FEBRUARY 16, 2019 CASE: G

TORRES-MADRID BROKERAGE vs. FEB MITSUI & BMT

TOPIC: Transportation Law

FACTS: Sony engaged the services of Torres-Madrid Brokerage (TMBI) to facilitate, process,
withdraw, and deliver the shipment of various electronic goods from Thailand at the port to its
warehouse in Binan, Laguna.

TMBI subcontracted the services of Benjamin Manalastas’ company, BMT Trucking Services
(BMT) to transport the shipment as they do not own any delivery trucks. TMBI notifies Sony and
had no objections of the arrangement.

Four (4) BMT trucks picked up the shipment from the port on Oct. 7, 2000 but due to the truck
ban they could not undertake delivery immediately and because the following day was Sunday.
BMT scheduled delivery on Oct. 9, 2000. October 9 early morning however, only 3 trucks arrived
at Sony’s Binan Warehouse. The fourth truck was seen abandoned along Diversion Road in
Filinvest, Alabang, Muntinlupa City at 12 noon wherein both the driver Rufo Lapesura and the
shipment were missing.

Victor Torres, TMBI’s general manager, filed with NBI against Lapesura for hijacking . TMBI
notified Sony of the loss and sent BMT a letter demanding payment for the lost shipment. BMT
refused so insisting the goods were hijacked.

Sony file an insurance claim with the Mitsui, the insurer of goods. Mitsui paid Sony P7,293,386.23.
After being subrogated to Sony’s rights, Mitsui sent TMBI a demand letter for payment of the lost
goods. TMBI refused to pay. Mitsui then filed a complaint against TMBI.

TMBI impleaded BMT as a 3rd party defendant, alleging BMT’s driver responsible and claimed
BMT’s negligence as the proximate cause. TMBI prayed that in the event it is held liable to Mitsui,
it should be reimbursed by BMT.

RTC found BMT and TMBI jointly and solidarily liable. That they have been doing business since
early 80’s and teh same incident happended on Sony’s cargo in 1997 but neither Sony not its
insurer filed a compliant. BMT and TMBI appealed. TMBI denied that its a common carrier
required to exercise extraordinary diligence and that hijack is a fortuitous event.

ISSUE:
1. WON TMBI is a common carrier engaged in the business of transporting goods for the
general public for a fee.
2. WON TMBI and BMT are solidarily liable to Mitsui.
 3. WON BMT is directly liable to Sony or Mitsui.
4. WON BMT is liable to TMBI for breach of their contract of carriage.

RULING:
FIRST ISSUE: Yes. TMBI as a brokerage may be considered a common carrier if it also
undertakes to deliver the goods for its customers. Common carrier are persons, corporation, firms
or associations engage in the business of transporting passengers or goods or both, by land, water,
or air, for compensation offering their services to the public. They are bound to observe
extraordinary diligence in the vigilance over the goods and in the safety of their passengers.

SECOND ISSUE: No. TMBI and BMT are not solidarily liable. TMBI’s liability to Mitsui
does not stem from a quasi-delict (culpa aquilliana) but from its breach of contract (culpa
contractual). The tie that binds with Mitsui is contractual, albeit one that passed on to Mitsui as a
result of TMBI’s contract of carriage with Sony to which Mitsui had been subrogate as an insurer
who had paid Sony’s insurance claim. The legal reality that results from this contractual tie
precludes the application of quasi-delict based Article 2194.

THIRD ISSUE: No, BMT is not directly liable to Sony/Mitsui for the loss of the cargo.
While undisputed that the cargo was lost under the actual; custody of BMT (whose employee is
the primary suspect in the hijacking or robbery of the shipment), no direct contractual relationship
existed between Sony/Mitsui and BMT, if at all, Sony/Mitsui’s cause of action against BMT could
only arise from quasi-delict, as a third party suffering damage from the action of another due to
the latter’s fault or negligence, pursuant to Article 2176 of the Civil Code.
FOURTH ISSUE: Yes. By subcontracting the cargo delivery to BMT, TMBI entered into
its own contract of carriage with a fellow common carrier. The cargo was lost after its transfer to
BMT’s custody based on its contract of carriage with TMBI. Following Article 1735, BMT is
presumed to be at fault. Since BMT failed to prove that it observed extraordinary diligence in the
performance of its obligation to TMBI, it is liable to TMBI for breach of their contract of carriage.

FEBRUARY 9, 2019 CASE: T

SEC vs. Court of Appeals, October 22, 2014
TOPIC: SRC, proxy, jurisdiction of SEC

FACTS: Omico Corporation (OMICO) is a company whose shares of stock are listed and traded
in the Philippines Stock Exchange, Inc. Astra Securities Corporation (Astra) is one of the
stockholders of Omico owning about 18% of the latter’s outstanding capital stock.
Omico scheduled its annual stockholders’ meeting on November 3, 2008. It set the deadline
for submission of proxies on 23 October 2008 and the validation of proxies on 25 October 2008.
Astra objected to the validation of the proxies issued in favor of Tia, representing about
38% of the outstanding capital stock of Omico. Astra also objected to the inclusion of the proxies
issued in favour of Tia and /or Martin Buncio, representing about 2% of the outstanding capital
stock of Omico.
Astra maintained that the proxy issuers, who were brokers, did not obtain the required
express written authorization of their clients when they issued the proxies in favor of Tia. In so
doing, the issuers were allegedly in violation of SRC Rules. Furthermore, the proxies issued in
favour Tia exceeded, thereby giving rise to the assumption thereof under said rules. Tia did not
also comply with the rules on proxy solicitation, in violation of the SRC. Despite the objections
of Astra, Omico’s Board of inspectors declared that the proxies issued in favor of Tia were valid.
ISSUE:
5. WON SEC has jurisdiction over controversies arising from the validation of proxies for
the election of the directors of a corporation.
6. WON SEC may appeal a reversal of its ruling.

RULING:
FIRST ISSUE: None. The Court held that when proxies are solicited in relation to the
election of corporate directors, the resulting controversy, even if it ostensibly raised the violation
of the SEC rules on proxy solicitation, should be properly seen as an election controversy within
the original and exclusive jurisdiction the trial courts by virtue of Section 5.2 of the SRC. Hence
the jurisdiction is still with the Special Commercial Courts.
An election contest covers any controversy or dispute involving the validation of proxies,
in general. Thus, it can only refer to all the beneficial purposes that validation of proxies can bring
about when made in connection with a forthcoming election of directors. Thus, there is no point
in making distinctions between who has jurisdiction before and who has jurisdiction after the
election of directors, as all controversies related thereto- whether before, during or after shall be
passed upon by regular courts as provided by law.
SECOND ISSUE: The Court held that quasi-judicial agencies do not have the right to seek
the review of an appellate court decision reversing any of their rulings. This is because they are
not real parties-interest. Thus, the Court expunged the petition filed by the SEC for the latter’s lack
of capacity to file the suit.
FEBRUARY 9, 2019 CASE: U
GSIS vs. Court of Appeals, April 16, 2009
TOPIC: SRC, proxy, jurisdiction of SEC

FACTS: GSIS, a major shareholder in Meralco, was distressed over the proxy validation
proceedings and the resulting certification of proxies in favor of the Meralco Management. The
proceedings were presided over by Meralco’s assistant corporate secretary and chief legal counsel
instead of the person duly designated by Meralco’s Board of Directors. Thus, GSIS moved before
the SEC to declare certain proxies, those issued to herein private respondents, as invalid. Private
respondents contend that dispute in the validity of proxies is an election contest which falls under
the trial court’s jurisdiction. GSIS argues there was no election yet at the time it filed its petition
with the SEC, hence no proper election contest over which the regular courts may have jurisdiction.

ISSUE: WON the proxy challenge is an election contest cognizable by the regular courts

RULING: Yes. Section 2, Rule 6 of the Interim Rules broadly defines the term “election contest”
as encompassing all plausible incidents arising from the election of corporate directors, including:
(1) any controversy or dispute involving title or claim to any elective office in a stock or non-stock
corporation, (2) the validation of proxies, (3) the manner and validity of elections and (4) the
qualifications of candidates, including the proclamation of winners.
Under Section 5(c) of the Presidential Decree No. 902-A, in relation to SRC, the jurisdiction
of the regular courts with respect to election-related controversies in the election or appointment
of directors, trustees, officers or managers of corporations, partnerships, or associations.”
Evidently, the jurisdiction of the regular courts over so-called election contest or controversies
under Section 5(c) does not extend to very potential subject that may be voted on by shareholders,
but only to the election of directors or trustees, in which stockholders are authorized to participate
under Section 24 of the Corporation Code.
The power of the SEC to investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters unrelated to the cases enumerated
under Section 5 of PD 902-A. However, when proxies are solicited in relation to the election of
corporate directors, the resulting controversy, even if it ostensibly raised the violation of the SEC
rules on proxy solicitation, should be properly seen as an election controversy within the original
and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section
5(c) of PD 902-A.
That the proxy challenge raised by GSIS relates to the election of the directors of Meralco
is undisputed. The controversy was engendered by the looming annual meeting, during which the
stockholders of Meralco were to elect the directors of the corporation. GSIS very well knew of
that fact.

CASE: dd
TERELAY INVESTMENT v. YULO, August 5, 2015
FACTS: Asserting her right as a stockholder, Yulo wrote a letter address to Terelay Investment
and Dev’t Corp, requesting that she be allowed to inspect its books and records which the
corporation continually denied. Thus Yulo went to the SEC. They agreed in the Preliminary
Conference that Yulo is a registered stockholder of TERELAY. However, one of the issues
stipulated is said hearing is the right of Yulo to inspect its books and records. One of the Terelay’s
arguments was that conceding that Yulo is a stockholder, she is an owner of 0.001% of stock thus,
she has no right to examine its books.

Because of the enactment of RA 8799, the case was transferred from the SEC to RTC. RTC then
ruled for Yulo. CA and SC affirms RTC ruling.

ISSUE: Whether or not Yulo was a stockholder who is entitled to inspect the corporation’s books
and records despite her shareholding being a measly interest- YES.

RULING: TERELAY’s argument cannot be sustained. A careful review of the records would
show that in the Preliminary Conference both parties represented by their respective counsels
agreed on the fact that petitioner –appellee was “registered as stockholder in respondent-
appellant’s stock and transfer book subject to qualifications in the Answer.” The records failed to
disclose any objection by TERELAY. Neither did TRERLAY raise this matter in the SEC hearing
held on August 7, 200, as one of the issues to be determined and resolved.

The Corporation Code has granted to all stockholders the right to inspect the corporate books and
records, and in so doing has not required any specific amount of interest for the exercise of the
right to inspect. Ubi lex non distinguit nee nos distinguire debemos. When the law has made no
distinction, we ought not to recognize any distinction.

CASE: ee
TURNER V. LORENZO SHIPPING, NOVEMBER 24, 2010
FACTS: Spouses Philip and Elnora Turner held 1.10 Million shares of stock of Lorenzo Shipping
Corporation (LSC), a domestic corporation engaged in cargo shipping. LSC decided to amend its
Articles of Incorporation to remove the stockholders’ pre-emptive rights to newly issued shares of
stock. As it is prejudicial to their interest as stockholders, spouse. Turner voted against the
amendment and demanded the payment of their shares (at the rate of P2.3/share) based on the book
value of the shares, totalling P2.3M). LSC disagreed on the amount, but an appraisal committee
settled the matter and set the valuation at P2.5M in total. Spouses Turner then demanded payment
based on this amount but LSC refused to pay. LSC argued that according to the Corporation Code,
payment can be made only if a corporation has unrestricted retained earnings (earnings that can be
distributed as dividends) in its books to cover the value of the shares. In January 22, 2001, upon
LSC’s refusal to pay, the Turners filed a complaint for collection and damages; RTC ruled in their
favour and ordered LSC to pay after it was proven that LSC actually had retained earning
amounting to P12M in March 21, 2002. CA, however, reversed the RTC and dismissed the case,
stating the cause of action had not yet accrued due to the lack of unrestricted retained earnings in
the books of LSC.

ISSUES: WON the petitioners have a valid cause of action against the respondent.
RULING: SC upheld the decision of the CA. RTC acted in excess of its jurisdiction. No
payment shall be made to any dissenting stockholder unless the corporation has unrestricted
retained earnings in its books to cover the payment (Trust fund doctrine). In case the corporation
has no available unrestricted retained earnings in its books, Sec. 83 provides that if the dissenting
stockholder is not paid the value of his shares within 30 days after the award, his voting and
dividend rights shall immediately be restored. The respondent had indisputably no unrestricted
retained earnings in its books at the time the petitioners commenced the Civil Case on January 22,
2001. It proved that the respondent’s legal obligation to pay the value of the petitioners’ shares
did not yet arise.
The Turners’ right of action arose only when petitioner had already retained earnings in the amount
of P11,975,490.00 on March 21, 2002; such right of action was inexistent on January 22, 2001
when they filed the Complaint. The RTC concluded that the respondent’s obligation to pay had
accrued by its having the unrestricted retained earnings after the making of the demand by the
petitioners. It based its conclusion on the fact that the Corporation Code did not provide that the
unrestricted retained earnings must already exist at the time of the demand. The RTC’s construal
of the Corporation Code was unsustainable, because it did not take into account the petitioners’
lack of a cause of action against the respondent. In order to give rise to any obligation to pay on
the part of the respondent, the petitioners should first make a valid demand that the respondent
refused to pay despite having unrestricted retained earnings. Otherwise, the respondent could not
be said to be guilty of any actionable omission that could sustain their action to collect. (THERE
MUST FIRST BE A REFUSAL despite having dividends).
CASE: ff
YUJUICO V. QUIAMBAO, June 2, 2014

FACTS: During the annual stockholders’ meeting of STRADEC, petitioner Yujuico was elected
as president and chairman of the company. Yujuico replaced Quiambao, the respondent.
STRADEC appointed Sumbilla as Treasurer and Blando as Corporate Secretary. During the
stockholder’s meeting, Yujuico demanded Quiambao for the turnover of the corporate records of
the company, particularly the accounting files, ledgers, journals and other records of the
corporation’s business. Quiambao refused and caused the removal of the corporate records of
STRADEC from the company’s principal office. Blando likewise demanded Pilapil, the previous
corporate secretary, for the turnover of the stock and transfer book of STRADEC. Pilapil refused.
Thus, the petitioners filed a complaint against respondents for the violation of Section 74 in relation
to Section 144 of the Corporation Code.

ISSUE: WHETHER THE RESPONDENTS CAN BE HELD LIABLE UNDER SECTION 74

IN RELATION TO SECTION 144 OF THE CORPORATION CODE?

RULING: No. A criminal action based the violation of a stockholder’s right to examine or
inspect the corporate records and the stock and transfer book of a corporation under the
2nd and 4th paragraphs of Section 74 of the Corporation Code can only be maintained against
corporate officers or any other person acting in behalf of such corporation. Violations of 2nd
and 4th paragraphs of Section 74 of the Corporation Code contemplates situation wherein a
corporation, acting thru one of its officers or agents, denies the right of any of its stockholders to
inspect the records, minutes and the stock and transfer book of such corporation. The petitioner’s
compliant failed to establish that respondents were acting on behalf of STRADEC. Instead it was
revealed that respondents are merely outgoing officers of STRADEC, who for some reason,
withheld and refused to turn over the company records of STRADEC and it is actually merely
trying to recover custody of the withheld records. Thus, petitioners are not actually invoking their
right to inspect the records and the stock and transfer book of STRADEC under Sec 74. What they
seek to enforce is the proprietary right of STRADEC to be in possession of such records and books.
Such right, though certainly legally enforceable by other means, cannot be enforced by a criminal
prosecution based on a violation of the 2nd and 4th paragraphs of Section 74 of the Corporation
Code. Therefore, the criminal case is dismissed for lack of probable cause.