Strategic Alliance vs.

Radstock Securities December 4, 2009 Facts Construction Development Corporation of the Philippines (CDCP) was incorporated in 1966. It was granted a franchise to construct, operate and maintain toll facilities in the North and South Luzon Tollways and Metro Manila Expressway. CDCP Mining Corporation (CDCP Mining), an affiliate of CDCP, obtained loans from Marubeni Corporation of Japan (Marubeni). A CDCP official issued letters of guarantee for the loans although there was no CDCP Board Resolution authorizing the issuance of such letters of guarantee. CDCP Mining secured the Marubeni loans when CDCP and CDCP Mining were still privately owned and managed. In 1983, CDCP s name was changed to Philippine National Construction Corporation (PNCC) in order to reflect that the Government already owned 90.3% of PNCC and only 9.70% is under private ownership. Meanwhile, the Marubeni loans to CDCP Mining remained unpaid. On 20 October 2000 and 22 November 2000, the PNCC Board of Directors (PNCC Board) passed Board Resolutions admitting PNCC s liability to Marubeni. Previously, for two decades the PNCC Board consistently refused to admit any liability for the Marubeni loans. In January 2001, Marubeni assigned its entire credit to Radstock Securities Limited (Radstock), a foreign corporation. Radstock immediately sent a notice and demand letter to PNCC. PNCC and Radstock entered into a Compromise Agreement. Under this agreement, PNCC shall pay Radstock the reduced amount of P6,185,000,000.00 in full settlement of PNCC s guarantee of CDCP Mining s debt allegedly totaling P17,040,843,968.00 (judgment debt as of 31 July 2006). To satisfy its reduced obligation, PNCC undertakes to (1) "assign to a third party assignee to be designated by Radstock all its rights and interests" to the listed real properties of PNCC; (2) issue to Radstock or its assignee common shares of the capital stock of PNCC issued at par value which shall comprise 20% of the outstanding capital stock of PNCC; and (3) assign to Radstock or its assignee 50% of PNCC s 6% share, for the next 27 years, in the gross toll revenues of the Manila North Tollways Corporation. Strategic Alliance Development Corporation (STRADEC) moved for reconsideration. STRADEC alleged that it has a claim against PNCC as a bidder of the National Government s shares, receivables, securities and interests in PNCC. Issue Whether or not the Compromise Agreement between

PNCC and Radstock is valid in relation to the Constitution, existing laws, and public policy Held Radstock is a private corporation incorporated in the British Virgin Islands. Its office address is at Suite 14021 Duddell Street, Central Hongkong. As a foreign corporation, with unknown owners whose nationalities are also unknown, Radstock is not qualified to own land in the Philippines pursuant to Section 7, in relation to Section 3, Article XII of the Constitution. Consequently, Radstock is also disqualified to own the rights to ownership of lands in the Philippines. Contrary to the OGCC s claim, Radstock cannot own the rights to ownership of any land in the Philippines because Radstock cannot lawfully own the land itself. Otherwise, there will be a blatant circumvention of the Constitution, which prohibits a foreign private corporation from owning land in the Philippines. In addition, Radstock cannot transfer the rights to ownership of land in the Philippines if it cannot own the land itself. It is basic that an assignor or seller cannot assign or sell something he does not own at the time the ownership, or the rights to the ownership, are to be transferred to the assignee or buyer.

Gloria vs. PNOC November 27, 2009 Facts: Petitioner Gloria V. Gomez used to work as Manager of the Legal Department of Petron Corporation, then a government-owned corporation. With Petron s privatization, she availed of the company s early retirement program and left that organization on April 30, 1994. On the following day, May 1, 1994, however, Filoil Refinery Corporation (Filoil), also a government-owned corporation, appointed her its corporate secretary and legal counsel, with the same managerial rank, compensation, and benefits that she used to enjoy at Petron. However, the privatization did not materialize so Gomez continued to serve as corporate secretary of respondent PDMC. On September 23, 1996 its president re-hired her as administrator and legal counsel of the company. On March 29, 1999 the new board of directors of respondent PDMC removed petitioner Gomez as corporate secretary. Further, at the board s meeting on October 21, 1999 the board questioned her continued employment as administrator. In answer, she presented the former president s May 24, 1998 letter that extended her term. Dissatisfied with this, the board sought the advice of its legal department, which expressed the view that Gomez s term extension was an ultra vires act of the former president. It reasoned that, since her position was functionally that of a vice-president or general manager, her term could be extended under the company s by-laws

only with the approval of the board. The legal department held that her de facto tenure could be legally put to an end. Petitioner Gomez for her part conceded that as corporate secretary, she served only as a corporate officer. But, when they named her administrator, she became a regular managerial employee. Consequently, the respondent PDMC s board did not have to approve either her appointment as such or the extension of her term in 1998. Issue: Is Gomez an ordinary employee whose complaint is within the jurisdiction of the NLRC? Held: Yes. The relationship of a person to a corporation, whether as officer or agent or employee, is not determined by the nature of the services he performs but by the incidents of his relationship with the corporation as they actually exist. That the employee served concurrently as corporate secretary for a time is immaterial. A corporation is not prohibited from hiring a corporate officer to perform services under circumstances which will make him an employee. Indeed, it is possible for one to have a dual role of officer and employee. NLRC has jurisdiction over a complaint filed by one who served both as corporate officer and employee, when the money claims were made as an employee and not as a corporate officer.

personal belonging." The DECS asked the RTC to order Kahn and Sanchez personally to pay it the P22,559,215.14 in rents due from ULFI with legal interest, exemplary damages of P1,000,000.00, attorney s fees of P500,000.00, and costs. Issue: Whether or not petitioner Sanchez, a director and chief executive officer of ULFI, can be held liable in damages under Section 31 of the Corporation Code for gross neglect or bad faith in directing the corporation s affairs. Held: Yes. The Court of Appeals found that from January 1992 to January 1996, after ULFI s authority to manage the Complex expired and despite the ejectment suit that the DECS filed against it, petitioner Sanchez and Kahn still continued to lease spaces in those facilities to third persons. And they collected and kept all the rents although they knew that these primarily belonged to the DECS. ULFI had merely managed the facilities and collected earnings from them for the DECS. What is more, Sanchez and Kahn were aware that they had to submit written accounts of those rents and remit the net earnings from them to the Bureau of Treasury, through the DECS, at the end of the year. Yet, Sanchez and Kahn, acting in bad faith or with gross neglect did not turn over even one centavo of rent to the DECS nor render an accounting of their collections. Nor did they account for the money they collected by submitting to the Securities and Exchange Commission the required financial statements covering such collections. Section 31 lays down the "doctrine of corporate opportunity" and holds personally liable corporate directors found guilty of gross negligence or bad faith in directing the affairs of the corporation, which results in damage or injury to the corporation, its stockholders or members, and other persons. The ejectment suit that held only ULFI liable to the DECS for unpaid rents does not constitute res judicata to the issue of personal liabilities of Kahn and petitioner Sanchez under the circumstances to pay such obligations, given that the unaccounted funds would have settled the same.

Sanchez vs. Republic October 9, 2009 Facts: In July 1980, First Lady Imelda R. Marcos and others organized the University of Life Foundation, Inc. (ULFI), a private non-stock, non-profit corporation devoted to nonformal education. On June 15, 1998 the DECS filed a complaint before the RTC of Pasig City in Civil Case 66852 for collection of the P22,559,215.14 in unremitted rents and damages against Henri Kahn, ULFI s President, and petitioner Manuel Luis S. Sanchez, its Executive Vice-President, based on their personal liability under Section 31 of the Corporation Code. The latter two were Managing Director and Finance Director, respectively, of the corporation. The complaint alleged that Kahn and petitioner Sanchez, as key ULFI officers, were remiss in safekeeping ULFI s corporate incomes and in accounting for them. They neither placed the incomes derived from the Complex in ULFI s deposit account nor submitted the required financial statements detailing their transactions. The underlying theory of the case is that Kahn and Sanchez "operated ULFI as if it were their own property, handled the collections and spent the money as if it were their

G Holdings vs. National Mines October 16, 2009 Facts: The petitioner, "G" Holdings, Inc. (GHI), is a domestic corporation primarily engaged in the business of owning and holding shares of stock of different companies. It was registered with the Securities and Exchange Commission on August 3, 1992. Private respondent, National Mines and Allied Workers Union Local 103 (NAMAWU), was the exclusive bargaining agent of the rank and file employees of Maricalum Mining Corporation (MMC), an entity

operating a copper mine and mill complex at Sipalay, Negros Occidental. On October 2, 1992, pursuant to a Purchase and Sale Agreement executed between GHI and Asset Privatization Trust (APT), the former bought ninety percent (90%) of MMC s shares and financial claims. These financial claims were converted into three Promissory Notes issued by MMC in favor of GHI totaling P500M and secured by mortgages over MMC s properties. Upon the signing of the Purchase and Sale Agreement and upon the full satisfaction of the stipulated down payment, GHI immediately took physical possession of the mine site and its facilities, and took full control of the management and operation of MMC. Four years thereafter, a labor dispute arose. NAMAWU seek to recover the balance due under judgments they obtained against Lake George Ventures Inc. (hereinafter LGV), a subsidiary of defendant that was formed to develop the Top O the World resort community overlooking Lake George, by piercing the corporate veil or upon the theory that LGV's transfer of certain assets constituted fraudulent transfers under the Debtor and Creditor Law. Issue: Whether it was proper for the CA to pierce the veil of corporate fiction between MMC and GHI. Held: No. Since the factual antecedents of this case do not warrant a finding that the mortgage and loan agreements between MMC and GHI were simulated, then their separate personalities must be recognized. To pierce the veil of corporate fiction would require that their personalities as creditor and debtor be conjoined, resulting in a merger of the personalities of the creditor (GHI) and the debtor (MMC) in one person, such that the debt of one to the other is thereby extinguished. But the debt embodied in the 1992 Financial Notes has been established, and even made subject of court litigation (Civil Case No. 95-76132, RTC Manila). This can only mean that GHI and MMC have separate corporate personalities.

father as stockholder of respondent. The complaint thus prayed that respondent allow petitioner to inspect its corporate book, render an accounting of all the transactions it entered into from 1962, and give petitioner all the profits, earnings, dividends, or income pertaining to the shares of Carlos L. Puno. Issue: Whether or not Joselito Musni Puno as an heir is automatically entitled for the stocks upon the death of a shareholder. Held: Upon the death of a shareholder, the heirs do not automatically become stockholders of the corporation and acquire the rights and privileges of the deceased as shareholder of the corporation. The stocks must be distributed first to the heirs in estate proceedings, and the transfer of the stocks must be recorded in the books of the corporation. Section 63 of the Corporation Code provides that no transfer shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation.During such interim period, the heirs stand as the equitable owners of the stocks, the executor or administrator duly appointed by the court being vested with the legal title to the stock.Until a settlement and division of the estate is effected, the stocks of the decedent are held by the administrator or executor. Consequently, during such time, it is the administrator or executor who is entitled to exercise the rights of the deceased as stockholder. Valle Verde vs. Africa September 4, 2009 Facts: February 27, 1996: Ernesto Villaluna, Jaime C. Dinglasan (Dinglasan), Eduardo Makalintal (Makalintal), Francisco Ortigas III, Victor Salta, Amado M. Santiago, Jr., Fortunato Dee, Augusto Sunico, and Ray Gamboa were elected as BOD during the Annual Stockholders Meeting of petitioner Valle Verde Country Club, Inc. (VVCC) 1997- 2001: Requisite quorum could not be obtained so they continued in a hold-over capacity September 1, 1998: Dinglasan resigned, BOD still constituting a quorom elected Eric Roxas (Roxas) November 10, 1998: Makalintal resigned On March 6, 2001: Jose Ramirez (Ramirez) was elected by the remaining BOD Respondent Africa (Africa), a member of VVCC, questioned the election of Roxas and Ramirez as members of the VVCC Board with the Securities and Exchange

Puno vs. Puno Enterprises September 11, 2009 Facts: Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno Enterprises, Inc. On March 14, 2003, petitioner Joselito Musni Puno, claiming to be an heir of Carlos L. Puno, initiated a complaint for specific performance against respondent. Petitioner averred that he is the son of the deceased with the latter s common-law wife, Amelia Puno. As surviving heir, he claimed entitlement to the rights and privileges of his late

Commission (SEC) and the Regional Trial Court (RTC) as contrary to Sec 23 and Sec 29 of Corporation Law. Makalintal's term should have expired after 1996 there being no unexpired term. The vacancy should have been filled by the stockholders in a regular or special meeting called for that purpose. RTC: Favored Africa - Ramirez as Makalintal's replacement = null and void SEC: Roxas as Vice hold-over director of Dinglasan = null and void VVCC appealed in SC for certiorari being partially contrary to law and jurisprudence Issue: Whether or not there is an unexpired term. Held: No. Term time during which the officer may claim to hold the office as of right. It is not affected by the holdover. It is fixed by statute and it does not change simply because the office may have become vacant, nor because the incumbent holds over in office beyond the end of the term due to the fact that a successor has not been elected and has failed to qualify. Tenure term during which the incumbent actually holds office. Section 23 of the Corporation Code: term of BOD only 1 year - fixed and has expired (1 yr after 1996)

Respondent started demolishing the concrete partition wall of the computer laboratory on 18 August 1999. In the morning of the following day, the maintenance crew, following respondent s order, brought plywood to cover the unfinished door opening of the computer laboratory. Carpio and AMACCI Assistant Vice President Balon Panay (Panay) came to AMACC-ER to conduct an inspection. However, on 25 August 1999, the Audit Department of AMACCI filed a complaint against respondent, charging him with "(t)hreatening to damage company property, negligence or failure to exercise adequate asset control measures within one s area of responsibility." Issue: Whether or not the corporate directors are personally liable for employee s illegal dismissal. Held: It is necessary for this Court to clarify and explicitly declare that no liability for respondent s illegal dismissal should attach to petitioners, and respondent s complaint as against them should be dismissed. Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their official acts, because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders and members. It is true that as an exception, corporate directors and officers are solidarily held liable with the corporation, where terminations of employment are done with malice or in bad faith; but where there is an absence of evidence that said directors and officers acted with malice or bad faith, as in this case, the Court must exempt them from any personal liability for the employee s illegal dismissal.

AMA (Aguiluz and Cruz) vs. Ignacio June 23, 2009 Facts: Petitioner AMACCI is a corporation organized and existing under and by virtue of Philippine laws, engaged in the business of providing computer education, among other courses. AMA Computer College-East Rizal (AMACC-ER) is one of its branches. Respondent was first employed on 25 September 1998 at another branch of AMACCI, namely, AMA Computer College-Fairview (AMACC-FV), as Management Trainee (Maintenance Supervisor). Three months thereafter, on 29 December 1998, respondent was granted permanent status. Ignacio went ahead to consult AMACC-ER School Director/COO Taganguin for the renovation, and then to secure the approval of Mr. Joselito Domingo, owner of the JL Domingo Building in which the AMACC-ER school facilities were located.

Yu vs. Yukayguan June 18, 2009 Facts: This is a petition of Anthony Yu et al against his younger half-brother Joseph Yukayguan et al, who were all shareholders of Winchester Industrial Supply Inc., a company engaged in hardware and industrial equipment business. Accusing his older brother s family of misappropriating funds and assets of the company, Yukayguan filed a derivative suit. After trial, the Cebu Regional Trial Court dismissed the case, saying Yukayguan failed to follow and observe the essentials for filing of a derivative suit or action. The ruling was upheld but later reversed by the Court of Appeals, prompting Yu to elevate the matter to the SC.

Issue: Whether or not the derivative suit filed by Yukayguan is meritorious? Held: Ruling in favor of Yu, the high court said: The general rule is that where a corporation is an injured party, its power to sue is lodged with its board of directors or trustees. Nonetheless, an individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stocks in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold the control of the corporation. The SC said a stockholder s right to institute a derivative suit is not based on any express provision of the Corporation Code, or even the Securities Regulation Code, but is impliedly recognized when the said laws make corporate directors or officers liable for damages suffered by the corporation and its stockholders for violation of their fiduciary duties. Hence, a stockholder may sue for mismanagement, waste or dissipation of corporate assets because of a special injury to him for which he is otherwise without redress.

Held: Both the RTC and Court of Appeals ruled that the action is in the form of a derivative suit although captioned as a petition for annulment of real estate mortgage and foreclosure sale. A derivative action is a suit by a shareholder to enforce a corporate cause of action.Under the Corporation Code, where a corporation is an injured party, its power to sue is lodged with its board of directors or trustees. But an individual stockholder may be permitted to institute a derivative suit on behalf of the corporation in order to protect or vindicate corporate rights whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold control of the corporation. In such actions, the corporation is the real party-in-interest while the suing stockholder, on behalf of the corporation, is only a nominal party. Lowe Inc. vs CA August 14, 2009 Facts: Lowe, an advertising agency, is a corporation duly organized and existing under the laws of the Philippines. Petitioner Maria Elizabeth "Mariles" L. Gustilo (Gustilo) the Chief Executive Officer and President of Lowe, while petitioner Raul M. Castro (Castro) is the Executive Creative Director of Lowe. Gustilo and Castro were included in the complaint for illegal dismissal in their capacity as officers of Lowe. Issue: Whether or not the corporate directors are personally liable for employee s monetary claim. Held: No. They are not liable. Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders or other persons; (2) they consent to the issuance of watered down stocks or when, having knowledge of such issuance, do not forthwith file with the corporate secretary their written objection; (3) they agree to hold themselves personally and solidarily liable with the corporation; or (4) they are made by specific provision of law personally answerable for their corporate action. Gustilo and Castro, as corporate officers of Lowe, have personalities which are distinct and separate from that of Lowe s. Hence, in the absence of any evidence showing that they acted with malice or in bad faith in declaring

Hi Yield Realty vs. CA June 23, 2009 Facts: On July 31, 2003, Roberto H. Torres (Roberto), for and on behalf of Honorio Torres & Sons, Inc. (HTSI), filed a Petition for Annulment of Real Estate Mortgage and Foreclosure Sale over two parcels of land located in Marikina and Quezon City. The suit was filed against Leonora, Ma. Theresa, Glenn and Stephanie, all surnamed Torres, the Register of Deeds of Marikina and Quezon City, and petitioner Hi-Yield Realty, Inc. (Hi-Yield). It was docketed as Civil Case No. 03-892 with Branch 148 of the Regional Trial Court (RTC) of Makati City. On September 15, 2003, petitioner moved to dismiss the petition on grounds of improper venue and payment of insufficient docket fees. The RTC denied said motion in an Order dated January 22, 2004. The trial court held that the case was, in nature, a real action in the form of a derivative suit cognizable by a special commercial court pursuant to Administrative Matter No. 00-11-03-SC. Petitioner sought reconsideration, but its motion was denied in an Order dated April 27, 2004. Issue: Whether the action to annul the real estate mortgage and foreclosure sale is a mere incident of the derivative suit.

Mutuc s position redundant, Gustilo and Castro are not personally liable for the monetary awards to Mutuc.

Estacio vs Pampanga Electric