Rights of Shareholders Case Digests

8/10/2019 Rights of Shareholders Case Digests

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RAMON C. LEE and ANTONIO DM. LACDAO, petitioners,vs. THE HON. COURT OF APPEALS, SACOBA MANUFACTURINGCORP., PABLO GONZALES, JR. and THOMAS GONZALES,respondents.G.R. No. 93695

F !"#a"$ %, &99'

FACTS(

What is the nature of the voting trust agreement executed betweentwo parties in this case? Who owns the stocks of the corporation underthe terms of the voting trust agreement? How long can a voting trustagreement remain valid and e ective? Did a director of the corporationcease to be such upon the creation of the voting trust agreement?

These are the uestions the answers to which are necessar! inresolving the principal issue in this petition for certiorari

complaint for a sum of mone! was "led b! the #nternational $orporate%ank, #nc. against the private respondents who, in turn, "led a thirdpart! complaint against &'(& and the petitioners

the trial court issued an order re uiring the issuance of an aliassummons upon &'(& through the D%) as a conse uence of thepetitioner*s letter informing the court that the summons for &'(& waserroneousl! served upon them considering that the management of &'(& had been transferred to the D%).

D%) claimed that it was not authori+ed to receive summons on behalf of &'(& since the D%) had not taken over the compan! which has aseparate and distinct corporate personalit! and existence.

private respondents argued that the voting trust agreement datedarch --, - /- did not divest the petitioners of their positions as

president and executive vice0president of &'(& so that service of summons upon &'(& through the petitioners as corporate o1cers wasproper.

trial court upheld the validit! of the service of summons on &'(&

through the petitioners, thus, den!ing the latter*s motion forreconsideration and re uiring &'(& to "led its answer through thepetitioners as its corporate o1cers.

the petitioners attached thereto a cop! of the voting trust agreementbetween all the stockholders of &'(& 2the petitioners included3, on theone hand, and the D%), on the other hand, whereb! the managementand control of &'(& became vested upon the D%).



trial court reversed itself and declared that service upon the petitionerswho were no longer corporate o1cers of &'(& cannot be considered asproper service of summons on &'(&.

a petition for certiorari was belatedl! submitted b! the privaterespondent before the public respondent

the trial court, not having been noti"ed of the pending petition forcertiorari with public respondent issued an 4rder declaring as "nal the4rder dated &pril 56, - /

)7T#T#4879:; 2-3 that the execution of the voting trust agreement b! a stockholderswhereb! all his shares to the corporation have been transferred to thetrustee deprives the stockholders of his position as director of the

corporation< to rule otherwise, as the respondent $ourt of &ppeals did,would be violative of section 5= of the $orporation $ode 2 Rollo , pp.5> 0=5>=3< and253 that the petitioners were no longer acting or holding an! of thepositions provided under 9ule -@, :ection -= of the 9ules of $ourtauthori+ed to receive service of summons for and in behalf of theprivate domestic corporation so that the service of summons on &'(&e ected through the petitioners is not valid and ine ective< to maintainthe respondent $ourt of &ppeals* position that &'(& was properl!served its summons through the petitioners would be contrar! to thegeneral principle that a corporation can onl! be bound b! such acts

which are within the scope of its o1cers* or agents* authorit!

#::A7; whether or not there was proper service of summons on &lfa#ntegrated Textile ills 2&'(&, for short3 through the petitioners aspresident and vice0president, allegedl!, of the subBect corporation afterthe execution of a voting trust agreement between &'(& and theDevelopment %ank of the )hilippines 2D%), for short3.

9A'#8C; We "nd the petitioners* position meritorious.

De"nition E4T#8C T9A:T 2%allentineFs 'aw Dictionar!3

trust created b! an agreement between a group of the stockholders of a corporation and the trustee or b! a group of identical agreementsbetween individual stockholders and a common trustee, whereb! it isprovided that for a term of !ears, or for a period contingent upon acertain event, or until the agreement is terminated, control over thestock owned b! such stockholders, either for certain purposes or for allpurposes, is to be lodged in the trustee, either with or without a



reservation to the owners, or persons designated b! them, of thepower to direct how such control shall be used.

$orporation $ode E4T#8C T9A:T: :7$ 6

GThe law simpl! provides that a voting trust agreement is anagreement in writing whereb! one or more stockholders of acorporation consent to transfer his or their shares to a trustee in orderto vest in the latter voting or other rights pertaining to said shares for aperiod not exceeding "ve !ears upon the ful"llment of statutor!conditions and such other terms and conditions speci"ed in theagreement. The "ve !ear0period ma! be extended in cases where thevoting trust is executed pursuant to a loan agreement whereb! theperiod is made contingent upon full pa!ment of the loan.

4ne or more stockholders of a stock corporation ma! create a voting

trust for the purpose of conferring upon a trustee or trustees the rightto vote and other rights pertaining to the share for a period rightspertaining to the shares for a period not exceeding "ve 263 !ears at an!one time;

)rovided, that in the case of a voting trust speci"call! re uired as acondition in a loan agreement, said voting trust ma! be for a periodexceeding 263 !ears but shall automaticall! expire upon full pa!ment of the loan.

& voting trust agreement must be in writing and notari+ed, and shall

specif! the terms and conditions thereof.

& certi"ed cop! of such agreement shall be "led with the corporationand with the :ecurities and 7xchange $ommission< otherwise, saidagreement is ine ective and unenforceable.

The certi"cate or certi"cates of stock covered b! the voting trustagreement shall be cancelled and new ones shall be issued in thename of the trustee or trustees stating that the! are issued pursuant tosaid agreement. #n the books of the corporation, it shall be noted thatthe transfer in the name of the trustee or trustees is made pursuant to

said voting trust agreement.

%! its ver! nature, a voting trust agreement results in the separation of the voting rights of a stockholder from his other rights such as;

-. the right to receive dividends,5. the right to inspect the books of the corporation,=. the right to sell certain interests in the assets of the corporation

and other rights to which a stockholder ma! be entitled until the



li uidation of the corporation.

However, in order to distinguish a voting trust agreement from proxiesand other voting pools and agreements, it must pass three criteria ortests, namel!;

2-3 that the voting rights of the stock are separated from the otherattributes of ownership<253 that the voting rights granted are intended to be irrevocable for

a de"nite period of time< and2=3 that the principal purpose of the grant of voting rights is to

ac uire voting control of the corporation.

Ander section 6 of the $orporation $ode, supra, a voting trustagreement ma! confer upon a trustee not onl! the stockholder*s votingrights but also other rights pertaining to his shares as long as thevoting trust agreement is not entered Ifor the purpose of

circumventing the law against monopolies and illegal combinations inrestraint of trade or used for purposes of fraud.I

The execution of a voting trust agreement, therefore, ma! create adichotom! between the e uitable or bene"cial ownership of thecorporate shares of a stockholders, on the one hand, and the legal titlethereto on the other hand.

#n support of their contention, the petitioners invoke section 5= of the$orporation $ode which provides, in part, that;

7ver! director must own at least one 2-3 share of the capital stock of the corporation of which he is a director which share shall stand in hisname on the books of the corporation. &n! director who ceases to bethe owner of at least one 2-3 share of the capital stock of thecorporation of which he is a director shall thereb! cease to be director

7((7$T; from legal titleholder or owner of the shares subBect of thevoting trust agreement, he becomes the e uitable or bene"cial owner.

#ssue whether the change in his status deprives the stockholder of the right to ualif! as a director under section 5= of the present

$orporation $ode which deletes the phrase Iin his own right.I

The facts of this case show that the petitioners, b! virtue of the votingtrust agreement executed in - /- disposed of all their shares throughassignment and delivery in favor of the DBP, as trustee . $onse uentl!,the petitioners ceased to own at least one share standing in theirnames on the books of &'(& as re uired under :ection 5= of the new$orporation $ode. The! also ceased to have an!thing to do with the



management of the enterprise. The petitioners ceased to be directors.Hence, the transfer of the petitioners* shares to the D%) createdvacancies in their respective positions as directors of &'(&.

$onsidering that the voting trust agreement between &'(& and the

D%) transferred legal ownership of the stock covered b! theagreement to the D%) as trustee, the latter became the stockholder of record with respect to the said shares of stocks. #n the absence of ashowing that the D%) had caused to be transferred in their names oneshare of stock for the purpose of ualif!ing as directors of &'(&, thepetitioners can no longer be deemed to have retained their status aso1cers of &'(& which was the case before the execution of the subBectvoting trust agreement. There appears to be no dispute from therecords that D%) has taken over full control and management of the"rm.

There can be no reliance on the inference that the "ve0!ear period of the voting trust agreement in uestion had lapsed in - /J so that thelegal title to the stocks covered b! the said voting trust agreementipso facto reverted to the petitioners as bene"cial owners pursuant tothe Jth paragraph of section 6 of the new $orporation $ode

the ultimate issue of whether or not there was proper service of summons on &'(& through the petitioners is readil! answered in thenegative.

To rule otherwise, as correctl! argued b! the petitioners, will

contravene the general principle that a corporation can onl! be boundb! such acts which are within the scope of the o1cer*s or agent*sauthorit!.

)7T#T#48 C9&8T7D.

97)A%'#$ 4( TH7 )H 2)$CC3 v. :&8D#C&8%&K&8G. R. No. &)**+9A "- 3), '))3

FACTS(

)residential $ommission on Cood Covernment 2)$CC3 conducted an7T)# stockholders meeting during which a )$CC controlled board of directors was elected. & special stockholders meeting was laterconvened b! the registered 7T)# stockholders wherein another set of board of directors was elected, as a result of which two sets of suchboard and o1cers were elected.



&frica, a stockholder of 7T)#, alleging that the )$CC had since Lanuar!5 , - // been Millegall! NexercisingF the rights of stockholders of 7T)#,especiall! in the election of the members of the board of directors,"led the above0said motion before the :andiganba!an.

The )$CC did not obBect to &fricaFs motion provided that;2-3 &n 4rder be issued upholding the right of )$CC to vote all the$lass M&O shares of 7T)#.

253 #n the alternative, in the remote event that )$CCFs right to votethe se uestered shares be not upheld, an 4rder be issued;

a. Disregarding the :tock and Transfer %ook and %ooklet of :tock $erti"cates of 7T)# in determining who can vote theshares in an &nnual :tockholders eeting of 7T)#,

b. &llowing )$CC to vote twent!0three and P- percent25=. Q3 of the total subscription in 7T)#, and

c. Directing the amendment of the &rticles of #ncorporation

and %!0laws of 7T)# providing for the minimum safeguardsfor the conservation of assets x x x prior to the calling of astockholders meeting

:&8D#C&8%&K&8; The 7xecutive $lerk of $ourt of this Division shallissue the call and notice of annual stockholders meeting of 7T)#addressed to all the dul! registeredPrecorded stockholders of 7T)#. Thestockholders meeting shall be conducted under the supervision andcontrol of this $ourt, through r. Lustice :abino 9. de 'eon, Lr. #naccordance with the :upreme $ourt ruling in $oBuangco et al vs.&+cuna, et al., supra, onl! the registered owners, their dul! authori+ed

representatives or their proxies ma! vote their corresponding shares.

:$; this $ourt enBoined the :andiganba!an from 2a3 implementing its9esolution of 8ovember -=, - 5, and 2b3 holding the stockholdersFmeeting of 7T)# scheduled on 8ovember 5>, - 5, at 5; p.m.

the )$CC, in earl! - 6, "led a ME79K A9C78T )7T#T#48 (49&ATH49#TK T4 H4'D :)7$#&' :T4$RH4'D79:F 77T#8C (49 GTH7:4'7 )A9)4:7 4( #8$97&:#8C G7T)#Fs &ATH49#S7D $&)#T&' :T4$R,Oit claiming that the increase in authori+ed capital stock was necessar!in light of the re uirements laid down b! 7xecutive 4rder 8o. -

The )$CC0controlled 7T)# board of directors thus authori+ed the 7T)#$hair and $orporate :ecretar! to call the special stockholdersmeeting.

&frica "led before this $ourt a motion to cite the )$CC Mand itsaccomplicesO in contempt and Mto nullif! the Nstockholders meetingFcalledPconducted b! )$CC and its accomplices,O he contending that



onl! this $ourt, and not the :andiganba!an, has the power to authori+ethe )$CC to call a stockholders meeting and vote the se uesteredshares

&(9#$&; &frica "led before this $ourt a motion to cite the )$CC Mand its

accomplicesO in contempt and Mto nullif! the Nstockholders meetingFcalledPconducted b! )$CC and its accomplices,O he contending thatonl! this $ourt, and not the :andiganba!an, has the power to authori+ethe )$CC to call a stockholders meeting and vote the se uesteredshares

#::A7; whether the )$CC can vote the se uestered 7T)# $lass M&Oshares in the stockholders meeting for the election of the board of directors.

9A'#8C; The )$CC cannot thus vote se uestered shares, except when

there are Mdemonstrabl! weight! and defensible groundsO or Mwhenessential to prevent disappearance or wastage of corporate propert!.O

a. PCGG May Not E ercise !cts of "#nership

the act of se uestrationG, free+ing or provisional takeover of propert! does not import or bring about a divestment of titleover said propert!< Git does not make the )$CC the ownerthereof. #n relation to the propert! se uestered, fro+en orprovisionall! taken over, the PCGG is a conservator, not ano#ner .

b. PCGG $as "nly Po#ers of !dministration

such as to bring and defend actions in its own name< receiverents< collect debts due< pa! outstanding debts due< andgenerall! do such other acts and things as ma! be necessar! toful"ll its mission as conservator and administrator.

c. Po#ers over Business Enterprises %a&en "ver 'y Marcos or Entities or Persons Close to him( )imitations %hereon

There should be no hast!, indiscriminate, unreasonedreplacement or substitution of management o1cials or change of policies, particularl! in respect of viable establishments. #n fact,such a replacement or substitution should be avoided if at allpossible, and undertaken onl! when Busti"ed b! demonstrabl!tenable grounds and in line with the stated obBectives of the)$CC.



d. *oting of +e uestered +toc&( Conditions %herefor

The emorandum should be construed in such a manner as tobe consistent with, and not contradictor! to the 7xecutive 4rders

earlier promulgated on the same matter. There should be noexercise of the right to vote simpl! because the right exists, orbecause the stocks se uestered constitute the controlling or asubstantial part of the corporate voting power. The stock is notto be voted to replace directors, or revise the articles or b!0laws,or otherwise bring about substantial changes in polic!, programor practice of the corporation except for demonstrabl! weight!and defensible grounds, and alwa!s in the context of the statedpurposes of se uestration or provisional takeover, i.e., to preventthe dispersion or undue disposal of the corporate assets.Directors are not to be voted out simpl! because the power to do

so exists. :ubstitution of directors is not to be done withoutreason or rh!me, should indeed be shunned if at all possible, andundertaken onl! when essential to prevent disappearance orwastage of corporate propert!, and alwa!s under suchcircumstances as to assure that replacements are trul!possessed of competence, experience and probit!.

#8 TH7 $&:7; there was ade uate Busti"cation to vote theincumbent directors out of o1ce and elect others in their steadbecause the evidence showed prima facie that the former were

Bust tools of )resident arcos and were no longer owners of an!

stock in the "rm, if the! ever were at all.

The issue of whether )$CC ma! vote the se uestered shares in : $necessitates a determination of at least two factual matters;

-. whether there is prima facie evidence showing that thesaid shares are ill0gotten and thus belong to the state< and

5. whether there is an immediate danger of dissipation thusnecessitating their continued se uestration and voting b!the )$CC while the main issue pends with the:andiganba!an

The two0tiered test, however, does not appl! in cases involving fundsof Mpublic character.O#n such cases, the government is granted the authorit! to vote saidshares, namel!;

2-3 Where government shares are taken over b! private personsor entities whoPwhich registered them in their own names, and

253 Where the capitali+ation or shares that were ac uired withpublic funds somehow landed in private hands



#n short, when se uestered shares registered in the names of privateindividuals or entities are alleged to have been ac uired with ill0gottenwealth, then the two0tiered test is applied. However, when these uestered shares in the name of private individuals or entities are

shown, prima facie, to have been 2-3 originall! government shares, or253 purchased with public funds or those a ected with public interest,then the two0tiered test does not appl!. 9ather, the public characterexception in Baseco v. PCGG and Con-uanco r. v. Ro as prevail< that is,the government shall vote the shares.

#n short, the :andiganba!an held that the public character exceptiondoes not appl!, in which case it should have proceeded to appl! thetwo0tiered test. This it failed to do.

The uestions thus remain if there is prima facie evidence showing thatthe subBect shares are ill0gotten and if there is imminent danger of

dissipation. This $ourt is not, however, a trier of facts, hence, it is notin a position to rule on the correctness of the )$CCFs contention.$onse uentl!, this issue must be remanded to the :andiganba!an forresolution.

87 T #::A7; whether the )$CC can vote all the above shares, the:andiganba!an, "nding in the a1rmative, held in its 9esolution of 8ovember -=, - 5;

9A'#8C; $onsidering the $ompromise &greement entered into b! the)$CC and 9oberto :. %enedicto in $ivil $ase 8o. wherein 9oberto

:. %enedicto assigned and transferred to the Covernment -5./Q of theshares of stock of 7T)#, which $ompromise &greement was made thebasis of a Budgment of this $ourt, it is onl! proper that the )$CC ma!vote these shares in the stockholders meeting after said Budgmentshall have become "nal and executor!. %esides, before the )$CC canvote these shares, the transfer to the :tate of the shares of stock mustbe entered in the :tock and Transfer %ook, the entries therein beingthe onl! basis for which the stockholder ma! vote the said shares.

#n re uiring that the transfer of the %enedicto shares be "rst recordedin 7T)#Fs :tock and Transfer %ook before the )$CC ma! vote them, the

:andiganba!an committed no grave abuse of discretion. (or :ectionJ= of the $orporation $ode provides;

:ec. J=. Certi/cate of stoc& and transfer of shares. The capital stockof stock corporations shall be divided into shares for which thecerti"cates signed b! the president or vice president, countersigned b!the secretar! or assistant secretar!, and sealed with the seal of thecorporation shall be issued in accordance with the b!0laws. :hares of



stock so issued are personal propert! and ma! be transferred b! thedeliver! of the certi"cate or certi"cates endorsed b! the owner or hisattorne!0in0fact or other person legall! authori+ed to make thetransfer. 8o transfer, however, shall be valid, except as between theparties to the transaction, the date of the transfer, the number of the

certi"cate or certi"cates and the number of shares transferred.7xplaining wh! registration is a prere uisite for the voting of shares

The purpose of registration, therefore, is two0fold;-. to enable the transferee to exercise all the rights of a

stockholder, including the right to vote and to be voted for, and5. to inform the corporation of an! change in share ownership so

that it can ascertain the persons entitled to the rights andsubBect to the liabilities of a stockholder.

Antil challenged in a proper proceeding, a stockholder of record has aright to participate in an! meeting< his vote can be properl! counted todetermine whether a stockholdersF resolution was approved, despitethe claim of the alleged transferee.

4n the other hand, a person who has purchased stock, and who desiresto be recogni+ed as a stockholder for the purpose of voting, mustsecure such a standing b! having the transfer recorded on thecorporate books. Antil the transfer is registered, the transferee is not astockholder but an outsider.

&lthough a stock certi"cate is sometimes regarded as uasi0negotiable,in the sense that it ma! be transferred b! deliver!, it is well settledthat the instrument is non0negotiable, because the holder thereof takesit without preBudice to such rights or defenses as the registered owneror creditor ma! have under the law, except insofar as such rights ordefenses are subBect to the limitations imposed b! the principlesgoverning estoppel.

That the )$CC found the stock certi"cates endorsed in blank does notnecessaril! make it the owner of the shares represented therein. Theirtrue ownership has to be ascertained in a proper proceeding. :imilarl!,

the ownership of the 8ieto shares has !et to be adBudicated. That the!allegedl! belong to former )resident arcos does not make the )$CCits owner. The )$CC must, in an appropriate proceeding, "rst establishthat the! trul! belong to the former )resident and that the! were ill0gotten. )ending "nal Budgment over the ownership of these shares,the )$CC ma! not register and vote the 8ieto and the alacaUangshares -n -/0 na1 . #f the :andiganba!an "nds, however, that there isevidence of dissipation of these shares, the )$CC ma! vote the same



a0 2on0 " a/o" thereof.

87 T #::A7; #t is necessar! to achieve a balancing of or a reconciliationbetween the stockholdersF right to vote and the conservatorFs statutor!dut! to recover and in the process thereof, to conserve assets, thought

to be ill0gotten wealth, until "nal Budicial determination of the characterof such assets or until a "nal compromise agreement between theparties is reached.

9A'#8C;-. the $ourt considers and so holds that in order to enable the

)$CC to perform its functions as conservator of the se uesteredshares of stock pending "nal determination b! the courts as towhether or not the same constitute ill0gotten wealth or a "nalcompromise agreement between the parties, the )$CC must berepresented in the %oard of Directors of the corporation and to its

maBorit!0owned subsidiaries or a1liates and in the 7xecutive$ommittee 2or its e uivalent3 and the &udit $ommittee thereof,in at least an e o0cio 2i.e., non0voting3 capacit!.

5. the $ourt considers and so holds that the following minimumsafeguards must be set in place and carefull! maintained until"nal Budicial resolution of the uestion of whether or not these uestered shares of stock 2or, in a proper case, the underl!ingassets of the corporation concerned3 constitute ill0gotten wealthor until a "nal compromise agreement between the parties isreached

Whether a particular case falls within the "rst or the second t!pe of situation described above, the following safeguards are indispensabl!necessar!;

-. The se uestered shares and an! stock dividends pertaining tosuch shares, ma! not be sold, transferred, alienated, mortgaged,or otherwise disposed of and no such sale, transfer or otherdisposition shall be registered in the books of the corporation,pending "nal Budicial resolution of the uestion of ill0gottenwealth or a "nal compromise agreement between the parties<and

5. Dividend and li uidating distributions shall not be delivered to

the registered stockholders of the se uestered shares, includingstock dividends pertaining to such shares, but shall instead bedeposited in an escrow, interest0bearing, account in a "rst classbank or banks, acceptable to the :andiganba!an, to be held b!such banks for the bene"t of whoever is held b! "nal Budicialdecision or "nal compromise agreement, to be entitled to theshares involved.



87 T #::A7; the uestion on the validit! of the )$$CFs voting the $lassM&O shares to increase the authori+ed capital stock of 7T)#.

9A'#8C;-. (irst, that this $ourt rendered decisions holding that the shares

of &frica, &794$4 and )4'KC48 are not or are no longerse uestered is of little conse uence since the decisions werepromulgated a4/ " the :andiganba!an issued its resolutiongranting the )$CC authorit! to call and hold the stockholdersmeeting to increase the authori+ed capital stock.

5. :econd, the )$CC correctl! argues that &frica has no cause of action to claim on behalf of &794$4 and )4'KC48 that thesetwo companies are entitled to vote their respective shares in thestockholders meeting to increase 7T)#Fs authori+ed capital stock.

IN SUM , this $ourt rules that;

2-3 The )$CC cannot vote se uestered shares to elect the 7T)#%oard of Directors or to amend the &rticles of #ncorporationfor the purpose of increasing the authori+ed capital stockunless there is a prima facie evidence showing that saidshares are ill0gotten and there is an imminent danger of dissipation.

253 The 7T)# :tock and Transfer %ook should be the basis fordetermining which persons have the right to vote in thestockholders meeting for the election of the 7T)# %oard of Directors.

2=3 The )$CC is entitled to vote the shares ceded to it b! 9oberto

:. %enedicto and his controlled corporations under the$ompromise &greement, provided that the shares are "rstregistered in the name of the )$CC. The )$CC ma! notregister the transfer of the alacaUang and the 8ieto sharesin the 7T)# :tock and Transfer %ook< however, it ma! vote thesame as conservator provided that the )$CC satis"es thetwo0tiered test devised b! the $ourt in Co-uangco v. Calpo ,supra .

2@3 The safeguards laid down in the case of Co-uangco v. Ro asshall be incorporated in the 7T)# &rticles of #ncorporationsubstantiall! contemporaneous to, but not before, the election

of the 7T)# %oard of Directors.263 embers of the :andiganba!an shall not participate in the

stockholders meeting for the election of the 7T)# %oard of Directors. 8either shall a $lerk of $ourt be appointed to callsuch meeting and issue notices thereof. The :andiganba!anshall appoint, or the parties ma! agree to constitute, acommittee of competent and impartial persons to call, sendnotices and preside at the meeting for the election of the 7T)#



%oard of Directors< and2J3 This $ourt has no Burisdiction over the motion to cite the

)$CC and Mits accomplicesO in contempt and to nullif! thestockholders meeting of arch ->, - >.

REPUBLIC OF THE PHILIPPINES, " " 0 n/ d !$ /PRESIDENTIAL COMMISSION ON GOOD GO ERNMENT 7PCGG8,

petitioner, vs. COCOFED / a . and BALLARES / a ., EDUARDOM. COJUANGCO JR. and / SANDIGANBA AN 7F-"0/ D- -0-on8respondents .G.R. No0. &%*)6':6%D 2 1! " &%, '))&

FACTS(

The right to vote se uestered shares of stock registered in the namesof private individuals or entities and alleged to have been ac uiredwith ill0gotten wealth shall, as a rule, be exercised b! the registeredowner. The )$CC ma!, however, be granted such voting rightprovided it can 2-3 show prima facie evidence that the wealth andPorthe shares are indeed ill0gotten< and 253 demonstrate imminent dangerof dissipation of the assets, thus necessitating their continuedse uestration and voting b! the government until a decision, rulingwith "nalit! on their ownership, is promulgated b! the proper court.

However, the foregoing Mtwo0tieredO test does not appl! when the

se uestered stocks are ac uired with funds that are prima facie publicin character or, at least, are a ected with public interest. #nasmuch asthe subBect A$)% shares in the present case were undisputabl!ac uired with coco lev! funds which are public in character, then theright to vote them shall be exercised b! the )$CC. #n sum, the MpubliccharacterO test, not the Mtwo0tieredO one, applies in the instantcontrovers!.

The movants $4$4(7D, et al. and %allares, et al. as well as 7duardo$oBuangco, et al., who were acknowledged to be registeredstockholders of the A$)% are authori+ed, as are all other registered

stockholders of the Anited $oconut )lanters %ank, until further ordersfrom this $ourt, to exercise their rights to vote their shares of stockand themselves to be voted upon in the Anited $oconut )lanters %ank2A$)%3 at the scheduled :tockholdersF eeting on arch J, 5 - or onan! subse uent continuation or resetting thereof, and to perform suchacts as will normall! follow in the exercise of these rights as registeredstockholders.



7xecutive 4rder 8o. -@, on the other hand, empowered the )$CC, withthe assistance of the 41ce of the :olicitor Ceneral and othergovernment agencies, inter alia , to "le and prosecute all casesinvestigated b! it under 74 8os. - and 5.

&mong the properties se uestered b! the $ommission were shares of stock in the Anited $oconut )lanters %ank 2A$)%3 registered in thenames of the alleged Mone million coconut farmers,O the so0called$oconut #ndustr! #nvestment (und companies 2$##( companies3 and)rivate 9espondent 7duardo $oBuangco Lr

the $ourt rendered its "nal Decision in C9 8o. J >=, nullif!ing andsetting aside the 8ovember -6, - 9esolution of the :andiganba!anwhich, as earlier stated, lifted the se uestration of the subBect A$)%shares. The express impleading of herein 9espondents $4$4(7D et al.was deemed unnecessar! because Mthe Budgment ma! simpl! be

directed against the shares of stock shown to have been issued inconsideration of ill0gotten wealthO

(urthermore, the companies Mare simpl! the res in the actions for therecover! of illegall! ac uired wealth, and there is, in principle, nocause of action against them and no ground to implead them asdefendants in said case.

:ix !ears later, on (ebruar! -=, 5 -, the %oard of Directors of A$)%received from the &$$9& 'aw 41ce a letter written on behalf of the$4$4(7D and the alleged nameless one million coconut farmers,

demanding the holding of a stockholdersF meeting for the purpose of,among others, electing the board of directors. #n response, the boardapproved a 9esolution calling for a stockholdersF meeting on arch J,5 - at three oFclock in the afternoon.

Hence, this )etition b! the 9epublic of the )hilippines represented b!the )$CC.

#::A7; Despite the fact that the subBect se uestered shares werepurchased with coconut lev! funds 2which were declared public incharacter3 and the continuing e ectivit! of 9esolution dated (ebruar!

-J, - = in C.9. 8o. J >= which allows the )$CC to vote saidse uestered shares, 9espondent :andiganba!an, with grave abuse of discretion, issued its 4rder dated (ebruar! 5/, 5 - enBoining )$CCfrom voting the se uestered shares of stock in A$)%.

9A'#8C; #mpressed with merit

Ma-n I00# ( Who May Vote the Sequestered Shares of Stock?



General Rule1 +e uestered +hares !re *oted 'y the Registered $older

50tiered test;2-3 #s there prima facie evidence showing that the said shares are

ill0gotten and thus belong to the :tate?

253 #s there an imminent danger of dissipation, thus necessitatingtheir continued se uestration and voting b! the )$CC, whilethe main issue is pending with the :andiganba!an?

+e uestered +hares !c uired #ith Pu'lic 2unds !re an E ception

has provided two clear Mpublic characterO exceptions under which thegovernment is granted the authorit! to vote the shares;

2-3 Where government shares are taken over b! private persons or

entities whoPwhich registered them in their own names, and253Where the capitali+ation or shares that were ac uired with publicfunds somehow landed in private hands.

The exceptions are based on the common0sense principle that legal"ction must !ield to truth< that public propert! registered in the namesof non0owners is a ected with trust relations< and that the prima faciebene"cial owner should be given the privilege of enBo!ing the rightsVowing from the prima facie fact of ownership.

#n short, when se uestered shares registered in the names of privateindividuals or entities are alleged to have been ac uired with ill0gottenwealth, then the two0tiered test is applied. However, when these uestered shares in the name of private individuals or entities areshown, prima facie, to have been 2-3 originall! government shares, or253 purchased with public funds or those a ected with public interest,then the two0tiered test does not appl!. 9ather, the public characterexceptions in Baseco v. PCGG and Co-uangco r. v. Ro as prevail< thatis, the government shall vote the shares.

3CPB +hares 4ere !c uired 4ith Coconut )evy 2undsCoconut )evy 2unds !re !5ected 4ith Pu'lic 6nterest

MThis being so, the right of the Gpetitioners to vote stock in theirnames at the meetings of the A$)% cannot be conceded at this time.

That right still has to be established b! them before the:andiganba!an. Antil that is done, the! cannot be deemed legitimateowners of A$)% stock and cannot be accorded the right to vote them.O



MThe coconut lev! funds are clearl! a ected with public interest. Antilit is demonstrated satisfactoril! that the! have legitimatel! becomeprivate funds, the! must prima facie and b! reason of thecircumstances in which the! were raised and accumulated be

accounted subBect to the measures prescribed in 7.4. 8os. -, 5, and -@to prevent their concealment, dissipation, etc., which measures includethe se uestration and other orders of the )$CC complained of.O

To stress, the two0tiered test is applied onl! when the se uesteredasset in the hands of a private person is alleged to have been ac uiredwith ill0gotten wealth.

#n the present case, the se uestered A$)% shares are con"rmed tohave been ac uired with coco levies, not with alleged ill0gottenwealth. Hence, b! parit! of reasoning, the right to vote them is not

subBect to the Mtwo0tiered testO but to the public character of theirac uisition, which per !ntiporda v. +andigan'ayan cited earlier, must/rst be determined.

Coconut Levy Funds Are Pri a Facie Pu!"ic Funds

)ublic funds are those mone!s belonging to the :tate or to an! politicalsubdivision of the :tate< more speci"call!, taxes, customs duties andmone!s raised b! operation of law for the support of the governmentor for the discharge of its obligations. Andeniabl!, 2o2on#/ $4#nd0 0a/-04$ / -0 ; n "a d <n-/-on o4 #! -2 4#nd0, because of

the following reasons;-. $oconut lev! funds are raised with the use of the police andtaxing powers of the :tate.

#ndeed, coconut lev! funds partake of the nature of taxes which,in general, are enforced proportional contributions from personsand properties, exacted b! the :tate b! virtue of its sovereignt!for the support of government and for all public needs.

5. The! are levies imposed b! the :tate for the bene"t of thecoconut industr! and its farmers.

#n fact, 7xecutive 4rder 8o. @/- dated a! -, - / speci"call!likens the coconut lev! funds to the sugar lev! funds, !o/! -n; 0 2-a #! -2 4#nd0 a2=#-" d / "o#; / /a>-n;and o -2 o? "0 o4 / S/a/ . The sugar lev! funds, whichare strikingl! similar to the coconut levies in their imposition andpurpose, were declared public funds b! this $ourt



=. 9espondents have Budiciall! admitted that the se uesteredshares were purchased with public funds.

7 uall! important as the fact that the coconut lev! funds wereraised through the taxing and police powers of the :tate is

respondentsF e ective Budicial admission that these levies aregovernment funds. &s shown b! the attachments to theirpleadings, respondents concede that the $oconut $onsumers:tabili+ation (und 2$$:(3 and the $oconut #nvestmentDevelopment (und Mconstitute government funds x x x for thebene"t of coconut farmers.O

@. The $ommission on &udit 2$4&3 reviews the use of coconut lev!funds.

%ecause these funds have been subBected to $4& audit, there

can be no other conclusion than that the! are prima facie publicin character.

6. The %ureau of #nternal 9evenue 2%#93, with the ac uiescence of private respondents, has treated them as public funds.

(urthermore, the executive branch treats the coconut levies aspublic funds. Thus, 7xecutive 4rder 8o. 5>>, issued on:eptember 5@, - 6, directed the mode of treatment, utili+ation,administration and management of the coconut lev! funds.

J. The ver! laws governing coconut levies recogni+e their publiccharacter.

:A &9K;

#n sum, we hold that the :andiganba!an committed grave abuse of discretion in grossl! contradicting and e ectivel! reversing existing

Burisprudence, and in depriving the government of its right to vote these uestered A$)% shares which are prima facie public in character.

We also la! down the caveat that, in declaring the coco lev! funds to

be prima facie public in character, we are not ruling in an! "nalmanner on their classi"cation 00 whether the! are general or trust orspecial funds 00 since such classi"cation is not at issue here. :u1ce itto sa! that the public nature of the coco lev! funds is decreed b! the$ourt onl! for the purpose of determining the right to vote the shares,pending the "nal outcome of the said civil cases.

The resolution of the main cases has indeed been long overdue. 7ver!



e ort, both b! the parties and the :andiganba!an, should be exertedto /nally settle this controvers!.

)7T#T#48 C9&8T7D

LA&8 D. 7E&8C7'#:T& 7T &'., plainti s0appellants,vs. 9&(&7' :&8T4:, defendant0appellee.a! - , - 6

C.9. 8o. '0->5-

(&$T:;

This is an action b! the minorit! stockholders of a corporation againstits principal o1cer for damages resulting from his mismanagement of its a airs and misuse of its assets.

The complaint alleges that plainti s are minorit! stockholders of theEitali 'umber $ompan!, #nc., a )hilippine corporation organi+ed for theexploitation of a lumber concession in Samboanga, )hilippines<

that defendant holds more than 6 per cent of the stocks of saidcorporation and also is and alwa!s has been the president, manager,and treasurer thereof< and

that defendant, in such triple capacit!, through fault, neglect, andabandonment allowed its lumber concession to lapse and its propertiesand assets, among them machineries, buildings, warehouses, trucks,

etc., to disappear, thus causing the complete ruin of the corporationand total depreciation of its stocks.

The complaint therefore pra!s for Budgment re uiring defendant;2-3 to render an account of his administration of the corporate a airs

and assets;253 to pa! plainti s the value of t heir respective participation in said

assets on the basis of the value of the stocks held b! each of them< and

2=3 to pa! the costs of suit. )lainti s also ask for such other remed!as ma! be and e uitable.

lower court rendered its order, granting the motion for dismissal uponthe two grounds alleged b! defendant, and reconsideration of thisorder having been denied, plainti s have appealed to this $ourt.

#::A7; The appeal presents two uestions. The "rst refers to venueand the second, to the right of the plainti s to bring this action for theirbene"t.



9A'#8C; While plainti s ask for remed! to which the! are not entitledunless the re uirement of section -J of the $orporation 'aw be "rstcomplied with, we note that the action stated in their complaint issusceptible of being converted into a derivative suit for the bene"t of

the corporation b! a mere change in the pra!er. :uch amendment,however, is not possible now, since the complaint has been "led in thewrong court, so that the same last to be dismissed.

- st issue; %elieving that defendant resided in the province of 9i+al,herein plainti s brought their action in the $ourt of (irst #nstance of that province. %ut that belief proved erroneous, for the lower courtfound after hearing that defendant had his residence in #loilo. The"nding is based on defendant*s sworn statement not rebutted b! an!proof to the contrar!.

While the service of the summons was good in either %aguio or anilawe are of the opinion that the obBection of the defendant to the placeof trial was proper in both cases and that the trial court should haveheld that the venue was improperl! laid.

&s to the second uestion, the complaint shows that the action is fordamages resulting from mismanagement of the a airs and assets of the corporation b! its principal o1cer, it being alleged that defendant*smaladministration has brought about the ruin of the corporation andthe conse uent loss of value of its stocks. The inBur! complained of isthus primaril! to the corporation, so that the suit for the damages

claimed should be b! the corporation rather than b! the stockholders

The stockholders ma! not directl! claim those damages for themselvesfor that would result in the appropriation b!, and the distributionamong them of part of the corporate assets before the dissolution of the corporation and the li uidation of its debts and liabilities,something which cannot be legall! done in view of section -J of the$orporation 'aw, which provides;

8o shall corporation shall make or declare an! stock or bond dividendor an! dividend whatsoever from the pro"ts arising from its business,

or divide or distribute its capital stock or propert! other than actualpro"ts among its members or stockholders until after the pa!ment of its debts and the termination of its existence b! limitation or lawfuldissolution.

%ut while it is to the corporation that the action should pertain in casesof this nature, however, if the o1cers of the corporation, who are theones called upon to protect their rights, refuse to sue, or where a



demand upon them to "le the necessar! suit would be futile becausethe! are the ver! ones to be sued or because the! hold the controllinginterest in the corporation, then in that case an! one of thestockholders is allowed to bring suit

%ut in that case it is the corporation itself and not the plainti stockholder that is the real propert! in interest, so that such damagesas ma! be recovered shall pertain to the corporation

plainti stockholders have brought the action not for the bene"t of thecorporation but for their own bene"t, since the! ask that the defendantmake good the losses occasioned b! his mismanagement and pa! tothem the value of their respective participation in the corporate assetson the basis of their respective holdings.

$learl!, this cannot be done until all corporate debts, if there be an!,

are paid and the existence of the corporation terminated b! thelimitation of its charter or b! lawful dissolution in view of the provisionsof section -J of the $orporation 'aw.

FRANCIS CHUA, petitioner, vs. HON. COURT OF APPEALS andL DIA C. HAO, respondents .G.R. No. &5)*93No 1! " &9, '))%

FACTS(

private respondent '!dia Hao, treasurer of :iena 9ealt! $orporation,"led a complaint0a1davit with the $it! )rosecutor of anila charging(rancis $hua and his wife, 7lsa $hua, of four counts of falsi"cation of public documents

the said accused prepared, certi"ed, and falsi"ed the inutes of the&nnual :tockholders meeting of the %oard of Directors of the :iena9ealt! $orporation, dul! notari+ed before a 8otar! )ublic, &tt!. LuanitoC. Carcia and entered in his 8otarial 9egistr! as Doc 8o. - , )age 55,%ook 8o. #E and :eries of - @, and therefore, a public document, b!making or causing it to appear in said inutes of the &nnual

:tockholders eeting that one 'KD#& H&4 $HA& was present and hasparticipated in said proceedings, when in truth and in fact, as the saidaccused full! well knew that said '!dia $. Hao was never presentduring the &nnual :tockholders eeting

$hua "led before the $ourt of &ppeals a petition for certiorari. Thepetition alleged that the lower court acted with grave abuse of discretion in; 2-3 refusing to consider material facts< 253 allowing :iena



9ealt! $orporation to be impleaded as co0petitioner in :$& 8o. 0@/@J although it was not a part! to the criminal complaint in $riminal

$ase 8o. 5/6>5-< and 2=3 e ectivel! amending the information againstthe accused in violation of his constitutional rights.

)etitioner had argued before the $ourt of &ppeals that respondent hadno authorit! whatsoever to bring a suit in behalf of the $orporationsince there was no %oard 9esolution authori+ing her to "le the suit.

respondent Hao claimed that the suit was brought under the conceptof a derivative suit. 9espondent maintained that when the directors ortrustees refused to "le a suit even when there was a demand fromstockholders, a derivative suit was allowed.

$ourt of &ppeals; held that the action was indeed a derivative suit. Thecorporation was a necessar! part! to the petition "led with the 9T$

and even if private respondent "led the criminal case, her act shouldnot divest the $orporation of its right to be a part! and present its ownclaim for damages.

#::A7:;2-3 #s the criminal complaint in the nature of a derivative suit?253 #s :iena 9ealt! $orporation a proper petitioner in :$& 8o. 0

@/@J? and2=3 :hould private prosecutors be allowed to activel! participate in thetrial of $riminal $ase 8o. 5/6>5-.

9A'#8C; )7T#T#48 D78#7D.

- st issue;Ander :ection =J G-= of the $orporation $ode, read in relation to :ection5=, G-@ where a corporation is an inBured part!, its power to sue islodged with its board of directors or trustees. G-6 &n individualstockholder is permitted to institute a derivative suit on behalf of thecorporation wherein he holds stocks in order to protect or vindicatecorporate rights, whenever the o1cials of the corporation refuse tosue, or are the ones to be sued, or hold the control of the corporation.#n such actions, the suing stockholder is regarded as a nominal part!,

with the corporation as the real part! in interest& derivative action is a suit b! a shareholder to enforce a corporatecause of action. The corporation is a necessar! part! to the suit. &ndthe relief which is granted is a Budgment against a third person in favorof the corporation. :imilarl!, if a corporation has a defense to an actionagainst it and is not asserting it, a stockholder ma! intervene anddefend on behalf of the corporation



Ander the 9evised )enal $ode, ever! person criminall! liable for afelon! is also civill! liable. G-/ When a criminal action is instituted, thecivil action for the recover! of civil liabilit! arising from the o ensecharged shall be deemed instituted with the criminal action, unless theo ended part! waives the civil action, reserves the right to institute it

separatel! or institutes the civil action prior to the criminal action.the complaint was instituted b! respondent against petitioner forfalsif!ing corporate documents whose subBect concerns corporateproBects of :iena 9ealt! $orporation. $learl!, :iena 9ealt! $orporationis an o ended part!. Hence, :iena 9ealt! $orporation has a cause of action. &nd the civil case for the corporate cause of action is deemedinstituted in the criminal action.

However, the board of directors of the corporation in this case did notinstitute the action against petitioner. )rivate respondent was the one

who instituted the action. )rivate respondent asserts that she "led aderivative suit in behalf of the corporation. This assertion is inaccurate.8ot ever! suit "led in behalf of the corporation is a derivative suit. (ora derivative suit to prosper, it is re uired that the minorit! stockholdersuing for and on behalf of the corporation must allege in his complaintthat he is suing on a derivative cause of action on behalf of thecorporation and all other stockholders similarl! situated who ma! wishto Boin him in the suit

#t is a condition sine ua non that the corporation be impleaded as apart! because not onl! is the corporation an indispensable part!, but it

is also the present rule that it must be served with process. The Budgment must be made binding upon the corporation in order that thecorporation ma! get the bene"t of the suit and ma! not bringsubse uent suit against the same defendants for the same cause of action. #n other words, the corporation must be Boined as part! becauseit is its cause of action that is being litigated and because Budgmentmust be a res ad-udicata against it.

Thus, the criminal complaint including the civil aspect thereof could notbe deemed in the nature of a derivative suit.

5 nd issue;when a trial court commits a grave abuse of discretion amounting tolack or excess of Burisdiction, the person aggrieved can "le a specialcivil action for certiorari. The aggrieved parties in such a case are the:tate and the private o ended part! or complainant

#n the instant case, we "nd that the recourse of the complainant to therespondent $ourt of &ppeals was proper. The petition was brought in



her own name and in behalf of the $orporation. &lthough, thecorporation was not a complainant in the criminal action, the subBect of the falsi"cation was the corporationFs proBect and the falsi"eddocuments were corporate documents. Therefore, the corporation is aproper part! in the petition for certiorari because the proceedings in

the criminal case directl! and adversel! a ected the corporation.= rd issue;When the civil action is instituted with the criminal action, evidenceshould be taken of the damages claimed and the court shoulddetermine who are the persons entitled to such indemnit!. The civilliabilit! arising from the crime ma! be determined in the criminalproceedings if the o ended part! does not waive to have it adBudgedor does not reserve the right to institute a separate civil action againstthe defendant. &ccordingl!, if there is no waiver or reservation of civilliabilit!, evidence should be allowed to establish the extent of inBuries

su ered.

#n the case before us, there was neither a waiver nor a reservationmade< nor did the o ended part! institute a separate civil action. #tfollows that evidence should be allowed in the criminal proceedings toestablish the civil liabilit! arising from the o ense committed, and theprivate o ended part! has the right to intervene through the privateprosecutors.

E@PERTRA EL TOURS, INC., petitioner, vs. COURT OFAPPEALS and OREAN AIRLINES, respondents .

G.R. No. &5'39'Ma$ '6, '))5

FACTS(

Rorean &irlines 2R&'3 is a corporation established and registered in the9epublic of :outh Rorea and licensed to do business in the )hilippines.#ts general manager in the )hilippines is :uk R!oo Rim, while itsappointed counsel was &tt!. ario &guinaldo and his law "rm.

R&', through &tt!. &guinaldo, "led a $omplaint G5 against 7T# with the

9egional Trial $ourt 29T$3 of anila, for the collection of the principalamount of )5J ,-6 . ,

The veri"cation and certi"cation against forum shopping was signed b!&tt!. &guinaldo, who indicated therein that he was the resident agentand legal counsel of R&' and had caused the preparation of thecomplaint.



7T# "led a motion to dismiss the complaint on the ground that &tt!.&guinaldo was not authori+ed to execute the veri"cation and certi"cateof non0forum shopping as re uired b! :ection 6, 9ule > of the 9ules of $ourt.

R&' opposed the motion, contending that &tt!. &guinaldo was itsresident agent and was registered as such with the :ecurities and7xchange $ommission 2:7$3 as re uired b! the $orporation $ode of the )hilippines. #t was further alleged that &tt!. &guinaldo was also thecorporate secretar! of R&'. &ppended to the said opposition was theidenti"cation card of &tt!. &guinaldo, showing that he was the law!erof R&'.

&tt!. &guinaldo claimed that he had been authori+ed to "le thecomplaint through a resolution of the R&' %oard of Directors approvedduring a special meeting

R&' was given a period of - da!s within which to submit a cop! of thesaid resolution.

T9#&' $4A9T; giving credence to the claims of &tt!. &guinaldo and :ukR!oo Rim that the R&' %oard of Directors indeed conducted ateleconference on Lune 56, - , during which it approved a resolutionas uoted in the submitted a1davit.

$& rendered Budgment dismissing the petition, ruling that theveri"cation and certi"cate of non0forum shopping executed b! &tt!.

&guinaldo was su1cient compliance

97:)48D78T; The respondent, for its part, avers that the issue of whether moderntechnolog! is used in the "eld of business is a factual issue< hence,cannot be raised in a petition for review on certiorari under 9ule @6 of the 9ules of $ourt

Hence, the courts ma! take Budicial notice that the )hilippine 'ongDistance Telephone $ompan!, #nc. had provided a record of corporateconferences and meetings through (iber8et using "ber0optic

transmission technolog!, and that such technolog! facilitates voiceand image transmission with ease< this makes constant communicationbetween a foreign0based o1ce and its )hilippine0based branches fasterand easier, allowing for cost0cutting in terms of travel concerns. #tpoints out that even the 70$ommerce 'aw has recogni+ed this moderntechnolog!.

The respondent posits that the courts are aware of this development in



technolog!< hence, ma! take Budicial notice thereof without need of hearings. 7ven if such hearing is re uired, the re uirement isnevertheless satis"ed if a part! is allowed to "le pleadings b! wa! of comment or opposition thereto.

)7T#T#4879; The petitioner further avers that the supposed holding of a specialmeeting on Lune 56, - through teleconferencing where &tt!.&guinaldo was supposedl! given such an authorit! is a farce,considering that there was no mention of where it was held, whether inthis countr! or elsewhere. #t insists that the $orporation $ode re uiresboard resolutions of corporations to be submitted to the :7$. 7venassuming that there was such a teleconference, it would be against theprovisions of the $orporation $ode not to have an! record thereof.

The petitioner insists that the teleconference and resolution adverted

to b! the respondent in its pleadings were mere fabrications foisted b!therespondent and its counsel on the 9T$, the $& and this $ourt.

9A'#8C; )7T#T#48 #: 79#T49#4A:

there was no allegation that &tt!. &guinaldo had been authori+ed toexecute the certi"cate of non0forum shopping b! the respondentFs%oard of Directors< moreover, no such board resolution was appendedthereto or incorporated therein.

#t is settled that the re uirement to "le a certi"cate of non0forumshopping is mandator! G/ and that the failure to compl! with thisre uirement cannot be excused. The certi"cation is a peculiar andpersonal responsibilit! of the part!, an assurance given to the court orother tribunal that there are no other pending cases involving basicall!the same parties, issues and causes of action. Hence, the certi"cationmust be accomplished b! the part! himself because he has actualknowledge of whether or not he has initiated similar actions orproceedings in di erent courts or tribunals. 7ven his counsel ma! beunaware of such facts. G Hence, the re uisite certi"cation executed b!the plainti Fs counsel will not su1ce

#n a case where the plainti is a private corporation, the certi"cationma! be signed, for and on behalf of the said corporation, b! aspeci"call! authori+ed person, including its retained counsel, who haspersonal knowledge of the facts re uired to be established b! thedocuments.

#f the authorit! of a part!Fs counsel to execute a certi"cate of non0



forum shopping is disputed b! the adverse part!, the former isre uired to show proof of such authorit! or representation.

Ander the law, &tt!. &guinaldo was not speci"call! authori+ed toexecute a certi"cate of non0forum shopping as re uired b! :ection 6,

9ule > of the 9ules of $ourt. This is because while a resident agentma! be aware of actions "led against his principal 2a foreigncorporation doing business in the )hilippines3, such resident ma! notbe aware of actions initiated b! its principal, whether in the )hilippinesagainst a domestic corporation or private individual, or in the countr!where such corporation was organi+ed and registered, against a)hilippine registered corporation or a (ilipino citi+en.

5 nd issue; Things of Mcommon knowledge,O of which courts take Budicialmatters coming to the knowledge of men generall! in the course of theordinar! experiences of life, or the! ma! be matters which are

generall! accepted b! mankind as true and are capable of read! andun uestioned demonstration. Thus, facts which are universall! known,and which ma! be found in enc!clopedias, dictionaries or otherpublications, are Budiciall! noticed, provided, the! are of such universalnotoriet! and so generall! understood that the! ma! be regarded asforming part of the common knowledge of ever! person. &s thecommon knowledge of man ranges far and wide, a wide variet! of particular facts have been Budiciall! noticed as being matters of common knowledge. But a court cannot ta&e -udicial notice of any fact #hich, in part, is dependent on the e istence or non7e istence of a fact of #hich the court has no constructive &no#ledge

#n this age of modern technolog!, the courts ma! take Budicial noticethat business transactions ma! be made b! individuals throughteleconferencing. Teleconferencing is interactive group communication2three or more people in two or more locations3 through an electronicmedium. #n general terms, teleconferencing can bring people togetherunder one roof even though the! are separated b! hundreds of miles.

This t!pe of group communication ma! be used in a number of wa!s,and have three basic t!pes; 2-3 video conferencing 0 television0likecommunication augmented with sound< 253 computer conferencing 0

printed communication through ke!board terminals, and 2=3 audio0conferencing0verbal communication via the telephone with optionalcapacit! for telewriting or telecop!ing

#ndeed, teleconferencing can onl! facilitate the linking of people< itdoes not alter the complexit! of group communication. &lthough itma! be easier to communicate via teleconferencing, it ma! also beeasier to miscommunicate. Teleconferencing cannot satisf! the



individual needs of ever! t!pe of meeting

The respondentFs allegation that its board of directors conducted ateleconference on Lune 56, - and approved the said resolution 2with&tt!. &guinaldo in attendance3 is incredible, given the additional fact

that no such allegation was made in the complaint. #f the resolutionhad indeed been approved on Lune 56, - , long before the complaintwas "led, the respondent should have incorporated it in its complaint,or at least appended a cop! thereof. The respondent failed to do so. #twas onl! on Lanuar! 5/, 5 that the respondent claimed, for the "rsttime, that there was such a meeting of the %oard of Directors held on

Lune 56, - < it even represented to the $ourt that a cop! of itsresolution was with its main o1ce in Rorea, onl! to allege later that nowritten cop! existed. #t was onl! on arch J, 5 that the respondentalleged, for the "rst time, that the meeting of the %oard of Directorswhere the resolution was approved was held via teleconference.

Worse still, it appears that as early as anuary 89, 8::: , &tt!. &guinaldohad signed a :ecretar!FsP9esident &gentFs $erti"cate alleging that theboard of directors held a teleconference on une ;<, 8::: . 8o suchcerti"cate was appended to the complaint, which was "led on:eptember J, - . ore importantl!, the respondent did not explainwh! the said certi"cate was signed b! &tt!. &guinaldo as earl! as

Lanuar! , - , and !et was notari+ed one !ear later 2on Lanuar! - ,5 3< it also did not explain its failure to append the said certi"cate tothe complaint, as well as to its $ompliance dated arch J, 5 . #twas onl! on Lanuar! 5J, 5 - when the respondent "led its comment

in the $& that it submitted the :ecretar!FsP9esident &gentFs$erti"cate G= dated Lanuar! - , 5 .

The $ourt is, thus, more inclined to believe that the allegedteleconference on Lune 56, - never took place, and that theresolution allegedl! approved b! the respondentFs %oard of Directorsduring the said teleconference was a mere concoction purposefull!foisted on the 9T$, the $& and this $ourt, to avert the dismissal of itscomplaint against the petitioner.

)7T#T#48 C9&8T7D

Rights of Shareholders Case Digests

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