Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

Adm. Matter No. R-181-P July 31, 1987

ADELIO C. CRUZ, complainant,

vs.
QUITERIO L. DALISAY, Deputy Sheriff, RTC, Manila, respondents.

RESOLUTION

FERNAN, J.:

In a sworn complaint dated July 23, 1984, Adelio C. Cruz charged Quiterio L. Dalisay, Senior Deputy Sheriff of Manila, with
"malfeasance in office, corrupt practices and serious irregularities" allegedly committed as follows:

1. Respondent sheriff attached and/or levied the money belonging to complainant Cruz when he was not himself the judgment debtor
in the final judgment of NLRC NCR Case No. 8-12389-91 sought to be enforced but rather the company known as "Qualitrans
Limousine Service, Inc.," a duly registered corporation; and,

2. Respondent likewise caused the service of the alias writ of execution upon complainant who is a resident of Pasay City, despite
knowledge that his territorial jurisdiction covers Manila only and does not extend to Pasay City.

In his Comments, respondent Dalisay explained that when he garnished complainant's cash deposit at the Philtrust bank, he was
merely performing a ministerial duty. While it is true that said writ was addressed to Qualitrans Limousine Service, Inc., yet it is also a
fact that complainant had executed an affidavit before the Pasay City assistant fiscal stating that he is the owner/president of said
corporation and, because of that declaration, the counsel for the plaintiff in the labor case advised him to serve notice of garnishment
on the Philtrust bank.

On November 12, 1984, this case was referred to the Executive Judge of the Regional Trial Court of Manila for investigation, report
and recommendation.

Prior to the termination of the proceedings, however, complainant executed an affidavit of desistance stating that he is no longer
interested in prosecuting the case against respondent Dalisay and that it was just a "misunderstanding" between them. Upon
respondent's motion, the Executive Judge issued an order dated May 29, 1986 recommending the dismissal of the case.

It has been held that the desistance of complainant does not preclude the taking of disciplinary action against respondent. Neither does
it dissuade the Court from imposing the appropriate corrective sanction. One who holds a public position, especially an office directly
connected with the administration of justice and the execution of judgments, must at all times be free from the appearance of
impropriety.1

We hold that respondent's actuation in enforcing a judgment against complainant who is not the judgment debtor in the case calls for
disciplinary action. Considering the ministerial nature of his duty in enforcing writs of execution, what is incumbent upon him is to
ensure that only that portion of a decision ordained or decreed in the dispositive part should be the subject of execution. 2 No more, no
less. That the title of the case specifically names complainant as one of the respondents is of no moment as execution must conform to
that directed in the dispositive portion and not in the title of the case.

The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans Limousine Service, Inc. to reinstate
the discharged employees and pay them full backwages. Respondent, however, chose to "pierce the veil of corporate entity" usurping
a power belonging to the court and assumed improvidently that since the complainant is the owner/president of Qualitrans Limousine
Service, Inc., they are one and the same. It is a well-settled doctrine both in law and in equity that as a legal entity, a corporation has a
personality distinct and separate from its individual stockholders or members. The mere fact that one is president of a corporation does
not render the property he owns or possesses the property of the corporation, since the president, as individual, and the corporation are
separate entities.3
Anent the charge that respondent exceeded his territorial jurisdiction, suffice it to say that the writ of execution sought to be
implemented was dated July 9, 1984, or prior to the issuance of Administrative Circular No. 12 which restrains a sheriff from
enforcing a court writ outside his territorial jurisdiction without first notifying in writing and seeking the assistance of the sheriff of
the place where execution shall take place.

ACCORDINGLY, we find Respondent Deputy Sheriff Quiterio L. Dalisay NEGLIGENT in the enforcement of the writ of execution
in NLRC Case-No. 8-12389-91, and a fine equivalent to three [3] months salary is hereby imposed with a stern warning that the
commission of the same or similar offense in the future will merit a heavier penalty. Let a copy of this Resolution be filed in the
personal record of the respondent.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

152 SCRA 482 – Business Organization – Corporation Law – Piercing the Veil of Corporate Fiction – Exercised by the Wrong
Person
In 1984, the National Labor Relations Commission issued an order against Qualitrans Limousine Service, Inc. (QLSI) ordering the latter
to reinstate the employees it terminated and to pay them backwages. Quiterio Dalisay, Deputy Sheriff of the court, to satisfy the
backwages, then garnished the bank account of Adelio Cruz. Dalisay justified his act by averring that Cruz was the owner and president
of QLSI. Further, he claimed that the counsel for the discharged employees advised him to garnish the account of Cruz.
ISSUE: Whether or not the action of Dalisay is correct.
HELD: No. What Dalisay did is tantamount to piercing the veil of corporate fiction. He actually usurped the power of the court. He
also overstepped his duty as a deputy sheriff. His duty is merely ministerial and it is incumbent upon him to execute the decision of the
court according to its tenor and only against the persons obliged to comply. In this case, the person judicially named to comply was
QLSI and not Cruz. It is a well-settled doctrine both in law and in equity that as a legal entity, a corporation has a personality distinct
and separate from its individual stockholders or members. The mere fact that one is president of a corporation does not render the
property he owns or possesses the property of the corporation, since the president, as individual, and the corporation are separate entities.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 173082 August 6, 2014

PALM AVENUE HOLDING CO., INC., and PALM A VENUE REALTY AND DEVELOPMENT
CORPORATION,Petitioners,
vs.
SANDIGANBAYAN 5TH Division, REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL
COMMISSION ON GOOD GOVERNMENT (PCGG), Respondent.

x-----------------------x

G.R. No. 195795

REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL COMMISSION ON GOOD

GOVERNMENT, Petitioner,
vs.
HON. SANDIGANBAYAN, PALM A VENUE REALTY and DEVELOPMENT CORPORATION and PALM AVENUE
HOLDING COMPANY, INC., Respondents.

DECISION

PERALTA, J.:

For resolution before the Court are the consolidated cases of G.R. No. 173082 and G.R. No. 195795. In G.R. No. 173082, Palm
Avenue Holding Co., Inc. and Palm Avenue Realtyand Development Corporation (the Palm Companies), through a Petition for
Certiorari under Rule 65 of the Rules of Court, seek to annul the Resolutionsof the Sandiganbayan (Fifth Division), promulgated on
January 10, 20031 and June 14, 20062 in Civil Case No. 0035, entitled Republic of the Philippines v. Benjamin "Kokoy" Romualdez
[in which intervention by Trans Middle East (Phil.) Equities, Inc. was allowed]. On the other hand, the Republic of the Philippines
(the Republic), in G.R. No. 195795, via a Petition for Certiorari and Prohibition, with application for temporary restraining order
and/or writ of preliminaryinjunction, prays for the nullification of the Sandiganbayan Resolutions dated October 21, 2010 3and January
11, 20114 rendered in the same case.

The factual and procedural antecedents are as follows:

Through a writ of sequestration dated October 27, 1986, the Presidential Commission on Good Government (PCGG) sequestered all
the assets, properties, records, and documents of the Palm Companies. Said sequestered assets included 16,237,339 Benguet
Corporation shares of stock, registered in the name of the PalmCompanies. The PCGG had relied on a letter from the Palm
Companies’ Attorney-in-Fact, Jose S. Sandejas, specifically identifying Benjamin "Kokoy" Romualdez, a known crony of former
President Ferdinand E. Marcos, as the beneficial owner of the Benguet Corporation shares in the Palm Companies’ name.

The Republic, represented by the PCGG, filed a complaint with the Sandiganbayan docketed as Civil Case No. 0035 but did not
initially implead the Palm Companies as defendants. However, the Sandiganbayan issued a Resolution dated June 16, 1989 where it
ordered said companies to be impleaded. The Court subsequentlyaffirmed this order to implead in G.R. No. 90667 5 on November 5,
1991. Pursuantto said order, the Republic filed an amended complaint dated January 17, 1997 and named therein the Palm Companies
as defendants. The graft court admitted the amended complaint on October 15, 2001.

In the meantime, on February 11, 1997, the Palm Companies filed an Urgent Motion to Lift the Writ of Sequestration, but was denied
on January 10, 2003. The dispositive portion of the Sandiganbayan Resolution reads:

WHEREFORE, in view of the foregoing:

1) The "URGENT MOTION TO NULLIFY WRIT OF SEQUESTRATION" dated January 28, 1997 filed by movant Trans
Middle East (Phils.) Equities, Inc., is hereby GRANTED. Accordingly, Sequestration Order No. 86-0056 dated April 15,
1986 is hereby declared null and void for having been issuedby one PCGG Commissioner only in direct contravention of
Section 3 of the PCGG’s own Rules and Regulations. Conformably, however, with the manifestation of the movant Trans
Middle East (Phils.) Equities, Inc. itself, the Court will not order the return of its shares of stocks sequestered per
Sequestration Order No. 86-0056 dated April 15, 1986, but orders that the same, including the interests earned thereon, to be
deposited with the Land Bank of the Philippines in escrow for the persons, natural or juridical, who shall eventually be
adjudged lawfully entitled thereto.

2) The "URGENT MOTION TOLIFT THE WRIT OF SEQUESTRATION" dated February 11, 1997 of Palm Avenue Realty
and Development Corporation and Palm Avenue Holdings, Co., Inc. is hereby DENIED for lack of merit.

SO ORDERED.6

They filed a Motion for Reconsideration, but the same was likewise denied on June 14, 2006. Hence, the Palm Companies filed the
petition in G.R. No. 173082.

On September 22, 2006, the Palm Companies filed a Motion to Release Sequestered Funds with the Sandiganbayan. In a Resolution
dated January 18, 2007, the Sandiganbayan granted said motion and ordered the release of the sequestered funds for the purchase of
additional shares in Benguet Corporation, and appointed a comptroller for this purpose. On May 29, 2007, the companies filed a
Motion for Bill of Particulars to direct the Republic to submit a bill of particulars regarding matters in the amended complaint which
were not alleged withcertainty or particularity. On December 21, 2007, the Republic submitted its bill of particulars. Thereafter, the
Palm Companies filed a motion to dismiss the Republic’s complaint. They argued that the bill of particulars did not satisfactorily
comply with the requested details.

On August 5, 2008, the Palm Companies filed a Motion to Order Payment of Interest on Balance of the Sequestered Funds. Later, on
September 29, 2008, the Sandiganbayan granted the Palm Companies’ motion to dismiss and dismissed the Republic’s complaint as to
them. This was affirmed by the Court in a Resolution7 dated January 20, 2010 in G.R. No. 189771. The Sandiganbayan also granted
the Palm Companies’ Motion to Order Payment of Interest on Balance of the Sequestered Funds on October 28, 2009.

Thereafter, the Palm Companies filed another motion dated May 14, 2010, this time, to order the PCGG to release all the companies’
shares of stock and funds in its custody. The Sandiganbayan then issued its October 21, 2010 Resolution, granting the companies’
foregoing motion. The graft court disposed of the case as follows:
WHEREFORE, in view of the foregoing, Palm Avenue Holding Company, Inc. and Palm Avenue Realty and Development
Corporation’s Motion to Order the PCGG to Release to the Palm Companies all the shares of stocks and funds in their custody that
pertain to the Palm Companies is hereby GRANTED.

SO ORDERED.8

Upon denial of the Republic’s motion for reconsideration, it filed the petition in G.R. No. 195795.

In G.R. No. 173082, the Palm Companies present this lone issue to be resolved by the Court:

[WHETHER OR NOT] RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DENYING PETITIONERS’ MOTION TO LIFT THE WRIT OF SEQUESTRATION NOTWITHSTANDING
THE FACT [THAT] SAID WRIT SHOULD BE DEEMED AUTOMATICALLY LIFTED PURSUANT TO SECTION 26,
ARTICLE XVIII OF THE 1987 CONSTITUTION FOR FAILURE TO IMPLEAD PETITIONERS WITHIN THE PERIOD OF SIX
(6) MONTHS PRESCRIBED IN THE SAID CONSTITUTION. 9

The Palm Companies pray for the lifting of the Writ of Sequestration against their assets, since they were not impleaded as parties-
defendants in Civil Case No. 0035 within the period prescribed by the Constitution.

On the other hand, the Republic, through the PCGG, contends in G.R. No. 195795 that:

THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF

JURISDICTION IN GRANTING THE PALM COMPANIES’ MOTION TO RELEASE ALL SHARES OF STOCK AND FUNDS
IN THE CUSTODY OF THE PCGG.10 The Republic argues that the dismissal of the complaint as to the Palm Companies is not
tantamount to a declaration that their sequestered assets are no longer ill-gotten.

The issues presented being essentially interrelated, the Court shall make a simultaneous discussion.

Section 26, Article XVIII of the 1987 Constitution provides:

xxxx

A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order and the list of the sequestered or
frozen properties shall forthwith be registered with the proper court. For orders issued before the ratification of this Constitution, the
corresponding judicial action or proceeding shall be filed within six months from its ratification.For those issued after such
ratification, the judicial action or proceeding shall be commenced within six months from the issuance thereof.

The sequestration or freeze order is deemed automatically liftedif no judicial action or proceeding iscommenced as herein provided. 11

The aforesaid provision mandates the Republic to file the corresponding judicial action or proceedings within a six-month period
(from its ratification on February 2, 1987)in order to maintain sequestration, non-compliance with which would result in the automatic
lifting of the sequestration order. The Court’s ruling in Presidential Commission on Good Government v. Sandiganbayan, 12 which
remains good law, reiterates the necessity of the Republic to actuallyimplead corporations as defendants in the complaint, out of
recognition for their distinct and separate personalities, failure to do so would necessarily be denying such entities their right to due
process.13Here, the writ of sequestration issued against the assets of the Palm Companies is not valid because the suit in Civil Case
No. 0035 against Benjamin Romualdez as shareholder in the Palm Companies is not a suit against the latter. The Court has held,
contrary to the assailed Sandiganbayan Resolution in G.R. No. 173082, that failure to implead these corporations as defendants and
merely annexing a list of such corporations to the complaints is a violation of their right to due process for it would be, in effect,
disregarding their distinctand separate personality without a hearing. 14 Here, the Palm Companies were merely mentioned as Item
Nos. 47 and 48, Annex A of the Complaint,as among the corporations where defendant Romualdez owns shares of stocks.
Furthermore, while the writ of sequestration was issued on October 27, 1986, the Palm Companies were impleaded in the case only in
1997, or already a decade from the ratification of the Constitution in 1987, way beyond the prescribed period.

The argument that the beneficial owner of these corporations was, anyway, impleaded as party-defendant can only be interpreted as a
tacit admission of the failure to file the corresponding judicial action against said corporations pursuant to the constitutional mandate.
Whether or not the impleaded defendant in Civil Case No. 0035 is indeed the beneficial owner of the Palm Companies is a matter
which the PCGG merely assumes and still has to prove in said case.15 The sequestration order issued against the Palm Companies is
therefore deemed automatically lifted due to the failure of the Republic to commence the proper judicial action or to implead them
therein within the period under the Constitution. However, the lifting of the writ of sequestration will not necessarily be fatal to the
main case since the same does not ipso facto mean that the sequestered properties are, in fact, not illgotten. The effect of the lifting
ofthe sequestration will merely be the termination of the government’s role asconservator. In other words, the PCGG may no longer
exercise administrative or housekeeping powers, and its nominees may no longer vote the sequestered shares to enable them to sit in
the corporate board of the subject company.16

The Republic, through the PCGG, may argue that it has substantially complied with the Constitutional requirements to support its
sequestration order when it filed an amended complaint which impleaded the Palm Companies, and which was subsequently admitted
by the Sandiganbayan. Even so, a careful perusal of the records reveals the existence of legal and factual grounds to warrant the lifting
ofthe writ of sequestration against the assets of the Palm Companies.

Since the Republic did not originallyinclude the Palm Companies in Civil Case No. 0035, the Sandiganbayan issued a Resolution
ordering said companies to be impleaded, which was affirmed by the Court in G.R. No. 90667 on November 5, 1991. The Court
declared in said case that the Palm Companies are real parties-in-interest in Civil Case No. 0035, because they still appear to be the
registered ownersof the remaining disputed shares. That Romualdez is consideredas their true or real owner is just a claim that still
needs to be proved in court.17 Section 2, Rule 3 of the Rules of Court states:

Sec. 2. Parties in interest. – A real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must beprosecuted or defended
in the name of the real party-in-interest.

This provision has two requirements:1) to institute an action, the plaintiff must be the real party-in-interest; and 2) the action must be
prosecuted in the name of the real party-in-interest. Interest within the meaning of the Rules of Court means material interest or an
interest in issue to be affected by the decree or judgment of the case, as distinguished from mere curiosity about the question involved.
One having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an action. When the plaintiff is
not the real party-in-interest, the case is dismissible on the ground of lack of cause of action.

Pursuant to said order, the Republic filed an amended complaint which named the Palm Companies as defendants. Thereafter, the
companies filed a Motion for Bill of Particulars for the Republic toclarify certain matters in its amended complaint. Upon submission
of the bill of particulars, the Palm Companies filed a motion to dismiss the Republic’s complaint. Later, the Sandiganbayan,sustained
by the Court in G.R. No. 189771, granted said motion to dismiss. The Sandiganbayan thus pronounced:

xxxx

Clearly, as in the previously discussed paragraphs, the above answers set forth by the plaintiff in its Bill of Particulars are indefinite
and deficient inasmuch as the question of what are the alleged illegally acquired funds or properties of the Palm Avenue Companies
which they are liable to return, remains unanswered, a product of uncertainty.

In sum, the allegations contained in plaintiff Republic’s Bill of Particulars are incomplete and indefinite as they merely express
conclusions of law and presumptions unsupported by factual premises.

Furthermore, the details desired by defendants Palm Avenue Companies in their motion for bill of particulars, such as the acts
constituting their involvement in the Marcoses’ alleged scheme to pillage the nation’s wealth, the alleged properties which they
supposedly acquired illegally and therefore should return to the government, and other relevant facts, are not evidentiary in nature. On
the contrary, those particulars are material facts that should be clearly and definitely averred in the complaint in order that the
defendants may, in fairness, be informed of the claims against them to the end that they may be prepared to meet the issues at trial.

xxxx

In view, therefore, of plaintiff Republic’s failure to file the proper bill of particulars which would completely amplify the charges
against defendant Palm Avenue Companies, and applying the abovequoted ruling of the High Court in the Virata case, this Court
deems it just and proper to order the dismissal of the Third Amended Complaint in so far as the charges against the Palm Avenue
Companies are concerned.

Finally, we sustain defendant-movants’ argument that the failure of the plaintiff to sufficiently provide the ultimate and material facts
they required in their motion for bill of particulars, makes the third amended complaint dismissible for failure to state a cause of
action.18

Simple justice demands that the Palm Companies must know what the complaint against them is all about. The law requires no
less.1âwphi1 In the similar case of Virata v. Sandiganbayan, 19 petitioner Virata filed a motion for a bill of particulars, asserting that
the allegations against him are vague and are not averred with sufficient definiteness as to enable him to effectively prepare his
responsive pleading. The Court held therein that a complaint must contain the ultimate facts constituting plaintiff's cause of action. A
cause of action has the following elements: (1) a right in favor of the plaintiff; (2) an obligation on the part of the named defendant to
respect such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff. As long as the complaint contains these three elements, a cause of action
exists. Although the allegationstherein may be vague, dismissal of the action is not the proper remedy because the defendant may ask
for more particulars. As such, a party may move for a more definite statement or for a bill of particulars of any matter which is not
averred with sufficient definiteness or particularity. This is to enable him to properly prepare his responsive pleading or to prepare for
trial.20 The Court in said case found that there were certain matters in the allegations which lacked in substantial particularity. They
were broad and definitely vague which required specifications in order that Virata could properly define the issues and formulate his
defenses. The two bills of particulars filed by the Republic were ruled to have failed in properly amplifying the charges leveled against
Virata because, not only are they mere reiteration or repetition of the allegations set forth in the expanded Second Amended
Complaint, but, to the large extent, they contain vague, immaterial and generalized assertions which are inadmissible under our
proceduralrules. As such, for failure of the Republic to obey the Court's directive and the Sandiganbayan's order to file the proper bill
of particulars which would completely amplify the charges against Virata, the Court deemed it just and proper to order the dismissal of
the expanded Second Amended Complaint, insofar as the charges against Virata are concerned. The Court relied on Section 3, Rule 17
of the Rules of Court, which provides that:

Sec. 3. Failure to prosecute. — If plaintiff failsto appear at the time of the trial, or to prosecute his action for an unreasonable length of
time, or to comply with these rules or any order of the court, the action may be dismissed upon motion of the defendant or upon the
court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by court.21

Similarly, the Republic in the case atbar failed to file a proper bill of particulars which would completely clarify and amplify the
charges against the Palm Companies. For said failure to comply with the graft court's order to file the required bill ofparticulars that
would completely and fully inform the Palm Companies of the charges against them, the amended complaint impleading said
companies necessarily failed to state a cause of action, warranting the dismissal of the case as tothem. By the dismissal of the case as
against the Palm Companies, there is ipso facto no more writ of sequestration to speak of.

The Republic cannot simply rely on the presumption that the PCGG has acted pursuant to law and based on prima facie evidence, for
the same will undermine the basic constitutional principle that public officers and employees must at all times be accountable to the
people. Indeed, sequestration is an extraordinary and harsh remedy. As such, it should be confined to its lawful parameters and
exercised with due regard to the requirements of fairness, due process, and justice. 22 While the Court acknowledges the Government's
admirable efforts to recover ill-gotten wealth allegedly taken by the corporations, it cannot, however, choose to tum a blind eye to the
demands of the law, justice, and faimess.23

WHEREFORE, in view of the foregoing, the petition in G.R. No. 173082 is GRANTED. The Resolutions of the Sandiganbayan (Fifth
Division) promulgated on January 10, 2003 and June 14, 2006 in Civil Case No. 0035 are REVERSED AND SET ASIDE, and the
writ of sequestration against the assets and properties of Palm A venue Holding Co., Inc. and Palm Avenue Realty and Development
Corporation is consequently LIFTED. The petition in G.R. No. 195795 is DISMISSED for lack of merit. The Sandiganbayan
Resolutions dated October 21, 2010 and January 11, 2011 are hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

SPS. PEDRO AND FLORENCIA VIOLAGO, G.R. No. 158262

Petitioners,
Present:

QUISUMBING, J., Chairperson,

- versus - YNARES-SANTIAGO,*
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
BA FINANCE CORPORATION and AVELINO
VIOLAGO, Promulgated:
Respondents.
July 21, 2008
x-----------------------------------------------------------------------------------------x

DECISION
VELASCO, JR., J.:

This is a Petition for Review on Certiorari of the August 20, 2002 Decision[1] and May 15, 2003 Resolution[2] of the Court of
Appeals (CA) in CA-G.R. CV No. 48489 entitled BA Finance Corporation, Plaintiff-Appellee v. Sps. Pedro and Florencia Violago,
Defendants and Third Party Plaintiffs-Appellants v. Avelino Violago, Third Party Defendant-Appellant. Petitioners-spouses Pedro and
Florencia Violago pray for the reversal of the appellate courts ruling which held them liable to respondent BA Finance Corporation (BA
Finance) under a promissory note and a chattel mortgage. Petitioners likewise pray that respondent Avelino Violago be adjudged directly
liable to BA Finance.
The Facts

Sometime in 1983, Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a car to his cousin,
Pedro F. Violago, and the latters wife, Florencia. Avelino explained that he needed to sell a vehicle to increase the sales quota of VMSC,
and that the spouses would just have to pay a down payment of PhP 60,500 while the balance would be financed by respondent BA
Finance. The spouses would pay the monthly installments to BA Finance while Avelino would take care of the documentation and
approval of financing of the car. Under these terms, the spouses then agreed to purchase a Toyota Cressida Model 1983 from VMSC. [3]

On August 4, 1983, the spouses and Avelino signed a promissory note under which they bound themselves to pay jointly and
severally to the order of VMSC the amount of PhP 209,601 in 36 monthly installments of PhP 5,822.25 a month, the first installment to
be due and payable on September 16, 1983. Avelino prepared a Disclosure Statement of Loan/Credit Transportation which showed the
net purchase price of the vehicle, down payment, balance, and finance charges. VMSC then issued a sales invoice in favor of the spouses
with a detailed description of the Toyota Cressida car. In turn, the spouses executed a chattel mortgage over the car in favor of VMSC
as security for the amount of PhP 209,601. VMSC, through Avelino, endorsed the promissory note to BA
Finance without recourse. After receiving the amount of PhP 209,601, VMSC executed a Deed of Assignment of its rights and interests
under the promissory note and chattel mortgage in favor of BA Finance. Meanwhile, the spouses remitted the amount of PhP 60,500 to
VMSC through Avelino.[4]

The sales invoice was filed with the Land Transportation Office (LTO)-Baliwag Branch, which issued Certificate of
Registration No. 0137032 in the name of Pedro on August 8, 1983. The spouses were unaware that the same car had already been sold
in 1982 to Esmeraldo Violago, another cousin of Avelino, and registered in Esmeraldos name by the LTO-San Rafael Branch. Despite
the spouses demand for the car and Avelinos repeated assurances, there was no delivery of the vehicle. Since VMSC failed to deliver
the car, Pedro did not pay any monthly amortization to BA Finance. [5]

On March 1, 1984, BA Finance filed with the Regional Trial Court (RTC), Branch 116 in Pasay City a complaint for Replevin
with Damages against the spouses. The complaint, docketed as Civil Case No. 1628-P, prayed for the delivery of the vehicle in favor of
BA Finance or, if delivery cannot be effected, for the payment of PhP 199,049.41 plus penalty at the rate of 3% per month from February
15, 1984 until fully paid. BA Finance also asked for the payment of attorneys fees, liquidated damages, replevin bond premium, expenses
in the seizure of the vehicle, and costs of suit. The RTC issued an Order of Replevin on March 28, 1984. The Violago spouses, as
defendants a quo, were declared in default for failing to file an answer.Eventually, the RTC rendered on December 3, 1984 a decision
in favor of BA Finance. A writ of execution was thereafter issued on January 11, 1985, followed by an alias writ of execution.[6]

In the meantime, Esmeraldo conveyed the vehicle to Jose V. Olvido who was then issued Certificate of Registration No.
0014830-4 by the LTO-Cebu City Branch on April 29, 1985. On May 8, 1987, Jose executed a Chattel Mortgage over the vehicle in
favor of Generoso Lopez as security for a loan covered by a promissory note in the amount of PhP 260,664. This promissory note was
later endorsed to BA Finance, Cebu City branch.[7]

On August 21, 1989, the spouses Violago filed a Motion for Reconsideration and Motion to Quash Writ of Execution on the
basis of lack of a valid service of summons on them, among other reasons. The RTC denied the motions; hence, the spouses filed a
petition for certiorari under Rule 65 before the CA, docketed as CA G.R. No. 2002-SP. On May 31, 1991, the CA nullified the RTCs
order. This CA decision became final and executory.

On January 28, 1992, the spouses filed their Answer before the RTC, alleging the following: they never received the vehicle
from VMSC; the vehicle was previously sold to Esmeraldo; BA Finance was not a holder in due course under Section 59 of
the Negotiable Instruments Law (NIL); and the recourse of BA Finance should be against VMSC. On February 25, 1995, the Violago
spouses, with prior leave of court, filed a Third Party Complaint against Avelino praying that he be held liable to them in the event that
they be held liable to BA Finance, as well as for damages. VMSC was not impleaded as third party defendant. In his Motion to Dismiss
and Answer, Avelino contended that he was not a party to the transaction personally, but VMSC. Avelinos motion was denied and the
third party complaint against him was entertained by the trial court. Subsequently, the spouses belabored to prove that they affixed their
signatures on the promissory note and chattel mortgage in favor of VMSC in blank.[8]

The RTC rendered a Decision on March 5, 1994, finding for BA Finance but against the Violago spouses. The RTC, however,
declared that they are entitled to be indemnified by Avelino. The dispositive portion of the RTCs decision reads:

WHEREFORE, defendant-[third]-party plaintiffs spouses Pedro F. Violago and Florencia R. Violago are ordered to
deliver to plaintiff BA Finance Corporation, at its principal office the BAFC Building, Gamboa St., Legaspi Village,
Makati, Metro Manila the Toyota Cressida car, model 1983, bearing Engine No. 21R-02854117, and with Serial No.
RX60-804614, covered by the deed of chattel mortgage dated August 4, 1983; or if such delivery cannot be made, to
pay, jointly and severally, to the plaintiff the sum of P198,003.06 together with the penalty [thereon] at three percent
(3%) a month, from March 1, 1984, until the amount is fully paid.

In either case, the defendant-third-party plaintiffs are required to pay, jointly and severally, to the plaintiff a sum
equivalent to twenty-five percent (25%) of P198,003.06 as attorneys fees, and another amount also equivalent to
twenty five percent (25%) of the said unpaid balance, as liquidated damages. The defendant-third party-plaintiffs are
also required to shoulder the litigation expenses and costs.
As indemnification, third-party defendant Avelino Violago is ordered to deliver to defendants-third-party plaintiffs
spouses Pedro F. Violago and Florencia R. Violago the aforedescribed motor vehicle; or if such delivery is not
possible, to pay to the said spouses the sum of P198,003.06, together with the penalty thereon at three (3%) a month
from March 1, 1984, until the amount is entirely paid.

In either case, the third-party defendant should pay to the defendant-third-party plaintiffs spouses a sum equivalent to
twenty-five percent (25%) of P198,003.06 as attorneys fees, and another sum equivalent also to twenty-five percent
(25%) of the said unpaid balance, as liquidated damages.

Third-party defendant Avelino Violago is further ordered to return to the third-party plaintiffs the sum of P60,500.00
they paid to him as down payment for the car; and to pay them P15,000.00 as moral damages; P10,000.00 as exemplary
damages; and reimburse them for all the expenses and costs of the suit.

The counterclaims of the defendants and third-party defendant, for lack of merit, are dismissed.[9]

The Ruling of the CA

Petitioners-spouses and Avelino appealed to the CA. The spouses argued that the promissory note is a negotiable instrument;
hence, the trial court should have applied the NIL and not the Civil Code. The spouses also asserted that since VMSC was not the owner
of the vehicle at the time of sale, the sale was null and void for the failure in the cause or consideration of the promissory note, which in
this case was the sale and delivery of the vehicle. The spouses also alleged that BA Finance was not a holder in due course of the note
since it knew, through its Cebu City branch, that the car was never delivered to the spouses.[10] On the other hand, Avelino prayed for
the dismissal of the complaint against him because he was not a party to the transaction, and for an order to the spouses to pay him moral
damages and costs of suit.

The appellate court ruled that the promissory note was a negotiable instrument and that BA Finance was a holder in due course,
applying Secs. 8, 24, and 52 of the NIL. The CA faulted petitioners for failing to implead VMSC, the seller of the vehicle and creditor
in the promissory note, as a party in their Third Party Complaint. Citing Salas v. Court of Appeals,[11] the appellate court reasoned that
since VMSC is an indispensable party, any judgment will not bind it or be enforced against it.The absence of VMSC rendered the
proceedings in the RTC and the judgment in the Third Party Complaint null and void, not only as to the absent party but also to the
present parties, namely the Defendants-Appellants (petitioners herein) and the Third-Party-Defendant-Appellant (Avelino Violago). The
CA set aside the trial courts order holding Avelino liable for damages to the spouses without prejudice to the action of the spouses
against VMSC and Avelino in a separate action.[12]

The dispositive portion of the August 20, 2002 CA Decision reads:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Plaintiffs-Appellants is DISMISSED. The appeal
of the Third-Party-Defendant-Appellant is GRANTED. The Decision of the Court a quo is AFFIRMED, with the
modification that the Third-Party Complaint against the Third-Party-Defendant-appellant is DISMISSED, without
prejudice. The counterclaims of the Third-Party Defendant Appellant against the Defendants-Appellants
are DISMISSED, also without prejudice.[13]
The spouses Violago sought but were denied reconsideration by the CA per its Resolution of May 15, 2003.

The Issues

Petitioners raise the following issues:

WHETHER OR NOT THE HOLDER OF AN INVALID NEGOTIABLE PROMISSORY NOTE MAY BE

CONSIDERED A HOLDER IN DUE COURSE

WHETHER OR NOT A CHATTEL MORTGAGE SHOULD BE CONSIDERED VALID DESPITE VITIATION

OF CONSENT OF, AND THE FRAUD COMMITTED ON, THE MORTGAGORS BY AVELINO, AND THE
CLEAR ABSENCE OF OBJECT CERTAIN

WHETHER OR NOT THE VEIL OF CORPORATE ENTITY MAY BE INVOKED AND SUSTAINED DESPITE
THE FRAUD AND DECEPTION OF AVELINO

The Courts Ruling

The ruling of the appellate court is set aside insofar as it dismissed, without prejudice, the third party complaint of petitioners
against Avelino thereby effectively absolving Avelino from any liability under the third party complaint.

In addressing the threshold issue of whether BA Finance is a holder in due course of the promissory note, we must determine
whether the note is a negotiable instrument and, hence, covered by the NIL. In their appeal to the CA, petitioners argued that the
promissory note is a negotiable instrument and that the provisions of the NIL, not the Civil Code, should be applied. In the present
petition, however, petitioners claim that Article 1318 of the Civil Code [14] should be applied since their consent was vitiated by fraud,
and, thus, the promissory note does not carry any legal effect despite its negotiation. Either way, the petitioners arguments deserve no
merit.

The promissory note is clearly negotiable. The appellate court was correct in finding all the requisites of a negotiable instrument
present. The NIL provides:

Section 1. Form of Negotiable Instruments. An instrument to be negotiable must conform to the following
requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.

The promissory note signed by petitioners reads:

209,601.00 Makati, Metro Manila, Philippines, August 4, 1983

For value received, I/we, jointly and severally, promise to pay to the order of VIOLAGO MOTOR SALES
CORPORATION, its office, the principal sum of TWO HUNDRED NINE THOUSAND SIX HUNDRED ONE
ONLY Pesos (P209,601.00), Philippines Currency, with interest at the rate stipulated herein below, in installments as
follows:

Thirty Six (36) successive monthly installments of P5,822.25, the first installment to be paid on 9-16-83, and the
succeeding monthly installments on the 16th day of each and every succeeding month thereafter until the account is
fully paid, provided that the penalty charge of three (3%) per cent per month or a fraction thereof shall be added on
each unpaid installment from maturity thereof until fully paid.

xxxx

Notice of demand, presentment, dishonor and protest are hereby waived.

(Sgd.) (Sgd.)
 PEDRO F. VIOLAGO FLORENCIA R. VIOLAGO

763 Constancia St., Sampaloc, Manila same

(Address) (Address)

(Sgd.) (Sgd.)
Marivic Avaria Jesus Tuazon
(WITNESS) (WITNESS)

PAY TO THE ORDER OF BA FINANCE CORPORATION

WITHOUT RECOURSE
VIOLAGO MOTOR SALES CORPORATION
By: (Sgd.)
AVELINO A. VIOLAGO, Pres. [15]

The promissory note clearly satisfies the requirements of a negotiable instrument under the NIL. It is in writing; signed by the
Violago spouses; has an unconditional promise to pay a certain amount, i.e., PhP 209,601, on specific dates in the future which could
be determined from the terms of the note; made payable to the order of VMSC; and names the drawees with certainty. The indorsement
by VMSC to BA Finance appears likewise to be valid and regular.

The more important issue now is whether or not BA Finance is a holder in due course. The resolution of this issue will determine
whether petitioners defense of fraud and nullity of the sale could validly be raised against respondent corporation.Sec. 52 of the NIL
provides:

Section 52. What constitutes a holder in due course.A holder in due course is a holder who has taken the instrument
under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been previously
dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the
title of the person negotiating it.

The law presumes that a holder of a negotiable instrument is a holder thereof in due course. [16] In this case, the CA is correct
in finding that BA Finance meets all the foregoing requisites:
In the present recourse, on its face, (a) the Promissory Note, Exhibit A, is complete and regular; (b) the Promissory
Note was endorsed by the VMSC in favor of the Appellee; (c) the Appellee, when it accepted the Note, acted in good
faith and for value; (d) the Appellee was never informed, before and at the time the Promissory Note was endorsed
to the Appellee, that the vehicle sold to the Defendants-Appellants was not delivered to the latter and that VMSC had
already previously sold the vehicle to Esmeraldo Violago. Although Jose Olvido mortgaged the vehicle to Generoso
Lopez, who assigned his rights to the BA Finance Corporation (Cebu Branch), the same occurred only on May 8,
1987, much later than August 4, 1983, when VMSC assigned its rights over the Chattel Mortgage by the Defendants-
Appellants to the Appellee. Hence, Appellee was a holder in due course.[17]

In the hands of one other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-
negotiable.[18] A holder in due course, however, holds the instrument free from any defect of title of prior parties and from defenses
available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof.[19] Since BA Finance
is a holder in due course, petitioners cannot raise the defense of non-delivery of the object and nullity of the sale against the
corporation. The NIL considers every negotiable instrument prima facie to have been issued for a valuable consideration.[20] In Salas, we
held that a party holding an instrument may enforce payment of the instrument for the full amount thereof. As such, the maker cannot
set up the defense of nullity of the contract of sale. [21] Thus, petitioners are liable to respondent corporation for the payment of the
amount stated in the instrument.

From the third party complaint to the present petition, however, petitioners pray that the veil of corporate fiction be set aside
and Avelino be adjudged directly liable to BA Finance. Petitioners likewise pray for damages for the fraud committed upon them.
In Concept Builders, Inc. v. NLRC, we held:
It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders
and from other corporations to which it may be connected. But, this separate and distinct personality of a corporation
is merely a fiction created by law for convenience and to promote justice. So, when the notion of separate juridical
personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device
 to defeat the labor laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an alter ego of another
corporation.

xxxx

The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:

1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of
policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust acts in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. [22]

This case meets the foregoing test. VMSC is a family-owned corporation of which Avelino was president. Avelino committed
fraud in selling the vehicle to petitioners, a vehicle that was previously sold to Avelinos other cousin, Esmeraldo.Nowhere in the
pleadings did Avelino refute the fact that the vehicle in this case was already previously sold to Esmeraldo; he merely insisted that he
cannot be held liable because he was not a party to the transaction. The fact that Avelino and Pedro are cousins, and that Avelino claimed
to have a need to increase the sales quota, was likely among the factors which motivated the spouses to buy the car. Avelino, knowing
fully well that the vehicle was already sold, and with abuse of his relationship with the spouses, still proceeded with the sale and collected
the down payment from petitioners. The trial court found that the vehicle was not delivered to the spouses. Avelino clearly defrauded
petitioners. His actions were the proximate cause of petitioners loss. He cannot now hide behind the separate corporate personality of
VMSC to escape from liability for the amount adjudged by the trial court in favor of petitioners.

The fact that VMSC was not included as defendant in petitioners third party complaint does not preclude recovery by petitioners
from Avelino; neither would such non-inclusion constitute a bar to the application of the piercing-of-the-corporate-veil doctrine. We
suggested as much in Arcilla v. Court of Appeals, an appellate proceeding involving petitioner Arcillas bid to avoid the adverse CA
decision on the argument that he is not personally liable for the amount adjudged since the same constitutes a corporate liability which
nevertheless cannot even be enforced against the corporation which has not been impleaded as a party below. In that case, the Court
found as well-taken the CAs act of disregarding the separate juridical personality of the corporation and holding its president, Arcilla,
liable for the obligations incurred in the name of the corporation although it was not a party to the collection suit before the trial court.
An excerpt from Arcilla:

x x x In short, even if We are to assume arguendo that the obligation was incurred in the name of the
corporation, the petitioner [Arcilla] would still be personally liable therefor because for all legal intents and purposes,
he and the corporation are one and the same. Csar Marine Resources, Inc. is nothing more than his business conduit
and alter ego. The fiction of separate juridical personality conferred upon such corporation by law should be
disregarded. Significantly, petitioner does not seriously challenge the [CAs] application of the doctrine which permits
the piercing of the corporate veil and the disregarding of the fiction of a separate juridical personality; this is because
he knows only too well that from the beginning, he merely used the corporation for his personal purposes. [23]
WHEREFORE, the CAs August 20, 2002 Decision and May 15, 2003 Resolution in CA-G.R. CV No. 48489 are SET
ASIDE insofar as they dismissed without prejudice the third party complaint of petitioners-spouses Pedro and Florencia Violago against
respondent Avelino Violago. The March 5, 1994 Decision of the RTC is REINSTATED and AFFIRMED. Costs against Avelino
Violago.

SO ORDERED.
Facts:
in 1983, Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a car to his cousin, Pedro F.
Violago, and the latter's wife, Florencia. Avelino explained that he needed to sell a vehicle to increase the sales quota of VMSC,...
the... spouses would just have to pay a down payment of PhP 60,500 while the balance would be financed by respondent BA Finance.
The spouses would pay the monthly installments to BA Finance while Avelino would take care of the documentation and approval of
financing of the car.
the spouses then agreed to purchase a Toyota Cressida Model 1983 from VMSC.
On August 4, 1983, the spouses and Avelino signed a promissory note under which they bound themselves to pay jointly and severally
to the order of VMSC the amount of PhP 209,601 in 36 monthly installments of PhP 5,822.25 a month, the first installment to be due
and payable on
September 16, 1983.
Avelino prepared a Disclosure Statement of Loan/Credit Transportation which showed the net purchase price of the vehicle, down
payment, balance, and finance charges.
VMSC then issued a sales invoice in favor of the spouses with a detailed description of the
Toyota Cressida car.
In turn, the spouses executed a chattel mortgage over the car in favor of VMSC as security for the amount of PhP 209,601.
VMSC, through Avelino, endorsed the promissory note to BA Finance without recourse.
After receiving the amount of
PhP 209,601, VMSC executed a Deed of Assignment of its rights and interests under the promissory note and chattel mortgage in
favor of BA Finance. Meanwhile, the spouses remitted the amount of PhP 60,500 to VMSC through Avelino.
The sales invoice was filed with the Land Transportation Office (LTO)-Baliwag Branch, which issued Certificate of Registration No.
0137032 in the name of Pedro on August 8, 1983.
The spouses were unaware that the same car had already been sold in 1982 to Esmeraldo Violago,... another cousin of Avelino, and
registered in Esmeraldo's name by the LTO-San Rafael Branch.
Despite the spouses' demand for the car and Avelino's repeated assurances, there was no delivery of the vehicle.
Since VMSC failed to deliver the car, Pedro did not pay any monthly... amortization to BA Finance.
On March 1, 1984, BA Finance filed with the Regional Trial Court (RTC), Branch 116 in Pasay City a complaint for Replevin with
Damages against the spouses.
The complaint, docketed as Civil Case No. 1628-P, prayed for the delivery of the vehicle in favor of BA Finance or, if... delivery
cannot be effected, for the payment of PhP 199,049.41 plus penalty at the rate of 3% per month from February 15, 1984 until fully
paid.
The RTC issued an Order of Replevin on March 28, 1984. The Violago spouses, as defendants a quo, were declared in default for
failing to file an answer.
the RTC rendered on December 3, 1984 a decision in favor of BA Finance.
On August 21, 1989, the spouses Violago filed a Motion for Reconsideration and Motion to Quash Writ of Execution on the basis of
lack of a valid service of summons on them, among other reasons.
The RTC denied the motions; hence, the spouses filed a petition for certiorari under
Rule 65 before the CA, docketed as CA G.R. No. 2002-SP.
On January 28, 1992, the spouses filed their Answer before the RTC
The RTC rendered a Decision on March 5, 1994, finding for BA Finance but against the Violago spouses. The RTC, however,
declared that they are entitled to be indemnified by Avelino.
Issues:
WHETHER OR NOT THE HOLDER OF AN INVALID NEGOTIABLE PROMISSORY NOTE MAY BE CONSIDERED A
HOLDER IN DUE COURSE
Ruling:
The appellate court ruled that the promissory note was a negotiable instrument
The CA set aside the trial court's order holding Avelino liable for damages to the spouses without prejudice to the action of the
spouses against VMSC and Avelino in a separate action.
The ruling of the appellate court is set aside insofar as it dismissed, without prejudice, the third party complaint of petitioners against
Avelino thereby effectively absolving Avelino from any liability under the third party complaint.
The promissory note is clearly negotiable.
The appellate court was correct in finding all the requisites of a negotiable instrument present. The NIL provides:
Section 1. Form of Negotiable Instruments. - An instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
The promissory note clearly satisfies the requirements of a negotiable instrument under the NIL. It is in writing; signed by the Violago
spouses; has an unconditional promise to pay a certain amount, i.e., PhP 209,601, on specific dates in the future which could be
determined... from the terms of the note; made payable to the order of VMSC; and names the drawees with certainty. The indorsement
by VMSC to BA Finance appears likewise to be valid and regular.
[G.R. No. 121466. August 15, 1997]

PMI COLLEGES, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION and ALEJANDRO
GALVAN, respondents.
DECISION
ROMERO, J.:

Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the resolution[1] of public respondent National
Labor Relations Commission[2] rendered on August 4, 1995, affirming in toto the December 7, 1994 decision[3] of Labor Arbiter Pablo
C. Espiritu declaring petitioner PMI Colleges liable to pay private respondent Alejandro Galvan P405,000.00 in unpaid wages
and P40,532.00 as attorneys fees.
A chronicle of the pertinent events on record leading to the filing of the instant petition is as follows:
On July 7, 1991, petitioner, an educational institution offering courses on basic seamans training and other marine-related courses,
hired private respondent as contractual instructor with an agreement that the latter shall be paid at an hourly rate of P30.00 to P50.00,
depending on the description of load subjects and on the schedule for teaching the same. Pursuant to this engagement, private respondent
then organized classes in marine engineering.
Initially, private respondent and other instructors were compensated for services rendered during the first three periods of the
abovementioned contract. However, for reasons unknown to private respondent, he stopped receiving payment for the succeeding
rendition of services. This claim of non-payment was embodied in a letter dated March 3, 1992, written by petitioners Acting Director,
Casimiro A. Aguinaldo, addressed to its President, Atty. Santiago Pastor, calling attention to and appealing for the early approval and
release of the salaries of its instructors including that of private respondent. It appeared further in said letter that the salary of private
respondent corresponding to the shipyard and plant visits and the ongoing on-the-job training of Class 41 on board MV Sweet Glory of
Sweet Lines, Inc. was not yet included. This request of the Acting Director apparently went unheeded. Repeated demands having
likewise failed, private respondent was soon constrained to file a complaint[4] before the National Capital Region Arbitration Branch on
September 14, 1993 seeking payment for salaries earned from the following: (1) basic seaman course Classes 41 and 42 for the period
covering October 1991 to September 1992; (2) shipyard and plant visits and on-the-job training of Classes 41 and 42 for the period
covering October 1991 to September 1992 on board M/V Sweet Glory vessel; and (3) as Acting Director of Seaman Training Course
for 3-1/2 months.
In support of the abovementioned claims, private respondent submitted documentary evidence which were annexed to his
complaint, such as the detailed load and schedule of classes with number of class hours and rate per hour (Annex A); PMI Colleges
Basic Seaman Training Course (Annex B); the aforementioned letter-request for payment of salaries by the Acting Director of PMI
Colleges (Annex C); unpaid load of private respondent (Annex D); and vouchers prepared by the accounting department of petitioner
but whose amounts indicated therein were actually never paid to private respondent (Exhibit E).
Private respondents claims, as expected, were resisted by petitioner. It alleged that classes in the courses offered which complainant
claimed to have remained unpaid were not held or conducted in the school premises of PMI Colleges. Only private respondent, it was
argued, knew whether classes were indeed conducted. In the same vein, petitioner maintained that it exercised no appropriate and proper
supervision of the said classes which activities allegedly violated certain rules and regulations of the Department of Education, Culture
and Sports (DECS). Furthermore, the claims, according to petitioner, were all exaggerated and that, at any rate, private respondent
abandoned his work at the time he should have commenced the same.
In reply, private respondent belied petitioners allegations contending, among others, that he conducted lectures within the premises
of petitioners rented space located at 5th Floor, Manufacturers Bldg., Sta. Cruz, Manila; that his students duly enrolled with the Registrars
Office of petitioner; that shipyard and plant visits were conducted at Fort San Felipe, Cavite Naval Base; that petitioner was fully aware
of said shipyard and plant visits because it even wrote a letter for that purpose; and that basic seaman courses 41 and 42 were sanctioned
by the DECS as shown by the records of the Registrars Office.
Later in the proceedings below, petitioner manifested that Mr. Tomas G. Cloma, Jr., a member of the petitioners Board of Trustees
wrote a letter[5] to the Chairman of the Board on May 23, 1994, clarifying the case of private respondent and stating therein, inter alia,
that under petitioners by-laws only the Chairman is authorized to sign any contract and that private respondent, in any event, failed to
submit documents on the alleged shipyard and plant visits in Cavite Naval Base.
Attempts at amicable settlement having failed, the parties were required to submit their respective position papers. Thereafter, on
June 16, 1994, the Labor Arbiter issued an order declaring the case submitted for decision on the basis of the position papers which the
parties filed. Petitioner, however, vigorously opposed this order insisting that there should be a formal trial on the merits in view of the
important factual issues raised. In another order dated July 22, 1994, the Labor Arbiter impliedly denied petitioners opposition,
reiterating that the case was already submitted for decision. Hence, a decision was subsequently rendered by the Labor Arbiter on
December 7, 1994 finding for the private respondent. On appeal, the NLRC affirmed the same in toto in its decision of August 4, 1995.
Aggrieved, petitioner now pleads for the Court to resolve the following issues in its favor, to wit:
I. Whether the money claims of private respondent representing salaries/wages as contractual instructor for class instruction,
on-the-job training and shipboard and plant visits have valid legal and factual bases;
II. Whether claims for salaries/wages for services relative to on-the-job training and shipboard and plant visits by instructors,
assuming the same were really conducted, have valid bases;
III. Whether the petitioner was denied its right to procedural due process; and
IV. Whether the NLRC findings in its questioned resolution have sound legal and factual support.
We see no compelling reason to grant petitioners plea; the same must, therefore, be dismissed.
At once, a mere perusal of the issues raised by petitioner already invites dismissal for demonstrated ignorance and disregard of
settled rules on certiorari. Except perhaps for the third issue, the rest glaringly call for a re-examination, evaluation and appreciation of
the weight and sufficiency of factual evidence presented before the Labor Arbiter. This, of course, the Court cannot do in the exercise
of its certiorari jurisdiction without transgressing the well-defined limits thereof. The corrective power of the Court in this regard is
confined only to jurisdictional issues and a determination of whether there is such grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of a tribunal or agency. So unyielding and consistent are the decisional rules thereon that it is indeed surprising
why petitioners counsel failed to accord them the observance they deserve.
Thus, in San Miguel Foods, Inc. Cebu B-Meg Feed Plant v. Hon. Bienvenido Laguesma,[6] we were emphatic in declaring that:
This Court is definitely not the proper venue to consider this matter for it is not a trier of facts. x x x Certiorari is a remedy narrow in
its scope and inflexible in character. It is not a general utility tool in the legal workshop. Factual issues are not a proper subject for
certiorari, as the power of the Supreme Court to review labor cases is limited to the issue of jurisdiction and grave abuse of
discretion. x x x (Emphasis supplied).

Of the same tenor was our disquisition in Ilocos Sur Electric Cooperative, Inc. v. NLRC[7] where we made plain that:
In certiorari proceedings under Rule 65 of the Rules of Court, judicial review by this Court does not go so far as to evaluate the
sufficiency of evidence upon which the Labor Arbiter and the NLRC based their determinations, the inquiry being limited essentially
to whether or not said public respondents had acted without or in excess of its jurisdiction or with grave abuse of
discretion. (Emphasis supplied).

To be sure, this does not mean that the Court would disregard altogether the evidence presented. We merely declare that the extent
of review of evidence we ordinarily provide in other cases is different when it is a special civil action of certiorari. The latter commands
us to merely determine whether there is basis established on record to support the findings of a tribunal and such findings meet the
required quantum of proof, which in this instance, is substantial evidence. Our deference to the expertise acquired by quasi-judicial
agencies and the limited scope granted to us in the exercise of certiorari jurisdiction restrain us from going so far as to probe into the
correctness of a tribunals evaluation of evidence, unless there is palpable mistake and complete disregard thereof in which case certiorari
would be proper. In plain terms, in certiorari proceedings, we are concerned with mere errors of jurisdiction and not errors of
judgment. Thus:
The rule is settled that the original and exclusive jurisdiction of this Court to review a decision of respondent NLRC (or Executive
Labor Arbiter as in this case) in a petition for certiorari under Rule 65 does not normally include an inquiry into the correctness of its
evaluation of the evidence.Errors of judgment, as distinguished from errors of jurisdiction, are not within the province of a special
civil action for certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion. It is thus incumbent upon
petitioner to satisfactorily establish that respondent Commission or executive labor arbiter acted capriciously and whimsically in total
disregard of evidence material to or even decisive of the controversy, in order that the extraordinary writ of certiorari will lie. By grave
abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be
shown that the discretion was exercised arbitrarily or despotically. For certiorari to lie there must be capricious, arbitrary and
whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of both civil law and common
law traditions.[8]

The Court entertains no doubt that the foregoing doctrines apply with equal force in the case at bar.
In any event, granting that we may have to delve into the facts and evidence of the parties, we still find no puissant justification
for us to adjudge both the Labor Arbiters and NLRCs appreciation of such evidence as indicative of any grave abuse of discretion.
First. Petitioner places so much emphasis on its argument that private respondent did not produce a copy of the contract pursuant
to which he rendered services. This argument is, of course, puerile. The absence of such copy does not in any manner negate the existence
of a contract of employment since (C)ontracts shall be obligatory, in whatever form they have been entered into, provided all the essential
requisites for their validity are present.[9] The only exception to this rule is when the law requires that a contract be in some form in order
that it may be valid or enforceable, or that a contract be proved in a certain way. However, there is no requirement under the law that
the contract of employment of the kind entered into by petitioner with private respondent should be in any particular form. While it may
have been desirable for private respondent to have produced a copy of his contract if one really exists, but the absence thereof, in any
case, does not militate against his claims inasmuch as:
No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no
scheming employer would ever be brought before the bar of justice, as no employer would wish to come out with any trace of the
illegality he has authored considering that it should take much weightier proof to invalidate a written instrument. x x x [10]

At any rate, the vouchers prepared by petitioners own accounting department and the letter-request of its Acting Director asking
for payment of private respondents services suffice to support a reasonable conclusion that private respondent was employed with
petitioner. How else could one explain the fact that private respondent was supposed to be paid the amounts mentioned in those
documents if he were not employed? Petitioners evidence is wanting in this respect while private respondent affirmatively stated that
the same arose out of his employment with petitioner. As between the two, the latter is weightier inasmuch as we accord affirmative
testimony greater value than a negative one. For the foregoing reasons, we find it difficult to agree with petitioners assertion that the
absence of a copy of the alleged contract should nullify private respondents claims.
Neither can we concede that such contract would be invalid just because the signatory thereon was not the Chairman of the Board
which allegedly violated petitioners by-laws. Since by-laws operate merely as internal rules among the stockholders, they cannot affect
or prejudice third persons who deal with the corporation, unless they have knowledge of the same. [11] No proof appears on record that
private respondent ever knew anything about the provisions of said by-laws. In fact, petitioner itself merely asserts the same without
even bothering to attach a copy or excerpt thereof to show that there is such a provision. How can it now expect the Labor Arbiter and
the NLRC to believe it? That this allegation has never been denied by private respondent does not necessarily signify admission of its
existence because technicalities of law and procedure and the rules obtaining in the courts of law do not strictly apply to proceedings of
this nature.
Second. Petitioner bewails the fact that both the Labor Arbiter and the NLRC accorded due weight to the documents prepared by
private respondent since they are said to be self-serving. Self-serving evidence is not to be literally taken as evidence that serves ones
selfish interest.[12] The fact alone that most of the documents submitted in evidence by private respondent were prepared by him does
not make them self-serving since they have been offered in the proceedings before the Labor Arbiter and that ample opportunity was
given to petitioner to rebut their veracity and authenticity. Petitioner, however, opted to merely deny them which denial, ironically, is
actually what is considered self-serving evidence[13] and, therefore, deserves scant consideration. In any event, any denial made by
petitioner cannot stand against the affirmative and fairly detailed manner by which private respondent supported his claims, such as the
places where he conducted his classes, on-the-job training and shipyard and plant visits; the rate he applied and the duration of said
rendition of services; the fact that he was indeed engaged as a contractual instructor by petitioner; and that part of his services was not
yet remunerated. These evidence, to reiterate, have never been effectively refuted by petitioner.
Third. As regards the amounts demanded by private respondent, we can only rely upon the evidence presented which, in this case,
consists of the computation of private respondent as well as the findings of both the Labor Arbiter and the NLRC. Petitioner, it must be
stressed, presented no satisfactory proof to the contrary. Absent such proof, we are constrained to rely upon private respondents
otherwise straightforward explanation of his claims.
Fourth. The absence of a formal hearing or trial before the Labor Arbiter is no cause for petitioner to impute grave abuse of
discretion. Whether to conduct one or not depends on the sole discretion of the Labor Arbiter, taking into account the position papers
and supporting documents submitted by the parties on every issue presented. If the Labor Arbiter, in his judgment, is confident that he
can rely on the documents before him, he cannot be faulted for not conducting a formal trial anymore, unless it would appear that, in
view of the particular circumstances of a case, the documents, without more, are really insufficient.
As applied to the instant case, we can understand why the Labor Arbiter has opted not to proceed to trial, considering that private
respondent, through annexes to his position paper, has adequately established that, first of all, he was an employee of petitioner; second,
the nature and character of his services, and finally, the amounts due him in consideration of his services. Petitioner, it should be
reiterated, failed to controvert them. Actually, it offered only four documents later in the course of the proceedings. It has only itself to
blame if it did not attach its supporting evidence with its position paper. It cannot now insist that there be a trial to give it an opportunity
to ventilate what it should have done earlier. Section 3, Rule V of the New Rules of Procedure of the NLRC is very clear on the matter:
Section 3. x x x

These verified position papers x x x shall be accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latters direct testimony. The parties shall thereafter not be allowed to allege facts, or present
evidence to prove facts, not referred to and any cause or causes of action not included in the complaint or position papers, affidavits
and other documents. x x x (Emphasis supplied).

Thus, given the mandate of said rule, petitioner should have foreseen that the Labor Arbiter, in view of the non-litigious nature of
the proceedings before it, might not proceed at all to trial. Petitioner cannot now be heard to complain of lack of due process. The
following is apropos:
The petitioners should not have assumed that after they submitted their position papers, the Labor Arbiter would call for a formal trial
or hearing. The holding of a trial is discretionary on the Labor Arbiter, it is not a matter of right of the parties, especially in this case,
where the private respondents had already presented their documentary evidence.

xxx
The petitioners did ask in their position paper for a hearing to thresh out some factual matters pertinent to their case. However, they
had no right or reason to assume that their request would be granted. The petitioners should have attached to their position paper all
the documents that would prove their claim in case it was decided that no hearing should be conducted or was necessary. In fact, the
rules require that position papers shall be accompanied by all supporting documents, including affidavits of witnesses in lieu of their
direct testimony.[14]

It must be noted that adequate opportunity was given to petitioner in the presentation of its evidence, such as when the Labor
Arbiter granted petitioners Manifestation and Motion[15] dated July 22, 1994 allowing it to submit four more documents. This
opportunity notwithstanding, petitioner still failed to fully proffer all its evidence which might help the Labor Arbiter in resolving the
issues. What it desired instead, as stated in its petition,[16] was to require presentation of witnesses buttressed by relevant documents in
support thereof. But this is precisely the opportunity given to petitioner when the Labor Arbiter granted its Motion and Manifestation. It
should have presented the documents it was proposing to submit. The affidavits of its witnesses would have sufficed in lieu of their
direct testimony[17] to clarify what it perceives to be complex factual issues. We rule that the Labor Arbiter and the NLRC were not
remiss in their duty to afford petitioner due process. The essence of due process is merely that a party be afforded a reasonable
opportunity to be heard and to submit any evidence he may have in support of his defense. [18]
WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED for lack of merit while the resolution of the
National Labor Relations Commission dated August 4, 1995 is hereby AFFIRMED.
SO ORDERED.
277 SCRA 462 – Business Organization – Corporation Law – By-laws and Innocent Third Persons
In 1991, PMI Colleges hired the services of Alejandro Galvan for the latter to teach in said institution. However, for unknown reasons,
PMI defaulted from paying the remunerations due to Galvan. Galvan made demands but were ignored by PMI. Eventually, Galvan filed
a labor case against PMI. Galvan got a favorable judgment from the Labor Arbiter; this was affirmed by the National Labor Relations
Commission. On appeal, PMI reiterated, among others, that the employment of Galvan is void because it did not comply with its by-
laws. Apparently, the by-laws require that an employment contract must be signed by the Chairman of the Board of PMI. PMI asserts
that Galvan’s employment contract was not signed by the Chairman of the Board.
ISSUE: Whether or not Galvan’s employment contract is void.
HELD: No. PMI Colleges never even presented a copy of the by-laws to prove the existence of such provision. But even if it did, the
employment contract cannot be rendered invalid just because it does not bear the signature of the Chairman of the Board of PMI. By-
Laws operate merely as internal rules among the stockholders, they cannot affect or prejudice third persons who deal with the
corporation, unless they have knowledge of the same. In this case, PMI was not able to prove that Galvan knew of said provision in the
by-laws when he was employed by PMI.
A.M. No. MTJ-92-643 November 27, 1992

LOUIS VUITTON S.A., complainant,

vs.
JUDGE FRANCISCO DIAZ VILLANUEVA, presiding Judge, Branch 36, The Metropolitan Trial Court at Quezon City,
Metro Manila, respondent.
CAMPOS, JR. J.:

This is a complaint filed by Louis Vuitton, S.A., represented by counsel, Quasha Asperilla Ancheta Peña and Nolasco Law Office,
against Judge Francisco Diaz Villanueva of the Metropolitan Trial Court of Quezon City, Branch 36, on the ground that the latter
knowingly rendered a manifestly unjust judgment.

This Court finds the following facts as relevant:

In Criminal Case No. XXXVI-62431, entitled "People of the Philippines vs. Jose V. Rosario", Louis Vuitton, S.A. accused the latter
of unfair competition as defined by paragraph 1 of Article 189, Revised Penal Code. The information stated:

. . . the above named accused, as owner/proprietor of Manila COD Department, Store . . . did then and there,
wilfully, unlawfully and feloniously manufacture, distribute, sell and offer for sale lady's bags, should (sic) bags,
wallets, purses and other similar goods made of leather with the labels, trademarks and logo of "LOUIS VUITTON
" and "LV", which are exclusive trademarks owned and registered with the Philippine Patent Office in the name of
private complainant LOUIS VUITTON S.A. . . . thus, giving to them the general appearance of goods or products of
said private complainant, or such appearance which would be likely to induce the public to believe that said goods
offered are those of private complainant, in unfair competition and for the purpose of deceiving or defrauding it of
its legitimate trade or the public in general. . . .1

On February 8, 1991, before judgment, prosecution filed the Prosecution's Memorandum with Motion found in Annex "A" of the
Complaint, where the prosecution prayed:

Premises considered, it is most respectfully prayed that the accused Jose V. Rosario be declared guilty beyond
reasonable doubt of having committed the offense described in the criminal information against him.

In the alternative, if the accused cannot be held responsible for the criminal information against him, it is
respectfully moved that the accused be committed to answer for the proper offense of "giving other persons (the
supposed concessionaire) a chance or opportunity to commit unfair competition" (Section 1, Article 189 of the
Revised Penal Code in conjunction with Rule 119 of the 1985 Rules on Criminal Procedure).2

The trial court summarized its factual findings as follows:

From the records of the case, the evidence presented and the arguments advanced by the parties, the Court finds that
the complaining witness in this case is the representative and attorney-in-fact, counsel of Louis Vuitton, S.A. French
Company with business address at Paris, France; that private complainant is suing the accused for the protection of
the trade mark Louis Vuitton and the L.V. logo which are duly registered with the Philippine Patent Office; that on
May 10, 1989, Atty. Felino Padlan of the Quasha Law Office brought a letter to the COD informing the latter to
cease and desist from selling leather articles bearing the trade marks Louis Vuitton and L.V. logo as the same is the
registered trade marks belonging to the private complainant which has not authorized any person in the Philippines
to sell such articles; that on August 4, 1989, prosecution witness, Miguel trade mark and logo of Louis Vuitton . . . ;
that again on September 6, 1989, said Mrs. Domingo again bought from the same store a wallet with a trade mark
and logo of Louis Vuitton . . . ; that on September 28 1989, the NBI, upon the request of the Quasha law Firm
applied for a Search Warrant at the Metropolitan Trial Court in Quezon City; that the application was granted and
the Search Warrant was issued against COD and was enforced on the same date; that from the implementation of the
said date; that from the implementation of the said Search Warrant, about seventy-two (72) leather products were
seized; that the accuse signed the inventory of the seized articles.

The accused, on the other hand, claimed: that he is not the manufacturer or seller of the seized articles; that the said
articles were sold in the store by a concessionaire by the name of Erlinda Tan who is doing business under the name
of Hi-Tech Bags and wallets. 3

In acquitting the accused, the trial court gave the following reasons:

From all the foregoing, considering that the accused denied being the manufacturer or seller of the seized articles, it
is incumbent upon the prosecution to prove that said articles are owned and being sold by the accused. The
prosecution relied as their evidence against the accused the inventory which was signed by him (accused) with a
notation under his signature "owner/representative". An examination of the inventory . . . would show that the same
was a prepared form of the NBI and that the accused was made to sign only on the space on the typewritten word
 owner/representative. Aside from this, no other evidence was presented by the prosecution to show that there is a
link between the Manufacturers of the seized goods and the accused. Further, when the case was filed the
Prosecutor's Office, it stated the name of the accused as the owner of the COD, but from the evidence presented, it
appears that the accused is not the owner by the stockholder and the executive-vice president thereof.

The prosecution evidence shows that long before the raid of September 28, 1989, surveys have been caused to be
made by the Quasha Law Firm, not only at the COD but also in other department stores as far as Baguio City and
Cebu City; that these seized products were being sold not only t the COD but also in some big department (sic) store
such as Cash and Carry. They could have easily verified from the Securities and Exchange Commission who the
actual officers of the COD [are] to be charged, but the prosecution did not do this and relied only on the inventory of
the seized goods prepared by the NBI agents with the typewritten word owner/representative.

With respect to the seized goods, the test of unfair competition is whether the goods have been made to appear that
will likely deceive the ordinary purchaser exercising ordinary care. The seized goods which were marked as exhibits
and presented to the Court would easily show that there was no attempt on the part of the manufacturer or seller to
pass these goods as products of Louis Vuitton. From the price tags attached to a seized bag, it could be seen that the
article carried a price tag of ONE HUNDRED FORTY-SEVEN (P147.00) PESOS, whereas, upon examination of
the expert witness presented by the prosecution, he testified that a genuine bag of Louis Vuitton would cost about
FOUR THOUSAND (P4,000.00) PESOS to FIVE THOUSAND (P5,000.00) PESOS. It is apparent that the seized
articles did not come close to the appearance of a genuine Louis Vuitton product. Further, the buckle of the bag also
carries the logo of Gucci, another trade mark. From the appearance of all the seized goods, it is very apparent that
these goods were roughly done. The quality and textures of the materials used are of low quality that an ordinary
purchases (sic) exercising ordinary [care] will easily determine that they were locally manufactured and will not
pass as a (sic) genuine Louis Vuitton products. From these, the Court finds that the prosecution failed to prove that
the essential elements of unfair competition, to wit:

a. That the offender gives his goods the general appearance of the goods of another manufacturer
or dealer;

b. That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping of
their packages, or in the (3) device or words therein, or in (4) any other feature of their a (sic)
appearance.

These elements, to the mind of the Court are absent in this case.

Further finally, the prosecution filed this case accused Jose V. Rosario in his personal capacity and not as an officer
of the Manila COD Department Store, which is a corporation, and has a separate legal personality. 4

In the complaint, pointed out that the respondent Judge did not consider the motion of February 11, 1990. This omission of respondent
judge allegedly constituted a clear and gross violation of his ministerial duty in order to allow the accused to escape criminal liability.
Furthermore, complainant claimed that the respondent judge's failure to resolve the motion exposed his gross ignorance of the law.
Section 11, Rule 119 of the 1985 Rules on Criminal Procedure states:

Sec. 11. When mistake has been made in charging the proper offense.— When it becomes manifest at any time
before judgment, that a mistake has been made in charging the proper offense, and the accused cannot be convicted
of the offense charged, or of any other offense necessarily included therein, the accused shall not be discharged, if
there appears to be good cause to detain him. In such case the court shall commit the accused to answer for the
proper information charged.

Complainant also assailed respondent judge's findings that there was no unfair competition because the elements of the crime were not
met, and that he seized articles did not come close to the appearance of a genuine Louis Vuitton product, the counterfeit items having
been poorly, done. According to complainant, in making such conclusions, respondent judge ignored the ruling Converse Rubber
Corp. vs. Jacinto Rubber & Plastics Co., Inc.,5that "the statute on unfair competition extends protection to the goodwill of a
manufacturer or dealer".

Thirdly, complainant criticized respondent judge for his failure to consider the alleged lack of credibility of Felix Lizardo, the lone
witness for the defense, in rendering the assailed decision.
Lastly, complainant pointed out that respondent judge violated the constitutional mandate that decisions should be rendered within
three (3) months from submission of the case. It appeared that the decision was date June 28, 1991 but it was promulgated only on
October 25, 1991.

In response to the forgoing accusations, respondent judge set forth in his comment that:

1. The evidence of the prosecution was not sufficient to sustain the conclusion that Jose V. Rosario was guilty beyond reasonable
doubt. The evidence did not prove all the elements of the offense charged. He added that in deciding criminal cases, the trial court
relies not on the weakness of the accused's evidence but on the strength of the evidence submitted by the prosecution.

2. His alleged failure to act on the motion was due to the prosecutor's failure to point out to the court before judgment was rendered
that a mistake was made in charging the proper offense. He also added that the prosecutor's evidence did not also manifest this
mistake.

Citing the conclusion of the Prosecution's Memorandum with Motion of the complaint, respondent judge averred that the private
prosecutor himself, instead of showing the court that the proper offense was not charged, clearly indicated that no such mistake was
committed. The cited statement says;

It is respectfully submitted that the prosecution had fairly proven that the accused is guilty beyond reasonable doubt
of having committed the offense outlined in the criminal Information against him. . . . 6

3. The prayer contained in the Prosecution's Memorandum with Motion should have been placed in a proper pleading. He also said
that the private prosecutor should have conferred with public prosecutor if the former believed that the proper offense of giving other
persons a chance to commit unfair competition would be charged against Rosario. The failure of both public and private prosecutors to
take the appropriate action provided no reason for respondent judge to commit the accused to answer for the proper information.

The sole issue for consideration of this Court is whether or not respondent judge is guilty of knowingly rendering a manifestly unjust
judgment.

The Revised Penal Code holds a judge liable for knowingly rendering a manifestly unjust judgment. Article 204 thereof provides:

Any judge who shall knowingly render an unjust judgment in a case submitted to him for decision shall be punished
...

The law requires that the (a) offender is a judge; (b) he renders a judgment in a case submitted to him for decision; (c) the judgment is
unjust; (d) he knew that said judgment is unjust.7 In some administrative cases8decided by this Court, We have ruled that in order to
hold a judge liable, it must be shown beyond reasonable doubt that the judgment is unjust and that it was made with conscious and
deliberate intent to do an injustice.

In this case, We are constrained to hold that complainant failed to substantiate its claims that respondent judge rendered an unjust
judgment knowingly. It merely relied on the failure of respondent judge to mentioned the motion in the decision, on his alleged
reliance on the testimony of defense witness and on the delay in the promulgation of the case.

But they are not enough to show that the judgment was unjust and was maliciously rendered.

A judgment is said to be unjust when it is contrary to the standards of conduct prescribed by law. 9 The test to determine whether an
order or judgment is unjust may be inferred from the circumstances that it is contrary to law or is not supported by evidence. 10

The decision herein rests on two legal grounds: first, that there was no unfair competition because the elements of the crime were not
sufficiently proven; second, that Jose V. Rosarion who was accused as owner/proprietor of COD was not properly charged as his
personality is distinct from that of the COD's.

In holding that there was no unfair competition, the respondent judge said that "the seized articles did not come close to the
appearance of a genuine Louis Vuitton product". 11 His pronouncement obviously had in mind the test to determine unfair competition
which this Court had laid down in the case of U.S. vs. Manuel, 12 to wit:

. . . whether certain goods have been clothed with an appearance which is likely to deceive the ordinary purchaser
exercising ordinary care, . . .
In so finding that the seized products did not come close to the appearance of genuine Louis Vuittons because they were poorly done,
the court considered not only their appearance but other factors as well, such as the price differences between the real and the fake
products. Complainant, on the other hand, alleged that they were good workmanship. But, this Court is not in a position to review the
evidence and thereafter conclude that the imitation was poorly or excellently done. The findings of fact of the trial court, if supported
by substantial evidence, are binding on the Supreme Court. 13 Even on the assumption that the judicial officer has erred in the
appraisal of evidence, he cannot be held administratively or civilly liable for his judicial action. 14

The second ground which was relied upon by the trial court in acquitting the accused finds basis in the well-settled doctrine that a
corporation has a distinct personality from that of its stockholders/owners. A corporation is vested by law with a personality of its
own, separate and distinct from that of its stockholders and from that of its officers who manage and run its affairs. 15 Furthermore,
Section 23 of the Corporation Code provides:

. . . the corporate powers of all corporations formed under this code shall be exercised, all business conducted, and
all property of such corporations controlled and held by the Board of Directors . . .

This decision is assailed to be unjust mainly because it did not consider the Prosecution's Memorandum with Motion and Motion for
Early Resolution filed by private prosecutor, herein complainant, on February 8, 1991 and February 11, 1991, respectively. According
to complainant, had respondent judge taken the former motion into account, he would not have acquitted the accused, Jose V. Rosario.
Instead, he would have been held guilty for giving others an opportunity engage in unfair competition as prescribed by Article 189 of
the Revised Penal Code.

Respondent judge's judgment cannot be rendered unjust by this alone.

In the first place, it would not have made any difference because Jose v. Rosario was charged as owner/proprietor. COD is not a single
proprietorship but one that is run and owned by a corporation, Rosario Bros., Inc., of which the accused is stockholder and Executive
Vice-President. A stockholder generally does not have a hand in the management of the corporate affairs. On the other hand, the Vice-
President had no inherent power to bind the corporation. 16 As general rule, his duties must be specified in the by-laws. 17 In the
criminal case, the information did not specify his duties as Executive Vice-President. The trial court had no basis for holding that as
such, the accused entered into a contract with the concessionaire thereby giving the latter an opportunity to practice unfair
competition. Whereas, Section 23 of the Corporation Code is explicit that the directors, acting as a body, exercise corporation powers
and conduct the corporation's business. The board has the sole power and responsibility to decide whether a corporation should enter
into any contract or perform any act. 18 The amendment of the charge, as proposed by the private prosecutor, would not in any way
affect the application of the doctrine that the corporation has a personality distinct from that of its owners.

Moreover, the finding of the trial court that there is no unfair competition rendered the consideration of the motions insignificant. If
there was unfair competition, so would there be no offense of giving others an opportunity to engage in unfair competition since there
was no unfair competition to begin with.

Herein complainant also failed to prove malice and deliberate intent on the part of respondent judge to perpetrate an unjustice. We
hereby quoted the decision of this Honorable Court in Sta. Maria vs. Ubay, 19 stating that:

. . . complainant failed to show any unmistakable indication that bad faith motivated the alleged unjust actuations of
the respondent judge . . . Absent, thus, any positive evidence on record that the respondent judge rendered judgment
in question with conscious and deliberate intent to do an injustice, the . . . charge of the complainant must fall.

In Mendoza vs. Villaluz, 20 this Court has also held:

. . . it is a fundamental rule of long standing that a judicial officer when required to exercise his judgment or
discretion is not criminally liable for any error he commits provided he acts in good faith, that in the absence of
malice or any wrongful conduct . . . the judge cannot be held administratively responsible . . . for "no one, called
upon to try the facts or interpret the law in the process of administering justice can be infallible in his judgment,"
and "to hold a judge administratively accountable for every erroneous ruling or decision he renders assuming that he
has erred, would be nothing short of harrasment or would make his position unbearable.

This pronouncement has been reiterated by Us in the case of Miranda vs. Judge Manalastas, 21 where We said:

Well established is the rule that mere errors in the appreciation of evidence, unless so gross and patent as to produce
an inference of ignorance or bad faith, or that the judge knowingly rendered an unjust decision, are irrelevant and
immaterial in administrative proceedings against him. No one called upon to try the facts or interpret the law in the
process of administering justice is infallible in his judgment. All that is expected of him is that he follows the rules
 prescribed to ensure a fair and impartial hearing, assess the different factors that emerge therefrom and bear on the
issues presented, and on the basis of the conclusions he find established, with only his conscience and knowledge of
the law to guide him, adjudicate the case accordingly. . . . If in the mind of the respondent, the evidence for the
defense was entitled to more weight and credence, the cannot held to account administratively for the result of his
ratiocination. For that is the very essence of judicial inquiry: otherwise the burdens of judicial office will be
intolerable. (Emphasis supplied)

A judge cannot be subjected to liability –– civil, criminal, or administrative — for any his official acts, not matter how erroneous, as
long as he acts in good faith. 22 In Pabalan vs. Guevarra, 23 the Supreme Court spoke of the rationale for this immunity. We held, thus:

. . . it is a general principle of the highest importance to the proper administration of justice that a judicial officer, in
exercising the authority vested in him, shall be free to act the authority vested in him, shall be free to act upon his
own convictions, without apprehension of personal consequences to himself." This concept of judicial immunity
rests upon consideration of public policy, its purpose being to preserve the integrity and independence of the
judiciary.

Still, complainant wants Us to apply the Res Ipsa Loquitur Doctrine as applied by this Court in the cases of People
vs. Valenzuela; 24 Cathay Pacific Airways vs. Romillo; 25 In Re: Wenceslao Laureta; 26 and Consolidated Bank and Trust Corporation
vs. Capistrano. 27

That doctrine, however, is not applicable to the case at bar. In similar administrative cases separately filed against Judge Liwag 28 and
Judge Dizon, 29 We have ruled that:

In these res ipsa loquitur resolutions, there was on the face of the assailed decisions, an inexpliacable grave
error bereft of any redeeming feature, a patent railroading of a case to bring about an unjust decision, or a
manifestly deliberate intent to wreak (sic) an injustice against a hapless party. The facts themselves, previously
proven or admitted, were of such a character as to give rise to a strong inference that evil intent was present. Such
intent, in short, was clearly deducible from what was already of record. The res ipsa loquitur doctrine does not
except or dispense with the necessity of proving the facts on which the inference of evil intent is based. It merely
expresses the clearly sound reasonable conclusion that when such facts are admitted or are already shown by the
record, and no credible explanation that would negative the strong inference of evil intent is forthcoming, no further
hearing to establish them to support a judgment as to the culpability of a respondents is necessary.

Thus, when asked to explain the clearly gross ignorance of law or the grave misconduct irresistibly reflecting on
their integrity, the respondent Judges were completely unable to give any credible explanation or to raise reasonable
doubt . . . (Emphasis supplied).

Thus, even granting that res ipsa loquitur is appreciable, complainant still has to present proof of malice and bad faith. Respondent
judge, on the other hand, may raise good faith as a defense. That good faith is a defense to the charge of knowingly rendering an
unjust judgment remains to be the law. 30 He is also given the chance to explain his acts and if such explanation is credible, the court
may absolve him of the charge.

In this case, We find that the facts and the explanation rendered by Judge Villanueva justify his absolution from the charge. However,
while he is held to be not guilty, he should avoid acts which tend to cast doubt on his integrity. Moreover, his delay in the
promulgation of this case deserves a reprimand from this Court as it is contrary to the mandate of our Constitution which enshrines the
right of the litigants to a speedy disposition of their cases.

WHEREFORE, in view of the foregoing, this complaint is hereby DISMISSED for lack of merit. Considering the delay in the
promulgation of the decision of this case by respondent judge, a reprimand is in order.

SO ORDERED.
G.R. No. 90580 April 8, 1991

RUBEN SAW, DIONISIO SAW, LINA S. CHUA, LUCILA S. RUSTE AND EVELYN SAW, petitioners,
vs.
HON. COURT OF APPEALS, HON. BERNARDO P. PARDO, Presiding Judge of Branch 43, (Regional Trial Court of
Manila), FREEMAN MANAGEMENT AND DEVELOPMENT CORPORATION, EQUITABLE BANKING
CORPORATION, FREEMAN INCORPORATED, SAW CHIAO LIAN, THE REGISTER OF DEEDS OF CALOOCAN
CITY, and DEPUTY SHERIFF ROSALIO G. SIGUA, respondents.

Benito O. Ching, Jr. for petitioners.

William R. Vetor for Equitable Banking Corp.
Pineda, Uy & Janolo for Freeman, Inc. and Saw Chiao.

CRUZ, J.:

A collection suit with preliminary attachment was filed by Equitable Banking Corporation against Freeman, Inc. and Saw Chiao Lian,
its President and General Manager. The petitioners moved to intervene, alleging that (1) the loan transactions between Saw Chiao Lian
and Equitable Banking Corp. were not approved by the stockholders representing at least 2/3 of corporate capital; (2) Saw Chiao Lian
had no authority to contract such loans; and (3) there was collusion between the officials of Freeman, Inc. and Equitable Banking
Corp. in securing the loans. The motion to intervene was denied, and the petitioners appealed to the Court of Appeals.

Meanwhile, Equitable and Saw Chiao Lian entered into a compromise agreement which they submitted to and was approved by the
lower court. But because it was not complied with, Equitable secured a writ of execution, and two lots owned by Freeman, Inc. were
levied upon and sold at public auction to Freeman Management and Development Corp.
The Court of Appeals1 sustained the denial of the petitioners' motion for intervention, holding that "the compromise agreement
between Freeman, Inc., through its President, and Equitable Banking Corp. will not necessarily prejudice petitioners whose rights to
corporate assets are at most inchoate, prior to the dissolution of Freeman, Inc. . . . And intervention under Sec. 2, Rule 12 of the
Revised Rules of Court is proper only when one's right is actual, material, direct and immediate and not simply contingent or
expectant."

It also ruled against the petitioners' argument that because they had already filed a notice of appeal, the trial judge had lost jurisdiction
over the case and could no longer issue the writ of execution.

The petitioners are now before this Court, contending that:

1. The Honorable Court of Appeals erred in holding that the petitioners cannot intervene in Civil Case No. 88-44404 because
their rights as stockholders of Freeman are merely inchoate and not actual, material, direct and immediate prior to the
dissolution of the corporation;

2. The Honorable Court of Appeals erred in holding that the appeal of the petitioners in said Civil Case No. 88-44404 was
confined only to the order denying their motion to intervene and did not divest the trial court of its jurisdiction over the whole
case.

The petitioners base their right to intervene for the protection of their interests as stockholders on Everett v. Asia Banking
Corp.2 where it was held:

The well-known rule that shareholders cannot ordinarily sue in equity to redress wrongs done to the corporation, but that the
action must be brought by the Board of Directors, . . . has its exceptions. (If the corporation [were] under the complete
control of the principal defendants, . . . it is obvious that a demand upon the Board of Directors to institute action and
prosecute the same effectively would have been useless, and the law does not require litigants to perform useless acts.

Equitable demurs, contending that the collection suit against Freeman, Inc, and Saw Chiao Lian is essentially in personam and, as an
action against defendants in their personal capacities, will not prejudice the petitioners as stockholders of the corporation. The Everett
case is not applicable because it involved an action filed by the minority stockholders where the board of directors refused to bring an
action in behalf of the corporation. In the case at bar, it was Freeman, Inc. that was being sued by the creditor bank.

Equitable also argues that the subject matter of the intervention falls properly within the original and exclusive jurisdiction of the
Securities and Exchange Commission under P.D. No. 902-A. In fact, at the time the motion for intervention was filed, there was
pending between Freeman, Inc. and the petitioners SEC Case No. 03577 entitled "Dissolution, Accounting, Cancellation of Certificate
of Registration with Restraining Order or Preliminary Injunction and Appointment of Receiver." It also avers in its Comment that the
intervention of the petitioners could have only caused delay and prejudice to the principal parties.

On the second assignment of error, Equitable maintains that the petitioners' appeal could only apply to the denial of their motion for
intervention and not to the main case because their personality as party litigants had not been recognized by the trial court.

After examining the issues and arguments of the parties, the Court finds that the respondent court committed no reversible error in
sustaining the denial by the trial court of the petitioners' motion for intervention.

In the case of Magsaysay-Labrador v. Court of Appeals,3 we ruled as follows:

Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, this Court affirms the respondent court's holding that
petitioners herein have no legal interest in the subject matter in litigation so as to entitle them to intervene in the proceedings
below. In the case of Batama Farmers' Cooperative Marketing Association, Inc. v. Rosal, we held: "As clearly stated in
Section 2 of Rule 12 of the Rules of Court, to be permitted to intervene in a pending action, the party must have a legal
interest in the matter in litigation, or in the success of either of the parties or an interest against both, or he must be so situated
as to be adversely affected by a distribution or other disposition of the property in the custody of the court or an officer
thereof."

To allow intervention, [a] it must be shown that the movant has legal interest in the matter in litigation, or otherwise
qualified; and [b] consideration must be given as to whether the adjudication of the rights of the original parties may be
delayed or prejudiced, or whether the intervenor's rights may be protected in a separate proceeding or not. Both requirements
must concur as the first is not more important than the second.
 The interest which entitles a person to intervene in a suit between other parties must be in the matter in litigation and of such
direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the
judgment. Otherwise, if persons not parties of the action could be allowed to intervene, proceedings will become
unnecessarily complicated, expensive and interminable. And this is not the policy of the law.

The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and which would put the
intervenor in a legal position to litigate a fact alleged in the complaint, without the establishment of which plaintiff could not
recover.

Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural, consequential and
collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the
corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the
corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the
owner thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or
beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation
as a distinct legal person.

On the second assignment of error, the respondent court correctly noted that the notice of appeal was filed by the petitioners on
October 24, 1988, upon the denial of their motion to intervene, and the writ of execution was issued by the lower court on January 30,
1989. The petitioners' appeal could not have concerned the "whole" case (referring to the decision) because the petitioners "did not
appeal the decision as indeed they cannot because they are not parties to the case despite their being stockholders of respondent
Freeman, Inc." They could only appeal the denial of their motion for intervention as they were never recognized by the trial court as
party litigants in the main case.

Intervention is "an act or proceeding by which a third person is permitted to become a party to an action or proceeding between other
persons, and which results merely in the addition of a new party or parties to an original action, for the purpose of hearing and
determining at the same time all conflicting claims which may be made to the subject matter in litigation. 4

It is not an independent proceeding, but an ancillary and supplemental one which, in the nature of things, unless otherwise provided
for by the statute or Rules of Court, must be in subordination to the main proceeding.5 It may be laid down as a general rule that an
intervenor is limited to the field of litigation open to the original parties. 6

In the case at bar, there is no more principal action to be resolved as a writ of execution had already been issued by the lower court and
the claim of Equitable had already been satisfied. The decision of the lower court had already become final and in fact had already
been enforced. There is therefore no more principal proceeding in which the petitioners may intervene.

As we held in the case of Barangay Matictic v. Elbinias:7

An intervention has been regarded, as merely "collateral or accessory or ancillary to the principal action and not an
independent proceedings; and interlocutory proceeding dependent on and subsidiary to, the case between the original
parties." (Fransisco, Rules of Court, Vol. 1, p. 721). With the final dismissal of the original action, the complaint in
intervention can no longer be acted upon. In the case of Clareza v. Resales, 2 SCRA 455, 457-458, it was stated that:

That right of the intervenor should merely be in aid of the right of the original party, like the plaintiffs in this case.
As this right of the plaintiffs had ceased to exist, there is nothing to aid or fight for. So the right of intervention has
ceased to exist.

Consequently, it will be illogical and of no useful purpose to grant or even consider further herein petitioner's prayer for the
issuance of a writ of mandamus to compel the lower court to allow and admit the petitioner's complaint in intervention. The
dismissal of the expropriation case has no less the inherent effect of also dismissing the motion for intervention which is but
the unavoidable consequence.

The Court observes that even with the denial of the petitioners' motion to intervene, nothing is really lost to them.1âwphi1 The denial
did not necessarily prejudice them as their rights are being litigated in the case now before the Securities and Exchange Commission
and may be fully asserted and protected in that separate proceeding.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so ordered.
G.R. No. L-57586 October 8, 1986

AQUILINO RIVERA, ISAMU AKASAKO and FUJIYAMA HOTEL & RESTAURANT, INC., petitioners,
vs.
THE HON. ALFREDO C. FLORENDO, as Judge of the Court of First Instance of Manila (Branch XXXVI), LOURDES
JUREIDINI and MILAGROS TSUCHIYA, respondents.

Bobby P. Yuseco for petitioners.

Arthur Canlas for private respondents.

PARAS, J.:

This is a petition for certiorari and prohibition with preliminary injunction seeking the annulment of the following Orders of the then
Court of First Instance of Manila, Branch XXXVI: (a) Order dated June 5, 1981 directing the issuance of a writ of preliminary
mandatory injunction requiring petitioners Fujiyama Hotel & Restaurant, Inc., Isamu Akasako and Aquilino Rivera to allow
respondents Lourdes Jureidini and Milagros Tsuchiya to manage the corporate property upon filing of a bond in the amount of
P30,000.00 (Rollo, pp. 43-57) and (b) Order dated July 24, 1981 denying petitioners' motion for reconsideration and motion to dismiss
for lack of jurisdiction but increasing the bond to P120,000.00 (Rollo, p. 81).

Petitioner corporation was organized and register under Philippine laws with a capital stock of P1,000,000.00 divided into 10,000
shares of P100.00 par value each by the herein petitioner Rivera and four (4) other incorporators. Sometime thereafter petitioner
Rivera increased his subscription from the original 1,250 to a total of 4899 shares (Rollo, p. 4).

Subsequently, Isamu Akasako, a Japanese national and co-petitioner who is allegedly the real owner of the shares of stock in the name
of petitioner Aquilino Rivera, sold 2550 shares of the same to private respondent Milagros Tsuchiya for a consideration of
P440,000.00 with the assurance that Milagros Tsuchiya will be made the President and Lourdes Jureidini a director after the purchase.
Aquilino Rivera who was in Japan also assured private respondents by overseas call that he will sign the stock certificates because
Isamu Akasako is the real owner. However, after the sale was consummated and the consideration was paid with a receipt of payment
therefor shown, Aquilino Rivera refused to make the indorsement unless he is also paid. (Rollo, pp. 51-52).

It also appears that the other incorporators sold their shares to both respondent Jureidini and Tsuchiya such that both respondents
became the owners of a total of 3300 shares or the majority out of 5,649 outstanding subscribed shares of the corporation (Rollo, pp.
4-5), and that there was no dispute as to the legality of the transfer of the stock certificate Exhibits "B-1" to "B-4" to Jureidini, all of
which bear the signatures of the president and the secretary as required by the Corporation Law with the proper indorsements of the
respective owners appearing thereon. Exhibits "B-1" to "B-4" are specifically indorsed to her while Exhibits "B-2" and "B-3" are
indorsed in blank. Aquilino Rivera admitted the genuineness of an the signatures of the officers of the corporation and of an the
indorsee therein. (Order dated June 5, 1981, Civil Case No. 13273, Rollo, pp. 51-53).

Nonetheless, private respondents attempted several times to register their stock certificates with the corporation but the latter refused
to register the same. (Ibid., Rollo, pp. 54-55). Thus, private respondents filed a special civil action for mandamus and damages with
preliminary mandatory injunction and/or receivership naming herein petitioners as respondents, docketed as Special Civil Action No.
13273, "Lourdes Jureidini, et al. v. Fujiyama Hotel et al." of the Court of First Instance of Manila, Branch XXXVI presided by
respondent Judge. Petitioners' counsel Atty. Marcelino A. Bueno, upon receipt of the summons and a copy of the aforesaid petition,
filed an answer thereto with denials, special and affirmative defenses and counterclaim. Thereafter, a hearing was held on the
application for preliminary mandatory injunction and/or receivership, after which respondent Judge issued an order for a writ of
preliminary mandatory injunction authorizing respondent Jureidini and Tsuchiya to manage the corporation's hotel and restaurant,
upon the filing of a bond in the amount of P30,000.00. Then through another counsel Atty. Eriberto D. Ignacio in collaboration with
their counsel of record, Atty. Marcelino A. Bueno, petitioners (respondents therein) filed a motion to dismiss the petition on the
ground that respondent Judge has no jurisdiction to entertain the case, while through Atty. Bueno, they filed a motion for
reconsideration of the Order granting the issuance of a writ of mandatory preliminary injunction. Private respondents filed their
opposition to both motions and on July 24, 1981, respondent Judge issued an Order denying both the motion for reconsideration and
the motion to dismiss the petition but increased the amount of the bond from P30,000.00 to P120,000.00 to sufficiently protect the
interests of herein petitioners. (Rollo, p. 81).

Hence, this petition.

After filing the petition, Atty. Eriberto D. Ignacio withdrew as counsel for petitioners on August 6, 1981. Such withdrawal was
confirmed by petitioner Isamu Akasako (Rollo, p. 83). On August 10, 1981 the appearance of Isaca & Espiritu Law Offices as counsel
in substitution of former counsel Attys. Marcelino A. Bueno and Eriberto D. Ignacio was received by this Court. (Rollo, p. 84); all of
which were noted in the resolution of the First Division of this Court dated August 17, 1981. (Rollo, p. 160).

The new counsel filed a Manifestation and Motion praying that the therein attached Supplement and certified copies of the questioned
orders and writs be admitted and considered as part of petitioners' original petition for certiorari and Prohibition with Preliminary
injunction. (Rollo, pp. 85-131). On August 14, 1981 petitioners filed an Urgent Motion for Restraining Order and Other Provisional
Injunctive Reliefs (Rollo, pp. 154-159). In the same resolution of August 17, 1981, after deliberating on the petition and supplemental
to the petition, the Court Resolved: (a) to require the respondents to comment thereon (not to file a motion to dismiss within ten (10)
days from notice and (b) upon petitioners' filing of an injunction bond in the amount of P30,000.00 to issue a Writ of Preliminary
Injunction enjoining respondents from enforcing the writ of preliminary mandatory injunction dated June 23, 1981 issued in Civil
Case No. 132673. (Rollo, p. 160). Said bond was filed on August 20, 1981 (Rollo, p. 161) and accordingly, a writ of preliminary
injunction was issued by this Court on August 21, 1981 (Rollo, pp. 172-173).

Subsequently, petitioners filed a manifestation and urgent motion on August 28, 1981 praying that private respondent Lourdes
Jureidini and her counsel Atty. Arthur Canlas be declared in contempt of court for the former's alleged defiant refusal: (a) to
acknowledge receipt of the Writ of Preliminary Injunction of August 21, 1981 and (b) to comply with the said writ issued by this
Court. (Rollo, pp. 174-180).

Comment thereon was filed by private respondents through counsel (Rollo, pp. 185-199) in compliance with the resolution of the First
Division dated August 17, 1981 (Rollo, p. 160), praying for the immediate lifting of the preliminary injunction. Said comment of
private respondents was noted in the resolution of October 5, 1981 (Rollo, p. 200) which also required respondents to comment on the
supplement to the petition.

On October 2, 1981, comment on the manifestation and urgent motion to declare Jureidini and her counsel in contempt of court was
filed by counsel for private respondent (Reno, pp. 201-214) in compliance with the resolution of September 14, 1981 (Rollo, p. 181).

In the resolution of October 26, 1981 (Reno, p. 215) the Court Resolved to require petitioners to file a reply to aforesaid comment.
(Rollo, p. 215).

Meanwhile, supplemental comment on the supplement to the petition was filed by private respondents on October 14, 1981 (Rollo, pp.
216-222) reiterating their stand that it is the ordinary court and not the Securities and Exchange Commission (SEC) that has
jurisdiction to entertain the case as the controversies did not arise from the intra-corporate relationship among the parties.

On October 21, 1981, petitioner filed: (a) motion for leave to file reply to comment of respondents on the petition and supplemental
petition required in the resolution of August 17, 1981 (Rollo, pp. 223-224) and (b) the attached Reply (Rollo, pp. 225-241). On
November 25, 1981, petitioners filed their Reply to respondents' Comment on petitioners' manifestation and urgent motion to declare
them in contempt. (Rollo, pp. 246-257).

On December 7, 1981 Atty. Bobby P. Yuseco entered his appearance as collaborating counsel for petitioners (Rollo, p. 258) and filed
an urgent petition for early resolution of petitioners' motion to hold private respondents in contempt and for issuance of Order
clarifying Writ of Injunction dated August 21, 1981. (Rollo, pp. 259-261).

In the resolution of January 18, 1982, this case and all pending incidents were set for hearing on February 3, 1982. (Rollo, p. 268).

On February 1, 1982, Lesaca and Espiritu Law Offices filed a Manifestation and Motion for Leave to withdraw as counsel for
petitioners. (Rollo, pp. 274-275).

When this case was called for hearing on February 3, 1982, counsel for both parties appeared and argued their causes and both were
required by the Court within an unextendible period of ten (10) days to file their respective memoranda in support of their positions on
an pending incidents of the case at bar while the hearing on the contempt proceedings was reset for February 10, 1982 where the
personal appearance of private respondent Lourdes Jureidini through her counsel was required. (Rollo, p. 279).

On February 9, 1982, counsel for private respondent Jureidini filed an Urgent Motion and Manifestation that he was informed by his
client that she is physically exhausted and is beset with hypertension and praying that she be excused from appearing at the hearing set
for February 10, 1982, that the hearing be cancelled and the contempt incident be considered submitted for decision on the basis of
pleadings previously filed. (Rollo, pp. 280-282).

On the same date, February 9, 1982, counsel for petitioners filed his Memorandum in support of his oral argument at the hearing of
February 3, 1982, (Rollo, pp. 283-287) while a supplement thereto was filed on February 12, 1982. (Rollo, pp. 291-294).
At the hearing of February 10, 1982, private respondent Lourdes Jureidini and her counsel failed to appear. Accordingly the Court
Resolved: (a) to IMPOSE on said counsel Atty. Canlas a fine of P200.00 or to suffer imprisonment if said fine is not paid; (b) to
RESET the hearing on the contempt incidents on March 3, 1982 and (c) to REQUIRE the presence of Atty. Canlas and respondent
Lourdes Jureidini and of complainants Attys. Bibiano P. Lasaca, Rodolfo A. Espiritu and Renato T. Paqui. (Resolution of February 10,
1982, Rollo, p. 290).

On February 15, 1982, private respondents file their memorandum in compliance with the resolution of this Court of February 3, 1982
while petitioners on February 25, 1982 filed their reply thereto.

At the hearing of March 3, 1982, both counsel as well as private respondent Lourdes Jureidini, Attys. Bibiano P. Lesaca, Rodolfo A.
Espiritu and Renato R. Paguio appeared. Atty. Canlas, Lourdes Jureidini, Atty. Lesaca and a representative of the petitioners were
interpellated by the Court. Thereafter, the incident was declared submitted for resolution. (Resolution of March 3, 1982, Rollo, p.
316).

On March 5, 1982, counsel for private respondents filed his compliance with the resolution of February 10, 1982 enclosing a check
payable to this Court in the amount of P200.00 in payment of the fine imposed with motion for reconsideration explaining why he
should not be declared in contempt and praying that the aforesaid resolution of February 10, 1982 be set aside, (Rollo, pp. 312-314).
However, in the resolution of March 10, 1982, (Rollo, p. 317) the Court acting on the compliance of Atty. Arthur Canlas with motion
for reconsideration, denied the motion and required the Chief of the Docket Division to return to Atty. Canlas the check in the amount
of P200.00 it being an out of town check, and Atty. Canlas to pay the fine in cash, and to show cause why he should not be
disciplinary dealt with or held in contempt for wilful delay in paying the fine by mail through an out of town check contrary to his
manifestation at the hearing that he had promptly paid the fine, both within forty eight hours from notice.

Meanwhile, counsel for petitioners filed on April 6, 1982 an Urgent Petition for Permission to Implement Injunction Writ issued on
August 21, 1981 (Rollo, pp. 323-325) which was granted in the resolution of May 26, 1982 (Rollo, p. 313). In the same resolution the
Court ordered Lourdes Jureidini and Milagros Tsuchiya to strictly and immediately comply with the Court's aforesaid writ of
preliminary injunction; indicated that it would resolve the pending incident for contempt against private respondent Lourdes Jureidini
when the Court decides the case on the merits; and gave the parties thirty (30) days from notice within which to submit simultaneously
their respective memoranda on the merits of the case.

On May 31, 1982, counsel for private respondent Atty. Canlas filed in compliance with the resolution of March 10, 1982, his
explanation and manifestation why he should not be disciplinarily dealt with and held in contempt of Court (Rollo, pp. 316-318). In
the resolution of June 2, 1982, the Court Resolved to set aside and lift the Order of Atty. Canlas' arrest and commitment it had issued
on March 31, 1982 but found the explanation and manifestation of Atty. Canlas dated May 29, 1982 unsatisfactory. In view thereof, he
was reprimanded for negligence and undue delay in complying with the Court's resolution. (Rollo, p. 319).

On June 18, 1982, counsel for petitioners allegedly for purposes of clarification as to the laws involved in the matter of contempt of
Lourdes Jureidini, filed a pleading entitled "Re Incident of Contempt against Lourdes Jureidini." (Rollo, pp. 320-326) which was
noted by the Court in the resolution of July 7, 1982. (Rollo, p. 328).

Counsel for private respondents manifested (Rollo, p. 329), on July 12, 1982 that they are adopting the memorandum submitted in the
preliminary injunction incident as their memorandum in the main case. Said manifestation was noted in the resolution of July 26,
1982. (Rollo, p. 331). Counsel for petitioners manifested (Rollo, p. 333) that they are adopting their memorandum in support of
argument last February 3, 1982 as their combined memoranda on the merits of the case. Said manifestation was noted in the resolution
of September 15, 1982. (Rollo, p. 334). In the resolution of November 29, 1982, this case was transferred to the Second Division.
(Rollo, p. 336).

In their petition and supplemental petition, petitioners raised the following issues:

THE RESPONDENT COURT OF FIRST INSTANCE HAS NO JURISDICTION OVER THE PETITION FOR
mandamus AND RECEIVERSHIP "AS WELL AS IN PLACING THE CORPORATE ASSETS UNDER
PROVISIONAL RECEIVERSHIP IN THE GUISE OF A WRIT OF PRELIMINARY MANDATORY
INJUNCTION.

II

EVEN FALSELY ASSUMING THAT THE RESPONDENT COURT HAD JURISDICTION, THE PRIVATE
RESPONDENTS' PRINCIPAL ACTION OF mandamus IS AN IMPROPER COURSE OF ACTION.
 III

ASSUMING ARGUENDO THAT WHAT THE RESPONDENT COURT FOUND IS TRUE, NAMELY THAT
PRIVATE RESPONDENTS "ARE OUTSIDERS" AND "NOT YET STOCKHOLDERS," THUS, HAVING NO
PERSONALLY AT ALL, THEN PROVISIONAL RECEIVERSHIP, ALBEIT CLOTHED AS A "WRIT OF
PRELIMINARY MANDATORY INJUNCTION" WAS ILLEGALLY ISSUED DE HORS ITS JURISDICTION.

IV

ASSUMING ARGUENDO THAT THE RESPONDENT COURT HAD JURISDICTION OVER BOTH THE
PETITION FOR mandamus AS WELL AS THE PROVISIONAL RECEIVERSHIP STILL THE RESPONDENT
COURT ACTED IN EXCESS OF ITS JURISDICTION OR IN GRAVE ABUSE OF ITS DISCRETION TO
GRANT RECEIVERSHIP OVER THE MANAGEMENT OF THE CORPORATE BUSINESS AND ASSETS
WHICH NEVER WAS NOR IS A SUBJECT MATTER OF LITIGATION.

EVEN GRANTING FOR THE SAKE OF AGRGUMENT THAT THE RESPONDENT COURT HAD
JURISDICTION OVER THE SUBJECT MATTER OF THE CASE; NONETHELESS IT WAS IN GRAVE
ABUSE OF ITS DISCRETION TO UNILATERALLY GRANT TO A "PARTY-IN-LITIGATION," THE
PRIVATE RESPONDENTS HEREIN, THE MANAGEMENT OF THE CORPORATE BUSINESS. (Petition and
Supplemental Petition; Rollo, pp. 2-18; 88-131).

The crucial issue in this case is whether it is the regular court or the Securities and Exchange Commission that has jurisdiction over
the present controversy.

Presidential Decree No. 902-A provides:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws
and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving

(a) ...

(b) Controversies arising out of intra-corporate or partnership relations and among stockholders, members, or
associates; between any or all of them and the corporation, partnership or association of which they are stockholders,
members, or associates, respectively and between such corporations, partnership or association and the State insofar
as it concerns their individual franchise or right to exist as such entity.

It has already been settled that an intracorporate controversy would call for the jurisdiction of the Securities and Exchange
Commission. (Philippine School of Business Administration v. Lanao, 127 SCRA 781, February 24, 1984). On the other hand, an
intra-corporate controversy has been defined as "one which arises between a stockholder and the corporate. There is no distinction,
qualification, nor any exemption whatsoever." (Philex Mining Corporation v. Reyes, 118 SCRA 605, November 19, 1982). This Court
has also ruled that cases of private respondents who are not shareholders of the corporation, cannot be a "controversy arising out of
intracorporate or partnership relations between and among stockholders, members or associates; between any or all of them and the
corporation, partnership or association, of which they are stockholders, members or associates, respectively." (Sunset View
Condominium Corporation v. Campos, Jr., 104 SCRA 303, April 27, 1981).

Under Batas Pambansa Blg. 68 otherwise known as "The Corporation Code of the Philippines," shares of stock are transferred as
follows:

SEC. 63. Certificate of stock and transfer of shares. — The capital stock of stock corporations shall be divided into
shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant
secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock
so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the
owner or his attorney-in- fact or other person legally authorized to make the transfer. No transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the book of the corporation showing the names
 of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number
of shares transferred.

xxx xxx xxx

As confirmed by this Court, "shares of stock may be transferred by delivery to the transferee of the certificate properly indorsed. 'Title
may be vested in the transferee by delivery of the certificate with a written assignment or indorsement thereof ' (18 C.J. S. 928). There
should be compliance with the mode of transfer prescribed by law (18 C.J.S. 930)' " (Nava v. Peers Marketing Corp. 74 SCRA 65, 69,
Nov. 25, 1976)

As the bone of contention in this case, is the refusal of petitioner Rivera to indorse the shares of stock in question and the refusal of the
Corporation to register private respondents' shares in its books, there is merit in the findings of the lower court that the present
controversy is not an intracorporate controversy; private respondents are not yet stockholders; they are only seeking to be registered as
stockholders because of an alleged sale of shares of stock to them. Therefore, as the petition is filed by outsiders not yet members of
the corporation, jurisdiction properly belongs to the regular courts.

II

On the other hand, there is merit in petitioners' contention that private respondents' principal action of mandamus is an improper
course of action.

It is evident that mandamus wig not lie in the instant case where the shares of stock in question are not even indorsed by the registered
owner Rivera who is specifically resisting the registration thereof in the books of the corporation. Under the above ruling, even the
shares of stock which were purchased by private respondents from the other incorporators cannot also be the subject of mandamus on
the strength of mere indorsement of the supposed owners of said shares in the absence of express instructions from them. The rights of
the parties will have to be threshed out in an ordinary action.

III-V

Petitioners insist that what was issued was a provisional receivership, while private respondents maintain that the trial court issued a
Writ of Preliminary Mandatory Injunction. Be that as it may, it appears obvious that from the abovementioned rulings of this Court,
petitioners' contention that respondent Judge in the issuance thereof committed acts of grave abuse of discretion, is well taken.

In the Order dated June 5, 1981, in Civil Case No. 132673, the basis of aforesaid Writ was as follows:

Finally, the Court, after assessing the evidence, finds that the issuance of a preliminary mandatory injunction is
proper. Respondents Isamu Akasako and Aquilino Rivera, thru their simulated relationship, have succeeded for two
years since 1979 to deprive the petitioners to participate in the profit and management of the corporation of which
they are the majority stockholders considering that the stocks certificates appearing in the name of Aquilino Rivera
(Exh. "8") is 55% to 75% of the total stocks of the corporation by Isamu Akasako would only prolong the injustice
committed against the petitioners and the damages they would suffer would be irreparable. The Court is aware that
preliminary mandatory injunction is the exception rather than the rule, but according to the Code Commission, in its
report on page 98, "the writ of preliminary mandatory injunction is called for by the fact that there are at present
prolonged litigation between owner and usurper and the former is deprived of his possession even when he has an
immediate right thereto." In the instant case, the right of the petitioners is clear and unmistakable on the law and the
facts and there exists an urgent and paramount necessity for the issuing of the writ in order to prevent extreme or
rather serious damage which ensues from withholding it. (43 C.J.S. 413)

WHEREFORE, in view of the foregoing circumstances, let a writ of preliminary mandatory injunction issue
requiring respondents to allow petitioners to manage the corporate property known as the Fujiyama Hotel &
Restauarant, Inc. upon petitioners' filing of a bond in the amount of P30,000.00.

A mandatory injunction is granted only on a showing (a) that the invasion of the right is material and substantial; (b) the right of
complainant is clear and unmistakable; and (c) there is an urgent and permanent necessity for the writ to prevent serious damage.
(Pelejo v. Court of Appeals, 117 SCRA 668, Oct. 18, 1982).

A mandatory injunction which commands the performance of some specific act is regarded as of a more serious nature than a mere
prohibitive injunction, the latter being intended generally to maintain the status quo only. While our courts, being both of law and
equity, have jurisdiction to issue a mandatory writ, it has always been held that its issuance would be justified only in clear cases; that
it is generally improper to issue it before final hearing because it tends to do more than maintain the status quo; that it should be issued
only where there is a willful and unlawful invasion of plaintiff's right and that the latter's case is one free from doubt and dispute.
(National Marketing v. Cloribel, 22 SCRA 1038, March 13, 1968).

Respondent court in the instant case violated the fundamental rule of injunctions that a mandatory injunction will not issue in favor of
a party whose rights are not clear and free of doubt or as yet undetermined. (Namarco v. Cloribel, 22 SCRA 1038-1039, March 13,
1968). It will be recalled that the disputed shares of stock were purchased not from the registered owner but from a Japanese national
who allegedly was the real owner thereof. It was also alleged that the registered owner was only a dummy of Akasako. it is also true
that the trial court has already made findings to that effect at the hearing for the issuance of the Order of June 5, 1981. Nonetheless,
these are contentious issues that should properly be ventilated at the trial on the merits. As correctly stated in petitioners' motion for
reconsideration, the Order of the trial court is in effect a judgment on the merits, declaring expressly or impliedly that petitioners are
stockholders of the Corporation at the hearing of only the incident for the issuance of a Writ of Preliminary Injunction. On the other
hand if the Order amounts to a judgment on the merits, the lower court should first rule on what private respondents seek, the
registration of their shareholdings in the books of the corporation and the issuance of new stock certificates. It is only thereafter that
the subsequent act of management may be ordered and the period of finality of such a judgment should be in accordance with the
Rules of Court, giving the respondents the right to an appeal or review and not be immediately executory as the Writ of Preliminary
Mandatory Injunction would infer. (Rollo, p. 65).

Another fundamental rule which appears to have been violated in the case at bar is that no advantage may be given to one to the
prejudice of the other, a court should not by means of a preliminary injunction transfer the property in litigation from the possession of
one party to another where the legal title is in dispute and the party having possession asserts ownership thereto. (Rodulfo v. Alonso,
76 Phil. 225), February 28, 1946). Similarly, the primary purpose of an injunction is to preserve the status quo, that is the last actual
peaceable uncontested status which preceded the controversy. In the instant case, petitioner Rivera is the registered majority and
controlling stockholder of the corporation before the ensuing events transpired. By the issuance of the Writ in question he appears to
have been deprived of his rights as stockholder thereof apart from his status as Chairman of the Board and President of the
corporation, with Akasako as the Manager of the two restaurants in this case; the same being the last uncontested status which
preceded the controversy. (Rollo, p. 127).

On the contempt incident involving private respondent Lourdes Jureidini, a Manifestation and Urgent Motion was filed by petitioners
to declare her in contempt of Court for allegedly refusing to acknowledge receipt of the Writ of Preliminary Injunction issued by this
Court and for allegedly refusing to comply therewith. Attributed to her were the following statements: "I will not obey that ... Yes, I
am higher than the Supreme Court ... I will obey only what my lawyer tells me."

In her explanation however, filed through her counsel she denied having uttered the statements alluded to her, the truth of the matter
being that she was alone in the restaurant when this Court's process server, accompanied by petitioners' lawyers, approached her and
demanded that she vacate the premises and surrender the management of the Restaurant. Fazed by the unusual display of lawyers she
requested that she be given time to confer with her counsel Said request allegedly precipitated the remark from Petitioners' counsel
that neither respondent herself, nor her counsel can be higher than the Supreme Court and that any conference seeking to clarify the
effect of the Writ of Preliminary Injunction would be futile. (Rollo, pp. 174-175).

It was likewise explained that respondent Jureidini did not sign and acknowledge receipt of the Writ because it was not addressed to
her but to the lower court and to her counsel.

Respondent's counsel says that the incident was concocted and devised by the petitioners and their counsel to serve no salutary
purpose but to scare and harass respondent Jureidini. He also stated that "it is equally improper, at least in practice, for lawyers to
accompany officers of the Court in serving or otherwise executing processes of said court as to create a seeming suspicion to the
public that lawyers are not involved only professionally in the case they handle but signify their personal interests as well." (Rollo, pp.
208-209).

When this contempt incident was heard on March 3, 1982, Atty. Arthur A. Canlas, counsel for private respondent Lourdes Jureidini,
Jureidini herself, Atty. Bibiano P. Lesaca a representative of the petitioners were interpellated by the Court. Thereafter, the incident
was declared submitted for resolution. (Resolution of March 3, 1982; Rollo, p. 316).

Thereafter, counsel for petitioner filed a pleading "The Incident of Contempt of Lourdes Jureidini" in the form of a summation of the
incident and reiteration of petitioners' charges of contempt.

Counsel for petitioner invokes the provisions of: Section 3, Rule 71 on Indirect Contempt and par. (b) thereof, on Disobedience of or
Resistance to a Lawful Writ, Process, Order, Judgement or Command of a Court; or Injunction granted by a Court or Judge ... ; (2)
Section 6, Rule 71 regarding punishment or penalty thereof and (3) Section 5, Rule 135, par. (e) to compel obedience to its judgments,
orders and processes, and to the lawful orders of a judge out of Court, in a case pending therein.
On the incident itself, petitioners' counsel stressed that present when the writ was served were attorneys for petitioners Bibiano P.
Lesaca, and Renato P. Paguio in the company of petitioners Isamu Akasako, Akasako's assistants Furnio, Fujihara and Isamu
Tajewakai and this Court's process server, before whose presence the alleged contemptuous acts were committed.

Counsel for petitioners also reminded the Court that the first summons of the Court were answered only by counsel for private
respondent Jureidini while the latter feigned sickness without a medical certificate. The hearing for the contempt charge was reset but
neither counsel for private respondent nor the latter appeared for which non-appearance Atty. Canlas was fined P200.00 for contempt
when finally both counsel and client appeared on the third day, the hearing was set.

At that hearing, counsel for petitioners narrated that Attys. Lesaca and Paguio and two Japanese nationals testified in unison that
Lourdes Jureidini not only disregarded the writ but distinctly uttered the complained of statements.

Petitioners' counsel laid emphasis on the fact that Lourdes Jureidini is a graduate of nursing, who speaks in straight polished English,
capable of understanding the Writ of Mandatory Injunction of the Respondent Court served on petitioners by herself and a Deputy
Sheriff of Manila, but incredibly unable to understand the Writ issued by the Supreme Court. She was assessed as "overbearing to the
point of insolence" and capable of uttering "I am higher than the Supreme Court."

There is no question that disobedience or resistance to a lawful writ, process, order, judgment or command of a court, or injunction
granted by a court or judge, more particularly in this case, the Supreme Court, constitutes Indirect Contempt punishable under Rule 71
of the Rules of Court. (Rule 71, Section 3(b) and Section 6).

It has been held that contempt of court is a defiance of the authority, justice or dignity of the court, such conduct as tends to bring the
authority and administration of the law into disrespect or to interfere with or prejudice parties litigant or their witnesses during
litigation. It is defined as a disobedience to the court by setting up an opposition to its authority justice and dignity. It signifies not
only a willful disregard or disobedience of the court's orders but such conduct as tends to bring the authority of the court and the
administration of law into disrepute or in some manner to impede the due administration of justice (Halili v. Court of Industrial
Relations, 136 SCRA 135, April 30, 1985).

However, it is also well settled that "the power to punish for contempt of court should be exercised on the preservative and not on the
vindictive principle. Only occasionally should the court invoke its inherent power in order to retain that respect without which the
administration of justice must falter or fail." (Villavicencio v. Lukban, 39 Phil. 778 [1919]; Gamboa v. Teodoro, et al., 91 Phil. 274
[1952]; Sulit v. Tiangco, 115 SCRA 207 [1982]; Lipata v. Tutaan, 124 SCRA 880 [1983]). "Only in cases of clear and contumacious
refusal to obey should the power be exercised. A bona fide misunderstanding of the terms of the order or of the procedural rules
should not immediately cause the institution of contempt proceedings." "Such power 'being drastic and extra-ordinary in its nature ...
should not be resorted to ... unless necessary in the interest of justice.' " (Gamboa v. Teodoro, et al., supra).

In the case at bar, although private respondent Jureidini did not immediately comply with the Writ of Injunction issued by this Court,
it appears reasonable on her part to request that she be allowed to confer with her lawyer first before she makes any move of her own.
It is likewise reasonable for counsel for private respondent to request that he be given time to file a motion for clarification with the
Supreme Court.

It will also be noted that the testimonies produced at the hearing to establish the fact that she had uttered the alleged contemptuous
statements alluded to her were those of Attys. Lesaca and Paguio and two Japanese nationals, a one-sided version for the petitioners.

It appears to Us that the version of counsel for private respondent is more in accord with human experience: Jureidini who was alone
in the Restaurant was fazed by the unusual display of might and by the presence of lawyers demanding that she vacate premises and
surrender the management of the Restaurant (Rollo, p. 204), this is more believable than the version of counsel for petitioners who
summed her up as a person "overbearing to the point of insolence" and capable of uttering" I am higher than the Supreme Court." It
would therefore be more reasonable to believe that what she uttered in that situation where she felt threatened, was more in self-
defense and not an open defiance of the Supreme Court.

Jureidini cannot also be faulted for finding it difficult to understand the writ issued against her by the Supreme Court as she believed
that not only have she and her correspondent the legal right to manage the restaurant but the equitable right as well, having been
placed in possession of the corporate property only after posting a bond of P120,000.00. (Rollo, pp. 197-198).

In connection with this incident, Jureidini through her counsel filed her comment on October 2, 1981 (Rollo, p. 201) contrary to the
allegation of petitioners' counsel that it was only Atty. Canlas who filed his comment.

WHEREFORE, the assailed orders of respondent Judge are SET ASIDE; the complaint (special civil action for mandamus with
damages, etc.) should ordinarily be dismissed without prejudice to the filing of the proper action; but as all parties are already duly
represented, We hereby consider the case as an ordinary civil action for specific performance, and the case is therefore remanded to
the lower court for trial on the merits; the charge of contempt against respondent Jureidini is DISMISSED but the order of Our Court
restraining respondent from taking over the management of the restaurant remains until after this case is decided.

SO ORDERED.

[G.R. NO. 139802. December 10, 2002]

VICENTE C. PONCE, petitioner, vs. ALSONS CEMENT CORPORATION, and FRANCISCO M. GIRON, JR., respondents.
DECISION
QUISUMBING, J.:

This petition for review seeks to annul the decision[1] of the Court of Appeals, in CA-G.R. SP No. 46692, which set aside the
decision[2] of the Securities and Exchange Commission (SEC) En Banc in SEC-AC No. 545 and reinstated the order[3] of the Hearing
Officer dismissing herein petitioners complaint. Also assailed is the CAs resolution[4] of August 10, 1999, denying petitioners motion
for reconsideration.
On January 25, 1996, plaintiff (now petitioner) Vicente C. Ponce, filed a complaint [5] with the SEC for mandamus and damages
against defendants (now respondents) Alsons Cement Corporation and its corporate secretary Francisco M. Giron, Jr. In his complaint,
petitioner alleged, among others, that:
xxx

5. The late Fausto G. Gaid was an incorporator of Victory Cement Corporation (VCC), having subscribed to and fully paid 239,500
shares of said corporation.
6. On February 8, 1968, plaintiff and Fausto Gaid executed a Deed of Undertaking and Indorsement whereby the latter acknowledges
that the former is the owner of said shares and he was therefore assigning/endorsing the same to the plaintiff. A copy of the said
deed/indorsement is attached as Annex A.

7. On April 10, 1968, VCC was renamed Floro Cement Corporation (FCC for brevity).

8. On October 22, 1990, FCC was renamed Alsons Cement Corporation (ACC for brevity) as shown by the Amended Articles of
Incorporation of ACC, a copy of which is attached as Annex B.

9. From the time of incorporation of VCC up to the present, no certificates of stock corresponding to the 239,500 subscribed and fully
paid shares of Gaid were issued in the name of Fausto G. Gaid and/or the plaintiff.

10. Despite repeated demands, the defendants refused and continue to refuse without any justifiable reason to issue to plaintiff the
certificates of stocks corresponding to the 239,500 shares of Gaid, in violation of plaintiffs right to secure the corresponding certificate
of stock in his name.[6]

Attached to the complaint was the Deed of Undertaking and Indorsement [7] upon which petitioner based his petition for
mandamus. Said deed and indorsement read as follows:
DEED OF UNDERTAKING

KNOW ALL MEN BY THESE PRESENTS:

I, VICENTE C. PONCE, is the owner of the total subscription of Fausto Gaid with Victory Cement Corporation in the total amount of
TWO HUNDRED THIRTY NINE THOUSAND FIVE HUNDRED (P239,500.00) PESOS and that Fausto Gaid does not have any
liability whatsoever on the subscription agreement in favor of Victory Cement Corporation.

(SGD.) VICENTE C. PONCE

February 8, 1968

CONFORME:

(SGD.) FAUSTO GAID

INDORSEMENT

I, FAUSTO GAID is indorsing the total amount of TWO HUNDRED THIRTY NINE THOUSAND FIVE HUNDRED (239,500.00)
stocks of Victory Cement Corporation to VICENTE C. PONCE.

(SGD.) FAUSTO GAID

With these allegations, petitioner prayed that judgment be rendered ordering respondents (a) to issue in his name certificates of
stocks covering the 239,500 shares of stocks and its legal increments and (b) to pay him damages. [8]
Instead of filing an answer, respondents moved to dismiss the complaint on the grounds that: (a) the complaint states no cause of
action; mandamus is improper and not available to petitioner; (b) the petitioner is not the real party in interest; (c) the cause of action is
barred by the statute of limitations; and (d) in any case, the petitioners cause of action is barred by laches. [9] They argued, inter alia, that
there being no allegation that the alleged INDORSEMENT was recorded in the books of the corporation, said indorsement by Gaid to
the plaintiff of the shares of stock in questionassuming that the indorsement was in fact a transfer of stockswas not valid against third
persons such as ALSONS under Section 63 of the Corporation Code. [10] There was, therefore, no specific legal duty on the part of the
respondents to issue the corresponding certificates of stock, and mandamus will not lie.[11]
Petitioner filed his opposition to the motion to dismiss on February 19, 1996 contending that: (1) mandamus is the proper remedy
when a corporation and its corporate secretary wrongfully refuse to record a transfer of shares and issue the corresponding certificates
of stocks; (2) he is the proper party in interest since he stands to be benefited or injured by a judgment in the case; (3) the statute of
limitations did not begin to run until defendant refused to issue the certificates of stock in favor of the plaintiff on April 13, 1992.
After respondents filed their reply, SEC Hearing Officer Enrique L. Flores, Jr. granted the motion to dismiss in an Order dated
February 29, 1996, which held that:
xxx

Insofar as the issuance of certificates of stock is concerned, the real party in interest is Fausto G. Gaid, or his estate or his heirs. Gaid
was an incorporator and an original stockholder of the defendant corporation who subscribed and fully paid for 239,500 shares of
stock (Annex "B"). In accordance with Section 37 of the old Corporation Law (Act No. 1459) obtaining in 1968 when the defendant
corporation was incorporated, as well as Section 64 of the present Corporation Code (Batas Pambansa Blg. 68), a stockholder who has
fully paid for his subscription together with interest and expenses in case of delinquent shares, is entitled to the issuance of a
certificate of stock for his shares. According to paragraph 9 of the Complaint, no stock certificate was issued to Gaid.

Comes now the plaintiff who seeks to step into the shoes of Gaid and thereby become a stockholder of the defendant corporation by
demanding issuance of the certificates of stock in his name. This he cannot do, for two reasons: there is no record of any assignment or
transfer in the books of the defendant corporation, and there is no instruction or authority from the transferor (Gaid) for such
assignment or transfer. Indeed, nothing is alleged in the complaint on these two points.

xxx

In the present case, there is not even any indorsement of any stock certificate to speak of. What the plaintiff possesses is a document
by which Gaid supposedly transferred the shares to him. Assuming the document has this effect, nevertheless there is neither any
allegation nor any showing that it is recorded in the books of the defendant corporation, such recording being a prerequisite to the
issuance of a stock certificate in favor of the transferee.[12]

Petitioner appealed the Order of dismissal. On January 6, 1997, the Commission En Banc reversed the appealed Order and directed
the Hearing Officer to proceed with the case. In ruling that a transfer or assignment of stocks need not be registered first before it can
take cognizance of the case to enforce the petitioners rights as a stockholder, the Commission En Banc cited our ruling in Abejo vs. De
la Cruz, 149 SCRA 654 (1987) to the effect that:
xxx As the SEC maintains, There is no requirement that a stockholder of a corporation must be a registered one in order that the
Securities and Exchange Commission may take cognizance of a suit seeking to enforce his rights as such stockholder. This is because
the SEC by express mandate has absolute jurisdiction, supervision and control over all corporations and is called upon to enforce the
provisions of the Corporation Code, among which is the stock purchasers right to secure the corresponding certificate in his name
under the provisions of Section 63 of the Code. Needless to say, any problem encountered in securing the certificates of stock
representing the investment made by the buyer must be expeditiously dealt with through administrative mandamus proceedings with
the SEC, rather than through the usual tedious regular court procedure. xxx

Applying this principle in the case on hand, a transfer or assignment of stocks need not be registered first before the Commission can
take cognizance of the case to enforce his rights as a stockholder. Also, the problem encountered in securing the certificates of stock
made by the buyer must be expeditiously taken up through the so-called administrative mandamus proceedings with the SEC than in
the regular courts.[13]

The Commission En Banc also found that the Hearing Officer erred in holding that petitioner is not the real party in interest.
xxx

As appearing in the allegations of the complaint, plaintiff-appellant is the transferee of the shares of stock of Gaid and is therefore
entitled to avail of the suit to obtain the proper remedy to make him the rightful owner and holder of a stock certificate to be issued in
his name. Moreover, defendant-appellees failed to show that the transferor nor his heirs have refuted the ownership of the
transferee. Assuming these allegations to be true, the corporation has a mere ministerial duty to register in its stock and transfer book
the shares of stock in the name of the plaintiff-appellant subject to the determination of the validity of the deed of assignment in the
proper tribunal. [14]

Their motion for reconsideration having been denied, herein respondents appealed the decision [15] of the SEC En Banc and the
resolution[16] denying their motion for reconsideration to the Court of Appeals.
In its decision, the Court of Appeals held that in the absence of any allegation that the transfer of the shares between Fausto Gaid
and Vicente C. Ponce was registered in the stock and transfer book of ALSONS, Ponce failed to state a cause of action. Thus, said the
CA, the complaint for mandamus should be dismissed for failure to state a cause of action.[17] petitioners motion for reconsideration was
likewise denied in a resolution[18] dated August 10, 1999.
Hence, the instant petition for review on certiorari alleging that:
I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPLAINT FOR ISSUANCE OF A
CERTIFICATE OF STOCK FILED BY PETITIONER FAILED TO STATE A CAUSE OF ACTION BECAUSE IT DID NOT
ALLEGE THAT THE TRANSFER OF THE SHARES (SUBJECT MATTER OF THE COMPLAINT) WAS REGISTERED IN THE
STOCK AND TRANSFER BOOK OF THE CORPORATION, CITING SECTION 63 OF THE CORPORATION CODE.

II. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE CASES OF ABEJO VS. DE LA CRUZ, 149
SCRA 654 AND RURAL BANK OF SALINAS, INC., ET AL VS. COURT OF APPEALS, ET AL., G.R. NO. 96674, JUNE 26,
1992.

III. THE HONORABLE COURT OF APPEALS ERRED IN APPLYING A 1911 CASE, HAGER VS. BRYAN, 19 PHIL. 138, TO
DISMISS THE COMPLAINT FOR ISSUANCE OF A CERTIFICATE OF STOCK. [19]

At issue is whether the Court of Appeals erred in holding that herein petitioner has no cause of action for a writ of mandamus.
Petitioner first contends that the act of recording the transfer of shares in the stock and transfer book and that of issuing a certificate
of stock for the transferred shares involves only one continuous process. Thus, when a corporate secretary is presented with a document
of transfer of fully paid shares, it is his duty to record the transfer in the stock and transfer book of the corporation, issue a new stock
certificate in the name of the transferee, and cancel the old one. A transferee who requests for the issuance of a stock certificate need
not spell out each and every act that needs to be done by the corporate secretary, as a request for issuance of stock certificates necessarily
includes a request for the recording of the transfer. Ergo, the failure to record the transfer does not mean that the transferee cannot ask
for the issuance of stock certificates.
Secondly, according to petitioner, there is no law, rule or regulation requiring a transferor of shares of stock to first issue express
instructions or execute a power of attorney for the transfer of said shares before a certificate of stock is issued in the name of the
transferee and the transfer registered in the books of the corporation. He contends that Hager vs. Bryan, 19 Phil. 138 (1911), and Rivera
vs. Florendo, 144 SCRA 643 (1986), cited by respondents, do not apply to this case. These cases contemplate a situation where a
certificate of stock has been issued by the company whereas in this case at bar, no stock certificates have been issued even in the name
of the original stockholder, Fausto Gaid.
Finally, petitioner maintains that since he is under no compulsion to register the transfer or to secure stock certificates in his name,
his cause of action is deemed not to have accrued until respondent ALSONS denied his request.
Respondents, in their comment, maintain that the transfer of shares of stock not recorded in the stock and transfer book of the
corporation is non-existent insofar as the corporation is concerned and no certificate of stock can be issued in the name of the
transferee. Until the recording is made, the transfer cannot be the basis of issuance of a certificate of stock. They add that petitioner is
not the real party in interest, the real party in interest being Fausto Gaid since it is his name that appears in the records of the
corporation. They conclude that petitioners cause of action is barred by prescription and laches since 24 years elapsed before he made
any demand upon ALSONS.
We find the instant petition without merit. The Court of Appeals did not err in ruling that petitioner had no cause of action, and
that his petition for mandamus was properly dismissed.
There is no question that Fausto Gaid was an original subscriber of respondent corporations 239,500 shares. This is clear from the
numerous pleadings filed by either party. It is also clear from the Amended Articles of Incorporation[20] approved on August 9,
1995[21] that each share had a par value of P1.00 per share. And, it is undisputed that petitioner had not made a previous request upon
the corporate secretary of ALSONS, respondent Francisco M. Giron Jr., to record the alleged transfer of stocks.
The Corporation Code states that:
SEC. 63. Certificate of stock and transfer of shares.The capital stock of stock corporations shall be divided into shares for which
certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of
the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred
by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or
certificates and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.

Pursuant to the foregoing provision, a transfer of shares of stock not recorded in the stock and transfer book of the corporation is
non-existent as far as the corporation is concerned.[22] As between the corporation on the one hand, and its shareholders and third persons
on the other, the corporation looks only to its books for the purpose of determining who its shareholders are. [23] It is only when the
transfer has been recorded in the stock and transfer book that a corporation may rightfully regard the transferee as one of its
stockholders. From this time, the consequent obligation on the part of the corporation to recognize such rights as it is mandated by law
to recognize arises.
 Hence, without such recording, the transferee may not be regarded by the corporation as one among its stockholders and the
corporation may legally refuse the issuance of stock certificates in the name of the transferee even when there has been compliance with
the requirements of Section 64[24] of the Corporation Code. This is the import of Section 63 which states that No transfer, however, shall
be valid, except between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. The situation would
be different if the petitioner was himself the registered owner of the stock which he sought to transfer to a third party, for then he would
be entitled to the remedy of mandamus.[25]
From the corporations point of view, the transfer is not effective until it is recorded. Unless and until such recording is made the
demand for the issuance of stock certificates to the alleged transferee has no legal basis. As between the corporation on the one hand,
and its shareholders and third persons on the other, the corporation looks only to its books for the purpose of determining who its
shareholders are.[26] In other words, the stock and transfer book is the basis for ascertaining the persons entitled to the rights and subject
to the liabilities of a stockholder. Where a transferee is not yet recognized as a stockholder, the corporation is under no specific legal
duty to issue stock certificates in the transferees name.
It follows that, as held by the Court of Appeals:
x x x until registration is accomplished, the transfer, though valid between the parties, cannot be effective as against the
corporation. Thus, in the absence of any allegation that the transfer of the shares between Gaid and the private respondent [herein
petitioner] was registered in the stock and transfer book of the petitioner corporation, the private respondent has failed to state a cause
of action.[27]

Petitioner insists that it is precisely the duty of the corporate secretary, when presented with the document of fully paid shares, to
effect the transfer by recording the transfer in the stock and transfer book of the corporation and to issue stock certificates in the name
of the transferee. On this point, the SEC En Banc cited Rural Bank of Salinas, Inc. vs. Court of Appeals, [28] where we held that:
For the petitioner Rural Bank of Salinas to refuse registration of the transferred shares in its stock and transfer book, which duty is
ministerial on its part, is to render nugatory and ineffectual the spirit and intent of Section 63 of the Corporation Code. Thus,
respondent Court of Appeals did not err in upholding the decision of respondent SEC affirming the Decision of its Hearing Officer
directing the registration of the 473 shares in the stock and transfer book in the names of private respondents. At all events, the
registration is without prejudice to the proceedings in court to determine the validity of the Deeds of Assignment of the shares of stock
in question.

In Rural Bank of Salinas, Inc., however, private respondent Melania Guerrero had a Special Power of Attorney executed in her
favor by Clemente Guerrero, the registered stockholder. It gave Guerrero full authority to sell or otherwise dispose of the 473 shares of
stock registered in Clementes name and to execute the proper documents therefor. Pursuant to the authority so given, Melania assigned
the 473 shares of stock owned by Guerrero and presented to the Rural Bank of Salinas the deeds of assignment covering the assigned
shares. Melania Guerrero prayed for the transfer of the stocks in the stock and transfer book and the issuance of stock certificates in the
name of the new owners thereof. Based on those circumstances, there was a clear duty on the part of the corporate secretary to register
the 473 shares in favor of the new owners, since the person who sought the transfer of shares had express instructions from and specific
authority given by the registered stockholder to cause the disposition of stocks registered in his name.
That cannot be said of this case. The deed of undertaking with indorsement presented by petitioner does not establish, on its face,
his right to demand for the registration of the transfer and the issuance of certificates of stocks. In Hager vs. Bryan, 19 Phil. 138 (1911),
this Court held that a petition for mandamus fails to state a cause of action where it appears that the petitioner is not the registered
stockholder and there is no allegation that he holds any power of attorney from the registered stockholder, from whom he obtained the
stocks, to make the transfer, thus:
It appears, however, from the original as well as the amended petition, that this petitioner is not the registered owner of the stock
which he seeks to have transferred, and except in so far as he alleges that he is the owner of the stock and that it was "indorsed" to him
on February 5 by the Bryan-Landon Company, in whose name it is registered on the books of the Visayan Electric Company, there is
no allegation that the petitioner holds any power of attorney from the Bryan-Landon Company authorizing him to make demand on
the secretary of the Visayan Electric Company to make the transfer which petitioner seeks to have made through the medium of the
mandamus of this court.

Without discussing or deciding the respective rights of the parties which might be properly asserted in an ordinary action or an action
in the nature of an equitable suit, we are all agreed that in a case such as that at bar, a mandamus should not issue to compel the
secretary of a corporation to make a transfer of the stock on the books of the company, unless it affirmatively appears that he has
failed or refused so to do, upon the demand either of the person in whose name the stock is registered, or of some person holding a
power of attorney for that purpose from the registered owner of the stock. There is no allegation in the petition that the petitioner or
anyone else holds a power of attorney from the Bryan-Landon Company authorizing a demand for the transfer of the stock, or that the
Bryan-Landon Company has ever itself made such demand upon the Visayan Electric Company, and in the absence of such allegation
we are not able to say that there was such a clear indisputable duty, such a clear legal obligation upon the respondent, as to justify the
issuance of the writ to compel him to perform it.
Under the provisions of our statute touching the transfer of stock (secs. 35 and 36 of Act No. 1459), [29] the mere indorsement of stock
certificates does not in itself give to the indorsee such a right to have a transfer of the shares of stock on the books of the company as
will entitle him to the writ of mandamus to compel the company and its officers to make such transfer at his demand, because, under
such circumstances the duty, the legal obligation, is not so clear and indisputable as to justify the issuance of the writ. As a general
rule and especially under the above-cited statute, as between the corporation on the one hand, and its shareholders and third persons on
the other, the corporation looks only to its books for the purpose of determining who its shareholders are, so that a mere indorsee of a
stock certificate, claiming to be the owner, will not necessarily be recognized as such by the corporation and its officers, in the
absence of express instructions of the registered owner to make such transfer to the indorsee, or a power of attorney authorizing such
transfer.[30]

In Rivera vs. Florendo, 144 SCRA 643, 657 (1986), we reiterated that a mere indorsement by the supposed owners of the stock, in
the absence of express instructions from them, cannot be the basis of an action for mandamus and that the rights of the parties have to
be threshed out in an ordinary action. That Hager and Rivera involved petitions for mandamus to compel the registration of the transfer,
while this case is one for issuance of stock, is of no moment. It has been made clear, thus far, that before a transferee may ask for the
issuance of stock certificates, he must first cause the registration of the transfer and thereby enjoy the status of a stockholder insofar as
the corporation is concerned. A corporate secretary may not be compelled to register transfers of shares on the basis merely of an
indorsement of stock certificates. With more reason, in our view, a corporate secretary may not be compelled to issue stock certificates
without such registration.[31]
Petitioners reliance on our ruling in Abejo vs. De la Cruz, 149 SCRA 654 (1987), that notice given to the corporation of the sale
of the shares and presentation of the certificates for transfer is equivalent to registration is misplaced. In this case there is no allegation
in the complaint that petitioner ever gave notice to respondents of the alleged transfer in his favor. Moreover, that case arose between
and among the principal stockholders of the corporation, Pocket Bell, due to the refusal of the corporate secretary to record the transfers
in favor of Telectronics of the corporations controlling 56% shares of stock which were covered by duly endorsed stock certificates. As
aforesaid, the request for the recording of a transfer is different from the request for the issuance of stock certificates in the transferees
name. Finally, in Abejo we did not say that transfer of shares need not be recorded in the books of the corporation before the transferee
may ask for the issuance of stock certificates. The Courts statement, that there is no requirement that a stockholder of a corporation must
be a registered one in order that the Securities and Exchange Commission may take cognizance of a suit seeking to enforce his rights as
such stockholder among which is the stock purchasers right to secure the corresponding certificate in his name, [32] was addressed to the
issue of jurisdiction, which is not pertinent to the issue at hand.
Absent an allegation that the transfer of shares is recorded in the stock and transfer book of respondent ALSONS, there appears no
basis for a clear and indisputable duty or clear legal obligation that can be imposed upon the respondent corporate secretary, so as to
justify the issuance of the writ of mandamus to compel him to perform the transfer of the shares to petitioner. The test of sufficiency of
the facts alleged in a petition is whether or not, admitting the facts alleged, the court could render a valid judgment thereon in accordance
with the prayer of the petition. [33] This test would not be satisfied if, as in this case, not all the elements of a cause of action are alleged
in the complaint.[34] Where the corporate secretary is under no clear legal duty to issue stock certificates because of the petitioners failure
to record earlier the transfer of shares, one of the elements of the cause of action for mandamus is clearly missing.
That petitioner was under no obligation to request for the registration of the transfer is not in issue. It has no pertinence in this
controversy. One may own shares of corporate stock without possessing a stock certificate. In Tan vs. SEC, 206 SCRA 740 (1992), we
had occasion to declare that a certificate of stock is not necessary to render one a stockholder in a corporation. But a certificate of stock
is the tangible evidence of the stock itself and of the various interests therein. The certificate is the evidence of the holders interest and
status in the corporation, his ownership of the share represented thereby. The certificate is in law, so to speak, an equivalent of such
ownership. It expresses the contract between the corporation and the stockholder, but it is not essential to the existence of a share in
stock or the creation of the relation of shareholder to the corporation.[35] In fact, it rests on the will of the stockholder whether he wants
to be issued stock certificates, and a stockholder may opt not to be issued a certificate. In Won vs. Wack Wack Golf and Country Club,
Inc., 104 Phil. 466 (1958), we held that considering that the law does not prescribe a period within which the registration should be
effected, the action to enforce the right does not accrue until there has been a demand and a refusal concerning the transfer. In the present
case, petitioners complaint for mandamus must fail, not because of laches or estoppel, but because he had alleged no cause of action
sufficient for the issuance of the writ.
WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of Appeals, in CA-G.R. SP No. 46692, which
set aside that of the Securities and Exchange Commission En Banc in SEC-AC No. 545 and reinstated the order of the Hearing Officer,
is hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Facts: On 25 January 1996, Vicente C. Ponce, filed a complaint with the SEC for mandamus and damages against Alsons Cement
Corporation and its corporate secretary Francisco M. Giron, Jr. In his complaint, Ponce alleged, among others, that "the late Fausto G.
Gaid was an incorporator of Victory Cement Corporation (VCC), having subscribed to and fully paid 239,500 shares of said corporation;
that on 8 February 1968, Ponce and Fausto Gaid executed a "Deed of Undertaking" and "Indorsement" whereby the latter acknowledges
that the former is the owner of said shares and he was therefore assigning/endorsing the same to Ponce; that on 10 April 1968, VCC was
renamed Floro Cement Corporation (FCC); that on 22 October 1990, FCC was renamed Alsons Cement Corporation (ACC); that from
the time of incorporation of VCC up to the present, no certificates of stock corresponding to the 239,500 subscribed and fully paid shares
of Gaid were issued in the name of Fausto G. Gaid and/or Ponce; and that despite repeated demands, ACC and Giron refused and
continue to refuse without any justifiable reason to issue to Ponce the certificates of stocks corresponding to the 239,500 shares of Gaid,
in violation of Ponce's right to secure the corresponding certificate of stock in his name. ACC and Giron moved to dismiss. SEC Hearing
Officer Enrique L. Flores, Jr. granted the motion to dismiss in an Order dated 29 February 1996. Ponce appealed the Order of dismissal.

On 6 January 1997, the Commission En Banc reversed the appealed Order and directed the Hearing Officer to proceed with the case. In
ruling that a transfer or assignment of stocks need not be registered first before it can take cognizance of the case to enforce Ponce's
rights as a stockholder, the Commission En Banc cited the Supreme Court's ruling in Abejo vs. De la Cruz, 149 SCRA 654 (1987). Their
motion for reconsideration having been denied, ACC and Giron appealed the decision of the SEC En Banc and the resolution denying
their motion for reconsideration to the Court of Appeals. In its decision, the Court of Appeals held that in the absence of any allegation
that the transfer of the shares between Gaid and Ponce was registered in the stock and transfer book of ACC, Ponce failed to state a
cause of action. Thus, said the appellate court, "the complaint for mandamus should be dismissed for failure to state a cause of action."
Ponce's motion for reconsideration was denied in a resolution dated 10 August 1999. Ponce filed the petition for review on certiorari.

Issue: Whether Ponce can require the corporate secretary, Giron, to register Gaid’s shares in his name.

Held: Fausto Gaid was an original subscriber of ACC's 239,500 shares. From the Amended Articles of Incorporation approved on 9
April 1995, each share had a par value of P1.00 per share. Ponce had not made a previous request upon the corporate secretary of ACC,
Francisco M. Giron Jr., to record the alleged transfer of stocks. Pursuant to Section 63 of the Corporation Code, a transfer of shares of
stock not recorded in the stock and transfer book of the corporation is non-existent as far as the corporation is concerned. As between
the corporation on the one hand, and its shareholders and third persons on the other, the corporation looks only to its books for the
purpose of determining who its shareholders are. It is only when the transfer has been recorded in the stock and transfer book that a
corporation may rightfully regard the transferee as one of its stockholders. From this time, the consequent obligation on the part of the
corporation to recognize such rights as it is mandated by law to recognize arises. Hence, without such recording, the transferee may not
be regarded by the corporation as one among its stockholders and the corporation may legally refuse the issuance of stock certificates
in the name of the transferee even when there has been compliance with the requirements of Section 64 of the Corporation Code. The
stock and transfer book is the basis for ascertaining the persons entitled to the rights and subject to the liabilities of a stockholder. Where
a transferee is not yet recognized as a stockholder, the corporation is under no specific legal duty to issue stock certificates in the
transferee's name. A petition for mandamus fails to state a cause of action where it appears that the petitioner is not the registered
stockholder and there is no allegation that he holds any power of attorney from the registered stockholder, from whom he obtained the
stocks, to make the transfer. The deed of undertaking with indorsement presented by Ponce does not establish, on its face, his right to
demand for the registration of the transfer and the issuance of certificates of stocks. Under the provisions of our statute touching the
transfer of stock, the mere indorsement of stock certificates does not in itself give to the indorsee such a right to have a transfer of the
shares of stock on the books of the company as will entitle him to the writ of mandamus to compel the company and its officers to make
such transfer at his demand, because, under such circumstances the duty, the legal obligation, is not so clear and indisputable as to justify
the issuance of the writ. As a general rule, as between the corporation on the one hand, and its shareholders and third persons on the
other, the corporation looks only to its books for the purpose of determining who its shareholders are, so that a mere indorsee of a stock
certificate, claiming to be the owner, will not necessarily be recognized as such by the corporation and its officers, in the absence of
express instructions of the registered owner to make such transfer to the indorsee, or a power of attorney authorizing such transfer. Thus,
absent an allegation that the transfer of shares is recorded in the stock and transfer book of ACC, there appears no basis for a clear and
indisputable duty or clear legal obligation that can be imposed upon the corporate secretary, so as to justify the issuance of the writ of
mandamus to compel him to perform the transfer of the shares to Ponce.

G.R. No. 61950 September 28, 1990

MARUBENI NEDERLAND B.V., petitioner,

vs.
THE HONORABLE JUDGE RICARDO P. TENSUAN, Presiding Judge of the Court of First Instance of Rizal, Branch IV,
Quezon City and ARTEMIO GATCHALIAN, respondents.

Siquion Reyna, Montecillo & Ongsiako for petitioner.

Maximo Belmonte for private respondent.

FERNAN, C.J.:

On October 23, 1976, in Tokyo, Japan, petitioner Marubeni Nederland B.V. and D.B. Teodoro Development Corporation (DBT for
short) entered into a contract whereby petitioner agreed to supply all the necessary equipment, machinery, materials, technical know-
how and the general design of the construction of DBT's lime plant at the Guimaras Islands in Iloilo for a total contract price of
US$5,400,000.00 on a deferred payment basis. Simultaneously with the supply contract, the parties entered into two financing
contracts, namely a construction loan agreement in the amount of US$1,600,000.00 and a cash loan agreement for US$1,500,000.00.
The obligation of DBT to pay the loan amortizations on their due dates under the three (3) contracts were absolutely and
unconditionally guaranteed by the National Investment and Development Corporation (NIDC).

Pursuant to the terms of the financing contracts, the loan amortizations of DBT fell due on January 7, 1980, July 7, 1980 and January
7, 1981. But before the first installment became due, DBT wrote a letter to the NIDC interposing certain claims against the petitioner
and at the same time requesting NIDC for a revision of the repayment schedule and of the amounts due under the contracts on account
of petitioner's delay in the performance of its contractual commitments. 1 In due time, the problems regarding the lime plant were
ironed out and the parties signed a "Settlement Agreement" on July 2, 1981. 2

However, on May 14, 1982, DBT through counsel, informed petitioner that it was rejecting the lime plant on the ground that it has not
been constructed in accordance with their agreement. DBT made a formal demand for indemnification in the total amount of
P95,150,000. 3 In its letter dated June 1, 1982, petitioner refused to accept DBT's unilateral rejection of the plant and reasoned that the
alleged operation and technical problems were "totally unrelated to the guaranteed capacity and specifications of the plant and
definitely are not attributable to any fault or omission on the part of Marubeni." 4

Before the first installment under the "Settlement Agreement" could be paid, private respondent Artemio Gatchalian, a stockholder of
DBT sued petitioner Marubeni for contractual breach before the then Court of First Instance of Rizal, Branch 4, Quezon City. 5 In his
complaint filed on June 22, 1982, Gatchalian impleaded DBT as an "unwilling plaintiff . . . for whose primary benefit th(e) action
(wa)s being prosecuted" together with NIDC which, as pledgee of the voting shares in DBT has controlling interest in that
corporation. 6 Gatchalian sought indemnification in the amount of P95,150,000.00 and further prayed for a writ of preliminary
injunction to enjoin DBT and NIDC from making directly or indirectly any payment to Marubeni in connection with the contracts they
had entered into. On June 25, 1982, respondent judge issued a temporary restraining order directed against DBT and NIDC and set the
injunction for hearing. 7

On July 5, 1982, petitioner Marubeni entered a limited and special appearance and sought the dismissal of the complaint on the ground
that the court a quo had no jurisdiction over the person of petitioner since it is a foreign corporation neither doing nor licensed to do
business in the Philippines. Private respondent opposed that motion. On September 22, 1982, the lower court denied petitioner's
motion to dismiss for lack of merit and gave it ten (10) days within which to file an answer. Petitioner opted to elevate the
jurisdictional issue directly to the High Court. 8Hence, this petition for certiorari and prohibition with prayer for a temporary
restraining order. On October 6, 1982, we issued the restraining order and subsequently required the parties to file simultaneous
memoranda.

The pivotal issue in this case is whether or not petitioner Marubeni Nederland B.V. can be considered as "doing business" in the
Philippines and therefore subject to the jurisdiction of our courts.

Petitioner claims that it is a foreign corporation not doing business in the country and as an entity with its own capitalization, it is
separate and distinct from Marubeni Corporation, Japan which is doing business in the Philippines through its Manila branch; that the
three (3) contracts entered into with DBT were perfected and consummated in Tokyo, Japan; that the sale and purchase of the
machineries and equipment for the Guimaras lime plant were isolated contracts and in no way indicated a purpose to engage in
business; and that the services performed by petitioner in the Philippines were merely auxillary to the aforesaid isolated transactions
entered into and perfected outside the Philippines.

On the other hand, private respondent Gatchalian contends that petitioner can be sued in Philippine courts on liabilities arising from
even a single transaction because in reality, it is already engaging in business in the country through Marubeni Corporation, Manila
branch and that they, together with Nihon Cement Company, Ltd. of Japan are but "alter egos, adjuncts, conduits instruments or
branch affiliates of Marubeni Corporation of Japan", the parent company. 9

In resolving the issue at hand, we reiterate that there is no general rule or principle that can be laid down to determine what constitutes
doing or engaging in business. Each case must be judged in the light of its peculiar factual milieu and upon the language of the statute
applicable. 10

Contrary to petitioner's allegations, we hold that petitioner can be sued in the regular courts because it is doing business in the
Philippines. The applicable law is Republic Act No. 5455 as implemented by the following rules and regulations of the Board of
Investments which took effect on February 3, 1969. Thus:

xxx xxx xxx

 (f) the performance within the Philippines of any act or combination of acts enumerated in Section 1 (1) of the Act
shall constitute "doing business" therein. In particular, "doing business" includes:

1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm
amounting to negotiation or fixing of the terms and conditions of sales or service contracts, regardless of whether the
contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed
place of business in the Philippines. . . .

2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or
distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the
name or for the account of the principal.

xxx xxx xxx

4) Opening offices whether called "liaison" offices, agencies or branches, unless proved otherwise.

xxx xxx xxx

10) Any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that
extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the
progressive prosecution of, commercial gain or of the purpose and objective of the business organization. 11

It cannot be denied that petitioner had solicited the lime plant business from DBT through the Marubeni Manila branch. Records show
that the "turn-key proposal for the . . . 300 T/D Lime Plant" was initiated by the Manila office through its Mr. T. Hojo. In a follow-up
letter dated August 3, 1976, Hojo committed the firm to a price reduction of $200,000.00 and submitted the proposed contract forms.
As reflected in the letterhead used, it was Marubeni Corporation, Tokyo, Japan which assumed an active role in the initial stages of the
negotiation. Petitioner Marubeni Nederland B.V. had no visible participation until the actual signing of the October 28, 1976
agreement in Tokyo and even there, in the space reserved for petitioner, it was the signature. of "S. Adachi as General Manager of
Marubeni Corporation, Tokyo on behalf of Marubeni Nederland B.V." which appeared. 12

Even assuming for the sake of argument that Marubeni Nederland B.V. is a different and separate business entity from Marubeni
Japan and its Manila branch, in this particular transaction, at least, Marubeni Nederland B.V. through the foregoing acts, had
effectively solicited "orders, purchases (sales) or service contracts" as well as constituted Marubeni Corporation, Tokyo, Japan and its
Manila Branch as its representative in the Philippines to transact business for its account as principal. These circumstances, taken
singly or in combination, constitute "doing business in the Philippines" within the contemplation of the law.

At this juncture it must be emphasized that a foreign corporation doing business in the Philippines with or without license is subject to
process and jurisdiction of the local courts. If such corporation is properly licensed, well and good. But it shall not be allowed, under
any circumstances, to invoke its lack of license to impugn the jurisdiction of our courts. 13

Finally, petitioner contends that it was denied due process when respondent Judge Tensuan peremptorily denied its motion to dismiss
without giving petitioner any opportunity to present evidence at a hearing set for this purpose. 14

The alleged denial of due process is more apparent than real. Under Section 13, Rule 16 of the Revised Rules of Court, the court,
when confronted with a motion to dismiss, is given two courses of action, to wit: (1) to deny or grant the motion or allow amendment
of the pleading or (2) to defer the hearing and determination of the motion until the trial on the merits, if the ground alleged therein
does not appear to be indubitable.

In the case at bar, assuming there was no formal hearing on the motion to dismiss prior to its rejection, such did not unduly prejudice
the rights of petitioner. Respondent court still had to conduct trial on the merits during which time it could grant the motion after
sufficient evidence has been presented showing without any question the want of jurisdiction over the person of the movant. It would
have been different had respondent court sustained petitioner's motion to dismiss without the required hearing in which case, the
corrective writ of certiorari would have issued against said court. In the absence of a hearing, the appellate court, in an appeal from an
order of dismissal, would have had no means of determining or resolving the legality of the proceedings and the sufficiency of the
proofs on which the order was based.

WHEREFORE, the petition is DISMISSED for lack of merit. Respondent Court is hereby directed to proceed with the hearing of Civil
Case No. Q-35534 with dispatch. This decision is immediately executory. Costs against the petitioner.
SO ORDERED.

G.R. No.148004 January 22, 2007

VINCENT E. OMICTIN, Petitioner,

vs.
HON. COURT OF APPEALS (Special Twelfth Division) and GEORGE I. LAGOS, Respondents.

DECISION

AZCUNA, J.:

This is a petition for certiorari1 with prayer for a writ of preliminary injunction seeking the nullification of the decision rendered by the
Court of Appeals (CA) on June 30, 2000, and its resolution, dated March 5, 2001 in CA-G.R. SP No. 55834 entitled "George I. Lagos
v. Hon. Reinato G. Quilala, Presiding Judge of RTC, Br. 57, Makati, Hon. Elizabeth Tayo Chua, Asst. City Prosecutor, Makati City,
and Vincent E. Omictin."

In its assailed decision, the CA declared the existence of a prejudicial question and ordered the suspension of the criminal proceedings
initiated by petitioner Vincent E. Omictin on behalf of Saag Phils., Inc. against private respondent George I. Lagos, in view of a
pending case before the Securities and Exchange Commission (SEC) filed by the latter against the former, Saag Pte. (S) Ltd., Nicholas
Ng, Janifer Yeo and Alex Y. Tan.

The facts are as follows:

Petitioner Vincent E. Omictin, Operations Manager Ad Interim of Saag Phils., Inc., filed a complaint for two counts of estafa with the
Office of the City Prosecutor of Makati against private respondent George I. Lagos. He alleged that private respondent, despite
repeated demands, refused to return the two company vehicles entrusted to him when he was still the president of Saag Phils., Inc..

On February 26, 1999, public prosecutor Alex G. Bagaoisan recommended the indictment of private respondent, and on the same day,
respondent was charged with the crime of estafa under Article 315, par. 1(b) of the Revised Penal Code before the Regional Trial
Court (RTC), Branch 57 of Makati City. The case was docketed as Criminal Case No. 99-633, entitled "People of the Philippines v.
George I. Lagos."

On June 4, 1999, private respondent filed a motion to recuse praying that Presiding Judge Reinato G. Quilala inhibit himself from
hearing the case based on the following grounds:

a) In an order, dated May 28, 1999, the presiding judge summarily denied respondent’s motion: 1) to defer issuance of the
warrant of arrest; and 2) to order reinvestigation.

b) Immediately before the issuance of the above-mentioned order, the presiding judge and Atty. Alex Y. Tan, SAAG
Philippines, Inc.’s Ad Interim President, were seen together. 2

On June 24, 1999, private respondent filed a motion to suspend proceedings on the basis of a prejudicial question because of a pending
petition with the Securities and Exchange Commission (SEC) involving the same parties.

It appears that on January 7, 1999, private respondent filed SEC Case No. 01-99-6185 for the declaration of nullity of the respective
appointments of Alex Y. Tan and petitioner as President Ad Interim and Operations Manager Ad Interim of Saag Phils., Inc.,
declaration of dividends, recovery of share in the profits, involuntary dissolution and the appointment of a receiver, recovery of
damages and an application for a temporary restraining order (TRO) and injunction against Saag (S) Pte. Ltd., Nicholas Ng, Janifer
Yeo, Tan and petitioner. 3

In the action before the SEC, private respondent averred that Saag (S) Pte. Ltd. is a foreign corporation organized and existing under
the laws of Singapore, and is fully owned by Saag Corporation (Bhd). On July 1, 1994, he was appointed as Area Sales Manager in the
Philippines by Thiang Shiang Hiang, Manager of Saag (S) Pte. Ltd. Pursuant to his appointment, respondent was authorized to
organize a local joint venture corporation to be known as Saag Philippines, Inc. for the wholesale trade and service of industrial
products for oil, gas and power industries in the Philippines.
On September 9, 1994, Saag Philippines, Inc. was incorporated with Saag (S) Pte. Ltd. as the majority stockholder. Private respondent
was appointed to the board of directors, along with Rommel I. Lagos, Jose E. Geronimo, Gan Ching Lai and Thiang Shiang Hiang,
and was elected president of the domestic corporation.

Later, due to intra-corporate disputes, Gan and Thiang resigned and divested their shares in Saag Corporation (Bhd), thereby resulting
in a change in the controlling interest in Saag (S) Pte. Ltd.

Barely three months after, or on June 23, 1998, private respondent resigned his post as president of Saag Phils., Inc. while still
retaining his position as a director of the company. 4 According to private respondent, the joint venture agreement (JVA) between him
or Saag Phils., Inc. and Saag (S) Pte. Ltd. provided that should the controlling interest in the latter company, or its parent company
Saag Corp. (Bhd), be acquired by any other person or entity without his prior consent, he has the option either to require the other
stockholders to purchase his shares or to terminate the JVA and dissolve Saag Phils., Inc. altogether. Thus, pursuant to this provision,
since private respondent did not give his consent as regards the transfer of shares made by Gan and Thiang, he made several requests
to Nicholas Ng, who replaced Gan as director, and Janifer Yeo, Executive Director of Saag (S) Pte. Ltd., to call for a board meeting in
order to discuss the following: a) implementation of the board resolution declaring dividends; b) acquisition of private respondent’s
shares by Saag (S) Pte. Ltd.; c) dissolution of Saag Phils., Inc.; and d) the termination of the JVA.

Ng and Yeo failed to appear, however, in the scheduled board meetings. Instead, on September 30, 1998 they issued a letter
appointing Alex Y. Tan as President Ad Interim of Saag Phils., Inc. Tan, in turn, appointed petitioner Omictin as the company’s
Operations Manager Ad Interim.

Citing as a reason the absence of a board resolution authorizing the continued operations of Saag Phils., Inc., private respondent
retained his possession of the office equipment of the company in a fiduciary capacity as director of the corporation pending its
dissolution and/or the resolution of the intra-corporate dispute. He likewise changed the locks of the offices of the company allegedly
to prevent Tan and petitioner from seizing company property.

Private respondent stressed that Tan’s appointment was invalid because it was in derogation of the company by-laws requiring that the
president must be chosen from among the directors, and elected by the affirmative vote of a majority of all the members of the board
of directors.5 As Tan’s appointment did not have the acquiescence of the board of directors, petitioner’s appointment by the former is
likewise allegedly invalid. Thus, neither has the power or the authority to represent or act for Saag Phils., Inc. in any transaction or
action before the SEC or any court of justice.

The trial court, in an order dated September 8, 1999, denied respondent’s motion to suspend proceedings and motion to recuse.

His motion for reconsideration having been denied by the trial court in its order issued on October 29, 1999, respondent filed with the
CA the petition for certiorari[6] assailing the aforesaid orders.

On June 30, 2000, the CA rendered its challenged decision. The pertinent portion reads:

In a case for estafa, a valid demand made by an offended party is one of the essential elements. It appears from the records that the
delay of delivery of the motor vehicles by petitioner to Saag Corporation is by reason of petitioner’s contention that the demand made
by Omictin and Atty. Tan to him to return the subject vehicles is not a valid demand. As earlier mentioned, petitioner filed a case with
the SEC questioning therein private respondents’ appointment.

If the SEC should rule that the dissolution of Saag Phils. is proper, or that the appointments of private respondents are invalid, the
criminal case will eventually be dismissed due to the absence of one of the essential elements of the crime of estafa.

Based on the foregoing, it is clear that a prejudicial question exists which calls for the suspension of the criminal proceedings before
the lower court.

WHEREFORE, in view of the foregoing, the assailed Order of September 8, 1999 and October 29, 1999, are hereby MODIFIED. The
motion to suspend proceedings is hereby GRANTED and respondent court is hereby enjoined from hearing Criminal Case No. 99-
633, entitled "People of the Philippines v. George I. Lagos," until the termination of the case with the Securities and Exchange
Commission. The denial of the motion to recuse is hereby AFFIRMED.

SO ORDERED.7
Incidentally, on January 18, 2001, the SEC case8 was transferred to the Regional Trial Court (RTC) of Mandaluyong City, Branch
214, pursuant to A.M. No. 00-11-03-SC9 implementing the Securities and Regulation Code (Republic Act No. 8799) 10 enacted on July
19, 2000, vesting in the RTCs jurisdiction over intra-corporate disputes.11

Meanwhile, on March 5, 2001, the CA, addressing petitioner’s motion for reconsideration of the aforementioned decision, issued its
assailed resolution:

Considering that the petition for review on certiorari of the 30 June 2000 decision of this Court, filed by the Office of the Solicitor
General before the Supreme Court has already TERMINATED on November 20, 2000 and a corresponding entry of judgment has
already been issued by the High Court, that the same is final and executory, the private respondent’s motion for reconsideration of the
decision 30 June 2000 before this Court is NOTED for being moot and academic.

SO ORDERED.12

Hence, this petition raises the following issues:

RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF

JURISDICTION -

A) WHEN IT DECREED THAT A PREJUDICIAL QUESTION EXISTS IN THE SEC CASE FILED BY PRIVATE
RESPONDENT AGAINST SAAG (S) PTE. LTD., A FOREIGN CORPORATION, ALTHOUGH THE PRIVATE COMPLAINANT
IN THE CRIMINAL CASE FOR ESTAFA (WHERE PRIVATE RESPONDENT IS THE ACCUSED THEREIN) IS ACTUALLY
SAAG PHILIPPINES, INC. A DOMESTIC CORPORATION WITH A SEPARATE JURIDICAL PERSONALITY OF ITS OWN
AND WHICH IS NOT EVEN A PARTY IN THE SEC CASE; AND,

B) WHEN IT ORDERED THE SUSPENSION OF THE PROCEEDINGS IN CRIMINAL CASE NO. 99-633 AGAINST PRIVATE
RESPONDENT.

II

THIS PETITION FOR CERTIORARI IS THE ONLY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE PREMISES.

In support of the above, petitioner argues, as follows:

1. The action before the SEC and the criminal case before the trial court do not involve any prejudicial question.13 SEC Case
No. 01-99-6185 mainly involves the dissolution of Saag (S) Pte. Ltd., the appointment of a receiver, the distribution of
profits, and the authority of petitioner and Tan to represent Saag Phils., Inc. The entity which is being sued is Saag (S) Pte.
Ltd., a foreign corporation over which the SEC has yet to acquire jurisdiction. Hence, any decision that may be rendered in
the SEC case will neither be determinative of the innocence or guilt of the accused nor bind Saag Phils., Inc. because the
same was not made a party to the action even if the former is its holding corporation;

2. Saag Phils., Inc. has a separate corporate existence and is to be treated as a separate entity from its holding or parent
company, Saag (S) Pte. Ltd. The mere fact that one or more corporations are owned or controlled by the same or single
stockholder is not a sufficient ground for disregarding separate corporate personalities;

3. Private respondent’s petition with the SEC seeks affirmative relief against Saag (S) Pte. Ltd. for the enforcement or
application of the alleged terms of the joint venture agreement (JVA) that he purportedly entered into with the foreign
corporation while he was still its Area Sales Manager in the Philippines. The foreign corporation is not licensed to do
business in the Philippines, thus, a party to a contract with a foreign corporation doing business in the Philippines without a
license is not entitled to relief from the latter; and

4. There is no pending civil or administrative case in SEC against Saag Phils., Inc. that warrants the application of a
prejudicial question and the consequent suspension of the criminal action it has instituted against private respondent. If any,
the action before the SEC was merely a ploy to delay the resolution of the criminal case and eventually frustrate the outcome
of the estafa case.
In sum, the main issue is whether or not a prejudicial question exists to warrant the suspension of the criminal proceedings pending the
resolution of the intra-corporate controversy that was originally filed with the SEC.

A prejudicial question is defined as that which arises in a case, the resolution of which is a logical antecedent of the issue involved
therein and the cognizance of which pertains to another tribunal. 14 Here, the case which was lodged originally before the SEC and
which is now pending before the RTC of Mandaluyong City by virtue of Republic Act No. 8799 involves facts that are intimately
related to those upon which the criminal prosecution is based.

Ultimately, the resolution of the issues raised in the intra-corporate dispute will determine the guilt or innocence of private respondent
in the crime of estafa filed against him by petitioner before the RTC of Makati. As correctly stated by the CA, one of the elements of
the crime of estafa with abuse of confidence under Article 315, par. 1(b) of the Revised Penal Code is a demand made by the offended
party to the offender:

The elements of estafa with abuse of confidence under subdivision No. 1, par. (b) of Art. 315 are as follows:

1. That money, goods, or other personal property be received by the offender in trust, or on commission, or for
administration, or under any other obligation involving the duty to make delivery of, or to return the same;

2. That there be misrepresentation or conversion of such money or property by the offender, or denial on his part of such
receipt;

3. That such misappropriation or conversion or denial is to the prejudice of another; and

4. That there is a demand made by the offended party to the offender. 15

Logically, under the circumstances, since the alleged offended party is Saag Phils., Inc., the validity of the demand for the delivery of
the subject vehicles rests upon the authority of the person making such a demand on the company’s behalf. Private respondent is
challenging petitioner’s authority to act for Saag Phils., Inc. in the corporate case pending before the RTC of Mandaluyong, Branch
214. Taken in this light, if the supposed authority of petitioner is found to be defective, it is as if no demand was ever made, hence, the
prosecution for estafa cannot prosper. Moreover, the mere failure to return the thing received for safekeeping or on commission, or for
administration, or under any other obligation involving the duty to deliver or to return the same or deliver the value thereof to the
owner could only give rise to a civil action and does not constitute the crime of estafa. This is because the crime is committed by
misappropriating or converting money or goods received by the offender under a lawful transaction. As stated in the case of United
States v. Bleibel:16

The crime of estafa is not committed by the failure to return the things received for sale on commission, or to deliver their value, but,
as this class of crime is defined by law, by misappropriating or converting the money or goods received on commission. Delay in the
fulfillment of a commission or in the delivery of the sum on such account received only involves civil liability. So long as the money
that a person is under obligation to deliver is not demanded of him, and he fails to deliver it for having wrongfully disposed of it, there
is no estafa, whatever be the cause of the debt.

Likewise, by analogy, the doctrine of primary jurisdiction may be applied in this case. The issues raised by petitioner particularly the
status of Saag Phils., Inc. vis-à-vis Saag (S) Pte. Ltd., as well as the question regarding the supposed authority of the latter to make a
demand on behalf of the company, are proper subjects for the determination of the tribunal hearing the intra-corporate case which in
this case is the RTC of Mandaluyong, Branch 214. These issues would have been referred to the expertise of the SEC in accordance
with the doctrine of primary jurisdiction had the case not been transferred to the RTC of Mandaluyong.

Strictly speaking, the objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from
exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising
in the proceeding before the court.17 The court cannot or will not determine a controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to resolving the same, where the question demands the exercise of sound administrative
discretion requiring special knowledge, experience and services in determining technical and intricate matters of fact. 18

While the above doctrine refers specifically to an administrative tribunal, the Court believes that the circumstances in the instant case
do not proscribe the application of the doctrine, as the role of an administrative tribunal such as the SEC in determining technical and
intricate matters of special competence has been taken on by specially designated RTCs by virtue of Republic Act No. 8799. 19 Hence,
the RTC of Mandaluyong where the intra-corporate case is pending has the primary jurisdiction to determine the issues under
contention relating to the status of the domestic corporation, Saag Phils., Inc., vis-à-vis Saag Pte. Ltd.; and the authority of petitioner
to act on behalf of the domestic corporation, the determination of which will have a direct bearing on the criminal case. The law
recognizes that, in place of the SEC, the regular courts now have the legal competence to decide intra-corporate disputes.20
In view of the foregoing, the Court finds no substantial basis in petitioner’s contention that the CA committed grave abuse of
discretion amounting to lack or excess of jurisdiction. Absent a showing of a despotic, whimsical and arbitrary exercise of power by
the CA, the petition must fail.

WHEREFORE, the petition is DISMISSED. The decision and resolution of the Court of Appeals in CA-G.R. SP No. 55834, dated
June 30, 2000 and March 5, 2001, respectively, are AFFIRMED.

No costs.

[G.R. No. 128550. March 16, 2000]

DIGITAL MICROWAVE CORPORATION, petitioner, vs. COURT OF APPEALS and ASIAN HIGH TECHNOLOGY
CORPORATION, respondents.

RESOLUTION

QUISUMBING, J.:

On December 14, 1994, private respondent Asian High Technology Corp. filed a complaint against petitioner Digital Microwave
Corp. for a sum of money and damages before the Regional Trial Court of Pasig city. Petitioner moved for the dismissal of the
complaint. The trial court denied the motion, as well as petitioners subsequent motion for reconsideration.

Petitioner then initiated a special civil action for certiorari before the Court of Appeals, alleging grave abuse of discretion on the part
of the trial court. However, the Court of Appeals dismissed the petition for failure to comply with Revised Circular No. 28-91, as
amended by Administrative Circular No. 04-94. Said circular requires the petition filed before the Court of Appeals to be
accompanied by a sworn certification against forum shopping, signed by petitioner himself. Petitioners certification was signed by
counsel; the petition was, thus, dismissed. Petitioner moved for a reconsideration of the dismissal and submitted a sworn certification
against forum shopping duly signed by one of its senior officers. The motion was, however, denied, with the Court of Appeals stating
that

"In the present case, absent any compelling reason for petitioners failure to comply, at first instance, with Revised
Supreme Court Circular No. 28-91, the Court cannot therefore, accept its subsequent compliance." [1]

Aggrieved, petitioner is now before this Court seeking reversal of the ruling of the Court of Appeals.

Revised Circular No. 28-91 provided:

"To avoid [forum shopping], every petition or complaint filed with the Supreme Court, the Court of Appeals, or
different Divisions thereof, or any other tribunal or agency, shall comply with the following requirements, aside
from pertinent provisions of the Rules of Court and existing circulars:

xxx

2. Certification.-The party must certify under oath that he has not commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other
tribunal or agency, and that to the best of his knowledge, no such action or proceeding is pending in the Supreme
Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency. If there is any other
action pending, he must state the status of the same. If he should learn that a similar action or proceeding has been
filed or is pending before the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other
tribunal or agency, he should notify the court, tribunal or agency within five (5) days from such notice." [2]

The requirement for a sworn certification against forum shopping was extended by administrative Circular No. 04-94 to complaints,
petitions, applications or other initiatory pleadings filed in all courts or agencies other than the Supreme Court or the Court of
Appeals.

Petitioner contends that in the case of a corporation as petitioner, the certification against forum shopping may be signed by a natural
person authorized to do so and with knowledge of the required facts. The authorized person may be anyone authorized by the
corporation, not necessarily an officer thereof. In such a case, petitioner argues, the counsel of record has the authority to execute the
certification on behalf of the corporation, particularly considering that under the Rules of Court, counsels authority to represent his
client is presumed. No written power of attorney is required for counsel to appear for his client.

If we follow petitioners line of reasoning, then the requirement in Revised Circular No. 28-91 that petitioner himself must make the
certification against forum shopping would have been rendered useless. Why require petitioner himself to certify when his counsel can
anyway execute the certification on his behalf?

The reason the certification against forum shopping is required to be accomplished by petitioner himself is because only the petitioner
himself has actual knowledge of whether or not he has initiated similar actions or proceedings in different courts or agencies. Even his
counsel may be unaware of such fact. For sure, his counsel is aware of the action for which he has been retained. But what of other
possible actions?

We disagree with petitioner that a corporation cannot possibly hope to comply with the requirement laid down by Revised Circular
No. 28-91 because it is a juridical entity and not a natural person. If this were so, then it would have been impossible for a corporation
to do anything at all. Needless to say, this is the reason why corporations have directors and officers, to represent it in its transactions
with others. The same is true for the certification against forum shopping. It could easily have been made by a duly authorized director
or officer of the corporation. That petitioner did not in the first instance comply with the requirement of revised Circular No. 28-91 by
having the certification against forum shopping signed by one of its officers, as it did after its petition before the Court of Appeals had
been dismissed, is beyond our comprehension.

In the recent case of Spouses Valentin Ortiz and Camilla Milan Ortiz v. Court of Appeals, et al., 299 SCRA 708, 711-712 (1998), we
ruled that

"Regrettably, we find that substantial compliance will not suffice in a matter involving strict observance as provided
for in Circular No. 28-91. The attestation contained in the certification on non-forum shopping requires personal
knowledge by the party who executed the same. To merit the Courts consideration, petitioners here must show
reasonable cause for failure to personally sign the certification. The petitioners must convince the court that the
outright dismissal of the petition would defeat the administration of justice."

In this case, petitioner has not adequately explained its failure to have the certification against forum shopping signed by one of its
officers.

Neither has it shown any compelling reason for us to disregard strict compliance with the rules.

As we further stated in Spouses Ortiz,

"Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal construction." [3]

WHEREFORE, finding no merit in the petition, the petition is hereby DENIED.

SO ORDERED.