catindig digest

7/21/2019 Catindig digest

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LOZANO VS DE LOS SANTOS - BARRETTO

Doctrine:The SEC has no jurisdiction over a dispute between members

of separate and distinct associations.

FACTS:

1. Petitioner Lozano, was the president of the Kapatirang Mabalacat-

Angeles Jeepney Drivers Association (KAMAJDA) while respondent,

Anda was the president of Samahang Angeles-Mabalacat Jeepney

Operators and Drivers Association (SAMAJODA).

2. Upon the request of the Sangguniang Bayan of Mabalacat, Pampanga,

petitioner and respondent agreed to consolidate their respective

associations to form one unified association called UMAJODA. They alsoagreed to elect one set of officers who shall be given the sole authority

to collect the daily dues from the members.

3. Elections were held and Petitioner won but respondent refused to

recognize the results and continued collecting the dues from the

members of SAMAJODA . Petitioner thus filed a complaint with the

MCTC to restrain Anda from collecting the dues and to order him to

pay damages and attorneys fees.

4. Anda moved to dismiss the complaint claiming that jurisdiction over

the case was lodged with the SEC and not with the regular courts. TheRTC found the dispute to be intracorporate and under the jurisdiction

of the SEC and ordered MCTC to dismiss the case.

ISSUE: WON the SEC has jurisdiction over this case

HELD: The regular courts have jurisdiction over the case, and not the

SEC.

1. In order for the SEC to take cognizance of a case, the controversy

must pertain to the following relationships:

a. between 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

insofar as its franchise, permit or license to operate is concerned and

d. among stockholders, partners or associates themselves.

2. There is no intracorporate nor partnership relation between

petitioner and respondent. The controversy between them arose out of

the plan to consolidate their respective associations into a singleassociation. This consolidated association is merely a proposal. It has

not been approved by the SEC, neither had its officers and members

submitted their articles of consolidation in accordance with Sec. 78 and

79 of the Corporation Code.

3. Consolidation becomes effective not upon mere agreement of the

members but only upon issuance of the certificate of consolidation by

the SEC. When the SEC, upon processing and examining the articles of

consolidation, is satisfied that the consolidation of the corporations is

not inconsistent with the provisions of the Corporation Code and

existing laws, it issues a certificate of consolidation which makes the

reorganization official. The new consolidated corporation comes into

existence and the constituent corporations dissolve and cease to exist.

4 The KAMAJDA and SAMAJODA to which petitioner and private

respondent belong are duly registered with the SEC, but these

associations are two separate entities. The dispute between petitioner

and private respondent is not within the KAMAJDA nor the SAMAJODA.

It is between members of separate and distinct associations. Petitioner


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and private respondent have no intracorporate relation much less do

they have an intracorporate dispute. The SEC therefore has no

jurisdiction over the complaint.

ISSUE: Whether the doctrine of corporation by estoppel applies in the

case of the unified association?

HELD: No, corporation by estoppel does not apply in this case.

The doctrine of corporation by estoppel advanced by private

respondent cannot override jurisdictional requirements. Jurisdiction is

fixed by law and is not subject to the agreement of the parties. It

cannot be acquired through or waived, enlarged or diminished by, any

act or omission of the parties, neither can it be conferred by the

acquiescence of the court.

Corporation by estoppel is founded on principles of equity and is

designed to prevent injustice and unfairness. It applies when persons

assume to form a corporation and exercise corporate functio

ns and

enter into business relations with third person. Where there is no third

person involved and the conflict arises only among those assuming the

form of a corporation, who therefore know that it has not been

registered, there is no corporation by estoppel.

Dispositive: IN VIEW WHEREOF, the petition is granted and the

decision dated April 18, 1996 and the order dated May 31, 1996 of the

Regional Trial Court, Branch 58, Angeles City are set aside. The

Municipal Circuit Trial Court of Mabalacat and Magalang, Pampanga is

ordered to proceed with dispatch in resolving Civil Case No. 1214. No

costs.

LIBAN VS GORDON - CHUA

FACTS: A Motion for Clarification and/or for Reconsideration filed by

respondent Richard J. Gordon (respondent) of the Decision

promulgated by this Court on July 15, 2009 (the Decision), a Motion for

Partial Reconsideration (PNRC), and a Manifestation and Motion to

Admit Attached Position Paper were filed by movant-intervenor

Philippine National Red Cross

In his Motion for Clarification and/or for Reconsideration, respondent

alleged that the constitutionality of Republic Act (R.A.) No. 95 [PNRC

Charter] was not raised by the parties, hence the Court went beyond

the case in deciding such issue.

Respondent argues that the validity of R.A. No. 95 was a non-issue;

therefore, it was unnecessary for the Court to decide on that question.

PNRC prays that the Court sustain the constitutionality of its Charter.

ISSUE: Whether of not the PNRC Charter is violative of the

Constitutional proscription against the creation of private corporations

by special law.

RULING: NO.

After a thorough study of the arguments and points raised by the

respondent as well as those of movant-intervenor in their respective

motions, we have reconsidered our pronouncements in our Decision

dated July 15, 2009 with regard to the nature of the PNRC and the

constitutionality of some provisions of the PNRC Charter, R.A. No. 95, as

amended.

National Societies such as the PNRC act as auxiliaries to the public

authorities of their own countries in the humanitarian field and provide

a range of services including disaster relief and health and social

programmes.

A National Society partakes of a sui generis character. It is a protected

component of the Red Cross movement under Articles 24 and 26 of the


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First Geneva Convention, especially in times of armed conflict. These

provisions require that the staff of a National Society shall be respected

and protected in all circumstances. Such protection is not ordinarily

afforded by an international treaty to ordinary private entities or even

non-governmental organisations (NGOs). This sui generis character is

also emphasized by the Fourth Geneva Convention which holds that an

Occupying Power cannot require any change in the personnel or

structure of a National Society. National societies are therefore

organizations that are directly regulated by international

humanitarian law, in contrast to other ordinary private entities,

including NGOs.

In addition, National Societies are not only officially recognized by their

public authorities as voluntary aid societies, auxiliary to the public

authorities in the humanitarian field, but also benefit from recognition

at the International level. This is considered to be an element

distinguishing National Societies from other organisations (mainly

NGOs) and other forms of humanitarian response.

The auxiliary status of [a] Red Cross Society means that it is at one

and the same time a private institution and a public service

organization because the very nature of its work implies

cooperation with the authorities, a link with the State. In carrying

out their major functions, Red Cross Societies give their humanitarian

support to official bodies, in general having larger resources than the

Societies, working towards comparable ends in a given sector.

This Court recognize too the countrys adherence to the Geneva

Convention and respect the unique status of the PNRC in

consonance with its treaty obligations.The Geneva Convention has

the force and effect of law. Under the Constitution, the Philippines

adopts the generally accepted principles of international law as part of

the law of the land. This constitutional provision must be reconciled

and harmonized with Article XII, Section 16 of the Constitution, instead

of using the latter to negate the former.

By requiring the PNRC to organize under the Corporation Code just like

any other private corporation, the Decision of July 15, 2009 lost sight of

the PNRCs special status under international humanitarian law and as

an auxiliary of the State, designated to assist it in discharging its

obligations under the Geneva Conventions.

In sum, the PNRC enjoys a special status as an important ally and

auxiliary of the government in the humanitarian field in accordance

with its commitments under international law. WHEREFORE, we

declare that the office of the Chairman of the Philippine National Red

Cross is not a government office or an office in a government-owned or

controlled corporation for purposes of the prohibition in Section 13,

Article VI of the 1987 Constitution.

GAMBOA VS TEVES (2011 ORIGINAL DECISION) -CONSTANTINO

FACTS:

PLDT was granted a franchise to engage in the telecommunications

business in 1928 through Act. No. 3436. During Martial Law 26 percent

of the outstanding common shares were sold by General Telephone and

Electronics Corporation (GTE) (an American company) to Philippine

Telecommunications Investment Corporation (PTIC), who in turn

assigned 111,415 shares of stock of PTIC (46 percent of outstanding

capital stock) to Prime Holdings Inc. (PHI). These shares of PTIC were

later sequestered by PCGG and adjudged by the court to belong to the

Republic.

54 percent of PTIC shares were sold to Hong Kong-based firm First

Pacific, and the remaining 46 percent was sold through public bidding

by the Inter-Agency Privatization Council, and eventually ended up

being bought by First Pacific subsidiary Metro Pacific Asset Holdings


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Inc. (MPAH) after the corporation exercised its right of first refusal .

The transaction was an indirect sale of 12 million shares or 6.3 percent

of the outstanding common shares of PLDT, making First Pacifics

common shareholdings of PLDT to 37 percent and the total common

shareholdings of foreigners in PLDT to 81.47 percent. Japanese NTT

DoCoMo owns 51.56 percent of the other foreign shareholdings/equity.

Petitioner Gamboa, alleged that the sale of 111,415 shares to MPAH

violates Sec. 11 of Art. XII of the Constitution, which limits foreign

ownership of the capital of a public utility to not more than 40 percent.

ISSUE:

(1) Whether petitioners choice of remedy was proper?

(2) Whether the term capital under Sec. 11, Article XII of the

Constitution refers only to the total common shares or to the total

outstanding stock of PLDT (public utility)?

HELD:

(1) NO. However, since the threshold and purely legal issue on the

definition of the term capital in Section 11, Article XII of the

Constitution has far-reaching implications to the national economy, the

Court treats the petition for declaratory relief as one for mandamus. It

is well-settled that this Court may treat a petition for declaratory reliefas one for mandamus if the issue involved has far-reaching

implications.

(2) The term capital in Section 11, Article XII of the Constitution

refers only to shares of stock entitled to vote in the election of

directors, and thus in the present case only to common shares, and not

to the total outstanding capital stock comprising both common and

non-voting preferred shares. The SC directed the SEC to apply this

definition in determining what was the extent of allowable foreign

ownership in PLDT, and in case of violation, impose the

appropriate penalty under the law.

Consistent with the constitutional mandate that the State shall develop

a self-reliant and independent national economy effectively controlled

by Filipinos, the term "capital" means the outstanding capital stock

entitled to vote (voting stock), coupled with beneficial ownership, both

of which results to "effective control."

"Mere legal title is insufficient to meet the 60 percent Filipino owned

capital required in the Constitution for certain industries. Full

beneficial ownership of 60 percent of the outstanding capital stock,

coupled with 60 percent of the voting rights, is required." In this case,

such twin requirements must apply uniformly and across the board toall classes of shares comprising the capital. Thus, "the 60-40 ownership

requirement in favor of Filipino citizens must apply separately to each

class of shares, whether common, preferred non-voting, preferred

voting or any other class of shares." This guarantees that the

controlling interest in public utilities always lies in the hands of

Filipino citizens.

A broader definition would unjustifiably disregards who owns the all-

important voting stock, which necessarily equates to control of the

public utility would be contrary to Sec. 11, Art. XII, a self-executing

provision of the Constitution.

A similar definition is found in Section 10, Article XII of the

Constitution, the Foreign Investments Act of 1991 and its IRR,

Regulation of Award of Government Contracts or R.A. No. 5183,

Philippine Inventors Incentives Act or R.A. No. 3850, Magna Carta for

Micro, Small and Medium Enterprises or R.A. No. 6977, Philippine

Overseas Shipping Development Act or R.A. No. 7471, Domestic

Shipping Development Act of 2004 or R.A. No. 9295, Philippine


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Technology Transfer Act of 2009 or R.A. No. 10055, and Ship Mortgage

Decree or P.D. No. 1521.

VELASCO (Separate Dissenting Opinion)

The present petition partakes of a collateral attack on PLDTs franchise

as a public utility with petitioner pleading as ground PLDTs alleged

breach of the 40% limit on foreign equity. Such is not allowed. As

discussed in PLDT v. National Telecommunications Commission , a

franchise is a property right that can only be questioned in a direct

proceeding.

(1) The intent of the framers of the Constitution was not to limit the

application of the word capital to voting or common shares alone.

Constitutional Commission records show that by using the word

capital, the framers of the Constitution adopted the definition orinterpretation that includes alltypes of shares, whether voting or non-

voting.

(2)Cassus Omissus Pro Omisso Habendus Esta person, object or thing

omitted must have been omitted intentionally. In this case, the

intention of the framers of the Constitution is very clearto omit the

phrases voting stock and controlling interest.

(3) The FIA should also be read in harmony with the Constitution. Since

the Constitution only provides for a single requirement for the

operation of a public utility under Sec. 11, i.e., 60% capital must be

Filipino-owned, a mere statute cannot add another requirement.

Otherwise, such statute may be considered unconstitutional.

Accordingly, the phrase entitled to voteshould not be interpreted to

be limited to common shares alone or those shares entitled to vote in

the election of members of the Board of Directors.

(4) Further, the FIA did not say entitled to vote in the management

affairs of the corporation or entitled to vote in the election of the

members of the Board of Directors. Verily, where the law does not

distinguish, neither should We. Hence, the proper interpretation of the

phrase entitled to vote under the FIA should be that it applies to all

shares, whether classified as voting or non-voting shares.

(5) Additionally, control is anotherinherent right of ownership. The

circumstances enumerated in Sec. 6 of the Corporation Code clearly

evince this. It gives voting rights to the stocks deemed as non-voting as

tofundamentaland majorcorporate changes. Thus, the issue should

not only dwell on the daily management affairs of the corporation but

also on the equally important fundamental changes that may need to be

voted on.

(6) The SEC rules, opinions and jurisprudence use the control test,

which requires that the nationality of a corporation is determined by

the total outstanding capital stock irrespective of the number of shares,and capital denotes the total shares subscribed and paid irrespective

of their nomenclature.

(7) Lastly, the last sentence of Sec. 11, Art. XII limits the participation

of the foreign investors in the governing body to their proportionate

share in the capital of the corporation.

ABAD (Dissenting Opinion)

(1) Authority to define and interpret the meaning of capital in Sec. 11,

Art. XII belongs to Congress as part of its policy making powers, as

the power to authorize and control a public utility is a prerogative of

Congress. Sec. 11, Art. XII is no self-executing and requires

Congressional action to clarify its meaning. FIA is restricted to

certain areas of investment and should not be construed to clarify

the meaning of capital under the constitutional provision as they

are rules which apply to future investors.

(2) Capital refers to the entirety of the corporations outstanding

voting stock as, first, the 40 percent limit (if held only to preferred


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shareholders) would render meaningless the fourth sentence which

limits foreign participation in the governing body of public utilities,

and, second, amicus curiae Dr. Villegas, Chairman of the Committee

of National Economy, said that the term capital did not distinguish

among the classes of shares. In both economic and business terms,

capital always meant the entire shares of stock. Further, Philippine

policy on foreign ownership already discourages foreign

investments and to impose additional restrictions would aggravate

economic growth.

(3) Sec. 11, Article XII already provides 3 limitations on foreign

participation in public utilities and the Court need not add more by

restricting the definition of capital. (digest taken from

https://www.scribd.com/doc/154296979/Gamboa-v-Teves-

Digest)

GAMBOA VS TEVES (2012 RULING ON THE MR OF THE 2011

DECISION) - CONSTANTINO

Issue:Whether or not the Court made an erroneous interpretation of

the term capitalin its 2011 decision?

Held/Reason: The Court said that the Constitution is clear in

expressing its State policy of developing an economyeffectively

controlledby Filipinos. Asserting the ideals that our Constitutions

Preamble want to achieve, that is -to conserve and develop our

patrimony, hence, the State should fortify a Filipino-controlled

economy. In the 2011 decision, the Court finds no wrong in the

construction of the term capitalwhich refers to the shareswith voting

rights, as well as with full beneficial ownership(Art. 12, sec. 10) which

implies that the right to vote in the election of directors, coupled with

benefits, is tantamount to an effective control. Therefore, the Courts

interpretation of the term capitalwas not erroneous. Thus, the motion

for reconsideration is denied. (digest taken from

http://dennieidea.wordpress.com/2014/08/10/gamboa-v-teves-case-

digest/)

LPU vs CA - ESPIRITU

FACTS:

1. Petitioner had sometime before commenced in the SEC a proceeding

(SEC-Case No. 1241) against the Lyceum of Baguio, Inc. to require it to

change its corporate name and to adopt another name not "similar [to]

or identical" with that of petitioner. In an Order dated 20 April 1977,

Associate Commissioner Julio Sulit held that the corporate name of

petitioner and that of the Lyceum of Baguio, Inc. were substantially

identical because of the presence of a "dominant" word, i.e., "Lyceum,"

the name of the geographical location of the campus being the onlyword which distinguished one from the other corporate name. The SEC

also noted that petitioner had registered as a corporation ahead of the

Lyceum of Baguio, Inc. in point of time, 1 and ordered the latter to

change its name to another name "not similar or identical [with]" the

names of previously registered entities.

2. Armed with the resolution of the Court, petitioner instituted before

the SEC to compel private respondents, which are also educational

institutions, to delete word Lyceum from their corporate names and

permanently to enjoin them from using such as part of their respective

names.

3. Hearing officer sustained the claim of petitioner and held that the

word Lyceum was capable of appropriation and th at petitioner had

acquired an enforceable right to the use of that word.

4. On appeal, however, by private respondents to the SEC En Banc, the

decision of the hearing officer was reversed and set aside. The SEC En

Banc did not consider the word "Lyceum" to have become so identified


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with petitioner as to render use thereof by other institutions as

productive of confusion about the identity of the schools concerned in

the mind of the general public. Unlike its hearing officer, the SEC En

Banc held that the attaching of geographical names to the word

"Lyceum" served sufficiently to distinguish the schools from one

another, especially in view of the fact that the campuses of petitioner

and those of the private respondents were physically quite remote from

each other.

5. Petitioner went to appeal with the CA but the latter just affirmed the

decision of the SEC En Banc.

HELD:

Under the corporation code, no corporate name may be allowed by the

SEC if the proposed name is identical or deceptively or confusinglysimilar to that of any existing corporation or to any other name already

protected by law or is patently deceptive, confusing or contrary to

existing laws. The policy behind this provision is to avoid fraud upon

the public, which would have the occasion to deal with the entity

concerned, the evasion of legal obligations and duties, and the

reduction of difficulties of administration and supervision over

corporations.

The corporate names of private respondents are not identical or

deceptively or confusingly similar to that of petitioners. Confusion and

deception has been precluded by the appending of geographic names to

the word Lyceum. Furthermore, the word Lyceum has become

associated in time with schools and other institutions providing public

lectures, concerts, and public discussions. Thus, it generally refers to a

school or an institution of learning.

Petitioner claims that the word has acquired a secondary meaning in

relation to petitioner with the result that the word, although originally

generic, has become appropriable by petitioner to the exclusion of

other institutions.

The doctrine of secondary meaning is a principle used in trademark law

but has been extended to corporate names since the right to use a

corporate name to the exclusion of others is based upon the same

principle, which underlies the right to use a particular trademark or

tradename. Under this doctrine, a word or phrase originally incapable

of exclusive appropriation with reference to an article in the market,

because geographical or otherwise descriptive might nevertheless have

been used for so long and so exclusively by one producer with

reference to this article that, in that trade and to that group of

purchasing public, the word or phrase has come to mean that the article

was his produce. The doctrine cannot be made to apply where the

evidence didn't prove that the business has continued for so long a time

that it has become of consequence and acquired good will ofconsiderable value such that its articles and produce have acquired a

well known reputation, and confusion will result by the use of the

disputed name.

Petitioner didn't present evidence, which provided that the word

Lyceum acquired secondary meaning. The petitioner failed to adduce

evidence that it had exclusive use of the word. Even if petitioner used

the word for a long period of time, it hadnt acquired any secondary

meaning in its favor because the appellant failed to prove that it had

been using the same word all by itself to the exclusion of others.

INDUSTRIAL REFACTORIESVSCA-GALAPATE

DOCTRINE: Section 18 of the Corporation Code expressly prohibits the

use of a corporate name which is identical or deceptively or

confusingly similar to that of any existing corporation or to any other

name already protected by law or is patently deceptive, confusing or

contrary to existing laws.To fall within the prohibition of the law, two

requisites must be proven, to wit: (1) that the complainant corporation


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acquired a prior right over the use of such corporate name; and (2) the

proposed name is either: (a) identical, or (b) deceptively or confusingly

similar to that of any existing corporation or to any other name already

protected by law; or (c) patently deceptive, confusing or contrary to

existing law.

FACTS: Refractories Corp. of the Philippines (RCP), organized on

October 13, 1976 for the purpose of engaging in the business of

manufacturing, producing, selling, exporting, and otherwise dealing in

any and all refractory bricks, its by-products and derivatives. On June

22, 1977, it registered its corporate and business name with the Bureau

of Domestic Trade.

Petitioner Industrial Refractories Corporation of the Philippines

(IRCP), on the other hand, was incorporated on August 23, 1979

originally under the name Synclaire Manufacturing Corporation. It

amended its Article of Incorporation in 1985 to change its corporatename to Industrial Refractories Corp.of the Philippines. It is engaged

in the business of manufacturing all kinds of ceramics and other

products, except paints and zines.

Both companies are the only local suppliers of monolithic gunning

mix.

Discovering that IRCP was using such corporate name, RCP filed on

April 14, 1988 with the Securities and Exchange Commission (SEC) a

petition to compel IRCP to change its corporate name on the ground

that its corporate name is confusingly similar with that of RCPs such

that the public may be confused or deceived into believing that they areone and the same corporation. The SEC decided in favor of RCP.

On appeal, the SEC En bancmodified the appealed decision in that

petitioner was ordered to delete or drop from its corporate name only

the word Refractories. They ruled in favor of respondent.

ISSUE: 1. Whether or not the petitioners argument that there is no

confusing or deceptive similarity between the parties corporate names

is correct.

2. Whether the generic word rule would apply to support

IRCPs cause.

RULING: 1. NO. the Supreme Court held that Section 18 of the

Corporation Code expressly prohibits the use of a corporate name

which is identical or deceptively or confusingly similar to that of

any existing corporation or to any other name already protected

by law or is patently deceptive, confusing or contrary to existing

laws. The policy behind the foregoing prohibition is to avoid fraud

upon the public that will have occasion to deal with the entity

concerned, the evasion of legal obligations and duties, and the

reduction of difficulties of administration and supervision over

corporation.

Pursuant thereto, the Revised Guidelines in the Approval of

Corporate and Partnership Names specifically requires that: (1) a

corporate name shall not be identical, misleading or confusingly similar

to one already registered by another corporation with the Commission;

and (2) if the proposed name is similar to the name of a registered firm,

the proposed name must contain at least one distinctive word different

from the name of the company already registered.

As held in Philips Export B.V. vs. Court of Appeals, to fall within the

prohibition of the law, two requisitesmust be proven, to wit: (1) that

the complainant corporation acquired a prior right over the use of

such corporate name; and (2) the proposed name is either: (a)

identical, or (b) deceptively or confusingly similar to that of any

existing corporation or to any other name already protected by

law; or (c) patently deceptive, confusing or contrary to existing

law.


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As regards the first requisite, it has been held that the right to the

exclusive use of a corporate name with freedom from infringement by

similarity is determined by priority of adoption. In this case,

respondent RCP was incorporated on October 13, 1976 and since then

has been using the corporate name Refractories Corp. of the

Philippines. Meanwhile, petitioner was incorporated on August 23,

1979 originally under the name Synclaire Manufacturing Corporation.

It only started using the name Industrial Refractories Corp. of the

Philippines when it amended its Articles of Incorporation on August

23, 1985, or nine (9) years after respondent RCP started using its name.

Thus, being the prior registrant, respondent RCP has acquired the right

to use the word Refractories as part of its corporate name.

Anent the second requisite, in determining the existence of

confusing similarity in corporate names, the test is whether the

similarity is such as to mislead a person using ordinary care and

discrimination and the Court must look to the record as well as the

names themselves. Petitioners corporate name is Industrial

Refractories Corp. of the Phils., while respondents is Refractories

Corp. of the Phils. Obviously, both names contain the identical words

Refractories, Corporation and Philippines. The only word that

distinguishes petitioner from respondent RCP is the word Industrial

which merely identifies a corporations general field of activities or

operations. We need not linger on these two corporate names to

conclude that they are patently similar that even with reasonable care

and observation, confusion might arise. It must be noted that both cater

to the same clientele, i.e. the steel industry. In fact, the SEC found thatthere were instances when different steel companies were actually

confused between the two, especially since they also have similar

product packaging. Such findings are accorded not only great respect

but even finality, and are binding upon this Court, unless it is shown

that it had arbitrarily disregarded or misapprehended evidence before

it to such an extent as to compel a contrary conclusion had such

evidence been properly appreciated. And even without such proof of

actual confusion between the two corporate names, it suffices that

confusion is probable or likely to occur.

2. Refractories are structural materials used at high temparatures to

industrial furnaces. They are supplied mainly in the form of brick of

standard sizes and of special shapes. While the word refractories is a

generic term, its usage is not widespread and is limited merely to the

industry/trade in which it is used, and its continuous use by RCP for a

considerable period has made the term so closely identified with it.

Moreover, IRCPs appropriation of RCPs corporate name cannot find

justification under the generic word rule.

REPUBLIC PLANTERS VS AGANA -JHOCSON

FACTS: On September 18, 1961, private respondent Corporation

secured a loan from petitioner in the amount of P120,000.00. As part ofthe proceeds of the loan, preferred shares of stocks were issued to

private respondent Corporation, through its officers then, private

respondent Adalia F. Robes and one Carlos F. Robes. In other words,

instead of giving the legal tender totaling to the full amount of the loan,

which is P120,000.00, petitioner lent such amount partially in t he form

of money and partially in the form of stock certificates numbered 3204

and 3205, each for 400 shares with a par value of P10.00 per share, or

for P4,000.00 each, for a total of P8,000.00. Said stock certificates were

in the name of private respondent Adalia F. Robes and Carlos F. Robes,

who subsequently, however, endorsed his shares in favor of Adalia F.Robes.

Said certificates of stock bear the following terms and conditions:

"The Preferred Stock shall have the following rights, preferences,

qualifications and limitations, to wit:

1. Of the right to receive a quarterly dividend of One Per Centum (1%),

cumulative and participating.


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2. That such preferred shares may be redeemed, by the system of

drawing lots, at any time after two (2) years from the date of issue at

the option of the Corporation."

On January 31, 1979, private respondents proceeded against petitioner

and filed a Complaint anchored on private respondents' alleged rights

to collect dividends under the preferred shares in question and to have

petitioner redeem the same under the terms and conditions of the stock

certificates.

On September 7, 1979, the trial court rendered a decision in favor of

private respondents ordering petitioner to pay private respondents the

face value of the stock certificates as redemption price, plus 1%

quarterly interest thereon until full payment.

ISSUE: W/N petitioner may not be compelled to redeem the preferred

shares issued to the private respondent

HELD: YES. The respondent judge, in compelling the petitioner to

redeem the shares in question and to pay the corresponding dividends,

committed grave abuse of discretion amounting to lack or excess of

jurisdiction in ignoring both the terms and conditions specified in the

stock certificate, as well as the clear mandate of the law.

A preferred share of stockis one which entitles the holder thereof tocertain preferences over the holders of common stock. The preferences

are designed to induce persons to subscribe for shares of a corporation.

Its most common forms may be classified into two: (1) preferred shares

as to assets; and (2) preferred shares as to dividends. The former is a

share which gives the holder thereof preference in the distribution of

the assets of the corporation in case of liquidation; the latter is a share

the holder of which is entitled to receive dividends on said share to the

extent agreed upon before any dividends at all are paid to the holders

of common stock. The present Corporation Code provides that the

board of directors of a stock corporation may declare dividends only

out of unrestricted retained earnings. Thus, the declaration of

dividends is dependent upon the availability of surplus profit or

unrestricted retained earnings, as the case may be.

Redeemable shares, on the other hand, are shares usually preferred,

which by their terms are redeemable at a fixed date, or at the option of

either issuing corporation, or the stockholder, or both at a certain

redemption price. A redemption by the corporation of its stock is, in a

sense, a repurchase of it for cancellation. The present Code allows

redemption of shares even if there are no unrestricted retained

earnings on the books of the corporation. This is a new provision which

in effect qualifies the general rule that the corporation cannot purchase

its own shares except out of current retained earnings. However, while

redeemable shares may be redeemed regardless of the existence ofunrestricted retained earnings, this is subject to the condition that the

corporation has, after such redemption, assets in its books to cover

debts and liabilities inclusive of capital stock. Redemption, therefore,

may not be made where the corporation is insolvent or if such

redemption will cause insolvency or inability of the corporation to meet

its debts as they mature.

What respondent Judge failed to recognize was that while the stock

certificate does allow redemption, the option to do so was clearly

vested in the petitioner bank. The redemption therefore is clearly the

type known as "optional". Thus, except as otherwise provided in the

stock certificate, the redemption rests entirely with the corporation and

the stockholder is without right to either compel or refuse the

redemption of its stock.

The redemption of said shares cannot be allowed. As pointed out by the

petitioner, the Central Bank made a finding that said petitioner has

been suffering from chronic reserve deficiency, and that such finding

resulted in a directive, issued on January 31, 1973 by then Gov. G. S.


11/19

Licaros of the Central Bank, to the President and Acting Chairman of the

Board of the petitioner bank prohibiting the latter from redeeming any

preferred share, on the ground that said redemption would reduce the

assets of the Bank to the prejudice of its depositors and creditors.

Redemption of preferred shares was prohibited for a just and valid

reason. The directive issued by the Central Bank Governor was

obviously meant to preserve the status quo, and to prevent the financial

ruin of a banking institution that would have resulted in adverse

repercussions, not only to its depositors and creditors, but also to the

banking industry as a whole. The directive, in limiting the exercise of a

right granted by law to a corporate entity, may thus be considered as an

exercise of police power. The respondent judge insists that the directive

constitutes an impairment of the obligation of contracts. It has,

however, been settled that the Constitutional guaranty of non-

impairment of obligations of contract is limited by the exercise of the

police power of the state, the reason being that public welfare issuperior to private rights.

WHEREFORE, the instant petition, being impressed with merit, is

hereby GRANTED. The challenged decision of respondent judge is set

aside and the complaint against the petitioner is dismissed.

CASTILLO VS BALINGHASAY -KARIM

FACTS: MCPI is a domestic corporation. At the time of its incorporation,

Act No. 1459, the old Corporation Law was still in force and effect. In itsoriginal Articles of Incorporation, as approved provide for authorized

capital stock amounting to P2,000,000.00, divided into 2,000 SHARES

at a par value of P1,000 each share, 1,000 subscribed by the

incorporating stockholders shall be classified as Class A shares while

the other 1,000 unissued shares shall be considered as Class B shares.

Only holders of Class A shares can have the right to vote and the right to

be elected as directors or as corporate officers.

The AOI was subsequently amended, to increase the authorized capital

stock to P5,000,000.00 increasing the Class B shares by 3,000 and

changing par to P 1,000.00. Class "B" stocks were granted the same

rights and privileges as holders of Class "A" stocks with respect to the

payment of dividends. Another amendment was made to increase the

authorized capital stock to P 32,000,000.00, increasing the Class B

shares by 27,000 and maintaining the par at P 1,000.00. Amendments

were approved by SEC.

On February 9, 2001, the shareholders of MCPI held their annual

stockholders meeting and election for directors. During the course of

the proceedings, respondent Rustico Jimenez, citing Article VII, as

amended, and notwithstanding MCPIs history, declared over the

objections of herein petitioners, that no Class "B" shareholder was

qualified to run or be voted upon as a director. In the past, MCPI had

seen holders of Class "B" shares voted for and serve as members of thecorporate board and some Class "B" share owners were in fact

nominated for election as board members. Nonetheless, Jimenez went

on to announce that the candidates holding Class "A" shares were the

winners of all seats in the corporate board. The petitioners protested,

claiming that Article VII was null and void for depriving them, as Class

"B" shareholders, of their right to vote and to be voted upon, in

violation of the Corporation Code.

In the case that ensued, the RTC rendered the election held on February

9, 2001 is VALID as the holders of CLASS "B" shares are not entitled to

vote and be voted for, saying that that corporations had the power to

classify their shares of stocks, such as "voting and non-voting" shares,

conformably with Section 67 of the Corporation Code of the Philippines.

The AOI is thus the law between the parties and should be strictly

enforced as to them.

ISSUE: whether or not holders of Class "B" shares of the MCPI may be

deprived of the right to vote and be voted for as directors in MCPI.


12/19

HELD: No. When Article VII of the Articles of Incorporation of MCPI

was amended in 1992, the phrase "except when otherwise provided by

law" was inserted in the provision governing the grant of voting

powers to Class "A" shareholders. This particular amendment is

relevant for it speaks of a law providing for exceptions to the exclusive

grant of voting rights to Class "A" stockholders. In this instance, the law

in force at the time of the 1992 amendment was the Corporation Code

(B.P. Blg. 68), not the Corporation Law (Act No. 1459), which had been

repealed by then.

However, we find and so hold that the law referred to in the

amendment to Article VII refers to the Corporation Code and no other

law. At the time of the incorporation of MCPI in 1977, the right of a

corporation to classify its shares of stock was sanctioned by Section 5

of Act No. 1459. The law repealing Act No. 1459, B.P. Blg. 68, retained

the same grant of right of classification of stock shares to corporations,but with a significant change. Under Section 6 of B.P. Blg. 68, the

requirements and restrictions on voting rights were explicitly provided

for, such that "no share may be deprived of voting rights except those

classified and issued as "preferred" or "redeemable" shares, unless

otherwise provided in this Code" and that "there shall always be a class

or series of shares which have complete voting rights." Section 6 of the

Corporation Code being deemed written into Article VII of the Articles

of Incorporation of MCPI, it necessarily follows that unless Class "B"

shares of MCPI stocks are clearly categorized to be "preferred" or

"redeemable" shares, the holders of said Class "B" shares may not bedeprived of their voting rights. Note that there is nothing in the Articles

of Incorporation nor an iota of evidence on record to show that Class

"B" shares were categorized as either "preferred" or "redeemable"

shares. The only possible conclusion is that Class "B" shares fall under

neither category and thus, under the law, are allowed to exercise voting

rights.

One of the rights of a stockholder is the right to participate in the

control and management of the corporation that is exercised through

his vote. The right to vote is a right inherent in and incidental to the

ownership of corporate stock, and as such is a property right. The

stockholder cannot be deprived of the right to vote his stock nor may

the right be essentially impaired, either by the legislature or by the

corporation, without his consent, through amending the charter, or the

by-laws.

JG SUMMIT VS CA LABANTA

PC JAVIER AND SONS VS CA LEONARDO

Facts:

In February, 1981, Plaintiff P.C. Javier and Sons Services, Inc., Plaintiff

Corporation, for short, applied with First Summa Savings and Mortgage

Bank, later on renamed as PAIC Savings and Mortgage Bank,Defendant Bank through Plaintiff Javier for a loan accommodation

under the Industrial Guarantee Loan Fund (IGLF) for P1.5 Million.

Plaintiff Corporation defaulted in the payment of its IGLF loan with

Defendant Bank hence Defendant Bank sent a demand letter dated

November 22, 1983, reminding Plaintiff Javier to make payments

because their accounts have been long overdue; that on May 2, 1984,

Defendant Bank sent another demand letter to Plaintiff spouses

informing them that since they have defaulted in paying their

obligation, their mortgage will now be foreclosed; that when Plaintiffs

still failed to pay, Defendant Bank initiated extrajudicial foreclosure of

the real estate mortgage executed by Plaintiff spouses and accordingly

the auction sale of the property covered by TCT No. 473216 was

scheduled by the ExOfficio Sheriff on May 9, 1984.

Petitioners argue that they are legally justified to withhold their

amortized payments to the respondent bank until such time they would

have been properly notified of the change in the corporate name of


13/19

First Summa Savings and Mortgage Bank. They claim that they have

never received any formal notice of the alleged change of corporate

name of First Summa Savings and Mortgage Bank to PAIC Savings &

Mortgage Bank, Inc. They further claim that the only and first time they

received formal evidence of a change in the corporate name of First

Summa Savings and Mortgage Bank surfaced when respondent bank

presented its witness, Michael Caguioa, on 03 April 1990, where he

presented the Securities and Exchange Commission (SEC) Certificate of

Filing of the Amended Articles of Incorporation of First Summa Savings

and Mortgage Bank,[14]the Central Bank (CB) Certificate of

Authority[15]to change the name of First Summa Savings and Mortgage

Bank to PAIC Savings and Mortgage Bank, Inc., and the CB Circular

Letter[16]dated 27 June 1983

The instant complaint was filed to forestall the extrajudicial foreclosure

sale of a piece of land covered by Transfer Certificate of Title (TCT) No.473216[6]mortgaged by petitioner corporation in favor of First Summa

Savings and Mortgage Bank which bank was later renamed as PAIC

Savings and Mortgage Bank, Inc. It likewise asked for the nullification of

the Real Estate Mortgages it entered into with First Summa Savings and

Mortgage Bank. The supplemental complaint added several defendants

who scheduled for public auction other real estate properties contained

in the same real estate mortgages and covered by TCTs No. N-5510, No.

426872, No. 506346 and Original Certificate of Tit le No. 10146.

Issue: Whether or not First Summa Savings and Mortgage Bank andPAIC Savings and Mortgage Bank, Inc. are one and the same entity.

Held:

First Summa Savings and Mortgage Bank and PAIC Savings and

Mortgage Bank, Inc. are one and the same entity.

Plaintiffs defense that they should first be formally notified of the

change of corporate name of First Summa Savings and Mortgage Bank

to PAIC Savings and Mortgage Bank, Inc., before they will continue

paying their loan obligations to respondent bank presupposes that

there exists a requirement under a law or regulation ordering a bank

that changes its corporate name to formally notify all its debtors. After

going over the Corporation Code and Banking Laws, as well as the

regulations and circulars of both the SEC and the Bangko Sentral ng

Pilipinas (BSP), we find that there is no such requirement. This being

the case, this Court cannot impose on a bank that changes its corporate

name to notify a debtor of such change absent any law, circular or

regulation requiring it. Such act would be judicial legislation. The

formal notification is, therefore, discretionary on the bank. Unless

there is a law, regulation or circular from the SEC or BSP requiring the

formal notification of all debtors of banks of any change in corporate

name, such notification remains to be a mere internal policy that banksmay or may not adopt.

In the case at bar, though there was no evidence showing that

petitioners were furnished copies of official documents showing the

First Summa Savings and Mortgage Banks change of corporate name to

PAIC Savings and Mortgage Bank, Inc., evidence abound that they had

notice or knowledge thereof. Several documents establish this fact.

First, letter[17]dated 16 July 1983 signed by Raymundo V. Blanco,

Accountant of petitioner corporation, addressed to PAIC Savings and

Mortgage Bank, Inc. Part of said letter reads: In connection with your

inquiry as to the utilization of funds we obtained from the former First

Summa Savings and Mortgage Bank, . . . Second, Board Resolution [18]of

petitioner corporation signed by Pablo C. Javier, Sr. on 24 August 1983

authorizing him to execute a Chattel Mortgage over certain machinery

in favor of PAIC Savings and Mortgage Bank, Inc. Third, Secretarys

Certificate[19]signed by Fortunato E. Gabriel, Corporate Secretary of

petitioner corporation, on 01 September 1983, certifying that a board

resolution was passed authorizing Mr. Pablo C. Javier, Sr. to execute a

chattel mortgage on the corporations equipment that will serve as
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collateral to cover the IGLF loan with PAIC Savings and Mortgage Bank,

Inc. Fourth, undated letter[20]signed by Pablo C. Javier, Sr. and

addressed to PAIC Savings and Mortgage Bank, Inc., authorizing Mr.

Victor F. Javier, General Manager of petitioner corporation, to secure

from PAIC Savings and Mortgage Bank, Inc. certain documents for his

signature.

From the foregoing documents, it cannot be denied that petitioner

corporation was aware of First Summa Savings and Mortgage Banks

change of corporate name to PAIC Savings and Mortgage Bank, Inc.

Knowing fully well of such change, petitioner corporation has no valid

reason not to pay because the IGLF loans were applied with and

obtained from First Summa Savings and Mortgage Bank. First Summa

Savings and Mortgage Bank and PAIC Savings and Mortgage Bank, Inc.,

are one and the same bank to which petitioner corporation is indebted.

A change in the corporate name does not make a new corporation,

whether effected by a special act or under a general law. It has no effect

on the identity of the corporation, or on its property, rights, or

liabilities.[21]The corporation, upon such change in its name, is in no

sense a new corporation, nor the successor of the original corporation.

It is the same corporation with a different name, and its character is in

no respect changed.[22]

HYATT VS GOLDSTAR - SORRO

DOCTRINE: It now becomes apparent that the residence or domicile of a

juridical person is fixed by "the law creating or recognizing" it. Under

Section 14(3) of the Corporation Code, the place where the principal

office of the corporation is to be located is one of the required contents

of the articles of incorporation, which shall be filed with the Securities

and Exchange Commission (SEC).

FACTS:

1. Petitioner [herein Respondent] (GOLDSTAR for brevity) is a

domestic corporation, with address at 6th Floor, Jacinta II

Building, 64 EDSA, Guadalupe, Makati City. On the other

hand, private respondent [herein petitioner] Hyatt Elevators

and Escalators Company (HYATT for brevity) is a domestic

corporation similarly engaged in the business of selling,

installing and maintaining/servicing elevators, escalators and

parking equipment, with address at the 6th Floor, Dao I

Condominium, Salcedo St., Legaspi Village, Makati, as stated

in its Articles of Incorporation.

2. HYATT filed a Complaint for unfair trade practices and

damages under Articles 19, 20 and 21 of the Civil Code of the

Philippines against LG Industrial Systems Co. Ltd. (LGISC) and

LG International Corporation (LGIC) plus damages.

3. LGISC and LGIC then filed a Motion to Dismiss on the grounds

among others: (2) improper venue., which the trial court

denied. Thus they filed an Answer with Compulsory

Counterclaim ex abundante cautela. Thereafter, they filed a

Motion for Reconsideration and to Expunge Complaint which

was denied.

4. HYATT filed a motion for leave of court to amend the

complaint, alleging that: (a) Subsequent to the filing of the

complaint, it learned that LGISC transferred all its organization,

assets and goodwill, as a consequence of a joint ventureagreement with Otis Elevator Company of the USA, to LG Otis

Elevator Company (LG OTIS, for brevity). Thus, LGISC was to be

substituted or changed to LG OTIS, its successor-in-interest; (b.)

GOLDSTAR was being utilized by LG OTIS and LGIC in

perpetrating their unlawful and unjustified acts against HYATT.

Consequently, in order to afford complete relief, GOLDSTAR was

to be additionally impleaded as a party-defendant.
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15/19

5. Hence, in the Amended Complaint, HYATT impleaded

GOLDSTAR as a party-defendant, and all references to LGISC

were correspondingly replaced with LG OTIS.

6. LG OTIS (LGISC) and LGIC filed their opposition to HYATTs

motion to amend the complaint. The trial court admitted theAmended Complaint. When LG OTIS (LGISC) and LGIC filed a

motion for reconsideration thereto but was similarly rebuffed.

7. GOLDSTAR also filed a Motion to Dismiss the amended

complaint, raising the same grounds: (1) the venue was

improperly laid, as neither HYATT nor defendants reside in

Mandaluyong City, where the original case was filed; and (2)

failure to state a cause of action against [respondent], since the

amended complaint fails to allege with certainty what specific

ultimate acts Goldstar performed in violation of Hyatts rights.

The trial court denied the motion to dismiss.

8. GOLDSTAR filed a motion for reconsideration, without waiving

the grounds it raised in its motion to dismiss, it also filed an

Answer Ad Cautelam. These however proved futile.

9. Claiming error was apparent in the denial of its motion,

GOLDSTAR filed the a petition for certiorari before the CA,

where it ruled in favor of GOLDSTAR. The appellate court held

that the venue was clearly improper, because none of the

litigants "resided" in Mandaluyong City, where the case wasfiled.

10. According to the appellate court, since Makati was the

principal place of business of both respondent and petitioner,

as stated in the latters Articles of Incorporation, that place was

controlling for purposes of determining the proper venue. The

fact that petitioner had abandoned its principal office in Makati

years prior to the filing of the original case did not affect the

venue where personal actions could be commenced and tried.

Hence, this Petition.

ISSUE: Whether or not the Court of Appeals, erred in holding that in the

light of the peculiar facts of this case, venue was improper.

RULING: NO. Residence is the permanent home -- the place to which,

whenever absent for business or pleasure, one intends to

return. Residence is vital when dealing with venue. A corporation,

however, has no residence in the same sense in which this term is

applied to a natural person. This is precisely the reason why the Court

in Young Auto Supply Company v. Court of Appeals ruled that "for

practical purposes, a corporation is in a metaphysical sense a resident of

the place where its principal office is located as stated in the articles of

incorporation." Even before this ruling, it has already been established

that the residence of a corporation is the place where its principal officeis established.

This Court has also definitively ruled that for purposes of venue, the

term "residence" is synonymous with "domicile." Correspondingly, the

Civil Code provides: "Art. 51. When the law creating or recognizing them,

or any other provision does not fix the domicile of juridical persons, the

same shall be understood to be the place where their legal representation

is established or where they exercise their principal functions."

It now becomes apparent that the residence or domicile of a juridicalperson is fixed by "the law creating or recognizing" it. Under Section

14(3) of the Corporation Code, the place where the principal office of

the corporation is to be located is one of the required contents of the

articles of incorporation, which shall be filed with the Securities and

Exchange Commission (SEC).

In the present case, there is no question as to the residence of

respondent. What needs to be examined is that of petitioner.


16/19

Admittedly, the latters principal place of business is Makati, as

indicated in its Articles of Incorporation. Since the principal place of

business of a corporation determines its residence or domicile, then the

place indicated in petitioners articles of incorporation becomes

controlling in determining the venue for this case.

Petitioner argues that the Rules of Court do not provide that when the

plaintiff is a corporation, the complaint should be filed in the location of

its principal office as indicated in its articles of

incorporation. Jurisprudence has, however, settled that the place where

the principal office of a corporation is located, as stated in the articles,

indeed establishes its residence. This ruling is important in determining

the venue of an action by or against a corporation, as in the present case.

Inconclusive are the bare allegations of petitioner that it had closed its

Makati office and relocated to Mandaluyong City, and that respondentwas well aware of those circumstances. Assuming arguendothat they

transacted business with each other in the Mandaluyong office of

petitioner, the fact remains that, in law, the latters residence was still

the place indicated in its Articles of Incorporation. Further

unacceptable is its faulty reasoning that the ground for the CAs

dismissal of its Complaint was its failure to amend its Articles of

Incorporation so as to reflect its actual and present principal office. The

appellate court was clear enough in its ruling that the Complaint was

dismissed because the venue had been improperly laid, not because of

the failure of petitioner to amend the latters Articles of Incorporation.

Indeed, it is a legal truism that the rules on the venue of personal

actions are fixed for the convenience of the plaintiffs and their

witnesses. Equally settled, however, is the principle that choosing the

venue of an action is not left to a plaintiffs caprice; the matter is

regulated by the Rules of Court. Allowing petitioners arguments may

lead precisely to what this Court was trying to avoid in Young Auto

Supply Company v. CA: the creation of confusion and untold

inconveniences to party litigants. Thus enunciated the CA:

"x x x. To insist that the proper venue is the actual principal office and not

that stated in its Articles of Incorporation would indeed create confusion

and work untold inconvenience. Enterprising litigants may, out of some

ulterior motives, easily circumvent the rules on venue by the simple

expedient of closing old offices and opening new ones in another place

that they may find well to suit their needs."

DISPOSITIVE PORTION: WHEREFORE, the Petition is

hereby DENIED,and the assailed Decision and ResolutionAFFIRMED.

Costs against petitioner.

SO ORDERED.

LOYOLA GRAND VILLAS VS CA

Facts: LGVHAI was organized as the association of homeowners and

residents of the Loyola Grand Villas. It was organized by the developer

of the subdivision and its first president was Victorio V. Soliven, himself

the owner of the developer. For unknown reasons, however, LGVHAI

did not file its corporate by-laws. The officers of the LGVHAI tried to

register its by-laws. They failed to do so. To the officers consternation,

they discovered that there were two other organizations within the

subdivision the North Association and the South Association. When

one of the officers inquired about the status of LGVHAI, the head of the

legal department of the HIGC, informed him that LGVHAI had been

automatically dissolved for two reasons. First, it did not submit its by-

laws within the period required by the Corporation Code and, second,

there was non-user of corporate charter because HIGC had not received

any report on the associations activities.


17/19

Issue: WON the LGVHAIs failure to file its by-laws within the period

prescribed by Section 46 of the Corporation Code had the effect of

automatically dissolving the said corporation?

Held: No. There can be no automatic corporate dissolutionsimply

because the incorporators failed to abide by the required filing of by-

laws embodied in Section 46 of the Corporation Code. There is no

outright demise of corporate existence.Proper notice and hearing are

cardinal components of due process in any democratic institution,

agency or society. In other words, the incorporators must be given the

chance to explain their neglect or omission and remedy the same. Non-

filing of the by-laws will not result in automatic dissolution of the

corporation. In fact, under the rules and regulations of the SEC, failure

to file the by-laws on time may be penalized merely with the imposition

of an administrative fine without affecting the corporate existence ofthe erring firm. (digest taken from

http://philippinecasedigests.wordpress.com/2013/02/14/loyola-

grand-villas-homeowners-south-association-vs-court-of-appeals-

1997/)

SAWADJAAN VS CA VERGARA

Doctrine: Failure to submit the by-laws within 60 days fromincorporation does not automatically dissolve the corporation. It ismerely a ground for suspension or revocation of its charter after proper

notice and hearing. The corporation is, at the very least, a de factocorporation whose existence may not be collaterally attacked.

Facts:

1. Petitioner Sappari K. Sawadjaan, who rose from the ranks, was

among the first employees of the Philippine Amanah Bank

(PAB) when it was created by virtue of Presidential Decree No.

264.2. While still designated as appraiser/investigator, Sawadjaan

was assigned to inspect the properties offered as collaterals by

Compressed Air Machineries and Equipment Corporation

(CAMEC) for a credit line of Five Million Pesos

(P5,000,000.00). The properties consisted of two parcels of

land covered by Transfer Certificates of Title (TCTs) No. N-130671 and No. C-52576.

3.

On the basis of his Inspection and Appraisal Report, the PABgranted the loan application.4. In the meantime, Sawadjaan was promoted to Loans Analyst I

on 01 July 1989.

5. In January 1990, Congress passed Republic Act 6848 creatingthe AIIBP and repealing P.D. No. 264 (which created the PAB).

All assets, liabilities and capital accounts of the PAB weretransferred to the AIIBP, and the existing personnel of the PAB

were to continue to discharge their functions unless

discharged. In the ensuing reorganization, Sawadjaan wasamong the personnel retained by the AIIBP.

6. When CAMEC failed to pay, the bank, now referred to as the

AIIBP, discovered that TCT No. N-130671 was spurious, theproperty described therein non-existent, and that the property

covered by TCT No. C-52576 had a prior existing mortgage infavor of one Divina Pablico.

7. The Board of Directors of the AIIBP created an Investigating

Committee to look into the CAMEC transaction, which had costthe bank Six Million Pesos (P6,000,000.00) in losses.

8. Consequently, petitioner received a memorandum from IslamicBank [AIIBP] Chairman Roberto F. De Ocampo charging him

with Dishonesty in the Performance of Official Duties and/or

Conduct Prejudicial to the Best Interest of the Service andpreventively suspending him.

9.

The Investigating Committee recommended that petitionerSAPPARI SAWADJAAN be meted the penalty of SIX (6)MONTHS and ONE (1) DAY SUSPENSION from office in

accordance with the Civil Service Commissions MemorandumCircular No. 30, Series of 1989.

10. The Board of Directors of the Islamic Bank [AIIBP] adopted

Resolution No. 2309 finding petitioner guilty of Dishonesty inthe Performance of Official Duties and/or Conduct Prejudicial

to the Best Interest of the Service and imposing the penalty ofDismissal from the Service.
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The Court did not find error in the decision of the AIIBP. As

appraiser/investigator, the petitioner was expected to conduct an

ocular inspection of the properties offered by CAMEC as collaterals and

check the copies of the certificates of title against those on file with theRegistry of Deeds. Not only did he fail to conduct these routine checks,

but he also deliberately misrepresented in his appraisal report thatafter reviewing the documents and conducting a site inspection, hefound the CAMEC loan application to be in order. Despite the number

of pleadings he has filed, he has failed to offer an alternative

explanation for his actions.

WHEREFORE, the petition is DISMISSED. The Decision of the Court of

Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No.

95-2754 of the Civil Service Commission, and its Resolution of 15

December 1999 are hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

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