Subscriber No.

of shares Total subscription Amount paid

THIRD DIVISION Donnina C. Halley 35,000 P350,000.00 P87,500.00

Roberto V. Cabrera, Jr. 18,000 P180,000.00 P45,000.00
[G.R. No. 157549. May 30, 2011.] Albert T. Yu 18,000 P180,000.00 P45,000.00
Zenaida V. Yu 2,000 P20,000.00 P5,000.00
Rizalino C. Viñeza 2,000 P20,000.00 P5,000.00
DONNINA C. HALLEY, petitioner, vs.
—————— ——————— ——————
PRINTWELL, INC., respondent. TOTAL 75,000 P750,000.00 P187,500.00
===== ========= ==========

DECISION Printwell engaged in commercial and industrial

printing. BMPI commissioned Printwell for the printing of
the magazine Philippines, Inc. (together with wrappers
BERSAMIN, J : p
and subscription cards) that BMPI published and sold.
For that purpose, Printwell extended 30-day credit
Stockholders of a corporation are liable for the accommodations to BMPI. ADSIaT

debts of the corporation up to the extent of their unpaid

subscriptions. They cannot invoke the veil of corporate In the period from October 11, 1988 until July 12,
identity as a shield from liability, because the veil may be 1989, BMPI placed with Printwell several orders on
lifted to avoid defrauding corporate creditors. credit, evidenced by invoices and delivery receipts
totaling P316,342.76. Considering that BMPI paid only
We affirm with modification the decision P25,000.00, Printwell sued BMPI on January 26, 1990
promulgated on August 14, 2002, 1 whereby the Court of for the collection of the unpaid balance of P291,342.76 in
Appeals (CA) upheld the decision of the Regional Trial the RTC.4
Court, Branch 71, in Pasig City (RTC), 2 ordering the
defendants (including the petitioner) to pay to Printwell, On February 8, 1990, Printwell amended the
Inc. (Printwell) the principal sum of P291,342.76 plus complaint in order to implead as defendants all the
interest. original stockholders and incorporators to recover on
their unpaid subscriptions, as follows: 5
Antecedents
Name Unpaid Shares
The petitioner was an incorporator and original
director of Business Media Philippines, Inc. (BMPI), Donnina C. Halley P262,500.00
which, at its incorporation on November 12, 1987, 3 had Roberto V. Cabrera, Jr. P135,000.00
an authorized capital stock of P3,000,000.00 divided into Albert T. Yu P135,000.00
300,000 shares each with a par value of P10.00, of which Zenaida V. Yu P15,000.00
75,000 were initially subscribed, to wit: Rizalino C. Viñeza P15,000.00
 ————————
TOTAL P562,500.00
=========
The defendants filed a consolidated
answer, 6 averring that they all had paid their
subscriptions in full; that BMPI had a separate personality
from those of its stockholders; that Rizalino C. Viñeza
had assigned his fully-paid up shares to a certain
Gerardo R. Jacinto in 1989; and that the directors and
stockholders of BMPI had resolved to dissolve BMPI
during the annual meeting held on February 5, 1990.
To prove payment of their subscriptions, the
defendant stockholders submitted in evidence BMPI
official receipt (OR) no. 217, OR no. 218, OR no. 220,
OR no. 221, OR no. 222, OR no. 223, and OR no. 227,
to wit:
sheet 8 and income statement 9 as of December 31,
1988; (c) BMPI income tax return for the year 1988
(stamped "received" by the BIR); 10 (d) journal
vouchers; 11 (e) cash deposit slips; 12 and (f) Bank of the
Philippine Islands (BPI) savings account passbook in the
name of BMPI. 13
Ruling of the RTC
On November 3, 1993, the RTC rendered a
decision in favor of Printwell, rejecting the allegation of
payment in full of the subscriptions in view of an
irregularity in the issuance of the ORs and observing that
the defendants had used BMPI's corporate personality to
evade payment and create injustice, viz.:
The claim of individual defendants that
they have fully paid their subscriptions to
defend[a]nt corporation, is not worthy of
consideration, because: — CTEDSI

Receipt No. Date Name Amount

a) in the case of defendants-spouses Albert and
217 November 5, Albert T. Yu P45,000.00 Zenaida Yu, it will be noted that the alleged
1987 payment made on May 13, 1988
218 May 13, 1988 Albert T. Yu P135,000.00 amounting to P135,000.00, is covered by
220 May 13, 1988 Roberto V. P135,000.00 Official Receipt No. 218 (Exh. "2"),
Cabrera, Jr. whereas the alleged payment made earlier
221 November 5, Roberto V. P45,000.00 on November 5, 1987, amounting to
1987 Cabrera, Jr. P5,000.00, is covered by Official Receipt
222 November 5, Zenaida V. Yu P5,000.00 No. 222 (Exh. "3"). This is cogent proof that
1987 said receipts were belatedly issued just to
223 May 13, 1988 Zenaida V. Yu P15,000.00 suit their theory since in the ordinary
227 May 13, 1988 Donnina C. P262,500.00 course of business, a receipt
Halley issued earliermust have serial
numbers lower than those issued on a
later date. But in the case at bar, the
In addition, the stockholders submitted other receipt issued on November 5, 1987 has
documents in evidence, namely: (a) an audit report dated serial numbers (222) higherthan those
March 30, 1989 prepared by Ilagan, Cepillo & Associates issued on a later date (May 13, 1988).
(submitted to the SEC and the BIR); 7 (b) BMPI balance
 b) The claim that since there was no call by the Zenaida V. Yu 15,000.00
Board of Directors of defendant Rizalino V. Viñeza 15,000.00
corporation for the payment of unpaid ————————
subscriptions will not be a valid excuse to Total P562,500.00
free individual defendants from liability. ==========
Since the individual defendants are
members of the Board of Directors of and it is an established doctrine that
defendant corporation, it was within their subscriptions to the capital stock of a corporation
exclusive power to prevent the fulfillment of constitute a fund to which creditors have a right to
the condition, by simply not making a call look for satisfaction of their claims (Philippine
for the payment of the unpaid National Bank vs. Bitulok Sawmill, Inc., 23 SCRA
subscriptions. Their inaction should not 1366) and, in fact, a corporation has no legal
work to their benefit and unjust enrichment capacity to release a subscriber to its capital stock
at the expense of plaintiff. from the obligation to pay for his shares, and any
Assuming arguendo that the individual agreement to this effect is invalid (Velasco vs.
defendants have paid their unpaid subscriptions, Poizat, 37 Phil. 802).
still, it is very apparent that individual defendants The liability of the individual stockholders
merely used the corporate fiction as a cloak or in the instant case shall be pro-rated as follows:
cover to create an injustice; hence, the alleged
separate personality of defendant corporation Names Amount
should be disregarded (Tan Boon Bee & Co., Inc. Donnina C. Halley P149,955.65
vs. Judge Jarencio, G.R. No. 41337, 30 June Roberto V. Cabrera, Jr. 77,144.55
1988). 14 Albert T. Yu 77,144.55
Zenaida V. Yu 8,579.00
Applying the trust fund doctrine, the RTC declared Rizalino V. Viñeza 8,579.00
the defendant stockholders liable to Printwell pro rata, —————————
thusly: Total P321,342.75 15
Defendant Business Media, Inc. is a ===========
registered corporation (Exhibits "A", "A-1" to "A-
9"), and, as appearing from the Articles of The RTC disposed as follows:
Incorporation, individual defendants have the WHEREFORE, judgment is hereby
following unpaid subscriptions: rendered in favor of plaintiff and against
Names Unpaid Subscription defendants, ordering defendants to pay to plaintiff
the amount of P291,342.76, as principal, with
Donnina C. Halley P262,500.00 interest thereon at 20% per annum, from date of
Roberto V. Cabrera, Jr. 135,000.00 default, until fully paid, plus P30,000.00 as
Albert T. Yu 135,000.00 attorney's fees, plus costs of suit.TDAHCS
 Defendants' counterclaims are ordered
dismissed for lack of merit.
SO ORDERED. 16
Ruling of the CA
All the defendants, except BMPI, appealed.
Spouses Donnina and Simon Halley, and Rizalino
Viñeza defined the following errors committed by the
RTC, as follows:
I.
THE TRIAL COURT ERRED IN HOLDING
APPELLANTS-STOCKHOLDERS LIABLE FOR
THE LIABILITIES OF THE DEFENDANT
CORPORATION.
II.
ASSUMING ARGUENDO THAT APPELLANTS
MAY BE LIABLE TO THE EXTENT OF THEIR
UNPAID SUBSCRIPTION OF SHARES OF
STOCK, IF ANY, THE TRIAL COURT
NONETHELESS ERRED IN NOT FINDING
THAT APPELLANTS-STOCKHOLDERS HAVE,
AT THE TIME THE SUIT WAS FILED, NO SUCH
UNPAID SUBSCRIPTIONS.
On their part, Spouses Albert and Zenaida Yu
averred:
I.
THE RTC ERRED IN REFUSING TO GIVE
CREDENCE AND WEIGHT TO DEFENDANTS-
APPELLANTS SPOUSES ALBERT AND
ZENAIDA YU'S EXHIBITS 2 AND 3 DESPITE
THE UNREBUTTED TESTIMONY THEREON BY
APPELLANT ALBERT YU AND THE ABSENCE
OF PROOF CONTROVERTING THEM.
II.
THE RTC ERRED IN HOLDING DEFENDANTS-
APPELLANTS SPOUSES ALBERT AND
ZENAIDA YU PERSONALLY LIABLE FOR THE
CONTRACTUAL OBLIGATION OF BUSINESS
MEDIA PHILS., INC. DESPITE FULL PAYMENT
BY SAID DEFENDANTS-APPELLANTS OF
THEIR RESPECTIVE SUBSCRIPTIONS TO THE
CAPITAL STOCK OF BUSINESS MEDIA PHILS.,
INC.
Roberto V. Cabrera, Jr. argued:
I.
IT IS GRAVE ERROR ON THE PART OF THE
COURT A QUO TO APPLY THE DOCTRINE OF
PIERCING THE VEIL OF CORPORATE
PERSONALITY IN ABSENCE OF ANY
SHOWING OF EXTRA-ORDINARY
CIRCUMSTANCES THAT WOULD JUSTIFY
RESORT THERETO.
II.
IT IS GRAVE ERROR ON THE PART OF THE
COURT A QUO TO RULE THAT INDIVIDUAL
DEFENDANTS ARE LIABLE TO PAY THE
PLAINTIFF-APPELLEE'S CLAIM BASED ON
THEIR RESPECTIVE SUBSCRIPTION.
NOTWITHSTANDING OVERWHELMING
EVIDENCE SHOWING FULL SETTLEMENT OF
SUBSCRIBED CAPITAL BY THE INDIVIDUAL
DEFENDANTS.
On August 14, 2002, the CA affirmed the RTC,
holding that the defendants' resort to the corporate
personality would create an injustice because Printwell
would thereby be at a loss against whom it would assert
the right to collect, viz.:
ATaDHC
 Settled is the rule that when the veil of
corporate fiction is used as a means of
perpetrating fraud or an illegal act or as a vehicle
for the evasion of an existing obligation, the
circumvention of statutes, the achievements or
perfection of monopoly or generally the
perpetration of knavery or crime, the veil with
which the law covers and isolates the corporation
from the members or stockholders who compose
it will be lifted to allow for its consideration merely
as an aggregation of individuals (First Philippine
International Bank vs. Court of Appeals, 252
SCRA 259). Moreover, under this doctrine, the
corporate existence may be disregarded where
the entity is formed or used for non-legitimate
purposes, such as to evade a just and due
obligations or to justify wrong (Claparols vs.
CIR, 65 SCRA 613).
In the case at bench, it is undisputed that
BMPI made several orders on credit from
appellee PRINTWELL involving the printing of
business magazines, wrappers and subscription
cards, in the total amount of P291,342.76
(Record, pp. 3-5, Annex "A") which facts were
never denied by appellants' stockholders that they
owe appellee the amount of P291,342.76. The
said goods were delivered to and received by
BMPI but it failed to pay its overdue account to
appellee as well as the interest thereon, at the
rate of 20% per annum until fully paid. It was also
during this time that appellants stockholders were
in charge of the operation of BMPI despite the fact
that they were not able to pay their unpaid
subscriptions to BMPI yet greatly benefited from
said transactions. In view of the unpaid
subscriptions, BMPI failed to pay appellee of its
liability, hence appellee in order to protect its right
can collect from the appellants' stockholders
regarding their unpaid subscriptions. To deny
appellee from recovering from appellants would
place appellee in a limbo on where to assert their
right to collect from BMPI since the stockholders
who are appellants herein are availing the
defense of corporate fiction to evade payment of
its obligations. 17
Further, the CA concurred with the RTC on the
applicability of the trust fund doctrine, under which
corporate debtors might look to the unpaid subscriptions
for the satisfaction of unpaid corporate debts, stating
thus:
It is an established doctrine that
subscription to the capital stock of a corporation
constitute a fund to which creditors have a right to
look up to for satisfaction of their claims, and that
the assignee in insolvency can maintain an action
upon any unpaid stock subscription in order to
realize assets for the payment of its debts (PNB
vs. Bitulok Sawmill, 23 SCRA 1366).
Premised on the above-doctrine, an
inference could be made that the funds, which
consists of the payment of subscriptions of the
stockholders, is where the creditors can claim
monetary considerations for the satisfaction of
their claims. If these funds which ought to be fully
subscribed by the stockholders were not paid or
remain an unpaid subscription of the corporation
then the creditors have no other recourse to
collect from the corporation of its liability. Such
occurrence was evident in the case at bar wherein
the appellants as stockholders failed to fully pay
their unpaid subscriptions, which left the creditors
helpless in collecting their claim due to
insufficiency of funds of the corporation. Likewise,
the claim of appellants that they already paid the
unpaid subscriptions could not be given weight
 because said payment did not reflect in the
Articles of Incorporations of BMPI that the unpaid
subscriptions were fully paid by the appellants'
stockholders. For it is a rule that a stockholder
may be sued directly by creditors to the extent of
their unpaid subscriptions to the corporation
(Keller vs. COB Marketing, 141 SCRA 86).
Moreover, a corporation has no power to
release a subscription or its capital stock, without
valuable consideration for such releases, and as
against creditors, a reduction of the capital stock
can take place only in the manner and under the
conditions prescribed by the statute or the charter
or the Articles of Incorporation. (PNB vs. Bitulok
Sawmill, 23 SCRA 1366). 18
The CA declared that the inconsistency in the
issuance of the ORs rendered the claim of full payment
of the subscriptions to the capital stock unworthy of
consideration; and held that the veil of corporate fiction
could be pierced when it was used as a shield to
perpetrate a fraud or to confuse legitimate issues, to wit:
Finally, appellants SPS YU, argued that
the fact of full payment for the unpaid
subscriptions was incontrovertibly established by
competent testimonial and documentary
evidence, namely — Exhibits "1", "2", "3" & "4",
which were never disputed by appellee, clearly
shows that they should not be held liable for
payment of the said unpaid subscriptions of BMPI.
The reliance is misplaced. CaDEAT
We are hereby reproducing the contents of
the above-mentioned exhibits, to wit:
Exh: "1" — YU — Official Receipt
No. 217 dated November 5, 1987
amounting to P45,000.00 allegedly
representing the initial payment of
subscriptions of stockholder Albert Yu.
Exh: "2" — YU — Official Receipt
No. 218 dated May 13, 1988 amounting to
P135,000.00 allegedly representing full
payment of balance of subscriptions of
stockholder Albert Yu. (Record, p. 352).
Exh: "3" — YU — Official Receipt
No. 222 dated November 5, 1987
amounting to P5,000.00 allegedly
representing the initial payment of
subscriptions of stockholder Zenaida Yu.
Exh: "4" — YU — Official Receipt
No. 223 dated May 13, 1988 amounting to
P15,000.00 allegedly representing the full
payment of balance of subscriptions of
stockholder Zenaida Yu. (Record p. 353).
Based on the above exhibits, we are in
accord with the lower court's findings that the
claim of the individual appellants that they fully
paid their subscription to the defendant BMPI is
not worthy of consideration, because, in the case
of appellants SPS. YU, there is an inconsistency
regarding the issuance of the official receipt since
the alleged payment made on May 13, 1988
amounting to P135,000.00 was covered by
Official Receipt No. 218 (Record, p. 352),
whereas the alleged payment made earlier on
November 5, 1987 amounting to P5,000.00 is
covered by Official Receipt No. 222 (Record, p.
353). Such issuance is a clear indication that said
receipts were belatedly issued just to suit their
claim that they have fully paid the unpaid
subscriptions since in the ordinary course of
business, a receipt is issued earlier must have
serial numbers lower than those issued on a later
 date. But in the case at bar, the receipt issued on
November 5, 1987 had a serial number (222)
higher than those issued on May 13, 1988 (218).
And even assuming arguendo that the individual
appellants have paid their unpaid subscriptions,
still, it is very apparent that the veil of corporate
fiction may be pierced when made as a shield to
perpetuate fraud and/or confuse legitimate
issues. (Jacinto vs. Court of Appeals, 198 SCRA
211). 19TAcSaC
Spouses Halley and Viñeza moved for a
reconsideration, but the CA denied their motion for
reconsideration.
Issues
Only Donnina Halley has come to the Court to seek
a further review, positing the following for our
consideration and resolution, to wit:
I.
THE COURT OF APPEALS ERRED IN
AFFIRMING IN TOTO THE DECISION THAT
DID NOT STATE THE FACTS AND THE LAW
UPON WHICH THE JUDGMENT WAS BASED
BUT MERELY COPIED THE CONTENTS OF
RESPONDENT'S MEMORANDUM ADOPTING
THE SAME AS THE REASON FOR THE
DECISION
II.
THE COURT OF APPEALS ERRED IN
AFFIRMING THE DECISION OF THE
REGIONAL TRIAL COURT WHICH
ESSENTIALLY ALLOWED THE PIERCING OF
THE VEIL OF CORPORATE FICTION
III.
THE HONORABLE COURT OF APPEALS
ERRED IN APPLYING THE TRUST FUND
DOCTRINE WHEN THE GROUNDS THEREFOR
HAVE NOT BEEN SATISFIED.
On the first error, the petitioner contends that the
RTC lifted verbatim from the memorandum of Printwell;
and submits that the RTC thereby violated the
requirement imposed in Section 14, Article VIII of
the Constitution 20 as well as in Section 1, Rule 36 of
the Rules of Court, 21 to the effect that a judgment or final
order of a court should state clearly and distinctly the
facts and the law on which it is based. The petitioner
claims that the RTC's violation indicated that the RTC did
not analyze the case before rendering its decision, thus
denying her the opportunity to analyze the decision; and
that a suspicion of partiality arose from the fact that the
RTC decision was but a replica of Printwell's
memorandum. She cites Francisco v. Permskul, 22 in
which the Court has stated that the reason underlying the
constitutional requirement, that every decision should
clearly and distinctly state the facts and the law on which
it is based, is to inform the reader of how the court has
reached its decision and thereby give the losing party an
opportunity to study and analyze the decision and enable
such party to appropriately assign the errors committed
therein on appeal.
On the second and third errors, the petitioner
maintains that the CA and the RTC erroneously pierced
the veil of corporate fiction despite the absence of cogent
proof showing that she, as stockholder of BMPI, had any
hand in transacting with Printwell; that the CA and the
RTC failed to appreciate the evidence that she had fully
paid her subscriptions; and the CA and the RTC wrongly
relied on the articles of incorporation in determining the
current list of unpaid subscriptions despite thearticles of
incorporation being at best reflective only of the pre-
incorporation status of BMPI.
As her submissions indicate, the petitioner assails
the decisions of the CA on: (a) the propriety of
disregarding the separate personalities of BMPI and its
stockholders by piercing the thin veil that separated
them; and (b) the application of the trust fund doctrine.
Ruling
The petition for review fails.
I ideas and views about the legal issues between himself
The RTC did not violate
the Constitution and the Rules of Court
The contention of the petitioner, that the RTC
merely copied the memorandum of Printwell in writing its
decision, and did not analyze the records on its own,
thereby manifesting a bias in favor of Printwell, is
unfounded.
It is noted that the petition for review merely
generally alleges that starting from its page 5, the
decision of the RTC "copied verbatim the allegations of
herein Respondents in its Memorandum before the said
court," as if "the Memorandum was the draft of the
Decision of the Regional Trial Court of Pasig," 23 but fails
to specify either the portions allegedly lifted verbatim
from the memorandum, or why she regards the decision
as copied. The omission renders the petition for review
insufficient to support her contention, considering that the
mere similarity in language or thought between
Printwell's memorandum and the trial court's decision did
not necessarily justify the conclusion that the RTC simply
lifted verbatim or copied from the memorandum.
It is to be observed in this connection that a trial or
appellate judge may occasionally view a party's
memorandum or brief as worthy of due consideration
either entirely or partly. When he does so, the judge may
adopt and incorporate in his adjudication the
memorandum or the parts of it he deems suitable, and
yet not be guilty of the accusation of lifting or copying
from the memorandum. 24 This is because of the avowed
objective of the memorandum to contribute in the proper
illumination and correct determination of the controversy.
Nor is there anything untoward in the congruence of
and the party drafting the memorandum. The frequency
of similarities in argumentation, phraseology, expression,
and citation of authorities between the decisions of the
courts and the memoranda of the parties, which may be
great or small, can be fairly attributable to the adherence
by our courts of law and the legal profession to widely
known or universally accepted precedents set in earlier
judicial actions with identical factual milieus or posing
related judicial dilemmas.
We also do not agree with the petitioner that the
RTC's manner of writing the decision deprived her of the
opportunity to analyze its decision as to be able to assign
errors on appeal. The contrary appears, considering that
she was able to impute and assign errors to the RTC that
she extensively discussed in her appeal in the CA,
indicating her thorough analysis of the decision of the
RTC.
Our own reading of the trial court's decision
persuasively shows that the RTC did comply with the
requirements regarding the content and the manner of
writing a decision prescribed in the Constitution and
the Rules of Court. The decision of the RTC contained
clear and distinct findings of facts, and stated the
applicable law and jurisprudence, fully explaining why the
defendants were being held liable to the plaintiff. In short,
the reader was at once informed of the factual and legal
reasons for the ultimate result. SECAHa
II
Corporate personality not to be used to foster
injustice
Printwell impleaded the petitioner and the other
stockholders of BMPI for two reasons, namely: (a) to
reach the unpaid subscriptions because it appeared that
such subscriptions were the remaining visible assets of
BMPI; and (b) to avoid multiplicity of suits. 25
The petitioner submits that she had no
participation in the transaction between BMPI and
Printwell; that BMPI acted on its own; and that she had
no hand in persuading BMPI to renege on its obligation
to pay. Hence, she should not be personally liable.
We rule against the petitioner's submission.
Although a corporation has a personality separate
and distinct from those of its stockholders, directors, or
officers, 26 such separate and distinct personality is
merely a fiction created by law for the sake of
convenience and to promote the ends of justice. 27 The
corporate personality may be disregarded, and the
individuals composing the corporation will be treated as
individuals, if the corporate entity is being used as a cloak
or cover for fraud or illegality; as a justification for a
wrong; as an alter ego, an adjunct, or a business conduit
for the sole benefit of the stockholders. 28 As a general
rule, a corporation is looked upon as a legal entity, unless
and until sufficient reason to the contrary appears. Thus,
the courts always presume good faith, and for that reason
accord prime importance to the separate personality of
the corporation, disregarding the corporate personality
only after the wrongdoing is first clearly and convincingly
established. 29 It thus behooves the courts to be careful
in assessing the milieu where the piercing of the
corporate veil shall be done. 30
Although nowhere in Printwell's amended
complaint or in the testimonies Printwell offered can it be
read or inferred from that the petitioner was instrumental
in persuading BMPI to renege on its obligation to pay; or
that she induced Printwell to extend the credit
accommodation by misrepresenting the solvency of
BMPI to Printwell, her personal liability, together with that
of her co-defendants, remained because the CA found
her and the other defendant stockholders to be in charge
of the operations of BMPI at the time the unpaid
obligation was transacted and incurred, to wit:
In the case at bench, it is undisputed that
BMPI made several orders on credit from
appellee PRINTWELL involving the printing of
business magazines, wrappers and subscription
cards, in the total amount of P291,342.76
(Record, pp. 3-5, Annex "A") which facts were
never denied by appellants' stockholders that they
owe(d) appellee the amount of P291,342.76. The
said goods were delivered to and received by
BMPI but it failed to pay its overdue account to
appellee as well as the interest thereon, at the
rate of 20% per annum until fully paid. It was also
during this time that appellants stockholders were
in charge of the operation of BMPI despite the fact
that they were not able to pay their unpaid
subscriptions to BMPI yet greatly benefited from
said transactions. In view of the unpaid
subscriptions, BMPI failed to pay appellee of its
liability, hence appellee in order to protect its right
can collect from the appellants stockholders
 regarding their unpaid subscriptions. To deny
appellee from recovering from appellants would
place appellee in a limbo on where to assert their
right to collect from BMPI since the stockholders
who are appellants herein are availing the
defense of corporate fiction to evade payment of
its obligations. 31
It follows, therefore, that whether or not the
petitioner persuaded BMPI to renege on its obligations to
pay, and whether or not she induced Printwell to transact
with BMPI were not good defenses in the suit.
III
Unpaid creditor may satisfy its claim from
unpaid subscriptions; stockholders must
prove full payment of their subscriptions
Both the RTC and the CA applied the trust fund
doctrine against the defendant stockholders, including
the petitioner.
The petitioner argues, however, that the trust fund
doctrine was inapplicable because she had already fully
paid her subscriptions to the capital stock of BMPI. She
thus insists that both lower courts erred in disregarding
the evidence on the complete payment of the
subscription, like receipts, income tax returns, and
relevant financial statements.
The petitioner's argument is devoid of substance.
The trust fund doctrine enunciates a —
. . . rule that the property of a corporation
is a trust fund for the payment of creditors, but
such property can be called a trust fund 'only by
way of analogy or metaphor.' As between the
corporation itself and its creditors it is a simple
debtor, and as between its creditors and
stockholders its assets are in equity a fund for the
payment of its debts. 32 DaTISc
The trust fund doctrine, first enunciated in the
American case of Wood v. Dummer, 33 was adopted in
our jurisdiction in Philippine Trust Co. v. Rivera, 34 where
this Court declared that:
It is established doctrine that subscriptions
to the capital of a corporation constitute a fund to
which creditors have a right to look for satisfaction
of their claims and that the assignee in insolvency
can maintain an action upon any unpaid stock
subscription in order to realize assets for the
payment of its debts. (Velasco vs. Poizat,37 Phil.
802) . . . 35
We clarify that the trust fund doctrine is not limited
to reaching the stockholder's unpaid subscriptions. The
scope of the doctrine when the corporation is
insolvent encompasses not only the capital stock,
but also other property and assets generally
regarded in equity as a trust fund for the payment of
corporate debts.36 All assets and property belonging to
the corporation held in trust for the benefit of creditors
that were distributed or in the possession of the
stockholders, regardless of full payment of their
subscriptions, may be reached by the creditor in
satisfaction of its claim.
Also, under the trust fund doctrine, a
corporation has no legal capacity to release an
original subscriber to its capital stock from the
obligation of paying for his shares, in whole or in
part, 37 without a valuable consideration, 38 or
fraudulently, to the prejudice of creditors. 39 The creditor
is allowed to maintain an action upon any unpaid
subscriptions and thereby steps into the shoes of the
corporation for the satisfaction of its debt. 40 To make out
a prima facie case in a suit against stockholders of an
insolvent corporation to compel them to contribute to the
payment of its debts by making good unpaid balances
upon their subscriptions, it is only necessary to establish
that the stockholders have not in good faith paid the par
value of the stocks of the corporation. 41
The petitioner posits that the finding of irregularity
attending the issuance of the receipts (ORs) issued to the
other stockholders/subscribers should not affect her
because her receipt did not suffer similar irregularity.
Notwithstanding that the RTC and the CA did not
find any irregularity in the OR issued in her favor, we still
cannot sustain the petitioner's defense of full payment of
her subscription.
In civil cases, the party who pleads payment has
the burden of proving it, that even where the plaintiff must
allege nonpayment, the general rule is that the burden
rests on the defendant to prove payment, rather than on
the plaintiff to prove nonpayment. In other words, the
debtor bears the burden of showing with legal certainty
that the obligation has been discharged by payment. 42
Apparently, the petitioner failed to discharge her
burden.
A receipt is the written acknowledgment of the fact
of payment in money or other settlement between the
seller and the buyer of goods, the debtor or the creditor,
or the person rendering services, and the client or the
customer. 43 Although a receipt is the best evidence of
the fact of payment, it is not conclusive, but merely
presumptive; nor is it exclusive evidence, considering
that parole evidence may also establish the fact of
payment. 44
The petitioner's OR No. 227, presented to prove
the payment of the balance of her subscription, indicated
that her supposed payment had been made by means of
a check. Thus, to discharge the burden to prove payment
of her subscription, she had to adduce evidence
satisfactorily proving that her payment by check was
regarded as payment under the law.
Payment is defined as the delivery of
money. 45 Yet, because a check is not money and only
substitutes for money, the delivery of a check does not
operate as payment and does not discharge the
obligation under a judgment. 46 The delivery of a bill of
exchange only produces the fact of payment when
the bill has been encashed. 47 The following passage
from Bank of the Philippine Islands v. Royeca 48 is
enlightening: TSHEIc
Settled is the rule that payment must be
made in legal tender. A check is not legal tender
and, therefore, cannot constitute a valid tender of
payment. Since a negotiable instrument is only a
substitute for money and not money, the delivery
of such an instrument does not, by itself, operate
as payment. Mere delivery of checks does not
discharge the obligation under a judgment. The
obligation is not extinguished and remains
suspended until the payment by commercial
document is actually realized.
To establish their defense, the
respondents therefore had to present proof, not
only that they delivered the checks to the
petitioner, but also that the checks were
encashed. The respondents failed to do so. Had
the checks been actually encashed, the
respondents could have easily produced the
cancelled checks as evidence to prove the same.
Instead, they merely averred that they believed in
 good faith that the checks were encashed
because they were not notified of the dishonor of
the checks and three years had already lapsed
since they issued the checks.
Because of this failure of the respondents
to present sufficient proof of payment, it was no
longer necessary for the petitioner to prove non-
payment, particularly proof that the checks were
dishonored. The burden of evidence is shifted
only if the party upon whom it is lodged was able
to adduce preponderant evidence to prove its
claim.
Ostensibly, therefore, the petitioner's mere
submission of the receipt issued in exchange of the
check did not satisfactorily establish her allegation of full
payment of her subscription. Indeed, she could not even
inform the trial court about the identity of her drawee
bank, 49 and about whether the check was cleared and
its amount paid to BMPI. 50 In fact, she did not present
the check itself.
The income tax return (ITR) and statement of
assets and liabilities of BMPI, albeit presented, had no
bearing on the issue of payment of the subscription
because they did not by themselves prove payment. ITRs
establish a taxpayer's liability for taxes or a taxpayer's
claim for refund. In the same manner, the deposit slips
and entries in the passbook issued in the name of BMPI
were hardly relevant due to their not reflecting the alleged
payments.
It is notable, too, that the petitioner and her co-
stockholders did not support their allegation of complete
payment of their respective subscriptions with the stock
and transfer book of BMPI. Indeed, books and records of
a corporation (including the stock and transfer book) are
admissible in evidence in favor of or against the
corporation and its members to prove the corporate acts,
its financial status and other matters (like the status of the
stockholders), and are ordinarily the best evidence of
corporate acts and proceedings. 51 Specifically, a stock
and transfer book is necessary as a measure of
precaution, expediency, and convenience because it
provides the only certain and accurate method of
establishing the various corporate acts and transactions
and of showing the ownership of stock and like
matters.52 That she tendered no explanation why the
stock and transfer book was not presented warrants the
inference that the book did not reflect the actual
payment of her subscription.
Nor did the petitioner present any certificate of
stock issued by BMPI to her. Such a certificate covering
her subscription might have been a reliable evidence of
full payment of the subscriptions, considering that under
Section 65 of the Corporation Code a certificate of stock
issues only to a subscriber who has fully paid his
subscription. The lack of any explanation for the absence
of a stock certificate in her favor likewise warrants an
unfavorable inference on the issue of payment.
Lastly, the petitioner maintains that both lower
courts erred in relying on the articles of incorporation as
proof of the liabilities of the stockholders subscribing to
BMPI's stocks, averring that the articles of
incorporation did not reflect the latest subscription status
of BMPI.
Although the articles of incorporation may possibly
reflect only the pre-incorporation status of a corporation,
the lower courts' reliance on that document to determine
whether the original subscribers already fully paid their
subscriptions or not was neither unwarranted nor
erroneous. As earlier explained, the burden of
establishing the fact of full payment belonged not to
Printwell even if it was the plaintiff, but to the stockholders
like the petitioner who, as the defendants, averred full
payment of their subscriptions as a defense. Their failure
to substantiate their averment of full payment, as well as
their failure to counter the reliance on the recitals found
in the articles of incorporation simply meant their failure
or inability to satisfactorily prove their defense of full
payment of the subscriptions. EAISDH
To reiterate, the petitioner was liable pursuant to
the trust fund doctrine for the corporate obligation of
BMPI by virtue of her subscription being still unpaid.
Printwell, as BMPI's creditor, had a right to reach her
unpaid subscription in satisfaction of its claim.
IV
Liability of stockholders for corporate debts is up
to the extent of their unpaid subscription
The RTC declared the stockholders pro rata liable
(Halley v. Printwell, Inc., G.R. No. 157549, [May 30,
|||
for the debt (based on the proportion to their shares in
2011], 664 PHIL 361-389)
the capital stock of BMPI); and held the petitioner
personally liable only in the amount of P149,955.65.
We do not agree. The RTC lacked the legal and
factual support for its prorating the liability. Hence, we
need to modify the extent of the petitioner's personal
liability to Printwell. The prevailing rule is that a
stockholder is personally liable for the financial
obligations of the corporation to the extent of his unpaid
subscription. 53 In view of the petitioner's unpaid
subscription being worth P262,500.00, she was liable up
to that amount.
Interest is also imposable on the unpaid obligation.
Absent any stipulation, interest is fixed at 12% per
annum from the date the amended complaint was filed
on February 8, 1990 until the obligation (i.e., to the extent
of the petitioner's personal liability of P262,500.00) is fully
paid. 54
Lastly, we find no basis to grant attorney's fees, the
award for which must be supported by findings of fact and
of law as provided under Article 2208 of the Civil
Code 55 incorporated in the body of decision of the trial
court. The absence of the requisite findings from the RTC
decision warrants the deletion of the attorney's fees.
ACCORDINGLY, we deny the petition for review
on certiorari; and affirm with modification the decision
promulgated on August 14, 2002 by ordering the
petitioner to pay to Printwell, Inc. the sum of
P262,500.00, plus interest of 12% per annum to be
computed from February 8, 1990 until full payment. HTASIa
The petitioner shall pay cost of suit in this appeal.
SO ORDERED.
FIRST DIVISION
[G.R. Nos. 163356-57. July 1, 2015.]
JOSE A. BERNAS, CECILE H. CHENG,
VICTOR AFRICA, JESUS B. MARAMARA,
JOSE T. FRONDOSO, IGNACIO T.
MACROHON, JR., AND PAULINO T. LIM,
ACTING IN THEIR CAPACITY AS
INDIVIDUAL DIRECTORS OF MAKATI
SPORTS CLUB, INC., AND ON BEHALF OF
THE BOARD OF DIRECTORS OF MAKATI
 SPORTS CLUB, petitioners, vs. JOVENCIO
F. CINCO, VICENTE R. AYLLON, RICARDO
G. LIBREA, SAMUEL L. ESGUERRA,
ROLANDO P. DELA CUESTA, RUBEN L.
TORRES, ALEX Y. PARDO, MA. CRISTINA
SIM, ROGER T. AGUILING, JOSE B.
QUIMSON, CELESTINO L. ANG, ELISEO V.
VILLAMOR, FELIPE L. GOZON, CLAUDIO
B. ALTURA, ROGELIO G. VILLAROSA,
MANUEL R. SANTIAGO, BENJAMIN A.
CARANDANG, REGINA DE LEON-
HERLIHY, CARLOS Y. RAMOS, JR.,
ALEJANDRO Z. BARIN, EFRENILO M.
CAYANGA AND JOHN DOES, respondents.
[G.R. Nos. 163368-69. July 1, 2015.]
JOVENCIO F. CINCO, RICARDO G. LIBREA
AND ALEX Y. PARDO, petitioners, vs. JOSE
A. BERNAS, CECILE H. CHENG AND
IGNACIO A. MACROHON,respondents.
DECISION
PEREZ, J :p
Before us are two consolidated Petitions for
Review on Certiorari 1 assailing the 28 April 2003
Decision and the 27 April 2004 Resolution of the Court of
Appeals in CA-G.R. SP No. 62683, 2 which declared the
17 December 1997 Special Stockholders' Meeting of the
Makati Sports Club invalid for having been improperly
called but affirmed the actions taken during the Annual
Stockholders' Meeting held on 20 April 1998, 19 April
1999 and 17 April 2000. The dispositive portion of the
assailed decision reads:
WHEREFORE, foregoing considered,
the instant petition for review is
hereby GRANTED. The appealed Decision
dated December 12, 2000 of the SEC en banc
isSET ASIDE and the Decision dated April 20,
1998 of the Hearing Officer
is REINSTATED and AMENDED as follows:
1. The supposed Special Stockholders'
Meeting of December 17, 1997 was
prematurely or invalidly called by
the [Cinco Group]. It therefore failed
to produce any legal effects and did
not effectively remove [the Bernas
Group] as directors of the Makati
Sports Club, Inc.;
2. The expulsion of petitioner Jose A.
Bernas as well as the public auction
of his share[s] is hereby declared
void and without legal effect;
3. The ratification of the removal of [the
Bernas Group] as directors, the
expulsion of petitioner Bernas and
the sale of his share by the
defendants and by the stockholders
held in their Regular Stockholders'
Meeting held in April of 1998, 1999
and 2000, is void and produces no
effects as they were not the proper
party to cause the ratification;
4. All other actions of the [Cinco Group]
and stockholders taken during the
Regular Stockholders' Meetings
held in April 1998, 1999 and 2000,
 including the election of the [Cinco
Group] as directors after the
expiration of the term of office of
petitioners as directors, are hereby
declared valid;
5. No awards for damages and attorney's
fees. 3
The Facts
Makati Sports Club (MSC) is a domestic
corporation duly organized and existing under Philippine
laws for the primary purpose of establishing, maintaining,
and providing social, cultural, recreational and athletic
activities among its members.
Petitioners in G.R. Nos. 163356-57, Jose A.
Bernas (Bernas), Cecile H. Cheng, Victor Africa, Jesus
Maramara, Jose T. Frondoso, Ignacio T. Macrohon and
Paulino T. Lim (Bernas Group) were among the Members
of the Board of Directors and Officers of the corporation
whose terms were to expire either in 1998 or 1999.
Petitioners in G.R. Nos. 163368-69 Jovencio
Cinco, Ricardo Librea and Alex Y. Pardo (Cinco Group)
are the members and stockholders of the corporation
who were elected Members of the Board of Directors and
Officers of the club during the 17 December 1997 Special
Stockholders Meeting.
The antecedent events of the meeting and its
results, follow:
Alarmed with the rumored anomalies in handling
the corporate funds, the MSC Oversight Committee
(MSCOC), composed of the past presidents of the club,
demanded from the Bernas Group, who were then
incumbent officers of the corporation, to resign from their
respective positions to pave the way for the election of
new set of officers. 4 Resonating this clamor were the
stockholders of the corporation representing at least 100
shares who sought the assistance of the MSCOC to call
for a special stockholders meeting for the purpose of
removing the sitting officers and electing new
ones. 5 Pursuant to such request, the MSCOC called a
Special Stockholders' Meeting and sent out notices 6 to
all stockholders and members stating therein the time,
place and purpose of the meeting. For failure of the
Bernas Group to secure an injunction before the
Securities Commission (SEC), the meeting proceeded
wherein Jose A. Bernas, Cecile H. Cheng, Victor Africa,
Jesus Maramara, Jose T. Frondoso, Ignacio T.
Macrohon, Jr. and Paulino T. Lim were removed from
office and, in their place and stead, Jovencio F. Cinco,
Ricardo G. Librea, Alex Y. Pardo, Roger T. Aguiling,
Rogelio G. Villarosa, Armando David, Norberto
Maronilla, Regina de Leon-Herlihy and Claudio B. Altura,
were elected. 7
Aggrieved by the turn of events, the Bernas Group
initiated an action before the Securities Investigation and
Clearing Department (SICD) of the SEC docketed asSEC
Case No. 5840 seeking for the nullification of the 17
December 1997 Special Stockholders Meeting on the
ground that it was improperly called. Citing Section 28 of
the Corporation Code, the Bernas Group argued that the
authority to call a meeting lies with the Corporate
Secretary and not with the MSCOC which functions
merely as an oversight body and is not vested with the
power to call corporate meetings. For being called by the
persons not authorized to do so, the Bernas Group urged
the SEC to declare the 17 December 1997 Special
Stockholders' Meeting, including the removal of the
sitting officers and the election of new ones, be
nullified.
CAIHTE
 For their part, the Cinco Group insisted that the 17
December 1997 Special Stockholders' Meeting is
sanctioned by the Corporation Code and the MSC by-
laws. In justifying the call effected by the MSCOC, they
reasoned that Section 25 8 of the MSC by-laws merely
authorized the Corporate Secretary to issue notices of
meetings and nowhere does it state that such authority
solely belongs to him. It was further asseverated by the
Cinco Group that it would be useless to course the
request to call a meeting thru the Corporate Secretary
because he repeatedly refused to call a special
stockholders' meeting despite demands and even filed a
suit to restrain the holding of a special meeting. 9
Meanwhile, the newly elected directors initiated an
investigation on the alleged anomalies in administering
the corporate affairs and after finding Bernas guilty of
irregularities, 10 the Board resolved to expel him from the
club by selling his shares at public auction. 11 After the
notice 12 requirement was complied with, Bernas' shares
was accordingly sold for P902,000.00 to the highest
bidder.
Prior to the resolution of SEC Case No. 5840, an
Annual Stockholders' Meeting was held on 20 April 1998
pursuant to Section 8 of the MSC bylaws. 13 During the
said meeting, which was attended by 1,017 stockholders
representing 2/3 of the outstanding shares, the majority
resolved to approve, confirm and ratify, among others,
the calling and holding of 17 December 1997 Special
Stockholders' Meeting, the acts and resolutions adopted
therein including the removal of Bernas Group from the
Board and the election of their replacements. 14
Due to the filing of several petitions for and against
the removal of the Bernas Group from the Board pending
before the SEC resulting in the piling up of legal
controversies involving MSC, the SEC En Banc, in its
Decision 15 dated 30 March 1999, resolved to supervise
the holding of the 1999 Annual Stockholders' Meeting.
During the said meeting, the stockholders once again
approved, ratified and confirmed the holding of the 17
December 1997 Special Stockholders' Meeting.
The conduct of the 17 December 1997 Special
Stockholders' Meeting was likewise ratified by the
stockholders during the 2000 Annual Stockholders'
Meeting which was held on 17 April 2000. 16
On 9 May 2000, the SICD rendered a
Decision 17 in SEC Case No. 12-97-5840 finding, among
others, that the 17 December 1997 Special Stockholders'
Meeting and the Annual Stockholders' Meeting
conducted on 20 April 1998 and 19 April 1999 are invalid.
The SICD likewise nullified the expulsion of Bernas from
the corporation and the sale of his share at the public
auction. The dispositive portion of the said decision
reads:
WHEREFORE, in view of the foregoing
considerations this Office, through the
undersigned Hearing Officer, hereby declares
as follows:
(1) The supposed Special
Stockholders' Meeting of
December 17, 1997 was
prematurely or invalidly called by
the [the Cinco Group]. It therefore
failed to produce any legal effects
and did not effectively remove [the
Bernas Group] as directors of the
Makati Sports Club, Inc.
(2) The April 20, 1998
meeting was not attended by a
sufficient number of valid proxies.
No quorum could have been
present at the said meeting. No
corporate business could have
been validly completed and/or
transacted during the said
meeting. Further, it was not called
by the validly elected Corporate
Secretary Victor Africa nor
presided over by the validly
elected president Jose A. Bernas.
Even if the April 20, 1998 meeting
was valid, it could not ratify the
December 17, 1997 meeting
because being a void meeting, the
December 17, 1997 meeting may
not be ratified.
(3) The April 1998 meeting
was null and void and therefore
produced no legal effect.
(4) The April 1999 meeting
has not been raised as a defense
in the Answer nor assailed in a
supplemental complaint.
However, it has been raised by
[the Cinco Group] in a
manifestation dated April 21, 1999
and in their position paper dated
April 8, 2000. Its legal effects must
be the subject of this Decision in
order to put an end to the
controversy at hand. In the first
place, by [the Cinco Group's] own
admission, the alleged attendance
at the April 1999 meeting
amounted to less than 2/3 of the
stockholders entitled to vote, the
minimum number required to
effect a removal. No removal or
ratification of a removal may be
effected by less than 2/3 vote of
the stockholders. Further, it
cannot ratify the December 1997
meeting for failure to adhere to the
requirement of the By-laws on
notice as explained in paragraph
(2) above, even if it was
accompanied by valid proxies,
which it was not.
(5) The [the Cinco Group],
their agents, representatives and
all persons acting for and
conspiring on their behalf, are
hereby permanently enjoined from
carrying into effect the resolutions
and actions adopted during the 17
December 1997 and April 20,
1998 meetings and of the Board of
Directors and/or other
stockholders' meetings resulting
therefrom, and from performing
acts of control and management
of the club.
(6) The expulsion of
complainant Jose A. Bernas as
well as the public auction of his
share is hereby declared void and
without legal effect, as prayed for.
While it is true that [the Cinco
Group] were not restrained from
acting as directors during the
pendency of this case, their tenure
as directors prior to this Decision
is in the nature of de
facto directors of a de
facto Board. Only the ordinary
acts of administration which [the
 Cinco Group] carried out de
facto in good faith are valid. Other
acts, such as political acts and the
expulsion or other disciplinary
acts imposed on the [the Bernas
Group] may not be appropriately
taken by de facto officers because
the legality of their tenure as
directors is not complete and
subject to the outcome of this
case.
(7) No awards for damages
and attorney's fees. 18
On appeal, the SEC En Banc, in its 12 December
2000 Decision 19 reversed the findings of the SICD and
validated the holding of the 17 December 1997 Special
Stockholders' Meeting as well as the Annual
Stockholders' Meeting held on 20 April 1998 and 19 April
1999. DETACa
On 28 April 2003, the Court of Appeals rendered a
Decision 20 declaring the 17 December 1997 Special
Stockholders' Meeting invalid for being improperly called
but affirmed the actions taken during the Annual
Stockholders' Meeting held on 20 April 1998, 19 April
1999 and 17 April 2000.
In a Resolution 21 dated 27 April 2004, the
appellate court refused to reconsider its earlier decision.
Aggrieved by the disquisition of the Court of
Appeals, both parties elevated the case before this Court
by filing their respective Petitions for Review onCertiorari.
While the Bernas Group agrees with the disquisition of
the appellate court that the Special Stockholders'
Meeting is invalid for being called by the persons not
authorized to do so, they urge the Court to likewise
invalidate the holding of the subsequent Annual
Stockholders' Meetings invoking the application of the
holdover principle. The Cinco Group, for its part, insists
that the holding of 17 December 1997 Special
Stockholders' Meeting is valid and binding underscoring
the overwhelming ratification made by the stockholders
during the subsequent annual stockholders' meetings
and the previous refusal of the Corporate Secretary to
call a special stockholders' meeting despite demand. For
the resolution of the Court are the following issues:
The Issues
I.
WHETHER OR NOT THE HONORABLE
COURT OF APPEALS ERRED IN RULING
THAT THE 17 DECEMBER 1997 SPECIAL
STOCKHOLDERS' MEETING IS INVALID;
AND
II.
WHETHER OR NOT THE HONORABLE
COURT OF APPEALS ERRED IN FAILING TO
NULLIFY THE HOLDING OF THE ANNUAL
STOCKHOLDERS' MEETING ON 20 APRIL
1998, 19 APRIL 1999 AND 17 APRIL 2000.
The Court's Ruling
The Corporation Code laid down the rules on the
removal of the Directors of the corporation by
providing, inter alia, the persons authorized to call the
meeting and the number of votes required for the
purpose of removal, thus:
Sec. 28. Removal of directors or
trustees. — Any director or trustee of a
corporation may be removed from office by a
vote of the stockholders holding or representing
at least two-thirds (2/3) of the outstanding
capital stock, or if the corporation be a non-stock
 corporation, by a vote of at least two-thirds (2/3)
of the members entitled to vote: Provided, That
such removal shall take place either at a regular
meeting of the corporation or at a special
meeting called for the purpose, and in either
case, after previous notice to stockholders or
members of the corporation of the intention to
propose such removal at the meeting. A special
meeting of the stockholders or members of
a corporation for the purpose of removal of
directors or trustees, or any of them, must
be called by the secretary on order of the
president or on the written demand of the
stockholders representing or holding at
least a majority of the outstanding capital
stock, or, if it be a non-stock corporation, on the
written demand of a majority of the members
entitled to vote. Should the secretary fail or
refuse to call the special meeting upon such
demand or fail or refuse to give the notice, or if
there is no secretary, the call for the meeting
may be addressed directly to the stockholders
or members by any stockholder or member of
the corporation signing the demand. Notice of
the time and place of such meeting, as well as
of the intention to propose such removal, must
be given by publication or by written notice
prescribed in this Code. Removal may be with
or without cause: Provided, That removal
without cause may not be used to deprive
minority stockholders or members of the right of
representation to which they may be entitled
under Section 24 of this Code. (Emphasis
supplied)
Corollarily, the pertinent provisions of MSC by-
laws which govern the manner of calling and sending of
notices of the annual stockholders' meeting and the
special stockholders' meeting provide:
SEC. 8. Annual Meetings. — The annual
meeting of stockholders shall be held at the
Clubhouse on the third Monday of April of every
year unless such day be a holiday in which case
the annual meeting shall be held on the next
succeeding business day. At such meeting, the
President shall render a report to the
stockholders of the clubs.
xxx xxx xxx
SEC. 10. Special Meetings. — Special
meetings of stockholders shall be held at the
Clubhouse when called by the President or by
the Board of Directors or upon written request of
the stockholders representing not less than one
hundred (100) shares. Only matters specified in
the notice and call will be taken up at special
meetings.
xxx xxx xxx
SEC. 25. Secretary. — The Secretary
shall keep the stock and transfer book and the
corporate seal, which he shall stamp on all
documents requiring such seal, fill and sign
together with the President, all the certificates of
stocks issued, give or caused to be given all
notices required by law of these By-laws as well
as notices of all meeting of the Board and of the
stockholders; shall certify as to quorum at
meetings; shall approve and sign all
correspondence pertaining to the Office of the
Secretary; shall keep the minutes of all
meetings of the stockholders, the Board of
Directors and of all committees in a book or
books kept for that purpose; and shall be acting
President in the absence of the President and
Vice-President. The Secretary must be a citizen
and a resident of the Philippines. The Secretary
 shall keep a record of all the addresses and
telephone numbers of all stockholders. 22
Textually, only the President and the Board of
Directors are authorized by the by-laws to call a special
meeting. In cases where the person authorized to call a
meeting refuses, fails or neglects to call a meeting, then
the stockholders representing at least 100 shares, upon
written request, may file a petition to call a special
stockholder's meeting.
In the instant case, there is no dispute that the 17
December 1997 Special Stockholders' Meeting was
called neither by the President nor by the Board of
Directors but by the MSCOC. While the MSCOC, as its
name suggests, is created for the purpose of overseeing
the affairs of the corporation, nowhere in the by-laws
does it state that it is authorized to exercise corporate
powers, such as the power to call a special meeting,
solely vested by law and the MSC by-laws on the
President or the Board of Directors.
The board of directors is the directing and
controlling body of the corporation. It is a creation of the
stockholders and derives its power to control and direct
the affairs of the corporation from them. The board of
directors, in drawing to itself the power of the corporation,
occupies a position of trusteeship in relation to the
stockholders, in the sense that the board should exercise
not only care and diligence, but utmost good faith in the
management of the corporate affairs. 23
The underlying policy of the Corporation Code is
that the business and affairs of a corporation must be
governed by a board of directors whose members have
stood for election, and who have actually been elected
by the stockholders, on an annual basis. Only in that way
can the continued accountability to shareholders, and the
legitimacy of their decisions that bind the corporation's
stockholders, be assured. The shareholder vote is critical
to the theory that legitimizes the exercise of power by the
directors or officers over the properties that they do not
own. 24
Even the Corporation Code is categorical in
stating that a corporation exercises its powers through its
board of directors and/or its duly authorized officers and
agents, except in instances where the Corporation
Code requires stockholders' approval for certain specific
acts:
SEC. 23. The Board of Directors or
Trustees. — Unless otherwise provided in this
Code, the corporate powers of all the
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 and trustees . . . .
A corporation's board of directors is understood to
be that body which (1) exercises all powers provided for
under the Corporation Code; (2) conducts all business of
the corporation; and (3) controls and holds all the
property of the corporation. Its members have been
characterized as trustees or directors clothed with
fiduciary character. 25 aDSIHc
It is ineluctably clear that the fiduciary relation is
between the stockholders and the board of directors and
who are vested with the power to manage the affairs of
the corporation. The ordinary trust relationship of
directors of a corporation and stockholders is not a matter
of statutory or technical law. 26 It springs from the fact
that directors have the control and guidance of corporate
affairs and property and hence of the property interests
of the stockholders. 27 Equity recognizes that
stockholders are the proprietors of the corporate interests
and are ultimately the only beneficiaries
thereof. 28 Should the board fail to perform its fiduciary
duty to safeguard the interest of the stockholders or
commit acts prejudicial to their interest, the law and the
by-laws provide mechanisms to remove and replace the
erring director. 29
Relative to the powers of the Board of Directors,
nowhere in the Corporation Code or in the MSC by-laws
can it be gathered that the Oversight Committee is
authorized to step in wherever there is breach of fiduciary
duty and call a special meeting for the purpose of
removing the existing officers and electing their
replacements even if such call was made upon the
request of shareholders. Needless to say, the MSCOC is
neither empowered by law nor the MSC by-laws to call a
meeting and the subsequent ratification made by the
stockholders did not cure the substantive infirmity, the
defect having set in at the time the void act was done.
The defect goes into the very authority of the persons
who made the call for the meeting. It is apt to recall that
illegal acts of a corporation which contemplate the doing
of an act which is contrary to law, morals or public order,
or contravenes some rules of public policy or public duty,
are, like similar transactions between individuals,
void. 30 They cannot serve as basis for a court action, nor
acquire validity by performance, ratification or
estoppel. 31 The same principle can apply in the present
case. The void election of 17 December 1997 cannot be
ratified by the subsequent Annual Stockholders' Meeting.
A distinction should be made between corporate
acts or contracts which are illegal and those which are
merely ultra vires. The former contemplates the doing of
an act which are contrary to law, morals or public policy
or public duty, and are, like similar transactions between
individuals, void. They cannot serve as basis of a court
action nor acquire validity by performance, ratification or
estoppel. Mere ultra vires acts, on the other hand, or
those which are not illegal or void ab initio, but are not
merely within the scope of the articles of incorporation,
are merely voidable and may become binding and
enforceable when ratified by the stockholders. 32The 17
December 1997 Meeting belongs to the category of the
latter, that is, it is void ab initio and cannot be validated.
Consequently, such Special Stockholders' Meeting
called by the Oversight Committee cannot have any legal
effect. The removal of the Bernas Group, as well as the
election of the Cinco Group, effected by the assembly in
that improperly called meeting is void, and since the
Cinco Group has no legal right to sit in the board, their
subsequent acts of expelling Bernas from the club and
the selling of his shares at the public auction, are likewise
invalid.
The Cinco Group cannot invoke the application
of de facto officership doctrine to justify the actions taken
after the invalid election since the operation of the
principle is limited to third persons who were originally not
part of the corporation but became such by reason of
voting of government-sequestered
shares. 33 InCojuangco v. Roxas, 34 the Court deemed
the directors who were elected through the voting of
government of sequestered shares who assumed office
in good faith as de facto officers, viz.:
In the light of the foregoing discussion,
the Court finds and so holds that the PCGG has
no right to vote the sequestered shares of
petitioners including the sequestered
corporate shares. Only their owners, duly
authorized representatives or proxies may vote
the said shares. Consequently, the election of
private respondents Adolfo Azcuna, Edison
 Coseteng and Patricio Pineda as members of
the board of directors of SMC for 1990-1991
should be set aside.
However, petitioners cannot be declared
as duly elected members of the board of
directors thereby. An election for the purpose
should be held where the questioned shares
may be voted by their owners and/or their
proxies. Such election may be held at the next
shareholders' meeting in April 1991 or at such
date as may be set under the by-laws of SMC.
Private respondents in both cases are
hereby declared to be de facto officers who
in good faith assumed their duties and
responsibilities as duly elected members of
the board of directors of the SMC. They are
thereby legally entitled to emoluments of the
office including salary, fees and other
compensation attached to the office until they
vacate the same. (Emphasis supplied)
Apparently, the assumption of office of the Cinco
Group did not bear parallelism with the factual milieu
in Cojuangco and as such they cannot be considered
asde facto officers and thus, they are without colorable
authority to authorize the removal of Bernas and the sale
of his shares at the public auction. They cannot bind the
corporation to third persons who acquired the shares of
Bernas and such third persons cannot be deemed as
buyer in good faith. 35
The case would have been different if the
petitioning stockholders went directly to the SEC and
sought its assistance to call a special stockholders'
meeting citing the previous refusal of the Corporate
Secretary to call a meeting. Where there is an officer
authorized to call a meeting and that officer refuses, fails,
or neglects to call a meeting, the SEC can assume
jurisdiction and issue an order to the petitioning
stockholder to call a meeting pursuant to its regulatory
and administrative powers to implement the Corporation
Code. 36 This is clearly provided for by Section 50 of
the Corporation Code which we quote:
Sec. 50. Regular and special meetings of
stockholders or members. — . . .
xxx xxx xxx
Whenever, for any cause, there is no
person authorized to call a meeting, the
Securities and Exchange Commission, upon
petition of a stockholder or member, and on a
showing of good cause therefore, may issue an
order to the petitioning stockholder or member
directing him to call a meeting of the corporation
by giving proper notice required by this Code or
by the by-laws. The petitioning stockholder or
member shall preside thereat until at least
majority of the stockholders or members present
have chosen one of their member[s] as
presiding officer.
As early as Ponce v. Encarnacion, etc. and
Gapol, 37 the Court of First Instance (now the SEC) 38 is
empowered to call a meeting upon petition of the
stockholder or member and upon showing of good cause,
thus:
On the showing of good cause therefore,
the court may authorize a stockholder to call a
meeting and to preside thereat until the majority
stockholders representing a majority of the
stock present and permitted to be voted shall
have chosen one among them to preside it. And
this showing of good cause therefor exists when
the court is apprised of the fact that the by-laws
of the corporation require the calling of a general
meeting of the stockholders to elect the board of
 directors but the call for such meeting has not
been done. 39
The same jurisprudential rule resonates
in Philippine National Construction Corporation v.
Pabion, 40 where the Court validated the order of the
SEC to compel the corporation to conduct a stockholders'
meeting in the exercise of its regulatory and
administrative powers to implement the Corporation
Code:
SEC's assumption of jurisdiction over this
case is proper, as the controversy involves the
election of PNCC's directors. Petitioner does not
really contradict the nature of the question
presented and agrees that there is an intra-
corporate question involved. ETHIDa
xxx xxx xxx
Prescinding from the above premises, it
necessarily follows that SEC can compel PNCC
to hold a stockholders' meeting for the purpose
of electing members of the latter's board of
directors.
xxx xxx xxx
As respondents point out, the SEC's
action is also justified by its regulatory and
administrative powers to implement the
Corporation Code, specifically to compel the
PNCC to hold a stockholders' meeting for
election purposes. 41
Given the broad administrative and regulatory
powers of the SEC outlined under Section 50 of
the Corporation Code and Section 6 of Presidential
Decree (PD) No. 902-A, the Cinco Group cannot claim
that if was left without recourse after the Corporate
Secretary previously refused to heed its demand to call a
special stockholders' meeting. If it be true that the
Corporate Secretary refused to call a meeting despite
fervent demand from the MSCOC, the remedy of the
stockholders would have been to file a petition to the SEC
to direct him to call a meeting by giving proper notice
required under the Code. To rule otherwise would open
the floodgates to abuse where any stockholder, who
consider himself aggrieved by certain corporate actions,
could call a special stockholders' meeting for the purpose
of removing the sitting officers in direct violation of the
rules pertaining to the call of meeting laid down in the by-
laws.
Every corporation has the inherent power to adopt
by-laws for its internal government, and to regulate the
conduct and prescribe the rights and duties of its
members towards itself and among themselves in
reference to the management of its affairs. 42 The by-
laws of a corporation are its own private laws which
substantially have the same effect as the laws of the
corporation. They are in effect written into the charter. In
this sense they become part of the fundamental law of
the corporation with which the corporation and its
directors and officers must comply. 43 The general rule is
that a corporation, through its board of directors, should
act in the manner and within the formalities, if any,
prescribed in its charter or by the general law. Thus,
directors must act as a body in a meeting called pursuant
to the law or the corporation's by-laws, otherwise, any
action taken therein may be questioned by the objecting
director or shareholder. 44
Certainly, the rules set in the by-laws are
mandatory for every member of the corporation to
respect. They are the fundamental law of the corporation
with which the corporation and its officers and members
must comply. It is on this score that we cannot upon the
other hand sustain the Bernas Group's stance that the
subsequent annual stockholders' meetings were invalid.
First, the 20 April 1998 Annual Stockholders
Meeting was valid because it was sanctioned by Section
8 45 of the MSC bylaws. Unlike in Special Stockholders
Meeting 46 wherein the bylaws mandated that such
meeting shall be called by specific persons only, no such
specific requirement can be obtained under Section 8.
Second, the 19 April 1999 Annual Stockholders
Meeting is likewise valid because in addition to the fact
that it was conducted in accordance to Section 8 of the
MSC bylaws, such meeting was supervised by the SEC
in the exercise of its regulatory and administrative powers
to implement the Corporation Code. 47
Needless to say, the conduct of SEC supervised
Annual Stockholders Meeting gave rise to the
presumption that the corporate officers who won the
election were duly elected to their positions and therefore
can be rightfully considered as de jure officers. As de
jure officials, they can lawfully exercise functions and
legally perform such acts that are within the scope of the
business of the corporation except ratification of actions
that are deemed void from the beginning.
Considering that a new set of officers were already
duly elected in 1998 and 1999 Annual Stockholders
Meetings, the Bernas Group cannot be permitted to use
the holdover principle as a shield to perpetuate in office.
Members of the group had no right to continue as
directors of the corporation unless reelected by the
stockholders in a meeting called for that purpose every
year. 48 They had no right to hold-over brought about by
the failure to perform the duty incumbent upon them. 49 If
they were sure to be reelected, why did they fail, neglect,
or refuse to call the meeting to elect the members of the
board? 50
Moreover, it is fundamental rule that factual
findings of quasi-judicial agencies like the SEC, if
supported by substantial evidence, are generally
accorded not only great respect but even finality, and are
binding upon this Court unless it was shown that the
quasi-judicial agencies had arbitrarily disregarded
evidence before it had misapprehended evidence to such
an extent as to compel a contrary conclusion if such
evidence had been properly appreciated. 51 It is not the
function of this Court to analyze or weigh all over again
the evidence and credibility of witnesses presented
before the lower court, tribunal, or office, as we are not
trier of facts. 52Our jurisdiction is limited to reviewing and
revising errors of law imputed to the lower court, the
latter's finding of facts being conclusive and not
reviewable by this Court. 53 However, when it can be
shown that administrative bodies grossly misappreciated
evidence of such nature as to compel a contrary
conclusion, the Court will not hesitate to reverse its
factual findings. 54 In the case at bar, the incongruent
findings of the SEC on the one hand, and the Court of
Appeals on the other, constrained the Court to review the
records to ascertain which body correctly appreciated the
facts vis-à-vis the standing statutory and jurisprudential
principles.
After finding that the ruling of the appellate court
was in accordance with the existing laws and
jurisprudence as exhaustively discussed above, we
hereby quote with approval its disquisition:
(1) The supposed Special Stockholders'
Meeting of 17 December 1997 was prematurely
or invalidly called by the [Cinco Group]. It
therefore failed to produce any legal effects and
 did not effectively remove [the Bernas Group] as
directors of the Makati Sports Club, Inc.;
(2) The expulsion of [Bernas] as well as
the public auction of his shares is hereby
declared void and without legal effect;
(3) The ratification of the removal of [the
Bernas Group] as directors, the expulsion of
Bernas and the sale of his share by the [Cinco
Group] and by the stockholders held in their
Regular Stockholders' Meeting held in April of
1998, 1999 and 2000, is void and produces no
effects as they were not the proper party to
cause the ratification;
(4) All other actions of the [Cinco Group]
and stockholders taken during the Regular
Stockholders' Meetings held in April 1998, 1999
and 2000, including the election of the [Cinco
Group] as directors after the expiration of the
term of office of [Bernas Group] as directors, are
hereby declared valid. 55
In fine, we hold that 17 December 1997 Special
Stockholders' Meeting is null and void and produces no
effect; the resolution expelling the Bernas Group from the
corporation and authorizing the sale of Bernas' shares at
the public auction is likewise null and void. The
subsequent Annual Stockholders' Meeting held on 20
April 1998, 19 April 1999 and 17 April 2000 are valid and
binding except the ratification of the removal of the
Bernas Group and the sale of Bernas' shares at the
public auction effected by the body during the said
meetings. The expulsion of the Bernas Group and the
subsequent auction of Bernas' shares are void from the
very beginning and therefore the ratifications effected
during the subsequent meetings cannot be sustained. A
void act cannot be the subject of ratification. 56
WHEREFORE, premises considered, the petitions
of Jose A. Bernas, Cecile H. Cheng, Victor Africa, Jesus
B. Maramara, Jose T. Frondoso, Ignacio A. Macrohon
and Paulino T. Lim in G.R. Nos. 163356-57 and of
Jovencio Cinco, Ricardo Librea and Alex Y. Pardo in
G.R. Nos. 163368-69 are hereby DENIED. The assailed
Decision dated 28 April 2003 and Resolution dated 27
April 2004 of the Court of Appeals are
hereby AFFIRMED.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro and Bersamin,
JJ., concur.
Perlas-Bernabe, J., please see separate
concurring opinion.
Separate Opinions
PERLAS-BERNABE, J., concurring:
I.
I agree with the ponencia that the December 17,
1997 Special Stockholders' Meeting is void because it
was improperly called. However, I find that a reliance 1on
Section 50 of the Corporation Code 2 or Section 10 of the
by-laws is misplaced.
To recount, the December 17, 1997 Special
Stockholders' Meeting was called by the Makati Sports
Club, Inc. (MSC) Oversight Committee (MSCOC), at the
instance of certain stockholders, to remove the members
of the Bernas Group who were sitting as directors at that
time. During the said meeting, the Bernas Group was
removed from office and the Cinco Group was elected as
directors of MSC. cSEDTC
 The correct provision to be applied is Section 28 of
the Corporation Code as it specifically governs the
procedure for removing directors or trustees, to wit:
SEC. 28. Removal of directors or
trustees. — Any director or trustee of a
corporation may be removed from office by a
vote of the stockholders holding or representing
at least two-thirds (2/3) of the outstanding
capital stock, or if the corporation be a non-stock
corporation, by a vote of at least two-thirds (2/3)
of the members entitled to vote: Provided, That
such removal shall take place either at a regular
meeting of the corporation or at a special
meeting called for the purpose, and in either
case, after previous notice to stockholders or
members of the corporation of the intention to
propose such removal at the meeting. A special
meeting of the stockholders or members of
a corporation for the purpose of removal of
directors or trustees, or any of them, must
be called by the secretary on order of the
president or on the written demand of the
stockholders representing or holding at
least a majority of the outstanding capital
stock, or, if it be a non-stock corporation, on the
written demand of a majority of the members
entitled to vote. Should the secretary fail or
refuse to call the special meeting upon such
demand or fail or refuse to give the notice, or
if there is no secretary, the call for the
meeting may be addressed directly to the
stockholders or members by any
stockholder or member of the corporation
signing the demand. Notice of the time and
place of such meeting, as well as of the intention
to propose such removal, must be given by
publication or by written notice prescribed in this
Code. Removal may be with or without
cause: Provided, That removal without cause
may not be used to deprive minority
stockholders or members of the right of
representation to which they may be entitled
under Section 24 of this Code. (Emphases
supplied)
Section 50 of the Corporation Code is inapplicable
since it governs the conduct of special stockholders'
meetings in general:
SEC. 50. Regular and special
meetings of stockholders or members. —
Regular meetings of stockholders or members
shall be held annually on a date fixed in the by-
laws, or if not so fixed, on any date in April of
every year as determined by the board of
directors or trustees: Provided. That written
notice of regular meetings shall be sent to all
stockholders or members of record at least two
(2) weeks prior to the meeting, unless a different
period is required by the by-laws.
xxx xxx xxx
Whenever, for any cause, there is no
person authorized to call a meeting, the
Securities and Exchange Commission, upon
petition of a stockholder or member on a
showing of good cause therefor, may issue an
order to the petitioning stockholder or member
directing him to call a meeting of the corporation
by giving proper notice required by this Code or
by the by-laws. The petitioning stockholder or
member shall preside thereat wail at least a
majority of the stockholders or members present
have chosen one of their number as presiding
officer. (Emphasis supplied)
 Neither would Section 10 of MSC's by-laws apply
since, similar to Section 50 of the Corporation Code, it
applies to special stockholders' meetings in general:
SEC. 10. Special Meetings. — Special meetings
of stockholders shall be held at the Clubhouse
when called by the President or by the Board of
Directors or upon written request of
stockholders representing not less than one
hundred (100) shares. Only matters specified in
the notice and call will be taken up at special
meetings.3
Following the doctrine that specific provisions must
prevail over general ones, 4 the procedure, as prescribed
in Section 28 of the Corporation Code, should have
therefore governed the conduct of the December 17,
1997 Meeting which was particularly intended for the
removal of the Bernas Group from the MSC's Board of
Directors, viz.:
(a) the special meeting must have been called by
the secretary; and
(b) the same should have been made upon the
order of the president or on written demand
of the stockholders representing at least a
majority of the outstanding capital stock;
and
(c) in case the secretary failed or refused to give
such notice, or if there was no secretary,
the call may have been be made directly by
any stockholder signing the demand.
Alternatively, an MSC stockholder could have filed
a petition before the Securities and Exchange
Commission (SEC) to compel either the president or a
majority of the stockholders of the corporation to order
the call, or the corporate secretary to make such call, for
good cause shown, in view of the SEC's broad regulatory
powers 5 under Presidential Decree No. (PD) 902-A. 6
In these cases, the procedure outlined in Section
28 of the Corporation Code was not complied with.
Neither was a petition to the SEC, as abovementioned,
filed by an MSC stockholder. The records show that
certain MSC stockholders — who were not shown to
constitute a majority of the outstanding capital stock of
the corporation at that — unduly caused the MSCOC to
make the call for the December 17, 1997 Meeting despite
the latter's lack of authority to do so under the
Corporation Code and/or the MSC by-laws. Thus, the
December 17, 1997 Meeting, which suffers from a
substantive and not a mere formal defect given that its
improper call goes against the mandated statutory
authority to effectuate such corporate action, is contrary
to law and, therefore, void ab initio.
II.
In Pirovano v. De la Rama Steamship Co.
(Pirovano), 7 the Court held that corporate acts which are
illegal for being contrary to law are incapable of
ratification, as opposed to acts which are merely ultra
vires, i.e., acts which are not within the powers of the
corporation, to wit:
. . . [A] distinction should be made
between corporate acts or contracts which are
illegal and those which are merely ultra vires.
The former contemplates the doing of an act
which is contrary to law, morals, or public policy
or public duty, and are, like similar transactions
between public order, or contravene some rules
of individuals, void. They cannot serve as basis
of a court action, nor acquire validity by
performance, ratification, or estoppel.
Mere ultra vires acts, on the other hand, or
 those which are not illegal and void ab initio, but
are not merely within the scope of the articles of
incorporation, are merely voidable and may
become binding and enforceable when ratified
by the stockholders. 8
As earlier mentioned, the December 17, 1997
Meeting is void ab initio for contravening Section 28 of
the Corporation Code. Hence, while I agree with
theponencia that the April 20, 1998 and April 19, 1999
Meetings were called in compliance with the MSC by-
laws, 9 I differ in that the removal of the Bernas Group
and election of the Cinco Group — which are mere
incidents resulting from the void December 17, 1997
Meeting — could not have been ratified, notwithstanding
the fact that the latter April 19, 1999 Meeting was held
under the supervision of the SEC. The SEC, being a
mere regulatory body, cannot lend validity to otherwise
invalid acts. Further, the presumption of
regularity 10 cannot apply for the purpose of validating an
internal action of a private corporation.
While Section 51 of the Corporation Code states
that a meeting shall be valid even if improperly called if
all the stockholders are present or duly represented at
the meeting, it has not been shown that this is the case
here.
Neither can the ratifications done during the April
20, 1998 and April 19, 1999 Meetings be equated to the
valid election of the Cinco Group, enough to accord them
with de jure status. 11 Clearly, these meetings were
specifically called for the ratification of acts taken during
the void December 17, 1997 Meeting, and not for the
actual election of directors anew; to reiterate, the
ratification of void acts is strictly prohibited under the
doctrine enunciated in Pirovano. Besides, the procedure
in ratifying acts approved or taken during prior meetings
is different from the procedure in electing
directors, 12 which was not shown to have been complied
with in any of those meetings.
Ultimately, however, it should be pointed out that
the issue of directorship has been rendered moot and
academic by the lapse of the three (3)-year staggered
term prescribed by the MSC's by-laws. 13 In fact, the
MSC's own website 14 states that the corporation has a
new set of directors which does not include any of the
herein parties. Thus, the only actual issue left to be
resolved is the validity of the expulsion of Bernas from
MSC and the subsequent sale of his shares, all effected
in the February 27, 1998 Meeting. On this score, I join
the ponencia in ruling that both actions are void and
without legal effect. 15
III.
Under the MSC by-laws, 16 a member may be
suspended or expelled with the two-thirds (2/3) vote of
the Board of Directors. SDAaTC
As aptly observed by the ponencia, the Cinco
Group cannot invoke the de facto officership doctrine to
justify its actions after their invalid election in the
December 17, 1997 Meeting, particularly, the expulsion
of Bernas from MSC and the sale of his shares. A de
facto officer is one who acts as such under color of an
election or appointment, but fails being a de jure officer
by some irregularity or failure to qualify as required by
law. 17 Having ruled out the validity of their election either
through the December 17, 1997 Meeting or through the
ratifications in the April 20, 1998 and April 19, 1999
Meetings, the Cinco Group cannot be considered as de
facto directors of MSC. As such, they could not have
validly expelled Bernas from MSC and sold his shares of
stock. More significantly, since the de factodoctrine rests
 on public policy and justice, the official dealings of
directors de facto with third persons being sustained as
rightful and valid on the ground of the corporation's
continuous acquiescence to the officers holding
themselves out as having such authority, it is only
available to third persons dealing with corporations.18 No
such third person invoked the doctrine here.
ACCORDINGLY, subject to the qualifications
herein made, I vote to DENY the consolidated petitions.
(Bernas v. Cinco, G.R. Nos. 163356-57 & 163368-69,
|||
[July 1, 2015])
THIRD DIVISION
[G.R. No. 184332. February 17, 2016.]
ANNA TENG, petitioner, vs. SECURITIES
AND EXCHANGE COMMISSION (SEC) and
TING PING LAY, respondents.
DECISION
REYES, J :p
This petition for review on certiorari 1 under Rule
45 of the Rules of Court seeks the reversal of the
Decision 2 dated April 29, 2008 and the
Resolution 3 dated August 28, 2008 rendered by the
Court of Appeals (CA) in CA-G.R. SP No. 99836. The CA
affirmed the orders of the Securities and Exchange
Commission (SEC) granting the issuance of an alias writ
of execution, compelling petitioner Anna Teng (Teng) to
register and issue new certificates of stock in favor of
respondent Ting Ping Lay (Ting Ping).
The Facts
This case has its origin in G.R. No.
129777 4 entitled TCL Sales Corporation and Anna Teng
v. Hon. Court of Appeals and Ting Ping Lay. Herein
respondent Ting Ping purchased 480 shares of TCL
Sales Corporation (TCL) from Peter Chiu (Chiu) on
February 2, 1979; 1,400 shares on September 22, 1985
from his brother Teng Ching Lay (Teng Ching), who was
also the president and operations manager of TCL; and
1,440 shares from Ismaelita Maluto (Maluto) on
September 2, 1989. 5
Upon Teng Ching's death in 1989, his son Henry
Teng (Henry) took over the management of TCL. To
protect his shareholdings with TCL, Ting Ping on August
31, 1989 requested TCL's Corporate Secretary, herein
petitioner Teng, to enter the transfer in the Stock and
Transfer Book of TCL for the proper recording of his
acquisition. He also demanded the issuance of new
certificates of stock in his favor. TCL and Teng, however,
refused despite repeated demands. Because of their
refusal, Ting Ping filed a petition for mandamus with the
SEC against TCL and Teng, docketed as SEC Case No.
3900. 6
In its Decision 7 dated July 20, 1994, the SEC
granted Ting Ping's petition, ordering as follows:
WHEREFORE, in view of all the
foregoing facts and circumstances, judgment is
hereby rendered.
A. Ordering [TCL and Teng] to record in
the Books of the Corporation the following
shares:
 1. 480 shares acquired by [Ting
Ping] from [Chiu] per Deed of
Sales [sic] dated February 20,
1979;
2. 1,400 shares acquired by [Ting
Ping] from [Teng Ching] per Deed
of Sale dated September 22,
1985; and
3. 1,440 shares acquired by [Ting
Ping] from [Maluto] per Deed of
Assignment dated Sept. 2,
1989 [sic].
B. Ordering [TCL and Teng] to issue
corresponding new certificates of stocks (sic) in
the name of [Ting Ping].
C. Ordering [TCL and Teng] to pay [Ting
Ping] moral damages in the amount of One
Hundred Thousand (P100,000.00) Pesos and
Fifty Thousand (P50,000.00) Pesos for
attorney's fees.
SO ORDERED. 8 AaCTcI
TCL and Teng appealed to the SEC en banc,
which, in its Order 9 dated June 11, 1996, affirmed the
SEC decision with modification, in that Teng was held
solely liable for the payment of moral damages and
attorney's fees.
Not contented, TCL and Teng filed a petition for
review with the CA, docketed as CA-G.R. SP. No. 42035.
On January 31, 1997, the CA, however, dismissed the
petition for having been filed out of time and for finding
no cogent and justifiable grounds to disturb the findings
of the SEC en banc. 10 This prompted TCL and Teng to
come to the Court via a petition for review
on certiorari under Rule 45.
On January 5, 2001, the Court promulgated its
Decision in G.R. No. 129777, the dispositive portion of
which states:
WHEREFORE, the petition is DENIED,
and the Decision dated January 31, 1997, as
well as the Resolution dated July 3, 1997 of [the
CA] are hereby AFFIRMED. Costs against [TCL
and Teng].
SO ORDERED. 11
After the finality of the Court's decision, the SEC
issued a writ of execution addressed to the Sheriff of the
Regional Trial Court (RTC) of Manila. Teng, however,
filed on February 4, 2004 a complaint for interpleader
with the RTC of Manila, Branch 46, docketed as Civil
Case No. 02-102776, where Teng sought to compel
Henry and Ting Ping to interplead and settle the issue of
ownership over the 1,400 shares, which were previously
owned by Teng Ching. Thus, the deputized sheriff held
in abeyance the further implementation of the writ of
execution pending outcome of Civil Case No. 02-
102776. 12
On March 13, 2003, the RTC of Manila, Branch 46,
rendered its Decision 13 in Civil Case No. 02-102776,
finding Henry to have a better right to the shares of stock
formerly owned by Teng Ching, except as to those
covered by Stock Certificate No. 011 covering 262.5
shares, among others. 14
Thereafter, an Ex Parte Motion for the Issuance
of Alias Writ of Execution 15 was filed by Ting Ping where
he sought the partial satisfaction of SEC en banc Order
dated June 11, 1996 ordering TCL and Teng to record
the 480 shares he acquired from Chiu and the 1,440
shares he acquired from Maluto, and for Teng's payment
of the damages awarded in his favor.
 Acting upon the motion, the SEC issued an On April 29, 2008, the CA promulgated the
Order 16 dated August 9, 2006 granting partial assailed decision dismissing the petition and denying the
enforcement and satisfaction of the Decision dated July motion to expunge the SEC's comment. 28 EcTCAD

20, 1994, as modified by the SEC en banc's Order dated Hence, Teng filed the present petition, raising the
June 11, 1996. 17 On the same date, the SEC issued an following grounds:
alias writ of execution. 18
I. THE RESPONDENT [CA] GRAVELY ERRED
Teng and TCL filed their respective motions to IN DECLARING THAT THERE WAS NO
quash the alias writ of execution, 19 which was opposed NEED TO SURRENDER THE STOCK
by Ting Ping, 20 who also expressed his willingness to CERTIFICATES REPRESENTING THE
surrender the original stock certificates of Chiu and SHARES CONVEYED BY [MALUTO] TO
Maluto to facilitate and expedite the transfer of the shares [TING PING] TO RECORD THE
in his favor. Teng pointed out, however, that the annexes TRANSFER THEREOF IN THE
in Ting Ping's opposition did not include the subject CORPORATE BOOKS AND ISSUE NEW
certificates of stock, surmising that they could have been STOCK CERTIFICATES[;]
lost or destroyed. 21 Ting Ping belied this, claiming that II. THE RESPONDENT [CA] GRAVELY ERRED
his counsel Atty. Simon V. Lao already communicated IN UPHOLDING THE POSE THAT
with TCL's counsel regarding the surrender of the said THERE WAS NEITHER AMENDMENT
certificates of stock. 22 Teng then filed a counter NOR ALTERATION OF THE FINAL
manifestation where she pointed out a discrepancy DECISION OF THE SUPREME COURT
IN "TCL SALE[S] CORP., ET AL. VS. CA,
between the total shares of Maluto based on the
ET AL.", G.R. NO. 129777, DESPITE THE
annexes, which is only 1305 shares, as against the 1440
CONTRARY RECORD THERETO[;]
shares acquired by Ting Ping based on the SEC Order
dated August 9, 2006. 23 III. THE RESPONDENT [CA] GRAVELY ERRED
IN DECLARING THAT THE [OSG] WAS
On May 25, 2007, the SEC denied the motions to ALREADY REQUIRED TO COMMENT
quash filed by Teng and TCL, and affirmed its Order ON [TENG'S] MOTION FOR
dated August 9, 2006. 24 RECONSIDERATION.29
Unperturbed, Teng filed a petition for certiorari and The core question before the Court is whether the
prohibition under Rule 65 of the Rules of Court, docketed surrender of the certificates of stock is a requisite before
as CA-G.R. SP No. 99836. 25 The SEC, through the registration of the transfer may be made in the corporate
Office of the Solicitor General (OSU), filed a Comment books and for the issuance of new certificates in its stead.
dated June 30, 2008, 26 which, subsequently, Teng Note at this juncture that the present dispute involves the
moved to expunge. 27 execution of the Court's decision in G.R. No. 129777 but
only with regard to Chiu's and Maluto's respective
shares. The subject of the orders of execution issued by
the SEC pertained only to these shares and the Court's
decision will revolve only on these shares.
Teng argues, among others, that the CA erred
when it held that the surrender of Maluto's stock
certificates is not necessary before their registration in
the corporate books and before the issuance of new
stock certificates. She contends that prior to registration
of stocks in the corporate books, it is mandatory that the
stock certificates are first surrendered because a
corporation will be liable to a bona fide holder of the
old certificate if, without demanding the said certificate,
it issues a new one. She also claims that the CA's
reliance on Tan v. SEC 30 is misplaced since therein
subject stock certificate was allegedly surrendered. 31
On the other hand, Ting Ping contends that
Section 63 of the Corporation Code does not require the
surrender of the stock certificate to the corporation, nor
make such surrender an indispensable condition before
any transfer of shares can be registered in the books of
the corporation. Ting Ping considers Section 63 as a
permissive mode of transferring shares in the
corporation. Citing Rural Bank of Salinas, Inc. v.
CA, 32 he claims that the only limitation imposed by
Section 63 is when the corporation holds any unpaid
claim against the shares intended to be transferred.
Thus, for as long as the shares of stock are validly
transferred, the corporate secretary has the ministerial
duty to register the transfer of such shares in the books
of the corporation, especially in this case because no less
than this Court has affirmed the validity of the transfer of
the shares in favor of Ting Ping. 33
Ruling of the Court
To restate the basics —
A certificate of stock is a written instrument signed
by the proper officer of a corporation stating or
acknowledging that the person named in the document
is the owner of a designated number of shares of its
stock. It is prima facie evidence that the holder is a
shareholder of a corporation. 34 A certificate, however, is
merely a tangible evidence of ownership of shares of
stock. 35 It is not a stock in the corporation and merely
expresses the contract between the corporation and the
stockholder. 36 The shares of stock evidenced by said
certificates, meanwhile, are regarded as property and the
owner of such shares may, as a general rule, dispose of
them as he sees fit, unless the corporation has been
dissolved, or unless the right to do so is properly
restricted, or the owner's privilege of disposing of his
shares has been hampered by his own action. 37
Section 63 of the Corporation Code prescribes the
manner by which a share of stock may be transferred.
Said provision is essentially the same as Section 35 of
the old Corporation Law, which, as held in Fleisher v.
Botica Nolasco Co., 38 defines the nature, character and
transferability of shares of stock. Fleisher also stated that
the provision on the transfer of shares of stocks
contemplates no restriction as to whom they may be
transferred or sold. As owner of personal property, a
shareholder is at liberty to dispose of them in favor of
whomsoever he pleases, without any other limitation in
this respect, than the general provisions of law. 39
Section 63 provides:
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 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.
No shares of stock against which the
corporation holds any unpaid claim shall be
transferable in the books of the corporation.
(Emphasis and underscoring ours)
Under the provision, certain minimum requisites
must be complied with for there to be a valid transfer of
stocks, to wit: (a) there must be delivery of the stock
certificate; (b) the certificate must be endorsed by the
owner or his attorney-in-fact or other persons legally
authorized to make the transfer; and (c) to be valid
against third parties, the transfer must be recorded in
the books of the corporation. 40 HSAcaE
It is the delivery of the certificate, coupled with the
endorsement by the owner or his duly authorized
representative that is the operative act of transfer of
shares from the original owner to the transferee. 41 The
Court even emphatically declared in Fil-Estate Golf and
Development, Inc., et al. v. Vertex Sales and Trading,
Inc. 42 that in "a sale of shares of stock, physical delivery
of a stock certificate is one of the essential requisites for
the transfer of ownership of the stocks purchased." 43 The
delivery contemplated in Section 63, however, pertains
to the delivery of the certificate of shares by the
transferor to the transferee, that is, from the original
stockholder named in the certificate to the person or
entity the stockholder was transferring the shares to,
whether by sale or some other valid form of absolute
conveyance of ownership. 44 "[S]hares of stock may be
transferred by delivery to the transferee of the
certificate properly indorsed. Title may be vested in the
transferee by the delivery of the duly indorsed certificate
of stock." 45
It is thus clear that Teng's position — that Ting Ping
must first surrender Chiu's and Maluto's respective
certificates of stock before the transfer to Ting Ping may
be registered in the books of the corporation — does not
have legal basis. The delivery or surrender adverted to
by Teng, i.e., from Ting Ping to TCL, is not a requisite
before the conveyance may be recorded in its books. To
compel Ting Ping to deliver to the corporation the
certificates as a condition for the registration of the
transfer would amount to a restriction on the right of Ting
Ping to have the stocks transferred to his name, which is
not sanctioned by law. The only limitation imposed by
Section 63 is when the corporation holds any unpaid
claim against the shares intended to be transferred.
In Rural Bank of Salinas, 46 the Court ruled that the
right of a transferee/assignee to have stocks transferred
to his name is an inherent right flowing from his
ownership of the stocks. 47 In said case, the private
respondent presented to the bank the deeds of
assignment for registration, transfer of the shares
assigned in the bank's books, cancellation of the stock
certificates, and issuance of new stock certificates, which
the bank refused. In ruling favorably for the private
respondent, the Court stressed that a corporation,
either by its board, its by-laws, or the act of its officers,
cannot create restrictions in stock transfers. In
transferring stock, the secretary of a corporation acts in
purely ministerial capacity, and does not try to decide the
question of ownership. 48 If a corporation refuses to make
such transfer without good cause, it may, in fact, even be
compelled to do so by mandamus. 49 With more reason
in this case where the Court, in G.R. No. 129777, already
upheld Ting Ping's definite and uncontested titles to the
subject shares, viz.:
Respondent Ting Ping Lay was able to
establish prima facie ownership over the shares
of stocks in question, through deeds of transfer
of shares of stock of TCL Corporation.
Petitioners could not repudiate these
documents. Hence, the transfer of shares to
him must be recorded on the corporation's
stock and transfer book. 50 (Emphasis and
underscoring ours)
In the same vein, Teng cannot refuse registration
of the transfer on the pretext that the photocopies of
Maluto's certificates of stock submitted by Ting Ping
covered only 1,305 shares and not 1,440. As earlier
stated, the respective duties of the corporation and its
secretary to transfer stock are purely ministerial. 51 Aside
from this, Teng's argument on this point was adequately
explained by both the SEC and CA in this wise:
In explaining the alleged discrepancy, the
public respondent, in its 25 May 2007 order,
cited the order of the Commission En Banc,
thus:
"An examination of this
decision, however, reveals, no
categorical pronouncements of
fraud. The refusal to credit in [Ting
Ping's] favor five hundred eighty-
five (585) shares in excess of what
[Maluto] owned and the two
hundred forty (240) shares that
[Ting Ping] bought from the
corporation, is a mere product of
the failure of the corporation to
register with the [SEC] the
increase in the subscribed capital
stock by 4000 shares last 1981.
Surely, [Ting Ping] cannot be
faulted for this." 52
Nevertheless, to be valid against third parties and
the corporation, the transfer must be recorded or
registered in the books of corporation. There are several
reasons why registration of the transfer is
necessary: one, to enable the transferee to exercise
all the rights of a stockholder; 53 two, to inform the
corporation of any change in share ownership so that it
can ascertain the persons entitled to the rights and
subject to the liabilities of a stockholder; 54 and three,
to avoid fictitious or fraudulent transfers, 55 among
others. Thus, in Chua Guan v. Samahang Magsasaka,
Inc., 56 the Court stated that the only safe way to
accomplish the hypothecation of share of stock is for the
transferee [a creditor, in this case] to insist on the
assignment and delivery of the certificate and to obtain
the transfer of the legal title to him on the books of the
corporation by the cancellation of the certificate and the
issuance of a new one to him. 57 In this case, given the
Court's decision in G.R. No. 129777, registration of the
transfer of Chiu's and Maluto's shares in Ting Ping's favor
is a mere formality in confirming the latter's status as a
stockholder of TCL. 58
Upon registration of the transfer in the books of the
corporation, the transferee may now then exercise all the
rights of a stockholder, which include the right to have
stocks transferred to his name. 59 In Ponce v. Alsons
Cement Corporation, 60 the Court stated that "[f]rom the
corporation's 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. . . . [T]he
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." 61 HESIcT
The manner of issuance of certificates of stock is
generally regulated by the corporation's by-laws. Section
47 of the Corporation Code states: "a private corporation
may provide in its by-laws for . . . the manner of issuing
stock certificates." Section 63, meanwhile, provides that
"[t]he 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." In Bitong v. CA, 62 the Court outlined the
procedure for the issuance of new certificates of stock in
the name of a transferee:
First, the certificates must be signed by the
president or vice-president, countersigned by
the secretary or assistant secretary, and sealed
with the seal of the corporation. . .
. Second, delivery of the certificate is an
essential element of its issuance. . . . Third, the
par value, as to par value shares, or the full
subscription as to no par value shares, must first
be fully paid. Fourth, the original certificate
must be surrendered where the person
requesting the issuance of a certificate is a
transferee from a stockholder. 63 (Emphasis
ours and citations omitted)
The surrender of the original certificate of stock is
necessary before the issuance of a new one so that the
old certificate may be cancelled. A corporation is not
bound and cannot be required to issue a new certificate
unless the original certificate is produced and
surrendered. 64 Surrender and cancellation of the old
certificates serve to protect not only the corporation but
the legitimate shareholder and the public as well, as it
ensures that there is only one document covering a
particular share of stock.
In the case at bench, Ting Ping manifested from
the start his intention to surrender the subject certificates
of stock to facilitate the registration of the transfer and for
the issuance of new certificates in his name. It would be
sacrificing substantial justice if the Court were to grant
the petition simply because Ting Ping is yet to surrender
the subject certificates for cancellation instead of
ordering in this case such surrender and cancellation,
and the issuance of new ones in his name. 65
On the other hand, Teng, and TCL for that matter,
have already deterred for so long Ting Ping's enjoyment
of his rights as a stockholder. As early as 1989, Ting Ping
already requested Teng to enter the transfer of the
subject shares in TCL's Stock and Transfer Book; in
2001, the Court, in G.R. No. 129777, resolved Ting Ping's
rights as a valid transferee and shareholder; in 2006, the
SEC ordered partial execution of the judgment; and in
2008, the CA affirmed the SEC's order of execution. The
Court will not allow Teng and TCL to frustrate Ting Ping's
rights any longer. Also, the Court will not dwell on the
other issues raised by Teng as it becomes irrelevant in
light of the Court's disquisition.AcICHD
 WHEREFORE, the petition is DENIED. The
Decision dated April 29, 2008 and Resolution dated
August 28, 2008 of the Court of Appeals in CA-G.R. SP
No. 99836 are AFFIRMED.
Respondent Ting Ping Lay is hereby ordered to
surrender the certificates of stock covering the shares
respectively transferred by Ismaelita Maluto and Peter
Chiu. Petitioner Anna Teng or the incumbent corporate
secretary of TCL Sales Corporation, on the other hand,
is hereby ordered, under pain of contempt, to
immediately cancel Ismaelita Maluto's and Peter Chiu's
certificates of stock and to issue new ones in the name
of Ting Ping Lay, which shall include Ismaelita Maluto's
shares not covered by any existing certificate of stock but
otherwise validly transferred to Ting Ping Lay.
Costs against petitioner Anna Teng.
SO ORDERED.
(Teng v. Securities and Exchange Commission, G.R. No.
|||
184332, [February 17, 2016])
FIRST DIVISION
[G.R. No. 208844. November 10, 2015.]
F & S VELASCO COMPANY, INC., IRWIN J.
SEVA, ROSINA B. VELASCO-SCRIBNER,
MERCEDEZ SUNICO, and JOSE
SATURNINO O.
VELASCO, * petitioners,vs. DR. ROMMEL L.
MADRID, PETER PAUL L. DANAO,
MANUEL L. ARIMADO, and MAUREEN R.
LABALAN, respondents.
DECISION
PERLAS-BERNABE, J : p
Assailed in this petition for review
on certiorari 1 are the Decision 2 dated March 1, 2013
and the Resolution 3 dated August 7, 2013 of the Court
of Appeals (CA) in CA-G.R. SP No. 113279, which
modified the Decision 4 dated March 3, 2010 of the
Regional Trial Court of Legazpi City, Branch 5 (RTC) in
SR-09-007: (a) declaring the Special Stockholders' and
Re-Organizational Meeting of petitioner F & S Velasco
Company, Inc. (FSVCI) held on November 18, 2009 legal
and valid; and (b) remanding the case to the court a
quo and directing it to appoint or constitute a
Management Committee to take over the corporate and
business affairs of FSVCI.
The Facts
On June 8, 1987, FSVCI was duly organized and
registered as a corporation with Francisco O. Velasco
(Francisco), Simona J. Velasco (Simona), Angela V.
Madrid (Angela), herein respondent Dr. Rommel L.
Madrid (Madrid), and petitioner Saturnino O. Velasco
(Saturnino) as its incorporators. When Simona and
Francisco died on June 12, 1998 and June 22, 1999,
respectively, their daughter, Angela, inherited their
shares, thereby giving her control of 70.82% of FSVCI's
total shares of stock. As of May 11, 2009, the distribution
of FSVCI's 24,000 total shares of stock is as
follows: (a) Angela with 16,998 shares; (b) Madrid with
1,000 shares; (c) petitioner Rosina B. Velasco-Scribner
(Scribner) with 6,000 shares; and (d) petitioners Irwin J.
Seva (Seva) and Mercedez Sunico (Sunico) with one (1)
share each. 5
 On September 20, 2009 and during her tenure as
Chairman of the Board of Directors of FSVCI (the other
members of the Board of Directors being Madrid,
Scribner, Seva, and Sunico), Angela died intestate and
without issue. On October 8, 2009, Madrid, as Angela's
spouse, executed an Affidavit of Self-Adjudication
covering the latter's estate which includes her 70.82%
ownership of FSVCI's shares of stock. Believing that he
is already the controlling stockholder of FSVCI by virtue
of such self-adjudication, Madrid called for a Special
Stockholders' and Re-Organizational Meeting to be held
on November 18, 2009. On November 10, 2009 and in
preparation for said meeting, Madrid executed separate
deeds of assignment transferring one share each to
Vitaliano B. Ricafort and to respondents Peter Paul L.
Danao (Danao), Maureen R. Labalan (Labalan), and
Manuel L. Arimado (Arimado; collectively, Madrid
Group). 6
Meanwhile, as Madrid was performing the
aforesaid acts, Seva, in his then-capacity as FSVCI
corporate secretary, sent a Notice of an Emergency
Meeting to FSVCI's remaining stockholders for the
purpose of electing a new president and vice-president,
as well as the opening of a bank account. Such meeting
was held on November 6, 2009 which was attended by
Saturnino, Seva, and Sunico (November 6, 2009
Meeting), during which, Saturnino was recognized as a
member of the FSVCI Board of Directors and thereafter,
as FSVCI President, while Scribner was elected FSVCI
Vice-President (Saturnino Group). 7
Despite the election conducted by the Saturnino
Group, the Madrid Group proceeded with the Special
Stockholders' and Re-Organizational Meeting on
November 18, 2009, wherein: (a) the current members of
FSVCI Board of Directors (save for Madrid) were ousted
and replaced by the members of the Madrid Group;
and (b) Madrid, Danao, Arimado, and Labalan were
elected President, Vice-President, Corporate Secretary,
and Treasurer, respectively, of FSVCI (November 18,
2009 Meeting). 8
In view of the November 18, 2009 Meeting, the
Saturnino Group filed a petition for Declaration of Nullity
of Corporate Election with Preliminary Injunction and
Temporary Restraining Order 9 (TRO) against the Madrid
Group before the RTC, which was acting as a Special
Commercial Court. 10
After the RTC denied the Saturnino Groups' prayer
for TRO, the Madrid Group filed its Answer (with
Compulsory Counterclaims) 11 which prayed for, among
others, the declaration of nullity of the November 6, 2009
Meeting conducted by the Saturnino Group. The Madrid
Group likewise applied for the Appointment of a
Management Committee for FSVCI, which was denied by
the RTC in an Order 12 dated January 12, 2010. 13 CAIHTE
The RTC Ruling
In a Decision 14 dated March 3, 2010, the RTC
declared both the November 6, 2009 and November 18,
2009 Meetings null and void. 15 It found the November 6,
2009 Meeting invalid because: (a) it was conducted
without a quorum as only two (2) FSVCI Board Members
(i.e., Seva and Sunico) attended the same, and that
Scribner cannot attend by proxy as the Corporation
Code expressly prohibits proxy attendance in Board
meetings; and (b) merely recognizing Saturnino as an Commented [KCV1]: No longer prohibited in the new
additional member of the FSVCI Board of Directors — code
and not electing him to take the position vacated by
Angela upon her death — had the effect of increasing
FSVCI's number of Directors to six (6), thus, exceeding
the number of Directors explicitly stated in the FSVCI
Articles of Incorporation. 16
On the other hand, in ruling on the invalidity of the
November 18, 2009 Meeting, the RTC held that until a
probate court conducting the settlement proceedings of
Angela's estate determines the rightful owner of Angela's
properties, Madrid only has an equitable right over
Angela's 70.82% ownership of FSVCI's shares of stock.
As such, Madrid cannot exercise the rights accorded to
such ownership, hence, making his call for a meeting, as
well as the actual conduct of the November 18, 2009
Meeting, invalid. 17
Aggrieved, the Madrid Group appealed 18 before
the CA contesting the RTC's declaration of invalidity of
the November 18, 2009 Meeting, as well as the denial of
the appointment of a Management Committee for
FSVCI. 19 Meanwhile, records do not show that the
Saturnino Group appealed the declaration of invalidity of
the November 6, 2009 Meeting to the CA.
The CA Ruling
In a Decision 20 dated March 1, 2013, the CA
modified the RTC ruling: (a) declaring the November 18,
2009 Meeting conducted by the Madrid Group valid;
and(b) remanding the case to the court a quo and
directing it to appoint or constitute a Management
Committee to take over the corporate and business
affairs of FSVCI.21
Contrary to the RTC findings, the CA held that
Madrid's execution of the Affidavit of Self-Adjudication
already conferred upon him the ownership of Angela's
70.82% ownership of FSVCI's shares of stock, resulting
in total ownership of 74.98% shares of stock inclusive of
his original 4.16% ownership. 22 In this relation, the CA
found that Madrid had already complied with the
registration requirement of such transfer in the books of
the corporation through the November 18, 2009 General
Information Sheet (GIS) of the corporation duly filed with
the Securities and Exchange Commission (SEC). As
such, he validly made the call for the November 18, 2009
Meeting, and accordingly, the matters resolved therein —
such as the reorganization of the FSVCI Board of
Directors and the election of corporate officers — should
bind the corporation. 23
Further, the CA ruled that the creation of a
Management Committee is appropriate in view of the
persisting conflict between the Saturnino and Madrid
Groups, the allegations of embezzlement of corporate
funds among the parties, and the uncertainty in the
leadership and direction of the corporation which had
created an imminent danger of dissipation, loss, and
wastage of FSVCI's assets and the paralyzation of its
business operations which may be prejudicial to the
minority stockholders, parties-litigants, or the general
public. 24
Dissatisfied, the Saturnino Group moved for
reconsideration 25 which was, however, denied in a
Resolution 26 dated August 7, 2013; hence, the instant
petition.
The Issues Before the Court
The core issues for the Court's resolution are
whether or not the CA correctly ruled that: (a) the
November 18, 2009 Meeting organized by Madrid is legal
and valid; and (b) a Management Committee should be
appointed or constituted to take over the corporate and
business affairs of FSVCI.
The Court's Ruling
The petition is partly meritorious.
 At the outset, the Court notes that after Madrid
executed his Affidavit of Self-Adjudication, he then filed a
petition for letters of administration regarding Angela's
estate, docketed as S.P. No. M-7025, before the
Regional Trial Court of Makati City, Branch 59 27 (RTC-
Makati Br. 59). Through Orders dated December 29,
2010 28 and March 29, 2011, 29 the RTC-Makati Br. 59
already recognized Madrid as Angela's sole heir to the
exclusion of others — i.e., Angela's purported biological
sister, Lourdita J. Estevez (Estevez) — and, thus,
appointed him as Special Administrator of Angela's
estate. 30 Estevez then belatedly challenged such Orders
of the RTC-Makati Br. 59 via a petition for annulment of
judgment before the CA, docketed as CA-G.R. SP No.
128979, which was dismissed through Resolutions dated
April 3, 2013 31 and November 4, 2013. 32 Undaunted,
Estevez made a further appeal 33 to the Court, which was
denied in the Minute Resolutions dated February 26,
201434 and June 16, 2014. 35 Such ruling of the Court
had already attained finality as evidenced by an Entry of
Judgment 36 dated June 16, 2014. In view of the
foregoing, the Court is constrained to view that Madrid is
indeed Angela's sole heir and her death caused the
immediate transfer of her properties, including her
70.82% ownership of FSVCI's shares of stock, to
Madrid. 37 As such, Madrid may compel the issuance of
certificates of stock in his favor, as well as the registration
of Angela's stocks in his name in FSVCI's Stock and
Transfer Book.
Be that as it may, it must be clarified that Madrid's
inheritance of Angela's shares of stock does not ipso
facto afford him the rights accorded to such majority
ownership of FSVCI's shares of stock. Section 63 of
the Corporation Code governs the rule on transfers of
shares of stock. It reads: DETACa
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 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.
No shares of stock against which the
corporation holds any unpaid claim shall be
transferable in the books of the corporation.
(Emphasis and underscoring supplied)
Verily, all transfers of shares of stock must be
registered in the corporate books in order to be binding
on the corporation. Specifically, this refers to the Stock
and Transfer Book, which is described in Section 74 of
the same Code as follows:
SEC. 74. Books to be kept; stock transfer
agent. — . . . .
xxx xxx xxx
Stock corporations must also keep a
book to be known as the "stock and transfer
book", in which must be kept a record of all
stocks in the names of the stockholders
 alphabetically arranged; the installments paid
and unpaid on all stock for which subscription
has been made, and the date of payment of any
installment; a statement of every alienation, sale
or transfer of stock made, the date thereof, and
by and to whom made; and such other entries
as the by-laws may prescribe. The stock and
transfer book shall be kept in the principal office
of the corporation or in the office of its stock
transfer agent and shall be open for inspection
by any director or stockholder of the corporation
at reasonable hours on business days.
xxx xxx xxx
In this regard, the case of Batangas Laguna
Tayabas Bus Co., Inc. v. Bitanga 38 instructs that an
owner of shares of stock cannot be accorded the rights
pertaining to a stockholder — such as the right to call for
a meeting and the right to vote, or be voted for — if his
ownership of such shares is not recorded in the Stock
and Transfer Book, viz.:
Indeed, until registration is accomplished, the
transfer, though valid between the parties,
cannot be effective as against the corporation.
Thus, the unrecorded transferee, the Bitanga
group in this case, cannot vote nor be voted
for. The purpose of registration, therefore, is
two-fold: to enable the transferee to exercise
all the rights of a stockholder, including the
right to vote and to be voted for, and to
inform the corporation of any change in
share ownership so that it can ascertain the
persons entitled to the rights and subject to
the liabilities of a stockholder. Until
challenged in a proper proceeding, a
stockholder of record has a right to participate in
any meeting; his vote can be properly counted
to determine whether a stockholders' resolution
was approved, despite the claim of the alleged
transferee. On the other hand, a person who
has purchased stock, and who desires to be
recognized as a stockholder for the purpose
of voting, must secure such a standing by
having the transfer recorded on the
corporate books. Until the transfer is
registered, the transferee is not a
stockholder but an outsider. 39 (Emphases
and underscoring supplied)
In the case at bar, records reveal that at the time
Madrid called for the November 18, 2009 Meeting, as
well as the actual conduct thereof, he was already the
owner of 74.98% shares of stock of FSVCI as a result of
his inheritance of Angela's 70.82% ownership thereof.
However, records are bereft of any showing that the
transfer of Angela's shares of stock to Madrid had been
registered in FSVCI's Stock and Transfer Book when he
made such call and when the November 18, 2009
Meeting was held. Thus, the CA erred in holding that
Madrid complied with the required registration of
transfers of shares of stock through mere reliance on
FSVCI's GIS dated November 18, 2009.
In this relation, it is noteworthy to point out that the
submission of a GIS of a corporation before the SEC is
pursuant to the objective sought by Section 26 40 of
the Corporation Code which is to give the public
information, under sanction of oath of responsible
officers, of the nature of business, financial condition, and
operational status of the company, as well as its key
officers or managers, so that those dealing and who
intend to do business with it may know or have the means
of knowing facts concerning the corporation's financial
resources and business responsibility. 41 The contents of
the GIS, however, should not be deemed conclusive as
to the identities of the registered stockholders of the
corporation, as well as their respective ownership of
shares of stock, as the controlling document should be
the corporate books, specifically the Stock and Transfer
Book. Jurisprudence in Lao v. Lao 42 is instructive on this
matter, to wit:
The mere inclusion as shareholder of
petitioners in the General Information Sheet
of PFSC is insufficient proof that they are
shareholders of the company.
Petitioners bank heavily on the General
Information Sheet submitted by PFSC to the
SEC in which they were named as shareholders
of PFSC. They claim that respondent is now
estopped from contesting the General
Information Sheet.
While it may be true that petitioners
were named as shareholders in the General
Information Sheet submitted to the SEC, that
document alone does not conclusively
prove that they are shareholders of PFSC.
The information in the document will still
have to be correlated with the corporate
books of PFSC. As between the General
Information Sheet and the corporate books,
it is the latter that is controlling. As correctly
ruled by the CA: aDSIHc
We agree with the trial
court that mere inclusion in the
General Information Sheets as
stockholders and officers does
not make one a stockholder of a
corporation, for this may have
come to pass by mistake,
expediency or negligence. As
professed by respondent-
appellee, this was done merely
to comply with the reportorial
requirements with the SEC. This
may be against the law but
"practice, no matter how long
continued, cannot give rise to any
vested right."
If a transferee of shares of
stock who failed to register such
transfer in the Stock and Transfer
Book of the Corporation could not
exercise the rights granted unto
him by law as stockholder, with
more reason that such rights be
denied to a person who is not a
stockholder of a corporation.
Petitioners-appellants never
secured such a standing as
stockholders of PFSC and
consequently, their petition should
be denied. 43 (Emphases and
underscoring supplied)
In light of the foregoing, Madrid could not have
made a valid call of the November 18, 2009 Meeting as
his stock ownership of FSVCI as registered in the Stock
and Transfer Book is only 4.16% in view of the non-
registration of Angela's shares of stock in the FSVCI
Stock and Transfer Book in his favor. As there was no
showing that he was able to remedy the situation by the
time the meeting was held, the conduct of such meeting,
as well as the matters resolved therein, including the
reorganization of the FSVCI Board of Directors and the
election of new corporate officers, should all be declared
null and void.
Thus, in view of the nullity of the November 6, 2009
Meeting conducted by the Saturnino Group which ruling
of the RTC had already attained finality, as well as the
November 18, 2009 Meeting conducted by the Madrid
Group — both of which attempted to wrest control of
FSVCI by reorganizing the Board of Directors and
electing a new set of corporate officers — the FSVCI
Board of Directors at the time of Angela's death (i.e.,
Madrid, Seva, Scribner, and Sunico) should be
reconstituted, and thereafter, fill the vacant seat left by
Angela in accordance with Section 29 44 of
the Corporation Code. Such Board of Directors shall only
act in a hold-over capacity until their successors are
elected and qualified, pursuant to Section 23 45 of
the Corporation Code. ATICcS
Finally, on the issue of the propriety of
appointing/constituting a Management Committee to
manage FSVCI's affairs, the Court recognizes that a
corporation may be placed under the care of a
Management Committee specifically created by a court
and, thus, under the latter's control and supervision, for
the purpose of preserving properties involved in a suit
and protecting the rights of the parties. 46 However, case
law is quick to point out that "the creation and
appointment of a management committee . . . is an
extraordinary and drastic remedy to be exercised with
care and caution; and only when the requirements under
the Interim Rules [of Procedure Governing Intra-
Corporate Controversies] are shown. It is a drastic
course for the benefit of the minority stockholders, the
parties-litigants or the general public [and is] allowed only
under pressing circumstances and when there is
inadequacy, ineffectual or exhaustion of legal or other
remedies. . . . The power of the court to continue a
business of a corporation . . . must be exercised with the
greatest care and caution. There should be a full
consideration of all the attendant facts, including the
interest of all the parties concerned." 47 In view of the
extraordinary nature of such a remedy, Section 1, Rule 9
of the Interim Rules of Procedure Governing Intra-
Corporate Controversies 48 provides the elements
needed for the creation of a Management Committee:
SEC. 1. Creation of a management
committee. — As an incident to any of the cases
filed under these Rules or the Interim Rules on
Corporate Rehabilitation, a party may apply for
the appointment of a management committee
for the corporation, partnership or association,
when there is imminent danger of:
(1) Dissipation, loss, wastage or
destruction of assets or other properties; and
(2) Paralyzation of its business
operations which may be prejudicial to the
interest of the minority stockholders, parties-
litigants or the general public.
Thus, applicants for the appointment of a
management committee need to establish the
confluence of these two (2) requisites. This is because
appointed management committees will immediately
take over the management of the corporation and
exercise the management powers specified in the law.
This may have a negative effect on the operations and
affairs of the corporation with third parties, as persons
who are more familiar with its operations are necessarily
dislodged from their positions in favor of appointees who
are strangers to the corporation's operations and
affairs. 49
In the case at bar, the CA merely based its
directive of creating a Management Committee for FSVCI
on its finding of "the persisting conflict between [the
Saturnino and Madrid Groups], the allegations of
embezzlement of corporate funds among the parties, and
the uncertainty in the leadership and direction of the
corporation had created an imminent danger of in accordance with prevailing laws, rules, and
dissipation, loss[,] and wastage of FSVCI's assets and jurisprudence.
the paralyzation of its business operations which may be SO ORDERED.
prejudicial to the minority stockholders, parties-litigants
or the general public." 50 However, absent any actual (F & S Velasco Co., Inc. v. Madrid, G.R. No. 208844,
|||

evidence from the records showing such imminent [November 10, 2015])
danger, the CA's findings have no legal or factual basis
to support the appointment/constitution of a Management
Committee for FSVCI. Accordingly, the CA erred in FIRST DIVISION
ordering the creation of a Management Committee in this
case. Hence, in the event a Management Committee had [G.R. No. 160924. August 5, 2015.]
already been constituted pursuant to the CA ruling, as
what herein respondents point out, 51 then it should be TERELAY INVESTMENT AND
immediately dissolved for the reasons aforestated. DEVELOPMENT
WHEREFORE, the petition is PARTLY CORPORATION, petitioner, vs. CECILIA
GRANTED. The Decision dated March 1, 2013 and the TERESITA J. YULO, respondent.
Resolution dated August 7, 2013 of the Court of Appeals
(CA) in CA-G.R. SP No. 113279 are
hereby REVERSED and SET ASIDE. The Special DECISION
Stockholders' and Re-Organizational Meeting of
petitioner F & S Velasco Company, Inc. called by
respondent Rommel L. Madrid and held on November BERSAMIN, J : p

18, 2009 is declared NULL and VOID and the
Management Committee constituted pursuant to the
aforementioned CA Decision and Resolution is
hereby DISSOLVED.
Accordingly, the Board of Directors of petitioner F
& S Velasco Company, Inc. prior to the death of Angela
V. Madrid — consisting of the remaining members
petitioners Rosina B. Velasco-Scribner, Irwin J. Sera,
and Mercedez Sunico and respondent Dr. Rommel L.
Madrid — is hereby ORDERED reconstituted. The Board
of Directors is ORDERED to fill the vacant seat left by
Angela V. Madrid and, thereafter, act in a hold-over
capacity until their successors are elected and qualified,
In its desire to block the inspection of its corporate
books by a stockholder holding a very insignificant
shareholding, the petitioner now seeks to set aside the
judgment promulgated on September 12,
2003, 1 whereby the Court of Appeals (CA) affirmed the
decision rendered on March 22, 2002 by the Regional
Trial Court, Branch 142, in Makati City (RTC) allowing the
inspection, and ordering it to pay attorney's fees of
P50,000.00 to the stockholder. 2
With the CA having denied the petitioner's motion
for reconsideration and motion for oral argument through
the resolution promulgated on November 28,
2003, 3 such denial is also the subject of this appeal.
Antecedents
The CA recited the following antecedents:
Asserting her right as a stockholder,
Cecilia Teresita Yulo wrote a letter, dated
September 14, 1999, addressed to Terelay
Investment and Development Corporation
(TERELAY) requesting that she be allowed to
examine its books and records on September
17, 1999 at 1:30 o'clock in the afternoon at the
latter's office on the 25th floor, Citibank Tower,
Makati City. In its reply-letter, dated September
15, 1999, TERELAY denied the request for
inspection and instead demanded that she show
proof that she was a bona fide stockholder.
On September 16, 1999, Cecilia Yulo
again sent another letter clarifying that her
request for examination of the corporate records
was for the purpose of inquiring into the financial
condition of TERELAY and the conduct of its
affairs by the principal officers. The following
day, Cecilia Yulo received a faxed letter from
TERELAY's counsel advising her not to
continue with the inspection in order to
avoid trouble.
On October 11, 1999, Cecilia Yulo filed
with the Securities and Exchange Commission
(SEC), a Petition for Issuance of a Writ
of Mandamus with prayer for Damages against
TERELAY, docketed as SEC Case No. 10-99-
6433. In her petition, she prayed that judgment
be rendered ordering TERELAY to allow her to
inspect its corporate records, books of account
and other financial records; to pay her actual
damages representing attorney's fees and
litigation expenses of not less than One
Hundred Thousand Pesos (P100,000.00); to
pay her exemplary damages; and to pay the
costs of the suit. On May 16, 2000, in the
preliminary conference held before the SEC
Hearing Officer, the parties agreed on the
following:
"1. Petitioner Cecilia
Teresita Yulo is registered as a
stockholder in the corporation's
stock and transfer book subject to
the qualification in the Answer,
and
2. Petitioner had informed
the respondent, through demand
letter, of her desire to inspect the
records of the corporation, but the
same was denied by the
respondent."
Thereafter, the parties stipulated that the
ISSUES to be resolved are the following:
"1. Whether or not
petitioner has the right to inspect
and examine TERELAY's
corporate records, books of
account and other financial
records pursuant to Section 74
of the Corporation Code of the
Philippines; aDSIHc
2. Whether or not petitioner
as stockholder and director of
TERELAY has been unduly
deprived of her right to inspect and
examine TERELAY's corporate
records, books of accounts and
other financial records in clear
 contravention of law, which
warrants her claim for damages;
3. Whether or not Atty.
Reynaldo G. Geronimo and/or the
principal officers, Ma. Antonia
Yulo Loyzaga and Teresa J. Yulo
of respondent corporation are
indispensable parties and hence,
should be impleaded as
respondents;
4. As a prejudicial
question, whether or not petitioner
is a stockholder of respondent
corporation and such being the
issue, whether this issue should
be threshed out in the probate of
the will of the late Luis A. Yulo and
settlement of estate now pending
with the Regional Trial Court of
Manila;
5. Assuming petitioner is a
stockholder, whether or not
petitioner's mere desire to inquire
into the financial condition of
respondent corporation and
conduct of the affairs of the
corporation is a just and sufficient
ground for inspection of the
corporate records." 4
Following the enactment of Republic Act No.
8799 (The Securities Regulation Code), the case was
transferred from the Securities and Exchange
Commission to the RTC.
On March 22, 2002, the RTC rendered its
judgment, 5 ruling thusly:
Accordingly, petitioner's application for
inspection of corporate records is granted
pursuant to Rule 7 of the Interim Rules in
relation to Sections 74 and 75 ofthe Corporation
Code. Defendant, through its officers, is ordered
to allow inspection of corporate books and
records at reasonable hours on business days
and/or furnish petitioner copies thereof, all at her
expense. In this connection, plaintiff is ordered
to deposit to the Court the amount of P1,000.00
to cover the estimated cost of the manpower
necessary to produce the books and records
and the cost of copying.
Respondent is further ordered to pay
petitioner attorney's fees in the amount of
P50,000.00
SO ORDERED. 6
On September 12, 2003, the CA affirmed the
RTC. 7
The petitioner sought reconsideration, and moved
for the holding of oral arguments thereon, but the CA
denied the motion on November 28, 2003. 8
Issues
In this appeal, the petitioner insists that the CA
committed serious error: (a) in holding that the
respondent was a stockholder entitled to inspect its
books and records, and allowing her to inspect its
corporate records despite her shareholding being a
measly .001% interest; (b) in declaring that the RTC had
the jurisdiction to determine whether or not she was a
stockholder; (c) in ruling that it did not adduce sufficient
proof showing that she was in bad faith or had an ulterior
motive in demanding inspection of the records; (d) in
finding that her purpose for the inspection, which was to
inquire into its financial condition and into the conduct of
its affairs by its principal officers, was a valid ground to
examine the corporate records; (e) in holding that her
petition for mandamus was not premature; (f) in not
resolving whether or not its principal officers should be
impleaded as indispensable parties; and (g) in not setting
aside the award of attorney's fees in the amount of
P50,000.00. 9
In her comment, 10 the respondent counters that
the law does not require substantial shareholding before
she can exercise her right of inspection as a stockholder;
that the issue of the nullity of the donation in her favor of
the shareholding was irrelevant because it was the
subscription to the shares that granted the statutory and
common rights to stockholders; that the RTC, sitting as a
corporate court, was the proper court to declare that she
was a stockholder; that she has just and sufficient
grounds to inspect its corporate records; that its officers
are not indispensable parties; that her petition
for mandamus was not premature; and that the CA
correctly upheld the RTC's order to pay attorney's fees to
her. ETHIDa
Ruling of the Court
We deny the petition for review on certiorari.
To start with, it is fundamental that a petition for
review on certiorari should raise only questions of
law. 11 In that regard, the findings of fact of the trial court,
as affirmed by the appellate court, are final and
conclusive, and cannot be reviewed on appeal by the
Court as long as such findings are supported by the
records, or are based on substantial evidence. In other
words, it is not the function of the Court to analyze or
weigh all over again the evidence or the factual premises
supportive of the lower courts' determinations.
Even when the Court has to review the factual
premises, it has consistently held that the findings of the
appellate and the trial courts are accorded great weight,
if not binding effect, unless the most compelling and
cogent reasons exist to revisit such findings. 12 Among
the compelling and cogent reasons are the
following, 13namely: (a) when the findings are grounded
entirely on speculation, surmises, or conjectures; (b)
when the inference made is manifestly mistaken, absurd,
or impossible; (c) when there is grave abuse of
discretion; (d) when the judgment is based on a
misapprehension of facts; (e) when the findings of facts
are conflicting; (f) when the CA, in making its findings,
went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the
appellee; (g) when the CA's findings are contrary to those
by the trial court; (h) when the findings are conclusions
without citation of specific evidence on which they are
based; (i) when the facts set forth in the petition as well
as in the petitioner's main and reply briefs are not
disputed by the respondent; (j) when the findings of fact
are premised on the supposed absence of evidence and
contradicted by the evidence on record; or (k) when the
CA manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered,
would justify a different conclusion.
However, the Court has determined from its review
in this appeal that the CA correctly disposed of the legal
and factual matters and issues presented by the parties.
This appeal is not, therefore, under any of the aforecited
exceptions.
The Court now adopts with approval the cogent
observations of the CA on the matters and issues raised
by the petitioner, as follows:
 Regarding the issue of jurisdiction,
TERELAY avers that it is not within the
jurisdiction of the trial court to determine
whether or not petitioner-appellee is its
stockholder. It contends that a petition for the
probate of the will of Cecilia's father, the late
Luis A. Yulo, and the settlement of his estate
was filed with the Regional Trial Court of Manila.
The inventory of the estate includes the five (5)
shares which Cecilia is claiming. Being a court
of limited jurisdiction, the court a quo could not
decide whether or not Luis A. Yulo donated five
(5) shares to Cecilia during his lifetime. The
position of TERELAY is untenable. As correctly
pointed out by Cecilia Yulo, the main issue in
this case is the question of whether or not she is
a stockholder and therefore, has the right to
inspect the corporate books and records. We
agree with the ruling of the trial court that the
determination of this issue is within the
competence of the Regional Trial Court, acting
as a special court for intra-corporate
controversies, and not in the proceeding for the
settlement of the estate of the late Luis Yulo.
On the matter of exhaustion of
administrative remedies, TERELAY asserts that
the petition for mandamus filed by Cecilia Yulo
was premature because she failed to exhaust all
available remedies before filing the instant
petition. The Court disagrees. A writ
of mandamus is a remedy provided by law
where despite the stockholder's request for
record inspection, the corporation still refuses to
allow the stockholder the right to inspect. In the
instant case, Cecilia Yulo, through counsel, sent
a letter-request, dated September 14, 1999, for
inspection of corporate records, books of
accounts and other financial records, but the
same was denied by TERELAY through
counsel, in its reply-letter, dated September 15,
1999. Appellee Yulo sent another letter, dated
September 16, 1999, reiterating the same
request but the same was again denied by
TERELAY in a reply-letter dated September 17,
1999. Clearly then, appellee Yulo's right is not
pre-mature and may be enforced by a writ
of mandamus.
On the contention that there was no
stipulation that Cecilia Yulo was registered as a
stockholder, TERELAY asserts that the trial
court was misled into believing that there was a
stipulation or admission that Cecilia Yulo is a
registered stockholder in its stock and transfer
book. According to TERELAY, the admission or
stipulation was that she was registered in the
Articles of Incorporation is separate and distinct
from being so in the stock and transfer book.
TERELAY's argument cannot be sustained. A
careful review of the records would show that in
the Preliminary Conference Order, dated May
16, 2000, of the SEC Hearing Officer, both
parties represented by their respective
counsels, agreed on the fact that petitioner-
appellee was "registered as a stockholder in
respondent-appellant's stock and transfer book
subject to the qualifications in the Answer." The
records failed to disclose any objection by
TERELAY. Neither did TERELAY raise this
matter in the SEC hearing held on August 7,
2000 as one of the issues to be determined and
resolved.
TERELAY further points out that her
name as incorporator, stockholder and director
in the Articles of Incorporation and Amendments
were unsigned; that she did not pay for the five
(5) shares appearing in the Amended Articles of
Incorporation and General Information Sheet of
TERELAY; that she did not subscribe to the
shares; that she has neither been in possession
of nor seen the certificate of stock covering the
five (5) shares of stock; that the donation of the
five (5) shares claimed by her was null and void
for failure to comply with the requisites of a
donation under Art. 748 of the Civil Code; and
that there was no acceptance of the donation by
her as donee. TERELAY further contends that
Cecilia Yulo's purpose in inspecting the books
was to inquire into its financial condition and the
conduct of its affairs by the principal officers
which are not sufficient and valid reasons.
Therefore, the presumption of good faith cannot
be accorded her.
TERELAY's position has no merit. The
records disclose that the corporate documents
submitted, which include the Articles of
Incorporation and the Amended Articles of
Incorporation, as well as the General
Information Sheets and the Quarterly Reports
all bear the signatures of the proper parties and
their authorized custodians. The signature of
appellee under the name Cecilia J. Yulo
appears in the Articles of Incorporation of
TERELAY. Likewise, her signatures under the
name Cecilia Y. Blancaflor appear in the
Amended Articles of Incorporation where she
signed as Director and Corporate Secretary of
TERELAY. The General Information Sheets
from December 31, 1977 up to February 20,
2002 all exhibited that she was recognized as
director and corporate secretary, and that she
had subscribed to five (5) shares of stock. The
quarterly reports do not show otherwise.
Verily, petitioner-appellee has presented
enough evidence that she is a stockholder of
TERELAY. The corporate documents presented
support her claim that she is a registered
stockholder in TERELAY's stock and transfer
book thus giving her the right, under Section 74
par. 2 and Section 75 of the Philippine
Corporation Law, to inspect TERELAY's books,
records, and financial statements. Section 74,
par. 2 and Section 75 of our Corporation
Code reads as follows: . . .
Accordingly, Cecilia Yulo as the right to
be fully informed of TERELAY's corporate
condition and the manner its affairs are being
managed. It is well-settled that the ownership of
shares of stock gives stockholders the right
under the law to be protected from possible
mismanagement by its officers. This right is
predicated upon self-preservation. In any case,
TERELAY did not adduce sufficient proof that
Cecilia Yulo was in bad faith or had an ulterior
motive in demanding her right under the law.
In view of the foregoing, the Court finds it
unnecessary to discuss the other issues raised
by TERELAY as they are incapable of defeating
the established fact that Cecilia Yulo is a
registered stockholder of respondent-applicant.
Finally, the Court agrees with the ruling
of the court a quo that the petitioner is entitled to
the reasonable amount of P50,000.00
representing attorney's fees for having been
compelled to litigate in order to exercise her
right of inspection. 14
Secondly, the petitioner's submission that the
respondent's "insignificant holding" of only .001% of the
petitioner's stockholding did not justify the granting of her
application for inspection of the corporate books and
records is unwarranted.
 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. 15 Ubi lex non distinguit nec nos distinguere
debemos. When the law has made no distinction, we
ought not to recognize any distinction. AIDSTE
Neither could the petitioner arbitrarily deny the
respondent's right to inspect the corporate books and
records on the basis that her inspection would be used
for a doubtful or dubious reason. Under Section 74, third
paragraph, of the Corporation Code, the only time when
the demand to examine and copy the corporation's
records and minutes could be refused is when the
corporation puts up as a defense to any action that "the
person demanding" had "improperly used any
information secured through any prior examination of the
records or minutes of such corporation or of any other
corporation, or was not acting in good faith or for a
legitimate purpose in making his demand."
The right of the shareholder to inspect the books
and records of the petitioner should not be made subject
to the condition of a showing of any particular dispute or
of proving any mismanagement or other occasion
rendering an examination proper, but if the right is to be
denied, the burden of proof is upon the corporation to
show that the purpose of the shareholder is improper, by
way of defense. According to a recognized
commentator: 16
By early English decisions it was formerly
held that there must be something more than
bare suspicion of mismanagement or fraud.
There must be some particular controversy or
question in which the party applying was
interested, and inspection would be granted
only so far as necessary for that particular
occasion. By the general rule in the United
States, however, shareholders have a right to
inspect the books and papers of the corporation
without first showing any particular dispute or
proving any mismanagement or other occasion
rendering an examination proper. The privilege,
however, is not absolute and the corporation
may show in defense that the applicant is acting
from wrongful motives.
In Guthrie v. Harkness, there was
involved the right of a shareholder in a national
bank to inspect its books for the purpose of
ascertaining whether the business affairs of the
bank had been conducted according to law, and
whether, as suspected, the bank was guilty of
irregularities. The court said: "The decisive
weight of American authority recognizes the
right of the shareholder, for proper purposes
and under reasonable regulations as to place
and time, to inspect the books of the corporation
of which he is a member . . . In issuing the writ
of mandamus the court will exercise a sound
discretion and grant the right under proper
safeguards to protect the interest of all
concerned. The writ should not be granted for
speculative purposes or to gratify idle curiosity
or to aid a blackmailer, but it may not be denied
to the stockholder who seeks the information for
legitimate purposes."
Among the purposes held to justify a
demand for inspection are the following: (1) To
ascertain the financial condition of the company
or the propriety of dividends; (2) the value of the
shares of stock for sale or investment; (3)
whether there has been mismanagement; (4) in
anticipation of shareholders' meetings to obtain
a mailing list of shareholders to solicit proxies or
 influence voting; (5) to obtain information in aid
of litigation with the corporation or its officers as
to corporate transactions. Among the improper
purposes which may justify denial of the right of
inspection are: (1) Obtaining of information as to
business secrets or to aid a competitor; (2) to
secure business "prospects" or investment or
advertising lists; (3) to find technical defects in
corporate transactions in order to bring "strike
suits" for purposes of blackmail or extortion. SDAaTC
In general, however, officers and
directors have no legal authority to close the
office doors against shareholders for whom they
are only agents, and withhold from them the
right to inspect the books which furnishes the
most effective method of gaining information
which the law has provided, on mere doubt or
suspicion as to the motives of the shareholder.
While there is some conflict of authority, when
an inspection by a shareholder is contested, the
burden is usually held to be upon the
corporation to establish a probability that the
applicant is attempting to gain inspection for a
purpose not connected with his interests as a
shareholder, or that his purpose is otherwise
improper. The burden is not upon the petitioner
to show the propriety of his examination or that
the refusal by the officers or directors was
wrongful, except under statutory provisions.
WHEREFORE, the Court AFFIRMS the judgment
promulgated on September 12, 2003; and ORDERS the
petitioner to pay the costs of suit.
SO ORDERED.
(Terelay Investment and Development Corp. v. Yulo, G.R.
|||
No. 160924, [August 5, 2015])
SECOND DIVISION
[G.R. No. 180416. June 2, 2014.]
ADERITO Z. YUJUICO and BONIFACIO C.
SUMBILLA, petitioners, vs. CEZAR T.
QUIAMBAO and ERIC C.
PILAPIL, respondents.
DECISION
PEREZ, J :p
This case is a Petition for Review on Certiorari 1 from
the Orders 2 dated 4 June 2007 and 5 November 2007 of the
Regional Trial Court (RTC), Branch 154, of Pasig City in
S.C.A. No. 3047.
The facts:
Background
Strategic Alliance Development Corporation
(STRADEC) is a domestic corporation operating as a
business development and investment company.
On 1 March 2004, during the annual stockholder's
meeting of STRADEC, petitioner Aderito Z. Yujuico (Yujuico)
was elected as president and chairman of the
company. 3 Yujuico replaced respondent Cezar T.
Quiambao (Quiambao), who had been the president and
chairman of STRADEC since 1994. 4
With Yujuico at the helm, STRADEC appointed
petitioner Bonifacio C. Sumbilla (Sumbilla) as treasurer and
one Joselito John G. Blando (Blando) as corporate
secretary. 5 Blando replaced respondent Eric C. Pilapil
(Pilapil), the previous corporate secretary of STRADEC. 6
The Criminal Complaint
On 12 August 2005, petitioners filed a criminal
complaint 7 against respondents and one Giovanni T.
Casanova (Casanova) before the Office of the City
Prosecutor (OCP) of Pasig City. The complaint was
docketed in the OCP as I.S. No. PSG 05-08-07465.
The complaint accuses respondents and Casanova of
violating Section 74 in relation to Section 144 of Batas
Pambansa Blg. 68 or the Corporation Code. The petitioners
premise such accusation on the following factual
allegations: 8
1. During the stockholders' meeting on 1
March 2004, Yujuico — as newly
elected president and chairman of
STRADEC — 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. DAEcIS
2. As it turns out, the corporate records of
STRADEC were in the possession of
Casanova — the accountant of
STRADEC. Casanova was keeping
custody of the said records on behalf of
Quiambao, who allegedly needed the
same as part of his defense in a
pending case in court.
3. After the 1 March 2004 stockholders'
meeting, Quiambao and Casanova
caused the removal of the corporate
records of STRADEC from the
company's offices in Pasig City.
4. Upon his appointment as corporate
secretary on 21 June 2004, Blando
likewise demanded Pilapil for the
turnover of the stock and transfer book
of STRADEC. Pilapil refused.
5. Instead, on 25 June 2004, Pilapil proposed
to Blando to have the stock and transfer
book deposited in a safety deposit box
with Equitable-PCI Bank, Kamias
Road, Quezon City. Blando acceded to
the proposal and the stock and transfer
book was deposited in a safety deposit
box with the bank identified. It was
agreed that the safety deposit box may
only be opened in the presence of both
Quiambao and Blando.
6. On 30 June 2004, however, Quiambao and
Pilapil withdrew the stock and transfer
book from the safety deposit box and
brought it to the offices of the Stradcom
Corporation (STRADCOM) in Quezon
City. Quiambao thereafter asked
Blando to proceed to the STRADCOM
offices. Upon arriving thereat,
Quiambao pressured Blando to make
certain entries in the stock and transfer
books. After making such entries,
Blando again demanded that he be
given possession of the stock and
transfer book. Quiambao refused.
7. On 1 July 2004, Blando received an order
dated 30 June 2004 issued by the RTC,
 Branch 71, of Pasig City in Civil Case
No. 70027, which directed him to
cancel the entries he made in the stock
and transfer book. Hence, on even
date, Blando wrote letters to Quiambao
and Pilapil once again demanding for
the turnover of the stock and transfer
book. Pilapil replied thru a letter dated
2 July 2004 where he appeared to
agree to Blando's demand.
8. However, upon meeting with Pilapil and
Quiambao, the latter still refused to
turnover the stock and transfer book to
Blando. Instead, Blando was once
again constrained to agree to a
proposal by Pilapil to have the stock
and transfer book deposited with the
RTC, Branch 155, of Pasig City. The
said court, however, refused to accept
such deposit on the ground that it had
no place for safekeeping.
9. Since Quiambao and Pilapil still refused to
turnover the stock and transfer book,
Blando again acceded to have the book
deposited in a safety deposit box, this
time, with the Export and Industry Bank
in San Miguel Avenue, Pasig City.
Petitioners theorize that the refusal by the
respondents and Casanova to turnover STRADEC's
corporate records and stock and transfer book violates their
right, as stockholders, directors and officers of the
corporation, to inspect such records and book under Section
74 of the Corporation Code. For such violation, petitioners
conclude, respondents may be held criminally liable
pursuant to Section 144 of the Corporation Code.
Preliminary investigation thereafter ensued. AHcaDC
Resolution of the OCP and the Informations
After receiving the counter-affidavits of the
respondents and Casanova, as well as the other
documentary submissions 9 by the parties, the OCP issued
a Resolution 10 dated 6 January 2006 in I.S. No. PSG 05-08-
07465. In the said resolution, the OCP absolved Casanova
but found probable cause to hail respondents to court on two
(2) offenses: (1) for removing the stock and transfer book of
STRADEC from its principal office, and (2) for refusing
access to, and examination of, the corporate records and the
stock and transfer book of STRADEC at its principal office.
Pursuant to the resolution, two (2)
informations 11 were filed against the respondents before
the Metropolitan Trial Court (MeTC) of Pasig City. The
informations were docketed as Criminal Case No. 89723
and Criminal Case No. 89724 and were raffled to Branch 69.
Criminal Case No. 89723 is for the offense of
removing the stock and transfer book of STRADEC from its
principal office. The information reads: 12
On and/or about the period between March 1
and June 25, 2004, inclusive, in Pasig City and
within the jurisdiction of this Honorable Court,
the above accused, being then members of the
Board of Directors and/or officers, as the case
may be, of Strategic Alliance Development
Corporation (STRADEC, for short), conspiring
and confederating together and mutually
helping and aiding one another, did then and
there willfully, unlawfully and feloniously,
remove the stock and transfer book of the said
STRADEC at its principal office at the 24th
 Floor, One Magnificent Mile-CITRA City Bldg.,
San Miguel Avenue, Ortigas Center, Pasig City,
where they should all be kept, in violation of the
aforesaid law, and to the prejudice of the said
complainants.
Criminal Case No. 89724, on the other hand, covers
the offense of refusing access to, and examination of, the
corporate records and the stock and transfer book of
STRADEC at its principal office. The information reads: 13
On and/or about the period between March 1
and June 25, 2004, inclusive, in Pasig City, and
within the jurisdiction of this Honorable Court,
the above accused, being then members of the
Board of Directors and/or officers, as the case
may be, of Strategic Alliance Development
Corporation (STRADEC, for short), conspiring
and confederating together and mutually
helping and aiding one another, did then and
there willfully, unlawfully and feloniously, refuse
to allow complainants Bonifacio C. Sumbilla and
Aderito Z. Yujuico, being then stockholders
and/or directors of STRADEC, access to, and
examination of, the corporate records, including
the stock and transfer book, of STRADEC at its
principal office at the 24th Floor, One
Magnificent Mile-CITRA Bldg., San Miguel
Avenue, Ortigas Center, Pasig City, where they
should all be kept, in violation of the aforesaid
law, and to the prejudice of the said
complainants.
Urgent Omnibus Motion and the Dismissal of Criminal
Case No. 89723
On 18 January 2006, respondents filed before the
MeTC an Urgent Omnibus Motion for Judicial Determination
of Probable Cause and to Defer Issuance of Warrants of
Arrest (Urgent Omnibus Motion). 14
On 8 May 2006, the MeTC issued an order 15 partially
granting the Urgent Omnibus Motion. The MeTC dismissed
Criminal Case No. 89723 but ordered the issuance of a
warrant of arrest against respondents in Criminal Case No.
89724.
In dismissing Criminal Case No. 89723, the MeTC
held that Section 74, in relation to Section 144, of
the Corporation Code only penalizes the act of "refus[ing] to
allow any director, trustee, stockholder or member of the
corporation to examine and copy excerpts from the records
or minutes of the corporation" 16 and that act is already the
subject matter of Criminal Case No. 89724. Hence, the
MeTC opined, Criminal Case No. 89723 — which seeks to
try respondents for merely removing the stock and transfer
book of STRADEC from its principal office — actually
charges no offense and, therefore, cannot be
sustained. 17CHIaTc
Anent directing the issuance of a warrant of arrest in
Criminal Case No. 89724, the MeTC found probable cause
to do so; given the failure of the respondents to present any
evidence during the preliminary investigation showing that
they do not have possession of the corporate records of
STRADEC or that they allowed petitioners to inspect the
corporate records and the stock and transfer book of
STRADEC. 18
Unsatisfied, the respondents filed a motion for partial
reconsideration 19 of the 8 May 2006 order of the MeTC
insofar as the disposition in Criminal Case No. 89724 is
concerned. The MeTC, however, denied such motion on 16
August 2006. 20
Certiorari Petition and the Dismissal of Criminal Case
No. 89724
 After their motion for partial reconsideration was
denied, respondents filed a certiorari petition, 21 with prayer
for the issuance of a temporary restraining order (TRO),
before the RTC of Pasig City on 27 September 2006. The
petition was docketed as S.C.A. No. 3047.
On 16 November 2006, the RTC issued a TRO
enjoining the MeTC from conducting further proceedings in
Criminal Case No. 89724 for twenty (20) days. 22
On 4 June 2007, the RTC issued an Order 23 granting
respondents' certiorari petition and directing the dismissal of
Criminal Case No. 89724. According to the RTC, the MeTC
committed grave abuse of discretion in issuing a warrant of
arrest against respondents in Criminal Case No. 89724.
The RTC found that the finding of probable cause
against the respondents in Criminal Case No. 89724 was not
supported by the evidence presented during the preliminary
investigation but was, in fact, contradicted by them: 24
1. The RTC noted that, aside from the
complaint itself, no evidence was ever
submitted by petitioners to prove that
they demanded and was refused
access to the corporate records of
STRADEC between 1 March to 25 June
2004. What petitioners merely
submitted is their letter dated 6
September 2004 demanding from
respondents access to the corporate
records of STRADEC.
2. The allegations of petitioners in their
complaint, as well as 6 September
2004 letter above-mentioned, however,
are contradicted by the sworn
statement dated 1 July 2004 of
Blando 25 wherein he attested that as
early as 25 June 2004, Pilapil already
turned over to him "two binders
containing the minutes, board
resolutions, articles of incorporation,
copies of contracts, correspondences
and other papers of the corporation,
except the stock certificate book and
the stock and transfer book."
3. The RTC also took exception to the reason
provided by the MeTC in supporting its
finding of probable cause against the
respondents. The RTC held that it was
not incumbent upon the respondents to
provide evidence proving their
innocence. Hence, the failure of the
respondents to submit evidence
showing that they do not have
possession of the corporate records of
STRADEC or that they have allowed
inspection of the same cannot be taken
against them much less support a
finding of probable cause against them.
The RTC further pointed out that, at most, the
evidence on record only supports probable cause that the
respondents were withholding the stock and transfer book of
STRADEC. The RTC, however, opined that refusing to allow
inspection of the stock and transfer book, as opposed to
refusing examination of other corporate records, is not
punishable as an offense under the Corporation
Code. 26 Hence, the directive of the RTC dismissing
Criminal Case No. 89724. IaCHTS
The petitioners moved for reconsideration, 27 but the
RTC remained steadfast. 28
 Hence, this petition by petitioners.
The Instant Petition
In their petition, petitioners claim that Criminal Case
No. 89724 may still be sustained against the respondents
insofar as the charge of refusing to allow access to the stock
and transfer book of STRADEC is concerned. They argue
that the RTC made a legal blunder when it held that the
refusal to allow inspection of the stock and transfer book of
a corporation is not a punishable offense under
the Corporation Code. Petitioners contend that such a
refusal still amounts to a violation of Section 74 of
the Corporation Code, for which Section 144 of the same
code prescribes a penalty.
OUR RULING
The RTC indeed made an inaccurate pronouncement
when it held that the act of refusing to allow inspection of the
stock and transfer book of a corporation is nota punishable
offense under the Corporation Code. Such refusal, when
done in violation of Section 74 (4) of the Corporation Code,
properly falls within the purview of Section 144 of the same
code and thus may be penalized as an offense.
The foregoing gaffe nonetheless, We still sustain the
dismissal of Criminal Case No. 89724 as against the
respondents.
A criminal action based on 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 second and fourth paragraphs of Section 74 of
the Corporation Code — such as Criminal Case No. 89724
— can only be maintained against corporate officers or any
other persons acting on behalf of such corporation. The
submissions of the petitioners during the preliminary
investigation, however, clearly suggest that respondents are
neither in relation to STRADEC.
Hence, we deny the petition.
The act of refusing to allow inspection of the
stock and transfer book of a corporation,
when done in violation of Section 74 (4) of
the Corporation Code, is punishable as an
offense under Section 144 of the same code.
We first address the inaccurate pronouncement of the
RTC.
Section 74 is the provision of the Corporation
Code that deals with the books a corporation is required to
keep. It reads:
Section 74. Books to be kept; stock transfer
agent. — Every corporation shall keep and
carefully preserve at its principal office a record
of all business transactions and minutes of all
meetings of stockholders or members, or of the
board of directors or trustees, in which shall be
set forth in detail the time and place of holding
the meeting, how authorized, the notice given,
whether the meeting was regular or special, if
special its object, those present and absent, and
every act done or ordered done at the meeting.
Upon the demand of any director, trustee,
stockholder or member, the time when any
director, trustee, stockholder or member
entered or left the meeting must be noted in the
minutes; and on a similar demand, the yeas and
nays must be taken on any motion or
proposition, and a record thereof carefully
made. The protest of any director, trustee,
stockholder or member on any action or
proposed action must be recorded in full on his
demand.
The records of all business transactions of
the corporation and the minutes of any
meetings shall be open to inspection by any
director, trustee, stockholder or member of
the corporation at reasonable hours on
business days and he may demand, in
writing, for a copy of excerpts from said
records or minutes, at his expense.
Any officer or agent of the corporation who
shall refuse to allow any director, trustees,
stockholder or member of the corporation to
examine and copy excerpts from its records
or minutes, in accordance with the
provisions of this Code, shall be liable to
such director, trustee, stockholder or
member for damages, and in addition, shall
be guilty of an offense which shall be
punishable under Section 144 of this Code:
Provided, That if such refusal is made
pursuant to a resolution or order of the
board of directors or trustees, the liability
under this section for such action shall be
imposed upon the directors or trustees who
voted for such refusal: and Provided,
further, That it shall be a defense to any
action under this section that the person
demanding to examine and copy excerpts
from the corporation's records and minutes
has improperly used any information
secured through any prior examination of
the records or minutes of such corporation
or of any other corporation, or was not
acting in good faith or for a legitimate
purpose in making his demand.
Stock corporations must also keep a book to be
known as the "stock and transfer book", in which
must be kept a record of all stocks in the names
of the stockholders alphabetically arranged; the
installments paid and unpaid on all stock for
which subscription has been made, and the date
of payment of any installment; a statement of
every alienation, sale or transfer of stock made,
the date thereof, and by and to whom made; and
such other entries as the by-laws may
prescribe. The stock and transfer book shall
be kept in the principal office of the
corporation or in the office of its stock
transfer agent and shall be open for
inspection by any director or stockholder of
the corporation at reasonable hours on
business days.
No stock transfer agent or one engaged
principally in the business of registering
transfers of stocks in behalf of a stock
corporation shall be allowed to operate in the
Philippines unless he secures a license from the
Securities and Exchange Commission and pays
a fee as may be fixed by the Commission, which
shall be renewable annually: Provided, That a
stock corporation is not precluded from
performing or making transfer of its own stocks,
in which case all the rules and regulations
imposed on stock transfer agents, except the
payment of a license fee herein provided, shall
be applicable. (51a and 32a; P.B. No. 268.)
(Emphasis supplied)
Section 144 of the Corporation Code, on the other
hand, is the general penal provision of the Corporation
Code. It reads:CEHcSI
Section 144. Violations of the Code. —
Violations of any of the provisions of this Code
or its amendments not otherwise specifically
penalized therein shall be punished by a fine of
not less than one thousand (P1,000.00) pesos
but not more than ten thousand (P10,000.00)
 pesos or by imprisonment for not less than thirty
(30) days but not more than five (5) years, or
both, in the discretion of the court. If the violation
is committed by a corporation, the same may,
after notice and hearing, be dissolved in
appropriate proceedings before the Securities
and Exchange Commission: Provided, That
such dissolution shall not preclude the institution
of appropriate action against the director,
trustee or officer of the corporation responsible
for said violation: Provided, further, That nothing
in this section shall be construed to repeal the
other causes for dissolution of a corporation
provided in this Code. (190 1/2 a) (Emphasis
supplied)
In the assailed Orders, the RTC expressed its opinion
that the act of refusing to allow inspection of the stock and
transfer book, even though it may be a violation of Section
74 (4), is not punishable as an offense under
the Corporation Code. 29 In justifying this conclusion, the
RTC seemingly relied on the fact that, under Section 74 of
the Corporation Code, the application of Section 144 is
expressly mentioned only in relation to the act of "refus[ing]
to allow any director, trustees, stockholder or member of the
corporation to examine and copy excerpts from [the
corporation's] records or minutes" that excludes its stock
and transfer book.
We do not agree.
While Section 74 of the Corporation Code expressly
mentions the application of Section 144 only in relation to
the act of "refus[ing] to allow any director, trustees,
stockholder or member of the corporation to examine and
copy excerpts from [the corporation's] records or
minutes," the same does not mean that the latter section no
longer applies to any other possible violations of the former
section.
It must be emphasized that Section 144 already
purports to penalize "[v]iolations" of "any provision" of
the Corporation Code "not otherwise specifically penalized
therein." Hence, we find inconsequential the fact that that
Section 74 expressly mentions the application of Section
144 only to a specific act, but not with respect to the other
possible violations of the former section.
Indeed, we find no cogent reason why Section 144 of
the Corporation Code cannot be made to apply to violations
of the right of a stockholder to inspect the stock and transfer
book of a corporation under Section 74 (4) given the already
unequivocal intent of the legislature to penalize violations of
a parallel right, i.e., the right of a stockholder or member to
examine the other records and minutes of a corporation
under Section 74 (2). Certainly, all the rights guaranteed to
corporators under Section 74 of the Corporation Code are
mandatory for the corporation to respect. All such rights are
just the same underpinned by the same policy consideration
of keeping public confidence in the corporate vehicle thru an
assurance of transparency in the corporation's operations.
Verily, we find inaccurate the pronouncement of the
RTC that the act of refusing to allow inspection of the stock
and transfer book is not a punishable offense under
the Corporation Code. Such refusal, when done in violation
of Section 74 (4) of the Corporation Code, properly falls
within the purview of Section 144 of the same code and thus
may be penalized as an offense.
A criminal action based on 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 second and
fourth paragraphs of Section 74 of the
 Corporation Code can only be maintained
against corporate officers or any other persons
acting on behalf of such corporation.
The foregoing notwithstanding, and independently of
the reasons provided therefor by the RTC, we sustain the
dismissal of Criminal Case No. 89724.
Criminal Case No. 89724 accuses respondents of
denying petitioners' right to examine or inspect the corporate
records and the stock and transfer book of STRADEC. It is
thus a criminal action that is based on the violation of the
second and fourth paragraphs of Section 74 of
the Corporation Code.
A perusal of the second and fourth paragraphs of
Section 74, as well as the first paragraph of the same
section, reveal that they are provisions
that obligates acorporation: they prescribe what books or
records a corporation is required to keep; where
the corporation shall keep them; and what are the other
obligations of the corporation to its stockholders or
members in relation to such books and records. Hence, by
parity of reasoning, the second and fourth paragraphs of
Section 74, including the first paragraph of the same section,
can only be violated by a corporation. SCEDAI
It is clear then that a criminal action based on the
violation of the second or fourth paragraphs of Section 74
can only be maintained against corporate officers or such
other persons that are acting on behalf of the corporation.
Violations of the second and fourth paragraphs of Section
74 contemplates a 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 problem with the petitioners' complaint and the
evidence that they submitted during preliminary
investigation is that they do not establish that respondents
were acting on behalf of STRADEC. Quite the contrary, the
scenario painted by the complaint is that the respondents
are merely outgoing officers of STRADEC who, for some
reason, withheld and refused to turn-over the company
records of STRADEC; that it is the petitioners who are
actually acting on behalf of STRADEC; and that STRADEC
is actually merely trying to recover custody of the withheld
records.
In other words, petitioners are not actually invoking
their right to inspect the records and the stock and transfer
book of STRADEC under the second and fourth paragraphs
of Section 74. What they seek to enforce is the
proprietary right of STRADEC to be in possession of
such records and book. Such right, though certainly legally
enforceable by other means, cannot be enforced by a
criminal prosecution based on a violation of the second and
fourth paragraphs of Section 74. That is simply not the
situation contemplated by the second and fourth paragraphs
of Section 74 of the Corporation Code.
For this reason, we affirm the dismissal of Criminal
Case No. 89724 for lack of probable cause.
WHEREFORE, premises considered, the petition is
hereby DENIED. The Orders dated 4 June 2007 and 5
November 2007 of the Regional Trial Court, Branch 154, of
Pasig City in S.C.A. No. 3047, insofar as said orders
effectively dismissed Criminal Case No. 89724 pending
before Metropolitan Trial Court, Branch 69, of Pasig City, are
hereby AFFIRMED.
SO ORDERED.
 (Yujuico v. Quiambao, G.R. No. 180416, [June 2, 2014],
||| G.R. SP No. 68202. The first assailed Resolution
734 PHIL 606-623) dismissed the appeal filed by petitioners with the CA.
Allegedly, without the proper authorization of the other
petitioners, the Verification and Certification of Non-
FIRST DIVISION Forum Shopping were signed by only one of them —
Atty. Sabino Padilla Jr. The second Resolution denied
[G.R. No. 153468. August 17, 2006.] reconsideration.
The Facts
PAUL LEE TAN, ANDREW LIUSON,
ESTHER WONG, STEPHEN CO, JAMES Petitioner Grace Christian High School (GCHS) is
TAN, JUDITH TAN, ERNESTO TANCHI JR., a nonstock, non-profit educational corporation with
EDWIN NGO, VIRGINIA KHOO, SABINO fifteen (15) regular members, who also constitute the
PADILLA JR., EDUARDO P. LIZARES and board of trustees. 4 During the annual members' meeting
GRACE CHRISTIAN HIGH held on April 6, 1998, there were only eleven
SCHOOL, petitioners, vs. PAUL SYCIP and (11) 5 living member-trustees, as four (4) had already
MERRITTO LIM, respondents. died. Out of the eleven, seven (7) 6 attended the meeting
through their respective proxies. The meeting was
convened and chaired by Atty. Sabino Padilla Jr. over the
objection of Atty. Antonio C. Pacis, who argued that there
DECISION
was no quorum. 7 In the meeting, Petitioners Ernesto
Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were
voted to replace the four deceased member-trustees.
PANGANIBAN, C.J : p

When the controversy reached the Securities and

For stock corporations, the "quorum" referred to in Exchange Commission (SEC), petitioners maintained
Section 52 of the Corporation Code is based on the that the deceased member-trustees should not be
number of outstanding voting stocks. For nonstock counted in the computation of the quorum because, upon
corporations, only those who are actual, their death, members automatically lost all their rights
living members with voting rights shall be counted in (including the right to vote) and interests in the
determining the existence of a quorum during members' corporation.
meetings. Dead members shall not be counted. SEC Hearing Officer Malthie G. Militar declared the
The Case- April 6, 1998 meeting null and void for lack of quorum.
She held that the basis for determining the quorum in a
The present Petition for Review
meeting of members should be their number as specified
on Certiorari 1 under Rule 45 of the Rules of Court seeks
in the articles of incorporation, not simply the number
the reversal of the January 23 2 and May 7,
of living members. 8 She explained that the qualifying
2002, 3 Resolutions of the Court of Appeals (CA) in CA-
phrase "entitled to vote" in Section 24 9 of the
Corporation Code, which provided the basis for
determining a quorum for the election of directors or
trustees, should be read together with Section 89. 10
The hearing officer also opined that Article III
(2) 11 of the By-Laws of GCHS, insofar as it prescribed
the mode of filling vacancies in the board of trustees,
must be interpreted in conjunction with Section 29 12 of
the Corporation Code. The SEC en banc denied the
appeal of petitioners and affirmed the Decision of the
hearing officer in toto. 13 It found to be untenable their
contention that the word "members,"' as used in Section
52 14 of the Corporation Code, referred only to
the livingmembers of a nonstock corporation. 15
As earlier stated, the CA dismissed the appeal of
petitioners, because the Verification and
Certification of Non-Forum Shopping had been
signed only by Atty. Sabino Padilla Jr. No Special
Power of Attorney had been attached to show his
authority to sign for the rest of the petitioners.
Hence, this Petition. 16
Issues
Petitioners state the issues as follows:
"Petitioners principally pray for the
resolution of the legal question of whether or not
in NON-STOCK corporations, dead
members should still be counted in determination
of quorum for purposed of conducting the Annual
Members' Meeting. STcHEI
"Petitioners have maintained before the
courts below that the DEAD members should no
longer be counted in computing quorum primarily
on the ground that members' rights are 'personal
and non-transferable' as provided in Sections 90
and 91 of the Corporation Code of the Philippines.
"The SEC ruled against the petitioners
solely on the basis of a 1989 SEC Opinion that did
not even involve a non-stock corporation as
petitioner GCHS.
"The Honorable Court of Appeals on the
other hand simply refused to resolve this question
and instead dismissed the petition for review on a
technicality — the failure to timely submit an SPA
from the petitioners authorizing their co-
petitioner Padilla, their counsel and also a
petitioner before the Court of Appeals, to sign the
petition on behalf of the rest of the petitioners.
"Petitioners humbly submit that the action
of both the SEC and the Court of Appeals are not
in accord with law particularly the
pronouncements of this Honorable Court
in Escorpizo v. University of Baguio (306 SCRA
497), Robern Development Corporation v.
Quitain (315 SCRA 150) and MC Engineering,
Inc. v. NLRC, (360 SCRA 183). Due course
should have been given the petition below and the
merits of the case decided in petitioners' favor." 17
In sum, the issues may be stated simply in this
wise: 1) whether the CA erred in denying the Petition
below, on the basis of a defective Verification and
Certification; and 2) whether dead members should still
be counted in the determination of the quorum, for
purposes of conducting the annual members' meeting.
The Court's Ruling
The present Petition is partly meritorious.
 Procedural Issue:
Verification and Certification
of Non-Forum Shopping
The Petition before the CA was initially flawed,
because the Verification and Certification of Non-Forum
Shopping were signed by only one, not by all, of the
petitioners; further, it failed to show proof that the
signatory was authorized to sign on behalf of all of them.
Subsequently, however, petitioners submitted a Special
Power of Attorney, attesting that Atty. Padilla was
authorized to file the action on their behalf. 18
In the interest of substantial justice, this initial
procedural lapse may be excused. 19 There appears to
be no intention to circumvent the need for proper
verification and certification, which are aimed at assuring
the truthfulness and correctness of the allegations in the
Petition for Review and at discouraging forum
shopping. 20 More important, the substantial merits of
petitioners' case and the purely legal question involved in
the Petition should be considered special
circumstances 21 or compelling reasons that justify an
exception to the strict requirements of the verification and
the certification of non-forum shopping. 22
Main Issue:
Basis for Quorum
Generally, stockholders' or members' meetings
are called for the purpose of electing directors or
trustees 23 and transacting some other business calling
for or requiring the action or consent of the shareholders
or members, 24 such as the amendment of the articles of
incorporation and bylaws, sale or disposition of all or
substantially all corporate assets, consolidation and
merger and the like, or any other business that may
properly come before the meeting.
Under the Corporation Code, stockholders or
members periodically elect the board of directors or
trustees, who are charged with the management of
the corporation. 25 The board, in turn, periodically
elects officers to carry out management functions on
a day-to-day basis. As owners, though, the stockholders
or members have residual powers over fundamental
and major corporate changes.
While stockholders and members (in some
instances) are entitled to receive profits, the
management and direction of the corporation are lodged
with their representatives and agents — the board of
directors or trustees. 26 In other words, acts of
management pertain to the board; and those of
ownership, to the stockholders or members. In the
latter case, the board cannot act alone, but must seek
approval of the stockholders or members. 27
Conformably with the foregoing principles, one of
the most important rights of a qualified shareholder
or member is the right to vote — either personally or
by proxy — for the directors or trustees who are to
manage the corporate affairs. 28 The right to choose
the persons who will direct, manage and operate the
corporation is significant, because it is the main way
in which a stockholder can have a voice in the
management of corporate affairs, or in which a
member in a nonstock corporation can have a say on
how the purposes and goals of the corporation may be
achieved. 29 Once the directors or trustees are elected,
the stockholders or members relinquish corporate
powers to the board in accordance with law.
In the absence of an express charter or statutory
provision to the contrary, the general rule is that every
member of a nonstock corporation, and every legal
owner of shares in a stock corporation, has a right to be
present and to vote in all corporate meetings.
Conversely, those who are not stockholders or members
have no right to vote. 30 Voting may be expressed
personally, or through proxies who vote in their
representative capacities. 31 Generally, the right to be
present and to vote in a meeting is determined by the
time in which the meeting is held. 32
Section 52 of the Corporation Code states:
"Section 52. Quorum in Meetings. —
Unless otherwise provided for in this Code or in
the by-laws, a quorum shall consist of the
stockholders representing a majority of the
outstanding capital stock or a majority of the
members in the case of non-stock corporations."
In stock corporations, the presence of a quorum is
ascertained and counted on the basis of the outstanding
capital stock, as defined by the Code thus:
"SECTION 137. Outstanding capital stock
defined. — The term 'outstanding capital stock' as
used in this Code, means the total shares of
stock issued under binding subscription
agreements to subscribers or stockholders,
whether or not fully or partially paid, except
treasury shares." (Underscoring supplied)
The Right to Vote in
Stock Corporations
The right to vote is inherent in and incidental to the
ownership of corporate stocks. 33 It is settled that
unissued stocks may not be voted or considered in
determining whether a quorum is present in a
stockholders' meeting, or whether a requisite proportion
of the stock of the corporation is voted to adopt a certain
measure or act. Only stock actually issued and
outstanding may be voted. 34 Under Section 6 of the
Corporation Code, each share of stock is entitled to vote,
unless otherwise provided in the articles of incorporation
or declared delinquent 35 under Section 67 of the
Code. CTDAaE
Neither the stockholders nor the corporation can
vote or represent shares that have never passed to the
ownership of stockholders; or, having so passed, have
again been purchased by the corporation. 36 These
shares are not to be taken into consideration in.
determining majorities. When the law speaks of a given
proportion of the stock, it must be construed to mean
the shares that have passed from the corporation, and
that may be voted. 37
Section 6 of the Corporation Code, in part,
provides:
"Section 6. Classification of shares. — The
shares of stock of stock corporations may be
divided into classes or series of shares, or both,
any of which classes or series of shares may have
such rights, privileges or restrictions as may be
stated in the articles of incorporation: Provided,
That no share may be deprived of voting rights
except those classified and issued as "preferred"
or "redeemable" shares, unless otherwise
provided in this Code: Provided, further, that there
shall always be a class or series of shares which
have complete voting rights.
xxx xxx xxx
"Where the articles of incorporation
provide for non-voting shares in the cases allowed
by this Code, the holders of such shares shall
nevertheless be entitled to vote on the following
matters:
 1. Amendment of the articles
incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage,
pledge or other disposition of all or
substantially all of the corporation
property;
4. Incurring, creating or increasing bonded
indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the
corporation with another
corporation or other corporations;
7. Investment of corporate funds in another
corporation or business in
accordance with this Code; and
8. Dissolution of the corporation.
"Except as provided in the immediately
preceding paragraph, the vote necessary to
approve a particular corporate act as provided in
this Code shall be deemed to refer only to stocks
with voting rights."
Taken in conjunction with Section 137, the last
paragraph of Section 6 shows that the intention of the
lawmakers was to base the quorum mentioned in
Section 52 on. the number of outstanding
voting stocks. 38
The Right to Vote
Nonstock Corporations
In nonstock corporations, the voting rights
attach to membership. 39 Members vote as persons, in
accordance with the law and the bylaws of the
of corporation. Each member shall be entitled to one vote
unless so limited, broadened, or denied in the articles of
incorporation or bylaws. 40 We hold that when the
principle for determining the quorum for stock
corporations is applied by analogy to nonstock
corporations, only those who are actual members
with voting rights should be counted.
Under Section 52 of the Corporation Code, the
majority of the members representing
the actual number of voting rights, not the number or
numerical constant that may originally be specified in the
articles of incorporation, constitutes the quorum. 41
The March 3, 1986 SEC Opinion 42 cited by the
hearing officer uses the phrase "majority vote of the
members"; likewise Section 48 of the Corporation Code
refers to 50 percent of 94 (the number of
registered members of the association mentioned
therein) plus one. The best evidence of who are
the present members of the corporation is the
"membership book"; in the case of stock corporations, it
is the stock and transfer book. 43
Section 25 of the Code specifically provides that a
majority of the directors or trustees, as fixed in the
articles of incorporation, shall constitute a quorum for the
transaction of corporate business (unless the articles of
incorporation or the bylaws provide for a greater
majority). If the intention of the lawmakers was to base
the quorum in the meetings of stockholders or members
on their absolute number as fixed in the articles of
in incorporation, it would have expressly specified so.
Otherwise, the only logical conclusion is that the
legislature did not have that intention.
Effect of the Death
of a Member or Shareholder
 Having thus determined that the quorum in a
members' meeting is to be reckoned as
the actual number of members of the corporation, the
next question to resolve is what happens in the event of
the death of one of them.
In stock corporations, shareholders may generally
transfer their shares. Thus, on the death of a
shareholder, the executor or administrator duly
appointed by the Court is vested with the legal title to the
stock and entitled to vote it. Until a settlement and
division of the estate is effected, the stocks of the
decedent are held by the administrator or executor. 44
On the other hand, membership in and all rights
arising from a nonstock corporation are personal and
non-transferable, unless the articles of incorporation
or the bylaws of the corporation provide
otherwise. 45 In other words, the determination of
whether or not "dead members" are entitled to exercise
their voting rights (through their executor or
administrator), depends on those articles of incorporation
or bylaws.
Under the By-Laws of GCHS, membership in the
corporation shall, among others, be terminated by the
death of the member. 46 Section 91 of the Corporation
Code further provides that termination extinguishes all
the rights of a member of the corporation, unless
otherwise provided in the articles of incorporation or the
bylaws.
Applying Section 91 to the present case, we hold
that dead members who are dropped from the
membership roster in the manner and for the cause
provided for in the By-Laws of GCHS are not to be
counted in determining the requisite vote in corporate
matters or the requisite quorum for the annual members'
meeting. With 11 remaining members, the quorum in the
present case should be 6. Therefore, there being a
quorum, the annual members' meeting, conducted with
six 47members present, was valid. CDScaT
Vacancy in the
Board of Trustees
As regards the filling of vacancies in the board of
trustees, Section 29 of the Corporation Code provides:
"SECTION 29. Vacancies in the office of
director or trustee. — Any vacancy occurring in
the board of directors or trustees other than by
removal by the stockholders or members or by
expiration of term, may be filled by the vote of at
least a majority of the remaining directors or
trustees, if still constituting a quorum; otherwise,
said vacancies must be filled by the stockholders
in a regular or special meeting called for that
purpose. A director or trustee so elected to fill a
vacancy shall be elected only for the unexpired
term of his predecessor in office."
Undoubtedly, trustees may fill vacancies in the
board, provided that those remaining still constitute a
quorum. The phrase "may be filled" in Section 29 shows
that the filling of vacancies in the board by the remaining
directors or trustees constituting a quorum is merely
permissive, not mandatory. 48 Corporations, therefore,
may choose how vacancies in their respective boards
may be filled up — either by the remaining directors
constituting a quorum, or by the stockholders or
members in a regular or special meeting called for the
purpose. 49
The By-Laws of GCHS prescribed
the specific mode of filling up existing vacancies in its
 board of directors; that is, by a majority vote of the
remaining members of the board. 50
While a majority of the remaining corporate
members were present, however, the "election" of the
four trustees cannot be legally upheld for the obvious
reason that it was held in an annual meeting of the
members, not of the board of trustees. We are not
unmindful of the fact that the members of GCHS
themselves also constitute the trustees, but we cannot
ignore the GCHS bylaw provision, which specifically
prescribes that vacancies in the board must be filled up
by the remaining trustees. In other words, these
remaining member-trustees must sit as a board in order
to validly elect the new ones.
Indeed, there is a well-defined distinction between
a corporate act to be done by the board and that by the
constituent members of the corporation. The board of
trustees must act, not individually or separately, but
as a body in a lawful meeting. On the other hand, in
their annual meeting, the members may be represented
by their respective proxies, as in the contested annual
members' meeting of GCHS.
WHEREFORE, the Petition is partly GRANTED.
The assailed Resolutions of the Court of Appeals are
hereby REVERSED AND SET ASIDE. The remaining
members of the board of trustees of Grace Christian High
School (GCHS) may convene and fill up the vacancies in
the board, in accordance with this Decision. No
pronouncement as to costs in this instance.
SO ORDERED.
(Tan v. Sycip, G.R. No. 153468, [August 17, 2006], 530
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PHIL 609-627)