119002

INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner, vs.

HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL
FEDERATION, respondents.

KAPUNAN, J.:

Facts:

Intl Express Travel wrote Phil Football Federation (PFF), through its president Henri
Kahn, and offered its services to the latter. PFF accepted.

IET was able to secure plane tickets for the athletes to the SEA Games etc. total ticket
cost was Php 449,654.83. Several payments had been made by PFF and personally by
Kahn. Still, however, the balance has not been totally paid. Thereafter, no payments
were made despite repeated demands.

IET filed a civil case before the RTC suing Kahn in his personal capacity and as
president of PFF and impleaded PFF as alternative defendant.

Kahn averred that IET has no cause of action against him because he merely acted as an
agent of PFF which has a separate juridical personality.

Issue: (MAIN) WON PFF has a juridical personality and is liable for the unpaid
obligation.

RTC: no juridical personality. Kahn solely liable.

CA: has juridical personality. Kahn not liable.

Held: PFF has no juridical personality. Kahn is solely liable.

Ratio:

RA 3135 and PD 604 granted the power to national sports association to acquire
juridical personality. However, this does not automatically take place by the mere
passage of the said 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. These laws merely recognized the existence of national sports
associations and provided the manner by which these entities may acquire juridical
personality. Clearly the above cited provisions require that 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 R.A. 3135,
and the Department of Youth and Sports Development under P.D. 604. This fact of
recognition, however, Henri Kahn failed to substantiate

Issue 2: Whether or not Doctrine of Corporation by estoppel applies.

Held 2: No. The application of the doctrine applies to a third party only when he tries to
escape liability on a contract from which he has benefited on the irrelevant ground of
defective incorporation. In the case at bar, the petitioner is not trying to escape liability
from the contract but rather is the one claiming from the contract.

Doctrine:

It is a settled principal in corporation law that any person acting or purporting to act on
behalf of a corporation which has no valid existence assumes such privileges and
becomes personally liable for contract entered into or for other acts performed as such
agent.

165941

G.R. No. 184517 : October 8, 2013

SME BANK v. De Guzman et al.

FACTS:

Security of tenure is a constitutionally guaranteed right.1 Employees may not be terminated

from their regular employment except for just or authorized causes under the Labor Code2
and other pertinent laws. A mere change in the equity composition of a corporation is neither
a just nor an authorized cause that would legally permit the dismissal of the corporations
employees en masse.
Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr. (Ricardo), Eufemia
Rosete (Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato
Mangoba (Liberato) were employees of Small and Medium Enterprise Bank, Incorporated
(SME Bank). Originally, the principal shareholders and corporate directors of the bank were
Eduardo M. Agustin, Jr. (Agustin) and Peregrin de Guzman, Jr. (De Guzman). SME Bank
experienced financial difficulties. To remedy the situation, the bank officials proposed its
sale to Abelardo Samson (Samson).

negotiations ensued, and a formal offer was made to Samson. Through his attorney-in-fact,
Tomas S. Gomez IV, Samson then sent formal letters (Letter Agreements) to Agustin and De
Guzman, demanding the following as preconditions for the sale of SME Banks shares of
stock: 1. You shall guarantee the peaceful turn over of all assets as well as the peaceful transition of
management of the bank and shall terminate/retire the employees we mutually agree upon, upon transfer of
shares in favor of our groups nominees; 2. All retirement benefits, if any of the above
officers/stockholders/board of directors are hereby waived upon cosummation [sic] of the above sale. The
retirement benefits of the rank and file employees including the managers shall be honored by the new
management in accordance with B.R. No. 10, S. 1997

Agustin and De Guzman accepted the terms and conditions proposed by Samson and
signed the conforme portion of the Letter Agreements.Simeon Espiritu (Espiritu), then the
general manager of SME Bank, held a meeting with all the employees of the head office and
of the Talavera and Munoz branches of SME Bank and persuaded them to tender their
resignations,11 with the promise that they would be rehired upon reapplication. His
directive was allegedly done at the behest of petitioner Olga Samson. Relying on their
representation All of them tendered their resignation , Eufemia first tendered resignation
then after tendered retirement.

Agustin and De Guzman signified their conformity to the Letter Agreements and sold
86.365% of the shares of stock of SME Bank to spouses Abelardo and Olga Samson. Spouses
Samson then became the principal shareholders of SME Bank, while Aurelio Villaflor, Jr. was
appointed bank president. As it turned out, respondent employees, except for Simeon, Jr.,26
were not rehired. After a month in service, Simeon, Jr. again resigned
Respondent-employees demanded the payment of their respective separation pays, but
their requests were denied.

Aggrieved by the loss of their jobs, respondent employees filed a Complaint before
the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. III and
sued SME Bank, spouses Abelardo and Olga Samson and Aurelio Villaflor (the Samson
Group) for unfair labor practice; illegal dismissal; illegal deductions; underpayment; and
nonpayment of allowances, separation pay and 13th month pay. Subsequently, they
amended their Complaint to include Agustin and De Guzman as respondents to the case.
 the labor arbiter ruled that the buyer of an enterprise is not bound to absorb its
employees, unless there is an express stipulation to the contrary. However, he also found
that respondent employees were illegally dismissed, because they had involuntarily
executed their resignation letters after relying on representations that they would be given
their separation benefits and rehired by the new management. Accordingly, the labor arbiter
decided the case against Agustin and De Guzman, but dismissed the Complaint against the
Samson Group. Thus ordering Agustin and De Guzman to pay separation pay to the
employees.

respondent employees, Agustin and De Guzman brought separate appeals to the NLRC.
Respondent employees questioned the labor arbiters failure to award backwages, while
Agustin and De Guzman contended that they should not be held liable for the payment of
the employees claims. The NLRC found that there was only a mere transfer of shares and
therefore, a mere change of management from Agustin and De Guzman to the Samson
Group. As the change of management was not a valid ground to terminate respondent bank
employees, the NLRC ruled that they had indeed been illegally dismissed. It further ruled
that Agustin, De Guzman and the Samson Group should be held jointly and severally liable
for the employees separation pay and backwages, CA affirming NLRC decision. Hence this
appeal.

ISSUE: WON respondent employees were illegally dismissed and, if so, which of the parties
are liable for the claims of the employees and the extent of the reliefs that may be awarded
to these employees.?

HELD: Petition was partially granted.

Petitioner bank also argues that, there being a transfer of the business establishment, the
innocent transferees no longer have any obligation to continue employing respondent
employees,56 and that the most that they can do is to give preference to the qualified
separated employees; hence, the employees were validly dismissed. The argument is
misleading and unmeritorious. Contrary to petitioner banks argument, there was no
transfer of the business establishment to speak of, but merely a change in the new majority
shareholders of the corporation.

There are two types of corporate acquisitions: asset sales and stock sales. In asset sales, the
corporate entity sells all or substantially all of its assets to another entity. In stock sales, the
individual or corporate shareholders sell a controlling block of stock to new or existing
shareholders.

In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected
employees, but is liable for the payment of separation pay under the law.The buyer in good
faith, on the other hand, is not obliged to absorb the employees affected by the sale, nor is it
liable for the payment of their claims. The most that it may do, for reasons of public policy
and social justice, is to give preference to the qualified separated personnel of the selling
firm.

In contrast with asset sales, in which the assets of the selling corporation are transferred to
another entity, the transaction in stock sales takes place at the shareholder level. Because
the corporation possesses a personality separate and distinct from that of its shareholders, a
shift in the composition of its shareholders will not affect its existence and continuity. Thus,
notwithstanding the stock sale, the corporation continues to be the employer of its people
and continues to be liable for the payment of their just claims. Furthermore, the
corporation or its new majority shareholders are not entitled to lawfully dismiss corporate
employees absent a just or authorized cause.

In the case at bar, the Letter Agreements show that their main object is the acquisition by
the Samson Group of 86.365% of the shares of stock of SME Bank.66 Hence, this case
involves a stock sale, whereby the transferee acquires the controlling shares of stock of
the corporation. Thus, following the rule in stock sales, respondent employees may not be
dismissed except for just or authorized causes under the Labor Code.

The rule should be different in Manlimos, as this case involves a stock sale. It is error
to even discuss transfer of ownership of the business, as the business did not actually
change hands. The transfer only involved a change in the equity composition of the
corporation. To reiterate, the employees are not transferred to a new employer, but
remain with the original corporate employer, notwithstanding an equity shift in its
majority shareholders. This being so, the employment status of the employees should not
have been affected by the stock sale. A change in the equity composition of the corporate
shareholders should not result in the automatic termination of the employment of the
corporations employees. Neither should it give the new majority shareholders the right to
legally dismiss the corporations employees, absent a just or authorized cause.

The right to security of tenure guarantees the right of employees to continue in their
employment absent a just or authorized cause for termination. This guarantee proscribes a
situation in which the corporation procures the severance of the employment of its
employees who patently still desire to work for the corporation only because new
majority stockholders and a new management have come into the picture. This situation is a
clear circumvention of the employees constitutionally guaranteed right to security of
tenure, an act that cannot be countenanced by this Court.

We therefore see it fit to expressly reverse our ruling in Manlimos insofar as it upheld that,
in a stock sale, the buyer in good faith has no obligation to retain the employees of the
selling corporation; and that the dismissal of the affected employees is lawful, even absent a
just or authorized cause.
Corporate Law Case Digest:
Stockholders Of F. Guanzon And Sons,
Inc V. Register Of Deeds Of Manila
(1962)
G.R. No. L-18216 October 30, 1962
Lessons Applicable: Strong Juridical Personality (Corporate Law)

FACTS:
Sept 19, 1960: 5 stockholders of the F. Guanzon and Sons, Inc. executed a
certificate of liquidation of the assets of the corporation, dissolution and
distribution among themselves in proportion to their shareholdings, as
liquidating dividends, corporate assets, including real properties

Register of Deeds of Manila denied the registration of the certificate of

liquidation:

1. The number of parcels not certified to in the acknowledgment;

2. P430.50 Reg. fees need be paid;

3. P940.45 documentary stamps need be attached to the document;

4. The judgment of the Court approving the dissolution and directing the
disposition of the assets of the corporation need be presented

Commissioner of Land Registration overruled ground No. 7 and sustained

requirements Nos. 3, 5 and 6.

Stockholders appealed

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

ISSUE: W/N certificate merely involves a distribution of the corporation's assets

(or should be considered a transfer or conveyance)
HELD: NO. affirm the resolution appealed from
Corporation - 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.

A share of stock only typifies an aliquot part of the corporation's property, or

the right to share in its proceeds to that extent when distributed according
to law and equity but its holder is NOT the owner of any part of the capital of
the corporation nor entitled to possession

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

property

G.R. No. 193872 October 19, 2011

Siochi Fishery Enterprises Inc., et. al. v. BPI

J. Carpio

Doctrine:

As an officer of the court and an expert, the rehabilitation receiver plays

an important role in corporate rehabilitation proceedings. The petition
for rehabilitation and rehabilitation plan should be referred to such
person.
According to the Interim Rules of Procedure on Corporate
Rehabilitation, a liquidation analysis that estimates the proportion of
the claims that the creditors and shareholders would receive if the
debtors properties were liquidated is required.
A corporation has a legal personality distinct from its stockholders and
directors.
A corporation undergoing rehabilitation must have concrete material
financial commitments in its rehabilitation plan.

Facts:

Siochi Fishery Enterprises, Inc., Jun-Jun Fishing Corporation, Dede Fishing

Corporation, Blue Crest Aqua-Farms, Inc. and Iloilo Property Ventures, Inc. (P)
 are domestic corporations of the Siochi family with principal office at Malabon
City.
In the course of their business, P borrowed from Bank of the Philippine Islands
(R) and from Ayala Life Assurance, Inc. Ps total obligation amounted to
P85,362,262.05.
P then filed shortly afterwards with the RTC a petition for corporate
rehabilitation.

RTC: Ruled in Ps favor and approved the petition.

P were net worthy since it had properties amounting to P393,922,000.00 that

can pay off the P79,848,920.23 debt to R.
Ps rehabilitation plan is feasible since a moratorium period of 5 years on the
payment of its loans/obligations will enable P to generate additional
capital/funds to continue its business operations.

CA: Ruled in Rs favor and Reversed the RTC decision.

The lower court committed a prime procedural infirmity in its failure to refer
Ps petition for rehabilitation and Rehabilitation Plan to the rehabilitation
receiver despite the explicit and clear mandate of the Interim Rules that if the
court is satisfied that there is merit in the petition, it shall give due course to
the petition and immediately refer the same and its annexes to the
rehabilitation receiver.
Rs material financial commitments are not concrete. Firstly, the sourcing of
funds from their internal operations is based on a mere expectancy. Secondly, P
failed to give the specific details regarding their prospective investors who will
supposedly put up additional fresh capital. Thirdly, by stating that their real
estate properties have not been exposed to the limit of their loan values, P are
implying that they will use the mortgaged properties as collaterals to secure a
different loan.

Issue:

Whether Ps petition for rehabilitation may be approved.

Ruling:

No.
 In the present case, the RTC hastily approved the rehabilitation plan in the
same order giving due course to the petition making an erroneous procedural
shortcut. The RTC confined the initial hearing to the issue of jurisdiction and
failed to address other more important matters relating to the petition and
comment. The RTC also failed to refer for evaluation the rehabilitation plan to
the rehabilitation receiver. Thus, the rehabilitation receiver was unable to
submit his recommendations and make modifications or revisions to the
rehabilitation plan as necessary.
P failed to include a liquidation analysis in their rehabilitation plan.
P do not own all of the properties with a total estimated value of P393,922,000
so they cannot pay the loan off. Some of the properties are owned by
Ferdinand, Gerald and Jose Patrick Siochi, and Mario Siochi, Jr., not by P. A
corporation has a legal personality distinct from its stockholders and directors.
As stated before, Ps material financial commitments arent concrete such as
the sourcing of funds from their internal operations is based on a mere
expectancy and their failure to give the specific details regarding their
prospective investors who will supposedly put up additional fresh capital.