NHA VS. CA location of the seven-hectare area under its usufruct.
However, the Court cannot countenance MSBF’s act
FACTS:
Pres. Marcos issued Proc. No. 481 (1968) setting
aside a 120-hectare portion of land in Quezon City
owned by the NHA as reserved property for the site of
National Government Center (NGC). Subsequently, he
issued Proc. No. 1670 (1977), which removed a 7-
hectare portion from the 120-hectare land, giving the
usufructuary rights to the “xxx Manila Seedling Bank
Foundation, Inc., for use in its operation and projects,
subject to private rights if any there be, and to future
survey, under the administration of the Foundation.
This parcel of land, which shall embrace 7 hectares,
shall be determined by the future survey based on the
technical descriptions found in Proclamation No. 481,
and most particularly on the original survey of the
area, dated July 1910 to June 1911, and on the
subdivision survey dated April 19-25, 1968.” Over the
years, MSBF occupied the area but it exceeded the 7-
hectare subject of the usufruct and occupied 16
hectares instead. By then the land occupied by MSBF
was bounded by Epifanio de los Santos Avenue
(EDSA) to the west, Agham Road to the east, Quezon
Avenue to the south and a creek to the north. On
1987, MSBF leased a portion of its area to BGC and
other stallholders. BGC leased the portion facing
EDSA, which occupies 4,590 square meters of the 16-
hectare area. On November 1987, Pres. Corazon
Aquino issued MO 127 which revoked the reserved
status of the 50 hectares, more or less, remaining out
of the 120 hectares of the NHA property reserved as
site of the NGC. It also authorized the NHA to
commercialize the area and to sell it to the public. On
August 1988, acting pursuant to MO 127, the NHA
gave BGC 10 days to vacate its occupied area. Any
structure left behind after the expiration of the 10-day
period will be demolished by NHA. BGC then filed a
complaint for injunction on 21 April 1988 before the
trial court. On 26 May 1988, BGC amended its
complaint to include MSBF as its co-plaintiff. Both the
NHA and MSBF conducted survey on the subject
parcel of land.
ISSUE:
Whether or not the MSBF has the right to
determine the subject 7-hectare portion of land
HELD:
Yes. Art. 565 states that, the rights and obligations of
the usufructuary shall be those provided in the title
constituting the usufruct; in default of such title, or in
case it is deficient, the provisions contained in the two
following Chapters shall be observed. In the present
case, Proc. No. 1670 is the title constituting the
usufruct. It categorically states that the 7-hectare area
shall be determined by future survey under the
administration of the Foundation subject to private
rights if there be any. It authorized MSBF to determine
the location of the 7-hectare area. This authority,
coupled with the fact that Proc. No. 1670 did not state
the location of the 7-hectare area, leaves no room for
doubt that Proc. No. 1670 left it to MSBF to choose the
of exceeding the 7-hectare portion granted to it by the
proclamation. A usufruct is not simply about rights and
privileges. A usufructuary has the duty to protect the
owner’s interests. Article 601 of the Civil Code states:
the usufructuary shall be obliged to notify the owner of
any act of a third person, of which he may have
knowledge, that may be prejudicial to the rights of
ownership, and he shall be liable should he not do so,
for damages, as if they had been caused through his
own fault. The controversy would not have arisen had
MSBF respected the limit of the beneficial use given to
it. Hence, there is a need for a new survey, conducted
jointly by the NHA and MSBF, consider existing
structures of MSBF and as much as possible include
all of the facilities of MSBF within the 7-hectare portion
without sacrificing contiguity.
Another point in the case: Article 605 of the Civil Code
states: Usufruct cannot be constituted in favor of a
town, corporation, or association for more than fifty
years. If it has been constituted, and before the
expiration of such period the town is abandoned, or
the corporation or association is dissolved, the
usufruct shall be extinguished by reason thereof.Proc.
No. 1670 was issued in 1977, or 28 years ago. Hence,
under Article 605, the usufruct in favor of MSBF has
22 years left.MO 127 released approximately 50
hectares of the NHA property as reserved site for the
NGC. However, it does not affect MSBF’s 7-hectare
area since under Proc. No. 1670, MSBF’s 7-hectare
area was already excluded from the operation of Proc.
No. 481, which established the NGC Site.
SALAFRANCA VS PHILAMLIFE
FACTS:
Petitioner Enrique Salafranca started working with the
private respondent Philamlife Village Homeowners
Association on May 1, 1981 as administrative officer
for a period of six months.
As administrative officer, petitioner was generally
responsible for the management of the villages day to
day activities.
After petitioners term of employment expired on
December 31, 1983, he still continued to work in the
same capacity, albeit, without the benefit of a renewed
contract.
Sometime in 1987, private respondent decided to
amend its bylaws.
Included therein was a provision regarding officers,
specifically, the position of administrative officer under
which said officer shall hold office at the pleasure of
the Board of Directors.
He continued working until his termination in
December 1992.
Claiming that his services had been unlawfully and
unceremoniously dispensed with, petitioner filed a
complaint for illegal dismissal with money claims and
for damages.
ISSUE:
Whether or not petitioner is illegally dismissed

RULING:
There is illegal dismissal.
On the outset, there is no dispute that petitioner
had already attained the status of a regular employee,
as evidenced by his eleven years of service with the
private respondent. Accordingly, petitioner enjoys the
right to security of tenure and his services may be
terminated only for causes provided by law.
Viewed in this light, while private respondent has
the right to terminate the services of petitioner, this is
subject to both substantive and procedural grounds.
The substantive causes for dismissal are those
provided in Articles 282 and 283 of the Labor Code,
while the procedural grounds refer to the observance
of the requirement of due process. In all these
instances, it is the private respondent, being the
employer, who must prove the validity of the dismissal.
The right to amend the bylaws lies solely in the
discretion of the employer, this being in the exercise of
management prerogative or business judgment.
However this right, extensive as it may be, cannot
impair the obligation of existing contracts or rights.
It would enable an employer to remove any
employee from his employment by the simple
expediency of amending its bylaws and providing that
his/her position shall cease to exist upon the
occurrence of a specified event.
PEÑA VS CA
Antecedents facts:
PAMPANGA BUS CO., INC. (PAMBUSCO) is the
owner of the three lots in dispute. PAMBUSCO
mortgaged the lots to the Development Bank of the
Philippines (DBP), which were later on foreclosed.
Rosita Peña was awarded the lots in a foreclosure
sale for being the highest bidder. The certificate of sale
was later issued to her and registered in her name.
Subsequently, the Board of Directors of PAMBUSCO,
through three out of its five directors, issued a
resolution to assign its right of redemption over the lots
in favor of any interested party. The right of
redemption was later on assigned to Marcelino
Enriquez, who redeemed the property.
Enriquez then sold the lots to spouses Rising T. Yap
and Catalina Lugue-Yap.
Meanwhile, a case involving the validity of the sale to
the spouses Yap was pending, and despite the
protestations of Peña as to validity of the
PAMBUSCO's assignment of the right of redemption,
the lots were somehow registered in the name of
spouses Yap. Despite the registration of the lots to
spouses Yap, Peña retained possession of the
property.
Main Case:
Spouses Yap sought to recover the possession of the
lots from Peña. The latter countered that she is now
the legitimate owner of the subject lands for having
purchased the same in a foreclosure proceeding
instituted by the DBP against PAMBUSCO and no
valid redemption having been effected within the
period provided by law.
The defense was that since the deed of assignment
executed by PAMBUSCO in favor of Enriquez was
void ab initio for being an ultra vires act of its board of
directors and for being without any valuable
consideration, it could not have had any legal effect.
(It should be noted that the by-laws of PAMBUSCO
provide that four out of five directors must be present
in a special meeting of the board to constitute a
quorum, and that the corporation has already ceased
to operate.)
CFI ruled in favor of Petitioner Peña, but the same
was overturned by the CA.
Issue: W/N there Peña is entitled to the lots.
Ruling: Yes.
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.
Apparently, only three (3) out of five (5) members
of the board of directors of respondent PAMBUSCO
convened by virtue of a prior notice of a special
meeting. There was no quorum to validly transact
business since it is required under its by-laws that at
least four (4) members must be present to constitute a
quorum in a special meeting of the board of directors.
Under Section 25 of the Corporation Code of the
Philippines, the articles of incorporation or by-laws of
the corporation may fix a greater number than the
majority of the number of board members to constitute
the quorum necessary for the valid transaction of
business. Any number less than the number provided
in the articles or by-laws therein cannot constitute a
quorum and any act therein would not bind the
corporation; all that the attending directors could do is
to adjourn.
Moreover, the records show that respondent
PAMBUSCO ceased to operate for about 25 years
prior to the board meeting. Being a dormant
corporation for several years, it was highly irregular,
for a group of three (3) individuals representing
themselves to be the directors of respondent
PAMBUSCO to pass a resolution disposing of the only
remaining asset of the corporation in favor of a former
corporate officer.
As a matter of fact, the three (3) alleged directors
who attended the special meeting on November 19,
1974 were not listed as directors of respondent
PAMBUSCO in the latest general information sheet.
Similarly, the latest list of stockholders of respondent
PAMBUSCO on file with the SEC does not show that
the said alleged directors were among the
stockholders of respondent PAMBUSCO, in
contravention of the rule requiring a director to own
one (1) share in their to qualify as director of a
corporation.
Further, under the Corporation Law, the sale or
disposition of any and/or substantially all properties of
the corporation requires, in addition to a proper board
resolution, the affirmative votes of the stockholders
holding at least two-thirds (2/3) of the voting power in
the corporation in a meeting duly called for that
purpose. This was not complied with in the case at
bar.
At the time of the passage of the questioned
resolution, respondent PAMBUSCO was insolvent and
its only remaining asset was its right of redemption
over the subject properties. Since the disposition of
said redemption right of respondent PAMBUSCO by
virtue of the questioned resolution was not approved
by the required number of stockholders, the said
resolution, as well as the subsequent assignment and
sale, were null and void.
Lastly, for lack of consideration, the assignment
should be construed as a donation. Under Article 725
of the Civil Code, in order to be valid, such a donation
must be made in a public document and the
acceptance must be made in the same or in a
separate instrument. In the latter case, the donor shall
be notified of the acceptance in an authentic form and
such step must be noted in both instruments. Since
assignment to Enriquez shows that there was no
acceptance of the donation in the same and in a
separate document, the said deed of assignment is
thus void ab initio.
DELA RAMA VS MA-AO SUGAR CENTRAL
Facts
This was a derivative suit commenced by four
minority stockholders against the Ma-ao Sugar Central
Co., Inc. and the corporation’s directors.
The complaint comprising the period November,
1946 to October, 1952, stated five causes of action, to
wit:
1. For alleged illegal and ultra-vires acts consisting of
self-dealing irregular loans, and unauthorized
investments;
2. For alleged gross mismanagement;
3. For alleged forfeiture of corporate rights warranting
dissolution;
4. For alleged damages and attorney's fees; and
5. For receivership.
Illegal investments in the Mabuhay Printing,
P2,280,00, and the Acoje Mining, P7,000.00. The
investments were made not in pursuance of the
corporate purpose and without the requisite authority
of two-thirds of the stockholders
Issue
Does the investment of corporate funds by the
Ma-Ao Sugar Central in another corporation
(Philippine Fiber Processing Co) violate the
Corporation Law?
Held: No.
The legal provision invoked by the plaintiffs, as
appellants, Sec. 17-½ of the Corporation Law,
provides:
No corporation organized under this act shall
invest its funds in any other corporation or business, or
for any purpose other than the main purpose for which
it was organized, unless its board of directors has
been so authorized in a resolution by the affirmative
vote of stockholders holding shares in the corporation
entitling them to exercise at least two-thirds of the
voting power on such proposal at a stockholders'
meeting called for the purpose
On the other hand, the defendants, as appellees,
invoked Sec. 13, par. 10 of the Corporation Law, which
provides:
(10) Except as in this section otherwise provided,
and in order to accomplish its purpose as stated in the
articles of incorporation, to acquire, hold, mortgage,
pledge or dispose of shares, bonds, securities and
other evidences of indebtedness of any domestic or
foreign corporation.
Reconciling these 2 apparently conflicting
provisions is easy.
A private corporation, in order to accomplish its
purpose as stated in its articles of incorporation, and
subject to the limitations imposed by the Corporation
Law, has the power to acquire, hold, mortgage, pledge
or dispose of shares, bonds, securities, and other
evidences of indebtedness of any domestic or foreign
corporation. Such an act, if done in pursuance of the
corporate purpose, does not need the approval of the
stockholders; but when the purchase of shares of
another corporation is done solely for investment and
not to accomplish the purpose of its incorporation, the
vote of approval of the stockholders is necessary.
A private corporation has the power to invest its
corporate funds in any other corporation or business,
or for any purpose other than the main purpose for
which it was organized, provided that 'its board of
directors has been so authorized in a resolution by the
affirmative vote of stockholders holding shares in the
corporation entitling them to exercise at least two-
thirds of the voting power on such a proposal at a
stockholders' meeting called for that purpose,’ When
the investment is necessary to accomplish its purpose
or purposes as stated in it articles of incorporation, the
approval of the stockholders is not necessary.
ISLAMIC DIRECTORATE Vs. CA
FACTS:
Petitioner IDP-Tamano Group alleges that
sometime in 1971, Islamic leaders of all Muslim major
tribal groups in the Philippines headed by Dean Cesar
Adib Majul organized and incorporated the ISLAMIC
DIRECTORATE OF THE PHILIPPINES (IDP), the
primary purpose of which is to establish an Islamic
Center in Quezon City for the construction of a
“Mosque (prayer place), Madrasah (Arabic School),
and other religious infrastructures” so as to facilitate
the effective practice of Islamic faith in the area.
In the same year, the Libyan government donated
money to the IDP to purchase land at Culiat, Tandang
Sora, and Quezon City, to be used as a Center for the transaction including the sale or disposition of IDP
Islamic populace. After the purchase of the land by the property.
Libyan government in the name of IDP, Martial Law The SEC already declared the election of the
was declared by the late President Ferdinand Marcos. Carpizo Group as well as the Abbas Group to the IDP
Most of the members of the 1971 Board of Trustees Board as null and void for being violative of the Articles
like Senators Mamintal Tamano, Salipada Pendatun, of Incorporation. In this case, the IDP, owner of the
Ahmad Alonto, and Congressman Al-Rashid Lucman subject parcels of land, never gave its consent, thru a
flew to the Middle East to escape political persecution. legitimate Board of Trustees, to the disputed Deed of
Thereafter, two Muslim groups sprung, the Absolute Sale executed in favor of INC. This is,
Carpizo Group, headed by Engineer Farouk Carpizo, therefore, a case not only of vitiated consent, but one
and the Abbas Group, led by Mrs. Zorayda Tamano where consent on the part of one of the supposed
and Atty. Firdaussi Abbas. Both groups claimed to be contracting parties is totally wanting. Ineluctably, the
the legitimate IDP. Significantly, on October 3, 1986, subject sale is void and produces no effect
the SEC, in a suit between these two contending whatsoever.
groups, came out with a decision declaring the
election of both the Carpizo Group and the Abbas
Group as IDP board members to be null and void.
Neither group, however, took the necessary steps
prescribed by the SEC, nor, thus, no valid election of
the members of the Board of Trustees of IDP was ever
called. Although the Carpizo Group attempted to
submit a set of by-laws, the SEC found that, aside
from Engineer Farouk Carpizo and Atty. Musib Buat,
those who prepared and adopted the by-laws were not
bona fide members of the IDP, thus rendering the
adoption of the by-laws likewise null and void.
Without having been properly elected as new
members of the Board of Trustees of IDP, the Carpizo
Group caused to be signed an alleged Board
Resolution of the IDP, authorizing the sale of the
subject two parcels of land to the private respondent
INC. The petitioner 1971 IDP Board of Trustees
headed by former Senator Mamintal Tamano, or the
Tamano Group, filed a petition before the SEC,
seeking to declare null and void the Deed of Absolute
Sale since the group was not legitimate Board of
Trustees.
SEC ruled in favor of 1971 Board of Trustees. The
CA reversed the decision.

ISSUE
Whether the sale of 2 parcels of land between the
IDP-Carpizo Group and private respondent INC is null
and void.

RULING
Yes. There can be no question as to the authority
of the SEC to pass upon the issue as to who among
the different contending groups is the legitimate Board
of Trustees of the IDP since this is a matter properly
falling within the original and exclusive jurisdiction of
the SEC by virtue of Sections 3 and 5(c) of
Presidential Decree No. 902-A. If the SEC can declare
who is the legitimate IDP Board, then by parity of
reasoning, it can also declare who is not the legitimate
IDP Board. This is precisely what the SEC did when it
adjudged the election of the Carpizo Group to the IDP
Board of Trustees to be null and void. By this ruling,
the SEC in effect made the unequivocal finding that
the IDP-Carpizo Group is a bogus Board of Trustees.
Consequently, the Carpizo Group is bereft of any
authority whatsoever to bind IDP in any kind of