Professional Documents
Culture Documents
VOL. 151, JUNE 30, 1987 VOL. 151, JUNE 30, 1987
359 357
Madrigal & Company, Inc. vs. Zamora Madrigal & Company, Inc, vs. Zamora
On January 29, 1976, the petitioner applied for clearance to SARMIENTO, J.:
terminate the services of a number of employees pursuant
supposedly to its retrenchment program. On February 3, These are two petitions for certiorari and prohibition filed by
1976, the petitioner applied for clearance to terminate 18 the petitioner, the Madrigal & Co., Inc, The facts are
employees more.20 On the same date, the respondent union undisputed.
went to the Regional Office (No. IV) of the Department of The petitioner was engaged, among several other corporate
Labor (NLRC Case No. R042143276) to complain of illegal objectives, in the management of Rizal Cement Co., Inc.1
lockout against the petitioner.21 Acting on this complaint, the Admittedly, the petitioner and Rizal Cement Co., Inc. are sister
Secretary of Labor, in a decision dated December 14, 1976,22 companies.2 Both are owned by the same or practically the
found the dismissals to be contrary to law23 and ordered same stockholders.3
the petitioner to reinstate some 40 employees, 37 of them with On December 28, 1973, the respondent, the Madrigal Central
backwages.24 The petitioner then moved for reconsideration, Office Employees Union, sought for the renewal of its
which the Acting Labor Secretary, Amado Inciong, denied.25 collective bargaining agreement with the petitioner, which
Thereafter, the petitioner filed an appeal to the Office of the was due to expire on February 28, 1974.4 Specifically, it
President. The respondent, the Presidential Assistant on proposed a wage increase of P200.00 a month, an allowance
Legal Affairs, affirmed with modification the Labor of P1 00,00 a month, and other economic benefits.5 The
Departments decision, thus: petitioner, however, requested for a deferment in the
xxx xxx xxx negotiations,
1. Eliseo Dizon, Eugenio Evangelista and Benjamin Victorio On July 29, 1974, by an alleged resolution of its stockholders,
are excluded from the order of reinstatement. the petitioner reduced its capital stock from 765,000 shares to
2. Rogelio Meneses and Roberto Taladro who appear to have 267,366 shares.6 This was effected through the distribution of
voluntarily retired and paid their retirement pay, their cases the marketable securities owned by the petitioner to its
are left to the judgment of the Secretary of Labor who is in a stockholders in exchange for their shares in an equivalent
better position to assess appellants allegation as to their amount in the corporation.7
retirement. On August 22, 1975, by yet another alleged stockholders
3. The rest are hereby reinstated with six (6) months action, the petitioner reduced its authorized capitalization
backwages, except Aleli Contreras, Teresita Eusebio and from 267,366 shares to 110,085 shares, again, through the
Norma Parlade who are to be reinstated without backwages. same scheme.8
SO ORDERED.26 After the petitioners failure to sit down with the respondent
xxx xxx xxx union, the latter, on August 28, 1974, commenced Case No.
On May 15, 1978, the petitioner came to this court. (G.R. LR-5415 with the National Labor Relations Commission
_______________ _______________
20 Id., G.R. No. 48237, 3, 84. 1 Rollo, G.R. No. 48237, 10, 18, 2021.
21 Id. 2 Id., 10.
22 Id., 2028. 3 Id., 20.
23 Id., 27. 4 Id., 21.
24 Id., 28. 5 Id., 29,
25 Id., 2936. 6 Id., 18, 30.
26 Id., 6061. 7 Id.
360 8 Id.
358
360
SUPREME COURT REPORTS ANNOTATED 358
Madrigal & Company, Inc. vs. Zamora SUPREME COURT REPORTS ANNOTATED
No. 48237.) Madrigal & Company, Inc. vs. Zamora
Meanwhile, on May 25, 1977, the National Labor Relations on a complaint for unfair labor practice.9 In due time, the
Commission rendered a decision affirming the labor arbiter s petitioner filed its position paper,10 alleging operational
judgment in Case No. LR-5415.27 The petitioner appealed to losses. Pending the resolution of Case No. LR-5415, the
the Secretary of Labor. On June 9, 1978, the Secretary of petitioner, in a letter dated November 17, 1975,11 informed the
In urging reversal of the appealed decision, appellant Labor dismissed the appeal.28 Following these successive
contends that (1) its letter dated November 17, 1975, reversals, the petitioner came anew to this court. (G.R. No.
constitute substantial compliance with the clearance 49023.)
requirement to terminate; and (2) individual appellees By our resolution dated October 9, 1978, we consolidated
dismissal had no relation to any union activities, but was the G.R. No. 48237 with G.R. No. 49023.29 We likewise issued
result of an honest-to-goodness retrenchment policy temporary restraining orders.30
occasioned by loss of income due to cessation of operation. In G.R. No. 48237, the petitioner argues, that.
We find the first contention to be without merit. Aside from xxx xxx xxx
the fact that the controversial letter was unverified, with not I. SAID RESPONDENTS ERRED IN HOLDING THAT THERE
even a single document submitted in support thereof, the WAS NO VALID COMPLIANCE WITH THE CLEARANCE
same failed to specify the individual employees to be affected REQUIREMENT.
by the intended retrenchment. Not only this, but the letter is II. SAID RESPONDENTS ERRED IN NOT HOLDING THAT
so vague and indefinite regarding the manner of effecting THERE IS NO LOCKOUT HERE IN LEGAL CONTEMPLATION,
appellants retrenchment plan as to provide the Secretary of MUCH LESS FOR UNION-BUSTING PURPOSES.
(sic) a reasonable basis on which to determine whether the III. RESPONDENT PRESIDENTIAL ASSISTANT ERRED IN
request for retrenchment was valid or otherwise, and whether ORDERING THE REINSTATEMENT OF THE REST OF
the mechanics in giving effect thereto was just or unjust to AFFECTED MEMBERS OF RESPONDENT UNION WITH SIX (6)
the employees concerned. In fact. to be cleary implied from MONTHS BACKWAGES, EXCEPT ALELI CONTRERAS,
the letter is that the implementary measures needed to give TERESITA EUSEBIO AND NORMA PARLADE WHO ARE TO BE
effect to the intended retrenchment are yet to be thought of or REINSTATED WITHOUT BACKWAGES.
concretized in the indefinite future, measures about which the IV. RESPONDENT PRESIDENTIAL ASSISTANT ERRED IN
office of the Secretary will be apprised accordingly. All LEAVING TO THE JUDGMENT OF RESPONDENT SECRETARY
these, and more, as correctly THE CASES OF ROGELIO MENESES AND ROBERTO
_______________ TALADRO WHO HAD VOLUNTARILY RETIRED AND PAID
THEIR RETIREMENT PAY.31
35 Special Events & Central Shipping Office Workers Union v. xxx xxx xxx
San Miguel Corp., supra, citing Consolidated Farms, Inc. v. _______________
Noriel, No. L-47752, July 31, 1978, 84 SCRA 469 (1970), Scott
v. Inciong, No. L-38868, December 29, 1975, 68 SCRA 473 27 Id., G.R. No. 49023, 6476.
(1975), and San Miguel Corp. v. Secretary of Labor, No. L- 28 Id., 7880.
39195, May 26, 1975, 64 SCRA 56 (1975). 29 Id., 86-A1.
36 Busier v. Leogardo, Jr., No. L-63316, July 31, 1984, 131 30 Id., 8586; id., G.R. No. 48237, 7778.
SCRA 151 (1984), citing Palma and Ignacio v. Q & S, Inc., No. 31 Id., G.R. No. 48237, 6.
L20366, May 19, 1966, 17 SCRA 97 (1966) and Philippine 361
Virginia Tobacco Administration v. Lucero, No. L-32550,
October 27, 1983, 125 SCRA 337 (1983). VOL. 151, JUNE 30, 1987
363 361
Madrigal & Company, Inc. us. Zamora
VOL. 151, JUNE 30, 1987 while in G.R. No. 49023, it submits that.
363 xxx xxx xxx
Madrigal & Company, Inc. vs. Zamora 1. RESPONDENT MINISTER ERRED IN AFFIRMING THE
found by the Acting Secretary, cannot but show that the letter DECISION EN BANC OF THE NATIONAL LABOR RELATIONS
is insufficient in form and substance to constitute a valid COMMISSION DESPITE CLEAR INDICATIONS IN THE
compliance with the clearance requirement. That being so, it RECORD THAT THE AWARD WAS PREMATURE IN THE
matters little whether or not complainant union or any of its ABSENCE OF A DEADLOCK IN NEGOTIATION AND THE
members failed to interpose any opposition thereto. FAILURE ON THE PART OF THE LABOR ARBITER TO
It cannot be over-emphasized that the purpose in requiring a RESOLVE THE MAIN IF NOT ONLY ISSUE OF REFUSAL TO
prior clearance by the Secretary of Labor, in cases of BARGAIN, THEREBY DEPRIVING PETITIONER OF ITS RIGHT
shutdown or dismissal of employees, is to afford said official TO DUE PROCESS.
ample opportunity to examine and determine the 2. ASSUMING ARGUENDO THAT THERE WAS A DEADLOCK
reasonableness of the request. This is made imperative in IN NEGOTIATION, RESPONDENT MINISTER ERRED
order to give meaning and substance to the constitutional NEVERTHELESS IN NOT FINDING THAT THE ECONOMIC
mandate that the State must afford protection to labor, and BENEFITS GRANTED IN THE FORM OF SALARY INCREASES
guarantee their security of tenure. Indeed, the rules require ARE UNFAIR AND VIOLATIVE OF THE MANDATORY
that the application for clearance be filed ten (10) days before GUIDELINES PRESCRIBED UNDER PRESIDENTIAL DECREE
the intended shutdown or dismissal, serving a copy thereof to NO. 525 AND IGNORING THE UNDISPUTED FACT THAT
the employees affected in order that the latter may register PETITIONER HAD VIRTUALLY CEASED OPERATIONS AFTER
their own individual objections against the grant of the HAVING TWICE DECREASED ITS CAPITAL STOCKS AND,
clearance. But how could this requirement of notice to the THEREFORE, NOT FINANCIALLY CAPABLE TO ABSORB
employees have been complied with, when, as observed by SUCH AWARD OF BENEFITS.32
the Acting Secretary in his modificatory decision dated June xxx xxx xxx
30, 1977 the latter of November 17, 1975 does not even state There is no merit in these two (2) petitions,
definitely the employees involved upon whom service could As a general rule, the findings of administrative agencies are
be made. accorded not only respect but even finality.33 This is
With respect to appellants second contention, we agree with especially true with respect to the Department of Labor, which
the Acting Secretarys findings that individual appellees performs not only a statutory function but carries out a
dismissal was an offshoot of the unions demand for a Constitutional mandate as well.34 Our jurisdiction, as a rule,
renegotiation of the then validly existing collective bargaining is confined to
Agreement. _______________
xxx xxx xxx
The pattern of appellants acts after the decision of the Labor 32 Id., G.R. No. 49023, 8.
Arbiter in Case No. LR-5415 has convinced us that its sole 33 Special Events & Central Shipping Office Workers Union
objective was to render moot and academic the desire of the San Miguel Corp., Nos. L-5100206, May 30, 1983, 122 SCRA
union to exercise its right to bargain collectively with 557 (1983), citing International Hardwood and Veneer Co. of
management, especially so when it is considered in the light the Phil. v. Leogardo, No. L-57429, October 28, 1982, 117
of the fact that under the said decision the demand by the SCRA 967 (1982), Genconsu Free Workers Union v. Inciong,
union for wage increase and allowances was granted. What No. L-48687, July 2, 1979, 91 SCRA 311 (1979), and Dy Keh
renders appellants motive suspect was its haste in Beng v. International Labor, No. L-32245, May 25, 1979, 90
terminating the services of individual appellees, without SCRA 161 (1979).
waiting the outcome of its appeal in Case No. LR-5415. The 34 Intl. Hardwood and Veneer Co. of the Phil. v. Leogardo,
amount involved by its offer to pay double separation could supra.
very well have been used to pay the salaries of those 362
employees whose services were sought to be terminated,
until the resolution of its appeal with the NLRC, since anyway, 362
if its planned retrenchment is found to be justifiable and done SUPREME COURT REPORTS ANNOTATED
in good faith, its only liability is to answer for the separation Madrigal & Company, Inc. us, Zamora
pay provided by law. By and large, therefore, we agree with cases of grave abuse of discretion.35 But for certiorari to lie,
the Acting Secretary that, under the circumstances obtaining there must be such arbitrary and whimsical exercise of power,
in this case, or that discretion was exercised despotically.36
364 In no way can the questioned decisions be seen as arbitrary.
The decisions themselves show why.
364 Anent Case No. R042143276 (G.R. No. 48237), we are
SUPREME COURT REPORTS ANNOTATED satisfied with the correctness of the respondent Presidential
Madrigal & Company, Inc. vs. Zamora Assistant for Legal Affairs findings. We quote:
xxx xxx xxx
security holdings on the pretext that they belong exclusively respondents action [was] a systematic and deliberate
to its stockholders. The dividends received by the company attempt to get rid of complainants because of their union
are corporate earnings arising from corporate investment activities.
which no doubt are attended to by the employees involved in We now come to the individual cases of Aleli Contreras,
this proceedings, Otherwise, it would not have been reflected Teresita Eusebio and Norma Parlade. It is appellants claim
as part of profits in the companys yearly financial that these three (3) should not be reinstated inasmuch as they
statements. In determining the reason have abandoned their work by their continued absences, and
366 moreover in the case of Contreras, she failed to oppose the
application for clearance filed against her on October 24,
366 1975. However, appellants payrolls for December 1631, 1975,
SUPREME COURT REPORTS ANNOTATED January 115, 1976 and January 1631, 1976, show that the
Madrigal & Company, Inc. vs. Zamora three (3) were on leave without pay. As correctly
ableness of the economic grants below, we have, therefore, appreciated by the Acting Secretary, these payrolls prove,
scrutinized the companys Statement of Income and first, that leave has been granted to these employees, and,
Expenses from 1972 to 1975 and after equating the welfare of second, that it is a practice in the company to grant leaves
the employees with the substantial earnings of the company, without pay without loss of employment status, to those who
we find the award to be predicated on valid justifications. have exhausted their authorized leaves. As regards, Norma
The salary increase we herein sanction is also in keeping with Parlade, the records show that she truly incurred illness and
the rational that made imperative the enactment of the actually underwent surgery in Oct., 1975. As to Aleli
Termination Pay Law since in case the respondent company Contreras, there is no showing that the Secretary of Labor or
really closes down, the employees will receive higher appellant ever acted on the clearance. If we were to follow the
separation pay or retirement benefits to tide them over while logic of appellant, Contreras should not have been included
seeking another employment.38 in the application for clearance filed on Feb. 3, 1976. The fact
What clearly emerges from the recorded facts is that the that she was included shows that up to that time, she was still
petitioner, awash with profits from its business operations but considered as a regular employee. It was for these reasons,
confronted with the demand of the union for wage increases, coupled with the length of service that these employees have
decided to evade its responsibility towards the employees by rendered appellant, that the Acting Secretary ordered their
a devised capital reduction. While the reduction in capital reinstatement but without backwages.37
stock created an apparent need for retrenchment, it was, by xxx xxx xxx
all indications, just a mask for the purge of union members, With respect to Case No. LR-5415 (G.R. No. 49023), we are
who, by then, had agitated for wage increases. In the face of likewise content with the findings of the National Labor
the petitioner companys piling profits, the unionists had the Relations Commission. Thus:
right to demand for such salary adjustments. xxx xxx xxx
That the petitioner made quite handsome profits is clear from Appellant now points that the only issue certified to
the records. The labor arbiter stated in his decision in the compulsory arbitration is refusal to bargain and it is,
collective agreement case (Case No. LR-5415): therefore, premature to dictate the terms of the CBA on the
xxx xxx xxx assumption that there was already a deadlock in negotiation.
A clear scrutiny of the financial reports of the respondent Appellant further contends that, assuming there was
[herein petitioner] reveals that it had been making substantial deadlock in negotiation, the economic benefits granted are
profits in the operation. unreasonable and violative of the guideline prescribed by P.D.
In 1972, when it still had 765,000 common shares, of which 525.
305,000 were unissued and 459,000 outstanding capitalized at On the other hand, it is the unions stance that its economic
P16,830,000.00, the respondent made a net profit of demands are justified by the persistent increase in the cost of
P2,403,211.58. Its total assets were P70,821,317.81. living
In 1973, based on the same capitalization, its profit increased _______________
to P2,724,465.33. Its total assets increased to P83,240,473.73.
In 1974, although its capitalization was reduced from 37 Id., G.R. No. 48237, 5557, 5859.
P16,830,000.00 to P1 1,230,459.36, its profits were further 365
increased to P2,922,349.70. Its assets were P78,842,175.75.
_______________ VOL. 151, JUNE 30, 1987
365
38 Id., G.R. No 49023, 6567. Madrigal & Company, Inc. vs. Zamora
367 and the substantial earnings of the company from 1971 to
1975.
VOL. 151, JUNE 30, 1987 It bears to stress that although the unions petition was
367 precipitated by the companys refusal to bargain, there are
Madrigal & Company, Inc. vs. Zamora glaring circumstances pointing out that the parties also
The reduction in its assets by P4,398,297.98 was due to the submitted deadlock to arbitration. The petition itself is
fact that its capital stock was reduced by the amount of couched in general terms, praying for arbitration of the
P5,599,540.54. unions dispute with the respondent concerning proposed
In 1975, for the period of only six months, the respondent changes in the collective bargaining agreement. It is
reported a net profit of P547,414.72, which when added to the supported with a copy of the proposed changes which just
surplus of P5,591.214.19, makes a total surplus of goes to show that the union, aside from the issue concerning
P6,138,628.91 as of June 30, 1975.39 respondents refusal to bargain, sought determination of the
xxx xxx xxx merit of its proposals. On the part of the appellant company, it
The petitioner would, however, have us believe that it in fact pleaded financial incapacity to absorb the proposed
sustained losses Whatever profits it earned, so it claims were economic benefits during the initial stage of the proceedings
in the nature of dividends declared on its shareholdings in below. Even the evidence and arguments proferred below by
other companies in the earning of which the employees had both parties are relevant to deadlock issue. In the f ace of
no participation whatsoever.40 Cash dividends, according these factual environment, it is our view that the Labor Arbiter
to it, are the absolute property of the stockholders and below did not commit a reversible error in rendering judgment
cannot be made available for disposition if only to meet the on the proposed CBA changes. At any rate, the minimum
employees economic demands.41 requirements of due process was satisfied because as
There is no merit in this contention. We agree with the heretofore stated, the appellant was given opportunity, and
National Labor Relations Commission that [t]he dividends had in fact, presented evidence and argument in avoidance of
received by the company are corporate earnings arising from the proposed CBA changes.
corporate investment.42 Indeed, as found by the We do not also subscribe to appellants argument that by
Commission, the petitioner had entered such earnings in its reducing its capital, it is made evident that it is phasing out its
financial statements as profits, which it would not have done operations. On the contrary, whatever may be the reason
if they were not in fact prof fits.43 behind such reductions, it is indicative of an intention to keep
Moreover, it is incorrect to say that such profitsin the form the company a going concern, 80 much so that until now
of dividendsare beyond the reach of the petitioners almost four (4) years later, it is still very much in existence
creditors since the petitioner had received them as and operational as before.
compensation for its management services in favor of the We now come to the question concerning the equitableness
companies it managed as a shareholder thereof. As such of the economic benefits granted below. It requires no
shareholder, the dividends paid to it were its own money, evidence to show that the employees concerned deserve
which may then be available for wage increments. It is not a some degree of upliftment due to the unabated increase in the
case of a corporation distributing dividends in favor of its cost of living especially in Metro Manila. Of course the
stockholders, in which case, such dividends would be the company would like us to believe that it is losing and is
absolute property of the stockholders and hence, out of reach therefore not financially capable of improving the present
by creditors of the corporation. Here, the petitioner was CBA to favor its employees. In support of such assertion, the
acting as stockholder itself, company points that the profits reflected in its yearly
_______________ Statement of Income and Expenses are dividends from
security holdings. We, however, reject as puerile its
39 Id., 3435. suggestion to dissociate the dividends it received from
51 No. L-23557, April 30, 1974, 56 SCRA 694 (1974). 40 Id., 53.
370 41 Id.
42 Id., 67.
370 43 Id.
SUPREME COURT REPORTS ANNOTATED 368
Madrigal & Company, Inc. vs. Zamora
firmed in a long line of decisions that came later,52 hereby 368
fixes the amount of backwages at three (3) years pay SUPREME COURT REPORTS ANNOTATED
reckoned at the increased rates decreed by the labor arbiter Madrigal & Company, Inc. vs. Zamora
in Case No. LR5415 without deduction or qualification. and in that case, the right to a share in such dividends, by
_______________ way of salary increases, may not be denied its employees.
Accordingly, this court is convinced that the petitioners
52 Manila Hotel Corporation v. NLRC, No. L-53453, January 22, capital reduction efforts were, to begin with, a subterfuge, a
1986, 141 SCRA 169 (1986); Akay Printing Press v. Minister of deception as it were, to camouflage the fact that it had been
Labor and Employment, No. L-59651, December 6, 1985, 140 making profits, and consequently, to justify the mass lay off in
SCRA 381 (1985); Magtoto v. National Labor Relations its employee ranks, especially of union members, They were
Commission, No. L63370, November 18, 1985, 140 SCRA 58 nothing but a premature and plain distribution of corporate
(1985); Panay Railways, Inc. v. National Labor Relations assets to obviate a just sharing to labor of the vast profits
Commission, No. L-69416, July 11, 1985, 137 SCRA 480 (1985); obtained by its joint efforts with capital through the years.
Lepanto Consolidated Mining Company v. Encarnacion, Nos. Surely, we can neither countenance nor condone this. It is an
L-6700203, April 30, 1985, 136 SCRA 256 (1985); Medical unfair labor practice.
Doctors, Inc. (Makati Medical Center) v. NLRC, No. L-56633, As we observed in Peoples Bank and Trust Company v.
April 24, 1985, 136 SCRA 1 (1985); Insular Life Assurance Co., Peoples Bank and Trust Co. Employees Union:44
Ltd. v. NLRC, No. L-49071, April 17, 1985, 135 SCRA 697 xxx xxx xxx
(1985); Flexo Manufacturing Corp. v. NLRC, No. L-55971, As has been held by this Court in Insular Lumber Company
February 28, 1985, 135 SCRA 145 (1985); Philippine Airlines, vs. CA, et al., L-23875, August 29, 1969, 29 SCRA 371,
Inc. v. NLRC, No. L-64809, November 29, 1983, 126 SCRA 223 retrenchment can only be availed of if the company is losing
(1983); Associated Anglo American Tobacco Corporation v. or meeting financial reverses in its operation, which certainly
Lazaro, No. L-63779, October 27, 1983, 125 SCRA 463 (1983); is not the case at bar. Undisputed is the fact, that the Bank at
Capital Garment Corporation v. Ople, No. L-53627, September no time incurred losses. As a matter of fact, the net
10, 1982, 117 SCRA 473 (1982); Litex Employees Association earnings of the Bank would be in the average of P2,000,000.00
v. CIR, No. L-39154, September 9, 1982, 116 SCRA 459 (1982); a year from 1960 to 1969 and, during this period of nine (9)
Yucoco v. Inciong, No. L-49061, March 29, 1982, 113 SCRA 245 years, the Bank continuously declared dividends to its
(1982); Peoples Industrial and Commercial Employees and stockholders. Thus the mass lay-off or dismissal of the 65
Workers Org. (FFLU) v. Peoples Industrial and Commercial employees under the guise of retrenchment policy of the
Corp., No. L-37687, March 15, 1982, 112 SCRA 440 (1982); Bank is a lame excuse and a veritable smoke-screen of its
Kapisanan ng Manggagawa sa Camara Shoes v. Camara scheme to bust the Union and thus unduly disturb the
Shoes, No. L-50985, January 30, 1982, 111 SCRA 477 (1982); employment tenure of the employees concerned, which act is
Pepito v. Secretary of Labor, No, L-49418, February 29,1980, certainly an unfair labor practice,45
96 SCRA 454 (1980); Citizens League of Free-Workers v. CIR, Yet, at the same time, the petitioner would claim that the
No. L-38293, February 21, 1980, 96 SCRA 225 (1980); Liberty phasing out of its operations which brought about the
Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., No. L- retrenchment of the affected employees was mainly dictated
33987, May 31, 1979, 90 SCRA 391 (1979); Dy Keh Beng v. be the necessity of its stockholders in their capacity as heirs
International Labor, supra; Bachrach Motor Co., Inc. v. Court of the late Don Vicente Madrigal to partition the estate left by
of Industrial Relations, No. L-26136, October 30, 1978, 86 _______________
SCRA 27 (1978); L.R. Aguinaldo & Co., Inc. v. Court of
Industrial Relations, No. L-31909, April 3, 1978, 82 SCRA 309 44 Nos. L-39598 and 39603, January 13, 1976, 69 SCRA 10
(1978); Danao Development Corporation v. NLRC, Nos. L40706 (1976).
& 40700, February 16, 1978, 81 SCRA 487 (1978); Monteverde 45 Supra, 2526.
v. Court of Industrial Relations, No. L-32975, September 30, 369
1977, 79 SCRA 259 (1977); Insular Life Assurance Co., Ltd.
Employees Association-Natu v. Insular Life Assurance Co., VOL. 151, JUNE 30, 1987
Ltd., No. L-25291, March 10, 1977, 76 SCRA 50 (1977); 369
Peoples Bank and Trust Com Madrigal & Company, Inc. vs. Zamora
371 him.46 It must be noted, however, that the labor cases were
tried on the theory of losses the petitioner was supposed to
VOL. 161, JUNE 30, 1987 have incurred to justify retrenchment. The petitioner cannot
371 change its theory in the Supreme Court. Moreover, there is
Madrigal & Company, Inc. vs. Zamora nothing in the records that will substantiate this claim. But
WHEREFORE, the petitions are hereby DISMISSED. Subject to what is more important is the fact that it is not impossible to
the modification as to the amount of backwages hereby partition the Madrigal estateassuming that the estate is up
awarded, the challenged decisions are AFFIRMED. The for partitionwithout the petitioners business closing shop
temporary restraining orders are LIFTED. With costs against and inevitably, without the petitioner laying off its employees.
the petitioner. As regards the question whether or not the petitioners letter
This decision is IMMEDIATELY EXECUTORY. dated November 17, 197547 was in substantial compliance
SO ORDERED. with legal clearance requirements, suffice it to state that apart
Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Feliciano from the Secretary of Labors valid observation that the same
and Gancayco, JJ., concur. did not constitute a sufficient clearance as contemplated by
Petitions dismissed Decisions affirmed with modification. law,48 the factual circumstances show that the letter in
Orders lifted. question was itself a part of the systematic and deliberate
Notes.Labor must be represented by a union that can attempt to get rid of [the union members] because of their
express its collective will. (Federacion Obrera de la Industria union activities.49 Hence, whether or not the said letter
Tabaquera y Otros Trabajadores de Filipinas vs. Noriel, 72 complied with the legal formalities is beside the point since
SCRA 24.) under the circumstances, retrenchment was, in all events,
Terms and conditions of collective bargaining contract unjustified. Parenthetically, the clearance required under
constitute the law between the parties. (Batangas- Presidential Decree No. 850 has been done away with by
LagunaTayabas Bus Company vs. Court of Appeals, 71 SCRA Batas Blg. 130, approved on August 21,1981.
470.) During the pendency of these petitions, the petitioner
Refusal by employer to comply with provisions of collective submitted manifestations to the effect that certain employees
bargaining agreement is an unfair labor practice. (MRR Yard have accepted retirement benefits pursuant to its
Crew Union vs. Philippine National Railways, 72 SCRA 88.) retrenchment scheme.50 This is a matter of defense that
o0o should be raised before the National Labor Relations
Commission.
_______________ To do away with the protracted process of determining the
earnings acquired by the employees as a result of ad interim
pany v. Peoples Bank and Trust Co. Employees Union, supra; employment, and to erase any doubt as to the amount of
Luzon Stevedoring v. Court of Industrial Relations, No. L- backwages due them, this court, in line with the precedent set
34300, November 22, 1974, 61 SCRA 154 (1974); Feati in Mercury Drug Co., Inc. v. Court of Industrial Relations,51 af-
University Faculty Club (Paflu) v. Feati University, No. L- _______________
31503, August 25, 1974, 58 SCRA 395 (1974).
372 [Madrigal & Company, Inc. vs. Zamora, 151 SCRA 46 Id., G.R. No. 48237, 144.
355(1987)] 47 Id., 1819.
48 Id., 25.
49 Id., 26.
VOL. 193, FEBRUARY 7, 1991 50 Id., 118122, 141145.
The validity of the redemption of a foreclosed real property is 717
the center of this controversy. Pea vs. Court of Appeals
The facts as found by the respondent court are not disputed. G.R. No. 91478. February 7, 1991.*
A reading of the records shows that [Pampanga Bus Co.] ROSITA PENA, petitioner, us. THE COURT OF APPEALS,
PAMBUSCO, original owners of the lots in question under SPOUSES RISING T. YAP and CATALINA YAP, PAMPANGA
TCT Nos. 4314, 4315 and 4316, mortgaged the same to the BUS CO., INC., JESUS DOMINGO, JOAQUIN BRIONES,
Development Bank of the Philippines (DBP) on January 3, SALVADOR BERNARDEZ, MARCELINO ENRIQUEZ and
1962 in consideration of the amount of P935.000.00. This EDGARDO A. ZABAT, respondents.
mortgage was foreclosed. In the foreclosure sale under Act Corporation Law; By-laws; Quorum; Three (3) out of five (5)
No. 3135 held on October 25, 1974, the said properties were members of the board of directors present in the special
awarded to Rosita Pena as highest bidder. A certificate of sale meeting of respondent PAMBUSCO do not constitute a
was issued in her favor by the Senior Deputy Sheriff of quorum to validly transact business. Section 4 of its amended
Pamapanga, Edgardo A. Zabat, upon payment of the sum of by-laws requires at least four (4) members present to
P128,000.00 to the Office of the Provincial Sheriff (Exh. 23). constitute a quorum in a special meeting of its board of
The certificate of sale was registered on October 29, 1974 directors.The by-laws of a corporation are its own private
(Exh. G). laws which substantially have the same effect as the laws of
On November 19, 1974, the board of directors of the corporation. They are in effect, written, into the charter. In
PAMBUSCO, through three (3) out of its five (5) directors, this sense they become part of the fundamental law of the
resolved to assign its right of redemption over the aforesaid corporation with which the corporation and its directors and
lots and authorized one of its members, Atty. Joaquin officers must comply. Apparently, only three (3) out of five (5)
Briones, to execute and sign a Deed of Assignment for and in members of the board of directors of respondent PAMBUSCO
behalf of PAMBUSCO in favor of any interested party xxx convened on November 19, 1974 by virtue of a prior notice of
(Exh. 24). Consequently, on March 18, 1975, Briones executed a special meeting. There was no quorum to validly transact
a Deed of Assignment of PAMBUSCOs redemption right over business since, under Section 4 of the amended by-laws
the subject lots in favor of Marcelino Enriquez (Exh. 25). The hereinabove reproduced, at least four (4) members must be
latter then redeemed the said properties and a certificate of present to constitute a quorum in a special meeting of the
redemption dated August 15, 1975 was issued in his favor by board of directors of respondent PAMBUSCO.
Sheriff Zabat upon payment of the sum of one hundred forty Same; Board of Directors; Only persons who own at least one
thousand, four hundred seventy four pesos P140,474.00) to (1) share in their own right may qualify to be directors of a
the Office of the Provincial Sheriff of Pampanga (Exh. 26). corporation.As a matter of fact, the three (3) alleged
A day after the aforesaid certificate was issued, Enriquez directors who attended the special meeting on November
executed a deed of absolute sale of the subject properties in 19,1974 were not listed as directors of respondent
favor of plaintiffs-appellants, the spouses Rising T. Yap and PAMBUSCO in the latest general information sheet of
Catalina Lugue, for the sum of P140,000.00 (Exh. F). respondent PAMBUSCO filed with the SEC dated 18 March
On August 18, 1975, a levy on attachment in favor of Capitol 1951. Similarly, the latest list of stockholders of respondent
Allied Trading was entered as an additional encumbrance on PAMBUSCO on file with the SEC does not show that the said
TCT Nos. 4314, 4315 and 4316 and a Notice of a pending alleged directors were
consulta was also annotated on the same titles concerning _______________
the Allied Trading case entitled Dante Gutierrez, et al. vs.
PAMBUSCO (Civil Case No. 4310) in which the registrability of * FIRST DIVISION.
the aforesaid lots in the name of the spouses Yap was sought 718
to be resolved (Exh. 20-F). The certificate of sale issued by
the Sheriff in favor of defendant Pea, the resolution of the 718
PAMBUSCOs board of directors assigning its redemption SUPREME COURT REPORTS ANNOTATED
rights Pea vs. Court of Appeals
720 among the stockholders of respondent PAMBUSCO. Under
Section 30 of the then applicable Corporation Law, only
720 persons who own at least one (1) share in their own right may
SUPREME COURT REPORTS ANNOTATED qualify to be directors of a corporation. Further, under Section
Pea vs. Court of Appeals 28 1/2 ofthe said law, the sale or disposition of all and/or
to any interested party, the deed of assignment PAMBUSCO substantially all properties of the corporation requires, in
executed in favor of Marcelino B. Enriquez, the certificate of addition to a proper board resolution, the affirmative votes of
redemption issued by the Sheriff in favor of Enriquez as well the stockholders holding at least two-thirds (2/3) of the voting
as the deed of absolute sale of the subject lots executed by power in the corporation in a meeting duly called for that
Enriquez in favor of the plaintiffs-appellants were all purpose. No doubt, the questioned resolution was not
annotated on the same certificates of title likewise on August confirmed at a subsequent stockholders meeting duly called
18, 1975. Also, on the same date, the Office of the Provincial for the purpose by the affirmative votes of the stockholders
Sheriff of San Fernando, Pampanga informed defendant- holding at least two-thirds (2/3) of the voting power in the
appellee by registered mail that the properties under TCT corporation. The same requirement is found in Section 40 of
Nos. 4314, 4315 and 4316 x x x x x x xxx were all redeemed by the present Corporation Code.
Mr. Marcelino B. Enriquez on August 15,1975 xxx xxx xxx; Same; Deed of Assignment; Civil Law; Donation; Liberality as
and that she may now get her money at the Sheriffs Office a consideration in the deed of assignment of the respondent
(Exh. J and J-1). PAMBUSCO in favor of its former corporate officer for
On September 8, 1975, Pena wrote the Sheriff notifying him services rendered is not just an ordinary deed of assignment
that the redemption was not valid as it was made under a void but a donation.Respondent court, in upholding the
deed of assignment. She then requested the recall of the said questioned deed of assignment, which appears to be without
redemption and a restraint on any registration or transaction any consideration at all, held that the consideration thereof is
regarding the lots in question (Exh. 27). the liberality of the respondent PAMBUSCO in favor of its
On Sept. 10, 1975, the CFI Branch III, Pampanga in the former corporate officer, respondent Enriquez, for services
aforementioned Civil Case No. 4310, entitled Dante Gutierrez, rendered. Assuming this to be so, then as correctly argued by
et al. vs. PAMBUSCO, et al., ordered the Register of Deeds of petitioner, it is not just an ordinary, deed of assignment, but is
Pampanga xxx to desist from registering or noting in his in fact a donation. Under Article 725 of the Civil Code, in order
registry of property xxx any of the following documents under to be valid, such a donation must be made in a public
contract, until further orders: document and the acceptance must be made in the same or in
(a) Deed of Assignment dated March 18, 1975 executed by the a separate instrument. In the latter case, the donor shall be
defendant Pampanga Bus Company in virtue of a resolution notified of the acceptance in an authentic form and such step
of its Board of Directors in favor of defendant Marcelino must be noted in both instruments. Non-compliance with this
Enriquez; requirement renders the donation null and void. Since
(b) A Certificate of Redemption issued by defendant Deputy undeniably the deed of assignment dated March 8, 1975 in
Sheriff Edgardo Zabat in favor of defendant Marcelino question, shows that there was no acceptance of the donation
Enriquez dated August 15, 1975; in the same and in a separate document, the said deed of
(c) Deed of Sale dated August 16,1975 executed by defendant assignment is thus void ab initio and of no force and effect.
Marcelino Enriquez in favor of defendant Rising Yap. (Original PETITION for certiorari to review the decision and resolution
Record, p. 244) of the Court of Appeals.
On November 17, 1975, the Land Registration Commission
opined under LRC Resolution No. 1029 that the levy on The facts are stated in the opinion of the Court.
attachment in favor of Capitol Allied Trading (represented by Cesar L. Villanueva for petitioner.
Dante Gutierrez) should be carried over on the new title that Martin N. Roque for private respondents.
would be issued in the name of Rising Yap in the event that he 719
is able to present the owners duplicates of the certificates of
title herein involved (Exh. G). VOL. 193, FEBRUARY 7, 1991
Meanwhile, defendant Pea, through counsel, wrote the 719
Sheriff asking for the execution of a deed of final sale in her Pea vs. Court of Appeals
favor on the ground that the one (1) year period of GANCAYCO, J.:
redemption has long elapsed without any valid redemption
Marcelino Enriquez in favor of the plaintiffs herein be all having been exercised; hence she will now refuse to receive
declared null and void; and further, that TCT Nos. 148983-R, the redemption money xxx (Exh. 28).
148984-R and 148985-R, covering these parcels issued in the On Dec. 30, 1977, plaintiff Yap wrote defendant Pea asking
plaintiffs name be cancelled and, in lieu thereof, 721
corresponding certificates of title over these same parcels be
issued in the name of defendant Rosita Pea. VOL. 193, FEBRUARY 7, 1991
Thereafter, the defendants with prior leave of court filed a 721
third-party complaint third-party defendants PAMBUSCO, Pea vs. Court of Appeals
Jesus Domingo, Joaquin Briones, Salvador Bernardez (as payment of back rentals in the amount of P42,750.00 for the
members of the Board of Directors of PAMBUSCO), Marcelino use and occupancy of the land and house located at Sta.
Enriquez, and Deputy Sheriff Edgardo Zabat of Pampanga. All Lucia, San Fernando, Pampanga, and informing her of an
these third-party defendants, how- increase in monthly rental to P2,000; otherwise, to vacate the
723 premises or face an eviction cum collection suit (Exh. D).
In the meantime, the subject lots, formerly under TCT Nos.
VOL. 193, FEBRUARY 7, 1991 4314, 4315 and 4316 were registered on June 16, 1978 in the
723 name of the spouses Yap under TCT Nos. 148983-R, 148984-R
Pea vs. Court of Appeals and 148985-R, with an annotation of a levy on attachment in
ever, were declared as in default for failure to file their answer, favor of Capitol Allied Trading. The LRC Resolution No. 1029
except Edgardo Zabat who did file his answer but failed to allowing the conditioned registration of the subject lots in the
appear at the pre-trial. name of the spouses Yap was also annotated on TCT No. 4315
After trial, a decision was rendered by the court in favor of on June 16, 1978 and the notice of a pending consulta noted
the defendants-appellees, to wit: thereon on August 18, 1975 was cancelled on the same date.
WHEREFORE, and in view of all the foregoing, judgment is No Trial on the merits was held concerning Civil Case No.
hereby rendered dismissing the complaint filed by the 4310. In an order dated February 17, 1983, the case was
plaintiffs against the defendants and declaring as null and dismissed without prejudice.
void the following: Despite the foregoing, defendant-appellee Pea remained in
(a) The resolution of the Board of Directors of PAMBUSCO possession of the lots in question; hence, the spouses Yap
approved on November 19, 1974 assigning the PAMBUSCOs were prompted to file the instant case.1
right of redemption concerning the parcels involved herein; The antecedents of the present petition are as follows:
(b) The deed of assignment dated March 18, 1975 executed in Plaintiffs-appellants, the spouses Rising T. Yap and Catalina
favor of Marcelino Enriquez pursuant to the resolution Lugue, are the registered owners of the lots in question under
referred to in the preceding paragraph; Transfer Certificate of Title (TCT) Nos. 148983-R, 148984-R,
(c) The certificate of redemption dated August 15, 1975 148985-R. In the complaint filed on December 15, 1978,
issued by Deputy Sheriff Edgardo Zabat in favor of Marcelino appellants sought to recover possession over the subject
Enriquez concerning these parcels; lands from defendants Rosita Pena and Washington Distillery
(d) The deed of absolute sale dated August 15, 1975 executed on the ground that being registered owners, they have to
by Marcelino Enriquez in favor of the plaintiffs concerning the enforce their right to possession against defendants who
same parcels; and have been allegedly in unlawful possession thereof since
(e) TCT Nos. 148983-R, 148984-R and 148985-R of the October 1974 when the previous owners assigned (their)
Kegister of Deeds of Pampanga in the name of the plaintiffs right to collect rentals x x x in favor of plaintiffs (Record, p.
also covering these parcels. 5). The amount claimed as damages is pegged on the total
Third-party defendant Edgardo Zabat, in his capacity as amount of unpaid rentals from October 1974 (as taken from
Deputy Sheriff of Pampanga is directed to execute in favor of the allegations in the complaint) up to December 1978 at a
defendant Rosita Pena the corresponding certificate of final monthly rate of P1,500.00 and the further sum of P2,000.00 a
sale involving the parcels bought by her in the auction sale of month from January 1979 until the defendants finally vacate
October 25, 1974 for which a certificate of sale had been the xxx premises in question; with interest at the legal rate
issued to her. (Record, p. 6).
Finally, the third-party defendants herein except Deputy In their answer, defendants Rosita Pena and Washington
Sheriff Edgardo Zabat are hereby ordered to pay the Distillery denied the material allegations of the complaint and
defendants/ third party plaintiffs, jointly and severally, the by way of an
amount of P10,000.00 as attorneys fees plus costs. 2 _______________
Thus, an appeal from said judgment of the trial court was
interposed by private respondents to the Court of Appeals 1 Pages 38 to 40, Rollo.
wherein in due course a decision was rendered on June 20, 722
1989, the dispositive part of which reads as follows:
_______________ 722
SUPREME COURT REPORTS ANNOTATED
2 Pages 35 to 38, Rollo. Pea vs. Court of Appeals
724 affirmative and special defense asserted that Perla is now the
legitimate owner of the subject lands for having purchased
724 the same in a foreclosure proceeding instituted by the DBP
SUPREME COURT REPORTS ANNOTATED xxx against PAMBUSCO xxx and no valid redemption having
Pea vs. Court of Appeals been effected within the period provided by law. It was
WHEREFORE, premises considered, the judgment of the trial contended that plaintiffs could not have acquired ownership
court on appeal is REVERSED. Defendant-appellee Pena is over the subject properties under a deed of absolute sale
hereby ordered to vacate the lands in question and pay the executed in their favor by one Marcelino B. Enriquez who
plaintiffs-appellants the accrued rentals from October, 1974 in likewise could not have become [the] owner of the properties
the amount of P1,500.00 per month up to December, 1978 and in question by redeeming the same on August 18, 1975 (Exh.
the amount of P2,000.00 per month thereafter, until appellee 26) under an allegedly] void deed of assignment executed in
finally vacate (sic) the premises; with interest at the legal his favor on March 18, 1975 by the original owners of the land
rate. in question, the PAMBUSCO. The defense was that since the
SO ORDERED.3 deed of assignment executed by PAMBUSCO in favor of
A motion for reconsideration filed by the appellee was denied Enriquez was void ab initio for being an ultra vires act of its
in a resolution dated December 27, 1989. board of directors and, for being without any valuable
Hence, this petition for review on certiorari of said decision consideration, it could not have had any legal effect; hence,
and resolution of the appellate court predicated on the all the acts which flowed from it and all the rights and
following assigned errors: obligations which derived from the aforesaid void deed are
First Assignment of Error likewise void and without any legal effect.
Further, it was alleged in the same Answer that plaintiffs are
THE RESPONDENT COURT OF APPEALS ERRED IN buyers in bad faith because they have caused the titles of the
HOLDING THAT THE TRIAL COURT HAD NO JURISDICTION subject properties with the Register of Deeds to be issued in
TO RULE ON THE VALIDITY OF THE QUESTIONED their names despite an order from the then CFI, Br. III,
RESOLUTION AND TRANSFERS. Pampanga in Civil Case No. 4310, entitled Dante Gutierrez, et
Second Assignment of Error al. vs. Pampanga Bus Company, Inc., et al., to desist from
registering or noting in his registry of property xxx any of the
THE RESPONDENT COURT OF APPEALS ERRED IN above-mentioned documents under contest, until further
HOLDING THAT PETITIONER HAS NO LEGAL STANDING TO orders. (Record, p. 11).
ASSAIL THE VALIDITY OF THE QUESTIONED RESOLUTION For its part, defendant Washington Distillery stated that it
AND THE SERIES OF SUCCEEDING TRANSACTIONS has never occupied the subject lots; hence they should not
LEADING TO THE REGISTRATION OF THE SUBJECT have been impleaded in the complaint.
PROPERTIES IN FAVOR OF THE RESPONDENTS YAP. The defendants, therefore, prayed that the complaint be
Third Assignment of Error dismissed; that the deed of assignment executed in favor of
Marcelino Enriquez, the certificate of redemption issued by
THE RESPONDENT COURT OF APPEALS ERRED IN the Provincial Sheriff also in favor of Marcelino Enriquez, and
HOLDING THAT THE RESOLUTION OF RESPONDENT the deed of sale of these parcels of land executed by
727 PAMBUSCO, ADOPTED ON 19 NOVEMBER 1974, ASSIGNING
ITS RIGHT OF REDEMPTION IS NOT VOID OR AT THE VERY
VOL. 193, FEBRUARY 7, 1991 LEAST LEGALLY DEFECTIVE.
727 _______________
Pea vs. Court of Appeals
or subsidiarily in a contract may exercise an action for nullity 3 Page 52, Rollo.
of the contract if he is prejudiced in his rights with respect to 725
one of the contracting parties, and can show the detriment
which would positively result to him from the contract in VOL. 193, FEBRUARY 7, 1991
which he had no intervention, Indeed, in the case now before 725
Us, the complaint alleges facts which show that plaintiff Pea vs. Court of Appeals
suffered detriment as a result of the deed of sale entered into Fourth Assignment of Error
by and between defendant PHHC and defendant Melisenda L.
Santos. We believe that the plaintiff should be given a chance THE RESPONDENT COURT OF APPEALS ERRED IN
to present evidence to establish that she suffered detriment HOLDING THAT THE DEED OF ASSIGNMENT, DATED 8
and that she is entitled to relief. (Emphasis supplied.) MARCH 1975, IN FAVOR OF RESPONDENT ENRIQUEZ IS NOT
There can be no question in this case that the questioned VOID OR AT THE VERY LEAST VOIDABLE OR RESCISSIBLE.
resolution and series of transactions resulting in the Fifth Assignment of Error
registration of the properties in the name of respondent Yap
spouses adversely affected the rights of petitioner to the said THE RESPONDENT COURT OF APPEALS ERRED IN NOT
properties. Consequently, petitioner has the legal standing to HOLDING THAT THE QUESTIONED DEED OF ASSIGNMENT,
question the validity of said resolution and transactions. DATED 8 MARCH 1975, WAS VOID AB INITIO FOR FAILING TO
As to the question of validity of the board resolution of COMPLY WITH THE FORMALITIES MANDATORILY REQUIRED
respondent PAMBUSCO adopted on November 19, 1974, UNDER THE LAW FOR DONATIONS.
Section 4, Article III of the amended by-laws of respondent Sixth Assignment of Error
PAMBUSCO, provides as follows:
Sec. 4. Notices of regular and special meetings of the Board THE RESPONDENT COURT OF APPEALS ERRED IN
of Directors shall be mailed to each Director not less than five HOLDING THAT RESPONDENTS YAP ARE PURCHASERS IN
days before any such meeting, and notices of special meeting GOOD FAITH AND IN FURTHER HOLDING THAT IT WAS TOO
shall state the purpose or purposes thereof. Notices of LATE FOR PETITIONER TO INTERPOSE THE ISSUE THAT
regular meetings shall be sent by the Secretary and notices of RESPONDENTS YAP WERE PURCHASERS IN BAD FAITH.
special meetings by the President or Directors issuing the Seventh Assignment of Error
call. No failure or irregularity of notice of meeting shall
invalidate any regular meeting or proceeding thereat; THE RESPONDENT COURT OF APPEALS ERRED IN
Provided a quorum of the Board is present, nor of any special REVERSING THE DECISION OF THE TRIAL COURT.4
meeting; Provided at least four Directors are present. The petition is impressed with merit.
(Emphasis supplied.)8 First, the preliminary issues.
The trial court in finding the resolution void held as follows: The respondent court ruled that the trial court has no
On the other hand, this Court finds merit in the position jurisdiction to annul the board resolution as the matter falls
taken by the defendants that the questioned resolution within the jurisdiction of the Securities and Exchange
should be declared invalid it having been approved in a Commission (SEC) and that petitioner did not have the proper
meeting attended by only 3 of the 5 members of the Board of standing to have the same declared null and void.
Directors of PAMBUSCO which attendance is short of the In Philex Mining Corporation vs. Reyes,5 this Court held that
number required by the By-Laws of the corporation. it is the fact of relationship between the parties that
_______________ determines the proper and exclusive jurisdiction of the SEC
to hear and
8 Exhibit 4-A. _______________
728
4 Pages 12 to 13, Rollo.
728 5 118 SCRA 602 (1982).
SUPREME COURT REPORTS ANNOTATED 726
Pea vs. Court of Appeals
x x x. 726
In the meeting of November 19, 1974 when the questioned SUPREME COURT REPORTS ANNOTATED
resolution was approved, the three members of the Board of Pea vs. Court of Appeals
Directors of PAMBUSCO who were present were Jesus decide intra-corporate disputes; that unless the controversy
Domingo, Joaquin Briones, and Salvador Bernardez. The has arisen between and among stockholders of the
remaining 2 others, namely: Judge Pio Marcos and Alfredo corporation, or between the stockholders and the officers of
Mamuyac were both absent therefrom. As it becomes clear the corporation, then the case is not within the jurisdiction of
that the resolution approved on November 19, 1974 is null and the SEC. Where the issue involves a party who is neither a
void it having been approved by only 3 of the members of the stockholder or officer of the corporation, the same is not
Board of Directors who were the only ones present at the said within the jurisdiction of the SEC.
meeting, the deed of assignment subsequently executed in In Union Glass & Container Corporation vs. Securities and
favor of Marcelino Enriquez pursuant to this resolution also Exchange Commission,6 this Court defined the relationships
becomes null and void, x x x9 which are covered within intra-corporate disputes under
However, the respondent court overturning said legal Presidential Decree No. 902-A, as amended, as follows:
conclusions of the trial court made the following disquisition: Otherwise stated, in order that the SEC can take cognizance
It should be noted that the provision in Section 4, Article III of a case, the controversy must pertain to any of the following
of PAMBUSCOs amended by-laws would apply only in case relationships; (a) between the corporation, partnership or
of a failure to notify the members of the board of directors on association and the public; (b) between the corporation,
the holding of a special meeting, x x x. partnership or association and its stockholders, partners,
In the instant case, however, there was no proof whatsoever, members, or officers; (c) between the corporation,
either by way of documentary or testimonial evidence, that partnership or association and the state in so far as its
there was such a failure or irregularity of notice as to make franchise, permit or license to operate is concerned; and (d)
the aforecited provision apply. There was not even such an among the stockholders, partners or associates themselves.
allegation in the Answer that should have necessitated a In this case, neither petitioner nor respondents Yap spouses
proof thereof. The fact alone that only three (3) out of five (5) are stockholders or officers of PAMBUSCO. Consequently, the
members of the board cf directors attended the subject issue of the validity of the series of transactions resulting in
special meeting, was not enough to declare the aforesaid the subject properties being registered in the names of
proceeding void ab initio, much less the board resolution respondents Yap may be resolved only by the regular courts.
borne out of it, when there was no proof of irregularity nor Respondent court held that petitioner being a stranger to the
failure of notice and when the defense made in the Answer questioned resolution and series of succeeding transactions
did not touch upon the said failure of attendance. Therefore, has no legal standing to question their validity. In Teves vs.
the judgment declaring the nullity of the subject board Peoples Homesite and Housing Corporation,7 this Court
resolution must be set aside for lack of proof. held:
Moreover, there is no categorical declaration in the by-laws We note however, in reading the complaint that the plaintiff
that a failure to comply with the attendance requirement in a is seeking the declaration of the nullity of the deed of sale,
special meeting should make all the acts of the board therein not as a party in the deed, or because she is obliged
null and void ab initio. A cursory reading of the subject principally or subsidiarily under the deed, but because she
provision, as aforequoted, would show that its framers only has an interest that is affected by the deed. This Court has
intended to make voidable a board meeting held Without the held that a person who is not a party obliged principally
necessary compliance with the attendance requirement in the _______________
by-laws. Just the use of the word Invalidate already denotes a
legal imputation of validity to the questioned board 6 126 SCRA 31, 38 (1983).
_______________ 7 23 SCRA 1141, 1147 (1968).
14 Exhibit 7.
15 Exhibit 8. 9 Pages 92 to 93, Rollo.
731 729
13 Exhibit 19.
Meanwhile, INC filed a suit for specific performance before RTC
Branch 81 against the Carpizo group. INC also moved to compel
a certain Leticia Ligon (who is apparently the mortgagee of the lot)
to surrender the title.
In 1993, the SEC ruled that the sale was null and void . On appeal
CA reversed the SEC ruling.
MAIN ISSUE: W/N the sale between the Carpizo group and INC
is null and void.