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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 93695 February 4, 1992 RAMON C. LEE a ! ANTON"O #M. LAC#AO, petitioners, vs. T$E $ON. COURT OF APPEALS, SACO%A MANUFACTUR"NG CORP., PA%LO GON&ALES, 'R. a ! T$OMAS GON&ALES, respondents. Cayanga, Zuniga & Angel Law Offices for petitioners. Timbol & Associates for private respondents.

GUT"ERRE&, 'R., J.: hat is the nature of the votin! trust a!ree"ent e#ecuted bet$een t$o parties in this case% ho o$ns the stoc&s of the corporation under the ter"s of the votin! trust a!ree"ent% Ho$ lon! can a votin! trust a!ree"ent re"ain valid and effective% Did a director of the corporation cease to be such upon the creation of the votin! trust a!ree"ent% These are the 'uestions the ans$ers to $hich are necessar( in resolvin! the principal issue in this petition for certiorari ) $hether or not there $as proper service of su""ons on *lfa Inte!rated Te#tile Mills +*,-*, for short. throu!h the petitioners as president and vice/president, alle!edl(, of the sub0ect corporation after the e#ecution of a votin! trust a!ree"ent bet$een *,-* and the Develop"ent 1an& of the Philippines +D1P, for short.. -ro" the records of the instant case, the follo$in! antecedent facts appear2 On Nove"ber 34, 3564, a co"plaint for a su" of "one( $as filed b( the International 7orporate 1an&, Inc. a!ainst the private respondents $ho, in turn, filed a third part( co"plaint a!ainst *,-* and the petitioners on March 38, 3569.

On Septe"ber 38, 3568, the petitioners filed a "otion to dis"iss the third part( co"plaint $hich the Re!ional Trial 7ourt of Ma&ati, 1ranch 46 denied in an Order dated :une ;8, 3566. On :ul( 36, 3566, the petitioners filed their ans$er to the third part( co"plaint. Mean$hile, on :ul( 3;, 3566, the trial court issued an order re'uirin! the issuance of an alias su""ons upon *,-* throu!h the D1P as a conse'uence of the petitioner<s letter infor"in! the court that the su""ons for *,-* $as erroneousl( served upon the" considerin! that the "ana!e"ent of *,-* had been transferred to the D1P. In a "anifestation dated :ul( ;;, 3566, the D1P clai"ed that it $as not authori=ed to receive su""ons on behalf of *,-* since the D1P had not ta&en over the co"pan( $hich has a separate and distinct corporate personalit( and e#istence. On *u!ust >, 3566, the trial court issued an order advisin! the private respondents to ta&e the appropriate steps to serve the su""ons to *,-*. On *u!ust 39, 3566, the private respondents filed a Manifestation and Motion for the Declaration of Proper Service of Su""ons $hich the trial court !ranted on *u!ust 38, 3566. On Septe"ber 3;, 3566, the petitioners filed a "otion for reconsideration sub"ittin! that Rule 3>, section 3? of the Revised Rules of 7ourt is not applicable since the( $ere no lon!er officers of *,-* and that the private respondents should have availed of another "ode of service under Rule 3>, Section 39 of the said Rules, i.e.,throu!h publication to effect proper service upon *,-*. In their 7o""ent to the Motion for Reconsideration dated Septe"ber ;8, 3566, the private respondents ar!ued that the votin! trust a!ree"ent dated March 33, 3563 did not divest the petitioners of their positions as president and e#ecutive vice/president of *,-* so that service of su""ons upon *,-* throu!h the petitioners as corporate officers $as proper. On :anuar( ;, 3565, the trial court upheld the validit( of the service of su""ons on *,-* throu!h the petitioners, thus, den(in! the latter<s "otion

for reconsideration and re'uirin! *,-* to filed its ans$er throu!h the petitioners as its corporate officers. On :anuar( 35, 3565, a second "otion for reconsideration $as filed b( the petitioners reiteratin! their stand that b( virtue of the votin! trust a!ree"ent the( ceased to be officers and directors of *,-*, hence, the( could no lon!er receive su""ons or an( court processes for or on behalf of *,-*. In support of their second "otion for reconsideration, the petitioners attached thereto a cop( of the votin! trust a!ree"ent bet$een all the stoc&holders of *,-* +the petitioners included., on the one hand, and the D1P, on the other hand, $hereb( the "ana!e"ent and control of *,-* beca"e vested upon the D1P. On *pril ;4, 3565, the trial court reversed itself b( settin! aside its previous Order dated :anuar( ;, 3565 and declared that service upon the petitioners $ho $ere no lon!er corporate officers of *,-* cannot be considered as proper service of su""ons on *,-*. On Ma( 34, 3565, the private respondents "oved for a reconsideration of the above Order $hich $as affir"ed b( the court in its Order dated *u!ust 3>, 3565 den(in! the private respondent<s "otion for reconsideration. On Septe"ber 36, 3565, a petition for certiorari $as belatedl( sub"itted b( the private respondent before the public respondent $hich, nonetheless, resolved to !ive due course thereto on Septe"ber ;3, 3565. On October 38, 3565, the trial court, not havin! been notified of the pendin! petition for certiorari $ith public respondent issued an Order declarin! as final the Order dated *pril ;4, 3565. The private respondents in the said Order $ere re'uired to ta&e positive steps in prosecutin! the third part( co"plaint in order that the court $ould not be constrained to dis"iss the sa"e for failure to prosecute. Subse'uentl(, on October ;4, 3565 the private respondents filed a "otion for reconsideration on $hich the trial court too& no further action. On March 35, 355@, after the petitioners filed their ans$er to the private respondents< petition for certiorari, the public respondent rendered its decision, the dispositive portion of $hich reads2 HARA-ORA, in vie$ of the fore!oin!, the orders of respondent 0ud!e dated *pril ;4, 3565 and *u!ust 3>, 3565 are

hereb( SAT *SIDA and respondent corporation is ordered to file its ans$er $ithin the re!le"entar( period. +7* Decision, p. 6B Rollo, p. ;>. On *pril 33, 355@, the petitioners "oved for a reconsideration of the decision of the public respondent $hich resolved to den( the sa"e on Ma( 3@, 355@. Hence, the petitioners filed this certiorari petition i"putin! !rave abuse of discretion a"ountin! to lac& of 0urisdiction on the part of the public respondent in reversin! the 'uestioned Orders dated *pril ;4, 3565 and *u!ust 3>, 3565 of the court a uo, thus, holdin! that there $as proper service of su""ons on *,-* throu!h the petitioners. In the "eanti"e, the public respondent inadvertentl( "ade an entr( of 0ud!"ent on :ul( 39, 355@ erroneousl( appl(in! the rule that the period durin! $hich a "otion for reconsideration has been pendin! "ust be deducted fro" the 34/da( period to appeal. Ho$ever, in its Resolution dated :anuar( ?, 3553, the public respondent set aside the aforestated entr( of 0ud!"ent after further considerin! that the rule it relied on applies to appeals fro" decisions of the Re!ional Trial 7ourts to the 7ourt of *ppeals, not to appeals fro" its decision to us pursuant to our rulin! in the case of Refractories Corporation of t!e "!ilippines v. #ntermediate Appellate Court, 389 S7R* 4?5 C3565D. +7* Rollo, pp. ;>5/;4@. In their "e"orandu", the petitioners present the follo$in! ar!u"ents, to $it2 +3. that the e#ecution of the votin! trust a!ree"ent b( a stoc&holders $hereb( all his shares to the corporation have been transferred to the trustee deprives the stoc&holders of his position as director of the corporationB to rule other$ise, as the respondent 7ourt of *ppeals did, $ould be violative of section ;? of the 7orporation 7ode + Rollo, pp. ;8@/?;8?.B and +;. that the petitioners $ere no lon!er actin! or holdin! an( of the positions provided under Rule 3>, Section 3? of the Rules of 7ourt authori=ed to receive service of su""ons for and in behalf of the private do"estic corporation so that the service of su""ons on *,-* effected throu!h the petitioners is not valid and ineffectiveB to "aintain the respondent 7ourt of *ppeals< position that *,-* $as properl( served its su""ons throu!h

the petitioners $ould be contrar( to the !eneral principle that a corporation can onl( be bound b( such acts $hich are $ithin the scope of its officers< or a!ents< authorit( +Rollo, pp. ;8?/;84. In resolvin! the issue of the propriet( of the service of su""ons in the instant case, $e d$ell first on the nature of a votin! trust a!ree"ent and the conse'uent effects upon its creation in the li!ht of the provisions of the 7orporation 7ode. * votin! trust is defined in 1allentine<s ,a$ Dictionar( as follo$s2 +a. trust created b( an a!ree"ent bet$een a !roup of the stoc&holders of a corporation and the trustee or b( a !roup of identical a!ree"ents bet$een individual stoc&holders and a co""on trustee, $hereb( it is provided that for a ter" of (ears, or for a period contin!ent upon a certain event, or until the a!ree"ent is ter"inated, control over the stoc& o$ned b( such stoc&holders, either for certain purposes or for all purposes, is to be lod!ed in the trustee, either $ith or $ithout a reservation to the o$ners, or persons desi!nated b( the", of the po$er to direct ho$ such control shall be used. +56 *,R ;d. ?85 sec. 3 CdDB 35 *" : ;d 7orp. sec. 964.. Ender Section 45 of the ne$ 7orporation 7ode $hich e#pressl( reco!ni=es votin! trust a!ree"ents, a "ore definitive "eanin! "a( be !athered. The said provision partl( reads2 Sec. 45. $oting Trusts ) One or "ore stoc&holders of a stoc& corporation "a( create a votin! trust for the purpose of conferrin! upon a trustee or trustees the ri!ht to vote and other ri!hts pertainin! to the share for a period ri!hts pertainin! to the shares for a period not e#ceedin! five +4. (ears at an( one ti"e2 Provided, that in the case of a votin! trust specificall( re'uired as a condition in a loan a!ree"ent, said votin! trust "a( be for a period e#ceedin! +4. (ears but shall auto"aticall( e#pire upon full pa("ent of the loan. * votin! trust a!ree"ent "ust be in $ritin! and notari=ed, and shall specif( the ter"s and conditions thereof. * certified cop( of such a!ree"ent shall be filed $ith the corporation and $ith the Securities and A#chan!e 7o""issionB other$ise, said a!ree"ent is

ineffective and unenforceable. The certificate or certificates of stoc& covered b( the votin! trust a!ree"ent shall be cancelled and ne$ ones shall be issued in the na"e of the trustee or trustees statin! that the( are issued pursuant to said a!ree"ent. In the boo&s of the corporation, it shall be noted that the transfer in the na"e of the trustee or trustees is "ade pursuant to said votin! trust a!ree"ent. 1( its ver( nature, a votin! trust a!ree"ent results in the separation of the votin! ri!hts of a stoc&holder fro" his other ri!hts such as the ri!ht to receive dividends, the ri!ht to inspect the boo&s of the corporation, the ri!ht to sell certain interests in the assets of the corporation and other ri!hts to $hich a stoc&holder "a( be entitled until the li'uidation of the corporation. Ho$ever, in order to distin!uish a votin! trust a!ree"ent fro" pro#ies and other votin! pools and a!ree"ents, it "ust pass three criteria or tests, na"el(2 +3. that the votin! ri!hts of the stoc& are separated fro" the other attributes of o$nershipB +;. that the votin! ri!hts !ranted are intended to be irrevocable for a definite period of ti"eB and +?. that the principal purpose of the !rant of votin! ri!hts is to ac'uire votin! control of the corporation. +4 -letcher, Cyclopedia of t!e Law on "rivate Corporations, section ;@84 C3589D p. ??3citing Tan&ersl( v. *lbri!ht, ?8> -. Supp. 4?6. Ender section 45 of the 7orporation 7ode, supra, a votin! trust a!ree"ent "a( confer upon a trustee not onl( the stoc&holder<s votin! ri!hts but also other ri!hts pertainin! to his shares as lon! as the votin! trust a!ree"ent is not entered Ffor the purpose of circu"ventin! the la$ a!ainst "onopolies and ille!al co"binations in restraint of trade or used for purposes of fraud.F +section 45, 4th para!raph of the 7orporation 7ode. Thus, the traditional concept of a votin! trust a!ree"ent pri"aril( intended to sin!le out a stoc&holder<s ri!ht to vote fro" his other ri!hts as such and "ade irrevocable for a li"ited duration "a( in practice beco"e a le!al device $hereb( a transfer of the stoc&holder<s shares is effected sub0ect to the specific provision of the votin! trust a!ree"ent. The e#ecution of a votin! trust a!ree"ent, therefore, "a( create a dichoto"( bet$een the e'uitable or beneficial o$nership of the corporate shares of a stoc&holders, on the one hand, and the le!al title thereto on the other hand.

The la$ si"pl( provides that a votin! trust a!ree"ent is an a!ree"ent in $ritin! $hereb( one or "ore stoc&holders of a corporation consent to transfer his or their shares to a trustee in order to vest in the latter votin! or other ri!hts pertainin! to said shares for a period not e#ceedin! five (ears upon the fulfill"ent of statutor( conditions and such other ter"s and conditions specified in the a!ree"ent. The five (ear/period "a( be e#tended in cases $here the votin! trust is e#ecuted pursuant to a loan a!ree"ent $hereb( the period is "ade contin!ent upon full pa("ent of the loan. In the instant case, the point of controvers( arises fro" the effects of the creation of the votin! trust a!ree"ent. The petitioners "aintain that $ith the e#ecution of the votin! trust a!ree"ent bet$een the" and the other stoc&holders of *,-*, as one part(, and the D1P, as the other part(, the for"er assi!ned and transferred all their shares in *,-* to D1P, as trustee. The( ar!ue that b( virtue to of the votin! trust a!ree"ent the petitioners can no lon!er be considered directors of *,-*. In support of their contention, the petitioners invo&e section ;? of the 7orporation 7ode $hich provides, in part, that2 Aver( director "ust o$n at least one +3. share of the capital stoc& of the corporation of $hich he is a director $hich share shall stand in his na"e on the boo&s of the corporation. *n( director $ho ceases to be the o$ner of at least one +3. share of the capital stoc& of the corporation of $hich he is a director shall thereb( cease to be director . . . +Rollo, p. ;8@. The private respondents, on the contrar(, insist that the votin! trust a!ree"ent bet$een *,-* and the D1P had all the "ore safe!uarded the petitioners< continuance as officers and directors of *,-* inas"uch as the !eneral ob0ect of votin! trust is to insure per"anenc( of the tenure of the directors of a corporation. The( cited the co""entaries b( Prof. *!uedo *!ba(ani on the ri!ht and status of the transferrin! stoc&holders, to wit2 The Ftransferrin! stoc&holderF, also called the Fdepositin! stoc&holderF, is e'uitable o$ner for the stoc&s represented b( the votin! trust certificates and the stoc& reversible on ter"ination of the trust b( surrender. It is said that the votin! trust a!ree"ent does not destro( the status of the transferrin! stoc&holders as such, and thus render the" ineli!ible as

directors. 1ut a "ore accurate state"ent see"s to be that for so"e purposes the depositin! stoc&holder holdin! votin! trust certificates in lieu of his stoc& and bein! the beneficial o$ner thereof, re"ains and is treated as a stoc&holder. It see"s to be deducible fro" the case that he "a( sue as a stoc&holder if the suit is in e'uit( or is of an e'uitable nature, such as, a technical stoc&holders< suit in ri!ht of the corporation. C7o""ercial ,a$s of the Philippines b( *!ba(ani, Vol. ? pp. >5;/>5?, citing 4 -letcher ?;9, ?;8D +Rollo, p. ;53. e find the petitioners< position "eritorious. 1oth under the old and the ne$ 7orporation 7odes there is no dispute as to the "ost i""ediate effect of a votin! trust a!ree"ent on the status of a stoc&holder $ho is a part( to its e#ecution ) fro" le!al titleholder or o$ner of the shares sub0ect of the votin! trust a!ree"ent, he beco"es the e'uitable or beneficial o$ner. +Salon!a, "!ilippine Law on "rivate Corporations, 3546 ed., p. ;96B Pineda and 7arlos, T!e Law on "rivate Corporations and Corporate "ractice, 3595 ed., p. 384B 7a"pos and ,ope=/7a"pos, T!e Corporation Code% Comments, &otes & 'elected Cases, 3563, ed., p. ?69B *!ba(ani, Commentaries and (urisprudence on t!e Commercial Laws of t!e "!ilippines, Vol. ?, 3566 ed., p. 4?9.. The penulti"ate 'uestion, therefore, is $hether the chan!e in his status deprives the stoc&holder of the ri!ht to 'ualif( as a director under section ;? of the present 7orporation 7ode $hich deletes the phrase Fin his o$n ri!ht.F Section ?@ of the old 7ode states that2 Aver( director "ust o$n in !is own rig!t at least one share of the capital stoc& of the stoc& corporation of $hich he is a director, $hich stoc& shall stand in his na"e on the boo&s of the corporation. * director $ho ceases to be the o$ner of at least one share of the capital stoc& of a stoc& corporation of $hich is a director shall thereb( cease to be a director . . . +A"phasis supplied. Ender the old 7orporation 7ode, the eli!ibilit( of a director, strictl( spea&in!, cannot be adversel( affected b( the si"ple act of such director bein! a part( to a votin! trust a!ree"ent inas"uch as he re"ains o$ner +althou!h beneficial or e'uitable onl(. of the shares sub0ect of the votin! trust a!ree"ent pursuant to $hich a transfer of the stoc&holder<s shares in

favor of the trustee is re'uired +section ?9 of the old 7orporation 7ode.. No dis'ualification arises b( virtue of the phrase Fin his o$n ri!htF provided under the old 7orporation 7ode. ith the o"ission of the phrase Fin his o$n ri!htF the election of trustees and other persons $ho in fact are not beneficial o$ners of the shares re!istered in their na"es on the boo&s of the corporation beco"es for"all( le!ali=ed +see 7a"pos and ,ope=/7a"pos, supra, p. ;59. Hence, this is a clear indication that in order to be eli!ible as a director, $hat is "aterial is the le!al title to, not beneficial o$nership of, the stoc& as appearin! on the boo&s of the corporation +; -letcher, Cyclopedia of t!e Law of "rivate Corporations, section ?@@, p. 5; C3595Dciting People v. ,ih"e, ;95 Ill. ?43, 3@5 N.A. 3@43.. The facts of this case sho$ that the petitioners, b( virtue of the votin! trust a!ree"ent e#ecuted in 3563 disposed of all t!eir s!ares t!roug! assignment and delivery in favor of t!e )*", as trustee . 7onse'uentl(, the petitioners ceased to o$n at least one share standin! in their na"es on the boo&s of *,-* as re'uired under Section ;? of the ne$ 7orporation 7ode. The( also ceased to have an(thin! to do $ith the "ana!e"ent of the enterprise. The petitioners ceased to be directors. Hence, the transfer of the petitioners< shares to the D1P created vacancies in their respective positions as directors of *,-*. The transfer of shares fro" the stoc&holder of *,-* to the D1P is the essence of the sub0ect votin! trust a!ree"ent as evident fro" the follo$in! stipulations2 3. The TRESTORS hereb( assi!n and deliver to the TRESTAA the certificate of the shares of the stoc&s o$ned b( the" respectivel( and shall do all thin!s necessar( for the transfer of their respective shares to the TRESTAA on the boo&s of *,-*. ;. The TRESTAA shall issue to each of the TRESTORS a trust certificate for the nu"ber of shares transferred, $hich shall be transferrable in the sa"e "anner and $ith the sa"e effect as certificates of stoc& sub0ect to the provisions of this a!ree"entB ?. The TRESTAA shall vote upon the shares of stoc& at all "eetin!s of *,-*, annual or special, upon an( resolution, "atter or business that "a( be sub"itted to an( such

"eetin!, and s!all possess in t!at respect t!e same powers as owners of t!e e uitable as well as t!e legal title to t!e stoc+ B >. The TRESTAA "a( cause to be transferred to an( person one share of stoc& for the purpose of 'ualif(in! such person as director of *,-*, and cause a certificate of stoc& evidencin! the share so transferred to be issued in the na"e of such personB ### ### ### 5. *n( stoc&holder not enterin! into this a!ree"ent "a( transfer his shares to the sa"e trustees $ithout the need of revisin! this a!ree"ent, and this a!ree"ent shall have the sa"e force and effect upon that said stoc&holder. +7* Rollo, pp. 3?8/3?6B A"phasis supplied. 7onsiderin! that the votin! trust a!ree"ent bet$een *,-* and the D1P transferred le!al o$nership of the stoc& covered b( the a!ree"ent to the D1P as trustee, the latter beca"e the stoc&holder of record $ith respect to the said shares of stoc&s. In the absence of a sho$in! that the D1P had caused to be transferred in their na"es one share of stoc& for the purpose of 'ualif(in! as directors of *,-*, the petitioners can no lon!er be dee"ed to have retained their status as officers of *,-* $hich $as the case before the e#ecution of the sub0ect votin! trust a!ree"ent. There appears to be no dispute fro" the records that D1P has ta&en over full control and "ana!e"ent of the fir". Moreover, in the 7ertification dated :anuar( ;>, 3565 issued b( the D1P throu!h one Alsa *. Guevarra, Vice/President of its Special *ccounts Depart"ent II, Re"edial Mana!e"ent Group, the petitioners $ere no lon!er included in the list of officers of *,-* Fas of *pril 356;.F +7* Rollo, pp. 3>@/3>;. Inas"uch as the private respondents in this case failed to substantiate their clai" that the sub0ect votin! trust a!ree"ent did not deprive the petitioners of their position as directors of *,-*, the public respondent co""itted a reversible error $hen it ruled that2 . . . $hile the individual respondents +petitioners ,ee and ,acdao. "a( have ceased to be president and vice/president, respectivel(, of the corporation at the ti"e of service of

su""ons on the" on *u!ust ;3, 3568, the( $ere at least up to that ti"e, still directors . . . The afore'uoted state"ent is 'uite inaccurate in the li!ht of the e#press ter"s of Stipulation No. > of the sub0ect votin! trust a!ree"ent. 1oth parties, *,-* and the D1P, $ere a$are at the ti"e of the e#ecution of the a!ree"ent that b( virtue of the transfer of shares of *,-* to the D1P, all the directors of *,-* $ere stripped of their positions as such. There can be no reliance on the inference that the five/(ear period of the votin! trust a!ree"ent in 'uestion had lapsed in 3569 so that the le!al title to the stoc&s covered b( the said votin! trust a!ree"ent ipso facto reverted to the petitioners as beneficial o$ners pursuant to the 9th para!raph of section 45 of the ne$ 7orporation 7ode $hich reads2 Enless e#pressl( rene$ed, all ri!hts !ranted in a votin! trust a!ree"ent shall auto"aticall( e#pire at the end of the a!reed period, and the votin! trust certificate as $ell as the certificates of stoc& in the na"e of the trustee or trustees shall thereb( be dee"ed cancelled and ne$ certificates of stoc& shall be reissued in the na"e of the transferors. On the contrar(, it is "anifestl( clear fro" the ter"s of the votin! trust a!ree"ent bet$een *,-* and the D1P that the duration of the a!ree"ent is contin!ent upon the fulfill"ent of certain obli!ations of *,-* $ith the D1P. This is sho$n b( the follo$in! portions of the a!ree"ent. HARA*S, the TRESTAA is one of the creditors of *,-*, and its credit is secured b( a first "ort!a!e on the "anufacturin! plant of said co"pan(B HARA*S, *,-* is also indebted to other creditors for various financial acco"odations and because of the burden of these obli!ations is encounterin! ver( serious difficulties in continuin! $ith its operations. HARA*S, in consideration of additional acco""odations fro" the TRESTAA, *,-* had offered and the TRESTAA has accepted participation in the "ana!e"ent and control of the co"pan( and to assure the aforesaid participation b( the TRESTAA, the TRESTORS have a!reed to e#ecute a votin!

trust coverin! their shareholdin! in *,-* in favor of the TRESTAAB *ND HARA*S, D1P is $illin! to accept the trust for the purpose afore"entioned. NO , THARA-ORA, it is hereb( a!reed as follo$s2 ### ### ### 9. This *!ree"ent shall last for a period of -ive +4. (ears, and is rene$able for as lon! as the obli!ations of *,-* $ith D1P, or an( portion thereof, re"ains outstandin!B +7* Rollo, pp. 3?8/ 3?6. Had the five/(ear period of the votin! trust a!ree"ent e#pired in 3569, the D1P $ould not have transferred all its ri!hts, titles and interests in *,-* Feffective :une ?@, 3569F to the national !overn"ent throu!h the *sset Privati=ation Trust +*PT. as attested to in a 7ertification dated :anuar( ;>, 3565 of the Vice President of the D1P<s Special *ccounts Depart"ent II. In the sa"e certification, it is stated that the D1P, fro" 3568 until 3565, had handled *PT<s account $hich included *,-*<s assets pursuant to a "ana!e"ent a!ree"ent b( and bet$een the D1P and *PT +7* Rollo, p. 3>;. Hence, there is evidence on record that at the ti"e of the service of su""ons on *,-* throu!h the petitioners on *u!ust ;3, 3568, the votin! trust a!ree"ent in 'uestion $as not (et ter"inated so that the le!al title to the stoc&s of *,-*, then, still belon!ed to the D1P. In vie$ of the fore!oin!, the ulti"ate issue of $hether or not there $as proper service of su""ons on *,-* throu!h the petitioners is readil( ans$ered in the ne!ative. Ender section 3?, Rule 3> of the Revised Rules of 7ourt, it is provided that2 Sec. 3?. 'ervice upon private domestic corporation or partners!ip. ) If the defendant is a corporation or!ani=ed under the la$s of the Philippines or a partnership dul( re!istered, service "a( be "ade on the president, "ana!er, secretar(, cashier, a!ent or an( of its directors.

It is a basic principle in 7orporation ,a$ that a corporation has a personalit( separate and distinct fro" the officers or "e"bers $ho co"pose it. +'ee Sulo n! 1a(an Inc. v. *raneta, Inc., 8; S7R* ?>8 C3589DB Osias *cade"( v. Depart"ent of ,abor and A"plo("ent, et al., G.R. Nos. 6?;48/46, Dece"ber ;3, 355@.. Thus, the above rule on service of processes of a corporation enu"erates the representatives of a corporation $ho can validl( receive court processes on its behalf. Not ever( stoc&holder or officer can bind the corporation considerin! the e#istence of a corporate entit( separate fro" those $ho co"pose it. The rationale of the aforecited rule is that service "ust be "ade on a representative so inte!rated $ith the corporation sued as to "a&e it a priori supposable that he $ill reali=e his responsibilities and &no$ $hat he should do $ith an( le!al papers served on hi". +-ar 7orporation v. -rancisco, 3>9 S7R* 358 C3569D citing Villa Re( Transit, Inc. v. -ar Aast Motor 7orp. 63 S7R* ?@? C3586D.. The petitioners in this case do not fall under an( of the enu"erated officers. The service of su""ons upon *,-*, throu!h the petitioners, therefore, is not valid. To rule other$ise, as correctl( ar!ued b( the petitioners, $ill contravene the !eneral principle that a corporation can onl( be bound b( such acts $hich are $ithin the scope of the officer<s or a!ent<s authorit(. +see Vicente v. Geralde=, 4; S7R* ;3@ C358?D.. HARA-ORA, pre"ises considered, the petition is hereb( GR*NTAD. The appealed decision dated March 35, 355@ and the 7ourt of *ppeals< resolution of Ma( 3@, 355@ are SAT *SIDA and the Orders dated *pril ;4, 3565 and October 38, 3565 issued b( the Re!ional Trial 7ourt of Ma&ati, 1ranch 46 are RAINST*TAD. SO ORDARAD.

Republic of the Philippines SUPREME COURT Manila SPA7I*, SA7OND DIVISION G.R. No. 1444(6 A)r*+ ,, 2--3

ONG .ONG, 'UAN"TA TAN ONG, /"LSON T. ONG, ANNA L. ONG, /"LL"AM T. ONG, /"LL"E T. ONG, a ! 'UL"E ONG ALON&O, petitioners, vs. #A0"# S. T"U, CEL. .. T"U, MOL. .U GA/, %ELEN SEE .U, #. TERENCE .. T"U, 'O$N .U, LOUR#ES C. T"U, "NTRALAN# RESOURCES #E0ELOPMENT CORP., MASAGANA TELAMART, "NC., REG"STER OF #EE#S OF PASA. C"T., a ! 12e SECUR"T"ES AN# E3C$ANGE COMM"SS"ON, respondents. #/////////////////////////////# G.R. No. 144629 A)r*+ ,, 2--3

#A0"# S. T"U, CEL. .. T"U, MOL. .U GA/, %ELEN SEE .U, #. TERENCE .. T"U, 'O$N .U, LOUR#ES C. T"U, a ! "NTRALAN# RESOURCES #E0ELOPMENT CORP., petitioners, vs. ONG .ONG, 'UAN"TA TAN ONG, /"LSON T. ONG, ANNA L. ONG, /"LL"AM T. ONG, /"LL"E T. ONG, a ! 'UL"A ONG ALON&O, respondents. RESOLUT"ON CORONA, J.4 1efore us are the +3. "otion for reconsideration, dated March 34, ;@@;, of petitioner "ovants On! Hon!, :uanita Tan On!, ilson On!, *nna On!, illia" On!, illie On! and :ulia On! *lon=o +the On!s.B +;. "otion for partial reconsideration, dated March 34, ;@@;, of petitioner "ovant illie On! see&in! a reversal of this 7ourt<s Decision,3 dated -ebruar( 3, ;@@;, in G.R. Nos. 3>>>89 and 3>>9;5 affir"in! $ith "odification the decision ; of the 7ourt of *ppeals, dated October 4, 3555, $hich in turn upheld, li&e$ise $ith "odification, the decision of the SA7 en banc, dated Septe"ber 33, 3556B and +?. "otion for issuance of $rit of e#ecution of petitioners David S. Tiu, 7el( H. Tiu, Mol( Hu Go$, 1elen See Hu, D. Terence H. Tiu, :ohn Hu and ,ourdes 7. Tiu +the Tius. of our -ebruar( 3, ;@@; Decision. * brief recapitulation of the facts sho$s that2

In 355>, the construction of the Masa!ana 7iti"all in Pasa( 7it( $as threatened $ith stoppa!e and inco"pletion $hen its o$ner, the -irst ,andlin& *sia Develop"ent 7orporation +-,*D7., $hich $as o$ned b( the Tius, encountered dire financial difficulties. It $as heavil( indebted to the Philippine National 1an& +PN1. for P35@ "illion. To stave off foreclosure of the "ort!a!e on the t$o lots $here the "all $as bein! built, the Tius invited On! Hon!, :uanita Tan On!, ilson T. On!, *nna ,. On!, illia" T. On! and :ulia On! *lon=o +the On!s., to invest in -,*D7. Ender the Pre/Subscription *!ree"ent the( entered into, the On!s and the Tius a!reed to "aintain e'ual shareholdin!s in -,*D72 the On!s $ere to subscribe to 3,@@@,@@@ shares at a par value of P3@@.@@ each $hile the Tius $ere to subscribe to an additional 4>5,6@@ shares at P3@@.@@ each in addition to their alread( e#istin! subscription of >4@,;@@ shares. -urther"ore, the( a!reed that the Tius $ere entitled to no"inate the Vice/President and the Treasurer plus five directors $hile the On!s $ere entitled to no"inate the President, the Secretar( and si# directors +includin! the chair"an. to the board of directors of -,*D7. Moreover, the On!s $ere !iven the ri!ht to "ana!e and operate the "all. *ccordin!l(, the On!s paid P3@@ "illion in cash for their subscription to 3,@@@,@@@ shares of stoc& $hile the Tius co""itted to contribute to -,*D7 a four/store( buildin! and t$o parcels of land respectivel( valued at P;@ "illion +for ;@@,@@@ shares., P?@ "illion +for ?@@,@@@ shares. and P>5.6 "illion +for >5,6@@ shares. to cover their additional 4>5,6@@ stoc& subscription therein. The On!s paid in another P8@ "illion ? to -,*D7 and P;@ "illion to the Tius over and above their P3@@ "illion invest"ent, the total su" of $hich +P35@ "illion. $as used to settle the P35@ "illion "ort!a!e indebtedness of -,*D7 to PN1. The business har"on( bet$een the On!s and the Tius in -,*D7, ho$ever, $as shortlived because the Tius, on -ebruar( ;?, 3559, rescinded the Pre/Subscription *!ree"ent. The Tius accused the On!s of +3. refusin! to credit to the" the -,*D7 shares coverin! their real propert( contributionsB +;. preventin! David S. Tiu and 7el( H. Tiu fro" assu"in! the positions of and perfor"in! their duties as Vice/President and Treasurer, respectivel(, and +?. refusin! to !ive the" the office spaces a!reed upon.

*ccordin! to the Tius, the a!ree"ent $as for David S. Tiu and 7el( S. Tiu to assu"e the positions and perfor" the duties of Vice/President and Treasurer, respectivel(, but the On!s prevented the" fro" doin! so. -urther"ore, the On!s refused to provide the" the space for their e#ecutive offices as Vice/President and Treasurer. -inall(, and "ost serious of all, the On!s refused to !ive the" the shares correspondin! to their propert( contributions of a four/stor( buildin!, a 3,5@;.?@ s'uare/ "eter lot and a 343 s'uare/"eter lot. Hence, the( felt the( $ere 0ustified in settin! aside their Pre/Subscription *!ree"ent $ith the On!s $ho alle!edl( refused to co"pl( $ith their underta&in!s. In their defense, the On!s said that David S. Tiu and 7el( H. Tiu had in fact assu"ed the positions of Vice/President and Treasurer of -,*D7 but that it $as the( $ho refused to co"pl( $ith the corporate duties assi!ned to the". It $as the contention of the On!s that the( $anted the Tius to si!n the chec&s of the corporation and underta&e their "ana!e"ent duties but that the Tius shied a$a( fro" helpin! the" "ana!e the corporation. On the issue of office space, the On!s pointed out that the Tius did in fact alread( have e#istin! e#ecutive offices in the "all since the( o$ned it 3@@I before the On!s ca"e in. hat the Tius reall( $anted $ere ne$ offices $hich $ere an($a( subse'uentl( provided to the". On the "ost i"portant issue of their alle!ed failure to credit the Tius $ith the -,*D7 shares co""ensurate to the Tius< propert( contributions, the On!s asserted that, althou!h the Tius e#ecuted a deed of assi!n"ent for the 3,5@;.?@ s'uare/"eter lot in favor of -,*D7, the( +the Tius. refused to pa( P 48@,95@ for capital !ains ta# and docu"entar( sta"p ta#. ithout the pa("ent thereof, the SA7 $ould not approve the valuation of the Tius< propert( contribution +as opposed to cash contribution.. This, in turn, $ould "a&e it i"possible to secure a ne$ Transfer 7ertificate of Title +T7T. over the propert( in -,*D7<s na"e. In an( event, it $as eas( for the Tius to si"pl( pa( the said transfer ta#es and, after the ne$ T7T $as issued in -,*D7<s na"e, the( could then be !iven the correspondin! shares of stoc&s. On the 343 s'uare/"eter propert(, the Tius never e#ecuted a deed of assi!n"ent in favor of -,*D7. The Tius initiall( clai"ed that the( could not as (et surrender the T7T because it $as Fstill bein! reconstitutedF b( the ,ichaucos fro" $ho" the Tius bou!ht it. The On!s later on discovered that -,*D7 had in realit( o$ned the propert( all alon!, even before their Pre/Subscription *!ree"ent $as e#ecuted in 355>. This "eant that the 343 s'uare/"eter propert( $as at that ti"e alread( the corporate propert(

of -,*D7 for $hich the Tius $ere not entitled to the issuance of ne$ shares of stoc&. The controvers( finall( ca"e to a head $hen this case $as co""enced> b( the Tius on -ebruar( ;8, 3559 at the Securities and A#chan!e 7o""ission +SA7., see&in! confir"ation of their rescission of the Pre/Subscription *!ree"ent. *fter hearin!, the SA7, throu!h then Hearin! Officer Rolando G. *nda(a, :r., issued a decision on Ma( 35, 3558 confir"in! the rescission sou!ht b( the Tius, as follo$s2 HARA-ORA, 0ud!"ent is hereb( rendered confir"in! the rescission of the Pre/Subscription *!ree"ent, and conse'uentl( orderin!2 +a. The cancellation of the 3,@@@,@@@ shares subscription of the individual defendants in -,*D7B +b. -,*D7 to pa( the a"ount of P38@,@@@,@@@.@@ to the individual defendants representin! the return of their contribution for 3,@@@,@@@ shares of -,*D7B +c. The plaintiffs to sub"it $ith +sic. the Securities and A#chan!e 7o""ission a"ended articles of incorporation of -,*D7 to confor" $ith this decisionB +d. The defendants to surrender to the plaintiffs T7T Nos. 3?;>5?, 3?;>5>, 3?>@99 +for"erl( 34468., 3?4?;4 and 3?>;@> and an( other title or deed in the na"e of -,*D7, failin! in $hich said titles are declared voidB +e. The Re!ister of Deeds to issue ne$ certificates of titles in favor of the plaintiffs and to cancel the annotation of the Pre/Subscription *!ree"ent dated 34 *u!ust 355> on T7T No. 3?>@99 +for"erl( 34468.B +f. The individual defendants, individuall( and collectivel(, their a!ents and representatives, to desist fro" e#ercisin! or perfor"in! an( and all acts pertainin! to stoc&holder, director or officer of -,*D7 or in an( "anner intervene in the "ana!e"ent and affairs of -,*D7B

+!. The individual defendants, 0ointl( and severall(, to return to -,*D7 interest pa("ent in the a"ount of P6,699,995.@@ and all interest pa("ents as $ell as an( pa("ents on principal received fro" the P8@,@@@,@@@.@@ ine#istent loan, plus the le!al rate of interest thereon fro" the date of their receipt of such pa("ent until full( paidB +h. The plaintiff David Tiu to pa( individual defendants the su" of P;@,@@@,@@@.@@ representin! his loan fro" said defendants plus le!al interest fro" the date of receipt of such a"ount. SO ORDARAD.4 On "otion of both parties, the above decision $as partiall( reconsidered but onl( insofar as the On!s< P8@ "illion $as declared not as a pre"iu" on capital stoc& but an advance +loan. b( the On!s to -,*D7 and that the i"position of interest on it $as correct.9 1oth parties appealed8 to the SA7 en banc $hich rendered a decision on Septe"ber 33, 3556, affir"in! the Ma( 35, 3558 decision of the Hearin! Officer. The SA7 en banc confir"ed the rescission of the Pre/Subscription *!ree"ent but reverted to classif(in! the P8@ "illion paid b( the On!s as pre"iu" on capital and not as a loan or advance to -,*D7, hence, not entitled to earn interest.6 On appeal, the 7ourt of *ppeals +7*. rendered a decision on October 4, 3555, thus2 HARA-ORA, the Order dated Septe"ber 33, 3556 issued b( the Securities and A#chan!e 7o""ission An 1anc in SA7 *7 7*SA NOS. 456 and 9@3 confir"in! the rescission of the Pre/Subscription *!ree"ent dated *u!ust 34, 355> is hereb( *--IRMAD, sub0ect to the follo$in! MODI-I7*TIONS2 3. The On! and Tiu Groups are ordered to li'uidate -irst ,andlin& *sia Develop"ent 7orporation in accordance $ith the follo$in! cash and propert( contributions of the parties therein. +a. On! Group J P3@@,@@@,@@@.@@ cash contribution for one +3. "illion shares in -irst ,andlin& *sia Develop"ent 7orporation at a par value of P3@@.@@ per shareB

+b. Tiu Group2 3. P>4,@;@,@@@.@@ ori!inal cash contribution for >4@,;@@ shares in -irst ,andlin& *sia Develop"ent 7orporation at a par value of P3@@.@@ per shareB ;. * four/store( buildin! described in Transfer 7ertificate of Title No. 34468 in the na"e of Intraland Resources and Develop"ent 7orporation valued at P;@,@@@,@@@.@@ for ;@@,@@@ shares in -irst ,andlin& *sia Develop"ent 7orporation at a par value of P3@@.@@ per shareB ?. * 3,5@;.?@ s'uare/"eter parcel of land covered b( Transfer 7ertificate of Title No. 34468 in the na"e of Masa!ana Tela"art, Inc. valued at P?@,@@@,@@@.@@ for ?@@,@@@ shares in -irst ,andlin& *sia Develop"ent 7orporation at a par value of P3@@.@@ per share. ;. hatever re"ains of the assets of the -irst ,andlin& *sia Develop"ent 7orporation and the "ana!e"ent thereof is + sic. hereb( ordered transferred to the Tiu Group. ?. -irst ,andlin& *sia Develop"ent 7orporation is hereb( ordered to pa( the a"ount of P8@,@@@,@@@.@@ that $as advanced to it b( the On! Group upon the finalit( of this decision. Should the for"er incur in dela( in the pa("ent thereof, it shall pa( the le!al interest thereon pursuant to *rticle ;;@5 of the Ne$ 7ivil 7ode. >. The Tius are hereb( ordered to pa( the a"ount of P;@,@@@,@@@.@@ loaned the" b( the On!s upon the finalit( of this decision. Should the for"er incur in dela( in the pa("ent thereof, it shall pa( the le!al interest thereon pursuant to *rticle ;;@5 of the Ne$ 7ivil 7ode. SO ORDARAD.5 *n interestin! sideli!ht of the 7* decision $as its description of the rescission "ade b( the Tius as the Fhei!ht of in!ratitudeF and as Fpullin! a fast oneF on the On!s. The 7* "oreover found the Tius !uilt( of $ithholdin! -,*D7 funds fro" the On!s and divertin! corporate inco"e to their o$n M*TTAR7O account.3@ These $ere findin!s later on affir"ed in

our o$n -ebruar( 3, ;@@; Decision $hich is the sub0ect of the instant "otion for reconsideration.33 1ut there $as also a stran!e aspect of the 7* decision. The 7* concluded that both the On!s and the Tius $ere in pari delicto +$hich $ould not have le!all( entitled the" to rescission. but, Ffor practical considerations,F that is, their inabilit( to $or& to!ether, it $as best to separate the t$o !roups b( rescindin! the Pre/Subscription *!ree"ent, returnin! the ori!inal invest"ent of the On!s and a$ardin! practicall( ever(thin! else to the Tius. Their "otions for reconsideration havin! been denied, both parties filed separate petitions for revie$ before this 7ourt. In their petition doc&eted as G.R. No. 3>>>89, Ong et al. vs. Tiu et al., the On!s ar!ued that the Tius "a( not properl( avail of rescission under *rticle 3353 of the 7ivil 7ode considerin! that the Pre/Subscription *!ree"ent did not provide for reciprocit( of obli!ationsB that the ri!hts over the sub0ect "atter of the rescission +capital assets and properties. had been ac'uired b( a third part( +-,*D7.B that the( did not co""it a substantial and funda"ental breach of their a!ree"ent since the( did not prevent the Tius fro" assu"in! the positions of Vice/President and Treasurer of -,*D7, and that the failure to credit the ?@@,@@@ shares correspondin! to the 3,5@;.?@ s'uare/"eter propert( covered b( T7T No. 3?>@99 +for"erl( 34468. $as due to the refusal of the Tius to pa( the re'uired transfer ta#es to secure the approval of the SA7 for the propert( contribution and, thereafter, the issuance of title in -,*D7<s na"e. The( also ar!ued that the li'uidation of -,*D7 "a( not le!all( be ordered b( the appellate court even for so called Fpractical considerationsF or even to prevent Ffurther s'uabbles and nu"erous liti!ations,F since the sa"e are not valid !rounds under the 7orporation 7ode. Moreover, the On!s be$ailed the failure of the 7* to !rant interest on their P8@ "illion and P;@ "illion advances to -,*D7 and David S. Tiu, respectivel(, and to a$ard costs and da"a!es. In their petition doc&eted as G.R. No. 3>>9;5, Tiu et al. vs. Ong et al., the Tius, on the other hand, contended that the rescission should have been li"ited to the restitution of the parties< respective invest"ents and not the li'uidation of -,*D7 based on the erroneous perception b( the court that2 the Masa!ana 7iti"all $as threatened $ith inco"pletion since -,*D7 $as in financial distressB that the Tius invited the On!s to invest in -,*D7 to

settle its P35@ "illion loan fro" PN1B that the( violated the Pre/ Subscription *!ree"ent $hen it $as the ,ichaucos and not the Tius $ho e#ecuted the deed of assi!n"ent over the 343 s'uare/"eter propert( co""ensurate to >5,6@@ shares in -,*D7 thereb( failin! to pa( the price for the said sharesB that the( did not turn over to the On!s the entire a"ount of -,*D7 fundsB that the( $ere divertin! rentals fro" lease contracts due to -,*D7 to their o$n M*TTAR7O accountB that the P8@ "illion paid b( the On!s $as an advance and not a pre"iu" on capitalB and that, b( rescindin! the Pre/Subscription *!ree"ent, the( $anted to $restle a$a( the "ana!e"ent of the "all and prevent the On!s fro" en0o(in! the profits of their P35@ "illion invest"ent in -,*D7. On -ebruar( 3, ;@@;, this 7ourt pro"ul!ated its Decision +the sub0ect of the instant "otions., affir"in! the assailed decision of the 7ourt of *ppeals but $ith the follo$in! "odifications2 3. the P;@ "illion loan e#tended b( the On!s to the Tius shall earn interest at t$elve percent +3;I. per annu" to be co"puted fro" the ti"e of 0udicial de"and $hich is fro" *pril ;?, 3559B ;. the P8@ "illion advanced b( the On!s to the -,*D7 shall earn interest at ten percent +3@I. per annu" to be co"puted fro" the date of the -,*D7 1oard Resolution $hich is :une 35, 3559B and ?. the Tius shall be credited $ith >5,6@@ shares in -,*D7 for their propert( contribution, specificall(, the 343 s'. ". parcel of land. This 7ourt affir"ed the fact that both the On!s and the Tius violated their respective obli!ations under the Pre/Subscription *!ree"ent. The On!s prevented the Tius fro" assu"in! the positions of Vice/President and Treasurer of the corporation. On the other hand, the Decision established that the Tius failed to turn over -,*D7 funds to the On!s and that the Tius diverted rentals due to -,*D7 to their M*TTAR7O account. 7onse'uentl(, it held that rescission $as not possible since both parties $ere in pari delicto. Ho$ever, this 7ourt a!reed $ith the 7ourt of *ppeals that the re"ed( of specific perfor"ance, as espoused b( the On!s, $as not practical and sound either and $ould onl( lead to further Fs'uabbles and nu"erous liti!ationsF bet$een the parties. On March 34, ;@@;, the Tius filed before this 7ourt a Motion for Issuance of a rit of A#ecution on the !rounds that2 +a. the SA7 order had beco"e

e#ecutor( as earl( as Septe"ber 33, 3556 pursuant to Sections 3 and 3;, Rule >? of the Rules of 7ourtB +b. an( further dela( $ould be in0urious to the ri!hts of the Tius since the case had been pendin! for "ore than si# (earsB and +c. the SA7 no lon!er had 'uasi/0udicial 0urisdiction under R* 6855 +Securities Re!ulation 7ode.. The On!s filed their opposition, contendin! that the Decision dated -ebruar( 3, ;@@; $as not (et final and e#ecutor(B that no !ood reason e#isted to issue a $arrant of e#ecutionB and that, pursuant to Section 4.; of R* 6855, the SA7 retained 0urisdiction over pendin! cases involvin! intra/corporate disputes alread( sub"itted for final resolution upon the effectivit( of the said la$. *side fro" their opposition to the Tius< Motion for Issuance of rit of A#ecution, the On!s filed their o$n FMotion for ReconsiderationB *lternativel(, Motion for Modification +of the -ebruar( 3, ;@@; Decision.F on March 34, ;@@;, raisin! t$o "ain points2 +a. that specific perfor"ance and not rescission $as the proper re"ed( under the pre"isesB and +b. that, assu"in! rescission to be proper, the sub0ect decision of this 7ourt should be "odified to entitle "ovants to their proportionate share in the "all. On their first point +specific perfor"ance and not rescission $as the proper re"ed(., "ovants On! ar!ue that their alle!ed breach of the Pre/ Subscription *!ree"ent $as, at "ost, casual $hich did not 0ustif( the rescission of the contract. The( stress that providin! appropriate offices for David S. Tiu and 7el( H. Tiu as Vice/President and Treasurer, respectivel(, had no bearin! on their obli!ations under the Pre/Subscription *!ree"ent since the said obli!ation +to provide e#ecutive offices. pertained to -,*D7 itself. Such obli!ation arose fro" the relations bet$een the said officers and the corporation and not an( of the individual parties such as the On!s. ,i&e$ise, the alle!ed failure of the On!s to credit shares of stoc& in favor of the Tius for their propert( contributions also pertained to the corporation and not to the On!s. :ust the sa"e, it could not be done in vie$ of the Tius< refusal to pa( the necessar( transfer ta#es $hich in turn resulted in the inabilit( to secure SA7 approval for the propert( contributions and the issuance of a ne$ T7T in the na"e of -,*D7. *esides, according to t!e Ongs, t!e principal ob,ective of bot! parties in entering into t!e "re-'ubscription Agreement in .//0 was to raise t!e "./1 million desperately needed for t!e payment of 2LA)C3s loan to "&* . Hence, in this li!ht, the alle!ed failure to provide office space for the t$o corporate officers $as no "ore than an inconse'uential infrin!e"ent. -or

rescission to be 0ustified, the la$ re'uires that the breach of contract should be so Fsubstantial or funda"entalF as to defeat the pri"ar( ob0ective of the parties in "a&in! the a!ree"ent. *t an( rate, the On!s clai" that it $as the Tius $ho $ere !uilt( of funda"ental violations in failin! to re"it funds due to -,*D7 and divertin! the sa"e to their M*TTAR7O account. The On!s also alle!e that, in vie$ of the findin!s of the 7ourt that both parties $ere !uilt( of violatin! the Pre/Subscription *!ree"ent, neither of the" could resort to rescission under the principle of pari delicto. In addition, since the cash and other contributions no$ sou!ht to be returned alread( belon! to -,*D7, an innocent third part(, said re"ed( "a( no lon!er be availed of under the la$. On their second point +assu"in! rescission to be proper, the On!s should be !iven their proportionate share of the "all., "ovants On! vehe"entl( ta&e e#ception to the second ite" in the dispositive portion of the 'uestioned Decision insofar as it decreed that $hatever re"ains of the assets of -,*D7 and the "ana!e"ent thereof +after li'uidation. shall be transferred to the Tius. The( point out that the "all itself, $hich $ould have been foreclosed b( PN1 if not for their ti"el( invest"ent of P35@ "illion in 355> and $hich is no$ $orth about P3 billion "ainl( because of their efforts, should be included in an( partition and distribution. The( +the On!s. should not "erel( be !iven interest on their capital invest"ents. The said portion of our Decision, accordin! to the", a"ounted to the un0ust enrich"ent of the Tius and ran contrar( to our o$n pronounce"ent that the act of the Tius in unilaterall( rescindin! the a!ree"ent $as Fthe hei!ht of in!ratitudeF and an atte"pt Fto pull a fast oneF as it $ould prevent the On!s fro" en0o(in! the fruits of their P35@ "illion invest"ent in -,*D7. It also contravenes this 7ourt<s assurance in the 'uestioned Decision that the On!s and Tius F$ill have a bountiful return of their respective invest"ents derived fro" the profits of the corporation.F illie On! filed a separate FMotion for Partial ReconsiderationF dated March 6, ;@@;, pointin! out that there $as no violation of the Pre/ Subscription *!ree"ent on the part of the On!sB that, after "ore than seven (ears since the "all be!an its operations, rescission had beco"e not onl( i"practical but $ould also adversel( affect the ri!hts of innocent partiesB and that it $ould be !ig!ly ine uitable and unfair to simply return t!e ".11 million investment of t!e Ongs and give t!e remaining assets now amounting to about ". billion to t!e Tius .

The Tius, in their opposition to the On!s< "otion for reconsideration, counter that the ar!u"ents therein are a "ere re/hash of the contentions in the On!s< petition for revie$ and previous "otion for reconsideration of the 7ourt of *ppeals< decision. The Tius co"pare the ar!u"ents in said pleadin!s to prove that the On!s do not raise ne$ issues, and, based on $ell/settled 0urisprudence,3; the On!s< present "otion is therefore proforma and did not prevent the Decision of this 7ourt fro" attainin! finalit(. On :anuar( ;5, ;@@?, the Special Second Division of this 7ourt held oral ar!u"ents on the respective positions of the parties. On -ebruar( ;8, ;@@?, Dr. illie On! and the rest of the "ovants On! filed their respective "e"oranda. On -ebruar( ;6, ;@@?, the Tius sub"itted their "e"orandu". e !rant the On!s< "otions for reconsideration. This is not the first ti"e that this 7ourt has reversed itself on a "otion for reconsideration. In "!ilippine Consumers 2oundation, #nc. vs. &ational Telecommunications Commission ,3? this 7ourt, throu!h then 7hief :ustice -eli# V. Ma&asiar, said that its "e"bers "a( and do chan!e their "inds, after a re/stud( of the facts and the la$, illu"inated b( a "utual e#chan!e of vie$s.3> *fter a thorou!h re/e#a"ination of the case, $e find that our Decision of -ebruar( 3, ;@@; overloo&ed certain aspects $hich, if not corrected, $ill cause e#tre"e and irreparable da"a!e and pre0udice to the On!s, -,*D7 and its creditors. The procedural rule on pro-forma "otions pointed out b( the Tius should not be blindl( applied to "eritorious "otions for reconsideration. *s lon! as the sa"e ade'uatel( raises a valid !round34 +i.e., the decision or final order is contrar( to la$., this 7ourt has to evaluate the "erits of the ar!u"ents to prevent an un0ust decision fro" attainin! finalit(. In 'ecurity *an+ and Trust Company vs. Cuenca,39 $e ruled that a "otion for reconsideration is not pro-forma for the reason alone that it reiterates the ar!u"ents earlier passed upon and re0ected b( the appellate court. e e#plained there that a "ovant "a( raise the sa"e ar!u"ents, if onl( to convince this 7ourt that its rulin! $as erroneous. Moreover, the rule +that a "otion is pro-forma if it onl( repeats the ar!u"ents in the previous pleadin!s. $ill not appl( if said ar!u"ents $ere not s'uarel( passed upon and ans$ered in the decision sou!ht to be reconsidered. #n t!e case at bar, no ruling was made on some of t!e petitioner Ongs3 arguments . -or instance, no clear rulin! $as "ade on $h( an order distributin! corporate assets and propert( to the

stoc&holders $ould not violate the statutor( preconditions for corporate dissolution or decrease of authori=ed capital stoc&. Thus, it $ould serve the ends of 0ustice to entertain the sub0ect "otion for reconsideration since so"e i"portant issues therein, althou!h "ere repetitions, $ere not considered or clearl( resolved b( this 7ourt. Goin! no$ to the "erits, $e resolve $hether the Tius could le!all( rescind the Pre/Subscription *!ree"ent. e rule that the( could not. -,*D7 $as ori!inall( incorporated $ith an authori=ed capital stoc& of 4@@,@@@ shares $ith the Tius o$nin! >4@,;@@ shares representin! the paid/ up capital. hen the Tius invited the On!s to invest in -,*D7 as stoc&holders, an increase of the authori=ed capital stoc& beca"e necessar( to !ive each !roup e'ual +4@/4@. shareholdin!s as a!reed upon in the Pre/Subscription *!ree"ent. The authori=ed capital stoc& $as thus increased fro" 4@@,@@@ shares to ;,@@@,@@@ shares $ith a par value of P3@@ each, $ith the On!s subscribin! to 3,@@@,@@@ shares and the Tius to 4>5,6@@ "ore shares in addition to their >4@,;@@ shares to co"plete 3,@@@,@@@ shares. Thus, the sub0ect "atter of the contract $as the 3,@@@,@@@ unissued shares of -,*D7 stoc& allocated to the On!s. Since these $ere unissued shares, the parties< Pre/Subscription *!ree"ent $as in fact a subscription contract as defined under Section 9@, Title VII of the 7orporation 7ode2 *n( contract for the ac'uisition of unissued stoc+ in an e4isting corporation or a corporation still to be for"ed shall be dee"ed a subscription $ithin the "eanin! of this Title, not$ithstandin! the fact that theparties refer to it as a purc!ase or some ot!er contract +Italics supplied.. * subscription contract necessaril( involves the corporation as one of the contractin! parties since the sub0ect "atter of the transaction is propert( o$ned b( the corporation J its shares of stoc&. Thus, the subscription contract +deno"inated b( the parties as a Pre/Subscription *!ree"ent. $hereb( the On!s invested P3@@ "illion for 3,@@@,@@@ shares of stoc& $as, fro" the vie$point of the la$, one bet$een the On!s and -,*D7, not bet$een the On!s and the Tius. Other$ise stated, the Tius did not contract in their personal capacities $ith the On!s since the( $ere not sellin! an( of their o$n shares to the". It $as -,*D7 that did.

7onsiderin! therefore that the real contractin! parties to the subscription a!ree"ent $ere -,*D7 and the On!s alone, a civil case for rescission on the !round of breach of contract filed b( the Tius in their personal capacities $ill not prosper. *ssu"in! it had valid reasons to do so, onl( -,*D7 +and certainl( not the Tius. had the le!al personalit( to file suit rescindin! the subscription a!ree"ent $ith the On!s inas"uch as it $as the real part( in interest therein. *rticle 3?33 of the 7ivil 7ode provides that Fcontracts ta&e effect onl( bet$een the parties, their assi!ns and heirsKF Therefore, a part( $ho has not ta&en part in the transaction cannot sue or be sued for perfor"ance or for cancellation thereof, unless he sho$s that he has a real interest affected thereb(. 38 In their -ebruar( ;6, ;@@? Me"orandu", the Tius clai" that there are t$o contracts e"bodied in the Pre/Subscription *!ree"ent2 a shareholder<s a!ree"ent bet$een the Tius and the On!s definin! and !overnin! their relationship and a subscription contract bet$een the Tius, the On!s and -,*D7 re!ardin! the subscription of the parties to the corporation. The( point out that these t$o co"ponent parts for" one $hole a!ree"ent and that their ter"s and conditions are intrinsicall( related and dependent on each other. Thus, the breach of the shareholders< a!ree"ent, $hich $as alle!edl( the consideration for the subscription contract, $as also a breach of the latter. *side fro" the fact that this is an entirel( ne$ an!le never raised in an( of their previous pleadin!s until after the oral ar!u"ents on :anuar( ;5, ;@@?, $e find this ar!u"ent too strained for co"fort. It is obviousl( intended to re"ed( and cover up the Tius< lac& of le!al personalit( to rescind an a!ree"ent in $hich the( $ere personall( not parties/in/interest. *ssu"in! ar!uendo that there $ere t$o Fsub/a!ree"entsF e"bodied in the Pre/ Subscription *!ree"ent, this 7ourt fails to see ho$ the shareholders a!ree"ent bet$een the On!s and Tius can, $ithin the bounds of reason, be interpreted as the consideration of the subscription contract bet$een -,*D7 and the On!s. There $as nothin! in the Pre/Subscription *!ree"ent even re"otel( su!!estin! such alle!ed interdependence. 1e that as it "a(, ho$ever, the Tius are nevertheless not the proper parties to raise this point because the( $ere not parties to the subscription contract bet$een -,*D7 and the On!s. Thus, the( are not in a position to clai" that the shareholders a!ree"ent bet$een the" and the On!s $as $hat induced -,*D7 and the On!s to enter into the subscription contract. It is the On!s alone $ho can sa( that. Thou!h -,*D7 $as represented b( the

Tius in the subscription contract, -,*D7 had a separate 0uridical personalit( fro" the Tius. The case before us does not $arrant piercin! the veil of corporate fiction since there is no proof that the corporation is bein! used Fas a cloa& or cover for fraud or ille!alit(, or to $or& in0ustice.F 36 The Tius also ar!ue that, since the On!s represent -,*D7 as its "ana!e"ent, breach b( the On!s is breach b( -,*D7. This "ust also fail because such an ar!u"ent disre!ards the separate 0uridical personalit( of -,*D7. The Tius alle!e that the( $ere prevented fro" participatin! in the "ana!e"ent of the corporation. There is evidence that the On!s did prevent the ri!htfull( elected Treasurer, 7el( Tiu, fro" e#ercisin! her function as such. The records sho$ that the President, ilson On!, supervised the collection and receipt of rentals in the Masa!ana 7iti"allB35 that he ordered the sa"e to be deposited in the ban&B ;@ and that he held on to the cash and properties of the corporation. ;3 Section ;4 of the 7orporation 7ode prohibits the President fro" actin! concurrentl( as Treasurer of the corporation. The rationale behind the provision is to ensure the effective "onitorin! of each officer<s separate functions. Ho$ever, althou!h the Tius $ere adversel( affected b( the On!s< un$illin!ness to let the" assu"e their positions, rescission due to breach of contract is definitel( the $ron! re"ed( for their personal !rievances. The Corporation Code, SEC rules and even the Rules of Court provide for appropriate and adequate intra-corporate remedies, other than rescission, in situations like this . Rescission is certainl( not one of the", speciall( if the part( as&in! for it has no le!al personalit( to do so and the re'uire"ents of the la$ therefor have not been "et. * contrar( doctrine $ill tread on e#tre"el( dan!erous !round because it $ill allo$ 0ust an( stoc&holder, for 0ust about an( real or i"a!ined offense, to de"and rescission of his subscription and call for the distribution of so"e part of the corporate assets to hi" $ithout co"pl(in! $ith the re'uire"ents of the 7orporation 7ode. Hence, the Tius, in their personal capacities, cannot see& the ulti"ate and e#traordinar( re"ed( of rescission of the sub0ect a!ree"ent based on a less than substantial breach of subscription contract. Not onl( are the( not parties to the subscription contract bet$een the On!s and -,*D7B the( also have other available and effective re"edies under the la$.

*ll this not$ithstandin!, !rantin! but not concedin! that the Tius possess the le!al standin! to sue for rescission based on breach of contract, said action $ill nevertheless still not prosper since rescission $ill violate the Trust -und Doctrine and the procedures for the valid distribution of assets and propert( under the 7orporation 7ode. The Trust -und Doctrine, first enunciated b( this 7ourt in the 35;? case of "!ilippine Trust Co. vs. Rivera,;;provides that subscriptions to the capital stoc& of a corporation constitute a fund to $hich the creditors have a ri!ht to loo& for the satisfaction of their clai"s. ;? This doctrine is the underl(in! principle in the procedure for the distribution of capital assets, e"bodied in the 7orporation 7ode, $hich allo$s the distribution of corporate capital onl( in three instances2 +3. a"end"ent of the *rticles of Incorporation to reduce the authori=ed capital stoc&,;> +;. purchase of redee"able shares b( the corporation, re!ardless of the e#istence of unrestricted retained earnin!s,;4 and +?. dissolution and eventual li'uidation of the corporation. -urther"ore, the doctrine is articulated in Section >3 on the po$er of a corporation to ac'uire its o$n shares;9 and in Section 3;; on the prohibition a!ainst the distribution of corporate assets and propert( unless the strin!ent re'uire"ents therefor are co"plied $ith. ;8 The distribution of corporate assets and propert( cannot be "ade to depend on the $hi"s and caprices of the stoc&holders, officers or directors of the corporation, or even, for that "atter, on the earnest desire of the court a uo Fto prevent further s'uabbles and future liti!ationsF unless the indispensable conditions and procedures for the protection of corporate creditors are follo$ed. Other$ise, the Fcorporate peaceF laudabl( hoped for b( the court $ill re"ain nothin! but a drea" because this ti"e, it $ill be the creditors< turn to en!a!e in Fs'uabbles and liti!ationsF should the court order an unla$ful distribution in blatant disre!ard of the Trust -und Doctrine. In the instant case, the rescission of the Pre/Subscription *!ree"ent $ill effectivel( result in the unauthori=ed distribution of the capital assets and propert( of the corporation, thereb( violatin! the Trust -und Doctrine and the 7orporation 7ode, since rescission of a subscription a!ree"ent is not one of the instances $hen distribution of capital assets and propert( of the corporation is allo$ed.

7ontrar( to the Tius< alle!ation, rescission $ill, in the final anal(sis, result in the pre"ature li'uidation of the corporation $ithout the benefit of prior dissolution in accordance $ith Sections 338, 336, 335 and 3;@ of the 7orporation 7ode.;6 The Tius "aintain that rescindin! the subscription contract is not s(non("ous to corporate li'uidation because all rescission $ill entail $ould be the si"ple restoration of the status uo ante and a return to the t$o !roups of their cash and propert( contributions. e $ish it $ere that si"ple. Ver( noticeable is the fact that the Tius do not e#plain $h( rescission in the instant case $ill not effectivel( result in li'uidation. The Tius "erel( refer in cavalier fashion to the end/result of rescission +$hich incidentall( is 3@@I favorable to the". but turn a blind e(e to its unfair, ine'uitable and disastrous effect on the corporation, its creditors and the On!s. In their Me"orandu" dated -ebruar( ;6, ;@@?, the Tius clai" that rescission of the a!ree"ent $ill not result in an unauthori=ed li'uidation of the corporation because their case is actuall( a petition to decrease capital stoc& pursuant to Section ?6 of the 7orporation 7ode. Section 3;; of the la$ provides that F+e.#cept b( decrease of capital stoc&K, no corporation shall distribute an( of its assets or propert( e#cept upon la$ful dissolution and after pa("ent of all its debts and liabilities.F The Tius clai" that their case for rescission, bein! a petition to decrease capital stoc&, does not violate the li'uidation procedures under our la$s. *ll that needs to be done, accordin! to the", is for this 7ourt to order +3. -,*D7 to file $ith the SA7 a petition to issue a certificate of decrease of capital stoc& and +;. the SA7 to approve said decrease. This ne$ ar!u"ent has no "erit. The Tius< case for rescission cannot validl( be dee"ed a petition to decrease capital stoc& because such action never co"plied $ith the for"al re'uire"ents for decrease of capital stoc& under Section ?? of the 7orporation 7ode. No "a0orit( vote of the board of directors $as ever ta&en. Neither $as there an( stoc&holders "eetin! at $hich the approval of stoc&holders o$nin! at least t$o/thirds of the outstandin! capital stoc& $as secured. There $as no revised treasurer<s affidavit and no proof that said decrease $ill not pre0udice the creditors< ri!hts. On the contrar(, all their pleadin!s contained $ere alle!ed acts of violations b( the On!s to 0ustif( an order of rescission. -urther"ore, it is an i"proper 0udicial intrusion into the internal affairs of the corporation to co"pel -,*D7 to file at the SA7 a petition for the

issuance of a certificate of decrease of stoc&. Decreasin! a corporation<s authori=ed capital stoc& is an a"end"ent of the *rticles of Incorporation. It is a decision that onl( the stoc&holders and the directors can "a&e, considerin! that the( are the contractin! parties thereto. #n t!is case, t!e Tius are actually not ,ust as+ing for a review of t!e legality and fairness of a corporate decision. T!ey want t!is Court to ma+e a corporate decision for 2LA)C. e decline to intervene and order corporate structural chan!es not voluntaril( a!reed upon b( its stoc&holders and directors. Truth to tell, a 0udicial order to decrease capital stoc& $ithout the assent of -,*D7<s directors and stoc&holders is a violation of the Fbusiness 0ud!"ent ruleF $hich states that2 ### ### ### +7.ontracts intra vires entered into b( the board of directors are bindin! upon the corporation and courts $ill not interfere unless such contracts are so unconscionable and oppressive as to a"ount to $anton destruction to the ri!hts of the "inorit(, as $hen plaintiffs aver that the defendants +"e"bers of the board., have concluded a transaction a"on! the"selves as $ill result in serious in0ur( to the plaintiffs stoc&holders.;5 The reason behind the rule is aptl( e#plained b( Dean 7esar ,. Villanueva, an estee"ed author in corporate la$, thus2 7ourts and other tribunals are $ont to override the business 0ud!"ent of the board "ainl( because, courts are not in the business of business, and the laisse5 faire rule or the free enterprise s(ste" prevailin! in our social and econo"ic set/up dictates that it is better for the State and its or!ans to leave business to the business"enB especiall( so, $hen courts are ill/e'uipped to "a&e business decisions. More i"portantl(, the social contract in the corporate fa"il( to decide the course of the corporate business has been vested in the board and not $ith courts.?@ *pparentl(, the Tius do not reali=e the ille!al conse'uences of see&in! rescission and control of the corporation to the e#clusion of the On!s. Such an act infrin!es on the la$ on reduction of capital stoc&. Orderin! the return and distribution of the On!s< capital contribution $ithout dissolvin! the corporation or decreasin! its authori=ed capital stoc& is not onl( a!ainst the

la$ but is also pre0udicial to corporate creditors $ho en0o( absolute priorit( of pa("ent over and above an( individual stoc&holder thereof. Stripped to its barest essentials, the issue of rescission in this case is not difficult to understand. If rescission is denied, $ill in0ustice be inflicted on an( of the parties% The ans$er is no because the financial interests of both the Tius and the On!s $ill re"ain intact and safe $ithin -,*D7. On the other hand, if rescission is !ranted, $ill an( of the parties suffer an in0ustice% Definitel( (es because the On!s $ill find the"selves out in the streets $ith nothin! but the "one( the( had in 355> $hile the Tius $ill not onl( en0o( a $indfall esti"ated to be an($here fro" P>4@ "illion to P5@@ "illion?3 but $ill also ta&e over an e#tre"el( profitable business $ithout "uch effort at all. *nother ver( i"portant point follo$s. The 7ourt of *ppeals and, later on, our Decision dated -ebruar( 3, ;@@;, stated that both !roups $ere in pari delicto, "eanin!, that both the Tius and the On!s co""itted breaches of the Pre/Subscription *!ree"ent. This "a( be true to a certain e#tent but, 0ud!in! fro" the co"parative !ravit( of the acts separatel( co""itted b( each !roup, $e find that the On!s< acts $ere relativel( ta"e vis/L/vis those co""itted b( the Tius in not surrenderin! -,*D7 funds to the corporation and divertin! corporate inco"e to their o$n M*TTAR7O account. The On!s $ere ri!ht in not issuin! to the Tius the shares correspondin! to the four/stor( buildin! and the 3,5@;.?@ s'uare/"eter lot because no title for it could be issued in -,*D7<s na"e, o$in! to the Tius< refusal to pa( the transfer ta#es. *nd as far as the 343 s'uare/"eter lot $as concerned, $h( should -,*D7 issue additional shares to the Tius for propert( alread( o$ned b( the corporation and $hich, in the final anal(sis, $as alread( factored into the shareholdin!s of the Tius before the On!s ca"e in% e are appalled b( the atte"pt b( the Tius, in the $ords of the 7ourt of *ppeals, to Fpull a fast oneF on the On!s because that $as $here the proble" precisel( started. It is clear that, $hen the finances of -,*D7 i"proved considerabl( after the e'uit( infusion of the On!s, the Tius started plannin! to ta&e over the corporation a!ain and e#clude the On!s fro" it. It appears that the Tius< refusal to pa( transfer ta#es "i!ht not have reall( been at all unintentional because, b( failin! to pa( that relativel( s"all a"ount $hich the( could easil( afford, the Tius should have e#pected that the( $ere not !oin! to be !iven the correspondin! shares. It $as, fro" ever( an!le, the perfect e#cuse for blac&ballin! the On!s. In other $ords,

the Tius created a proble" then used that sa"e proble" as their prete#t for sho$in! their partners the door. In the process, the( stood to be re$arded $ith a bonan=a of an($here bet$een P>4@ "illion to P5@@ "illion in assets +fro" an invest"ent of onl( P>4 "illion $hich $as nearl( foreclosed b( PN1., to the e#tre"e and irreparable da"a!e of the On!s, -,*D7 and its creditors. *fter all is said and done, no one can close his e(es to the fact that the Masa!ana 7iti"all $ould not be $hat it has beco"e toda( $ere it not for the ti"el( infusion of P35@ "illion b( the On!s in 355>. There are no ifs or buts about it. ithout the On!s, the Tius $ould have lost ever(thin! the( ori!inall( invested in said "all. If onl( for this and the fact that this Resolution can trul( pave the $a( for both !roups to en0o( the fruits of their invest"ents ) assu"in! !ood faith and honest intentions ) $e cannot allo$ the rescission of the sub0ect subscription a!ree"ent. The On!s< shortco"in!s $ere far fro" serious and certainl( less than substantialB the( $ere in fact re"ediable and correctable under the la$. It $ould be totall( a!ainst all rules of 0ustice, fairness and e'uit( to deprive the On!s of their interests on pett( and tenuous !rounds. HARA-ORA, the "otion for reconsideration, dated March 34, ;@@;, of petitioners On! Hon!, :uanita Tan On!, ilson On!, *nna On!, illia" On!, illie On! and :ulie On! *lon=o and the "otion for partial reconsideration, dated March 34, ;@@;, of petitioner illie On! are hereb( GR*NTAD. The Petition for 7onfir"ation of the Rescission of the Pre/ Subscription *!ree"ent doc&eted as SA7 7ase No. @;/59/4;95 is hereb( DISMISSAD for lac& of "erit. The unilateral rescission b( the Tius of the sub0ect Pre/Subscription *!ree"ent, dated *u!ust 34, 355>, is hereb( declared as null and void. The "otion for the issuance of a $rit of e#ecution, dated March 34, ;@@;, of petitioners David S. Tiu, 7el( H. Tiu, Mol( Hu Go$, 1elen See Hu, D. Terence H. Tiu, :ohn Hu and ,ourdes 7. Tiu is hereb( DANIAD for bein! "oot. *ccordin!l(, the Decision of this 7ourt, dated -ebruar( 3, ;@@;, affir"in! $ith "odification the decision of the 7ourt of *ppeals, dated October 4,

3555, and the SA7 en banc, dated Septe"ber 33, 3556, is hereb( RAVARSAD. 7osts a!ainst the petitioner Tius. SO ORDARAD. *ellosillo, 6C!airman7, 8uisumbing, and Calle,o, 'r., ((., concur.