Gulfo v Ancheta: (2012)

- Edito and Emmanuela Guflo filed petition for review on certiorari under Rule 34 to assail decision of CA reversing RTC decision,
remanding the case back to RTC for trial on the merits
- Guflos = neighbors of Jose Ancheta
o Both parties live in duplex residential unit on Zodia St, Veraville Homes, Almanza Uno, Las Pinas City (Guflos in 9-B,
Ancheta in 9-A)
- 1998: Anchetas septic tank overflowed
o human waste and offensive materials spread thru property
o Ancheta and family lived in unsanitary environment, suffering fould order for several months
- 1999: early months
o Ancheta engaged services of ZE Malabanan Excavation and Plumbing Services to fix overflow
o Discovery:
Underground drainage pipe, connecting Anchetas septic tank to subdivisions drainage system, had been
closed by cement that blocked the free flow of wastes from septic tank to drainage system
Ancheta narrated that Guflos had recently renovated their duplex + made some diggings in same portion
where drainage pipe had been cemented + closing of rdainage pipe could not have been result of accident, but
was malicious act by Guflos
o May 19, 1999: filed complaint for damages against Gulfos, alleging malicious closure of portion of drainge pipe leading to
overflow of Anchetas septic tank
- June 1999: Guflos moved to dismiss complaint on ground of lack of jurisdiction
o Since Anchest reside in same division and are members of same homeowners association (Veraville Homeowners
Association Inc), case falls within jurisdiction of Home Insurance and Guaranty Corp)
HIGC is gocc created under RA 580, vested with administrative supervision over homeowners associations to
the Securities and Exchange Commission
RA later repealed by EO 535 = transferred regulatory and djudicative functions of SEC over homeowners
ssociations to HIGC
o Gulfos based arguments on Sec 1(b) Rule II of 1994 Revised Rules of Procedure regulating Hearing of Homeownerss
Dispute:
(b) Controversies arising out of intra-corporate relations between and among members of the association;
between any or all of them and the association of which they are members; and between such association and
the state/general public or other entity in so far as it concerns its right to exist as a corporate entity.1
- RTC: dismissed complaint for lack of jurisdiction
o Viewed case as involving intra-corporate dispute falling under jurisdiction of HIGC
o Considering parties substantiated allegations that Vervaille Homeowners Association is duly registered with HIGC, thus
Court has no jurisdiction over instant case
o Ancheta brought appeal
- CA:
o Reversed + remanded case to RTC for trial on merits, on grounds that factual allegations support claim for damages
o Although case involves dispute between members of homeowners association, it is not an intra-corporate matter as it
does not concern the right of the corporation to exist as an entity
- ISSUE: WON the CA erred in ruling that the RTC has jurisdiction over the dispute. NO.
o Jurisdiction is determined by the allegations in the complaint.
Allegations in complaint and reliefs prayed for are determinants of nature of action and of which court has
jurisdiction.
Paragaphs 7, 8 and ( of complaint:
7 due to malicious act of cutting/closing off protion of drainage pipe, ancheta suffered sleepless
nights and claims damages
8 malicious and deliberate acts violative of others rights especially those inimical to health or life
exemplary damages
to protect and enforce rights, ancehta had to hire services of counsel, hence prays for attorneys fes
complaint is an ordinary act for damages = purely civil rather than corporate in character; Acnehta merely
seeks indemnification for harmy suffered; no question re membership of Guflos in association involved, nor
existence of association is in any manner under question
complaint is based on either Articles 19, 20 or 21 of Civil Code on human relations; CA correctly held that acts
alleged in complaint may give rise to indemnification under ART 2176 (quasi-delict)
since issue of damages arising from Civil Code, not intra-corporate controversy, RTC is appropricate court to
try case, and not the homeowners association
o What is an intra-corporate dispute?
Intra-corporate dispute is one that arises from intra-corporate relations; relations between or among
stockholders; or the relationships between the stockholders and the corporation. To limit the broad
definition, Court has applied the RELATIONSHIP test and the CONTROVERSY test to determine whether the
dispute is intra-corporate in nature.
RELATIONSHP TEST (Union Glass & Container Corp): whether the relationship is between:
the corporation, partnership or association and the public
the corporation, partnership or association and its stockholders, partners, members or officers
between the corporation, partnership or association and the State insofar as its franchise, permit or
license to operate is concerned
and among the stockholders, partners or associates themselves
AS APPLIED:
 o While the parties were members of the same association, this must be supplemented by
controversy test; the relationship alone does not ipso facto make the dispute intra-
corporate; the mere existence of an intra-corporate relationship does not always give
rise to an intra-corporate controversy the incidents of the relationship must be
considered to ascertain whether the controvery itself is intracorporate.
CONTROVERSY TEST: dispute must be rooted in the xistence of an intra-corporate relationship, and must
refer to the enforcement of the parties correlative rights and obligations under the Corporation Code, as well
as the internal and intra-corporate regulatory rules of the corporation, as determined through the allegations
in the complaint.
AS APPLIED:
From the allegations in the complaint, Ancheta did not question the status of Gulfos as members of
th association
There was no allegation assailing the Gulfos rights or obligations on the basis of the associations
rules and by-laws or regarding the Gulfos relationship with the association
What was alleged were daemands for civil indemnity and damages
Thus the case involves a simple civil action, which can be determined only through a full-blown
hearing before the RTC
- HELD: Petition denied; CA decision affirmed; case remanded to RTC for trial on the merits.

Abejo v dela Cruz: (1987)

- 1982: Telectronics purchased 63k shares registered in the name of Virginia Braga (with said purchase, Telectronics would become
majority stockholder) + requested corporate secretary, Norberto Braga, to register and transfer to its name and issue new
certificates of stock
o Norbertyo refused to register transfer of shares, asserting Bagas claim preemptive rights over 133,000 Abejo shares and
that Virginia Braga never transferred her 63k shares to Tleectronics but had LOST the 5 stock certificates representing
those shares
o Bragas claim civil court has jurisdiction; Abejos claim SEC has jurisdiction
o Abejos:
Prayer for mandamus ordering Norberto as corporate secretary to register in their name the transfer of
Pocket Bell shares + injunction enjoining Bragas from disbursing/disposing funds and assets of Pocket Bell
Norberto filed MTD on ground that acton is not an intracorproate controversy, Telectronics not being a
stockholder of Pocket Bell
o 1983: Sec Hearing Officer denied MTD --; but Hearing officer Garaygay granted Bragas MR, dismissing SEC case
SEC three-man committee on injunction case reconsidered the dismissal of mandamus petition and directed
Braga to file answer
o Bragas:
Filed petition for certiorari, prohibition and mandamus with SEC en banc seeking dismissal of SEC cases and
setting aside of three-man committee
o 1984: SEC en banc issued order dismissing Bragas petition for lack of merit + ordering continuaince of hearings of the
case, ruling issue is not ownership of shares but nonperformance by Corporate Secretary of ministerial duty to record
transfers of shares fo stock
o Bragas in CFI:
Filed complaint against Abejos and Telectronics in CFI Pasig for recission and annulment of sale of shares of
stock by Aejos in favor of Telectronics on ground that it violated Bragas alleged pre-emptive right over
Abejos shareholdings + alleged perfected contract with Abejos to sell the same shares to Bragas + damages
for bad faith + declaration of nullity of transfer by Virginia Bragas 64k shares to Telectronics for want of
consideration, since said stock certificates were intended as security for loan application (hence endorsed as
blank_ and had been lost
Abejos filed MTD that SEC has original and exlusive jurisdiction as per PD 902-A; dismissal granted
Bragas MR de la Cruz issued order rescinding order + revived TRO against Telectronics restraining them
from constituting themselves as new officers of Pocket Bell; Abejos MR denied
o Abejos filed present petition against de La Cruz alleging grave abuse of discretion + lack of jurisdicton
o Bragas alleged SEC has no jurisdiction and had acted capriciously in dismissing their petition
- ISSUE: who between the RTC and the SEC has jurisdiction over a dispute between the principal stockholders of corporation Pocket
Bell (Abejos) and purchaser Telectronic Systems Inc: SEC.
o SEC en banc resolution correct: issue is not ownership of shares but nonperformance by corporate secretary to perform
ministerial duty of recording transfers of shares of stock.
SECs primary and exclusive jurisdiction based on PD 902-A:
Sec. 3: Commission has absolute jurisdiction, supervision and control over all corporations,
partnerships or associations who are grantees of primary franchise/license or permit by govt to
operate
Sec 5: in additin to regulatory and adjudicative functions of SEC has original and exclusive
jurisdiction to hear and decide cases
Sec. 6: power to issue prelim/permanent injunctions whether prohibitory or mandatory in nature
in all cases to which it has jurisdiction
Dispute at bar is an intracorporate dispute arising because the corporate secretary backed by his parents
(erstwhile majority shareholders) failed to perform his ministerial duty to record the transfers of
corporations controlling shares in favor of Telectronics as purchase of the Abejos; mandamus in SEC is
proper
 Claims of Bragas in RTC praying for resicions and annulment of sale to Telectronics on ground of preemptive
right of Bragas + lost shares of stock by Virginia may in no way deprive SEC of primary and exclusive
jurisdiction to grant or not the writ of mandamus Bragas contention that question of ordering the recording
of transfers hinges on question of ownership notwithstanding, jurisdiction over dispute is vested with SEC
o Bragas complaint itself involves controversies between and among stockholders as to Abejos right to sell and dispose
of shares to Telectronics and the validity of the latters acquisition of those shares + who among bragas/Abejas should
be reocngized as controlling shareholders of the corporation + RTC order restraining Telectronics from constituting
themselves as new set of officers of Pcoket Bell encroached on SECs exclusive jurisdiction
nowhere does PD 902-A empower any CFI to interfere with the orders of the Commission + any ruling by the
TC on the issue of ownership of shares of stock is not binding on the Commission
o Bragas refusal to record the transfer of shares of stock may be deemed a device/scheme amounting to
fraud/misrepresentation employed to keep the Bragas in control of the corporation ot the detriment of Telectronics and
Abejos, thus falling under par. A of PD 902-A + dispute is an intra-corporate controversy between and among the
majority and minority stockholders as to the transfer and disposition of the controlling shares of the corporation falling
under par. b + concerns issue of whether the Bragas or Telectronics have the right to elect the corporate directors and
officers and manage its business an doperations under par. c.
o An intra-corporate controversy is one which arises between a stockholder and the corporation, without
distinction; issue of whether or not a corporation is bound to replace a stockholders lost certificate of stock isa
matter purely between a stockholder and the corporation (damages is incidental to the main issue); general
intent of law is to segregate from general jurisdiction of regular courts controversies involving corporations
and their stockholders and to bring them to the SEC for exclusive resolution
Fact of WON to register to Telectronics shares must be resolved by SEC; Norberto blocked this dispute
resolution by refusing to register the transfer
Dispute between Abejos and bragas as to sale and transfer of As former shres to Telectronics is an
intracorporate one; SEC must resolve the Bragas caim of an alleged pre-emptive right to buy the Abejos
share by virtue of on-going negotiations _ corporation is not a close corporation, and there is no restriction
over the free transferability of the shares in the Articles of Incorporation
Dispute between Bragas and Telectronics re Virginias 63k shares endorsed in blank in certificates afll within
SEC jurisdiction since they deal with free transferability of corporate shares as guaranteed by the Corporation
Code and its proclaimed policy of encouraging foreign and domestic investments in Ph private corporations
There is no requirement that astockholder of a corporation must be a registered one in order that the SEC
may take cognizance of a suit seeking to enforce his rights as such stockholder (SEC has absolute jursdiciton,
superivison and control over all corporations)
o Doctrine of primary jurisdiction: the courts cannot or will n6t determine a controversy involving a question which is
within the jurisdiction of an administrative tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience, and seruices of the administratiue tribunal to determine
technical and intricate matters of fact, and a uniformity of ruling is essential to comply uith the purposes of the
regulatory statute administere
o Corporation Code specifically vests the SEC with Rule-makign power in discharge of its task of implemnting provisions
of the Code particularly in the prevention of fraud and abuses on the part of the controlling stockholders, members,
directors, trustees or officers. SEC has primary and exclusvei jurisdiction over this dispute.
Action fo rrecovery of glass plant in an action to annul the dacion en pago could be brought by dissenting
stockholder to regular courts only if and when the SEC rendered final judgment annulling dacion en pago and
subject to Union Glass defenses as athrid party buyer in good faith
Money claim under a slease contract, even if the collection of rentals includes shares of stock in defendant
corporation, would be beyond the competence of the SEC.
o Precinding from great concern of damage and prejudice expressed by Telctronics due to Bragas remaining in control of
corporation and allegedly committing acts of gross mismangement and misapplication of funds, fair that SECs order
creaing receivership committee be implemented (3-man committee: rep of SEC, rep of petitioner, rep of respondent)
- HELD:
o Order of de la cruz annulled + dismissed for lack of jursidction
o TRO on Telectronics lfited
o SEC Hearing Comitte to proceed with mandamus petition re transfer of shares to Telectronics + implementation of
receivership or management comittee

Magalad v Premiere Financing Corporation: (1992)

- Premiere, a financing company for solicity/accepting money market placements or deposits, on Sept 1983 w/ expired permit to
issue commercial papers and with intention to defraud creditors, induced Magalad into making money market placement of P50k
at 22% interest per annum + issued 2 post-dated checks in total sum of P51,079 and assigned to Magalad its receivable from a
David Saman
o Drawee bank disnohonred checks for lack of sufficient funds
o Magald made demands to replace checks with cash, but Premiere failed to honor demans without just cause
- Magalad filed complaint with RTC, QC against Premiere; Premiere failed to fie answer, so lower court declared Premiere in default
and allowed Magalad to present evidence ex-parte
- RTC:
o Magalad fuly established claim Premiere obliged to play Magalad principal obligation _ interest until amount fully paid
_ damages
- Premieres MR: SEC has exclusive and original jurisdiction over a corporation under a state of suspension of payments
o RTC denied mR
o CA certified appeal by Premiere to SC on question of law
- ISSUE: WON lower court has jurisdiction to try the case.
 o PD 902-A provides that SEC has absolute jurisdiction over all corporations + over schemes by Board of corporations
amounting to fraud or misrepresentation which may be detrimental to public/stockholders/partners etc
o Considering that Magalads complaint sufficiently alleges acts amounting to fraud and misrepresentation
committed by Premiere, SEC has original and exclusive jurisdiction over the case despite the suit involving
collection of sums of money paid to said corporation fraud is detrimental to interest of public
o In this case, complaint alleges that schemes amount to fraud have been resorted to by Premiere
Fact that Premieres authority to engage in financing already expired does not divest SEC of jurisdiction;
Magalads money placement were in the nature of investiments in Premiere
Magalads reliance on Union Glass and DMRC are misplaced since in those cases, nothing in the complaint
alleges fraud on the part of defendant corporatins
SEC had further already appointed a Rehabilitation Receiver for Premiere and directed that all proceedings or
claims against it be suspended (Sec. 6 of PD 902-A: upon appointment of a rehabilitation receiver all
actions for claims against corporations under receivership pending before any court, tribunal, board or
body shall be suspended accordingly.
Exercise by SEC of original and exclusive jurisdciton to hear and decide cass involving petitions of
corporations/partnerships/associations to be declared in the state o fsuspension of paymentsin
cases where the corporation etc possesses sufficient property to cover all its debts but foresees the
impossibility of meeting thme when they respectively fall due, or in cases where corp etc has no
sufficient assets to cover its liabilities but is under the management of a Rehabilitation Receiver
- HELD: appeal granted; RTC decision reversed and set aside w/o prejudice to Magalad filing appropriate complaint against
Premiere with SEC.

Manuel Dulay v CA: (1993)

- Manuel Dulay Enterprises owned Dulay Apartment (16 apartment units) in Pasay City; thru president Manuel Dulay, DE obtained
loans for construction of its hotel project (Frederick Hotel) and borrowed from Virgilio Dulay, who occupied one of the unit
apartments since 1973 while managing the Dulay Apartment as his shareholdings in the corp was increased by his father
- Dec 1976: Manuel via Board Resolution sold the property to Maria Theresa and Castrense Veloso for P300k; TCTs were issued to
them, with right to repurchase within 2 years (but was not annotated on TCT)
o w/o Manuels knowledge, TVeloso mortgaged the property to Manuel Torres for a P250k loan, annotated in TCT
o when Veloso efaulted, subject property was sold to Torres as highest bidder in extrajudicial foreclosure
- July 1978: Veloso executed deed of absolute assignment of right to redeem in favor of Manuel Dulay assigning her right to
repurchase subject property from Torres
o Neither Veloso nor Dulay redeemed w/in 1 year statutory period
o Torres filed affidavit for consolidation of ownership, and TCT was issued to him
- Oct 1979: Torres filed petition for issuance of writ of possession against Veloso and Dulay; but Dulay was never authorized by
corporation to sell the subject property, hence trial court ordered Torres to implead corporation as indispensible party, but Torres
later moved for dismissal of petition which was granted
- June 1980: Torres and Pabalan (real estate administrator) filed action against corporation and Nepomuceno, tenant of Dulay
Aprtment, for recovryo fpossession + sum of money and damages in CFI Rizal
o Dulay Corp filed action against Velosos and Torres for cancellation of certificate of Sheriffs sale
o Jan 1981: Pabalan and Tores filed action against Manalastasas, tenants of Dulay Aparmtment, for ejectment with MTC
Pasay City, which ruled in favor of Torres ordering tennats to vacate
- May 1985: Corporation and DUlay fild action against MTC Pasay City, Pabal and Torres, for annulment of RTC decision
- Cases were jointly tried; ruled in favor of Torres; CA affirmed, hence this petition
- ISSUE: WON respondent court acted with grave abuse of discretion when it applied the doctrine of piercing the veil of corporate
entity considering the sale of subject property between Veloso and Dualy was pursuant to a resolution that was not approved by all
members of the board and was prepared by a person not designated by corp to be its secretary. NO GAD.
o Sec 101 of Corporation Code: When board meeting is unnecessary or improperly held. Unless the by- laws provide
otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if:
1. Before or after such action is taken, written consent thereto is signed by all the directors, or
2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto
in writing; or
3. The directors are accustomed to take informal action with the express or implied acquiese of all the
stockholders, or
4. All the directors have express or implied knowledge of the action in question and none of them makes
prompt objection thereto in writing.
If a directors' meeting is held without call or notice, an action taken therein within the corporate powers is
deemed ratified by a director who failed to attend, unless he promptly files his written objection with the
secretary of the corporation after having knowledge thereof.
o As applied: Dulay Corp is a close corporation; a board resolution authorizing the sale/mortgage of subject property is
not necessary to bind the corporation for the action of its president + corporate action taken at a board meeting without
proper call or notice ina close corporation is deemed ratified by the absent director unless the latter promptly files his
written objection with the secretary of the corporation after knowledge of the meeting which Virgilio Dulay failed to do
o A corporation may have a personality distinct from its members, but the veil of corporate fiction may be pierced when it
is used to defeat public convenience, justif wrong, protect fraud, or defend crime; when the corporation is used as a mere
alter ego of a person, the law will regard the corporation as the act of that person
o CA was correct in ruling that Virgiio Dulay was privy to transactions as incorporator and one of the board, and as a
family corporation + 4/5 of its incorporators are close relatives (3 children and their father) + Virgilio executed an
affidavit as signatory witness to the execution of the Deed of Absolute Slae in favor of Torres = awareness of transaction
by his father
o Corporation is liable for Manuel Dulays act and the sale is vali and binding
 Sale was a corporate act and not a personal transaction of Manuel, because Manuel was not just president and
treasurer but also general manager of the corporation; the only non-relative on the board was Atty Jose who
appeared on paper as secretary; as a closed family ocrporation, it cannot be concealed that Manuel as
president had absolute control over the business and affairs of the corporation
o Furthermore, prior physical delivery or possession is not legally required for Torres to acquire ownership, since
texecution of deed of sale in public instrument is deemed eqivalent to delivery.
- HELD: Decision appealed from affirmed.

NDC v Philippine Veterans Bank: (1990)

- PD 1717 ordered rehabilitation of the Agrix Group of Companies to be administered by the National Devt Company outlined
procedure for filing claims against the Agrix companies + created Claims Committee to process these claims + Sec 4(1): all
mortgages and other liens presently attaching to any of the assets of the dissolved corporations are hereby extinguished.
- Agrix Marketing had executed in favor of Ph veterans Bank a rel estate mortgage (July 1978) over 3 parcels of land in Los Banos,
Laguna; during existence of mortgage, AGRIX went bankrupt to salvage this and other Agrix companies, PD was issued by Pres
Marcos
- PVB filed claim against Agrix Claims Committee for payment of its loan credit, while Agrix and Natl Devt Company invoked Sec. 4,
filed a peititon with RTC Calamba, Laguna for cancellation fo the mortgage lien; PVB took steps to extrajudicially forelcose
mortgage, prompting Agrix and NDC to file second case to stop foreclosure
- RTC:
o Annulled Sec. 4 but also the entire PD 1717 on grounds that presidential exercise of legislative power violates principle
of separation of powers + law impaired obligation of contracts + decree violated the equal protection clause
- Issue: WON PVB is estopped from contesting the validity of the decree, considering they had filed claims with the Claims
Committee. No.
o While PVB did file a claim with the claims committee, this was done in 1980 when Pres Marcos was absolute ruler and
his decrees were absolute law; msut be distinguished from Mendoza where petitioners after filing claims, received in
settlement shares fo stock without protest or reservation in thi cs,PVas not been paid its claim + validity of the claim
was not questioned by Agrix when it soguht to restrain the extrajudicial foreclosure, simply limiting its argument to
questioning the decree because of prior compliance
o Sec 4 _ Subsection ii (all unsecured obligations shall not bear interest) + subsetion III (all accrued interests, penalties
or charges as of date hereof pertaining to the obligations, whether secured or unsecured, shall not be recognized) must
be read with Bill of Rights, where Sec 1 provides that no person shall be deprived of life, liberty or property w/o due
course of law nor shall any person be denied the equal protection of the law, and Sec 10 that no law impairing the
obligation of contracts shall be passed
Legislative act based on police power requires concurrence of lawful subject + lawful method --? Interests of
public generally, as distinguished from those of particular class, should justify interference of the state; and
menas employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive
upon individuals
Interests of public are not sufficiently involved to warrant interference of govt w/ private
contracts of AGRIX decree speaks vaguely of public and small investorys who would be
prejudiced if the corporation were not to be assisted, but does not state how many there are of such
investors, who they are, etc
Indispensible link to welfare of greater number has not been established + means employed to
rehabilitate AGRIX all short of requirement that they not be unduly oppressive (ie right to propery
in all mortgages, liens, interests, penalties and charges owing to creditors of AGRIC is arbitrarily
destroyed = private propery cannot simply be taken by law from one person and given to another
w/o comepsnation and any known public purpose) _ discrimination (decree lumps secured
creditors with unsecured creditors and places them on same level in prosecution of respective
claims, ie treat them all as unsecured creditors, only concession given to secured creditors is that
their loans are allowd to earn interest from date of the decree but that does not justify cancellation
of the interests earned before the date; under equal protection clause, all persons differently
situated should be treated differently)
Why was AGRIX singled out for govt help? AGRIX was also created by special decree despite Art
XIV Sec 4 of 1973 Constitution: that batasang Pambansa shall not, except by general law, provide
for the formation, organization, or regulation of private corporations, unless such corporations are
owned or controlled b the Govt or any subdivision or instrumentality thereof AGRIX is neither
owned nor controlled by the Govt; NDC merely extened loan to Agrix + manages corporation but
with obligation of making period reports to board of directors and after payment of loan, board can
appoint its own management + stocks of new corp to be issued to old investors of Agrix upon proof
of claims against abolished corporation = Agrix Inc is entirely private and should have been
organized under Corporation Law
Decree also impairs obligation of contract between AGRIX and PVB w/o justification; contracts of
loan and mortgage by AGRIX are purely private transactions and have not been shown to be
affected with public interest
Mortgage lien is a property right protected by due process and contract clauses
- HELD: PD 1717 = invalid exercise of police power; extinction of mortgage and other liens constitutes taking without due process of
law, compounded by reduction of secured creditors to category of unsecured creditors in violation of equal protection clause + new
corporation being neither owned nor controlled by the Govt, should have been created only by general and not special law _ decree
interferes with purely private agreements petition dismissed; PD 1717 declared unconstitutional; TRO lifted.

Pioneer Insurance v CA: (1989)

- 1965: Jaclob Lim owned and operated Southern Air Lines, a single proprietorship
o May 1965: at Tokyo, Japan, Japan Domestic Airlines and Lim entered into an executed sales contract for 2 planes and 1
set of spare parts for USD 109k to be paid in installments one plane arrived in June 1965, the other on July 1965
o Border Machinery and Heavy Equipment Company (Bormaheco), Francisco and Modesto Cervantes (Cervanteses) and
Constancio Maglana had contributed some funds for the purchase as their contributions to a new corporation by Lim to
expand his airline business
o Two indemnity agreements were executed to bind them solidarily to save Pioneer from damages in consequence of
having become surety upon the bond
- June 1965: Lim under SAL executed in favor of Pioneer a deed of chattel mortgage as security for the latters suretyship = reistered
with Office of the Register of Deeds of the City o Manila and the Civil Aeronautics Administration
o Lim defaulted; JDA requested pyments from surety, which Pioneer paid
o Pioneer filed petition for extrajudicial foreclosure before Sheriff of Davao City w/ application for writ of preliminary
attachment against Lim and respondents, who filed cross-craim against Lim alleging they were not privies to the
contracts
- Trial court: Lim liable to Pioneer, but dismissed Pioneers complaint against other defendants; CA affirmed, hence this petition.
- Issue: Has Pioneer a cause of action against defendants with respect to its obligations to JDA as has been paid with reinsurance
money?
o Total amount paid by Pioneer to JDA is P299; Pioneer colleceed from reinsurers P295k, with uninsured portion having
difference of P3,666 but was covered by the proceeds of the chattel mortgage sale, totaling P37k, thus Pioneer was
overpaid by P33k Pioneer has no claim against defendants
o Art 2207 applies insofar as the reinsurer acquires the same rights by subrogation as are acquired in similar cases where
the orignal insurer pays a loss, whereby the insurance company shall be subrogated to the rights of the insured against
the wrongdoer or the person who has violated the contract (ie insurer is deemed subogated to the rights of the insured
against the wrongdoer and if the amount paid by the insurer does not fully cover the loss, then the aggrieved party is the
one entitled to recover the deficiency real party in interest is thus the insurer and ot the insured
o When Pioneer sued in its own name and not as an attorney-in-fact of the reinsurer, it erred because Pioneer is not the
real party in interest (should be reinsurer) and thus has no cause of action against respondents)
o The indemnity agreement ceased to be valid and effective after the execution of the chattel mortgage the planes could
not be mortgaged at first being in Japan, but as soon as they were brought to the Philippines, they wuld be mortgaged to
Pioneer Insurane to cover the bond and the indemnity agreement would be cancelled; Pioneer, having foreclosed on the
chattel mortgage, have no further action against the indemnitors since the indemnity agreement was extinguished upon
the foreclosure of the chattel mortgage (Recto Law)
o Original memorandum was novated by a subsequent agreement that altered the maturity dates of the obligation twice
having been done without the knowledge or consent of defendants, their obligation under the inemnity agreement was
extinguished (NCC 2079: an extension granted to the debtor by the creditor without the consent of the guarantor
extinguishes the guaranty)
o JDA had not presented claim to Pioneer within 10 days from default of Lim or SAL; thus Pioneer not entitled to exact
reimbursement even though he paid the surety to JDA because payment by a solidary debtor shall not entitle him to
reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal
- Issue: WON as a result of respondents failure to incorporate, a de facto partnership among them was created, and as a
consequence of such relationship, all must share in the losses and/or gains of the venture in proportion to their contribution? Ie
WON respondents should reimburse amounts given by them to Pioneer as their contributions to the intended corporation?
o As between themselves, rights of stockholders in a defectively incorporate association should be governed by the
supposed charter and laws of the state relating thereto and not by the rules governing partners, BUT persons who
attempt but fail to form a corporation and who carry on business under the corporate name occupy the position of
prtners inter se
Legal effects = partners inter se
However, such a relation does not necessarily exist, for ordinarily persons cannot be made to assume the
relation of partners, as between themselves, when their purpose is that no partnership shall exist, and it
should be implied only when necessary to do justice between the parties + thus one who takes no part except
to subscribe for stock in a proposed corporation which is never legally formed does not become a partner
with other subscribers who engage in business under the name of the pretended corporation, so as to be
liable as such in an action for settlement of the alleged partnership and contribution
AS APPLIED: although Lim received money from respondents as to planes and spare parts, Lim denied having
received any amount never had intention to form a corporation with respondents despite his
representations, hence respondents cross-claims that they were induced and lured by Lim to make
contributons to a proposed corporation which was never formed because Lim reneged on their agreement
Thus no de facto partnership was created among the parties which would entitle Lim to a
reimbumrsenent of the supposed losses of the proposed corporation; record shows Lim was acting
on his own and not in behalf of other would-be incorporators in transaction the sale of planes and
spare parts.
- HELD: petitions dismissed.

ALPS Transporation v Rodriguez: (2013)

- Elpidio Rodriguez, bus conductor, entered into an employment contract with Contact Tours Manpower and was assigned to work
with bus company ALPS Transportation
o He committed irregularities (e.g. collecting bus fares w/o issuing corresponding tickets to passengers) irregularity
report was annotated with the word Terminate
 o Rodriguez alleged he was terminated the day after the issuance of the last irregularity report, but did not receive any
written notice of termination bus company refused to readmit him
o Filed with labor arbiter a complaint for illegal dismissal
o ALPS response: they had no prerogative to dismiss Rodriguez, since Contact Tours was his employer; CT had obligation
to inform Rodriguez of the contents of the reports and the appropriate sanctions
o Pending illegal dismissal case, ALPS charged Rodriguez with theft before Office of Provincial Prosecutor of Tanauan,
Batangas, but eventually filed affidavit of desistance
o LA dismissed illegal dismissal case for lack of merit no evidence to support contention that R had been terminated +
representative of Contact Tours manifestated a willingness to reinstate him
o Rodriguez appealed with NLRC, who set aside LA decision and ordered ALPS to reinstate Rodriguez, ruling that CT was a
labor-only contractor an Rodriguez was considered a regular EE of ALPS given that ALPS had failed to prove R had
abandoned his work, and R had failed prove termination, ER should order EE to report back to work
o CA NLRC acted with GAD; in termination cases, ER bears burden of proving EE was not illegally dismissed, and ALPS
had failed to present convincing evidence that R had collected bus fares without issuing corresponding tickets to
passengers + more than 6 months had lapsed prior to filing complaint that R had not been given an assignment
ordered ALPS to reinstate Rodriguez and pay him full backwages
- Issue: was Rodriguez validly dismissed. No. Illegal dismissal.
o For dismissal to be valid, must be pursuant to a just/authorized cause and comply with procedural due process (notice
and hearing)
ALPS failed to prove just cause burden of proving that termination of EE was for just acuse lies with ER; the
irregularity report which served as basis for his dismissal may only be considered as an uncorroborated
allegation if unspported by substantial evidence failure to remit to company must be substantial and not
based on mere conjectures + R was not given written notice specifying grounds for termination nor
reasonable opportunity to explain his side
R entitled to twin remedies of reinstatmenet and payment of full backwages
- Issue: if illegally dismissed, was ALPS and/or Alfredo Perez liable for dismissal.
o Presumption is that a contractor is a labor-only contractor unless he overcomes the burden of proving that it has
substantial capital, investment, tools, and the like; ALPS has burden of proving that CT is an independent contractor, and
not labor-only
o Incumbent on ALPS to present sufficient proof that CT has substantial capital, investment and tools to successfully
impute liability, which ALPS failed to substantiate
o As labor-only contractor, CT is deemed agent of ALPS, thus ALPS is liable as ER
o Since ALPS is a sole proprietoryship owned by Alfredo Perez, it is he who must be held liable for the payment of
backwages to Rodriguez. A sole proprietoryship does not possess a juridical personality separate and distinct
from that of the owner of the enterpsie. Thus the owner has unlimiated personal liability for all the debts and
obligations of the business, and it is agains him that a decision for illegaldismissal is to be enforced.
- Held: petition denied; CA decision affirmed.