April 21, 2018 Corporation Law

Reyes v. RTC of Makati [G.R. No. 165744. August 11, 2008]

OSCAR C. REYES, petitioner,
vs.
HON. REGIONAL TRIAL COURT OF MAKATI, Branch 142, ZENITH INSURANCE
CORPORATION and RODRIGO C. REYES, respondents.
[G.R. No. 165744. August 11, 2008]
FACTS:
Petitioner and private respondent were siblings together with two others, namely Pedro
and Anastacia, in a family business established as Zenith Insurance Corporation
(Zenith), from which they owned shares of stocks. The Pedro and Anastacia
subsequently died. The former had his estate judicially partitioned among his heirs,
but the latter had not made the same in her shareholding in Zenith. Zenith and
Rodrigo filed a complaint with the Securities and Exchange Commission (SEC) against
petitioner (1) a derivative suit to obtain accounting of funds and assets of Zenith, and
(2) to determine the shares of stock of deceased Pedro and Anastacia that were
arbitrarily and fraudulently appropriated [by Oscar, and were unaccounted for]. In his
answer with counterclaim, petitioner denied the illegality of the acquisition of shares of
Anastacia and questioned the jurisdiction of SEC to entertain the complaint because it
pertains to settlement of [Anastacia’s] estate. The case was transferred to. Petitioner
filed Motion to Declare Complaint as Nuisance or Harassment Suit and must be
dismissed. RTC denied the motion. The motion was elevated to the Court of Appeals by
way of petition for certiorari, prohibition and mandamus, but was again denied.
ISSUES:
Mercantile Law
(1) Whether or not Rodrigo may be considered a stockholder of Zenith with respect to
the shareholdings originally belonging to Anastacia.
(2) Whether or not there is an intra-corporate relationship between the parties that
would characterize the case as an intra-corporate dispute?
Remedial Law
(1) Whether or not the complaint is a mere nuisance or harassment suit that should
be dismissed under the Interim Rules of Procedure of Intra-Corporate Controversies;
(2) Whether or not the complaint is a derivative suit within the jurisdiction of the RTC
acting as a special commercial court.
RULINGS:
Mercantile Law

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(1) No. Rodrigo must, hurdle two obstacles before he can be considered a stockholder
of Zenith with respect to the shareholdings originally belonging to Anastacia. First, he
must prove that there are shareholdings that will be left to him and his co-heirs, and
this can be determined only in a settlement of the decedent’s estate. No such
proceeding has been commenced to date. Second, he must register the transfer of the
shares allotted to him to make it binding against the corporation. He cannot demand
that this be done unless and until he has established his specific allotment (and prima
facie ownership) of the shares. Without the settlement of Anastacia’s estate, there can
be no definite partition and distribution of the estate to the heirs. Without the
partition and distribution, there can be no registration of the transfer. And without the
registration, we cannot consider the transferee-heir a stockholder who may invoke the
existence of an intra-corporate relationship as premise for an intra-corporate
controversy within the jurisdiction of a special commercial court. The subject shares of
stock (i.e., Anastacia’s shares) are concerned – Rodrigo cannot be considered a
stockholder of Zenith.
(2) No. Court cannot declare that an intra-corporate relationship exists that would
serve as basis to bring this case within the special commercial court’s jurisdiction
under Section 5(b) of PD 902-A, as amended because Rodrigo’s complaint failed the
relationship test above.
Remedial Law
(1) Yes. The rule is that a complaint must contain a plain, concise, and direct
statement of the ultimate facts constituting the plaintiff’s cause of action and must
specify the relief sought. Section 5, Rule 8 of the Revised Rules of Court provides
that in all averments of fraud or mistake, the circumstances constituting fraud
or mistake must be stated with particularity. These rules find specific application
to Section 5(a) of P.D. No. 902-A which speaks of corporate devices or schemes that
amount to fraud or misrepresentation detrimental to the public and/or to the
stockholders.
Allegations of deceit, machination, false pretenses, misrepresentation, and threats are
largely conclusions of law that, without supporting statements of the facts to which
the allegations of fraud refer, do not sufficiently state an effective cause of
action. Fraud and mistake are required to be averred with particularity in order to
enable the opposing party to controvert the particular facts allegedly constituting such
fraud or mistake. Tested against these standards, charges of fraud against Oscar were
not properly supported by the required factual allegations. While the complaint
contained allegations of fraud purportedly committed by him, these allegations are not
particular enough to bring the controversy within the special commercial court’s
jurisdiction; they are not statements of ultimate facts, but are mere conclusions of
law: how and why the alleged appropriation of shares can be characterized as “illegal
and fraudulent” were not explained nor elaborated on. The case must be dismissed.
(2) No. The allegations of the present complaint do not amount to a derivative
suit. First, as already discussed above, Rodrigo is not a shareholder with respect to the
shareholdings originally belonging to Anastacia; he only stands as a transferee-heir

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whose rights to the share are inchoate and unrecorded. Second, in order that a
stockholder may show a right to sue on behalf of the corporation, he must allege with
some particularity in his complaint that he has exhausted his remedies within the
corporation by making a sufficient demand upon the directors or other officers for
appropriate relief with the expressed intent to sue if relief is denied. Lastly, Court
found no injury, actual or threatened, alleged to have been done to the corporation
due to Oscar’s acts. If indeed he illegally and fraudulently transferred Anastacia’s
shares in his own name, then the damage is not to the corporation but to his co-heirs;
the wrongful transfer did not affect the capital stock or the assets of Zenith.
In summary, whether as an individual or as a derivative suit, the RTC – sitting as
special commercial court – has no jurisdiction to hear Rodrigo’s complaint since what
is involved is the determination and distribution of successional rights to the
shareholdings of Anastacia Reyes. Rodrigo’s proper remedy, under the circumstances,
is to institute a special proceeding for the settlement of the estate of the deceased
Anastacia Reyes, a move that is not foreclosed by the dismissal of his present
complaint.

Lim Tay v CA Case Digest

Lim Tay vs. Court of Appeals
[GR 126891, 5 August 1998]

Facts: On 8 January 1980, Sy Guiok secured a loan from Lim Tay in the amount of
P40,000 payable within 6 months. To secure the payment of the aforesaid loan and
interest thereon, Guiok executed a Contract of Pledge in favor of Lim Tay whereby he
pledged his 300 shares of stock in the Go Fay & Company Inc. Guiok obliged himself
to pay interest on said loan at the rate of 10% per annum from the date of said
contract of pledge. On the same date, Alfonso Sy Lim secured a loan, from Lim Tay in
the amount of P40,000 payable in 6 months. To secure the payment of his loan, Sy
Lim executed a "Contract of Pledge" covering his 300 shares of stock in Go Fay & Co.
Under said contract, Sy Lim obliged himself to pay interest on his loan at the rate of
10% per annum from the date of the execution of said contract. The contractual
stipulation in the pledge showed that Lim Tay was merely authorized to foreclose the
pledge upon maturity of the loans, not to own them. Such foreclosure is not
automatic, for it must be done in a public or private sale. Guiok and Sy Lim endorsed
their respective shares of stock in blank and delivered the same to Lim Tay. However,
Guiok and Sy Lim failed to pay their respective loans and the accrued interests
thereon to Lim Tay. In October 1990, Lim Tay filed a "Petition for Mandamus" against
Go Fay & Co., with the SEC (SEC Case 03894), praying that an order be issued
directing the corporate secretary of Go Fay & Co. to register the stock transfers and
issue new certificates in favor of Lim Tay; and ordering Go Fay & Co. to pay all
dividends due and unclaimed on the said certificates to Lim Tay. In the interim, Sy
Lim died. Guiok and the Intestate Estate of Alfonso Sy Lim, represented by Conchita
Lim, filed their Answer-In-Intervention with the SEC.

After due proceedings, the SEC hearing officer promulgated a Decision dismissing Lim
Tay's Complaint on the ground that although the SEC had jurisdiction over the action,

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pursuant to the Decision of the Supreme Court in the case of "Rural Bank of Salinas
et. al. versus Court of Appeals, et al., 210 SCRA 510," he failed to prove the legal basis
for the secretary of the Corporation to be compelled to register stock transfers in favor
of Lim Tay and to issue new certificates of stock under his name. Lim Tay appealed
the Decision of the hearing officer to the SEC, but, on 7 March 1996, the SEC
promulgated a Decision, dismissing Lim Tay's appeal. On appeal to the Court of
Appeals, the appellate court debunked Lim Tay's claim that he had acquired
ownership over the shares by virtue of novation, holding that Guiok's and Sy Lim's
indorsement and delivery of the shares were pursuant to Articles 2093 and 2095 of
the Civil Code and that Lim Tay's receipt of dividends was in compliance with Article
2102 of the same Code. Lim Tay's claim that he had acquired ownership of the shares
by virtue of prescription was likewise dismissed by the appellate court. Lim Tay
brought before the Supreme Court a Petition for Review on Certiorari in accordance
with Rule 45 of the Rules of Court.

Issue: Whether Lim Tay is the owner of the shares previously subjected to pledge, for
him to cause the registration of said shares in his own name.

Held: Lim Tay's ownership over the shares was not yet perfected when the Complaint
was filed. The contract of pledge certainly does not make him the owner of the shares
pledged. Further, whether prescription effectively transferred ownership of the shares,
whether there was a novation of the contracts of pledge, and whether laches had set in
were difficult legal issues, which were unpleaded and unresolved when Lim Tay asked
the corporate secretary of Go Fay to effect the transfer, in his favor, of the shares
pledged to him. Lim Tay has failed to establish a clear legal right. Lim Tay's contention
that he is the owner of the said shares is completely without merit. Lim Tay does not
have any ownership rights at all. At the time Lim Tay instituted his suit at the SEC,
his ownership claim had no prima facie leg to stand on. At best, his contention was
disputable and uncertain. Lim Tay cannot claim to have acquired ownership over the
certificates of stock through extraordinary prescription, as provided for in Article 1132
of the Civil Code. What is required by Article 1132 is possession in the concept of an
owner. Herein, Lim Tay's possession of the stock certificates came about because they
were delivered to him pursuant to the contracts of pledge. His possession as a pledgee
cannot ripen into ownership by prescription. Lim Tay expressly repudiated the pledge,
only when he filed his Complaint and claimed that he was not a mere pledgee, but that
he was already the owner of the shares. Based on the foregoing, Lim Tay has not
acquired the certificates of stock through extraordinary prescription. Neither did Lim
Tay acquire the shares by virtue of a novation of the contract of pledge. Novation
cannot be presumed by Guiok's and Sy Lim's indorsement and delivery of the
certificates of stock covering the 600 shares, nor Lim Tay's receipt of dividends from
1980 to 1983, nor the fact that Guiok and Sy Lim have not instituted any action to
recover the shares since 1980. Novation is never presumed inferred.

Tan versus Sycip

G.R. No. 153468; August 17, 2006

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For stock corporations, the quorum referred to in Section 52 of the Corporation Code is
based on the number of outstanding voting stocks. For nonstock corporations, only those
who are actual, living members with voting rights shall be counted in determining the
existence of a quorum during members meetings. Dead members shall not be counted.
Facts:
Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit educational
corporation with fifteen (15) regular members, who also constitute the board of
trustees. During the annual members meeting held on April 6, 1998, there were only
eleven (11) living member-trustees, as four (4) had already died. Out of the eleven,
seven (7) 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 was no quorum. In the meeting, Petitioners Ernesto
Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were voted to replace the four
deceased member-trustees.
When the controversy reached the Securities and Exchange Commission (SEC),
petitioners maintained that the deceased member-trustees should not be counted in
the computation of the quorum because, upon their death, members automatically
lost all their rights (including the right to vote) and interests in the corporation.
SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and
void for lack of quorum. She held that the basis for determining the quorum in a
meeting of members should be their number as specified in the articles of
incorporation, not simply the number of living members.
Issue:
Whether or not in NON-STOCK corporations, dead members should still be counted in
determination of quorum for purpose of conducting the Annual Members Meeting.
Ruling:
The Right to Vote in Nonstock Corporations
In nonstock corporations, the voting rights attach to membership. Members vote as
persons, in accordance with the law and the bylaws of the corporation. Each member
shall be entitled to one vote unless so limited, broadened, or denied in the articles of
incorporation or bylaws. 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.
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

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 meetings of stockholders or members on their absolute number as fixed in the articles
of 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
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.
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. 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. 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 members present, was
valid.

Lanuza vs. CA
GR No. 131394 | March 28, 2005

Facts:
· Petitioners seek to nullify the Court of Appeals’ Decision in CA–G.R. SP No.
414731 promulgated on 18 August 1997, affirming the SEC Order dated 20 June
1996, and the Resolution2 of the Court of Appeals dated 31 October 1997 which denied
petitioners’ motion for reconsideration.
· In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated,
with seven hundred (700) founders’ shares and seventy-six (76) common shares as its
initial capital stock subscription reflected in the articles of incorporation
· Onrubia et. al, who were in control of PMMSI registered the company’s stock and
transfer book for the first time in 1978, recording thirty-three (33) common shares as
the only issued and outstanding shares of PMMSI.
· In 1979, a special stockholders’ meeting was called and held on the basis of what
was considered as a quorum of twenty-seven (27) common shares, representing more
than two-thirds (2/3) of the common shares issued and outstanding.

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· In 1982, Juan Acayan, one of the heirs of the incorporators filed a petition for the
registration of their property rights was filed before the SEC over 120 founders’ shares
and 12 common shares owned by their father
· SEC Hearing Officer: heirs of Acayan were entitled to the claimed shares and called
for a special stockholders’ meeting to elect a new set of officers.
· SEC en banc: affirmed the decision
· As a result, the shares of Acayan were recorded in the stock and transfer book.
· On May 6, 1992, a special stockholders’ meeting was held to elect a new set of
directors
· Onrubia et al filed a petition with SEC questioning the validity of said
meeting alleging that the quorum for the said meeting should not be based on the 165
issued and outstanding shares as per the stock and transfer book, but on the initial
subscribed capital stock of seven hundred seventy-six (776) shares, as reflected in the
1952 Articles of Incorporation
· Petition was dismissed
· SC en banc: shares of the deceased incorporators should be duly represented by
their respective administrators or heirs concerned. Called for a stockholders meeting
on the basis of the stockholdings reflected in the articles of incorporation for the
purpose of electing a new set of officers for the corporation
· Lanuza, Acayan et al, who are PMMSI stockholders, filed a petition for review with
the CA, raising the following issues:
1. whether the basis the outstanding capital stock and accordingly also for
determining the quorum at stockholders’ meetings it should be the 1978 stock and
transfer book or if it should be the 1952 articles of incorporation
(They contended that the basis is the stock and transfer book, not articles of
incorporation in computing the quorum)
2. whether the Espejo decision (decision of SEC en banc ordering the recording of the
shares of Jose Acayan in the stock and transfer book) is applicable to the benefit of
Onrubia et al
· CA decision:
1. For purposes of transacting business, the quorum should be based on the
outstanding capital stock as found in the articles of incorporation
2. To require a separate judicial declaration to recognize the shares of the original
incorporators would entail unnecessary delay and expense. Besides. the incorporators
have already proved their stockholdings through the provisions of the articles of
incorporation.
· Appeal was made by Lanuza et al before the SC
· Lanuza et al’ contention:
a. 1992 stockholders’ meeting was valid and legal
b. Reliance on the 1952 articles of incorporation for determining the quorum
negates the existence and validity of the stock and transfer book Onrubia et al
prepared
c. Onrubia et al must show and prove entitlement to the founders and common
shares in a separate and independent action/proceeding in order to avail of the
benefits secured by the heirs of Acayan
· Onrubia et al’s contention, based on the Memorandum: petition should be
dismissed on the ground of res judicata
· Another appeal was made

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· Lanuza et al’s contention: instant petition is separate and distinct from G.R. No.
131315, there being no identity of parties, and more importantly, the parties in the
two petitions have their own distinct rights and interests in relation to the subject
matter in litigation
· Onrubia et al’s manifestation and motion: moved for the dismissal of the case

Issue: What should be the basis of quorum for a stockholders’ meeting—the

outstanding capital stock as indicated in the articles of incorporation or that contained
in the company’s stock and transfer book?

Ruling:
· Articles of Incorporation
- Defines the charter of the corporation and the contractual relationships between the
State and the corporation, the stockholders and the State, and between the
corporation and its stockholders.
- Contents are binding, not only on the corporation, but also on its shareholders.
· Stock and transfer book
- Book which records the names and addresses of all stockholders arranged
alphabetically, the installments paid and unpaid on all stock for which subscription
has been made, and the date of payment thereof; 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 may be prescribed by law
- necessary as a measure of precaution, expediency and convenience since 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
- Not public record, and thus is not exclusive evidence of the matters and things
which ordinarily are or should be written therein
· In this case, the articles of incorporation indicate that at the time of incorporation,
the incorporators were bona fide stockholders of 700 founders’ shares and 76 common
shares. Hence, at that time, the corporation had 776 issued and outstanding shares.
· According to Sec. 52 of the Corp Code, “a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock.” As such, quorum is based on
the totality of the shares which have been subscribed and issued, whether it be
founders’ shares or common shares
· To base the computation of quorum solely on the obviously deficient, if not
inaccurate stock and transfer book, and completely disregarding the issued and
outstanding shares as indicated in the articles of incorporation would work injustice
to the owners and/or successors in interest of the said shares.
· The stock and transfer book of PMMSI cannot be used as the sole basis for
determining the quorum as it does not reflect the totality of shares which have been
subscribed, more so when the articles of incorporation show a significantly larger
amount of shares issued and outstanding as compared to that listed in the stock and
transfer book.
· One who is actually a stockholder cannot be denied his right to vote by the
corporation merely because the corporate officers failed to keep its records
accurately. A corporation’s records are not the only evidence of the ownership of stock
in a corporation.
· It is no less than the articles of incorporation that declare the incorporators to have
in their name the founders and several common shares. Thus, to disregard the

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contents of the articles of incorporation would be to pretend that the basic document
which legally triggered the creation of the corporation does not exist and accordingly to
allow great injustice to be caused to the incorporators and their heirs

WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs
against petitioners

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Wednesday, December 19, 2012

Republic vs. Cocofed Case Digest

Republic of the Philippines vs. Cocofed
[GRs 147062-64, 14 December 2001]

Facts: Immediately after the 1986 EDSA Revolution, then President Corazon C.
Aquino issued Executive Orders 1, 5 2 6 and 14. On the explicit premise that vast
resources of the government have been amassed by former President Ferdinand E.
Marcos, his immediate family, relatives, and close associates both here and abroad,
the Presidential Commission on Good Government (PCGG) was created by Executive
Order 1 to assist the President in the recovery of the ill-gotten wealth thus
accumulated whether located in the Philippines or abroad. Executive Order 2 stated
that the ill-gotten assets and properties are in the form of bank accounts, deposits,
trust accounts, shares of stocks, buildings, shopping centers, condominiums,
mansions, residences, estates, and other kinds of real and personal properties in the
Philippines and in various countries of the world. Executive Order 14, on the other
hand, empowered the PCGG, with the assistance of the Office of the Solicitor General
and other government agencies, inter alia, to file and prosecute all cases investigated
by it under EOs 1 and 2. Pursuant to these laws, the PCGG issued and implemented
numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-
gotten companies, assets and properties, real or personal.

Among the properties sequestered by the Commission were shares of stock in the
United Coconut Planters Bank (UCPB) registered in the names of the alleged “one
million coconut farmers,” the so-called Coconut Industry Investment Fund companies
(CIIF companies) and Eduardo Cojuangco Jr. In connection with the sequestration of
the said UCPB shares, the PCGG, on 31 July 1987, instituted an action for
reconveyance, reversion, accounting, restitution and damages (Case 0033) in the
Sandiganbayan. On 15 November 1990, upon Motion of COCOFED, the

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Sandiganbayan issued a Resolution lifting the sequestration of the subject UCPB
shares on the ground that COCOFED and the so-called CIIF companies had not been
impleaded by the PCGG as parties-defendants in its 31 July 1987 Complaint for
reconveyance, reversion, accounting, restitution and damages. The Sandiganbayan
ruled that the Writ of Sequestration issued by the Commission was automatically
lifted for PCGG’s failure to commence the corresponding judicial action within the six-
month period ending on 2 August 1987 provided under Section 26, Article XVIII of the
1987 Constitution. The anti-graft court noted that though these entities were listed in
an annex appended to the Complaint, they had not been named as parties-
respondents. The Sandiganbayan Resolution was challenged by the PCGG in a Petition
for Certiorari (GR 96073) in the Supreme Court. Meanwhile, upon motion of
Cojuangco, the anti-graft court ordered the holding of elections for the Board of
Directors of UCPB. However, the PCGG applied for and was granted by this Court a
Restraining Order enjoining the holding of the election. Subsequently, the Court lifted
the Restraining Order and ordered the UCPB to proceed with the election of its board
of directors. Furthermore, it allowed the sequestered shares to be voted by their
registered owners. The victory of the registered shareholders was fleeting because the
Court, acting on the solicitor general’s Motion for Clarification/Manifestation, issued a
Resolution on 16 February 1993, declaring that “the right of COCOFED, et. al. to vote
stock in their names at the meetings of the UCPB cannot be conceded at this time.
That right still has to be established by them before the Sandiganbayan. Until that is
done, they cannot be deemed legitimate owners of UCPB stock and cannot be accorded
the right to vote them.” On 23 January 1995, the Court rendered its final Decision in
GR 96073, nullifying and setting aside the 15 November 1990 Resolution of the
Sandiganbayan which lifted the sequestration of the subject UCPB shares.

A month thereafter, the PCGG — pursuant to an Order of the Sandiganbayan —

subdivided Case 0033 into eight Complaints (Cases 0033-A to 0033-H). Six years later,
on 13 February 2001, the Board of Directors of UCPB received from the ACCRA Law
Office a letter written on behalf of the COCOFED and the alleged nameless one million
coconut farmers, demanding the holding of a stockholders’ meeting for the purpose of,
among others, electing the board of directors. In response, the board approved a
Resolution calling for a stockholders’ meeting on 6 March 2001 at 3 p.m. On 23
February 2001, “COCOFED, et al. and Ballares, et al.” filed the “Class Action Omnibus
Motion” in Sandiganbayan Civil Cases 0033-A, 0033-B and 0033-F, asking the
Sandiganbayan to enjoin the PCGG from voting the UCPB shares of stock registered in
the respective names of the more than one million coconut farmers; and to enjoin the
PCGG from voting the SMC shares registered in the names of the 14 CIIF holding
companies including those registered in the name of the PCGG. On 28 February 2001,
the Sandiganbayan, after hearing the parties on oral argument, issued the Order,
authorizing COCOFED, et. al. and Ballares, et. al. as well as Cojuangco, as are all
other registered stockholders of the United Coconut Planters Bank, until further
orders from the Court, to exercise their rights to vote their shares of stock and
themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the
scheduled Stockholders’ Meeting on 6 March 2001 or on any subsequent continuation

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or resetting thereof, and to perform such acts as will normally follow in the exercise of
these rights as registered stockholders. The Republic of the Philippines represented by
the PCGG filed the petition for certiorari.

Issue: Whether the PCGG can vote the sequestered UCPB shares.

Held: The registered owner of the shares of a corporation exercises the right and the
privilege of voting. This principle applies even to shares that are sequestered by the
government, over which the PCGG as a mere conservator cannot, as a general rule,
exercise acts of dominion. On the other hand, it is authorized to vote these
sequestered shares registered in the names of private persons and acquired with
allegedly ill-gotten wealth, if it is able to satisfy the two-tiered test devised by the Court
in Cojuangco v. Calpo and PCGG v. Cojuangco Jr. Two clear “public character”
exceptions under which the government is granted the authority to vote the shares
exist (1) Where government shares are taken over by private persons or entities
who/which registered them in their own names, and (2) Where the capitalization or
shares that were acquired with public funds somehow landed in private hands. The
exceptions are based on the common-sense principle that legal fiction must yield to
truth; that public property registered in the names of non-owners is affected with trust
relations; and that the prima facie beneficial owner should be given the privilege of
enjoying the rights flowing from the prima facie fact of ownership. In short, when
sequestered shares registered in the names of private individuals or entities are
alleged to have been acquired with ill-gotten wealth, then the two-tiered test is applied.
However, when the sequestered shares in the name of private individuals or entities
are shown, prima facie, to have been (1) originally government shares, or (2)
purchased with public funds or those affected with public interest, then the two-tiered
test does not apply. Rather, the public character exceptions in Baseco v. PCGG and
Cojuangco Jr. v. Roxas prevail; that is, the government shall vote the shares. Herein,
the money used to purchase the sequestered UCPB shares came from the Coconut
Consumer Stabilization Fund (CCSF), otherwise known as the coconut levy funds. The
sequestered UCPB shares are confirmed to have been acquired with coco levies, not
with alleged ill-gotten wealth. As the coconut levy funds are not only affected with
public interest, but are in fact prima facie public funds, the Court believes that the
government should be allowed to vote the questioned shares, because they belong to it
as the prima facie beneficial and true owner. The Sandiganbayan committed grave
abuse of discretion in grossly contradicting and effectively reversing existing
jurisprudence, and in depriving the government of its right to vote the sequestered
UCPB shares which are prima facie public in character.

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GSIS V. CA (G.R. NO. 183905)

Facts:
GSIS, a major shareholder in Meralco, was distressed over the proxy validation
proceedings and the resulting certification of proxies in favor of the Meralco
Management. The proceedings were presided over by Meralco’s assistant corporate
secretary and chief legal counsel instead of the person duly designated by Meralco’s
Board of Directors. Thus, GSIS moved before the SEC to declare certain proxies, those
issued to herein private respondents, as invalid. Private respondents contend that
dispute in the validity of proxies is an election contest which falls under the trial
court’s jurisdiction. GSIS argues there was no election yet at the time it filed its
petition with the SEC, hence no proper election contest over which the regular courts
may have jurisdiction.
Issue:
Whether or not the proxy challenge is an election contest cognizable by the regular
courts.
Ruling: YES.
Section 2, Rule 6 of the Interim Rules broadly defines the term “election contest” as
encompassing all plausible incidents arising from the election of corporate directors,
including: (1) any controversy or dispute involving title or claim to any elective office in
a stock or non-stock corporation, (2) the validation of proxies, (3) the manner and
validity of elections and (4) the qualifications of candidates, including the proclamation
of winners.
Under Section 5(c) of Presidential Decree No. 902-A, in relation to the SRC, the
jurisdiction of the regular trial courts with respect to election-related controversies is
specifically confined to “controversies in the election or appointment of directors,
trustees, officers or managers of corporations, partnerships, or associations.”
Evidently, the jurisdiction of the regular courts over so-called election contests or
controversies under Section 5(c) does not extend to every potential subject that may be
voted on by shareholders, but only to the election of directors or trustees, in which
stockholders are authorized to participate under Section 24 of the Corporation Code.
The power of the SEC to investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters unrelated to the cases
enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies
are solicited in relation to the election of corporate directors, the resulting controversy,
even if it ostensibly raised the violation of the SEC rules on proxy solicitation, should
be properly seen as an election controversy within the original and exclusive
jurisdiction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section
5(c) of Presidential Decree No. 902-A.
That the proxy challenge raised by GSIS relates to the election of the directors of
Meralco is undisputed. The controversy was engendered by the looming annual
meeting, during which the stockholders of Meralco were to elect the directors of the
corporation. GSIS very well knew of that fact.

12
LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMG LIFE
INSURANCE CO. INC.) v. COURT OF APPEALS and COMMISSIONER OF INTERNAL
REVENUE. G.R. No. 118043. July 23, 1998. 249 SCRA 92
FACTS:

Jardine-CMG Life Insurance Company, Inc., is a domestic corporation engaged in the

life insurance business. It issued 50,000 shares of stock as stock dividends, with a par
value of P100 or a total of P5 million. Petitioner paid documentary stamp taxes on
each certificate on the basis of its par value.
The CIR decided that the book value of the shares should be used as a basis for
determining the amount of the documentary stamp tax. The CIR issued a deficiency
documentary stamp tax assessment of P78,991.25 in excess of the par value of the
stock dividends.
Petitioner appealed to the CTA which held that the amount of the documentary stamp
tax should be based on the par value stated on each certificate of stock reversing the
CIR's decision. The CIR appealed with the CA and again held in favor of the CIR.
ISSUE: Whether the amount to be paid for stock dividends as documentary
stamp tax, is the par value or the book value of the shares.
RULING:
The par value. The Court reaffirmed the CTA's decision.
Petitioner is correct in basing the assessment on the book value thereof rejecting the
principles enunciated in Commissioner of Internal Revenue vs. Heald Lumber Co. as
the said case refers to purchases of no-par certificates of stocks and not to stock
dividends.
The documentary stamp tax is not levied upon the shares of stock per se but rather on
the privilege of issuing certificates of stock.
It is clear that stock dividends are shares of stock and not certificates of stock which
merely represent them. There is no reason for determining the actual value of such
dividends for purposes of the documentary stamp tax if the certificates representing
them indicate a par value.

13
Yu vs. Yukayguan

G.R. No. 177549; June 18, 2009

FACTS:

The case stemmed from the petition of Anthony Yu et. al. against his younger half-brother Joseph
Yukayguan et. al., who were all shareholders of Winchester Industrial Supply Inc., a company engaged in
hardware and industrial equipment business.

Accusing his older brother’s family of misappropriating funds and assets of the company,
Yukayguan filed a derivative suit. After trial, the Cebu Regional Trial Court dismissed the case, saying
Yukayguan failed to follow and observe the essentials for filing of a derivative suit or action. The ruling
was upheld but later reversed by the Court of Appeals, prompting Yu to elevate the matter to the SC.

ISSUE:

Mandatory requirements before courts can give due course to derivative suits – or legal actions
that may be taken by a stockholders on behalf of a corporation or association.

HELD:

The fact that Winchester, Inc. is a family corporation should not in any way exempt respondents
from complying with the clear requirements and formalities of the rules for filing a derivative suit.

A stockholder’s right to institute a derivative suit is not based on any express provision of the
Corporation Code, or even the Securities Regulation Code, but is impliedly recognized when the said
laws make corporate directors or officers liable for damages suffered by the corporation and its
stockholders for violation of their fiduciary duties.

However, there are mandatory requirements before a derivative suit can be given due course by
the Court. Citing Section 1, Rule 8 of the Interim Rules of Procedure Governing Intra-Corporate
Controversies, the SC said derivative actions may be filed provided that the suing party was a
stockholder or member at the time the acts or transactions subject of the action occurred and at the time
the action was filed; and he exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules
governing the corporation or partnership to obtain the relief he desires. As additional requirements,
the SC said there must be no appraisal rights — which would allow a stockholder to sell his holdings
back to the company – available and the suit is not a nuisance or harassment suit.

14
Filipinas port vs Go

FACTS:

 Sept 4 1992: Eliodoro C. Cruz, Filport’s president from 1968-1991,

wrote a letter to the corporation’s BOD questioning the creation and
election of the following positions with a monthly remuneration of
P13,050.00 each. Cruz requested the board to take necessary
action/actions to recover from those elected to the aforementioned
positions the salaries they have received.
 Jun 4 1993: Cruz, purportedly in representation of Filport and its stockholders, among
which is herein co-petitioner Mindanao Terminal and Brokerage Services, Inc. (Minterbro),
filed with the SEC a derivative suit against Filport's BOD for acts of
mismanagement detrimental to the interest of the corporation and its shareholders at large.
 Cruz prayed that the BOD be made to pay Filport, jointly and severally, the sums
of money variedly representing the damages incurred as a result of the creation of the
offices/positions complained of and the aggregate amount of the questioned increased
salaries.
 RTC: BOD have the power to create positions not in the by-laws and can increase
salaries. But Edgar C. Trinidad under the third and fourth causes of action to restore to the
corporation the total amount of salaries he received as assistant vice president for corporate
planning; and likewise ordering Fortunato V. de Castro and Arsenio Lopez Chua under the
fourth cause of action to restore to the corporation the salaries they each received as special
assistants respectively to the president and board chairman. In case of insolvency of any or
all of them, the members of the board who created their positions are subsidiarily liable.
 Appealed: creation of the positions merely for accommodation purposes - GRANTED
ISSUES:
1. W/N there was mismanagement - NO
2. W/N there is a proper derivative suit - YES

HELD: CA Affirmed
1. NO

 Section 35 of the Corporation Code, the creation of an executive

committee (as powerful as the BOD) must be provided for in the bylaws of
the corporation
 Notwithstanding the silence of Filport’s bylaws on the matter, we cannot rule that
the creation of the executive committee by the board of directors is illegal or unlawful. One
reason is the absence of a showing as to the true nature and functions of executive
committee
 But even assuming there was mismanagement resulting to corporate
damages and/or business losses, respondents may not be held liable in
the absence of a showing of bad faith in doing the acts complained of.

15
 ("dishonest purpose","some moral obliquity","conscious doing of a wrong", "partakes of the
nature of fraud")
 determination of the necessity for additional offices and/or positions in a corporation is a
management prerogative which courts are not wont to review in the absence of any proof that
such prerogative was exercised in bad faith or with malice
2. YES
 Besides, the requisites before a derivative suit can be filed by a
stockholder: - present
a) the party bringing suit should be a shareholder as of the time of the act
or transaction complained of, the number of his shares not being
material; - a stockholder of Filport
b) he has tried to exhaust intra-corporate remedies, i.e., has made a
demand on the board of directors for the appropriate relief but the latter
has failed or refused to heed his plea; and
- he wrote a letter
c) the cause of action actually devolves on the corporation, the wrongdoing or harm having
been, or being caused to the corporation and not to the particular stockholder bringing the
suit. - wrong against the stockholders of the corporation generally

San Miguel Corporation vs. Khan

G.R. No. 85339; August 11, 1989

FACTS:
Fourteen corporations initially acquired shares of outstanding capital stock of SMC and
constituted a Voting Trust thereon in favor of Andres Soriano, Jr. When the latter died Eduardo
Cojuanco was elected as the substitute trustee. However, after the EDSA revolution, Cojuanco fled
out of the country, and subsequently an agreement was entered into between the 14 corporations
and Andres Soriano III (as an agent of several persons) for the purchase of the shares held by the
former.
Actually the buyer of the shares was Neptunia Corporation, a foreign corporation and
wholly-owned subsidiary of another subsidiary wholly owned by SMC. Neptunia paid the
downpayment from the proceeds of certain loans. PCGG then sequestered the shares subject of the
sale so SMC suspended all the other installments of the price to the sellers. The 14 corporations
then sued for rescission and damages.
Meanwhile, PCGG directed SMC to issue qualifying shares to seven (7) individuals including
Eduardo de los Angeles from the sequestered shares for them to hold in trust. Then, the SMC’s
board of directors passed a resolution assuming the loans incurred by Neptunia for the
downpayment. De los Angeles assailed the resolution alleging that it was not passed by the board
aside from its deleterious effects on the corporation’s interest. When his efforts to obtain relief
within the corporation proved futile, he filed this action with the SEC. Respondent directors alleged

16
that de los Angeles has no legal standing having been merely “imposed” by the PCGG and that the
twenty (20) shares owned by him personally cannot fairly and adequately represent the interest of
the minority.

ISSUE:
WON de los Angeles have the legal standing to sue. (Derivative suit)

HELD:
YES. The bona fide ownership by a stockholder in his own right suffices to invest him with
the standing to bring a derivative suit for the benefit of the corporation. The number of his shares is
immaterial since he is not suing in his own behalf, or for the protection or vindication of his own
particular right, or the redress of a wrong committed against him individually but in behalf and for
the benefit of the corporation.
The requisites of a derivative suit are: (1) the party bringing the suit should be a
stockholder as of the time of the act or transactions complained of, the number of shares not being
material; (2) exhaustion of intra-corporate remedies (has made a demand on the board of directors
for the appropriate relief but the latter has failed or refused to heed his plea); and (3) the cause of
action actually devolves on the corporation and not to the particular stockholder bringing the suit.

-YIELD REALTY, INC., petitioner, vs. COURT OF APPEALS, HONORABLE MAURICIO RIVERA AS
PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, ANTIPOLO CITY, BRANCH 73 AND NOLI
FRANCISCO, respondents.
DECISION
CORONA, J.:
For review is the decision dated November 18, 1998 of the Court of Appeals, the dispositive part of
which reads:
WHEREFORE, foregoing considered, the petition to declare the Orders dated 31 January 1994, 15
March 1994, 13 June 1994 and 16 July 1997 of the Regional Trial Court of Antipolo, Rizal, Branch
23, in Civil Case No. 93-2813 is DENIED. Accordingly, the assailed Orders are SUSTAINED. The trial
court is hereby directed to make a final determination of the REDEMPTION PRICE. HI-YIELD
REALTY, INC. is directed to allow NOLI S. FRANCISCO to redeem the subject property for the amount
as determined by the trial court.
SO ORDERED.[1]
THE FACTS

17
On August 10, 1987, private respondent Noli Francisco, as attorney-in-fact of spouses Servulo
Carawatan and Felicidad Leyva, and petitioner Hi-Yield Realty, Inc. entered into a Deed of Real
Estate Mortgage with Francisco as mortgagor and Hi-Yield Realty, Inc. as mortgagee. The property
subject of the mortgage, which was owned by the spouses Carawatan, was situated at Lumang
Dayap, Cainta, Rizal and covered by Transfer Certificate of Title No. 297171. It was mortgaged as
security for the loan of P100,000 which was payable in three (3) months.
Private respondent failed to pay and settle the amount loaned despite repeated demands by
petitioner. Hence, on February 27, 1992, petitioner extrajudicially foreclosed the mortgage on the
property. The property was sold for P285,000 with petitioner as the highest bidder. Subsequently, a
Certificate of Sale[2] was issued in favor of petitioner. This was registered on August 13, 1992. Under
the law, private respondent thus had a twelve-month redemption period expiring on August 13,
1993.
On August 13, 1993, however, private respondent, claiming that he offered to redeem the property
twice prior to the expiration of the said redemption period but that petitioner allegedly refused to
accept the offer and instead demanded more than P1,500,000 as redemption price, filed a petition
with the Regional Trial Court, Branch 23 of Antipolo, Rizal, with the following prayer:
1. ordering the respondent to have the subject real property be redeemed by the petitioner after
paying the amount of P285,000.00, plus 1% per month interest therein and other amount which the
purchaser may have paid thereon after purchase;
2. Notifying the Register of Deeds for the Province of Rizal of the instant petition and hence, title to
the aforesaid real property not be consolidated to and in favor of the respondent foreclosure
sale/buyer.
And in the meantime, Petitioner further prays before the Honorable Court, that he be allowed to
consign/deposit the amount of P285,000.00 plus interest of 1% per month beginning August 12,
1992 in favor of respondent, to show his good faith in paying the redemption price. [3]
On January 31, 1994, the trial court declared that the issue as manifested by the parties in the pre-
trial conference was merely to determine the amount of the capital gains tax and documentary
stamps as computed by the Marikina BIR office. Thus, it ordered private respondent to pay the
corresponding amount of taxes within thirty (30) days or on March 15, 1994.
On March 15, 1994, the trial court issued an order directing petitioner to submit within two (2)
days an updated statement of account which was to be the basis for the payment of the redemption
price by private respondent. In the same order, private respondent was also directed to pay the
redemption price within fifteen (15) days from receipt of the order.
In compliance with the order, petitioner submitted to the trial court a detailed computation of the
total redemption price as of March 17, 1994. Private respondent received his copy on March 24,
1994 and therefore had until April 8, 1994 to pay the redemption price in full. He, however, failed to
pay it by that date. Instead, on April 8, 1994, private respondent filed an Urgent Motion for
Extension of Time[4] with the trial court asking for an extra time of forty-five (45) days within which
to pay the redemption price. He reasoned that his debtor was not able to pay him the amount he
needed to augment his cash on hand and that he was then waiting for a bank loan for P150,000.
Simply put, private respondent did not have sufficient money to tender.

18
The trial court denied private respondents motion in its order dated May 4, 1994, recognizing the
right of petitioner to consolidate the property in its name. [5] The order stated:
Acting on the motion for extension of time filed by the petitioner in this case praying that they be
granted a period of 45 days from April 8, 1994 within which to pay the redemption price to the
respondent and considering that since April 8, 1994 up to the present, a period of 26 days have
elapsed without any pleading filed by the petitioner that they are ready and willing to pay the
redemption price and considering the opposition filed by the respondent/oppositor, the motion is
found to be without merit and, therefore, the Court denies the motion.
Wherefore, the respondent has the right to consolidate the property in its name.
Subsequently, petitioner filed a motion to compel private respondent to deliver the original owners
copy of title (TCT No. 297171).
On May 26, 1994, private respondent moved to reconsider, offering to pay the amount of P510,000
in managers check and P38, 872.93 in personal check.
In a surprising turn-around, the trial court issued an order on June 13, 1994 directly contradicting
its May 4, 1994 order: it now allowed private respondent to pay petitioner the redemption price in
the amount of P548, 872.93 plus 1% per month from April 8, 1994 to June 30, 1994 within five (5)
days from receipt of the order. Not only that. Petitioner was also ordered to accept the payment
offered by respondent as the full redemption price.
When petitioner refused to accept private respondents tender of payment, private respondent, on
June 28, 1994, filed a motion [6] with the trial court to consign the amount of P561, 247.61 as the full
and final redemption price.
On July 8, 1994, petitioner moved to reconsider the June 13, 1994 order arguing that the period of
redemption could not be extended as it is fixed by law. But the trial court, on July 16, 1997, not only
denied petitioners motion for reconsideration but also granted private respondents motion for
consignation.
Aggrieved, petitioner filed a petition for certiorari at the Court of Appeals, alleging that the orders of
the trial court dated January 31, 1994, March 15, 1994, June 13, 1994 and July 16, 1997 were issued
in excess of the trial courts jurisdiction. Petitioner argued that the trial court in effect extended the
twelve-month period of redemption of a duly foreclosed property by almost four years.
The Court of Appeals, however, did not find merit in the petition on the basis of the following:
x x x the one-year redemption period should be reckoned from 13 August 1992. In this regard, NOLI
was able to effectively exercise his right of redemption on 13 August 1993.
The records show that on two occasions, within the redemption period, NOLI offered to redeem the
subject property. Failing to afford the redemption price stated by HYRI, he filed an action before the
trial court with the purpose of determining the subject property. To show his good faith in paying
the redemption price, NOLI offered to consign/deposit the amount of P285,000.00 plus 1% interest
per month beginning 12 August 1992 in favor of HYRI.
NOLIs petition filed on 13 August 1993 had the effect of a formal offer to redeem. As stated
in Belisario vs. Intermediate Appellate Court, the filing of a complaint to enforce

19
repurchase within the period of redemption is equivalent to an offer to redeem and has the effect of
preserving the right to redemption. To explain, a formal offer to redeem, accompanied by a bona
fide tender of the redemption price, although proper, is not essential where x x x the right to redeem
is exercised thru the filing of judicial action. Where the action is filed after the statutory period has
expired, the determination of whether the plaintiff consigned the redemption price with the court
simultaneous with the filing of the action is necessary to see if the right of redemption sans judicial
action was validly exercised. Thus, to reiterate, the filing of the action itself within the redemption
period is equivalent to a formal offer to redeem. (Underscoring provided)
In view thereof, the petition filed before the trial court was timely made and was rightfully acted on.
xxxxxxxxx
In the instant case, the assailed Orders were issued merely to determine the amount of capital gains
tax and documentary stamps, as computed by BIR Marikina and to consider the granting of NOLIs
right to redeem the subject property. x x x In view thereof, there was no extension of the
redemption period. As heretofore stated, the period of redemption expired on 13 August 1993. And
within the said period, NOLI has effectively exercised his right of redemption. Having so established
the same, the contention of extending the redemption period finds no support in the records of the
instant case.[7]
Frustrated in its attempt to stymie private respondents efforts to redeem the subject property on a
petition to the Court of Appeals, petitioner now seeks a review of the respondent courts decision
under the following
ASSIGNMENT OF ERRORS
A. THE HONORABLE COURT OF APPEALS ERRED IN SUSTAINING THE ORDERS OF THE TRIAL
COURT EXTENDING THE PERIOD OF REDEMPTION AND GRANTING A RELIEF IN EQUITY WHERE
THE APPLICABLE LAW AND JURISPRUDENCE SPECIFICALLY PROVIDES OTHERWISE.
B. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE ORDERS OF THE TRIAL
COURT WHICH ERRED IN ITS APPLICATION AND INTERPRETATION OF SECTION 28, RULE 39 OF
THE 1997 RULES OF CIVIL PROCEDURE.
C. THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE RULINGS IN
THE BELISARIO CASE IN THE CASE AT BAR.[8]
THE ISSUES
In a nutshell, petitioner argues that the trial court erred in allowing redemption after April 8, 1994,
the date when private respondent lost all his redemptive rights. Stated otherwise, the trial court
should not have allowed private respondent forty-five (45) more days beyond April 8, 1994 within
which to redeem the foreclosed property.
Petitioner contends that the motions dated May 26, 1994 and June 28, 1994 filed by private
respondent to consign and tender the payment of the redemption price were merely designed to
stretch the time for redemption of the subject property. Private respondent did not have the ability
to redeem the subject property as he had no money at the outset. The redemption price he initially
offered was woefully inadequate because it did not include the taxes, interest and other expenses
petitioner incurred during the foreclosure proceedings.Petitioner therefore felt it was justified in

20
refusing to accept private respondents initial offer to redeem. Hence, private respondents action in
the Antipolo RTC, filed on August 13, 1993 (the original expiration date of the period of redemption),
was merely a subterfuge to forestall the running of the redemption period.
Furthermore, according to petitioner, even if private respondent had been legally allowed to redeem
the property until April 8, 1994 (as authorized by the March 15, 1994 order of the trial court), the
latter never made any actual tender or consignation of payment and therefore no redemption was
ever made. Thus, private respondent had already lost all his redemptive rights as of that date and
the order dated June 13, 1994 granting a further forty-five (45) day extension to redeem after April
8, 1994 was completely beyond the trial courts power to give.
THE QUESTIONED ORDERS
Petitioner challenged before the respondent Court of Appeals the authority of the trial court to issue
the following orders
(a) dated January 31, 1994 which defined the issue involved in the case as merely determining the
amount of taxes and which mandated private respondent to pay the corresponding amount of taxes
within thirty (30) days;
(b) dated March 15, 1994 which directed petitioner to submit an updated statement of account and
private respondent to pay the redemption price (the updated statement of account as basis
therefor) within fifteen (15) days from receipt of the order;
(c) dated June 13, 1994 which allowed private respondent to redeem upon payment to petitioner of
the redemption price of P548,872.93 and
(d) dated July 16, 1997 which denied petitioners motion for reconsideration of the June 13, 1994
order and which granted private respondents motion for consignation.
Petitioner now seeks to correct in this Court the error of the Court of Appeals in sustaining the four
above-mentioned orders of the trial court.
THIS COURTS RULING
Section 28, Rule 39 of the Rules of Court provides:
SEC. 28. Time and manner of, and amounts payable on, successive redemptions; notice to be given and
filed. The judgment obligor, or redemptioner, may redeem the property from the purchaser, at any
time within one (1) year from the date of the registration of the certificate of sale, by paying the
purchaser the amount of his purchase, with one per centum per month interest thereon in addition,
up to the time of redemption, together with the amount of any assessments or taxes which the
purchaser may have paid thereon after purchase, and interest on such last named amount of the
same rate; and if the purchaser be also a creditor having a prior lien to that of the redemptioner,
other than the judgment under which such purchase was made, the amount of such other lien, with
interest.
Pursuant to the abovementioned rule, the right of redemption should be exercised within the
specified time limit, which is one year from the date of registration of the certificate of sale.Moreover,
the redemptioner should make an actual tender in good faith of the full amount of the purchase

21
price as provided above, which means the auction price of the property plus the creditors other
legitimate expenses like taxes, registration fees, etc.
The rule works well if both parties agree on the amount to be tendered on or before the end of the
redemption period. In this case, however, the parties could not agree on the amount as in fact the
private respondent claimed he twice tried to redeem the property but the petitioner refused
because they could not agree on the redemption price.
What is the redemptioners option therefore when the redemption period is about to expire and the
redemption cannot take place on account of disagreement over the redemption price?
According to jurisprudence,[9] the redemptioner faced with such a problem may preserve his right of
redemption through judicial action which in every case must be filed within the one-year period of
redemption. The filing of the court action to enforce redemption, being equivalent to a formal offer
to redeem, would have the effect of preserving his redemptive rights and freezing the expiration of
the one-year period. This is a fair interpretation provided the action is filed on time and in good
faith, the redemption price is finally determined and paid within a reasonable time, and the rights of
the parties are respected.
Stated otherwise, the foregoing interpretation, as applied to the case at bar, has three critical
dimensions: (1) timely redemption or redemption by expiration date (or, as what happened in this
case, the redemptioner was forced to resort to judicial action to freeze the expiration of the
redemption period); (2) good faith as always, meaning, the filing of the private respondents action
on August 13, 1993 must have been for the sole purpose of determining the redemption price and
not to stretch the redemptive period indefinitely; and (3) once the redemption price is determined
within a reasonable time, the redemptioner must make prompt payment in full.
Conversely, if private respondent had to resort to judicial action to stall the expiration of the
redemptive period on August 13, 1993 because he and the petitioner could not agree on the
redemption price which still had to be determined, private respondent could not thereby be expected
to tender payment simultaneously with the filing of the action on said date.
Accordingly, the trial court did not err when it resolved to allow private respondent to redeem the
property through its orders dated January 31, 1994 and March 15, 1994. The order dated March 15,
1994 thus preserved private respondents right to redeem pending the computation of the taxes to
be added to the total amount of the redemption price.
Private respondent could not be reproached, at least initially, for offering to pay less than the full
amount of the redemption price as the amount of taxes and expenses, at that point, was not yet
clearly determined. Proof of this is the fact that petitioner had to be required by the March 15, 1994
order of the trial court to submit an updated account of the total capital gains tax and interest added
to the purchase price. Petitioner did not oppose the said order. Instead, on March 17, 1994, it
promptly complied with the directive of the trial court. Which could have only meant that petitioner
itself recognized that the redemption price was uncertain and could not therefore be settled yet at
that point.
However, after petitioner, pursuant to the trial court order on March 15, 1994, furnished private
respondent the updated statement of account on March 24, 1994, the latter should have redeemed
the foreclosed property within 15 days, that is, on or before April 8, 1994. The private respondent

22
should have promptly tendered by then the complete and updated redemption price as
computed. Should the amount allow redemption, the redemptioner should then pay the amount
already adverted to.[10]
But on April 8, 1994, the deadline set by the trial court, private respondent did not tender any
payment. Instead, he asked for an extension of 45 days because his money was not enough. The trial
court was therefore correct when it denied, on May 4, 1994, [11] private respondents plea for a 45-
day extension for payment. It was also correct in declaring, in the same order, the right of petitioner
to consolidate the property in its name on account of private respondents failure to redeem the
property on or before April 8, 1994.
Strangely, however, the trial court had a sudden change of heart and reversed itself after private
respondent filed a motion for reconsideration on May 26, 1994. This is where we draw the line
between the judicious and injudicious use of discretion by the trial court.
On June 13, 1994 and July 16, 1997, it issued two orders which effectively allowed an extension of
the redemptive period and consignation of the redemption price. We raise a quizzical eyebrow, to
say the least.
The trial court resolved to allow private respondent to redeem and pay the redemption price of the
property in the interest of justice and on the ground of equity way beyond what was reasonable and
contemplated by the law. We cannot upbraid the trial court for sympathizing with private
respondent but this exercise of discretion cannot be allowed to trample upon the other partys
rights.
The pendency of the right of redemption depresses the market value of the land until the period
expires. Permitting private respondent to file a suit for redemption, with either party unable to
foresee when final judgment will come, renders meaningless the period fixed by the statute for
effecting the redemption. It makes the redemptive period indefinite and cripples any effort of the
landowner to realize the value of his land. In the same way, the buyer cannot immediately recover
his investment.[12] Thus, unless and until the redemption is resolved with finality, both the
landowners and buyers needs cannot be met. Petitioner and private respondent herein were thus
basically posed on similar footing before redemption. But whoever of them stands to be irreparably
injured in the long run deserves the Courts equitable protection. [13] Thus we have held that:
Equity has been defined as justice outside law, being ethical rather than jural and belonging to the
sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction
of positive law.[14]
Private respondent may have elicited the sympathy of the trial court. We cannot, however, be blind
to the rights of petitioner. It was serious error to make the final redemption of the foreclosed
property dependent on the financial condition of private respondent. It may have been difficult for
private respondent to raise the money to redeem the property but financial hardship is not a
ground to extend the period of redemption.[15]
Thus, this Court cannot apply the same leniency as it did in Belisario vs. IAC.[16] The Belisario case is
not on all fours with the instant case. For one, in Belisario, the petitioners therein manifested their
desire to redeem the property through a letter addressed to PNB. Enclosed in the letter was a postal
money order in the amount of P630 as partial payment, with the balance to be paid in 12 equal

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monthly installments. There was a definite tender of payment by petitioners therein although at the
outset the amount tendered was incomplete and made with a proposal to pay on installment. This
Court held that (t)here (was) no cogent reason for requiring the vendee to accept payment by
installments from the redemptioner as it would ultimately result in an indefinite extension of the
redemption period. In the instant case, however, there was no definite tender of payment to
petitioner when private respondent allegedly offered to redeem the property on August 13, 1993.
Had private respondents act of filing a suit for redemption really been in good faith, private
respondent could have at least consigned or deposited what he thought to be the correct amount
simultaneously with the filing of the action to redeem on August 13, 1993 - to show not only good
faith but also his intention and capability of paying in full what he believed to be the reasonable
price. But even as he petitioned the court for the consignation of the redemption price, no actual
consignation was made. He instead sought a 45-day extension of the period to pay the redemption
price. This was downright reflective of private respondents financial inability to redeem from the
very start.
For another, the controversy in the Belisario case involved the determination of the proper
reckoning of the period of redemption. This Court held there that
(t)he redemption period, for purposes of determining the time when a final Deed of Sale may be
executed or issued and the ownership of the registered land consolidated in the purchaser at an
extrajudicial foreclosure sale under Act 3135, should be reckoned from the date of the registration
of the Certificate of Sale in the Office of the Register of Deeds concerned and not from the date of
public auction.
In the instant case, however, the fact that private respondent made a formal offer to redeem before
the expiration of the period to redeem was not squarely at issue. The focal issue here is whether or
not the extension of the redemptive period by the trial court was well within private respondents
preserved right to redeem. The circumstances clearly show it was not.
The Court of Appeals thus cited the Belisario case out of context because the incidents of said case
are different from those of the case at bar.
Precedents are helpful in deciding cases when they are on all fours or at least substantially identical
with previous litigations. Argumentum a simili valet in lege. x x x Except when there is a need to
reverse them because of an emergent viewpoint or an altered situation x x x. [17]
The opportunity to redeem the subject property was never denied to private respondent. His timely
formal offer through judicial action to redeem was likewise recognized. But that is where it
ends. We cannot sanction and grant every succeeding motion or petition specially if frivolous or
unreasonable filed by him because this would manifestly and unreasonably delay the final
resolution of ownership of the subject property.
And we cannot be clearer on this point: as a result of the trial courts grant of a 45-day extended
period to redeem, almost nine (9) years have elapsed with both parties claims over the property
dangling in limbo, to the serious impairment of petitioners rights.
We cannot thus help but call the trial courts attention to the prejudice it has wittingly or unwittingly
caused the petitioner. It was really all too simple. The trial court should have seen, as in fact it had

24
already initially seen, that the 45-day extension sought by private respondent on April 8, 1994 was
just a play to cover up his lack of funds to redeem the foreclosed property.
WHEREFORE, the petition is PARTLY GRANTED. The decision of the Court of Appeals under review
is hereby MODIFIED as follows: (1) the orders dated January 31, 1994 and March 15, 1994 of the
trial court are hereby SUSTAINED; (2) the orders dated June 13, 1994 and July 16, 1997 of the trial
court are hereby SET ASIDE and NULLIFIED. Consequently, for failure of private respondent to
redeem the property within the period set by the trial court in its order dated March 15, 1994,
the petitioner is hereby allowed to consolidate the title to the subject property in its name.
SO ORDERED.

Corporation; shares of stock. 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.
Here, FEGDI clearly failed to deliver the stock certificates, representing the
shares of stock purchased by Vertex, within a reasonable time from the point the
shares should have been delivered. This was a substantial breach of their
contract that entitles Vertex the right to rescind the sale under Article 1191 of
the Civil Code. It is not entirely correct to say that a sale had already been
consummated as Vertex already enjoyed the rights a shareholder can exercise.
The enjoyment of these rights cannot suffice where the law, by its express
terms, requires a specific form to transfer ownership. Fil-Estate Gold and
Development, Inc., et al. v. Vertex Sales and Trading, Inc., G.R. No. 202079, June 10,
2013.

VANGELISTA vs. SANTOS Case Digest

EVANGELISTA vs. SANTOS
86 P.R. 387

Facts: Plaintiff’s are minority stockholders of the Vitali Lumber Company, Inc., a Philippine
corporation organized for the exploitation of a lumber concession in Zamboanga, Philippines; that
defendant holds more than 50 per cent of the stocks of said corporation and also is and always has
been the president, manager, and treasurer thereof; and that defendant, in such triple capacity,
through fault, neglect, and abandonment allowed its lumber concession to lapse and its properties
and assets to disappear, thus causing the complete ruin of the corporation and total depreciation of
its stocks. Their complaint therefore prays for judgment requiring defendant: (1) to render an account
of his administration of the corporate affairs and assets: (2) to pay plaintiffs the value of their
respective participation in said assets on the basis of the value of the stocks held by each of them;
and (3) to pay the costs of suit.

The complaint does not give plaintiffs’ residence, but, for purposes of venue, alleges that defendant
resides at 2112 Dewey Boulevard, corner Libertad Street, Pasay, province of Rizal. Having been
served with summons at that place, defendant filed a motion for the dismissal of the complaint on the
ground of improper venue and also on the ground that the complaint did not state a cause of action
in favor of plaintiffs.

25
In support of the objection to the venue, defendant states that he is a resident of Iloilo City and not of
Pasay, defendant also presented further affidavit to the effect that while he has a house in Pasay,
where members of his family who are studying in Manila live and where he himself is sojourning for
the purpose of attending to his interests in Manila, yet he has his permanent residence in the City of
Iloilo where he is registered as a voter for election purposes and has been paying his residence
certificate.

Issue: Whether or not defendant is a resident of Iloilo, therefore, there was no proper venue when
he was served with summons in Pasay.

Held: The facts in this case show that the objection to the venue is well-founded. Where the plaintiff
is a nonresident and the contract upon which suit is brought was made in the Philippine Islands it
may safely be asserted that the convenience of the defendant would be best served by a trial in the
province where he resides. The fact that defendant was sojourning in Pasay at the time he was
served with summons does not make him a resident of that place for purposes of venue. Residence
is “the permanent home, the place to which, whenever absent for business or pleasure, one intends
to return.

LEGASPI TOWERS 300, INC v. AMELIA P. MUER (Jurisdiction; Class Suit)

LEGASPI TOWERS 300, INC., LILIA MARQUINEZ PALANCA, ROSANNA D. IMAI,
GLORIADOMINGO and RAY VINCENT, Petitioners, vs. AMELIA P. MUER, SAMUEL M.
TANCHOCO, ROMEO TANKIANG, RUDEL PANGANIBAN,DOLORES AGBAYANI,
ARLENEDAL A. YASUMA, GODOFREDO M. CAGUIOA and EDGARDO
M.SALANDANAN, Respondents.
FACTS: Pursuant to the by-laws of Legaspi Towers 300, Inc., petitioners, the
incumbent Board of Directors, set the annual meeting of the members of the
condominium corporation and the election of the new Board of Directors at the lobby
of Legaspi Towers 300, Inc. The Committee on Elections of Legaspi Towers 300, Inc.,
however, found most of the proxy votes, at its face value, irregular, thus, questionable;
and for lack of time to authenticate the same, petitioners adjourned the meeting for
lack of quorum. However, the group of respondents challenged the adjournment of the
meeting. Despite petitioners’ insistence that no quorum was obtained during the
annual meeting held on April 2, 2004, respondents pushed through with the
scheduled election and were elected as the new Board of Directors and officers of
Legaspi Towers 300, Inc. and subsequently submitted a General Information Sheet to
the Securities and Exchange Commission (SEC). On plaintiffs’ motion to admit
amended complaint to include Legaspi Towers 300, Inc. as plaintiff),the RTC ruled
denying the motion for being improper. Then, petitioners filed with the Court of
Appeals and held that Judge Antonio I. De Castro of the Regional Trial Court (RTC) of
Manila, did not commit grave abuse of discretion in issuing the Orders denying
petitioners’ Motion to Admit Second Amended Complaint and that petitioners the
justified the inclusion of Legaspi Towers 300, Inc. as plaintiff by invoking the doctrine

26
of derivative suit. Petitioners’ motion for reconsideration was denied by the Court of
Appeals thereafter. Hence this petition.
ISSUE: Whether or not Derivative Suit proper in this case?
RULING: The Supreme Court DENIED the petition and AFFIRMED the Decision of the
Court of Appeals. Derivative Suit is not applicable. Since it is the corporation that is
the real party-in-interest in a derivative suit, then the reliefs prayed for must be for
the benefit or interest of the corporation. When the reliefs prayed for do not pertain to
the corporation, then it is an improper derivative suit. The requisites for a derivative
suit are as follows:
1. a) the party bringing suit should be a shareholder as of the time of the act or
transaction complained of, the number of his shares not being material;
2. b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on
the board of directors for the appropriate relief but the latter has failed or
refused to heed his plea; and
3. c) the cause of action actually devolves on the corporation, the wrongdoing or
harm having been, or being caused to the corporation and not to the particular
stockholder bringing the suit.
As stated by the Court of Appeals, petitioners’ complaint seek to nullify the said
election, and to protect and enforce their individual right to vote. The cause of action
devolves on petitioners, not the condominium corporation, which did not have the
right to vote. Hence, the complaint for nullification of the election is a direct action by
petitioners, who were the members of the Board of Directors of the corporation before
the election, against respondents, who are the newly-elected Board of Directors. Under
the circumstances, the derivative suit filed by petitioners in behalf of the condominium
corporation in the Second Amended Complaint is improper.

BITONG V. CA (G.R. NO. 123553)

Facts:
Petitioner Bitong allegedly acting for the benefit of Mr. & Ms. Co. filed a derivative suit
before the SEC against respondent spouses Apostol, who were officers in said
corporation, to hold them liable for fraud and mismanagement in directing its affairs.
Respondent spouses moved to dismiss on the ground that petitioner had no legal
standing to bring the suit as she was merely a holder-in-trust of shares of JAKA
Investments which continued to be the true stockholder of Mr. & Ms. Petitioner
contends that she was a holder of proper stock certificates and that the transfer was
recorded. She further contends that even in the absence of the actual certificate, mere
recording will suffice for her to exercise all stockholder rights, including the right to
file a derivative suit in the name of the corporation. The SEC Hearing Panel dismissed

27
the suit. On appeal, the SEC En Banc found for petitioner. CA reversed the SEC En
Banc decision.
Issue:
Whether or not petitioner is the true holder of stock certificates to be able
institute a derivative suit.
Ruling: NO.
Sec 63 of the Corporation Code envisions a formal certificate of stock which can be
issued only upon compliance with certain requisites. 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. A mere typewritten statement
advising a stockholder of the extent of his ownership in a corporation without
qualification and/or authentication cannot be considered as a formal certificate of
stock. Second, delivery of the certificate is an essential element of its issuance. Hence,
there is no issuance of a stock certificate where it is never detached from the stock
books although blanks therein are properly filled up if the person whose name is
inserted therein has no control over the books of the company. 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.
The certificate of stock itself once issued is a continuing affirmation or representation
that the stock described therein is valid and genuine and is at least prima
facie evidence that it was legally issued in the absence of evidence to the contrary.
However, this presumption may be rebutted. Aside from petitioner’s own admissions,
several corporate documents disclose that the true party-in-interest is not petitioner
but JAKA. It should be emphasized that JAKA executed, a deed of sale over 1,000 Mr.
& Ms. shares in favor of respondent Eugenio D. Apostol. On the same day, respondent
Apostol signed a declaration of trust stating that she was the registered owner of 1,000
Mr. & Ms. shares covered by a Certificate of Stock. And, there is nothing in the records
which shows that JAKA had revoked the trust it reposed on respondent Eugenia D.
Apostol. Neither was there any evidence that the principal had requested her to assign
and transfer the shares of stock to petitioner. In fine, the records are unclear on how
petitioner allegedly acquired the shares of stock of JAKA.
Thus, for a valid transfer of stocks, the requirements are as follows: (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. At most, in the instant case, petitioner has satisfied only the third
requirement. Compliance with the first two requisites has not been clearly and
sufficiently shown.
*The basis of a stockholder’s suit is always one in equity. However, it cannot
prosper without first complying with the legal requisites for its institution. The
most important of these is the bona fide ownership by a stockholder of a stock

28
in his own right at the time of the transaction complained of which invests him
with standing to institute a derivative action for the benefit of the corporation.

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