[G.R. No. 168757, January 19, 2011] RENATO REAL, PETITIONER, VS. SANGU PHILIPPINES, INC.

AND/ OR KIICHI ABE, RESPONDENTS. DECISION DEL CASTILLO, J.: The perennial question of whether a complaint for illegal dismissal is intra-corporate and thus beyond the jurisdiction of the Labor Arbiter is the core issue up for consideration in this case.

Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a corporation engaged in the business of providing manpower for general services. He was removed from office. Respondents, on the other hand, refuted petitioner's claim of illegal dismissal by alleging that after petitioner was appointed Manager, he committed gross acts of misconduct detrimental to the company since 2000.

Cut to the chase:

While admitting that he is indeed a stockholder of respondent corporation, petitioner nevertheless disputed the declaration of the NLRC that he is a corporate officer thereof. He posited that his being a

stockholder and his being a managerial employee do not ipso facto confer upon him the status of a corporate officer.

He pointed out that although said information sheet clearly indicates that he is a stockholder of respondent corporation, he is not an officer thereof as shown by the entry "N/A" or "not applicable" opposite his name in the officer column. Said column requires that the particular position be indicated if the person is an officer and if not, the entry "N/A".

Petitioner further argued that the fact that his dismissal was effected through a board resolution does not likewise mean that he is a corporate officer. Otherwise, all that an employer has to do in order to avoid compliance with the requisites of a valid dismissal under the Labor Code is to dismiss a managerial employee through a board resolution. Moreover, he insisted that his action for illegal dismissal is not an intra-corporate controversy as same stemmed from employee-employer relationship which is well within the jurisdiction of the Labor Arbiter.

In contrast, respondents stood firm that the action against them is an intra-corporate controversy. It cited Tabang v. National Labor Relations Commission[9] wherein this Court declared that "an intracorporate controversy is one which arises between a stockholder and the corporation;" that "[t]here is no distinction, qualification, nor any exemption whatsoever;" and that it is "broad and covers all kinds of controversies between stockholders and corporations."

In the assailed Decision[10] dated June 28, 2005, the CA sided with respondents and affirmed the NLRC's finding that aside from being a stockholder of respondent corporation, petitioner is also a corporate officer thereof and consequently, his complaint is an intra-corporate controversy over which the labor arbiter has no jurisdiction.

Issue

whether petitioner's complaint for illegal dismissal constitutes an intra-corporate controversy and thus, beyond the jurisdiction of the Labor Arbiter

held:

Two-tier test in determining the existence of intra-corporate controversy Respondents strongly rely on this Court's pronouncement in the 1997 case of Tabang v. National Labor Relations Commission, to wit: [A]n intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification nor any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations.[16]

that before the promulgation of the Tabang case, the Court provided in Mainland Construction Co., Inc. v. Movilla[17] a "better policy" in determining which between the Securities and Exchange Commission (SEC) and the Labor Arbiter has jurisdiction over termination disputes,[18] or similarly, whether they are intracorporate or not, viz: The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of the SEC (now the Regional Trial Court[19]). The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is subject of their controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only SEC (now the Regional Trial Court[20]) can resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours)

WHAT IS AN INTRA CORPORATE CONTROVERSY?

Initially, the main consideration in determining whether a dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among the parties. The types of relationships embraced under Section 5(b) x x x were as follows:

a) between the corporation, partnership or association and the public; b) between the corporation, partnership or association and its stockholders, partners, members or officers; c) between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and d) among the stockholders, partners or associates themselves. The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC (now the RTC), regardless of the subject matter of the dispute. This came to be known as the relationship test.

2. Nature of the controversy test. We declared in this case that it is not the mere existence of an intracorporate relationship that gives rise to an intra-corporate controversy;

Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties' correlative rights and obligations under the Corporation Code and the internal and intracorporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intracorporate controversy exists.

This two-tier test was adopted in the recent case of Speed Distribution Inc. v. Court of Appeals: `To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy. The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or associates, between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership, or association and the State insofar as it concerns the individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy.' [Citations omitted.] Guided by this recent jurisprudence, we thus find no merit in respondents' contention that the fact alone that petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as to consider them as intra-corporate controversies. What then is the nature of petitioner's Complaint for Illegal Dismissal? Is it intra-corporate and thus beyond the jurisdiction of the Labor Arbiter? We shall answer this question by using the standards set forth in the Reyes case. No intra-corporate relationship between the parties As earlier stated, petitioner's status as a stockholder and director of respondent corporation is not

disputed. What the parties disagree on is the finding of the NLRC and the CA that petitioner is a corporate officer. An examination of the complaint for illegal dismissal, however, reveals that the root of the controversy is petitioner's dismissal as Manager of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is involved in this case not in his capacity as a stockholder or director, but as an alleged corporate officer.

CONCLUSION

Present controversy does not relate to intra-corporate dispute We now go to the nature of controversy test. As earlier stated, respondents terminated the services of petitioner for the following reasons: (1) his continuous absences at his post at Ogino Philippines, Inc; (2) respondents' loss of trust and confidence on petitioner; and, (3) to cut down operational expenses to reduce further losses being experienced by the corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement, backwages, moral damages and attorney's fees. From these, it is not difficult to see that the reasons given by respondents for dismissing petitioner have something to do with his being a Manager of respondent corporation and nothing with his being a director or stockholder.

Certainly, what we have here is a case of termination of employment which is a labor controversy and not an intra-corporate dispute. In sum, we hold that petitioner's complaint likewise does not satisfy the nature of controversy test.

With the elements of intra-corporate controversy being absent in this case, we thus hold that petitioner's complaint for illegal dismissal against respondents is not intra-corporate. Rather, it is a termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter pursuant to Section 217[30] of the Labor Code.

G.R. No. 187872

November 17, 2010

STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner, vs. STAR INFRASTRUCTURE DEVELOPMENT CORPORATION ET AL., Respondents. DECISION PEREZ, J.: Petitioner Strategic Alliance Development Corporation (STRADEC) is a domestic corporation primarily engaged in the business of a development company in all the elements and details thereof, with principal place of business at Poblacion Sur, Bayambang, Pangasinan.3 Along with five individuals4 and three other corporations,5 STRADEC incorporated respondent Star Infrastructure Development Corporation (SIDC) on 28 October 1997

STRADEC fully paid and owned 2,449,998 shares or 49% of the 5,000,000 shares of stock into which SIDCs authorized capital stock of P5,000,000.00 were divided.6 Pursuant to an amendment of its Articles of Incorporation on 5 June 1998, SIDC transferred its principal place of business from Pasig City

to Lipa, Batangas.8

TURNING EVENT: SA BATANGAS RTC The Court holds that as for the first and second causes of action, to wit: First declaration of nullity of the supposed loan extended by respondent Wong to STRADEC and the Deed of Pledge covering STRADECs entire shareholding in SIDC; Second declaration of nullity of the 26 April 2005 auction sale of STRADECs entire shareholdings in SIDC in Makati City, this Court is the wrong venue; The Rules of Court provides that all other actions (other than real) may be commenced and tried where the plaintiff or any of the principal plaintiffs resides; or where the defendant or any of the principal defendants resides, at the election of the plaintiff. By the foregoing, STRADEC should file the case, under the first cause of action, either in Bayambang, Pangasinan, its principal place of business as stated in the Articles of Incorporation or in any of the residences of Yujuico, Sumbilla or Wong. The same holds true with respect to the second cause of action. The matter is between STRADEC and its alleged erring officers over the alleged irregular auction sale of STRADECs shareholdings in SIDC, hence, venue should be at the residences of the parties, as plaintiff may elect, as discussed above.
MR SA CA DENIED

HENCE SC NA SILA

ISSUE: THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT CHARACTERIZING THE FIRST

AND SECOND CAUSES OF ACTION IN CIVIL CASE NO. 7956 AS INTRA-CORPORATE AND PLACE ITS VENUE AND JURISDICTION IN RTC BATANGAS CITY.

HELD:

Applying the relationship test, we find that STRADECs first and second causes of action qualify as intracorporate disputes since said corporation and respondent Wong are incorporators and/or stockholders of SIDC. Having acquired STRADECs shares thru the impugned notarial sale conducted by respondent Caraos, respondent Wong appears to have further transferred said shares in favor of CTCII, a corporation he allegedly formed with members of his own family. By reason of said transfer, CTCII became a stockholder of SIDC and was, in fact, alleged to have been recognized as such by the latter and its corporate officers. To our mind, these relationships were erroneously disregarded by the RTC when it ruled that venue was improperly laid for STRADECs first and second causes of action which, applying Section 2, Rule 4 of the 1997 Rules of Civil Procedure,36 should have been filed either at the place where it maintained its principal place of business or where respondents Yujuico, Sumbilla and Wong resided. Considering that they fundamentally relate to STRADECs status as a stockholder and the alleged fraudulent divestment of its stockholding in SIDC, the same causes of action also qualify as intracorporate disputes under the nature of the controversy test. As part of the fraud which attended the transfer of its shares, STRADEC distinctly averred, among other matters, that respondents Yujuico and Sumbilla had no authority to contract a loan with respondent Wong; that the pledge executed by

respondent Yujuico was simulated since it did not receive the proceeds of the loan for which its shares in SIDC were set up as security; that irregularities attended the notarial sale conducted by respondent Caraos who sold said shares to respondent Wong; that the latter unlawfully transferred the same shares in favor of CTCII; and, that SIDC and its officers recognized and validated said transfers despite being alerted about their defects. Ultimately, the foregoing circumstances were alleged to have combined to rid STRADEC of its shares in SIDC and its right as a stockholder to participate in the latters corporate affairs. In addition to being conferred by law,37 it bears emphasizing that the jurisdiction of a court or tribunal over the case is determined by the allegations in the complaint38 and the character of the relief sought,39 irrespective of whether or not the plaintiff is entitled to recover all or some of the claims asserted therein.40 Moreover, pursuant to Section 5.2 of Republic Act No. 8799,41 otherwise known as the Securities Regulation Code, the jurisdiction of the SEC over all cases enumerated under Section 5 of Presidential Decree No. 902-A has been transferred to RTCs designated by this Court as SCCs 42 pursuant to A.M. No. 00-11-03-SC promulgated on 21 November 2000. Thus, Section 1(a), Rule 1 of the Interim Rules of Procedure Governing Intra-Corporate Controversies (Interim Rules) provides as follows: "SECTION 1. (a) Cases covered. These Rules shall govern the procedure to be observed in civil cases involving the following: (1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association; (2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or association of which they are stockholders, members, or associates, respectively;

(3) Controversies in the election or appointment of directors, trustees, officers, or managers of corporations, partnerships, or associations; (4) Derivative suits; and (5) Inspection of corporate books." (Italics supplied) In upholding the RTCs pronouncement that venue was improperly laid, the CA ruled that STRADECs first and second causes of action were not intra-corporate disputes because the issues pertaining thereto were civil in nature.

It should be noted that the SCCs are still considered courts of general jurisdiction. Section 5.2 of R.A. No. 8799 directs merely the Supreme Court's designation of RTC branches that shall exercise jurisdiction over intra-corporate disputes. Nothing in the language of the law suggests the diminution of jurisdiction of those RTCs to be designated as SCCs. The assignment of intra-corporate disputes to SCCs is only for the purpose of streamlining the workload of the RTCs so that certain branches thereof like the SCCs can focus only on a particular subject matter. The designation of certain RTC branches to handle specific cases is nothing new. For instance, pursuant to the provisions of R.A. No. 6657 or the Comprehensive Agrarian Reform Law, the Supreme Court has assigned certain RTC branches to hear and decide cases under Sections 56 and 57 of R.A. No. 6657. The RTC exercising jurisdiction over an intra-corporate dispute can be likened to an RTC exercising its probate jurisdiction or sitting as a special agrarian court. The designation of the SCCs as such has not in

Viewed in the foregoing light and the intra-corporate nature of STRADECs first and second causes of action, the CA clearly erred in upholding the RTCs finding that venue therefor was improperly laid. Given that the question of venue is decidedly not jurisdictional and may, in fact, be waived, 48 said error was further compounded when the RTC handed down its first 30 August 2006 order even before respondents were able to file pleadings squarely raising objections to the venue for said causes of action.49

The rule is settled that rules of procedure ought not to be applied in a very rigid, technical sense,52 for they have been adopted to help secure not override substantial justice.53 Considering that litigation is not a game of technicalities54 courts have been exhorted, time and again, to afford every litigant the amplest opportunity for the proper and just determination of his case free from the constraints of technicalities. Since rules of procedure are mere tools designed to facilitate the attainment of justice, it is well recognized that courts are empowered to suspend its rules, when the rigid application thereof tends to frustrate rather than promote the ends of justice.55 No less than Section 3, Rule 1 of the Interim Rules provides that the provisions thereof are to "be liberally construed in order to promote their objective of securing a just, summary, speedy and inexpensive determination of every action or proceeding."

[G.R. No. 124293. January 31, 2005]

J.G. SUMMIT HOLDINGS, INC., petitioner, vs. COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET PRIVATIZATION TRUST; and PHILYARDS HOLDINGS, INC., respondents.

Original parties: NIDC AND KAWASAKI FOR WHAT? CONSTRUCTION OF SUBIC SHIPYARD THEN WHAT? THE JVA BECAME PHILSECO WHAT IS IN THE JVA? THE FEATURE OF RIGHT OF FIRST REFUSAL
Under the JVA, the NIDC and KAWASAKI will contribute P330 million for the capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient features is the grant to the parties of the right of first refusal should either of them decide to sell, assign or transfer its interest in the joint venture, viz:

1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [PHILSECO] to any third party without giving the other under the same terms the right of first refusal. This provision shall not apply if the transferee is a corporation owned or controlled by the GOVERNMENT or by a KAWASAKI affiliate. THEN WHAT? On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB THEN 1989, as a result of a quasi-reorganization of PHILSECO to settle its huge obligations to PNB, the National Government's shareholdings in PHILSECO increased to 97.41% thereby reducing KAWASAKI's shareholdings to 2.59%. THEN In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government's share in PHILSECO to private entities. This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National Government's 87.67% equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (P1,300,000,000.00). The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting following the bidding, for the purpose of determining whether or not it should be endorsed by the

APT Board of Trustees to the COP, and the latter approves the same. The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc., that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT within which to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent thereof. 6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise their "Option to Top the Highest Bid," they shall so notify the APT about such exercise of their option and deposit with APT the amount equivalent to ten percent (10%) of the highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph 6.0 above. APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they shall have a period of ninety (90) days from the receipt of the APT's notice within which to pay the balance of their bid price. THEN At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc.[2] submitted a bid of Two Billion and Thirty Million Pesos (P2,030,000,000.00) with an acknowledgment of KAWASAKI/[PHILYARDS'] right to top, viz: THEN As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993

"subject to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in the bidding rules." On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to top its bid on the grounds that: (a) the KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the ASBR because the last four (4) companies were the losing bidders thereby circumventing the law and prejudicing the weak winning bidder; (b) only KAWASAKI could exercise the right to top; (c) giving the same option to top to PHI constituted unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a public bidding or auction sale; and (e) the JG Summit consortium was not estopped from questioning the proceeding On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the purchase price of the subject bidding. On February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and that the COP had approved the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock Purchase Agreement. Consequently, petitioner filed with this Court a Petition for Mandamus under G.R. No. 114057. On May 11, 1994, said petition was referred to the Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of merit. It ruled that the petition for mandamus was not the proper remedy to question the constitutionality or legality of the right of first refusal and the right to top that was exercised by KAWASAKI/PHI, and that the matter must be brought "by the proper party in the proper forum at the proper time and threshed out in a full blown trial." The Court of

Appeals further ruled that the right of first refusal and the right to top are prima facie legal and that the petitioners. THEN IN THE SC On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that the Court of Appeals erred when it dismissed the petition on the sole ground of the impropriety of the special civil action of mandamus because the petition was also one of certiorari. It further ruled that a shipyard like PHILSECO is a public utility whose capitalization must be sixty percent (60%) Filipino-owned. Consequently, the right to top granted to KAWASAKI under the Asset Specific Bidding Rules (ASBR) drafted for the sale of the 87.67% equity of the National Government in PHILSECO is illegal not only because it violates the rules on competitive bidding but more so, because it allows foreign corporations to own more than 40% equity in the shipyard. It also held that "although the petitioner had the opportunity to examine the ASBR before it participated in the bidding, it cannot be estopped from questioning the unconstitutional, illegal and inequitable provisions thereof." Thus, this Court voided the transfer of the national government's 87.67% share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to take title to the said shares, viz: In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x x resolution: (1) Whether PHILSECO is a public utility; (2) Whether under the 1977 JVA,

KAWASAKI can exercise its right of first refusal only up to 40% of the total capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the principles of competitive bidding.[3] (citations omitted) In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On the first issue, we held that Philippine Shipyard and Engineering Corporation (PHILSECO) is not a public utility, as by nature, a shipyard is not a public utility[4] and that no law declares a shipyard to be a public utility.[5] On the second issue, we found nothing in the 1977 Joint Venture Agreement (JVA) which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring more than 40% of PHILSECOs total capitalization.[6] On the final issue, we held that the right to top granted to KAWASAKI in exchange for its right of first refusal did not violate the principles of competitive bidding.[7] On October 20, 2003, the petitioner filed a Motion for Reconsideration[8] and a Motion to Elevate This Case to the Court En Banc.[9] Public respondents Committee on Privatization (COP) and Asset Privatization Trust (APT), and private respondent Philyards Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.s (JG Summits) Motion for Reconsideration and Motion to Elevate This Case to the Court En Banc on January 29, 2004 and February 3, 2004, respectively. II. Issues

Based on the foregoing, the relevant issues to resolve to end this litigation are the

following: 1. Whether there are sufficient bases to elevate the case at bar to the Court en banc. 2. Whether the motion for reconsideration raises any new matter or cogent reason to warrant a reconsideration of this Courts Resolution of September 24, 2003. Motion to Elevate this Case to the Court En Banc The petitioner prays for the elevation of the case to the Court en banc on the following grounds: 1. The main issue of the propriety of the bidding process involved in the present case has been confused with the policy issue of the supposed fate of the shipping industry which has never been an issue that is determinative of this case.[10] 2. The present case may be considered under the Supreme Court Resolution dated February 23, 1984 which included among en banc cases those involving a novel question of law and those where a doctrine or principle laid down by the Court en banc or in division may be modified or reversed.[11] 3. There was clear executive interference in the judicial functions of the Court when the Honorable Jose Isidro Camacho, Secretary of Finance, forwarded to Chief Justice Davide, a memorandum dated November 5, 2001, attaching a copy of the Foreign Chambers

Report dated October 17, 2001, which matter was placed in the agenda of the Court and noted by it in a formal resolution dated November 28, 2001.[12] Office of the Solicitor Generals Motion to Refer is different from its own Motion to Elevate; different grounds are invoked by the two motions; there was unwarranted executive interference; and the change in ponente is merely noted in asserting that this case should be decided by the Court en banc.[15] We find no merit in petitioners contention that the propriety of the bidding process involved in the present case has been confused with the policy issue of the fate of the shipping industry which, petitioner maintains, has never been an issue that is determinative of this case. The Courts Resolution of September 24, 2003 reveals a clear and definitive ruling on the propriety of the bidding process. In discussing whether the right to top granted to KAWASAKI in exchange for its right of first refusal violates the principles of competitive bidding, we made an exhaustive discourse on the rules and principles of public bidding and whether they were complied with in the case at bar.[16] This Court categorically ruled on the petitioners argument that PHILSECO, as a shipyard, is a public utility which should maintain a 60%-40% Filipino-foreign equity ratio, as it was a pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding industry which was beyond avoidance.[17] We reject petitioners argument that the present case may be considered under the Supreme Court Resolution dated February 23, 1984 which included among en banc cases those involving a novel question of law and those where a doctrine or principle laid down by

the court en banc or in division may be modified or reversed. The case was resolved based on basic principles of the right of first refusal in commercial law and estoppel in civil law. Contractual obligations arising from rights of first refusal are not new in this jurisdiction and have been recognized in numerous cases.[18] Estoppel is too known a civil law concept to require an elongated discussion. Fundamental principles on public bidding were likewise used to resolve the issues raised by the petitioner. To be sure, petitioner leans on the right to top in a public bidding in arguing that the case at bar involves a novel issue. We are not swayed. The right to top was merely a condition or a reservation made in the bidding rules which was fully disclosed to all bidding parties. In Bureau Veritas, represented by Theodor H. Hunermann v. Office of the President, et al., [19]we dealt with this conditionality, viz: x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that in an "invitation to bid, there is a condition imposed upon the bidders to the effect that the bidding shall be subject to the right of the government to reject any and all bids subject to its discretion. In the case at bar, the government has made its choice and unless an unfairness or injustice is shown, the losing bidders have no cause to complain nor right to dispute that choice. This is a well-settled doctrine in this jurisdiction and elsewhere." The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x

Like the condition in the Bureau Veritas case, the right to top was a condition imposed by the government in the bidding rules which was made known to all parties. It was a condition imposed on all bidders equally, based on the APTs exercise of its discretion in deciding on how best to privatize the governments shares in PHILSECO. It was not a whimsical or arbitrary condition plucked from the ether and inserted in the bidding rules but a condition which the APT approved as the best way the government could comply with its contractual obligations to KAWASAKI under the JVA and its mandate of getting the most advantageous deal for the government. The right to top had its history in the mutual right of first refusal in the JVA and was reached by agreement of the government and KAWASAKI. Further, there is no executive interference in the functions of this Court by the mere filing of a memorandum by Secretary of Finance Jose Isidro Camacho. The memorandum was merely noted to acknowledge its filing. It had no further legal significance. Notably too, the assailed Resolution dated September 24, 2003 was decided unanimously by the Special First Division in favor of the respondents. Again, we emphasize that a decision or resolution of a Division is that of the Supreme Court[20] and the Court en banc is not an appellate court to which decisions or resolutions of a Division may be appealed.[21] For all the foregoing reasons, we find no basis to elevate this case to the Court en banc. Motion for Reconsideration

Three principal arguments were raised in the petitioners Motion for Reconsideration. First, that a fair resolution of the case should be based on contract law, not on policy considerations; the contracts do not authorize the right to top to be derived from the right of first refusal.[22] Second, that neither the right of first refusal nor the right to top can be legally exercised by the consortium which is not the proper party granted such right under either the JVA or the Asset Specific Bidding Rules (ASBR).[23] Third, that the maintenance of the 60%-40% relationship between the National Investment and Development Corporation (NIDC) and KAWASAKI arises from contract and from the Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation.[24]

On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been able to show compelling reasons to warrant a reconsideration of the Decision of the Court.[25] PHILYARDS denies that the Decision is based mainly on policy considerations and points out that it is premised on principles governing obligations and contracts and corporate law such as the rule requiring respect for contractual stipulations, upholding rights of first refusal, and recognizing the assignable nature of contracts rights.[26] Also, the ruling that shipyards are not public utilities relies on established case law and fundamental rules of statutory construction. PHILYARDS stresses that KAWASAKIs right of first refusal or even the right to top is not limited to the 40% equity of the latter.[27 As regards the right of first refusal, private respondent explains that KAWASAKIs reduced shareholdings (from 40% to 2.59%) did not translate to a deprivation or loss of its

contractually granted right of first refusal.[31] Also, the bidding was valid because PHILYARDS exercised the right to top and it was of no moment that losing bidders later joined PHILYARDS in raising the purchase price.[32] In cadence with the private respondent PHILYARDS, public respondents COP and APT contend: 1. The conversion of the right of first refusal into a right to top by 5% does not violate any provision in the JVA between NIDC and KAWASAKI. 2. PHILSECO is not a public utility and therefore not governed by the constitutional restriction on foreign ownership. 3. The petitioner is legally estopped from assailing the validity of the proceedings of the public bidding as it voluntarily submitted itself to the terms of the ASBR which included the provision on the right to top. 4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact that PHILYARDS formed a consortium to raise the required amount to exercise the right to top the highest bid by 5% does not violate the JVA or the ASBR. 5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does not apply to PHILSECO because as admitted by petitioner itself, PHILSECO no longer owns real property. 6. Petitioners motion to elevate the case to the Court en banc is baseless and would only delay the termination of this case.[33]

In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of the public and private respondents in this wise: 1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders through the exercise of a right to top, which is contrary to law and the constitution is null and void for being violative of substantive due process and the abuse of right provision in the Civil Code. a. b. c. The bidders[] right to top was actually exercised by losing bidders. The right to top or the right of first refusal cannot co-exist with a genuine competitive bidding. The benefits derived from the right to top were unwarranted.

2. The landholding issue has been a legitimate issue since the start of this case but is shamelessly ignored by the respondents. a. b. c. The landholding issue is not a non-issue. The landholding issue does not pose questions of fact. That PHILSECO owned land at the time that the right of first refusal was agreed upon and at the time of the bidding are most relevant.

d.

Whether a shipyard is a public utility is not the core issue in this case.

3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to the right to top. a. b. The history behind the birth of the right to top shows fraud and bad faith. The right of first refusal was, indeed, effectively useless.

4. Petitioner is not legally estopped to challenge the right to top in this case. a. b. c. Estoppel is unavailing as it would stamp validity to an act that is prohibited by law or against public policy. Deception was patent; the right to top was an attractive nuisance. The 10% bid deposit was placed in escrow.

J.G. Summits insistence that the right to top cannot be sourced from the right of first refusal is not new and we have already ruled on the issue in our Resolution of September 24, 2003. We upheld the mutual right of first refusal in the JVA.[34] We also ruled that nothing in the JVA prevents KAWASAKI from acquiring more than 40% of PHILSECOs total capitalization.[35] Likewise, nothing in the JVA or ASBR bars the conversion of the right of first refusal to the right to top. In sum, nothing new and of significance in the

petitioners pleading warrants a reconsideration of our ruling. Likewise, we already disposed of the argument that neither the right of first refusal nor the right to top can legally be exercised by the consortium which is not the proper party granted such right under either the JVA or the ASBR. Thus, we held: The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has joined PHILYARDS in the latter's effort to raise P2.131 billion necessary in exercising the right to top is not contrary to law, public policy or public morals. There is nothing in the ASBR that bars the losing bidders from joining either the winning bidder (should the right to top is not exercised) or KAWASAKI/PHI (should it exercise its right to top as it did), to raise the purchase price. The petitioner did not allege, nor was it shown by competent evidence, that the participation of the losing bidders in the public bidding was done with fraudulent intent. Absent any proof of fraud, the formation by [PHILYARDS] of a consortium is legitimate in a free enterprise system. The appellate court is thus correct in holding the petitioner estopped from questioning the validity of the transfer of the National Government's shares in PHILSECO to respondent.[36] Further, we see no inherent illegality on PHILYARDS act in seeking funding from parties who were losing bidders. This is a purely commercial decision over which the State should not interfere absent any legal infirmity. It is emphasized that the case at bar involves the disposition of shares in a corporation which the government sought to privatize. As such, the persons with whom PHILYARDS desired to enter into business with in order to raise funds to purchase the shares are basically its business. This is in contrast to a case involving a contract for the operation of or construction of a government

infrastructure where the identity of the buyer/bidder or financier constitutes an important consideration. In such cases, the government would have to take utmost precaution to protect public interest by ensuring that the parties with which it is contracting have the ability to satisfactorily construct or operate the infrastructure. On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding company, KAWASAKI could exercise its right of first refusal only up to 40% of the shares of PHILSECO due to the constitutional prohibition on landholding by corporations with more than 40% foreign-owned equity. It further argues that since KAWASAKI already held at least 40% equity in PHILSECO, the right of first refusal was inutile and as such, could not subsequently be converted into the right to top. [37] Petitioner also asserts that, at present, PHILSECO continues to violate the constitutional provision on landholdings as its shares are more than 40% foreign-owned.[38] PHILYARDS admits that it may have previously held land but had already divested such landholdings.[39] It contends, however, that even if PHILSECO owned land, this would not affect the right of first refusal but only the exercise thereof. If the land is retained, the right of first refusal, being a property right, could be assigned to a qualified party. In the alternative, the land could be divested before the exercise of the right of first refusal. In the case at bar, respondents assert that since the right of first refusal was validly converted into a right to top, which was exercised not by KAWASAKI, but by PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are owned by Filipinos), then there is no violation of the Constitution.[40] At first, it would seem that questions of fact beyond cognizance by this Court were involved in the issue. However, the records show that PHILYARDS admits it had owned land up until

the time of the bidding.[41] Hence, the only issue is whether KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA considering that PHILSECO owned land until the time of the bidding and KAWASAKI already held 40% of PHILSECOs equity. We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them to purchase the shares of their co-shareholder before they are offered to a third party. The agreement of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent. The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with. Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECOs equity. In fact, it can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%, it is not the foreign stockholders ownership of the shares which is adversely affected but the capacity of the corporation to own land that is, the corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the corporation and its

stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. This is the clear import of the following provisions in the Constitution: Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. xxx xxx xxx

Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands

of the public domain.[42] (emphases supplied) The petitioner further argues that an option to buy land is void in itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The right of first refusal granted to KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced from the right of first refusal, is also void.[43] Contrary to the contention of petitioner, the case of Lui She did not that say an option to buy land is void in itself, for we ruled as follows: x x x To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship. As this Court said in Krivenko vs. Register of Deeds: [A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire. But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus disponendi) rights the sum total of which make up ownership. It is just as if today the possession is

transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in an alien. And yet this is just exactly what the parties in this case did within this pace of one year, with the result that Justina Santos'[s] ownership of her property was reduced to a hollow concept. If this can be done, then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko vs. Register of Deeds, is indeed in grave peril.[44] (emphases supplied; Citations omitted) In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of ownership as the owner could not sell or dispose of his properties. The contract in Lui She prohibited the owner of the land from selling, donating, mortgaging, or encumbering the property during the 50-year period of the option to buy. This is not so in the case at bar where the mutual right of first refusal in favor of NIDC and KAWASAKI does not amount to a virtual transfer of land to a non-Filipino. In fact, the case at bar involves a right of first refusal over shares of stock while the Lui She case involves an option to buy the land itself. As discussed earlier, there is a distinction between the shareholders ownership of shares and the corporations ownership of land arising from the separate juridical personalities of the corporation and its shareholders. We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO continues to violate the Constitution as its foreign equity is above 40% and yet owns longterm leasehold rights which are real rights.[45] It cites Article 415 of the Civil Code which includes in the definition of immovable property, contracts for public works, and servitudes and other real rights over immovable property.[46] Any existing landholding, however, is denied by PHILYARDS citing its recent financial statements.[47] First, these

are questions of fact, the veracity of which would require introduction of evidence. The Court needs to validate these factual allegations based on competent and reliable evidence. As such, the Court cannot resolve the questions they pose. Second, J.G. Summit misreads the provisions of the Constitution cited in its own pleadings, to wit: 29.2 Petitioner has consistently pointed out in the past that private respondent is not a 60%-40% corporation, and this violates the Constitution x x x The violation continues to this day because under the law, it continues to own real property xxx xxx xxx

32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution (the JVA was signed in 1977), provided: Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. 32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.

32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the public domain are corporations at least 60% of which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141, as amended). (emphases supplied) As correctly observed by the public respondents, the prohibition in the Constitution applies

only to ownership of land.[48] It does not extend to immovable or real property as defined under Article 415 of the Civil Code. Otherwise, we would have a strange situation where the ownership of immovable property such as trees, plants and growing fruit attached to the land[49] would be limited to Filipinos and Filipino corporations only. III. WHEREFORE, in view of the foregoing, the petitioners Motion for Reconsideration is DENIED WITH FINALITY and the decision appealed from is AFFIRMED. The Motion to Elevate This Case to the Court En Banc is likewise DENIED for lack of merit. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Tinga, JJ., concur.
G.R. No. 58168 December 19, 1989 CONCEPCION MAGSAYSAY-LABRADOR, SOLEDAD MAGSAYSAY-CABRERA, LUISA MAGSAYSAY-CORPUZ, assisted be her husband, Dr. Jose Corpuz, FELICIDAD P. MAGSAYSAY, and MERCEDES MAGSAYSAY-DIAZ, petitioners, vs. THE COURT OF APPEALS and ADELAIDA RODRIGUEZ-MAGSAYSAY, Special Administratrix of the Estate of the late Genaro F. Magsaysay respondents. ISSUE: WIFE KASI WANTS THE PROPERTIES She prayed that the Deed of Assignment and the Deed of Mortgage be annulled and that the Register of Deeds be ordered to cancel TCT No. 22431 and to issue

a new title in her favor. BUT On March 7, 1979, herein petitioners, sisters of the late senator, filed a motion for intervention on the ground that on June 20, 1978, their brother conveyed to them one-half (1/2 ) of his shareholdings in SUBIC or a total of 416,566.6 shares and as assignees of around 41 % of the total outstanding shares of such stocks of SUBIC, they have a substantial and legal interest in the subject matter of litigation and that they have a legal interest in the success of the suit with respect to SUBIC. On July 26, 1979, the court denied the motion for intervention, and ruled that petitioners have no legal interest whatsoever in the matter in litigation and their being alleged assignees or transferees of certain shares in SUBIC cannot legally entitle them to intervene because SUBIC has a personality separate and distinct from its stockholders.
TALO SA APPEAL MR DENIED SC SAID NO LEGAL INTEREST KAYO OKAY

The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and which would put the intervenor in a legal position to litigate a fact alleged in the complaint, without the establishment of which plaintiff could not recover. 7 Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural, consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person. 8
October 30, 1962 G.R. No. L-18216 STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitioners-appellants, vs. REGISTER OF DEEDS OF MANILA, respondent-appellee. On September 19, 1960, the five stockholders of the F. Guanzon and Sons, Inc. executed a certificate of liquidation of the assets of the corporation reciting, among other things, that by virtue of a resolution of the stockholders adopted on September 17, 1960, dissolving the corporation, they have distributed among themselves in proportion to their shareholdings, as liquidating dividends, the assets of said corporation, including real properties located in Manila. e Commissioner of Land Registration, the propriety or impropriety of the three grounds on which the denial of the registration of the certificate of liquidation was predicated hinges on whether or not that certificate merely involves a distribution of the corporation's assets or should be considered a transfer or conveyance. Appellants contend that the certificate of liquidation is not a conveyance or transfer but merely a distribution of the assets of the corporation which has ceased to exist for having been dissolved. This is apparent in the minutes for dissolution attached to the document. Not being a conveyance the certificate need not contain a statement of the number of parcel of land involved in the distribution in the acknowledgment appearing therein. Hence the amount of documentary stamps to be affixed thereon should only be P0.30 and not P940.45, as required by the register of deeds. Neither is it correct to require appellants to pay the amount of P430.50 as registration fee. The Commissioner of Land Registration, however, entertained a different opinion. He concurred in the view expressed by the register of deed to the effect that the certificate of liquidation in question, though it

involves a distribution of the corporation's assets, in the last analysis represents a transfer of said assets from the corporation to the stockholders. Hence, in substance it is a transfer or conveyance. ISSUE: CONVEYANCE OR NOT HELD We agree with the opinion of these two officials. A corporation is a juridical person distinct from the members composing it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. While shares of stock constitute personal property they do not represent property of the corporation. The corporation has property of its own which consists chiefly of real estate A share of stock only typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that extent when distributed according to law and equity but its holder is not the owner of any part of the capital of the corporation The stockholder is not a co-owner or tenant in common of the corporate property On the basis of the foregoing authorities, it is clear that the act of liquidation made by the stockholders of the F. Guanzon and Sons, Inc. of the latter's assets is not and cannot be considered a partition of community property, but rather a transfer or conveyance of the title of its assets to the individual stockholders. Indeed, since the purpose of the liquidation, as well as the distribution of the assets of the corporation, is to transfer their title from the corporation to the stockholders in proportion to their shareholdings, and this is in effect the purpose which they seek to obtain from the Register of Deeds of Manila, that transfer cannot be effected without the corresponding deed of conveyance from the corporation to the stockholders. It is, therefore, fair and logical to consider the certificate of liquidation as one in the nature of a transfer or conveyance. TALO SILA APPELLANTS

G.R. No. L-48627 June 30, 1987 FERMIN Z. CARAM, JR. and ROSA O. DE CARAM, petitioners vs. THE HONORABLE COURT OF

APPEALS and ALBERTO V. ARELLANO, respondents.

CRUZ, J.: ISSUE as mere subsequent investors in the corporation that was later created, they should not be held solidarily liable with the Filipinas Orient Airways, a separate juridical entity, and with Barretto and Garcia, their codefendants in the lower court, ** who were the ones who requested the said services from the private respondent. 3 whether or not the petitioners themselves are also and personally liable for such expenses and, if so, to what extent. The petitioners were merely among the financiers whose interest was to be invited and who were in fact persuaded, on the strength of the project study, to invest in the proposed airline. Significantly, there was no showing that the Filipinas Orient Airways was a fictitious corporation and did not have a separate juridical personality, to justify making the petitioners, as principal stockholders thereof, responsible for its obligations. As a bona fide corporation, the Filipinas Orient Airways should alone be liable for its corporate acts as duly authorized by its officers and directors. In the light of these circumstances, we hold that the petitioners cannot be held personally liable for the compensation claimed by the private respondent for the services performed by him in the organization of the corporation. To repeat, the petitioners did not contract such services. It as only the results of such

services that Barretto and Garcia presented to them and which persuaded them to invest in the proposed airline. The most that can be said is that they benefited from such services, but that surely is no justification to hold them personally liable therefor. Otherwise, all the other stockholders of the corporation, including those who came in later, and regardless of the amount of their share holdings, would be equally and personally liable also with the petitioners for the claims of the private respondent.

G.R. No. 91889 August 27, 1993 MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO REDOVAN, petitioners, vs. THE HONORABLE COURT OF APPEALS, EDGARDO D. PABALAN, MANUEL A. TORRES, JR., MARIA THERESA V. VELOSO AND CASTRENSE C. VELOSO, respondents. Petitioner Manuel R. Dulay Enterprises, Inc, a domestic corporation with the following as members of its Board of Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer and general manager, Atty. Virgilio E. Dulay with 10 shares and designated as vice-president; Linda E. Dulay with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary, owned a property covered by TCT No. 17880 4 and known as Dulay Apartment consisting of sixteen (16) apartment units on a six hundred eighty-nine (689) square meters lot, more or less, located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City. Petitioner corporation through its president, Manuel Dulay, obtained various loans for the construction of its hotel project, Dulay Continental Hotel

It even had to borrow money from petitioner Virgilio Dulay to be able to continue the hotel project. As a result of said loan, petitioner Virgilio Dulay occupied one of the unit apartments of the subject property since property since 1973 while at the same time managing the Dulay Apartment at his shareholdings in the corporation was subsequently increased by his father. On December 23, 1976, Manuel Dulay by virtue of Board Resolution No 18 6 of petitioner corporation sold the subject property to private respondents spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as evidenced by the Deed of Absolute Sale. private respondent Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject property to private respondent Manuel A. Torres for a loan of P250,000.00 which was duly annotated as Entry No. 68139 in TCT No. 23225. 10 Upon the failure of private respondent Maria Veloso to pay private respondent Torres, the subject property was sold on April 5, 1978 to private respondent Torres as the highest bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of Sheriff's Sale 11 issued on April 20, 1978. On July 20, 1978, private respondent Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem 12 in favor of Manuel Dulay assigning her right to repurchase the subject property from private respondent Torres as a result of the extra sale held on April 25, 1978. On October 1, 1979, private respondent Torres filed a petition for the issuance of a writ of possession against private respondents spouses Veloso and Manuel Dulay in LRC Case No. 1742-P. However, when petitioner Virgilio Dulay was never authorized by the petitioner corporation to sell or mortgage the subject property, the trial court ordered private respondent Torres to implead petitioner corporation as an indispensable party