G.R. No.

211485, May 30, 2016

MAGALLANES WATERCRAFT ASSOCIATION, INC., AS REPRESENTED BY ITS BOARD OF TRUSTEES, NAMELY:

EDILBERTO M. BAJAO, GERARDO O. PLAZA, ISABELITA MULIG, EDNA ABEJAY, MARCELO DONAN, NENITA O. VARQUEZ,
MERLYN ALVAREZ, EDNA EXCLAMADOR, AND CESAR MONSON, Petitioner, v. MARGARITO C. AUGUIS AND DIOSCORO C.
BASNIG, Respondents.

MENDOZA, J.:

MWAI is a local association of motorized banca owners and ferrying cargoes and passengers from Magallanes. Respondents were
the VP and Secretary of MWAI respectively.

On Dec. 5, 2003, MWAI Board of Trustees passed Resolution suspending respondents for 60 days due to non- payment of
membership dues.

Respondents filed an action for damages. RTC held MWAI liable. CA affirmed finding that MWAI’s act of suspending respondents was
an ultra vires act.

ISSUE: W/n the MWAI’s act of suspending respondents was ultra vires

RULING: NO, Corporate powers include implied and incidental powers

Sec. 45. Ultra vires acts of corporations. - No corporation under this Code shall possess or exercise any corporate powers except
those conferred by this Code or by its articles of incorporation and except such as are necessary or incidental to the exercise of the
powers so conferred.

Thus, a corporation has necessary or incidental powers to the exercise of those expressly conferred. An act which cannot fall under a
corporation's express or necessary or incidental powers is an ultra vires act.

Here, under MWAI's By-Laws, its members are bound "[t]o obey and comply with the by-laws, rules and regulations that may be
promulgated by the association from time to time" and "[t]o pay membership dues and other assessments of the association." Thus,
the respondents were obligated to pay the membership dues of which they were delinquent. MWAI could not be faulted in suspending
the rights and privileges of its delinquent members.

MWAI can properly impose sanctions on Auguis and Basnig for being delinquent members considering that the payment of
membership dues enables MWAI to discharge its duties and functions enumerated under its charter. The suspension of their rights
and privileges is not an ultra vires act as it is reasonably necessary or proper in order to further the interest and welfare of MWAI.
Otherwise, MWAI will be rendered inutile as it will have no means of ensuring that its members will promptly settle their obligations. It
will be exposed to deleterious consequences as it will be unable to continue with its operations if the members continue to be
delinquent in the payment of their obligations, without fear of possible sanctions.
G.R. No. 196134, October 12, 2016

VALENTIN S. LOZADA, Petitioner, v. MAGTANGGOL MENDOZA, Respondent.

DECISION

BERSAMIN, J.:

Mendoza was employed as a technician by VSL Service Center, a single proprietorship owned and managed by Valentin Lozada. VSL
Service Center changed its business name to LB&C Services Corporation. Subsequently, Mendoza was asked by Lozada to sign a
new employment contract but Mendoza did not accede because the company did not consider the number of years of service that he
had rendered. From then on, the petitioner's work schedule was reduced to one to three days a week.

Later on, petitioner was advised by the company not to report for work and just wait for a call from the respondent company regarding
his work schedule to no avail. He filed a complaint against the company for illegal dismissal.

LA ruled for Mendoza. Upon execution, LB&C Services Corporation moved for the lifting of the levy because the real property levied
upon had been constituted by Lozada as family home;9 and that Lozada is not solidarily liable for the obligation.

Issue- W/n the petitioner is solidarily liable with LB&C Services Corporation?

Ruling: NO

As a general rule, corporate officers are not held solidarily liable with the corporation for separation pay because the corporation is
invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal
entity to which it may be related. The exception is the doctrine of piercing the corporate veil which makes an officer solidarily liable.
But in the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate officer
cannot be made personally liable for corporate liabilities.23

Here, Mendoza was not able to clearly and convincingly prove that Lozada had acted in bad faith. There was no evidence whatsoever
to corroborate Lozada's participation in the illegal dismissal. Unless the closure is clearly demonstrated to be deliberate, malicious and
in bad faith, the general rule that a corporation has, by law, a personality separate and distinct from that of its owners should hold
sway. Thus, Lozada could not be validly held to be jointly and solidarily liable with LB&C Services Corporation.
G.R. No. 184332, February 17, 2016

ANNA TENG, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION (SEC) AND TING PING LAY, Respondents.

DECISION

REYES, J.:

In an earlier case, Ting Ping purchased 480 shares of TCL Sales Corporation from Chiu; 1,400 shares from his brother Teng Ching,
who was also the president and operations manager of TCL; and 1,440 shares from Maluto.

Upon Teng Ching's death in 1989, his son Henry took over the management of TCL. To protect his shareholdings with TCL, Ting Ping
requested TCL's Corporate Secretary, petitioner Teng, to enter the transfer in the Stock and Transfer Book of TCL for the proper
recording of his acquisition. He also demanded the issuance of new certificates of stock in his favor. TCL and Teng, however, refused
despite repeated demands and claimed that the original stock certificates of Chiu and Maluto should first be surrendered. This led Ting
Ping to file a petition for mandamus with the SEC against TCL and Teng.

ISSUE: W/n the surrender of the certificates of stock is a requisite before registration of the transfer may be made in the
corporate books and for the issuance of new certificates in its stead.

Ruling: NO

A certificate is merely a tangible evidence of ownership of shares of stock and not a stock in the corporation. It merely expresses the
contract between the corporation and the stockholder.

The provision on the transfer of shares of stocks contemplates no restriction as to whom they may be transferred or sold. As owner of
personal property, a shareholder is at liberty to dispose of them in favor of whomsoever he pleases, without any other limitation in this
respect, than the general provisions of law.39

It is the delivery of the certificate, coupled with the endorsement by the owner or his duly authorized representative that is the
operative act of transfer of shares from the original owner to the transferee.

Teng's position - that Ting Ping must first surrender Chiu's and Maluto's respective certificates of stock before the transfer to Ting Ping
may be registered in the books of the corporation -does not have legal basis. To compel Ting Ping to deliver to the corporation the
certificates as a condition for the registration of the transfer would amount to a restriction on the right of Ting Ping to have the stocks
transferred to his name, which is not sanctioned by law. The only limitation imposed by Section 63 is when the corporation holds any
unpaid claim against the shares intended to be transferred.
G.R. No. 185979, March 16, 2016

BANGKO SENTRAL NG PILIPINAS, Petitioner, v. VICENTE JOSE CAMPA, JR., MIRIAM M. CAMPA, MARIA ANTONIA C.
ORTIGAS, MARIA TERESA C. AREVALO, MARIA NIEVES C. ALVAREZ, MARIAN M. CAMPA AND BALBINO JOSE
CAMPA, Respondents.

PEREZ, J.:

Bankwise applied for a loan from BSP which advised it to submit mortgages of properties owned by third parties to secure its
outstanding obligation. When Bankwise failed to pay its obligations, BSP applied for extra-judicial foreclosure of the third-party
mortgages which were eventually sold at public auction to BSP being the highest bidder and corresponding certificates of sale were
registered.

Aliño filed a Complaint alleging that he is a stockholder of VR Holdings, owning 10% of the outstanding shares of stock therein. He
also averred that he allowed his properties to be used by Bankwise as collateral for the loan because Bankwise and VR
Holdings6 assured him that the properties will be returned to him and that he will not be exposed to the risk of foreclosure.

Respondents filed a Motion for Leave to Intervene and Admit their Complaint-in-Intervention. They asserted that they have a legal
interest in the matter of litigation being the registered owners of certain real properties subject of the mortgage and in accommodation
of the request of Bankwise who assured them that there is no risk of foreclosure.

BSP insists that since the case is a derivative suit filed by Aliño as a stockholder of VR Holdings, respondents cannot have an actual
legal interest in the matter of litigation because they are not stockholders in VR Holdings.

ISSUE: W/n the complaint of Aliño is a derivative suit

RULING: NO

A derivative action is a suit by a shareholder to enforce a corporate cause of action. An individual stockholder may be permitted to
institute a derivative suit on behalf of the corporation in order to protect or vindicate corporate rights whenever the officials of the
corporation refuse to sue, or are the ones to be sued, or hold control of the corporation. In such actions, the corporation is the real
party-in-interest which is deemed injured, while the suing stockholder on behalf of the corporation, is only a nominal party.14

The requirements for derivative suits are:

1. the party bringing suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares
not being material;

2. he has tried to exhaust intra-corporate remedies; and

3. the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or being caused to the
corporation and not to the particular stockholder bringing the suit.17

Here, the damage does not devolve on the corporation but on the properties registered under Aliño and other third-party mortgagors.
The prayer in the complaint seeks for recovery of the properties, belonging to Aliño and other third-party mortgagors, some of whom
are not stockholders of VR Holdings, who mortgaged their properties to BSP. There is no actual or threatened injury alleged to have
been done to the corporation due to the foreclosure of the properties belonging to third-party mortgagors.

The instant case, which was found to be an ordinary civil case, and not a derivative suit, and the jurisdiction of which pertains to the
RTC, should be re-raffled to all the RTCs of the place where the complaint was filed. Dismissal of the action is no longer the proper
recourse.
G.R. No. 172948, October 05, 2016

PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION, Petitioner, v. PABLITO O. LIM, MANUEL A. AGCAOILI,
AND CONSUELO M. PADILLA, Respondents.

LEONEN, J.:

PASAR is a corporation duly organized and existing under the laws of the Philippines and is engaged in copper smelting and refining.
While respondents were former senior officers and presently shareholders of PASAR holding 500 shares each.

Petition for Injunction was filed by PASAR to restrain respondents from demanding inspection of its confidential and inexistent records.

RTC then enjoined respondents from inspecting the books. Respondents filed a Motion for Dissolution of the Writ of Preliminary
Injunction on the ground that the petition is insufficient. They claim that the enforcement of the right to inspect book should be on the
stockholders and not on PASAR and that no irreparable injury is caused to PASAR which justifies the issuance of the writ of
preliminary injunction.

ISSUE: W/n the petition for injunction filed by the corporation is proper in refusing the inspection of the corporate books

RULING: NO

A stockholder has the right to inspect the records of all business transactions of the corporation and the minutes of any meeting at
reasonable hours on business days. The stockholder may demand in writing for a copy of excerpts from these records or minutes, at
his or her expense. The right to inspect under Section 74 of the Corporation Code is subject to certain limitations. However, these
limitations are expressly provided as defenses in actions filed under Section 74. A corporation's objections to the right to inspect must
be raised as a defense. Officers and directors have no legal authority to close the office doors against shareholders to inspect the
books. When an inspection by a shareholder is contested, the burden is upon the corporation to establish a probability that the
applicant is attempting to gain inspection for a purpose not connected with his interests as a shareholder, or that his purpose is
otherwise improper.

Here, petitioner invokes its right to raise the limitations. However, petitioner provides scant legal basis to claim this right because it
does not raise the limitations as a matter of defense.

An action for injunction and, consequently, a writ of preliminary injunction filed by a corporation is generally unavailable to prevent
stockholders from exercising their right to inspection. Specifically, stockholders cannot be prevented from gaining access to the (a)
records of all business transactions of the corporation; and (b) minutes of any meeting of stockholders or the board of directors,
including their various committees and subcommittees.
G.R. No. 189158

JAMES IENT and MAHARLIKA SCHULZE, Petitioners, vs. TULLETT PREBON (PHILIPPINES), INC., Respondent.

LEONARDO-DE CASTRO, J.:

Lent and Schulze are part of the "Tradition Group” which is allegedly the third largest group of Inter-dealer Brokers (IDB) in the world.
The Tradition Group and Tullett are competitors in the inter-dealer broking business. Sometime in August 2008, petitioners were
tasked with the establishment of a Philippine subsidiary of Tradition Asia to be known as Tradition Philippines which was
registered with petitioners named as incorporators and directors in its Articles of Incorporation. 11

Tullett filed a Complaint-Affidavit against petitioners, Villalon, who was formerly President of Tullett, Chuidian, who was formerly a
member of Tullett's BOD, and other John and Jane Does. Villalon and Chuidian were charged with using their former positions in
Tullett to sabotage said company by orchestrating the mass resignation of its entire brokering staff in order for them to join Tradition
Philippines. According to Tullett, Villalon and Chuidian (who were still its directors or officers at the times material to the Complaint-
Affidavit) violated Sections 31 and 34 of the Corporation Code which made them criminally liable under Section 144. Tullett asserted
that petitioners conspired with Villalon and Chuidian.

Petitioners pointed out that a charge of conspiracy which has for its basis Article 8 of the RPC cannot be made applicable to the
provisions of the Corporation Code.

Tullett argued that Section 144 applies to all other violations of the Corporation Code without exception. Article 8 of the RPC on
conspiracy was allegedly applicable to the Corporation Code as a special law with a penal provision. 25

ISSUE: W/n Sec 144 of the Corp Code applies to Secs 31 and 34 such that criminal liability attaches to violations of Secs 31 and 34.

RULING: NO

A perusal of Section 144 shows that it is not a purely penal provision. When it is a corporation that commits a violation of the
Corporation Code, it may be dissolved in appropriate proceedings before the SEC. The involuntary dissolution of an erring corporation
is not imposed as a criminal sanction,53 but rather it is an administrative penalty.

Sections 31 to 34 were introduced into the Corporation Code to define what acts are covered, as well as the consequences of such
acts or omissions amounting to a failure to fulfil a director's or corporate officer's fiduciary duties to the corporation.

No legislative intent to criminalize Sections 31 and 34 was manifested in the deliberations on the Corporation Code. In common law,
the remedies available in the event of a breach of director's fiduciary duties to the corporation are civil remedies. If a director or officer
is found to have breached his duty of loyalty, an injunction may be issued or damages may be awarded. 68 A corporate officer guilty of
fraud or mismanagement may be held liable for lost profits. 69 A disloyal agent may also suffer forfeiture of his compensation. 70 There
is nothing in the deliberations to indicate that drafters of the Corporation Code intended to deviate from common law practice and
enforce the fiduciary obligations of directors and corporate officers through penal sanction aside from civil liability. On the contrary,
there appears to be a concern among the drafters of the Corporation Code that even the imposition of the civil sanctions under
Section 31 and 34 might discourage competent persons from serving as directors in corporations.

The Corporation Code was intended as a regulatory measure, not primarily as a penal statute. Sections 31 to 34 in particular were
intended to impose exacting standards of fidelity on corporate officers and directors but without unduly impeding them in the discharge
of their work with concerns of litigation. Considering the object and policy of the Corporation Code to encourage the use of the
corporate entity as a vehicle for economic growth, we cannot espouse a strict construction of Sections 31 and 34 as penal offenses in
relation to Section 144 in the absence of unambiguous statutory language and legislative intent to that effect.

Had the Legislature intended to attach penal sanctions to Sections 31 and 34 of the Corporation Code it could have expressly stated
such intent in the same manner that it did for Section 74 of the same Code.
G.R. No. 220546, December 07, 2016

LUZON IRON DEVELOPMENT GROUP CORPORATION AND CONSOLIDATED IRON SANDS, LTD., Petitioners, v. BRIDESTONE
MINING AND DEVELOPMENT CORPORATION AND ANACONDA MINING AND DEVELOPMENT CORPORATION, Respondents.

MENDOZA, J.:

Bridestone and Anaconda filed separate complaints for rescission of contract and damages against petitioners. Both complaints
sought the rescission of the Tenement Partnership and Acquisition Agreement (TPAA) for the assignment of the Exploration Permit
Application of the petitioners in favor of the respondents. The complaints also sought the return of the Exploration Permits to
Bridestone and Anaconda.5

Luzon Iron and Consolidated Iron filed Motion to Dismiss. They contended that the RTC could not acquire jurisdiction over
Consolidated Iron because it was a foreign corporation that had never transacted business in the Philippines. They argue that there
could be no means by which the trial court could acquire jurisdiction over the person of Consolidated Iron under any mode of service
of summons. The petitioners claim that the service of summons to Consolidated Iron was defective because the mere fact that Luzon
Iron was a wholly-owned subsidiary of Consolidated Iron did not establish that Luzon Iron was the agent of Consolidated Iron. They
emphasize that Consolidated Iron and Luzon Iron are two distinct and separate entities.

RTC denied the motions to dismiss finding that Consolidated Iron was doing business in the Philippines, with Luzon Iron as its resident
agent. CA affirmed.

ISSUES: W/n RTC ACQUIRED JURISDICTION OVER CONSOLIDATED IRON;

RULING: NO, Summons were not validly served

Section 12 of Rule 14 of the Revised Rules of Court provides that "[w]hen the defendant is a foreign private juridical entity which
has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents
within the Philippines." It specifically applies to a defendant foreign private juridical entity which had transacted business in the
Philippines. Both rules may provide for similar modes of service of summons, nevertheless, they should only be applied in particular
cases, with one applicable to defendants which do not reside and are not found in the Philippines and the other to foreign private
juridical entities which had transacted business in the Philippines.

Here, Consolidated Iron transacted business in the Philippines as it was a signatory in the TPAA that was executed in Makati. Hence,
as the respondents argued, it may be served with the summons in accordance with the modes provided under Section 12, Rule 14 of
the Rules of Court. However, Consolidated Iron was not properly served with summons through any of the permissible modes under
the Rules of Court. Indeed, Consolidated Iron was served with summons through Luzon Iron. Such service of summons, however, was
defective because Luzon Iron was never registered before SEC as Consolidated Iron's resident agent.

To reiterate, the Court did not acquire jurisdiction over Consolidated Iron because the service of summons, coursed through Luzon
Iron, was defective. Luzon Iron was neither the resident agent nor the conduit or agent of Consolidated Iron.