Corpo Case List 4th List

7/24/2019 Corpo Case List 4th List

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G.R. No. 143088 January 24, 2006

PHILIPPINE AIRLINES, INC., MANOLO AQUINO, JORGE MA. CUI, JR. and PATRICIA CHIONG, Petitioners,

vs. FLIGHT ATTENANTS AN STE!ARS ASSOCIATION OF THE PHILIPPINES "FASAP# and LEONARO

$HAG!ANI, Res%ondents.

This petition for review on certiorari uner Ru!e 4" of the Ru!es of #ourt presents a recurrin$ %uestion re$arin$ the#ourt&s re%uire'ent of a certi(cation of non)foru' shoppin$.

*etitioners *hi!ippine +ir!ines, nc. -*+/ an ano!o +%uino, Jor$e a. #ui, Jr. an *atricia #hion$, in their capacityas ecutive ice)*resient +'inistration an ervices, ana$er nternationa! #a5in #rew an +ssistant ice)

*resient #a5in ervices, respective!y, are 5efore the #ourt seein$ the reversa! of the reso!ution of the #ourt of+ppea!s in #.+. G.R. No. *)"68"0, ate January 31, 2000, is'issin$ their appea! an the reso!ution of ay 11,

2000, enyin$ the 'otion for reconsieration.

The facts on the con7ict 5etween *+ an responents !i$ht +ttenants an tewars +ssociation of the

*hi!ippines -++*/ an eonaro 9ha$wani are not necessary for the #ourt&s reso!ution of the petition. t is enou$hto state that on ay 14, 1::; ++* an eonaro 9ha$wani (!e a co'p!aint for unfair !a5or practice, i!!e$a!

suspension an i!!e$a! is'issa! a$ainst petitioners 5efore the a5or +r5iter of the Nationa! a5or Re!ations#o''ission -NR#/. The a5or +r5iter renere a ecision ho!in$ that *+ co''itte unfair !a5or practice ani!!e$a! is'issa! of 9ha$wani an, conse%uent!y, orere the pay'ent of a'a$es. The NR# !ater 'oi(e theecision 5y settin$ asie the (nin$ that *+ was $ui!ty of unfair !a5or practice, 5ut ae! #ar'en, ice)*resient ?u'an Resources an +ssistantice)*resient #a5in ervices of *+, respective!y, who are not parties to the case. The certi(cation, however, waswithout proof that the two ae! #ar'en. The certi(cation, however, was without proof of authority to si$n. =hen a 'otionfor reconsieration was (!e, a ecretary&s #erti(cate was su5'itte as proof that the 5oar of irectors of *+ haauthoriAe the two to eecute the certi(cate. Nonethe!ess, the #ourt (ns that this 5e!ate su5'ission is aninsu


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This #ourt has a!!owe the reinstate'ent of petitions that were is'isse ue to !ac of proof of authority to si$nthe certi(cation upon its su5se%uent su5'ission, sayin$ that this a'ounte to

su5stantia! co'p!iance. The rationa!e was that the si$natories, at the ti'e of eecution of the certi(cation, were infact authoriAe to si$n, a!thou$h proof of their authority was !acin$."

This is not what happene in this case. + perusa! of the ecretary&s #erti(cate su5'itte revea!s that the authorityto cause the (!in$ of the petition was $rante on e5ruary 1", 2000.6 The petition, on the other han, was (!e on

January 24, 2000 an was is'isse 5y the #ourt of +ppea!s on January 31, 2000. This 'eans that at the ti'e the

certi(cation was si$ne, #esar R. a'5erte an usan >e! #ar'en were not u!y authoriAe 5y the 9oar of>irectors of *+ an, conse%uent!y, their si$nin$ an attestations were not in representation of *+. This eCective!y

trans!ates to a petition that was (!e without a certi(cation at a!! as none was issue 5y *+, the principa! party tothe case.

The re%uire certi(cation of non)foru' shoppin$ 'ust 5e va!i at the ti'e of (!in$ of the petition. +n inva!icerti(cate cannot 5e re'eie 5y the su5se%uent su5'ission of a ecretary&s #erti(cate that vests authority on!y

after the petition ha 5een (!e.

=?RDR, the petition is >N>. No costs.

D DR>R>.


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#ase >i$est on Peo%&e's Air(ar)o and !are*o+sin), In(. vs. CA

Ju!y 2;, 2010

*eop!e&s +ircar$o an =arehousin$ #o., nc. vs. #+ E2:; #R+ 1;0 -Dct ; 1::8/F

*ower of 9oar of >irectors to 9in #orporation

acts *eop!e&s +ircar$o is a o'estic corporation or$aniAe to operate a custo's 5one warehouse. To o5tain a!icense for the corporation fro' the 9ureau of #usto's, *unsa!an, its *resient, so!icite a proposa! fro' ano forthe preparation of a feasi5i!ity stuy. ano su5'itte a !etter proposa! to *unsa!an of the ter's an conitions ofthe contract, a'ountin$ to *3"0,000.00. *unsa!an sent a !etter to ano con(r'in$ to their a$ree'ent.

+ccorin$!y, ano prepare the feasi5i!ity stuy. ano was pai in fu!!.

Thereafter, a 2n contract was entere into for consu!tancy services. ?ence, the 9ureau of #usto's issue a

!icense to *eop!e&s +ircar$o. ano was not pai for this 2n contract. ?ence, he (!e a co!!ection case a$ainst thecorporation. eanwhi!e, *unsa!an so! his shares in *eop!e&s +ircar$o anresi$ne as presient.

*eop!e&s +ircar$o enie that there were consu!tancy services renere 5y ano. t a!!e$e that the 2n contractentere into 5etween hi' an *unsa!an was without authority.

RT# a@u$e in favor of ano. #+ a, no person, not even its o, which eercises a!'ost a!! corporate powers, !ays own a!!corporate 5usiness po!icies an is responsi5!e for the e


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San J+an Str+(t+ra& and Stee& Fari(ators In(. vs. CAE2:6 #R+ 631 -ept 2: 1::8/F

Cect of InauthoriAe +cts of #orporate Dee of +ssi$n'ent of the !an. an Juan iscovere that otorich

entere into a >ee of +5so!ute a!e of the !an to +# >eve!op'ent #orporation. ?ence, an Juan (!e aco'p!aint with the RT#.

Dn the other han, otorich contens that since Nenita Gruen5er$ was on!y the treasurer of sai corporation, anthat its presient, Reyna!o Gruen5er$, i not si$n the a$ree'ent entere into 5y an Juan an otorich, the

treasurer&s si$nature was inae%uate to 5in otorich to the a$ree'ent. urther'ore, Nenita contene that sincean Juan was not a5!e to pay within the stipu!ate perio, no ee of assi$n'ent cou! 5e 'ae. The ee wasa$ree to 5e eecute on!y after receipt of the cash pay'ent, an since accorin$ to Nenita, no cash pay'ent was'ae on the ue ate, no ee cou! have 5een eecute.

RT# is'isse the case ho!in$ that Nenita Gruen5er$ was not authoriAe 5y otorich to enter into sai contractwith an Juan, an that a 'a@ority vote of the 9o> was necessary to se!! assets of the corporation in accorancewith ec. 40 of the #orporation #oe. #+ a


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n the case at 5ar, an Juan ha the responsi5i!ity of ascertainin$ the etent of Nenita&s authority to represent thecorporation. e!!in$ is o5vious!y forei$n to a corporate treasurer&s function. Neither was rea! estate sa!e shown to5e a nor'a! 5usiness activity of otorich. The pri'ary purpose of sai corporation is 'aretin$, istri5ution,i'port an eport re!atin$ to a $enera! 'erchanisin$ 5usiness. In'istaa5!y, its treasurer is not c!oae withactua! or apparent authority to 5uy or se!! rea! property, an activity which fa!!s way 5eyon the scope of her $enera!authority.

+cts of corporate o to enter

into the sai contract.

The vei! can on!y 5e isre$are when it is uti!iAe as a shie! to co''it frau, i!!e$a!ity or ine%uity, efeat pu5!ic

convenience, confuse !e$iti'ate issues, or serve as a 'ere a!ter e$o or 5usiness conuit of a person or aninstru'enta!ity, a$ency or a@unct of another corporation. ?ence, the %uestion of piercin$ the vei! 5eco'es a'atter of proof. n the case at 5ar, # foun no reason to pierce the vei!. an Juan fai!e to esta5!ish that saicorporation was for'e for the purpose of shie!in$ any frauu!ent act of its o


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3. T? E#+F, =T? + >I R*#T, #DTT> *+*+9 +N> RR9 RRDR D += =?N T T +>T? R+ T+T DRTG+G +N> T? +=+R> D +TTDRNH& , 10 LI>+T> >++G +N> T? #DTD IT.

4. T? E#+F, =T? + >I R*#T, #DTT> *+*+9 +N> RR9 RRDR D += =?N T T +>T? +=+R> D NTRT 9H =+H D >++G N +DR D *TTDNR.8

The issues to 5e reso!ve are the fo!!owin$

1/ whether the !oans were persona! !ia5i!ities of e i!!a or e5ts of responent corporation an

2/ whether the 'ort$a$e on responent corporation&s property was nu!! an voi for havin$ 5een eecute without

its authority.

=e 5e$in with a 5rief stuy of so'e we!!)sett!e !e$a! octrines re!evant to the isposition of this case.

*ersona! or #orporate ia5i!ityM

+ corporation is a @uriica! person, separate an istinct fro' its stocho!ers. 9ein$ a @uriica! entity, a corporation

'ay act throu$h its 5oar of irectors, as provie in ection 23 of the #orporation #oe of the *hi!ippines:

ec. 23. The 9oar of >irectors or Trustees. In!ess otherwise provie in this #oe, the corporate powers of a!!

corporations for'e uner this #oe sha!! 5e eercise, a!! 5usiness conucte an a!! property of suchcorporations contro!!e an he! 5y the 5oar of irectors or trustees O

The corporation can a!so act throu$h its corporate o


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The #+ he! that this a'ission was not tanta'ount to rati(cation 5ecause what responent corporation a'ittewas that the 'oney was in fact receive as an invest'ent. t conc!ue that

O even if the Eresponent corporationF receive the 'oney, it cannot 5e he! responsi5!e for not nowin$ theprecein$ transaction 5etween the EpFresient an the EpetitionerF as in fact there was a 'isrepresentation 'ae tothe Eresponent corporationF, to the eCect that the 'oney was an invest'ent an not a !oan. The a!!e$einvest'ent is actua!!y a persona! !oan of #eci!io e i!!a.20

*etitioner&s contention has no 'erit. There was no showin$ that responent corporation ever authoriAe e i!!a too5tain the !oans on its 5eha!f. The notes i not show that e i!!a acte on 5eha!f of the corporation. +ctua!!y, the

corporation wou! not have ($ure in the transaction at a!! ha it not 5een for its a'ission that it receive thea'ount of *1.3 'i!!ion. +s cou! 5e $!eane fro' the pro'issory notes, it was a stran$er to the transaction.

Thus, we conc!ue that petitioner hi'se!f i not consier the corporation to 5e his e5tor for if he rea!!y new thate i!!a was o5tainin$ the !oan on 5eha!f of the corporation, then why i he a!!ow the notes to re7ect on!y the

persona! !ia5i!ity of e i!!aM21 ven the e'an !etters of petitioner were persona!!y aresse to e i!!a an notto responent corporation.22 Inou5te!y, petitioner ea!t with e i!!a pure!y in his persona! capacity.

Responent corporation cou! not have rati(e the act of e i!!a 5ecause there was no proof that it new that hetoo out a !oan on its 5eha!f. +s state ear!ier, rati(cation is a vo!untary choice that is nowin$!y 'ae. Thecorporation cou! not have rati(e an act it ha no now!e$e of

Drinari!y, the principa! 'ust have fu!! now!e$e at the ti'e of rati(cation of a!! the 'ateria! facts ancircu'stances re!atin$ to the unauthoriAe act of the person who assu'e to act as a$ent. Thus, if 'ateria! factswere suppresse or unnown, there can 5e no va!i rati(cation O. 23

The fact that the corporation a'itte receivin$ the procees of the !oan i not a'ount to rati(cation of the !oan.t accepte the a'ount fro' e i!!a, its presient at that ti'e, in $oo faith. Goo faith is a!ways presu'e.24*etitioner i not show that the corporation acte in 5a faith.

t fo!!ows that responent corporation was not !ia5!e for the su5se%uent !oss of the 'oney which it accepte as aninvest'ent. t cou! not 5e fau!te for not nowin$ that it was the procees of a !oan o5taine 5y e i!!a. t wasuner no o5!i$ation to chec the source of the invest'ents which went into its coCers. +s !on$ as the invest'ent

was use for !e$iti'ate corporate purposes, the investor 5ore the ris of !oss.

Therefore, on the (rst issue, the !oan was persona! to e i!!a. There was no 5asis to ho! the corporation !ia5!e

since there was no authority, epress, i'p!ie or apparent, $iven to e i!!a to 5orrow 'oney fro' petitioner.Neither was there any su5se%uent rati(cation of his act.

=as the ort$a$e a!i or oiM

*etitioner insists that the 'ort$a$e eecute 5y e i!!a, as presient of the corporation, was rati(e 5y the !atter

since the 'ort$a$e was an accessory contract of the !oan.2" =e isa$ree.

+ specia! power of attorney is necessary to create or convey rea! ri$hts over i''ova5!e property.26 urther'ore,

the specia! power of attorney 'ust appear in a pu5!ic ocu'ent.2; n the a5sence of a specia! power of attorney infavor of e i!!a as presient of the corporation, no va!i 'ort$a$e cou! have 5een eecute 5y hi'.28 ince the'ort$a$e was voi, it cou! not 5e rati(e.

*etitioner cannot 5!a'e anyone 5ut hi'se!f. ?e i not chec if the person he was ea!in$ with ha the authority to'ort$a$e the property 5ein$ oCere as co!!atera!.

Given that the !oan an 'ort$a$e were not 5inin$ on responent corporation, the !atter cannot 5e he! !ia5!e forinterest, attorney&s fees an !i%uiate a'a$es arisin$ fro' the !oan.

*ersona! ia5i!ity of >e i!!a

The !ia5i!ity arisin$ fro' the !oan was the so!e ine5teness of e i!!a -or of his estate after his eath/. *etitionervi$orous!y sou$ht to 'ae responent corporation !ia5!e 5ut eerte no eCort at a!! to ar$ue for the !ia5i!ity ofresponent heirs. The tria! court correct!y is'isse the case a$ainst the !atter. *etitioner&s re'ey now is to (!e a'oney c!ai' in the sett!e'ent proceein$s of e i!!a&s estate, if not too !ate, as inicate in

Ru!e 862: of the Ru!es of #ourt.


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=?RDR, the petition is here5y >N>. The Dcto5er 18, 2001 ecision of the #ourt of +ppea!s in #+)G.R. #No. 61;"" is +R>.

#osts a$ainst petitioner.

D DR>R>.

#ivi! #oe

+$encyQ apparent authority of an a$ent 5ase on estoppe!Q concept. n !ood(*i&d Ho&din)s, In(. v. Ro0as

E&e(tri( and Constr+(tion Co1%an2, In(. the #ourt state that persons ea!in$ with an assu'e a$ency,whether the assu'e a$ency 5e a $enera! or specia! one, are 5oun at their peri!, if they wou! ho! the principa!

!ia5!e, to ascertain not on!y the fact of a$ency 5ut a!so the nature an etent of authority, an in case either iscontroverte, the 5uren of proof is upon the' to esta5!ish it.S n other wors, when the petitioner re!ie on!y on

the wors of responent +!e@anro without securin$ a copy of the *+ in favor of the !atter, the petitioner is 5oun5y the ris acco'panyin$ such trust on the 'ere assurance of +!e@anro.

The sa'e =oochi! case stresse that apparent authority 5ase on estoppe! can arise fro' the principa! whonowin$!y per'it the a$ent to ho! hi'se!f out with authority an fro' the principa! who c!othe the a$ent with

inicia of authority that wou! !ea a reasona5!y pruent person to 5e!ieve that he actua!!y has such authority.

+pparent authority of an a$ent arises on!y fro' acts or conuct on the part of the principa! an such acts orconuct of the principa! 'ust have 5een nown an re!ie upon in $oo faith an as a resu!t of the eercise ofreasona5!e pruence 5y a thir person as c!ai'ant an such 'ust have prouce a chan$e of position to itsetri'ent.S n the instant case, the sa!e to the pouses a@arca an other transactions where +!e@anro a!!e$e!yrepresente a consiera5!e 'a@ority of the co)owners transpire after the sa!e to the petitionerQ thus, the petitionercannot re!y upon these acts or conuct to 5e!ieve that +!e@anro ha the sa'e authority to ne$otiate for the sa!e ofthe su5@ect property to hi'. Re'an Recio v. ?eirs of pouses +$ue$o an aria +!ta'irano, G.R. No.18234:, Ju!y24, 2013.

ao 3a sin tradin) vs (a20: #R+ ;63 9usiness Dr$aniAation #orporation aw ia5i!ity of D


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I =hether or not the presient of a corporation is c!othe with apparent authority to enter into 5inin$contracts with thir persons without the authority of the 9oar

?>

No. The 9oar 'ay enter into contracts throu$h the presient. The presient 'ay on!y enter into contracts upon

authority of the 9oar. ?ence, any a$ree'ent si$ne 5y the presient is su5@ect to approva! 5y the 9oar. In!ie a$enera! 'ana$er -!ie the case of rancisco vs G/, the presient has no apparent authority to enter into 5inin$contracts with thir persons. urther, if inee the 5y)!aws of *ri'e =hite i provie a$!ana with apparent

authority, this was not proven 5y Hao Ka in.

+s a ru!e, apparent authority 'ay resu!t fro' -1/ the $enera! 'anner, 5y which the corporation ho!s out an o


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ssue =DN the 5oar reso!ution is an u!tra vires act an in eCect a onation fro' the 5oar of irectorsM

?e!

No. There can 5e no ou5t that the irectors of the appe!!ee co'pany ha authority to 'oify the propose ter'sof the +'ene i!!in$ #ontract for the purpose of 'ain$ its ter's 'ore accepta5!e to the other contractin$parties. +s the reso!ution in %uestion was passe in $oo faith 5y the 5oar of irectors, it is va!i an 5inin$, anwhether or not it wi!! cause !osses or ecrease the pro(ts of the centra!, the court has no authority to review the'.

=hether the 5usiness of a corporation shou! 5e operate at a !oss urin$ epression, or c!ose own at a s'a!!er!oss, is a pure!y 5usiness an econo'ic pro5!e' to 5e eter'ine 5y the irectors of the corporation an not 5y the

court. The appe!!ee 9aco!o)urcia i!!in$ #o'pany is, uner the ter's of its Reso!ution of +u$ust 20, 1:36, uty5oun to $rant si'i!ar increases to p!aintiCs)appe!!ants herein.

3. >.Q >.Q >.Q NT+N# =?N *RDN+ # +9TH #+N 9 +=IH +TT+#?> TD + #DR*DR+T>R#TDR, TRIT DR D#R. ) n Tra1at Mer(anti&e, In(. vs. Co+rt o9 A%%ea&s, -238 #R+ 14, 1:/ the#ourt has co!!ate the sett!e instances when, without necessari!y piercin$ the vei! of corporate (ction, persona!civi! !ia5i!ity can a!so 5e sai to !awfu!!y attach to a corporate irector, trustee or o


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Dn 0: +pri! 1:84, e!chor e !a #uesta, oin$ 5usiness uner the na'e an sty!e of ar'ers achineries, so! toTra'at ercanti!e, nc. -Tra'at/, one -1/ unit ?NDDTD TR+#TDR oe! 9 1100> powere 5y a 13 ?.*. iese!en$ine. n pay'ent, >avi Dn$, Tra'atUs presient an 'ana$er, issue a chec for *33,"00.00 -apparent!yrep!acin$ an ear!ier postate chec for *33,080.00/. Tra'at, in turn, so! the tractor, to$ether with an attache!awn 'ower fa5ricate 5y it, to the etropo!itan =aterwors an ewera$e yste' -N+=++/ for *6;,000.00.>avi Dn$ cause a stop pay'ent of the chec when N+=++ refuse to pay the tractor an !awn 'ower after

iscoverin$ that, asie fro' so'e state efects of the attache !awn 'ower, the en$ine -so! 5y e !a #uesta/was a reconitione unit.

Dn 28 ay 1:8", e !a #uesta (!e an action for the recovery of *33,"00.00, as we!! as attorneyUs fees of*10,000.00, an the costs of suit. Dn$, in his answer, averre, a'on$ other thin$s, that e !a #uesta ha no cause

of actionQ that the %uestione transaction was 5etween p!aintiC an Tra'at ercanti!e, nc., an not with Dn$ in hispersona! capacityQ an that the pay'ent of the chec was stoppe 5ecause the su5@ect tractor ha 5een price as

a 5ran new, not as a reconitione unit.

Dn 02 Nove'5er 1:8:, after the reception of evience, the tria! court renere a ecision, the ispositive portionsof which rea

=?RDR, in view of the fore$oin$ consieration, @u$'ent is here5y renere

1. Drerin$ the efenants, @oint!y an severa!!y, to pay the p!aintiC the su' of *33,"00.00 with !e$a! interestthereon at the rate of 12 per annu' fro' Ju!y ;, 1:84 unti! fu!!y paiQ an

2. Drerin$ the efenants, @oint!y an severa!!y, to pay the p!aintiC the su' of *10,000.00 as attorneyUs fees, an

the costs of this suit.

D DR>R>. 1

+n appea! was ti'e!y interpose 5y the efenants. Dn 04 arch 1::3, the #ourt of +ppea!s a


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t has to 5e note in this re$ar that, to satisfy the re%uire'ents of the =, the appe!!ants 5orrowe a !awn'ower fro' the = so they cou! fa5ricate one such 'ower. The appe!!antsU witness state that the in of 'i)'ounte !awn 'ower was 5ein$ 'anufacture 5y their co'petitor, +!pha achinery, which ha 5y then stoppesupp!yin$ the sa'e -tsn,

Nov. 2:, 1:88, pp. ;3);4/. There is no showin$ that the appe!!ants ha ha any previous eperience in thefa5rication of this !awn 'ower. n fact, as aforesai, they ha to 5orrow one fro' the = which they cou! copy.

9ut a!thou$h they 'ae a copy with the sa'e speci(cations an esi$n, there was no assurance that the copy

wou! function as we!! as with the 'oe!.

+!thou$h the tria! court iscusse it in a iCerent !i$ht, =e view the 'atter in the sa'e way the tria! court i P

that the !awn 'ower as fa5ricate 5y the appe!!ants was the root of the partiesU pro5!e's.

?avin$ ha no previous eperience in the 'anufacture of !awn 'owers of the sa'e type as that in !iti$ation, an in

a possi5!y patent)infrin$in$ eCort to unercut their co'petition, the appe!!ants $athere enou$h arin$ to o thefa5rication the'se!ves. 9ut the prouct 'i$ht have prove too 'uch for the su5@ect tractor to power, an the

tractorUs en$ine was straine 5eyon its !i'its, causin$ it to overheat an a'a$e its $asets.

No woner, then, it was a $aset o!ea #ac ha to rep!ace, at a cost char$ea5!e to the appe!!ants. No woner,further'ore, the appe!!antsU witness ec!are that even after the rep!ace'ent of that one $aset, the en$ine sti!!!eae oi! after 5ein$ torture)teste. The inte$rity of the other en$ine $asets 'i$ht have 5een i'paire, too. uchwas the 5uren p!ace on the en$ine. The en$ine 'a!functione not necessari!y 5ecause the en$ine, as a!!e$e 5y

the appe!!ants, ha 5een a reconitione, an not a 5ran new, one. t 'a!functione 5ecause it was 'ae to owhat it si'p!y cou! not. 2

t was, neverthe!ess, an error to ho! >avi Dn$ @oint!y an severa!!y !ia5!e with TR++T to e !a #uesta uner the%uestione transaction. Dn$ ha there so acte, not in his persona! capacity, 5ut as an oI #DIR an the ecision of the tria! court, a. Nocosts.

D DR>R>.

G.R. No. 1;288" Dcto5er :, 200:

MANUEL LUIS S. SANCHE:, Petitioner, vs. REPU$LIC OF THE PHILIPPINES, Re%resented 2 t*e

e%art1ent o9 Ed+(ation, C+&t+re and S%orts, Res%ondent.


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This petition for review on certiorari assai!s the e5ruary 21, 2006 >ecision1 of the #ourt of +ppea!s in #+)G.R. #83648 an its Reso!ution2 of ay 2:, 2006, which is'isse the petitioner&s appea! fro' the ecision of 9ranch ;1of the Re$iona! Tria! #ourt -RT#/ of *asi$ #ity in #ivi! #ase 668"2.

The acts an the #ase

n 1:80, urin$ the re$i'e of *resient erinan . arcos, the $overn'ent)owne ?u'an ett!e'ents>eve!op'ent #orporation -?>#/ 5ui!t with pu5!ic funs an on $overn'ent !an the t. artin Technica! nstitute

#o'p!e at 9aran$ay I$on$, *asi$ #ity. This !ater on 5eca'e nown as the Iniversity of ife #o'p!e.

n Ju!y 1:80, irst ay 'e!a R. arcos an others or$aniAe the Iniversity of ife ounation, nc. -I/, a

private non)stoc, non)pro(t corporation evote to non)for'a! eucation. Dn +u$ust 26, 1:80 the $overn'ent$ave the 'ana$e'ent an operation of the #o'p!e to I 5ut ?># was to continue to construct faci!ities an

ac%uire e%uip'ent for it. +!thou$h I was to $et a!! the inco'es of the #o'p!e, I ha to pay ?># an annua!fee of 14 percent of ?>#&s invest'ents in it.

+fter the fa!! of the arcos re$i'e in 1:86, the new $overn'ent reor$aniAe ?># into the trate$ic nvest'ent>eve!op'ent #orporation ->#DR/ uner the supervision of the D#, now tota!in$ a5out *316 'i!!ion, on Ju!y 2", 1:8: >#DR rescinethe ?>#)I a$ree'ent. ronica!!y, in its p!ace, >#DR entere into an nteri' ana$e'ent +$ree'ent withI, a!!owin$ it to continue 'ana$in$ an operatin$ the #o'p!e.

eanti'e, in Dcto5er 1:8:, the $overn'ent transferre the ownership of I&s properties to the >epart'ent ofucation, #u!ture an ports ->#/. ater in January 1::0, Repu5!ic +ct 684; transferre fu!! contro! an

'ana$e'ent of the #o'p!e to ># with eCect two years fro' the !aw&s enact'ent. The ># transferre itso#DR transferre a!! its ri$hts in the #o'p!e tothe Nationa! Govern'ent which in turn transferre the sa'e to the >#.

Dn January 31, 1::1 ># an I entere into a ana$e'ent +$ree'ent, $rantin$ I the authority to 'ana$ean operate the #o'p!e unti! the en of that year. >urin$ this perio, I was epress!y 'anate uner the saiana$e'ent +$ree'ent to re'it to the 9ureau of the Treasury, throu$h the >#, a!! inco'es fro' the #o'p!e,net of a!!owa5!e epenses.3 +t the en of 1::1, the ># $ave I notice to i''eiate!y vacate the #o'p!e. 9ut

I ec!ine, pro'ptin$ the ># to (!e an action for un!awfu! etainer a$ainst it in #ivi! #ase 2:": of theetropo!itan Tria! #ourt -eT#/ of *asi$ #ity. +fter hearin$, eT# is'isse the action for !ac of 'erit. Dn the

>#&s appea! to the RT#, the !atter a# to the #ourt of +ppea!s 5y petition for review,4 however, the !atter renere @u$'ent on

January 1;, 1::", reversin$ the eT# an RT# ecisions. The appea!s court orere I to vacate the #o'p!e anpay such reasona5!e renta!s as the eT# 'i$ht (. This #ourt is'isse I&s recourse to it fro' the @u$'ent of

the #ourt of +ppea!s."

Dn +pri! 1", 1::6 the eT# (e, after hearin$, the rents that I ha to pay the ># at *22,"":,21".14 -ue

fro' e5ruary 1::2 to January 1::6/ p!us *6,32".00 per 'onth unti! it sha!! have vacate the pre'ises.6 The >#succeee in e@ectin$ I 5ut the !atter i not pay the a'ounts ue fro' it.

Dn June 1", 1::8 the ># (!e a co'p!aint; 5efore the RT# of *asi$ #ity in #ivi! #ase 668"2 for co!!ection of the*22,"":,21".14 in unre'itte rents an a'a$es a$ainst ?enri Kahn, I&s *resient, an petitioner anue! uis. ancheA, its ecutive ice)*resient, 5ase on their persona! !ia5i!ity uner ection 31 of the #orporation #oe.

The !atter two were ana$in$ >irector an inance >irector, respective!y, of the corporation.8

The co'p!aint a!!e$e that Kahn an petitioner ancheA, as ey I o


14/33

unti! they sha!! have fu!!y pai the sa'e, *"00,000.00 in ee'p!ary a'a$es, an *200,000.00 in attorney&s fees,p!us costs.11

9oth Kahn an petitioner ancheA appea!e to the #ourt of +ppea!s. The !atter court $ave ue course to ancheA&sappea! 5ut enie that of Kahn since it was (!e out of ti'e. Dn e5ruary 21, 2006 the #ourt of +ppea!s renere

@u$'ent, who!!y a# pursuant to the >#)I a$ree'ent.

The ssues

The case 5efore this #ourt presents the fo!!owin$ issues

1. whether or not petitioner ancheA, a irector an chief eecutive o#.

Ru!in$s of the #ourt

*etitioner ancheA points out that the #ourt of +ppea!s& ecision ar5itrari!y chan$e the >#&s theory of the casefro' one 5ase on his an Kahn&s a!!e$e fai!ure to eposit for the account of I whatever renta!s they haveco!!ecte to another 5ase on their a!!e$e fai!ure to re'it to the ># the inco'es of the faci!ities they 'ana$e.9ut ancheA is rawin$ insi$ni(cant istinctions fro' what the ># c!ai's an what the court 5e!ow (ns. 9othessentia!!y rest on Kahn an ancheA&s fai!ure to account for the rent inco'es that they co!!ecte fro' !ease of

spaces in the faci!ities of the #o'p!e 5eyon the one)year 'ana$e'ent authority that the ># $rante I in1::1.

*etitioner ancheA c!ai's that there is no $roun for the courts 5e!ow to pierce the vei! of corporate ientity an

ho! hi' an Kahn, who were 'ere corporate o#. 9ut thisis not a case of piercin$ the vei! of corporate (ction. The ># 5rou$ht its action a$ainst ancheA an Kahn uner

ection 31 of the #orporation #oe, which shou! not 5e confuse with actions intene to pierce the corporate(ction.

ection 31 of the #orporation #oe 'aes irectors)o


15/33

case was 5rou$ht, 'aes a corporate irectorwho 'ay or 'ay not even 5e a stocho!er or 'e'5eraccounta5!efor his 'ana$e'ent of the aCairs of the corporation.

9a faith i'p!ies 5reach of faith an wi!!fu! fai!ure to respon to p!ain an we!! unerstoo o5!i$ation.1" t oes notsi'p!y connote 5a @u$'ent or ne$!i$enceQ it i'ports a ishonest purpose or so'e 'ora! o5!i%uity an consciousoin$ of wron$Q it 'eans 5reach of a nown uty throu$h so'e 'otive or interest or i!! wi!!.16 t partaes of the

nature of frau.1;

Gross ne$!i$ence, on the other han, is the want of even s!i$ht care, actin$ or o'ittin$ to act in a situation where

there is uty to act, not inavertent!y 5ut wi!!fu!!y an intentiona!!y, with a conscious iniCerence to conse%uencesinsofar as other persons 'ay 5e aCecte.18 t evinces a thou$ht!ess isre$ar of conse%uences without eertin$

any eCort to avoi the'Q1: the want or a5sence of or fai!ure to eercise s!i$ht care or i!i$ence, or the entirea5sence of care.20

n reso!vin$ the issue of whether or not petitioner ancheA, a irector an chief eecutive o# (!e a$ainst it, petitioner ancheA an Kahn sti!! continue to

!ease spaces in those faci!ities to thir persons. +n they co!!ecte an ept a!! the rents a!thou$h they new thatthese pri'ari!y 5e!on$e to the >#. I ha 'ere!y 'ana$e the faci!ities an co!!ecte earnin$s fro' the' forthe >#. =hat is 'ore, ancheA an Kahn were aware that they ha to su5'it written accounts of those rents anre'it the net earnin$s fro' the' to the 9ureau of Treasury, throu$h the >#, at the en of the year. Het, ancheAan Kahn, actin$ in 5a faith or with $ross ne$!ect i not turn over even one centavo of rent to the ># norrener an accountin$ of their co!!ections. Nor i they account for the 'oney they co!!ecte 5y su5'ittin$ to theecurities an chan$e #o''ission the re%uire (nancia! state'ents coverin$ such co!!ections.

*arenthetica!!y, a witness for the efense, van$e!ine Nanion$, I&s 5ooeeper, testi(e that the revenues fro'the rents were eposite in the 5an in the na'es of ancheA an I&s accountant. +n so on!y they cou!

withraw an spen those revenues.21

*etitioner ancheA of course c!ai's that the funs they ha co!!ecte prove inae%uate even to 'eet epenses.

9ut, as the appe!!ate court he!, he ha 5een una5!e to su5stantiate such c!ai's. +s the o


16/33

G.R. No. 1;288" Dcto5er :, 200:

MANUEL LUIS S. SANCHE:, Petitioner, vs. REPU$LIC OF THE PHILIPPINES, Re%resented 2 t*e

e%art1ent o9 Ed+(ation, C+&t+re and S%orts, Res%ondent.

The acts

n January 1::0, Repu5!ic +ct 684; transferre fu!! contro! an 'ana$e'ent of the #o'p!e to ># -epart'entof eucation cu!ture an sports/ with eCect two years fro' the !aw&s enact'ent. The ># transferre its oeve!op'ent #orporation/ transferre a!! its ri$hts in the #o'p!e tothe Nationa! Govern'ent which in turn transferre the sa'e to the >#.

># an I entere into a ana$e'ent +$ree'ent, $rantin$ I the authority to 'ana$e an operate the#o'p!e unti! the en of that year. >urin$ this perio, I was epress!y 'anate uner the sai ana$e'ent

+$ree'ent to re'it to the 9ureau of the Treasury, throu$h the >#, a!! inco'es fro' the #o'p!e, net ofa!!owa5!e epenses, ># $ave I notice to i''eiate!y vacate the #o'p!e. 9ut I ec!ine, pro'ptin$ the

># to (!e an action for un!awfu! etainer.

># succeee in e@ectin$ I 5ut the !atter i not pay the a'ounts ue fro' it.

># (!e a co'p!aint 5efore the RT# of *asi$ #ity in for co!!ection of unre'itte rents an a'a$es a$ainst ?enriKahn, I&s *resient, an petitioner anue! uis . ancheA, its ecutive ice)*resient, 5ase on their persona!!ia5i!ity uner ection 31 of the #orporation #oe. The !atter two were ana$in$ >irector an inance >irector,respective!y, of the corporation.

The co'p!aint a!!e$e that Kahn an petitioner ancheA, as ey I o#, @oint!y an severa!!y,

#ourt of +ppea!s. who!!y a# pursuant to the >#)I a$ree'ent.

ssue

=hether or not petitioner ancheA, a irector an chief eecutive o


17/33

Ru!in$

ancheA an han @oint!y an severa!!y !ia5!e.

ection 31 !ays own the octrine of corporate opportunity an ho!s persona!!y !ia5!e corporate irectors foun$ui!ty of $ross ne$!i$ence or 5a faith in irectin$ the aCairs of the corporation, which resu!ts in a'a$e or in@ury tothe corporation, its stocho!ers or 'e'5ers, an other persons. The e@ect'ent suit that he! on!y I !ia5!e to the># for unpai rents oes not constitute res @uicata to the issue of persona! !ia5i!ities of Kahn an petitioner

ancheA uner the circu'stances to pay such o5!i$ations, $iven that the unaccounte funs wou! have sett!e thesa'e.

*etitioner ancheA of course c!ai's that the funs they ha co!!ecte prove inae%uate even to 'eet epenses.9ut, as the appe!!ate court he!, he ha 5een una5!e to su5stantiate such c!ai's. +s the o# (!e a$ainst it,petitioner ancheA an Kahn sti!! continue to !ease spaces in those faci!ities to thir persons. +n they co!!ectean ept a!! the rents a!thou$h they new that these pri'ari!y 5e!on$e to the >#. I ha 'ere!y 'ana$e thefaci!ities an co!!ecte earnin$s fro' the' for the >#. =hat is 'ore, ancheA an Kahn were aware that they hato su5'it written accounts of those rents an re'it the net earnin$s fro' the' to the 9ureau of Treasury, throu$hthe >#, at the en of the year. Het, ancheA an Kahn, actin$ in 5a faith or with $ross ne$!ect i not turn overeven one centavo of rent to the ># nor rener an accountin$ of their co!!ections. Nor i they account for the'oney they co!!ecte 5y su5'ittin$ to the ecurities an chan$e #o''ission the re%uire (nancia! state'entscoverin$ such co!!ections.

*arenthetica!!y, a witness for the efense, van$e!ine Nanion$, I&s 5ooeeper, testi(e that the revenues fro'

the rents were eposite in the 5an in the na'es of ancheA an I&s accountant. +n so on!y they cou!withraw an spen those revenues.


18/33

G.R. No. :6""1 Nove'5er 4, 1::6

PREMIUM MAR$LE RESOURCES, INC., %etitioner, vs. THE COURT OF APPEALS and INTERNATIONAL

CORPORATE $AN-, res%ondents.

*RNTN #DR*DR+TDN, petitioner,vs. T? #DIRT D +**+ an NTRN+TDN+ #DR*DR+T 9+NK,

responents.

+ssai!e in the instant petition for review is the ecision 1 of the #ourt of +ppea!s in #+)G.R. # No. 16810 ate

epte'5er 28, 1::0 which au'aa$ ascounse!, (!e an action for a'a$es a$ainst nternationa! #orporate 9an which was ocete as #ivi! #ase No.

14413. The co'p!aint states, inter a!ia

3. o'eti'e in +u$ust to Dcto5er 1:82, +ya!a nvest'ent an >eve!op'ent #orporation issue three -3/ checs

ENos. 0:;088, 0:;414 W 2;884F in the a$$re$ate a'ount of *31,663.88 paya5!e to the p!aintiC an rawn a$ainst#iti5anQ

". Dn or a5out +u$ust to Dcto5er 1:82, for'er o


19/33

n its +nswer nternationa! #orporate 9an a!!e$e, inter a!ia, that *re'iu' has no capacityBpersona!ityBauthority tosue in this instance an the co'p!aint shou!, therefore, 5e is'isse for fai!ure to state a cause of action.

+ few ays after *re'iu' (!e the sai case, *rint!ine #orporation, a sister co'pany of *re'iu' a!so (!e an actionfor a'a$es a$ainst nternationa! #orporate 9an ocete as #ivi! #ase No. 14444. Thereafter, 5oth civi! caseswere conso!iate.

eanti'e, the sa'e corporation, i.e., *re'iu', 5ut this ti'e represente 5y i$uion Reyna, onteci!!io an

Dn$siao aw D


20/33

The #ourt of +ppea!s is without @urisiction to prohi5it the incu'5ent 9oar of >irectors fro' actin$ an (!in$ thiscase when the # where # #ase No. 2688 is penin$ has not even 'ae the prohi5ition.

=e (n the petition without 'erit.

&he only issue in this case is whether or not the fling o the case or damages against "riate res"ondent was

authori'ed by a duly constituted (oard o )irectors o the "etitioner cor"oration%

*etitioner, throu$h the (rst set of o


21/33

+##DR>NGH, for !ac of 'erit, the petition is here5y >N>.

D DR>R>.

G.R. No. )68""" arch 1:, 1::3

PRIME !HITE CEMENT CORPORATION, %etitioner vs. HONORA$LE INTERMEIATE APPELLATE COURT

and ALEJANRO TE, res%ondents.

9efore Is is a *etition for Review on #ertiorari (!e 5y petitioner *ri'e =hite #e'ent #orporation seein$ thereversa! of the ecision Y of the then nter'eiate +ppe!!ate #ourt, the ispositive portion of which reas as fo!!ows

=?RDR, in view of the fore$oin$, the @u$'ent appea!e fro' is here5y a


22/33

Ri$ht after the p!aintiC entere into the aforesai ea!ership a$ree'ent, he p!ace an avertise'ent in a nationa!,circu!atin$ newspaper the fact of his 5ein$ the ec!usive ea!er of the efenant corporationUs white ce'entproucts in inanao area, 'ore particu!ar!y, in the ani!a #hronic!e ate +u$ust 16, 1:6: -hi5its R an R)1/an was even con$ratu!ate 5y his 5usiness associates, so 'uch so, he was ase 5y so'e of his 5usiness'enfriens an c!ose associates if they can 5e his

su5)ea!er in the inanao area.

Re!yin$ heavi!y on the ea!ership a$ree'ent, p!aintiC so'eti'e in the 'onths of epte'5er, Dcto5er, an>ece'5er, 1:6:, entere into a written a$ree'ent with severa! harware stores ea!in$ in 5uyin$ an se!!in$ white

ce'ent in the #ities of >avao an #a$ayan e Dro which wou! thus ena5!e hi' to se!! his a!!ocation of 20,000 5a$sre$u!ar supp!y of the sai co''oity, 5y epte'5er, 1:;0 -hi5its D, D)1, D)2, *, *)1, *)2, L, L)1 an L)2/. +fter

the p!aintiC was assure 5y his suppose 5uyer that his a!!ocation of 20,000 5a$s of white ce'ent can 5e isposeof, he infor'e the efenant corporation in his !etter ate +u$ust 18, 1:;0 that he is 'ain$ the necessary

preparation for the openin$ of the re%uisite !etter of creit to cover the price of the ue initia! e!ivery for the 'onthof epte'5er, 1:;0 -hi5it 9/, !ooin$ forwar to the efenant corporationUs uty to co'p!y with the ea!ershipa$ree'ent. n rep!y to the aforesai !etter of the p!aintiC, the efenant corporation thru its corporate secretary,rep!ie that the 5oar of irectors of the sai efenant ecie to i'pose the fo!!owin$ conitions

a. >e!ivery of white ce'ent sha!! co''ence at the en of Nove'5er, 1:;0Q

5. Dn!y 8,000 5a$s of white ce'ent per 'onth for on!y a perio of three -3/ 'onths wi!! 5e e!ivereQ

c. The price of white ce'ent was price at *13.30 per 5a$Q

. the price of white ce'ent is su5@ect to rea@ust'ent uni!atera!!y on the part of the efenantQ

e. The p!ace of e!ivery of white ce'ent sha!! 5e +usturias -sic/Q

f. The !etter of creit 'ay 5e opene on!y with the *ruentia! 9an, aati 9ranchQ

$. *ay'ent of white ce'ent sha!! 5e 'ae in avance an which pay'ent sha!! 5e use 5y the efenant as$uaranty in the openin$ of a forei$n !etter of creit to cover costs an epenses in the procure'ent of 'ateria!s inthe 'anufacture of white ce'ent. -hi5it #/.

evera! e'ans to co'p!y with the ea!ership a$ree'ent -hi5its >, , G, , R, , an N/ were 'ae 5y thep!aintiC to the efenant, however, efenant refuse to co'p!y with the sa'e, an p!aintiC 5y force ofcircu'stances was constraine to cance! his a$ree'ent for the supp!y of white ce'ent with thir parties, whichwere conc!ue in anticipation of, an pursuant to the sai ea!ership a$ree'ent.

Notwithstanin$ that the ea!ership a$ree'ent 5etween the p!aintiC an efenant was in force an su5sistin$, theefenant corporation, in vio!ation of, an with evient intention not to 5e 5oun 5y the ter's an conitions

thereof, entere into an ec!usive ea!ership a$ree'ent with a certain Napo!eon #o for the 'aretin$ of whitece'ent in inanao -hi5it T/ hence, this suit. -*!aintiCUs Recor on +ppea!, pp. 86):0/.

+fter tria!, the tria! court a@u$e the corporation !ia5!e to +!e@anro Te in the a'ount of *3,302,400.00 as actua!a'a$es, *100,000.00 as 'ora! a'a$es, an *10,000.00 as an for attorneyUs fees an costs. The appe!!ate court

a


23/33

T? >#DN +N> RDITDN D T? NTR>+T +**+T #DIRT >RG+R>> T? *RN#* +N>JIR*RI>N#, *RN#* +N> RI DN INNDR#+9 #DNTR+#T + *RD>> N +RT# 131; D T?N= # #D>.

T? >#DN +N> RDITDN D T? NTR>+T +**+T #DIRT >RG+R>> T? *RN#* +N>JIR*RI>N# + TD =?N +=+R> D +#TI+ +N> DR+ >++G *RD*R.

N NDT +=+R>NG *TTDNRU #+I D +#TDN + T+T> N T +N=R =T? *#+ +N> +R+T

>N =T? #DINTR#+ T? NTR>+T +**+T #DIRT ?+ #+RH >*+RT> RD T?+##*T> II+, #DIR D JI>#+ *RD#>NG.

There is on!y one !e$a! issue to 5e reso!ve 5y this #ourt whether or not the ea!ership a$ree'ent referre 5ythe *resient an #hair'an of the 9oar of petitioner corporation is a va!i an enforcea5!e contract. =e o not

a$ree with the conc!usion of the responent #ourt that it is.

Iner the #orporation aw, which was then in force at the ti'e this case arose, " as we!! as uner the present

#orporation #oe, a!! corporate powers sha!! 5e eercise 5y the 9oar of >irectors, ecept as otherwise provie5y !aw. 6 +!thou$h it cannot co'p!ete!y a5icate its power an responsi5i!ity to act for the @uriica! entity, the 9oar

'ay epress!y e!e$ate speci(c powers to its *resient or any of its oea!in$s of irectors, trustees or o


24/33

=here any of the (rst two conitions set forth in the precein$ para$raph is a5sent, in the case of a contract with airector or trustee, such contract 'ay 5e rati(e 5y the vote of the stocho!ers representin$ at !east two)thirs-2B3/ of the outstanin$ capita! stoc or of two)thirs -2B3/ of the 'e'5ers in a 'eetin$ ca!!e for the purpose*rovie, That fu!! isc!osure of the averse interest of the irectors or trustees invo!ve is 'ae at such 'eetin$*rovie, however, That the contract is fair an reasona5!e uner the circu'stances.

+!thou$h the o! #orporation aw which $overns the instant case i not contain a si'i!ar provision, yet the cite

provision su5stantia!!y incorporates we!!)sett!e princip!es in corporate !aw. 12

Grantin$ ar$ueno that the ea!ership a$ree'ent invo!ve here wou! 5e va!i an enforcea5!e if entere into

with a person other than a irector or oirector an +uitor of the petitioner corporation chan$es the who!e situation. irst of a!!, =e 5e!ieve that the

contract was neither fair nor reasona5!e. The ea!ership a$ree'ent entere into in Ju!y, 1:6:, was to se!! ansupp!y to responent Te 20,000 5a$s of white ce'ent per 'onth, for (ve years startin$ epte'5er, 1:;0, at the

(e price of *:.;0 per 5a$. Responent Te is a 5usiness'an hi'se!f an 'ust have nown, or at !east 'ust 5epresu'e to now, that at that ti'e, prices of co''oities in $enera!, an white ce'ent in particu!ar, were notsta5!e an were epecte to rise. +t the ti'e of the contract, petitioner corporation ha not even co''ence the'anufacture of white ce'ent, the reason why e!ivery was not to 5e$in unti! 14 'onths !ater. ?e 'ust have nownthat within that perio of si years, there wou! 5e a consiera5!e rise in the price of white ce'ent. n fact,responent TeUs own e'oranu' shows that in epte'5er, 1:;0, the price per 5a$ was *14."0, an 5y the'i!e of 1:;", it was a!reay *3;."0 per 5a$. >espite this, no provision was 'ae in the ea!ership a$ree'entto a!!ow for an increase in price 'utua!!y accepta5!e to the parties. nstea, the price was pe$$e at *:.;0 per 5a$for the who!e (ve years of the contract. airness on his part as a irector of the corporation fro' who' he was to

5uy the ce'ent, wou! re%uire such a provision. n fact, this unfairness in the contract is a!so a 5asis which renersa contract entere into 5y the *resient, without authority fro' the 9oar of >irectors, voi or voia5!e, a!thou$h it'ay have 5een in the orinary course of 5usiness. =e 5e!ieve that the (e price of *:.;0 per 5a$ for a perio of

(ve years was not fair an reasona5!e. Responent Te, hi'se!f, when he su5se%uent!y entere into contracts torese!! the ce'ent to his new ea!ers ?enry =ee 13 an Gauencio Ga!an$ 14 stipu!ate as fo!!ows

The price of white ce'ent sha!! 5e 'utua!!y eter'ine 5y us 5ut in no case sha!! the sa'e 5e !ess than *14.00 per5a$ -:4 !5s/.

The contract with ?enry =ee was on epte'5er 1", 1:6:, an that with Gauencio Ga!an$, on Dcto5er 13, 1:6;. +si'i!ar contract with *ruencio i' was 'ae on >ece'5er 2:, 1:6:. 1" +!! of these contracts were entere into

soon after his ea!ership a$ree'ent with petitioner corporation, an in each one of the' he protecte hi'se!ffro' any increase in the 'aret price of white ce'ent. Het, ecept for the contract with ?enry =ee, the contractswere for on!y two years fro' Dcto5er, 1:;0. =hy i he not protect the corporation in the sa'e 'anner when heentere into the ea!ership a$ree'entM or that 'atter, why i the *resient an the #hair'an of the 9oar noto so eitherM +s irector, specia!!y since he was the other party in interest, responent TeUs 5ounen uty was to act

in such 'anner as not to unu!y pre@uice the corporation. n the !i$ht of the circu'stances of this case, it is to Is%uite c!ear that he was $ui!ty of is!oya!ty to the corporationQ he was atte'ptin$ in eCect, to enrich hi'se!f at theepense of the corporation. There is no showin$ that the stocho!ers rati(e the ea!ership a$ree'ent or thatthey were fu!!y aware of its provisions. The contract was therefore not va!i an this #ourt cannot a!!ow hi' to reapthe fruits of his is!oya!ty.

+s a resu!t of this action which has 5een proven to 5e without !e$a! 5asis, petitioner corporationUs reputation an$oowi!! have 5een pre@uice. ?owever, there can 5e no awar for 'ora! a'a$es uner +rtic!e 221; an

succeein$ artic!es on ection 1 of #hapter 3 of Tit!e Z of the #ivi! #oe in favor of a corporation.

n view of the fore$oin$, the >ecision an Reso!ution of the nter'eiate +ppe!!ate #ourt ate arch 30, 1:84 an

+u$ust 6, 1:84, respective!y, are here5y T +>. *rivate responent +!e@anro Te is here5y orere to paypetitioner corporation the su' of *20,000.00 for attorneyUs fees, p!us the cost of suit an epenses of !iti$ation.

o orere

#orporate aw #ase >i$est Fi&i%inas Port v. Go-200;/

G.R. No. 161886 arch 16, 200;

essons +pp!ica5!e Rationa!e for #entra!iAe ana$e'ent >octrine

+#T

ept 4 1::2 !iooro #. #ruA, i!port&s presient fro' 1:68)1::1, wrote a !etter to the corporation&s 9D>%uestionin$ the creation an e!ection of the fo!!owin$ positions with a 'onth!y re'uneration of *13,0"0.00 each.


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#ruA re%ueste the 5oar to tae necessary actionBactions to recover fro' those e!ecte to the afore'entionepositions the sa!aries they have receive.

Jun 4 1::3 #ruA, purporte!y in representation of i!port an its stocho!ers, a'on$ which is herein co)petitioner inanao Ter'ina! an 9roera$e ervices, nc. -inter5ro/, (!e with the # a erivative suit a$ainsti!portUs 9D> for acts of 'is'ana$e'ent etri'enta! to the interest of the corporation an its shareho!ers at !ar$e.

#ruA praye that the 9D> 5e 'ae to pay i!port, @oint!y an severa!!y, the su's of 'oney varie!y

representin$ the a'a$es incurre as a resu!t of the creation of the o have the power to create positions not in the 5y)!aws an can increase sa!aries. 9ut $ar #. Triniauner the thir an fourth causes of action to restore to the corporation the tota! a'ount of sa!aries he receive as

assistant vice presient for corporate p!annin$Q an !iewise orerin$ ortunato . e #astro an +rsenio opeA#hua uner the fourth cause of action to restore to the corporation the sa!aries they each receive as specia!

assistants respective!y to the presient an 5oar chair'an. n case of inso!vency of any or a!! of the', the'e'5ers of the 5oar who create their positions are su5siiari!y !ia5!e.

+ppea!e creation of the positions 'ere!y for acco''oation purposes ) GR+NT>

I

=BN there was 'is'ana$e'ent ) ND

=BN there is a proper erivative suit ) H

?> #+ +


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n this petition for review on certiorari,1 the parties raise a !e$a! %uestion on corporate $overnance #an the'e'5ers of a corporation&s 5oar of irectors e!ect another irector to (!! in a vacancy cause 5y the resi$nation ofa ho!)over irectorM

T? +#TI+ +NT#>NT

Dn e5ruary 2;, 1::6, urin$ the +nnua! tocho!ers& eetin$ of petitioner a!!e ere #ountry #!u5, nc. -##/,the fo!!owin$ were e!ecte as 'e'5ers of the ## 9oar of >irectors rnesto i!!a!una, Jai'e #. >in$!asan->in$!asan/, uaro aa!inta! -aa!inta!/, rancisco Drti$as , ictor a!ta, +'ao . antia$o, Jr., ortunato

>ee, +u$usto unico, an Ray Ga'5oa.2 n the years 1::;, 1::8, 1:::, 2000, an 2001, however, the re%uisite%uoru' for the ho!in$ of the stocho!ers& 'eetin$ cou! not 5e o5taine. #onse%uent!y, the a5ove)na'e

irectors continue to serve in the ## 9oar in a ho!)over capacity.

Dn epte'5er 1, 1::8, >in$!asan resi$ne fro' his position as 'e'5er of the ## 9oar. n a 'eetin$ he! on

Dcto5er 6, 1::8, the re'ainin$ irectors, sti!! constitutin$ a %uoru' of ##&s nine)'e'5er 5oar, e!ecte ricRoas -Roas/ to (!! in the vacancy create 5y the resi$nation of >in$!asan.

+ year !ater, or on Nove'5er 10, 1::8, aa!inta! a!so resi$ne as 'e'5er of the ## 9oar. ?e was rep!ace 5yJose Ra'ireA -Ra'ireA/, who was e!ecte 5y the re'ainin$ 'e'5ers of the ## 9oar on arch 6, 2001.

Responent +frica -+frica/, a 'e'5er of ##, %uestione the e!ection of Roas an Ra'ireA as 'e'5ers of the## 9oar with the ecurities an chan$e #o''ission -#/ an the Re$iona! Tria! #ourt -RT#/, respective!y.

The # case %uestionin$ the va!iity of Roas& appoint'ent was ocete as # #ase No. 01)::)61;;. The RT#case %uestionin$ the va!iity of Ra'ireA& appoint'ent was ocete as #ivi! #ase No. 68;26.

n his nu!!i(cation co'p!aint3 5efore the RT#, +frica a!!e$e that the e!ection of Roas was contrary to ection 2:, inre!ation to ection 23, of the #orporation #oe of the *hi!ippines -#orporation #oe/. These provisions rea

ec. 23. The 5oar of irectors or trustees. ) In!ess otherwise provie in this #oe, the corporate powers of a!!corporations for'e uner this #oe sha!! 5e eercise, a!! 5usiness conucte an a!! property of suchcorporations contro!!e an he! 5y the 5oar of irectors or trustees to 5e e!ecte fro' a'on$ the ho!ers ofstocs, or where there is no stoc, fro' a'on$ the 'e'5ers of the corporation, who sha!! ho! o


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+s fra'e 5y ##, the issue for reso!ution is whether the re'ainin$ irectors of the corporation&s 9oar, sti!!constitutin$ a %uoru', can e!ect another irector to (!! in a vacancy cause 5y the resi$nation of a ho!)overirector.

#itin$ !aw an @urispruence, ## posits that the power to (!! in a vacancy create 5y the resi$nation of a ho!)over irector is epress!y $rante to the re'ainin$ 'e'5ers of the corporation&s 5oar of irectors.

Iner the a5ove)%uote ection 2: of the #orporation #oe, a vacancy occurrin$ in the 5oar of irectors cause

5y the epiration of a 'e'5er&s ter' sha!! 5e (!!e 5y the corporation&s stocho!ers. #orre!atin$ ection 2: withection 23 of the sa'e !aw, ## a!!e$es that a 'e'5er&s ter' sha!! 5e for one year an unti! his successor is

e!ecte an %ua!i(eQ otherwise state, a 'e'5er&s ter' epires on!y when his successor to the 9oar is e!ectean %ua!i(e. Thus, unti! such ti'e as Ea successor isF e!ecte or %ua!i(e in an annua! e!ection where a %uoru' is

present, ## contens that the ter' of Ea 'e'5erF of the 5oar of irectors has yet not epire.

+s the vacancy in this case was cause 5y aa!inta!&s resi$nation, not 5y the epiration of his ter', ## insists

that the 5oar ri$htfu!!y appointe Ra'ireA to (!! in the vacancy.

n support of its ar$u'ents, ## cites the #ourt&s ru!in$ in the 1:2; ! ?o$ar6 case which states

Dwin$ to the fai!ure of a %uoru' at 'ost of the $enera! 'eetin$s since the responent has 5een in eistence, it has5een the practice of the irectors to (!! in vacancies in the irectorate 5y choosin$ suita5!e persons fro' a'on$ thestocho!ers. This custo' (ns its sanction in +rtic!e ;1 of the 9y)aws, which reas as fo!!ows

+rt. ;1. The irectors sha!! e!ect fro' a'on$ the shareho!ers 'e'5ers to (!! the vacancies that 'ay occur in the

5oar of irectors unti! the e!ection at the $enera! 'eetin$.

Ipon fai!ure of a %uoru' at any annua! 'eetin$ the irectorate natura!!y ho!s over an continues to function unti!another irectorate is chosen an %ua!i(e. In!ess the !aw or the charter of a corporation epress!y provies thatan o


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9oar an unti! his successor&s e!ection an %ua!i(cation is not part of the irector&s ori$ina! ter' of oR>.


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!ESTERN INSTITUTE OF TECHNOLOG, INC., vs. RICARO T. SALAS, SAL/AOR T. SALAS, SOLEA

SALAS4TU$ILLEJA, ANTONIO S. SALAS, RICHAR S. SALAS < HON. JUGE PORFIRIO PARIAN, G.R. No.

55=>=8 A+)+st 85, 566?

+#T

Ip for review on certiorari are the >ecision an the Drer of 9ranch 33 of the RT# of !oi!o #ity in #ri'ina! #ases forestafa an fa!si(cation of a pu5!ic ocu'ent. The @u$'ent ac%uitte the private responents of 5oth char$es, 5ut

petitioners see to ho! the' civi!!y !ia5!e.

*rivate responents Ricaro T. a!as, a!vaor T. a!as, o!ea a!as)Tu5i!!e@a, +ntonio . a!as, an Richar .

a!as, 5e!on$in$ to the sa'e fa'i!y, are the 'a@ority an contro!!in$ 'e'5ers of the 9oar of Trustees of =esternnstitute of Techno!o$y, nc. -=T, for short/, a stoc corporation en$a$e in the operation, a'on$ others, of an

eucationa! institution. +ccorin$ to petitioners, the 'inority stocho!ers of =T, so'eti'e on June 1, 1:86 in theprincipa! o


30/33

1st issue *etitioners wou! !ie us to ho! private responents civi!!y !ia5!e espite their ac%uitta! in #ri'ina!#ases. They 5ase their c!ai' on the a!!e$e i!!e$a! issuance 5y private responents of Reso!ution No. 48, series of1:86 orerin$ the is5urse'ent of corporate funs in the a'ount of *186,4;0.;0 representin$ retroactiveco'pensation as of June 1, 1:8" in favor of private responents, 5oar 'e'5ers of =T, p!us *1,4"3,:;0.;: for thesu5se%uent co!!ective sa!aries of private responents every 1"th an 30th of the 'onth unti! the (!in$ of thecri'ina! co'p!aints a$ainst the' on arch 1::1. *etitioners 'aintain that this $rant of co'pensation to private

responents is proscri5e uner ection 30 of the #orporation #oe, thus, private responents are o5!i$e to returnthese a'ounts to the corporation with interest.

=e cannot sustain the petitioners. The pertinent section of the #orporation #oe provies ec. 30. #o'pensationof irectors P n the a5sence of any provision in the 5y)!aws (in$ their co'pensation, the irectors sha!! not

receive any co'pensation, as such irectors, ecept for reasona5!e per ie's *rovie, however, That any suchco'pensation -other than per ie's/ 'ay 5e $rante to irectors 5y the vote of the stocho!ers representin$ at

!east a 'a@ority of the outstanin$ capita! stoc at a re$u!ar or specia! stocho!ersU 'eetin$. n no case sha!! thetota! year!y co'pensation of irectors, as such irectors, ecee ten -10/ percent of the net inco'e 5eforeinco'e ta of the corporation urin$ the precein$ year.

Iner the fore$oin$ section, there are on!y two -2/ ways 5y which 'e'5ers of the 5oar can 5e $ranteco'pensation apart fro' reasona5!e per ie's -1/ when there is a provision in the 5y)!aws (in$ theirco'pensationQ an -2/ when the stocho!ers representin$ a 'a@ority of the outstanin$ capita! stoc at a re$u!aror specia! stocho!ersU 'eetin$ a$ree to $ive it to the'.

=orthy of note is the c!ear phraseo!o$y of ection 30 which states OETFhe irectors sha!! not receive any

co'pensation, as such irectors, O The una'5i$uous i'p!ication is that 'e'5ers of the 5oar 'ay receiveco'pensation, in aition to reasona5!e per ie's, when they rener services to the corporation in a capacity otherthan as irectorsBtrustees. n the case at 5ench, Reso!ution No. 48, s. 1:86 $rante 'onth!y co'pensation toprivate responents not in their capacity as 'e'5ers of the 5oar, 5ut rather as o


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The ac%uitta! in #ri'ina! #ases is not 'ere!y 5ase on reasona5!e ou5t 5ut rather on a (nin$ that the accuse)private responents i not co''it the cri'ina! acts co'p!aine of. Thus, pursuant to the a5ove ru!e an sett!e

@urispruence, any civi! action e e!icto cannot prosper. +c%uitta! in a cri'ina! action 5ars the civi! action arisin$therefro' where the @u$'ent of ac%uitta! ho!s that the accuse i not co''it the cri'ina! acts i'pute tothe'. =?RDR, the instant petition is here5y >N> with costs a$ainst petitioners. D DR>R>.

T+rner vs. Loren@o S*i%%in)

acts

The petitioners -*hi!ip an !nora Turner/ he! 1,010,000 shares of stoc of the responent -orenAo hippin$

#orp./, a o'estic corporation en$a$e pri'ari!y in car$o shippin$ activities. The responent ecie to a'en itsartic!es of incorporation to re'ove the stocho!ers& pre)e'ptive ri$hts to new!y issue shares of stoc. The

petitioners vote a$ainst the a'en'ent an e'ane pay'ent of their shares at the rate of *2.2;6Bshare 5aseon the 5oo va!ue of the shares, or a tota! of *2,2:8,;60.00.

The responent foun the fair va!ue of the shares e'ane to 5e unaccepta5!e. t insiste that the 'aret va!ueon the ate 5efore the action to re'ove the pre)e'ptive ri$ht was taen shou! 5e the va!ue, or *0.41Bshare-*414,100.00/ an that the pay'ent cou! 5e 'ae on!y if the responent ha unrestricte retaine earnin$s in its5oos to cover the va!ue of the shares, which was not the case.

The isa$ree'ent on the va!uation of the shares !e the parties to constitute an appraisa! co''ittee pursuant toec. 82 of the #orporation #oe. The co''ittee reporte its va!uation of *2."4Bshare, for an a$$re$ate va!ue of*2,"6",400.00.

u5se%uent!y, the petitioners e'ane pay'ent 5ase on the va!uation p!us 2B'onth pena!ty fro' the ate oftheir ori$ina! e'an for pay'ent, as we!! as the rei'5urse'ent of the a'ounts avance as professiona! fees tothe appraisers.

Responent refuse the petitioners& e'an, ep!ainin$ that pursuant to the #orporation #oe, the issentin$stocho!ers eercisin$ their appraisa! ri$hts cou! 5e pai on!y when the corporation ha unrestricte retaine

earnin$s to cover the fair va!ue of the shares, 5ut that it ha no retaine earnin$s at the ti'e of the petitioners&e'an, as 5orne out 5y its inancia! tate'ents for isca! Hear 1::: showin$ a e(cit of *;2,:;3,114.00 as of

>ece'5er 31, 1:::.

Ipon the responent&s refusa! to pay, the petitioners sue the responent for co!!ection an a'a$es in the RT# on

January 22, 2001.

The petitioners (!e their 'otion for partia! su''ary @u$'ent, c!ai'in$ that the responent has an accu'u!ate

unrestricte retaine earnin$s of *11,:;",4:0.00, evience 5y its inancia! tate'ent as of the Luarter nin$arch 31, 2002Q


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The responent oppose the 'otion for partia! su''ary @u$'ent, statin$ that the eter'ination of theunrestricte retaine earnin$s shou! 5e 'ae at the en of the (sca! year of the responent, an that thepetitioners i not have a cause of action a$ainst the responent.

RT# $rante the petitioners& 'otion (in$ the fair va!ue of the shares of stocs at *2."4 per share. The eviencesu5'itte shows that the responent has retaine earnin$s of *11,:;",4:0 as of arch 21, 2002. This is not

ispute 5y the efenant. ts on!y ar$u'ent a$ainst payin$ is that there 'ust 5e unrestricte retaine earnin$s atthe ti'e the e'an for pay'ent is 'ae. RT# further state that the !aw oes not say that the unrestricte

retaine earnin$s 'ust eist at the ti'e of the e'an. ven if there are no retaine earnin$s at the ti'e thee'an is 'ae if there are retaine earnin$s !ater, the fair va!ue of such stocs 'ust 5e pai. The on!y restriction

is that there 'ust 5e su an the#ivi! #ase is orere >>.

ssue

=DN the petitioners have a va!i cause of action a$ainst the responent.

?e!

No. # uphe! the ecision of the #+. RT# acte in ecess of its @urisiction.

No pay'ent sha!! 5e 'ae to any issentin$ stocho!er un!ess the corporation has unrestricte retaine earnin$sin its 5oos to cover the pay'ent -app!y the Trust fun octrine/. n case the corporation has no avai!a5!eunrestricte retaine earnin$s in its 5oos, ec. 83 provies that if the issentin$ stocho!er is not pai the va!ueof his shares within 30 ays after the awar, his votin$ an ivien ri$hts sha!! i''eiate!y 5e restore.

The responent ha inisputa5!y no unrestricte retaine earnin$s in its 5oos at the ti'e the petitionersco''ence the #ivi! #ase on January 22, 2001. t prove that the responent&s !e$a! o5!i$ation to pay the va!ue ofthe petitioners& shares i not yet arise. The Turners& ri$ht of action arose on!y when petitioner ha a!reayretaine earnin$s in the a'ount of *11,:;",4:0.00 on arch 21, 2002Q such ri$ht of action was ineistent on

January 22, 2001 when they (!e the #o'p!aint.

The RT# conc!ue that the responent&s o5!i$ation to pay ha accrue 5y its havin$ the unrestricte retaineearnin$s after the 'ain$ of the e'an 5y the petitioners. t 5ase its conc!usion on the fact that the #orporation

#oe i not provie that the unrestricte retaine earnin$s 'ust a!reay eist at the ti'e of the e'an.

The RT#&s construa! of the #orporation #oe was unsustaina5!e, 5ecause it i not tae into account the petitioners&

!ac of a cause of action a$ainst the responent. n orer to $ive rise to any o5!i$ation to pay on the part of theresponent, the petitioners shou! (rst 'ae a va!i e'an that the responent refuse to pay espite havin$

unrestricte retaine earnin$s. Dtherwise, the responent cou! not 5e sai to 5e $ui!ty of any actiona5!e o'issionthat cou! sustain their action to co!!ect.

Neither i the su5se%uent eistence of unrestricte retaine earnin$s after the (!in$ of the co'p!aint cure the !acof cause of action. The petitioners& ri$ht of action cou! on!y sprin$ fro' an eistin$ cause of action. Thus, aco'p!aint whose cause of action has not yet accrue cannot 5e cure 5y an a'ene or supp!e'enta! p!eain$a!!e$in$ the eistence or accrua! of a cause of action urin$ the penency of the action. or, on!y when there is aninvasion of pri'ary ri$hts, not 5efore, oes the a@ective or re'eia! !aw 5eco'e operative. eri!y, a pre'atureinvocation of the court&s intervention reners the co'p!aint without a cause of action an is'issi5!e on such$roun. n short, the #ivi! #ase, 5ein$ a $roun!ess suit, shou! 5e is'isse.


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ven the fact that the responent a!reay ha unrestricte retaine earnin$s 'ore than su

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