only an indirect interest
in the assets and business of the former.
Since the Decision of the Labor Arbiter dated April 29, 2005 directed only
Golden to pay the petitioner the sum of P115,561.05 and the same was
not joint and solidary obligation with Gois, then the latter could not be held
personally liable since Golden has a separate and distinct personality of
its own.
PEOPLE OF THE PHILIPPINES, Petitioners, v. HON. JUDGE RUMOLDO
R. FERNANDEZ and HAJIME UMEZAWA, Respondents.
FACTS:
Mobilia Products, Inc. is a corporation engaged in the manufacture and
export of quality furniture which caters only to the purchase orders booked
and placed through Mobilia Products Japan, the mother company which
does all the marketing and booking.
Mobilia Products Japan sent Hajime Umezawa to the Philippines in order
to head Mobilia Products, Inc. as President and General Manager. To
qualify him as such and as a Board Director, he was entrusted with one
nominal share of stock.
Sometime in the last week of January 1995, Umezawa, then the President
and General Manager of Mobilia Products, Inc., organized another
company with his wife Kimiko, and his sister, Mitsuyo Yaguchi, to be
known as Astem Philippines Corporation, without the knowledge of the
Chairman and Chief Executive Officer Susumo Kodaira and the other
members of the Board of Directors of Mobilia.
The said company would be engaged in the same business as Mobilia.
Spouses Umezawa recruited Justin Legaspi, former Production Manager
of Mobilia, to act as Manager and one Yoshikazu Hayano of Phoenix
Marble Corporation to serve as investors [sic].
Pending formal organization, Spouses Umezawa, Justin Legaspi and
Yoshikazu Hayano wanted to accelerate the market potentials of Astem by
participating in the International Furniture Fair 1995 held at the Word
Trade Centre of Singapore on March 6 to 10, 1995.
One of the requirements of such Fair was that the furniture exhibits must
arrive and be received at Singapore not later than February 23, 1995.
Pressed for time, with less than one month to prepare and while Astem
had yet no equipment and machinery, no staff and no ready personnel,
Umezawa, with grave abuse of the confidence reposed on him as
President and General Manager of Mobilia Products, Inc., and in
conspiracy with his wife, his sister Mitsuyo Yaguchi, Yoshikazu Hayano
and Justin Legaspi, all with intent to gain for themselves and for their
company Astem Philippines Corporation, stole prototype furniture from
petitioner Mobilia so that the said pieces of furniture would be presented
and exhibited as belonging to Astem in the International Furniture Fair '95
in Singapore.

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BUS. ORG.-CASES (1

Again, on February 18, 1995, Umezawa, with grave abuse of confidence

and taking advantage of his position as President and General Manager,
unlawfully stole expensive furniture from Mobilia's factory
worth P2,964,875.00. In order to avoid detection, the said furniture were
loaded in the truck belonging to Dew Foam, with respondent Umezawa
personally supervising the loading, the carting and spiriting away of the
said furniture. Thus, taking advantage of his position as General Manager,
he managed to have the said furniture taken out of the company premises
and passed the company guard without any problem and difficulty.

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value or amount thereof: Provided, however, That in offenses

involving damage to property through criminal negligence, they
shall have exclusive original jurisdiction thereof.
Case law has it that in order to determine the jurisdiction of the court in
criminal cases, the complaint or Information must be examined for the
purpose of ascertaining whether or not the facts set out therein and the
prescribed period provided for by law are within the jurisdiction of the
court, and where the said Information or complaint is filed.

Sometime in March 1995, based on orders booked for Astem, Umezawa,

with unfaithfulness and abuse of confidence reposed on him as the
President and General Manager of petitioner Mobilia, ordered and caused
the manufacture of eighty-nine (89) pieces of furniture with a total value
of P17,108,500.00. The said pieces of furniture were made with Mobilia
supplies, materials and machineries, as well as with Mobilia time and
personnel, all of which were under the administration and control of
Umezawa as President and General Manager. The said materials and
supplies, the time and labor, were supposed to be used for the
manufacture and production of quality furniture for the EXCLUSIVE USE
of Mobilia. However, Umezawa, in violation of his duty to apply the same
for the use of Mobilia and the duty to account for the same, converted their
use for the benefit of Astem or for the use and benefit of Umezawa, his
wife and sister, Yoshikazu Hayano and Legaspi, much to the damage and
prejudice of Mobilia Products.

It is settled that the jurisdiction of the court in criminal cases is determined

by the allegations of the complaint or Information and not by the findings
based on the evidence of the court after trial.

The Board of Directors of MPI, consisting of its Chairman Susumo Kodaira

and members Yasushi Kato and Rolando Nonato, approved a Resolution
on May 2, 1995 authorizing the filing of a complaint against Umezawa for
two counts of qualified theft allegedly committed on February 18 and 19,
1995. Attached to the complaint was the Joint Affidavit of Danilo Lallaban,
George del Rio and Yasushi Kato. The case was docketed as I.S. No. 95275.

The bare fact that the respondent was the president and general manager
of the petitioner corporation when the crimes charged were allegedly
committed and was then a stockholder thereof does not in itself deprive
the court a quo of its exclusive jurisdiction over the crimes charged. The
property of the corporation is not the property of the stockholders or
members or of its officers who are stockholders.

Umezawa posits that there was no valid charged against him by Chairman
Susumo and members Yasushi and Rolando because the resolution
authorizing the filing of the cases against him was approved by a mere
minority of the members of the MPI Board of Directors.
On January 29, 1999, the trial court issued a Joint Order 8 dismissing the
cases for lack of jurisdiction. It held that the dispute between the private
complainant and the accused over the ownership of the properties subject
of the charges is intra-corporate in nature, and was within the exclusive
jurisdiction of the SEC.
RULING:

Article 310 of the Revised Penal Code further provides for the penalty for
qualified theft:
Art. 310. Qualified theft. - The crime of theft shall be punished by the
penalties next higher by two degrees than those respectively specified in
the next preceding article, if committed by a domestic servant, or with
grave abuse of confidence, or if the property stolen is motor vehicle, mail
matter or large cattle or consists of coconuts taken from the premises of a
plantation, fish taken from a fishpond or fishery or if property is taken on
the occasion of fire, earthquake, typhoon, volcanic eruption, or any other
calamity, vehicular accident or civil disturbance.

From the foregoing, it can thus be concluded that the filing of the
civil/intra-corporate case before the SEC does not preclude the
simultaneous and concomitant filing of a criminal action before the regular
courts; such that, a fraudulent act may give rise to liability for violation of
the rules and regulations of the SEC cognizable by the SEC itself, as well
as criminal liability for violation of the Revised Penal Code cognizable by
the regular courts, both charges to be filed and proceeded independently,
and may be simultaneously with the other.
A dispute involving the corporation and its stockholders is not necessarily
an intra-corporate dispute cognizable only by the Securities and Exchange
Commission. Nor does itipso facto negate the jurisdiction of the Regional
Trial Court over the subject cases.

According to Section 20 of B.P. Blg. 129

SEC. 20. Jurisdiction in criminal cases. - Regional Trial Courts shall
exercise exclusive original jurisdiction in all criminal cases not within the
exclusive jurisdiction of any court, tribunal or body, except those now
falling under the exclusive and concurrent jurisdiction of the
Sandiganbayan which shall hereafter be exclusively taken cognizance of
by the latter.
Section 32 thereof was later amended by Section 2 of Republic Act No.
7691, as follows:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in Criminal Cases. - Except in cases
falling within the exclusive original jurisdiction of the Regional Trial Court
and of the Sandiganbayan, the Metropolitan Trial Courts, and Municipal
Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over all violations of city or
municipal ordinances committed within their respective
territorial jurisdiction; and
(2) Exclusive original jurisdiction over all offenses punishable with
imprisonment not exceeding six (6) years irrespective of the
amount of fine, and regardless of other imposable accessory or
other penalties, including the civil liability arising from such
offenses or predicated thereon, irrespective of kind, nature,

RICARDO S. SILVERIO, JR., ESSES DEVELOPMENT CORPORATION,

and TRI-STAR FARMS, INC., petitioners,
vs.
FILIPINO BUSINESS CONSULTANTS, INC., respondent.
FACTS:
The parties are wrangling over possession of a 62 hectare-land in
Calatagan, Batangas (Calatagan Property).
Silverio, Jr. is the President of Esses and Tri-Star. Esses and Tri-Star
were in possession of the Calatagan Property, covered by TCT No. T55200 and registered in the names of Esses and Tri-Star.
On 22 September 1995, Esses and Tri-Star executed a Deed of Sale with
Assumption of Mortgage in favor of FBCI. Esses and Tri-Star failed to
redeem the Calatagan Property.
FBCI obtained a judgment by default. Subsequently, TCT No. T-55200 in
the names of Esses and Tri-Star was cancelled and TCT No. T-77656 was
issued in FBCIs name. On 20 April 1998, the RTC Balayan issued a writ
of possession in FBCIs favour. FBCI then entered the Calatagan Property.

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Silverio, Jr., Esses and Tri-Star alleged that the judgment by default is void
because the RTC Balayan did not acquire jurisdiction over them. FBCI
allegedly forged the service of summons on them.

We see no reason why the execution of the writ of possession has been
long delayed.

The judgment by default was nullified after the RTC Balayan found out
that the service of summons on Silverio, Jr., Esses and Tri-Star was
procured fraudulently. The RTC Balayan thus recalled the writ of
possession it had issued to FBCI.

Possession of the Calatagan Property must be restored to Esses and TriStar through their representative, Silverio, Jr. There is no proof on record
that Silverio, Jr. has ceased to be the representative of Esses and Tri-Star
in this case.

The RTC Balayan restored possession of the Calatagan Property to

Silverio, Jr., Esses and Tri-Star as restitution resulting from the annulment
of the judgment by default. The order restoring possession of the
Calatagan Property to Silverio, Jr., Esses and Tri-Star has attained
finality. This case then proceeded to pre-trial.
On May 23, 2000, FBCI filed with the RTC the suspension of the writ of
possession alleging a supervening event, pointing out that it is now the
new owner of ESSES and TRI-STAR having purchased the substantial
and controlling shares of the stocks of the two corporations.
FBCI has resisted the enforcement of the writ of possession by
barricading the Calatagan Property and threatening violence if its
possession of the property is taken away from it. To avoid bloodshed, as
FBCI also claimed that Silverio, Jr. had armed civilians threatening to
shoot FBCIs representatives, the RTC Balayan momentarily suspended
the execution of the writ.
RULING:
The court may stay immediate execution of a judgment when supervening
events, occurring subsequent to the judgment, bring about a material
change in the situation of the parties.
To justify the stay of immediate execution, the supervening events must
have a direct effect on the matter already litigated and settled.
Or, the supervening events must create a substantial change in the rights
or relations of the parties which would render execution of a final judgment
unjust, impossible or inequitable making it imperative to stay immediate
execution in the interest of justice.
The issuance of the writ of possession in favor of Silverio, Jr., Esses and
Tri-Star is also not a judgment on the merits.
A writ of possession is an order whereby the sheriff is commanded to
place a person in possession of real or personal property.
The issuance of the writ of possession to Silverio, Jr., Esses and Tri-Star
is but an order of restitution a consequence of the nullification of the
judgment by default.
FBCIs acquisition of the substantial and controlling shares of stocks of
Esses and Tri-Star does not create a substantial change in the rights or
relations of the parties that would entitle FBCI to possession of the
Calatagan Property, a corporate property of Esses and Tri-Star.
Esses and Tri-Star, just like FBCI, are corporations.
A corporation has a personality distinct from that of its stockholders.
A corporation is a juridical person distinct from the members composing it.
Properties registered in the name of the corporation are owned by it as an
entity separate and distinct from its members. While shares of stock
constitute personal property, they do not represent property of the
corporation. The corporation has property of its own which consists chiefly
of real estate.
Thus, FBCIs alleged controlling shareholdings in Esses and Tri-Star
merely represent a proportionate or aliquot interest in the properties of the
two corporations.
Such controlling shareholdings do not vest FBCI with any legal right or title
to any of Esses and Tri-Stars corporate properties.
As a stockholder, FBCI has an interest in Esses and Tri-Stars corporate
properties that is only equitable or beneficial in nature.

CONSTRUCTION & DEVELOPMENT CORPORATION OF THE

PHILIPPINES (now PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION), Petitioners,
vs.
RODOLFO M. CUENCA and MALAYAN INSURANCE CO.,
INC., Respondent.
FACTS:
Ultra International Trading Corporation (UITC) applied for a surety bond
from Malayan Insurance Co., Inc. (MICI), to guarantee its credits,
indebtedness, obligations and liabilities of any kind to Goodyear Tire and
Rubber Company of the Philippines (Goodyear). MICI approved the
application and issued MICO Bond No. 65734 for an amount not
exceeding P600,000.00.
To protect MICIs interests, UITC, Edilberto Cuenca, and Rodolfo Cuenca,
herein respondent, executed an Indemnity Agreement4 in favor of MICI.
Edilberto was then the President, while Rodolfo was a member of the
Board of Directors of UITC.
Edilberto signed the indemnity agreement in his official and personal
capacity, while Rodolfo signed in his personal capacity only. In the said
agreement, UITC, Edilberto and Rodolfo bound themselves jointly and
severally to indemnify MICI of any payment it would make under the
surety bond.
On February 18, 1983, Goodyear sent a letter to MICI informing it of
UITCs default on its obligation. In the said letter, Goodyear requested
MICI to pay P600,000.00 under the surety bond. MICI sent several
demand letters to UITC, Edilberto and Rodolfo, requiring them to
immediately settle Goodyears claim.6 UITC, Edilberto and Rodolfo failed
to settle the account with Goodyear. Thus, on April 25, 1983, MICI paid
Goodyear P600,000.00.
Upon demand by MICI, UITC replied that CONSTRUCTION &
DEVELOPMENT CORPORATION of the PHILIPPINES (CDCP), now
PNCC had initiated a complete review of UITCs financial plans to enable
it to pay its creditors.
UITC was a subsidiary of petitioner PNCC, with the latter owning around
78% of the formers shares of stock.
Rodolfo filed a motion for leave to file a third party complaint against
CDCP alleging that it had assumed RODOLFOs LIABILITY under the
indemnity agreement as indicated in a board resolution.
The RTC rendered a decision holding UITC and PNCC, jointly and
solidarily liable to MICI under the indemnity agreement. The lower court
ruled that UITC was bound by the indemnity agreement entered into by its
two officers, even though there was no board resolution specifically
authorizing them to do so because it had, in effect, ratified the acts of the
said officers.
ISSUE:
Whether or not the petitioner is jointly and solidarily liable with UITC, a
subsidiary corporation, to respondent MICI under the indemnity
agreement?
RULING:

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