corpo case digests for by-laws

7/25/2019 CORPO Case Digests for by-laws

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BY-LAWS

1. Gokongwei vs. Securities and Exchange

Commission

G! L-"#$11% 11 A&ri' 1$($)

*acts+ [SEC Case 1375] On 22 October 1976, John

Gokongwei Jr, as stockho!"er o# San $ig%e! Cor&oration,

#i!e" with the Sec%rities an" E'change Co((ission )SEC*

a &etition #or +"ec!aration o# n%!!it o# a(en"e" b-!aws,cance!!ation o# certi#icate o# #i!ing o# a(en"e" b-!aws,

in.%nction an" "a(ages with &raer #or a &re!i(inar

in.%nction+ against the (a.orit o# the (e(bers o# the

/oar" o# 0irectors an" San $ig%e! Cor&oration as an

%nwi!!ing &etitioner s a #irst ca%se o# action, Gokongwei

a!!ege" that on 1 Se&te(ber 1976, n"res Soriano, Jr,

Jose $ Soriano, Enri%e 4obe!, ntonio o'as, E(eterio

/%ao, a!thro"e / Con"e, $ig%e! Ortigas, an" ntonio

8rieto a(en"e" b b!aws o# the cor&oration, basing their

a%thorit to "o so on a reso!%tion o# the stockho!"ers

a"o&te" on 13 $arch 1961, when the o%tstan"ing ca&ita!

stock o# the cor&oration was on! 87,1397:, "i;i"e"

into 5,513,97: co((on shares at 81 &er share an"

15, &re#erre" shares at 81 &er share t the

ti(e o# the a(en"(ent, the o%tstan"ing an" &ai" %&

shares tota!!e" 3,127,:3, with a tota! &ar ;a!%e o#

831,27,:3

<t was conten"e" that accor"ing to section 22 o# the

Cor&oration =aw an" rtic!e ><<< o# the b-!aws o# the

cor&oration, the &ower to a(en", (o"i#, re&ea! or a"o&t

new b-!aws (a be "e!egate" to the /oar" o# 0irectors

on! b the a##ir(ati;e ;ote o# stockho!"ers re&resenting

not !ess than 2?3 o# the s%bscribe" an" &ai" %& ca&ita!

stock o# the cor&oration, which 2?3 sho%!" ha;e been

co(&%te" on the basis o# the ca&ita!i@ation at the ti(e o#

the a(en"(ent Since the a(en"(ent was base" on the

1961 a%thori@ation, Gokongwei conten"e" that the /oar"

acte" witho%t a%thorit an" in %s%r&ation o# the &ower o#

the stockho!"ers s a secon" ca%se o# action, it was

a!!ege" that the a%thorit grante" in 1961 ha" a!rea"

been e'ercise" in 1962 an" 1963, a#ter which the

a%thorit o# the /oar" cease" to e'ist s a thir" ca%se o#

action, Gokongwei a;erre" that the (e(bershi& o# the

/oar" o# 0irectors ha" change" since the a%thorit wasgi;en in 1961, there being 6 new "irectors s a #o%rth

ca%se o# action, it was c!ai(e" that &rior to the %estione"

a(en"(ent, Gokogwei ha" a!! the %a!i#ications to be a

"irector o# the cor&oration, being a s%bstantia! stockho!"er

thereo#A that as a stockho!"er, Gokongwei ha" ac%ire"

rights inherent in stock ownershi&, s%ch as the rights to

;ote an" to be ;ote" %&on in the e!ection o# "irectorsA an"

that in a(en"ing the b-!aws, Soriano, et a! &%r&ose!

&ro;i"e" #or GokongweiBs "is%a!i#ication an" "e&ri;e"

hi( o# his ;este" right as a#ore-(entione", hence the

a(en"e" b-!aws are n%!! an" ;oi" s a""itiona! ca%ses

o# action, it was a!!ege" that cor&orations ha;e no inheren

&ower to "is%a!i# a stockho!"er #ro( being e!ecte" as a

"irector an", there#ore, the %estione" act is %!tra ;ires

an" ;oi"A that n"res $ Soriano, Jr an"?or Jose $

Soriano, whi!e re&resenting other cor&orations, entere"

into contracts )s&eci#ica!! a (anage(ent contract* with

the cor&oration, which was a;owe" beca%se the

%estione" a(en"(ent ga;e the /oar" itse!# the&rerogati;e o# "eter(ining whether the or other &ersons

are engage" in co(&etiti;e or antagonistic b%sinessA that

the &ortion o# the a(en"e" b-!aws which states that in

"eter(ining whether or not a &erson is engage" in

co(&etiti;e b%siness, the /oar" (a consi"er s%ch

#actors as b%siness an" #a(i! re!ationshi&, is

%nreasonab!e an" o&&ressi;e an", there#ore, ;oi"A an"

that the &ortion o# the a(en"e" b-!aws which re%ires

that +a!! no(inations #or e!ection o# "irectors sha!! be

s%b(itte" in writing to the /oar" o# 0irectors at !east #i;e

)5* working "as be#ore the "ate o# the nn%a! $eeting+ is

!ikewise %nreasonab!e an" o&&ressi;e <t was, there#ore&rae" that the a(en"e" b-!aws be "ec!are" n%!! an"

;oi" an" the certi#icate o# #i!ing thereo# be cance!!e", an"

that Soriano, et a! be (a"e to &a "a(ages, in s&eci#ie"

a(o%nts, to Gokongwei On 2 October 1976, in

connection with the sa(e case, Gokongwei #i!e" with the

Sec%rities an" E'change Co((ission an +rgent $otion

#or 8ro"%ction an" <ns&ection o# 0oc%(ents+, a!!eging tha

the Secretar o# the cor&oration re#%se" to a!!ow hi( to

ins&ect its recor"s "es&ite re%est (a"e b Gokongwe

#or &ro"%ction o# certain "oc%(ents en%(erate" in the

re%est, an" that the cor&oration ha" been atte(&ting to

s%&&ress in#or(ation #ro( its stockho!"ers "es&ite a

negati;e re&! b the SEC to its %er regar"ing thei

a%thorit to "o so

Dhe (otion was o&&ose" b Soriano, et a! Dhe

Cor&oration, Soriano, et a! #i!e" their answer, an" their

o&&osition to the &etition, res&ecti;e! $eanwhi!e, on 1

0ece(ber 1976, whi!e the &etition was et to be hear"

the cor&oration iss%e" a notice o# s&ecia! stockho!"ers

(eeting #or the &%r&ose o# +rati#ication an" con#ir(ation o

the a(en"(ent to the /-!aws+, setting s%ch (eeting #or

1 ebr%ar 1977 Dhis &ro(&te" Gokongwei to ask the

SEC #or a s%((ar .%"g(ent inso#ar as the #irst ca%se o#

action is concerne", #or the a!!ege" reason that b ca!!ing

a s&ecia! stockho!"ersB (eeting #or the a#oresai" &%r&ose

Soriano, et a! a"(itte" the in;a!i"it o# the a(en"(ents

o# 1 Se&te(ber 1976 Dhe (otion #or s%((ar .%"g(en

was o&&ose" b Soriano, et a! 8en"ing action on the

(otion, Gokongwei #i!e" an +rgent $otion #or the

<ss%ance o# a De(&orar estraining Or"er+, &raing tha

&en"ing the "eter(ination o# GokongweiBs a&&!ication #or

the iss%ance o# a &re!i(inar in.%nction an" o

GokongweiBs (otion #or s%((ar .%"g(ent, a te(&orar



restraining or"er be iss%e", restraining Soriano, et a!

#ro( ho!"ing the s&ecia! stockho!"ersB (eeting as

sche"%!e" Dhis (otion was "%! o&&ose" b Soriano, et

a! On 1 ebr%ar 1977, Cre(ation iss%e" an or"er

"ening the (otion #or iss%ance o# te(&orar restraining

or"er #ter recei&t o# the or"er o# "enia!, Soriano, et a!

con"%cte" the s&ecia! stockho!"ersB (eeting wherein the

a(en"(ents to the b-!aws were rati#ie" On 1: ebr%ar

1977, Gokongwei #i!e" a conso!i"ate" (otion #or conte(&tan" #or n%!!i#ication o# the s&ecia! stockho!"ersB (eeting

(otion #or reconsi"eration o# the or"er "ening

GokongweiBs (otion #or s%((ar .%"g(ent was #i!e" b

Gokongwei be#ore the SEC on 1 $arch 1977

[SEC Case 1:23] Gokongwei a!!ege" that, ha;ing

"isco;ere" that the cor&oration has been in;esting

cor&orate #%n"s in other cor&orations an" b%sinesses

o%tsi"e o# the &ri(ar &%r&ose c!a%se o# the cor&oration,

in ;io!ation o# section 17-1?2 o# the Cor&oration =aw, he

#i!e" with SEC, on 2 Jan%ar 1977, a &etition seeking to

ha;e n"res $ Soriano, Jr an" Jose $ Soriano, as we!!

as the cor&oration "ec!are" g%i!t o# s%ch ;io!ation, an"

or"ere" to acco%nt #or s%ch in;est(ents an" to answer #or

"a(ages On : ebr%ar 1977, (otions to "is(iss were

#i!e" b Soriano, et a!, to which a conso!i"ate" (otion to

strike an" to "ec!are Soriano, et a! in "e#a%!t an" an

o&&osition a" ab%n"antiore( ca%te!a( were #i!e" b

Gokongwei 0es&ite the #act that sai" (otions were #i!e"

as ear! as : ebr%ar 1977, the Co((ission acte"

thereon on! on 25 &ri! 1977, when it "enie" Soriano, et

a!Bs (otions to "is(iss an" ga;e the( two )2* "as within

which to #i!e their answer, an" set the case #or hearing on

&ri! 29 an" $a 3, 1977 Soriano, et a! iss%e" notices o# the ann%a! stockho!"ersB (eeting, inc!%"ing in the gen"a

thereo#, the +rea##ir(ation o# the a%thori@ation to the /oar"

o# 0irectors b the stockho!"ers at the (eeting on 2

$arch 1972 to in;est cor&orate #%n"s in other co(&anies

or b%sinesses or #or &%r&oses other than the (ain

&%r&ose #or which the Cor&oration has been organi@e",

an" rati#ication o# the in;est(ents therea#ter (a"e

&%rs%ant thereto+ / reason o# the #oregoing, on 2 &ri!

1977, Gokongwei #i!e" with the SEC an %rgent (otion #or

the iss%ance o# a writ o# &re!i(inar in.%nction to restrain

Soriano, et a! #ro( taking %& <te( 6 o# the gen"a at the

ann%a! stockho!"ersB (eeting, re%esting that the sa(e be

set #or hearing on 3 $a 1977, the "ate set #or the secon"

hearing o# the case on the (erits Dhe SEC, howe;er,

cance!!e" the "ates o# hearing origina!! sche"%!e" an"

reset the sa(e to $a 16 an" 17, 1977, or a#ter the

sche"%!e" ann%a! stockho!"ersB (eeting or the &%r&ose

o# %rging the Co((ission to act, Gokongwei #i!e" an

%rgent (ani#estation on 3 $a 1977, b%t this

notwithstan"ing, no action has been taken %& to the "ate

o# the #i!ing o# the instant &etition

Gokongwei #i!e" a &etition #or &etition #or certiorari

(an"a(%s an" in.%nction, with &raer #or iss%ance o# writ

o# &re!i(inar in.%nction, with the S%&re(e Co%rt, a!!eging

that there a&&ears a "e!iberate an" concerte" inabi!it on

the &art o# the SEC to act

,ssue+

1 hether the cor&oration has the &ower to &ro;i"e

#or the )a""itiona!* %a!i#ications o# its "irectors

2 hether the "is%a!i#ication o# a co(&etitor #ro(

being e!ecte" to the /oar" o# 0irectors is a reasonab!e

e'ercise o# cor&orate a%thorit

3 hether the SEC gra;e! ab%se" its "iscretion in

"ening GokongweiBs re%est #or an e'a(ination o# the

recor"s o# San $ig%e! <nternationa!, <nc, a #%!! owne"

s%bsi"iar o# San $ig%e! Cor&oration

: hether the SEC gra;e! ab%se" its "iscretion in

a!!owing the stockho!"ers o# San $ig%e! Cor&oration to

rati# the in;est(ent o# cor&orate #%n"s in a #oreign

cor&oration

e'd+

1 <t is recogni@e" b a!! a%thorities that +e;er cor&oration

has the inherent &ower to a"o&t b-!aws B#or its interna

go;ern(ent, an" to reg%!ate the con"%ct an" &rescribe

the rights an" "%ties o# its (e(bers towar"s itse!# an"

a(ong the(se!;es in re#erence to the (anage(ent o# its

a##airsB+ <n this .%ris"iction %n"er section 21 o# the

Cor&oration =aw, a cor&oration (a &rescribe in its b-

!aws +the %a!i#ications, "%ties an" co(&ensation o

"irectors, o##icers an" e(&!oees+ Dhis (%st necessari!re#er to a %a!i#ication in a""ition to that s&eci#ie" b

section 3 o# the Cor&oration =aw, which &ro;i"es tha

+e;er "irector (%st own in his right at !east one share o#

the ca&ita! stock o# the stock cor&oration o# which he is a

"irector+ n &erson +who b%s stock in a cor&oration

"oes so with the know!e"ge that its a##airs are "o(inate"

b a (a.orit o# the stockho!"ers an" that he i(&!ie"!

contracts that the wi!! o# the (a.orit sha!! go;ern in a!

(atters within the !i(its o# the act o# incor&oration an"

!aw#%!! enacte" b-!aws an" not #orbi""en b !aw+ Do this

e'tent, there#ore, the stockho!"er (a be consi"ere" to

ha;e +&arte" with his &ersona! right or &ri;i!ege to reg%!atethe "is&osition o# his &ro&ert which he has in;este" in the

ca&ita! stock o# the cor&oration, an" s%rren"ere" it to the

wi!! o# the (a.orit o# his #e!!ow incor&orators <t can no

there#ore be .%st! sai" that the contract, e'&ress o

i(&!ie", between the cor&oration an" the stockho!"ers is

in#ringe" b an act o# the #or(er which is a%thori@e" b a

(a.orit+ 8%rs%ant to section 1 o# the Cor&oration =aw

an cor&oration (a a(en" its artic!es o# incor&oration b

a ;ote or written assent o# the stockho!"ers re&resenting

at !east two-thir"s o# the s%bscribe" ca&ita! stock o# the



cor&oration <# the a(en"(ent changes, "i(inishes or

restricts the rights o# the e'isting shareho!"ers, then the

"issenting (inorit has on! one right, ;i@F +to ob.ect

thereto in writing an" "e(an" &a(ent #or his share+

n"er section 22 o# the sa(e !aw, the owners o# the

(a.orit o# the s%bscribe" ca&ita! stock (a a(en" or

re&ea! an b-!aw or a"o&t new b-!aws <t cannot be sai",

there#ore, that Gokongwei has a ;este" right to be e!ecte"

"irector, in the #ace o# the #act that the !aw at the ti(e s%chright as stockho!"er was ac%ire" containe" the

&rescri&tion that the cor&orate charter an" the b-!aw sha!!

be s%b.ect to a(en"(ent, a!teration an" (o"i#ication

2 !tho%gh in the strict an" technica! sense, "irectors o# a

&ri;ate cor&oration are not regar"e" as tr%stees, there

cannot be an "o%bt that their character is that o# a

#i"%ciar inso#ar as the cor&oration an" the stockho!"ers

as a bo" are concerne" s agents entr%ste" with the

(anage(ent o# the cor&oration #or the co!!ecti;e bene#it o#

the stockho!"ers, +the occ%& a #i"%ciar re!ation, an" in

this sense the re!ation is one o# tr%st+ +Dhe or"inar tr%st

re!ationshi& o# "irectors o# a cor&oration an" stockho!"ers

is not a (atter o# stat%tor or technica! !aw <t s&rings #ro(

the #act that "irectors ha;e the contro! an" g%i"ance o#

cor&orate a##airs an" &ro&ert an" hence o# the &ro&ert

interests o# the stockho!"ers E%it recogni@es that

stockho!"ers are the &ro&rietors o# the cor&orate interests

an" are %!ti(ate! the on! bene#iciaries thereo#+

"irector is a #i"%ciar Dheir &owers are &owers in tr%st e

who is in s%ch #i"%ciar &osition cannot ser;e hi(se!# #irst

an" his cest%is secon" e cannot (ani&%!ate the a##airs

o# his cor&oration to their "etri(ent an" in "isregar" o# the

stan"ar"s o# co((on "ecenc e cannot b theinter;ention o# a cor&orate entit ;io!ate the ancient

&rece&t against ser;ing two (asters e cannot %ti!i@e his

insi"e in#or(ation an" strategic &osition #or his own

&re#er(ent e cannot ;io!ate r%!es o# #air &!a b "oing

in"irect! thro%gh the cor&oration what he co%!" not "o so

"irect! e cannot ;io!ate r%!es o# #air &!a b "oing

in"irect! thro%gh the cor&oration what he co%!" not "o so

"irect! e cannot %se his &ower #or his &ersona!

a";antage an" to the "etri(ent o# the stockho!"ers an"

cre"itors no (atter how abso!%te in ter(s that &ower (a

be an" no (atter how (etic%!o%s he is to satis# technica!

re%ire(ents or that &ower is at a!! ti(es s%b.ect to the

e%itab!e !i(itation that it (a not be e'ercise" #or the

aggran"i@e(ent, &re#erence, or a";antage o# the #i"%ciar

to the e'c!%sion or "etri(ent o# the cest%is Dhe "octrine

o# +cor&orate o&&ort%nit+ is &recise! a recognition b the

co%rts that the #i"%ciar stan"ar"s co%!" not be %&he!"

where the #i"%ciar was acting #or two entities with

co(&eting interests Dhis "octrine rests #%n"a(enta!! on

the %n#airness, in &artic%!ar circ%(stances, o# an o##icer or

"irector taking a";antage o# an o&&ort%nit #or his own

&ersona! &ro#it when the interest o# the cor&oration .%st!

ca!!s #or &rotection <t is not "enie" that a (e(ber o# the

/oar" o# 0irectors o# the San $ig%e! Cor&oration has

access to sensiti;e an" high! con#i"entia! in#or(ation

s%ch asF )a* (arketing strategies an" &ricing str%ct%reA )b*

b%"get #or e'&ansion an" "i;ersi#icationA )c* research an"

"e;e!o&(entA an" )"* so%rces o# #%n"ing, a;ai!abi!it o

&ersonne!, &ro&osa!s o# (ergers or tie-%&s with othe

#ir(s <t is ob;io%s! to &re;ent the creation o# an

o&&ort%nit #or an o##icer or "irector o# San $ig%eCor&oration, who is a!so the o##icer or owner o# a

co(&eting cor&oration, #ro( taking a";antage o# the

in#or(ation which he ac%ires as "irector to &ro(ote his

in"i;i"%a! or cor&orate interests to the &re.%"ice o# San

$ig%e! Cor&oration an" its stockho!"ers, that the

%estione" a(en"(ent o# the b-!aws was (a"e

Certain!, where two cor&orations are co(&etiti;e in a

s%bstantia! sense, it wo%!" see( i(&robab!e, i# no

i(&ossib!e, #or the "irector, i# he were to "ischarge

e##ecti;e! his "%t, to satis# his !oa!t to both

cor&orations an" &!ace the &er#or(ance o# his cor&oration

"%ties abo;e his &ersona! concerns Dhe o##er an"ass%rance o# Gokongwei that to a;oi" an &ossibi!it o# his

taking %n#air a";antage o# his &osition as "irector o# San

$ig%e! Cor&oration, he wo%!" absent hi(se!# #ro(

(eetings at which con#i"entia! (atters wo%!" be

"isc%sse", wo%!" not "etract #ro( the ;a!i"it an"

reasonab!eness o# the b-!aws in;o!;e" &art #ro( the

i(&ractica! res%!ts that wo%!" ens%e #ro( s%ch

arrange(ent, it wo%!" be inconsistent with GokongweiBs

&ri(ar (oti;e in r%nning #or boar" (e(bershi& H which

is to &rotect his in;est(ents in San $ig%e! Cor&oration

$ore i(&ortant, s%ch a &ro&ose" nor( o# con"%ct wo%!"

be against a!! acce&te" &rinci&!es %n"er!ing a "irectorBs

"%t o# #i"e!it to the cor&oration, #or the &o!ic o# the !aw

is to enco%rage an" en#orce res&onsib!e cor&orate

(anage(ent

3 8%rs%ant to the secon" &aragra&h o# section 51 o# the

Cor&oration =aw, +)t*he recor" o# a!! b%siness transactions

o# the cor&oration an" (in%tes o# an (eeting sha!! be

o&en to the ins&ection o# an "irector, (e(ber o

stockho!"er o# the cor&oration at reasonab!e ho%rs+ Dhe

stockho!"erBs right o# ins&ection o# the cor&orationBs books

an" recor"s is base" %&on their ownershi& o# the assets

an" &ro&ert o# the cor&oration <t is, there#ore, an inci"ent

o# ownershi& o# the cor&orate &ro&ert, whether this

ownershi& or interest be ter(e" an e%itab!e ownershi&, a

bene#icia! ownershi&, or a %asi-ownershi& Dhis right is

&re"icate" %&on the necessit o# se!#-&rotection <t is

genera!! he!" b (a.orit o# the co%rts that where the

right is grante" b stat%te to the stockho!"er, it is gi;en to

hi( as s%ch an" (%st be e'ercise" b hi( with res&ect to

his interest as a stockho!"er an" #or so(e &%r&ose

ger(ane thereto or in the interest o# the cor&oration <n

other wor"s, the ins&ection has to be ger(ane to the



&etitionerBs interest as a stockho!"er, an" has to be &ro&er

an" !aw#%! in character an" not ini(ica! to the interest o#

the cor&oration Dhe +genera! r%!e that stockho!"ers are

entit!e" to #%!! in#or(ation as to the (anage(ent o# the

cor&oration an" the (anner o# e'&en"it%re o# its #%n"s,

an" to ins&ection to obtain s%ch in#or(ation, es&ecia!!

where it a&&ears that the co(&an is being (is(anage"

or that it is being (anage" #or the &ersona! bene#it o#

o##icers or "irectors or certain o# the stockho!"ers to thee'c!%sion o# others+ hi!e the right o# a stockho!"er to

e'a(ine the books an" recor"s o# a cor&oration #or a

!aw#%! &%r&ose is a (atter o# !aw, the right o# s%ch

stockho!"er to e'a(ine the books an" recor"s o# a who!!-

owne" s%bsi"iar o# the cor&oration in which he is a

stockho!"er is a "i##erent thing Stockho!"ers are entit!e"

to ins&ect the books an" recor"s o# a cor&oration in or"er

to in;estigate the con"%ct o# the (anage(ent, "eter(ine

the #inancia! con"ition o# the cor&oration, an" genera!!

take an acco%nt o# the stewar"shi& o# the o##icers an"

"irectors herein, consi"ering that the #oreign s%bsi"iar is

who!! owne" b San $ig%e! Cor&oration an", there#ore,%n"er <ts contro!, it wo%!" be (ore in accor" with e%it,

goo" #aith an" #air "ea!ing to constr%e the stat%tor right o#

&etitioner as stockho!"er to ins&ect the books an" recor"s

o# the cor&oration as e'ten"ing to books an" recor"s o#

s%ch who!! owne" s%bsi"iar which are in the

cor&orationBs &ossession an" contro!

: Section 17-1?2 o# the Cor&oration =aw a!!ows a

cor&oration to +in;est its #%n"s in an other cor&oration or

b%siness or #or an &%r&ose other than the (ain &%r&ose

#or which it was organi@e"+ &ro;i"e" that its /oar" o#

0irectors has been so a%thori@e" b the a##ir(ati;e ;ote o# stockho!"ers ho!"ing shares entit!ing the( to e'ercise at

!east two-thir"s o# the ;oting &ower <# the in;est(ent is

(a"e in &%rs%ance o# the cor&orate &%r&ose, it "oes not

nee" the a&&ro;a! o# the stockho!"ers <t is on! when the

&%rchase o# shares is "one so!e! #or in;est(ent an" not

to acco(&!ish the &%r&ose o# its incor&oration that the ;ote

o# a&&ro;a! o# the stockho!"ers ho!"ing shares entit!ing

the( to e'ercise at !east two-thir"s o# the ;oting &ower is

necessar s state" b the cor&oration, the &%rchase o#

beer (an%#act%ring #aci!ities b S$C was an in;est(ent in

the sa(e b%siness state" as its (ain &%r&ose in its

rtic!es o# <ncor&oration, which is to (an%#act%re an"

(arket beer <t a&&ears that the origina! in;est(ent was

(a"e in 19:7-19:, when S$C, then San $ig%e!

/rewer, <nc, &%rchase" a beer brewer in ongkong

)ongkong /rewer I 0isti!!er, =t"* #or the (an%#act%re

an" (arketing o# San $ig%e! beer thereat estr%ct%ring

o# the in;est(ent was (a"e in 197-1971 thr% the

organi@ation o# S$< in /er(%"a as a ta' #ree

reorgani@ation ss%(ing arg%en"o that the /oar" o#

0irectors o# S$C ha" no a%thorit to (ake the assai!e"

in;est(ent, there is no %estion that a cor&oration, !ike an

in"i;i"%a!, (a rati# an" thereb ren"er bin"ing %&on i

the origina!! %na%thori@e" acts o# its o##icers or othe

agents Dhis is tr%e beca%se the %estione" in;est(ent is

neither contrar to !aw, (ora!s, &%b!ic or"er or &%b!ic

&o!ic <t is a cor&orate transaction or contract which is

within the cor&orate &owers, b%t which is "e#ecti;e #ro( a

&%r&orte" #ai!%re to obser;e in its e'ec%tion the

re%ire(ent o# the !aw that the in;est(ent (%st be

a%thori@e" b the a##ir(ati;e ;ote o# the stockho!"ersho!"ing two-thir"s o# the ;oting &ower Dhis re%ire(ent is

#or the bene#it o# the stockho!"ers Dhe stockho!"ers #or

whose bene#it the re%ire(ent was enacte" (a

there#ore, rati# the in;est(ent an" its rati#ication b sai"

stockho!"ers ob!iterates an "e#ect which it (a ha;e ha"

at the o%tset /esi"es, the in;est(ent was #or the

&%rchase o# beer (an%#act%ring an" (arketing #aci!ities

which is a&&arent! re!e;ant to the cor&orate &%r&ose Dhe

(ere #act that the cor&oration s%b(itte" the assai!e"

in;est(ent to the stockho!"ers #or rati#ication at the ann%a

(eeting o# 1 $a 1977 cannot be constr%e" as an

a"(ission that the cor&oration ha" co((itte" an %!tra;ires act, consi"ering the co((on &ractice o# cor&orations

o# &erio"ica!! s%b(itting #or the rati#ication o# thei

stockho!"ers the acts o# their "irectors, o##icers an"

(anagers

2 Loo'a Grand /i''as omeowners 0South

Association% ,nc vs CA

=oo!a Gran" >i!!as o(eowners ssociation, <nc

)=G><* was organi@e" on ebr%ar 193 as the

ho(eownersB association #or =oo!a Gran" >i!!as <t was

a!so registere" as the so!e ho(eownersB association in the

sai" ;i!!age with the o(e inancing Cor&oration )which

e;ent%a!! beca(e o(e <ns%rance G%arantee

Cor&oration [+<GC+]*owe;er, the association was no

ab!e #i!e its cor&orate b-!aws

Dhe =G>< o##icers then trie" to registere" its /-=aws in

19, b%t the #ai!e" to "o so Dhe then "isco;ere" tha

there were two other ho(eownersB organi@ations within

the s%b"i;ision - the =oo!a Gran" >i!!as o(eowners

)orth* ssociation, <nc [orth ssociation] an" herein

8etitioner =oo!a Gran" >i!!as o(eowners )So%th

ssociation, <nc[+So%th ssociationK]

&on in%ir b the =G>< to <GC, it was "isco;ere"

that =G>< was "isso!;e" #or its #ai!%re to s%b(it its b-

!aws within the &erio" re%ire" b the Cor&oration Co"e

an" #or its non-%ser o# cor&orate charter beca%se <GC

ha" not recei;e" an re&ort on the associationBs acti;ities

Dhese &a;e" the wa #or the #or(ation o# the orth an"

So%th ssociations

=G>< then !o"ge" a co(&!aint with <GC earing

O##icer 0ani!o Ja;ier, an" %estione" the re;ocation o# its

registration earing O##icer Ja;ier r%!e" in #a;or o



=G><, re;oking the registration o# the orth an" So%th

ssociations

8etitioner So%th ssociation a&&ea!e" the r%!ing,

conten"ing that =G><Bs #ai!%re to #i!e its b-!aws within

the &erio" &rescribe" b Section :6 o# the Cor&oration

Co"e e##ecti;e! a%to(atica!! "isso!;e" the cor&oration

Dhe &&ea!s /oar" o# the <GC an" the Co%rt o# &&ea!s

both re.ecte" the contention o# the 8etitioner a##ir(e" the

"ecision o# earing O##icer Ja;ier

,ssue+ ? =G><Bs #ai!%re to #i!e its b-!aws within the

&erio" &rescribe" b Section :6 o# the Cor&oration Co"e

ha" the e##ect o# a%to(atica!! "isso!;ing the sai"

cor&oration

!u'ing+ o

Dhe &ertinent &ro;ision o# the Cor&oration Co"e that is the

#oca! &oint o# contro;ers in this case statesF

Sec :6 "o&tion o# b-!aws - E;er cor&oration #or(e"

%n"er this Co"e, (%st within one )1* (onth a#ter recei&t o#

o##icia! notice o# the iss%ance o# its certi#icate o# incor&oration b the Sec%rities an" E'change

Co((ission, a"o&t a co"e o# b-!aws #or its go;ern(ent

not inconsistent with this Co"e

Or"inari!, the wor" +(%st+ connotes an i(&osition o# "%t

which (%st be en#orce" owe;er, the wor" +(%st+ in a

stat%te, !ike +sha!!,+ is not a!was i(&erati;e <t (a be

consistent with an ecercise o# "iscretion <# the !ang%age o#

a stat%te, consi"ere" as a who!e with "%e regar" to its

nat%re an" ob.ect, re;ea!s that the !egis!at%re inten"e" to

%se the wor"s +sha!!+ an" +(%st+ to be "irector, the

sho%!" be gi;en that (eaningDhe !egis!ati;e "e!iberations o# the Cor&oration Co"e

re;ea!s that it was not the intention o# Congress to

a%to(atica!! "isso!;e a cor&oration #or #ai!%re to #i!e the

/-=aws on ti(e

$oreo;er, /-=aws (a be necessar to go;ern the

cor&oration, b%t /-=aws are sti!! s%bor"inate to the

rtic!es o# <ncor&oration an" the Cor&oration Co"e <n #act,

there are cases where /-=aws are %nnecessar to the

cor&orate e'istence an" to the ;a!i" e'ercise o# cor&orate

&owers

Dhe Cor&oration Co"e "oes not e'&ress! &ro;i"e #or the

e##ects o# non-#i!ing o# /-=aws owe;er, these ha;e

been recti#ie" b Section 6 o# 80 92- which &ro;i"es

that SEC sha!! &ossess the &ower to s%s&en" or re;oke,

a#ter &ro&er notice an" hearing, the #ranchise or certi#icate

o# registration o# cor&orations %&on #ai!%re to #i!e /-=aws

within the re%ire" &erio"

Dhis shows that there (%st be notice an" hearing be#ore a

cor&oration is "isso!;e" #or #ai!%re to #i!e its /-=aws E;en

ass%(ing that the e'istence o# a gro%n", the &ena!t is no

necessari! re;ocation, b%t (a on! be s%s&ension

/-=aws are in"is&ensab!e to cor&orations, since the are

re%ire" b !aw #or an or"er! (anage(ent o

cor&orations owe;er, #ai!%re to #i!e the( within the

&erio" &rescribe" "oes not e%ate to the a%to(atic

"isso!%tion o# a cor&oration

3 China Banking Cor&oration vs. Court o2 A&&ea's

G! 11(34"% 53 6arch 1$$()

*acts+ On 21 %g%st 197:, Ga!icano Ca!a&atia, Jr, a

stockho!"er o# >a!!e Go!# I Co%ntr C!%b, <nc )>GCC<*

&!e"ge" his Stock Certi#icate 1219 to China /anking

Cor&oration )C/C* On 16 Se&te(ber 197:, C/C wrote

>GCC< re%esting that the &!e"ge agree(ent be recor"e"

in its books <n a !etter "ate" 27 Se&te(ber 197:, >GCC

re&!ie" that the "ee" o# &!e"ge e'ec%te" b Ca!a&atia in

C/CBs #a;or was "%! note" in its cor&orate books On 3

%g%st 193, Ca!a&atia obtaine" a !oan o# 82,

#ro( C/C, &a(ent o# which was sec%re" b the &!e"geagree(ent sti!! e'isting between Ca!a&atia an" C/C 0%e

to Ca!a&atiaBs #ai!%re to &a his ob!igation, C/C, on 12

&ri! 195, #i!e" a &etition #or e'tra.%"icia! #orec!os%re

be#ore otar 8%b!ic ntonio D "e >era o# $ani!a

re%esting the !atter to con"%ct a &%b!ic a%ction sa!e o# the

&!e"ge" stock On 1: $a 195, C/C in#or(e" >GCC< o

the #orec!os%re &rocee"ings an" re%este" that the

&!e"ge" stock be trans#erre" to its na(e an" the sa(e be

recor"e" in the cor&orate books owe;er, on 15 J%!

195, >GCC< wrote C/C e'&ressing its inabi!it to acce"e

to C/CBs re%est in ;iew o# Ca!a&atiaBs %nsett!e" acco%nts

with the c!%b 0es&ite the #oregoing, otar 8%b!ic "e >era

he!" a &%b!ic a%ction on 17 Se&te(ber 195 an" C/C

e(erge" as the highest bi""er at 82, #or the

&!e"ge" stock Conse%ent!, C/C was iss%e" the

corres&on"ing certi#icate o# sa!e

On 21 o;e(ber 195, >GCC< sent Ca!a&atia a notice

"e(an"ing #%!! &a(ent o# his o;er"%e acco%nt in the

a(o%nt o# 81,732: Sai" notice was #o!!owe" b a

"e(an" !etter "ate" 12 0ece(ber 195 #or the sa(e

a(o%nt an" another notice "ate" 22 o;e(ber 196 #or

823,:32: On : 0ece(ber 196, >GCC< ca%se" to be

&%b!ishe" in the news&a&er 0ai! E'&ress a notice o#a%ction sa!e o# a n%(ber o# its stock certi#icates, to be

he!" on 1 0ece(ber 196 at 1F a( <nc!%"e" therein

was Ca!a&atiaBs own share o# stock )Stock Certi#icate

1219* Dhro%gh a !etter "ate" 15 0ece(ber 196, >GCC<

in#or(e" Ca!a&atia o# the ter(ination o# his (e(bershi&

"%e to the sa!e o# his share o# stock in the 1 0ece(ber

196 a%ction On 5 $a 199, C/C a";ise" >GCC< that i

is the new owner o# Ca!a&atiaBs Stock Certi#icate 1219 b

;irt%e o# being the highest bi""er in the 17 Se&te(ber

195 a%ction an" re%este" that a new certi#icate o# stock



be iss%e" in its na(e On 2 $arch 199, >GCC< re&!ie"

that +#or reason o# "e!in%enc+ Ca!a&atiaBs stock was so!"

at the &%b!ic a%ction he!" on 1 0ece(ber 196 #or

825, On 9 $arch 199, C/C &roteste" the sa!e b

>GCC< o# the s%b.ect share o# stock an" therea#ter #i!e" a

case with the egiona! Dria! Co%rt o# $akati #or the

n%!!i#ication o# the 1 0ece(ber 196 a%ction an" #or the

iss%ance o# a new stock certi#icate in its na(e On 1

J%ne 199, the egiona! Dria! Co%rt o# $akati "is(isse"the co(&!aint #or !ack o# .%ris"iction o;er the s%b.ect

(atter on the theor that it in;o!;es an intra-cor&orate

"is&%te an" on 27 %g%st 199 "enie" C/CBs (otion #or

reconsi"eration On 2 Se&te(ber 199, C/C #i!e" a

co(&!aint with the Sec%rities an" E'change Co((ission

)SEC* #or the n%!!i#ication o# the sa!e o# Ca!a&atiaBs stock

b >GCC<A the cance!!ation o# an new stock certi#icate

iss%e" &%rs%ant theretoA #or the iss%ance o# a new

certi#icate in &etitionerBs na(eA an" #or "a(ages,

attorneBs #ees an" costs o# !itigation

On 3 Jan%ar 1992, SEC earing O##icer $an%e! 8 8erea

ren"ere" a "ecision in #a;or o# >GCC<, stating in the (ain

that consi"ering that the sai" share is "e!in%ent, >GCC<

ha" ;a!i" reason not to trans#er the share in the na(e o#

C/C in the books o# >GCC< %nti! !i%i"ation o#

"e!in%enc Conse%ent!, the case was "is(isse" On

1: &ri! 1992, earing O##icer 8erea "enie" C/CBs (otion

#or reconsi"eration C/C a&&ea!e" to the SEC en banc

an" on : J%ne 1993, the Co((ission iss%e" an or"er

re;ersing the "ecision o# its hearing o##icerA ho!"ing that

C/C has a &rior right o;er the &!e"ge" share an" beca%se

o# &!e"gorBs #ai!%re to &a the &rinci&a! "ebt %&on (at%rit,

C/C can &rocee" with the #orec!os%re o# the &!e"ge"shareA "ec!aring that the a%ction sa!e con"%cte" b

>GCC< on 1 0ece(ber 196 is "ec!are" == an"

>O<0A an" or"ering >GCC< to iss%e another (e(bershi&

certi#icate in the na(e o# C/C >GCC< so%ght

reconsi"eration o# the or"er owe;er, the SEC "enie" the

sa(e in its reso!%tion "ate" 7 0ece(ber 1993 Dhe

s%""en t%rn o# e;ents sent >GCC< to seek re"ress #ro(

the Co%rt o# &&ea!s On 15 %g%st 199:, the Co%rt o#

&&ea!s ren"ere" its "ecision n%!!i#ing an" setting asi"e

the or"ers o# the SEC an" its hearing o##icer on gro%n" o#

!ack o# .%ris"iction o;er the s%b.ect (atter an",

conse%ent!, "is(isse" C/CBs origina! co(&!aint Dhe

Co%rt o# &&ea!s "ec!are" that the contro;ers between

C/C an" >GCC< is not intra-cor&orateA n%!!i#ing the SEC

or"ers an" "is(issing C/CLs co(&!aint C/C (o;e" #or

reconsi"eration b%t the sa(e was "enie" b the Co%rt o#

&&ea!s in its reso!%tion "ate" 5 October 199: C/C #i!e"

the &etition #or re;iew on certiorari

,ssue+ hether C/C is bo%n" b >GCC<Bs b-!aws

e'd+ <n or"er to be bo%n", the thir" &art (%st ha;e

ac%ire" know!e"ge o# the &ertinent b-!aws at the ti(e

the transaction or agree(ent between sai" thir" &art an"

the shareho!"er was entere" into erein, at the ti(e the

&!e"ge agree(ent was e'ec%te" >GCC< co%!" ha;e

easi! in#or(e" C/C o# its b-!aws when it sent notice

#or(a!! recogni@ing C/C as &!e"gee o# one o# its shares

registere" in Ca!a&atiaBs na(e C/CBs be!ate" notice o

sai" b-!aws at the ti(e o# #orec!os%re wi!! not s%##ice /-

!aws signi#ies the r%!es an" reg%!ations or &ri;ate !aws

enacte" b the cor&oration to reg%!ate, go;ern an" controits own actions, a##airs an" concerns an" its stockho!"ers

or (e(bers an" "irectors an" o##icers with re!ation thereto

an" a(ong the(se!;es in their re!ation to it <n othe

wor"s, b-!aws are the re!ati;e! &er(anent an"

contin%ing r%!es o# action a"o&te" b the cor&oration #or

its own go;ern(ent an" that o# the in"i;i"%a!s co(&osing

it an" ha;ing the "irection, (anage(ent an" contro! o# its

a##airs, in who!e or in &art, in the (anage(ent an" contro!

o# its a##airs an" acti;ities Dhe &%r&ose o# a b-!aw is to

reg%!ate the con"%ct an" "e#ine the "%ties o# the (e(bers

towar"s the cor&oration an" a(ong the(se!;es Dhe are

se!#-i(&ose" an", a!tho%gh a"o&te" &%rs%ant to stat%tora%thorit, ha;e no stat%s as &%b!ic !aw Dhere#ore, it is the

genera!! acce&te" r%!e that thir" &ersons are not bo%n"

b b-!aws, e'ce&t when the ha;e know!e"ge o# the

&ro;isions either act%a!! or constr%cti;e! or the

e'ce&tion to the genera! acce&te" r%!e that thir" &ersons

are not bo%n" b b-!aws to be a&&!icab!e an" bin"ing

%&on the &!e"gee, know!e"ge o# the &ro;isions o# the

>GCC< /-!aws (%st be ac%ire" at the ti(e the &!e"ge

agree(ent was contracte" Mnow!e"ge o# sai" &ro;isions

either act%a! or constr%cti;e, at the ti(e o# #orec!os%re wi!

not a##ect &!e"geeBs right o;er the &!e"ge" share rtic!e

27 o# the Ci;i! Co"e &ro;i"es that it is a!so o# the

essence o# these contracts that when the &rinci&a

ob!igation beco(es "%e, the things in which the &!e"ge or

(ortgage consists (abe a!ienate" #or the &a(ent to the

cre"itor %rther, >GCC<Bs contention that C/C is "%t

bo%n" to know its b-!aws beca%se o# rtic!e 299 o# the

Ci;i! Co"e which sti&%!ates that the cre"itor (%st take

care o# the thing &!e"ge" with the "i!igence o# a goo"

#ather o# a #a(i!, #ai!s to con;ince C/C was ne;e

in#or(e" o# Ca!a&atiaBs %n&ai" acco%nts an" the restricti;e

&ro;isions in >GCC<Bs b-!aws %rther(ore, Section 63 o

the Cor&oration Co"e which &ro;i"es that +no shares ostock against which the cor&oration ho!"s an %n&ai"

c!ai( sha!! be trans#erab!e in the books o# the cor&oration+

cannot be %ti!i@e" b >GCC< Dhe ter( +%n&ai" c!ai(+

re#ers to +an %n&ai" c!ai( arising #ro( %n&ai"

s%bscri&tion, an" not to an in"ebte"ness which a

s%bscriber or stockho!"er (a owe the cor&oration arising

#ro( an other transaction+ erein, the s%bscri&tion #or

the share in %estion has been #%!! &ai" as e;i"ence" b

the iss%ance o# $e(bershi& Certi#icate 1219 ha



Ca!a&atia owe" the cor&oration were (ere! the (onth!

"%es ence, Section 63 "oes not a&&!

: Grace Christian igh Schoo' vs CA

281 SCRA 133 – Business Organization – Corporation

Law – Members of the Corporate Boar

Grace Christian igh Schoo! )GCS* is an e"%cationa!

instit%tion in Grace >i!!age )NC* Grace >i!!age ssociation, <nc )G><*is the ho(eowners association in

Grace >i!!age G>< has an e'isting b!"#aws which was

a!rea" in e##ect since 196 /%t in 1975, the boar" o#

"irectors (a"e a "ra#t a(en"ing the b-!aws whereb the

re&resentati;e o# GCS sha!! ha;e a &er(anent seat in

the 15-seat boar" Dhe "ra#t howe;er was ne;er

&resente" to the genera! (e(bershi& #or a&&ro;a! /%t

ne;erthe!ess, the re&resentati;e o# GCS he!" a seat in

the boar" #or 15 ears %nti! in 199 when a &ro&osa! was

(a"e to the boar" to reconsi"er the &ractice o# a!!owing

the GCS re&resentati;e in taking a &er(anent seatDherea#ter, an e!ection was sche"%!e" #or the 15 seat in

the boar" GCS o&&ose" the e!ection as it insists that

the e!ection sho%!" on! be #or 1: "irectors beca%se it has

a &er(anent seat G>< arg%e" that GCS c!ai( has no

basis beca%se the 1975 &ro&ose" a(en"(ent was ne;er

rati#ie" GCS a;erre" that it was rati#ie" when it was

a!!owe" to take the seat #or 15 ears an" as s%ch its right

has a!rea" ;este"

,SS7E+ hether or not the re&resentati;e #ro( Grace

Christian igh Schoo! sho%!" be a!!owe" to ha;e a

&er(anent seat in the boar" o# "irectors

EL8+ o Dhe Cor&oration Co"e is c!ear when it

&ro;i"es that (e(bers o# the boar" o# a cor&oration must

9e e'ected b the stockho!"ers )stock cor&oration* or the

(e(bers )non-stock cor&oration* "(itte"!, there are

cor&orations who a!!ow so(e o# their "irectors to sit in the

boar" witho%t being e!ecte" P b%t s%ch &ractice cannot

&re;ai! o;er &ro;isions o# !aw 8ractice, no (atter how

!ong contin%e", cannot gi;e rise to an ;este" right i# it is

contrar to !aw %rther, there is no reason as to wh a

re&resentati;e #ro( GCS sho%!" be gi;en an a%to(atic

seat <t sho%!" there#ore go thro%gh the &rocess o#

e!ection <t cannot a!so be arg%e" that the "ra#t o# the b-

!aws in 1975 was rati#ie" when GCS was a!!owe" to take

its seat #or 15 ears witho%t an e!ection <n the #irst &!ace,

the &ro&osa! was (ere! a "ra#t an" e;en i# &asse" an"

a&&ro;e" b the genera! (e(bershi&, it cannot be gi;en

e##ect beca%se it is ;oi" an" contrar to the !aw GCSL

seat in the cor&orate boar" is at best (ere! to!erate" b

G><

5 Bar9a vs Liceo de Cagaan

*AC:S+

8etitioner 0r $a $erce"es = /arba )/arba* was the

0ean o# the Co!!ege o# 8hsica! Dhera& o# res&on"ent=iceo "e Cagaan ni;ersit, <nc )=iceo*

<n the schoo! ear 23 to 2:, the Co!!ege o# 8hsica

Dhera& s%##ere" a "ra(atic "ec!ine in the n%(ber o

enro!!ees #ro( a tota! o# 1,121 st%"ents in the schoo! ear

1995 to 1996 to on! 29 st%"ents in the #irst se(ester o#

schoo! ear 23 to 2: 0%e to the !ow n%(ber o#

enro!!ees, =iceo "eci"e" to #ree@e the o&eration o# the

Co!!ege o# 8hsica! Dhera& in"e#inite! Dherea#ter, the

Co!!ege o# 8hsica! Dhera& cease" o&erations an" /arba

went on !ea;e witho%t &a starting S%bse%ent!, =iceo

sent /arba a !etter "ate" &ri! 27, 25 instr%cting /arbato ret%rn to work on an" re&ort to $a Chona 8a!o(ares

the cting 0ean o# the Co!!ege o# %rsing, to recei;e her

teaching !oa" an" assign(ent as a #%!!-ti(e #ac%!t

(e(ber in that "e&art(ent /arba "i" not re&ort to

8a!o(ares an" re%este" #or the &rocessing o# he

se&aration bene#its in ;iew o# the c!os%re o# the Co!!ege o#

8hsica! Dhera&

nother !etter was sent to /arba b%t the !atter sti!! re#%se"

to ret%rn to work ence, =iceo sent /arba a notice

ter(inating her ser;ices on the gro%n" o# aban"on(ent

/arba #i!e" a co(&!aint be#ore the =abor rbiter #or i!!ega

"is(issa!, &a(ent o# se&aration &a an" retire(en

bene#its against=iceo She a!!ege" that her trans#er to the

Co!!ege o# %rsing as a #ac%!t (e(ber is a "e(otion

a(o%nting to constr%cti;e "is(issa!

Dhe = r%!e" that /arba was not constr%cti;e! "is(isse"

Dhe =C re;erse" the = =iceo went to the C an" #i!e"

a S%&&!e(enta! 8etition raising #or the #irst ti(e the iss%e

o# !ack o# .%ris"iction o# the =abor rbiter an" the =C

o;er the case =iceo c!ai(e" that a Co!!ege 0ean is a

cor&orate o##icer %n"er its b-!aws an" /arba was a

cor&orate o##icer o# =iceo since her a&&oint(ent was

a&&ro;e" b the boar" o# "irectors Dh%s, =iceo

(aintaine" that the .%ris"iction o;er the case is with the

reg%!ar co%rts an" not with the !abor trib%na!s

<n its origina! 0ecision, the C re;erse" the =C

reso!%tions Dhe C "i" not #in" (erit in =iceos assertion

in its S%&&!e(enta! 8etition that the &osition o# /arba as

Co!!ege 0ean was a cor&orate o##ice Dhe C #%rther #o%n"

that no constr%cti;e "is(issa! occ%rre" nor has /arba

aban"one" her work



nsatis#ie", both /arba an" =iceo so%ght reconsi"eration

o# the C "ecision Dherea#ter, the C re;erse" its ear!ier

r%!ing ence,/arba #i!e" the &resent &etition

,SS7ES+

,. Whether or not the 'a9or tri9una's have ;urisdiction

over Bar9as com&'aint 2or constructive dismissa'<

,,. Whether or not Bar9a was constructive'

dismissed<

EL8+ :he &etition is granted.

6E!CA=:,LE LAW+ cor&orate o22icers

*,!S: ,SS7E+ La9or tri9una's have ;urisdiction over

Bar9as com&'aint.

Cor&orate o##icers are e!ecte" or a&&ointe" b the

"irectors or stockho!"ers, an" are those who are gi;en

that character either b the Cor&oration Co"e or b the

cor&orations b-!aws Section 25 o# the Cor&oration Co"e

en%(erates cor&orate o##icers as the &resi"ent, the

secretar, the treas%rer an" s%ch other o##icers as (a be

&ro;i"e" #or in the b-!aws <n $at!ing <n"%stria! an"

Co((ercia! Cor&oration ; Coros, the &hrase +s%ch other

o##icers as (a be &ro;i"e" #or in the b-!aws+ has been

c!ari#ie", th%sF +Con#or(ab! with Section 25, a &osition

(%st be e'&ress! (entione" in the /-=aws in or"er to

be consi"ere" as a cor&orate o##ice Dhe rest o# the

cor&orate o##icers co%!" be consi"ere" on! as e(&!oees

o# s%bor"inate o##icia!s+

owe;er, an assi"%o%s &er%sa! o# these "oc%(ents "oes

not con;ince %s that /arba occ%&ies a cor&orate o##ice

&osition in the %ni;ersit <n =iceos b-!aws, there are #o%r o##icers s&eci#ica!! (entione", na(e!, a &resi"ent, a ;ice

&resi"ent, a secretar an" a treas%rer <n a""ition, it is

&ro;i"e" that there sha!! be other a&&ointi;e o##icia!s, a

Co!!ege 0irector an" hea"s o# "e&art(ents whose

a&&oint(ents, co(&ensations, &owers an" "%ties sha!! be

"eter(ine" b the boar" o# "irectors <t is worth to note

that a Co!!ege 0ean is not a(ong the cor&orate o##icers

(entione" in =iceos b-!aws /arba was not "irect!

e!ecte" nor a&&ointe" b the boar" o# "irectors to an

cor&orate o##ice b%t her a&&oint(ent was (ere! a&&ro;e"

b the boar" together with the other aca"e(ic "eans o# res&on"ent %ni;ersit in accor"ance with the &roce"%re

&rescribe" in =iceos "(inistrati;e $an%a! Dho%gh the

boar" o# "irectors (a create a&&ointi;e &ositions other

than the &ositions o# cor&orate o##icers, the &ersons

occ%&ing s%ch &ositions cannot be "ee(e" as cor&orate

o##icers as conte(&!ate" b Section 25 o# the Cor&oration

Co"e Dh%s, &etitioner, being an e(&!oee o# res&on"ent,

her co(&!aint #or i!!ega!?constr%cti;e "is(issa! against

res&on"ent was &ro&er! within the .%ris"iction o# the

=aborrbiter an" the =C

LAB>! LAW+ constructive dismissa'

On the iss%e o# constr%cti;e "is(issa!, we agree with the

=abor rbiter an" the a&&e!!ate co%rts ear!ier r%!ing tha

/arba was not constr%cti;e! "is(isse"/arbas !etter o

a&&oint(ent s&eci#ica!! a&&ointe" her as 0ean o# the

Co!!ege o# 8hsica! Dhera& an" 0octor-in-Charge o# the

ehabi!itation C!inic +#or a &erio" o# three ears e##ecti;e

J%! 1, 22 %n!ess sooner re;oke" #or ;a!i" ca%se or

ca%ses+ E;i"ent!, /arbas a&&oint(ent as Co!!ege 0eanwas #or a #i'e" ter(, s%b.ect to rea&&oint(ent an"

re;ocation or ter(ination #or a ;a!i" ca%se hen =iceo

"eci"e" to c!ose its Co!!ege o# 8hsica! Dhera& "%e to

"rastic "ecrease in enro!!ees,/arbas a&&oint(ent as its

Co!!ege 0ean was ;a!i"! re;oke" an" her s%bse%ent

assign(ent to teach in the Co!!ege o# %rsing was .%sti#ie"

as it is sti!! re!ate" to her scho!arshi& st%"ies in 8hsica

Dhera& 8artic%!ar!, #or a trans#er not to be consi"ere" a

constr%cti;e "is(issa!, the e(&!oer (%st be ab!e to show

that s%ch trans#er is not %nreasonab!e, incon;enient, or

&re.%"icia! to the e(&!oee

G!A=:E8.

3. *'eischer vs Botica =o'asco

=essons &&!icab!eF ight o# irst e#%sa! )Cor&orate

=aw*

*AC:S+

$arch 13, 1923F $an%e! Gon@a!es (a"e a written

state(ent to the /otica o!asco, <nc, re%esting that

5 shares o# stock so!" b hi( to enr !eischer be

note" trans#erre" to !eischerBs na(e

e a!so acknow!e"ge" in sai" written

state(ent the &re#erentia! right o# the cor&oration to

b% sai" #i;e shares

J%ne 1:, 1923F he with"raw an" cance!!e" his

written state(ent o# $arch 13, 1923

o!asco re&!ie" that his !etter o# J%ne 1:th

was o# no e##ect, an" that the shares in %estion ha"

been registere" in the na(e o# the /otica o!asco

<nc,

o;e(ber 15, 1923F !eischer

#i!e" an a(en"e" co(&!aint against the /otica

o!asco, <nc, a!!eging that he beca(e the owner o# 5

shares o# #%!! &ai" stock o# /otica o!asco Co

)o!asco* b &%rchase #ro( their origina! owner

$an%e! Gon@a!e@

0es&ite re&eate" "e(an"s, o!asco re#%se" to

register sai" shares in his na(e in the books o# the

cor&oration

ca%se" hi( "a(ages a(o%nting to 85



o!ascoBs "e#enseF

artic!e 12 o# its b-!awsF it ha" &re#erentia!

right to b% the shares at the &ar ;a!%e o# 81?share,

&!%s 89 as "i;i"en"s corres&on"ing to the ear 1922

o##er was re#%se" b !eischer

Dria! Co%rtF #a;ore" !eischer an" or"ere" the

share" be registere"

,SS7E+ ? artic!e 12 o# o!ascoBs b-!aws is in con#!ict

with ct o 1:59 )Cor&oration =aw*, es&ecia!! with

section 35 )ow Sec 63*

EL8+ ##ir(e" (an"a(%s wi!! !ie to co(&e! the o##icers

o# the cor&oration to trans#er sai" stock %&on the books o#

the cor&oration

Section 13, &aragra&h 7, abo;e-%ote",

e(&owers a cor&oration to (ake b-!aws, not

inconsistent with an e'isting !aw, #or the trans#erring

o# its stock

section 35 o# ct o 1:59 )now Sec 63*

conte(&!ates no restriction as to who(

the (a be trans#erre" or so!"

<t "oes not s%ggest that an

"iscri(ination (a be create" b the cor&oration in

#a;or or against a certain &%rchaser

Dhe ho!"er o# shares, as owner o#

&ersona! &ro&ert, is at !ibert, %n"er sai" section, to

"is&ose o# the( in #a;or o# who(soe;er he &!eases,

witho%t an other !i(itation in this res&ect, than thegenera! &ro;isions o# !aw

GF the b-!aws o# a cor&oration are ;a!i" i# the

are reasonab!e an" ca!c%!ate" to carr into e##ect the

ob.ects o# the cor&oration, an" are not contra"ictor to

the genera! &o!ic o# the !aws o# the !an"

b-!aw cannot take awa or abri"ge the

s%bstantia! rights o# stockho!"er

n"er a stat%te a%thori@ing b- !aws #or

the trans#er o# stock, a cor&oration can "o no (ore

than &rescribe a genera! (o"e o# trans#er on thecor&orate books an" cannot .%sti# an %nreasonab!e

restriction %&on the right o# sa!e

b-!aw cannot o&erate to "e#eat his rights as a

&%rchaser who obtaine" the( in goo" #aith an" #or a

;a!%ab!e consi"eration

7 ?6, Co''eges vs =L!C

2$$ SCRA %&2 – Business Organization – Corporation

Law – B!"#aws an 'nno(ent )hir *ersons

<n 1991, 8$< Co!!eges hire" the ser;ices o# !e.an"ro

Ga!;an #or the !atter to teach in sai" instit%tion owe;er

#or %nknown reasons, 8$< "e#a%!te" #ro( &aing the

re(%nerations "%e to Ga!;an Ga!;an (a"e "e(an"s b%t

were ignore" b 8$< E;ent%a!!, Ga!;an #i!e" a !abor case

against 8$< Ga!;an got a #a;orab!e .%"g(ent #ro( the

=abor rbiterA this was a##ir(e" b the ationa! =abo

e!ations Co((ission On a&&ea!, 8$< reiterate", a(ong

others, that the e(&!o(ent o# Ga!;an is ;oi" beca%se it"i" not co(&! with its b-!aws &&arent!, the b-!aws

re%ire that an e(&!o(ent contract (%st be signe" b

the Chair(an o# the /oar" o# 8$< 8$< asserts tha

Ga!;anLs e(&!o(ent contract was not signe" b the

Chair(an o# the /oar"

,SS7E+ hether or not Ga!;anLs e(&!o(ent contract is

;oi"

EL8+ o 8$< Co!!eges ne;er e;en &resente" a co& o#

the b-!aws to &ro;e the e'istence o# s%ch &ro;ision /%t

e;en i# it "i", the e(&!o(ent contract cannot be ren"ere"

in;a!i" .%st beca%se it "oes not bear the signat%re o# theChair(an o# the /oar" o# 8$< /-=aws o&erate (ere! as

interna! r%!es a(ong the stockho!"ers, the! (annot affe(

or pre+ui(e thir persons who "ea! with the cor&oration

%n!ess the ha;e know!e"ge o# the sa(e <n this case

8$< was not ab!e to &ro;e that Ga!;an knew o# sai"

&ro;ision in the b-!aws when he was e(&!oe" b 8$<

@. Sawad;aan vs CA

== DEQDF

Dhis is a &etition #or (ertiorari %n"er %!e 65 o# the

%!es o# Co%rt o# the 0ecision [1] o# the Co%rt o# &&ea!s o

3 $arch 1999 a##ir(ing eso!%tions o 9:-::3 an" o

95-275: o# the Ci;i! Ser;ice Co((ission )CSC* "ate" 11

%g%st 199: an" 11 &ri! 1995, res&ecti;e!, which in t%rn

a##ir(e" eso!%tion o 239 o# the /oar" o# 0irectors o#

the !-(anah <s!a(ic <n;est(ent /ank o# the 8hi!i&&ines

)<</8* "ate" 13 0ece(ber 1993, #in"ing &etitioner g%i!t

o# 0ishonest in the 8er#or(ance o# O##icia! 0%ties an"?or

Con"%ct 8re.%"icia! to the /est <nterest o# the Ser;ice an"

"is(issing hi( #ro( the ser;ice, an" its eso!%tion[2] o# 15

0ece(ber 1999 "is(issing &etitioners $otion #oeconsi"eration

Dhe recor"s show that &etitioner Sa&&ari M

Sawa".aan was a(ong the #irst e(&!oees o# the

8hi!i&&ine (anah /ank )8/* when it was create" b

;irt%e o# 8resi"entia! 0ecree o 26: on 2 %g%st 1973

e rose thro%gh the ranks, working his wa %& #ro( his

initia! "esignation as sec%rit g%ar", to sett!ing c!erk

bookkee&er, cre"it in;estigator, &ro.ect ana!st, a&&raiser?

ins&ector, an" e;ent%a!!, !oans ana!st [3]

http://sc.judiciary.gov.ph/jurisprudence/2005/jun2005/141735.htm#_ftn1









<n ebr%ar 19, whi!e sti! ! "esignate" as

a&&raiser?in;estigator, Sawa".aan was assigne" to ins&ect

the &ro&erties o##ere" as co!!atera!s b Co(&resse" ir

$achineries an" E%i&(ent Cor&oration )C$EC* #or a

cre"it !ine o# i;e $i!!ion 8esos )85,,* Dhe

&ro&erties consiste" o# two &arce!s o# !an" co;ere" b

Drans#er Certi#icates o# Dit!e )DCDs* o -13671 an" o

C-52576 On the basis o# his <ns&ection an" &&raisa!

e&ort,

[:]

the 8/ grante" the !oan a&&!ication hen the!oan (at%re" on 17 $a 199, C$EC re%este" an

e'tension o# 1 "as, b%t was grante" on! 12 "as to

re&a the !oan[5]

<n the (eanti(e, Sawa".aan was &ro(ote" to =oans

na!st < on 1 J%! 199[6]

<n Jan%ar 199, Congress &asse" e&%b!ic ct

6: creating the <</8 an" re&ea!ing 80 o 26: )which

create" the 8/* !! assets, !iabi!ities an" ca&ita!

acco%nts o# the 8/ were trans#erre" to the <</8,[7] an"

the e'isting &ersonne! o# the 8/ were to contin%e to"ischarge their #%nctions %n!ess "ischarge"[] <n the

ens%ing reorgani@ation, Sawa".aan was a(ong the

&ersonne! retaine" b the <</8

hen C$EC #ai!e" to &a "es&ite the gi;en

e'tension, the bank, now re#erre" to as the <</8,

"isco;ere" that DCD o -13671 was s&%rio%s, the

&ro&ert "escribe" therein non-e'istent, an" that the

&ro&ert co;ere" b DCD o C-52576 ha" a &rior e'isting

(ortgage in #a;or o# one 0i;ina 8ab!ico

On J%ne 1993, the /oar" o# 0irectors o# the <</8

create" an <n;estigating Co((ittee to !ook into the

C$EC transaction, which ha" cost the bank Si' $i!!ion

8esos )86,,* in !osses[9] Dhe s%bse%ent

e;ents, as #o%n" an" "eci"e" %&on b the Co%rt o#

&&ea!s,[1] are as #o!!owsF

On 1 J%ne 1993, &etitioner recei;e" a (e(oran"%(

#ro( <s!a(ic /ank [<</8] Chair(an oberto 0e

Oca(&o charging hi( with 0ishonest in the 8er#or(ance

o# O##icia! 0%ties an"?or Con"%ct 8re.%"icia! to the /est

<nterest o# the Ser;ice an" &re;enti;e! s%s&en"ing hi(

<n his (e(oran"%( "ate" Se&te(ber 1993, &etitioner

in#or(e" the <n;estigating Co((ittee that he co%!" not

s%b(it hi(se!# to the .%ris"iction o# the Co((ittee

beca%se o# its a!!ege" &artia!it or his #ai!%re to a&&ea

be#ore the hearing set on 17 Se&te(ber 1993, a#ter the

hearing o# 13 Se&te(ber 1993 was &ost&one" "%e to the

$ani#estation o# e;en "ate #i!e" b &etitioner, the

<n;estigating Co((ittee "ec!are" &etitioner in "e#a%!t an"

the &rosec%tion was a!!owe" to &resent its e;i"ence e, parte

On 0ece(ber 1993, the <n;estigating Co((ittee

ren"ere" a "ecision, the &ertinent &ortions o# which rea"s

as #o!!owsF

<n ;iew o# res&on"ent S0JS ab.ect #ai!%re to

&er#or( his "%ties an" assigne" tasks as

a&&raiser?ins&ector, which res%!te" to the &re.%"ice an"

s%bstantia! "a(age to the /ank, res&on"ent sho%!" be

he!" !iab!e there#ore t this .%nct%re, howe;er, the

<n;estigating Co((ittee is o# the consi"ere" o&inion thathe co%!" not be he!" !iab!e #or the a"(inistrati;e o##ense o

"ishonest consi"ering the #act that no e;i"ence was

a""%ce" to show that he &ro#ite" or bene#ite" #ro( being

re(iss in the &er#or(ance o# his "%ties Dhe recor" is

bere#t o# an e;i"ence which wo%!" show that he recei;e"

an a(o%nt in consi"eration #or his non-&er#or(ance o#

his o##icia! "%ties

Dhis notwithstan"ing, res&on"ent cannot esca&e !iabi!it

s a";erte" to ear!ier, his #ai!%re to &er#or( his o##icia

"%ties res%!te" to the &re.%"ice an" s%bstantia! "a(age tothe <s!a(ic /ank #or which he sho%!" be he!" !iab!e #or the

a"(inistrati;e o##ense o# CO0CD 8EJ0<C<= DO

DE /ESD <DEESD O DE SE><CE

8re(ises consi"ere", the <n;estigating Co((ittee

reco((en"s that res&on"ent S88< S0J be

(ete" the &ena!t o# S<Q )6* $ODS an" OE )1* 0R

SS8ES<O #ro( o##ice in accor"ance with the Ci;i

Ser;ice Co((issions $e(oran"%( Circ%!ar o 3

Series o# 199

On 13 0ece(ber 1993, the /oar" o# 0irectors o# the<s!a(ic /ank [<</8] a"o&te" eso!%tion o 239 #in"ing

&etitioner g%i!t o# 0ishonest in the 8er#or(ance o

O##icia! 0%ties an"?or Con"%ct 8re.%"icia! to the /es

<nterest o# the Ser;ice an" i(&osing the &ena!t o

0is(issa! #ro( the Ser;ice

On reconsi"eration, the /oar" o# 0irectors o# the <s!a(ic

/ank [<</8] a"o&te" the eso!%tion o 2332 on 2

ebr%ar 199: re"%cing the &ena!t i(&ose" on &etitioner





















#ro( "is(issa! to s%s&ension #or a &erio" o# si' )6* (onths

an" one )1* "a

On 29 $arch 199:, &etitioner #i!e" a notice o# a&&ea! to

the $erit Sste( 8rotection /oar" )$S8/*

On 11 %g%st 199:, the CSC a"o&te" eso!%tion o 9:-

::3 "is(issing the a&&ea! #or !ack o# (erit an" a##ir(ing

eso!%tion o 239 "ate" 13 0ece(ber 1993 o# the/oar" o# 0irectors o# <s!a(ic /ank

On 11 &ri! 1995, the CSC a"o&te" eso!%tion o 95-

257: "ening &etitioners $otion #or econsi"eration

On 16 J%ne 1995, the instant &etition was #i!e" with the

onorab!e S%&re(e Co%rt on the #o!!owing assign(ent o#

errorsF

< 8%b!ic res&on"ent !-(anah <s!a(ic <n;est(ent

/ank o# the 8hi!i&&ines has co((itte" a gra;e ab%se o#

"iscretion a(o%nting to e'cess or !ack o# .%ris"iction when

it initiate" an" con"%cte" a"(inistrati;e in;estigation

witho%t a ;a!i"! &ro(%!gate" r%!es o# &roce"%re in the

a".%"ication o# a"(inistrati;e cases at the <s!a(ic /ank

<< 8%b!ic res&on"ent Ci;i! Ser;ice Co((ission has

co((itte" a gra;e ab%se o# "iscretion a(o%nting to !ack

o# .%ris"iction when it &re(at%re! an" #a!se! ass%(e"

.%ris"iction o# the case not a&&ea!e" to it, b%t to the $erit

Sste( 8rotection /oar"

<<< /oth the <s!a(ic /ank an" the Ci;i! Ser;iceCo((ission erre" in #in"ing &etitioner Sawa".aan o#

ha;ing "e!iberate! re&orting #a!se in#or(ation an"

there#ore g%i!t o# 0ishonest an" Con"%ct 8re.%"icia! to

the /est <nterest o# the Ser;ice an" &ena!i@e" with

"is(issa! #ro( the ser;ice

On : J%! 1995, the onorab!e S%&re(e Co%rt -n

Ban( re#erre" this &etition to this onorab!e Co%rt

&%rs%ant to e;ise" "(inistrati;e Circ%!ar o 1-95,

which took e##ect on 1 J%ne 1995

e "o not #in" (erit [in] the &etition

nent the #irst assign(ent o# error, a rea"ing o# the

recor"s wo%!" re;ea! that &etitioner raises #or the #irst ti(e

the a!!ege" #ai!%re o# the <s!a(ic /ank [<</8] to

&ro(%!gate r%!es o# &roce"%re go;erning the a".%"ication

an" "is&osition o# a"(inistrati;e cases in;o!;ing its

&ersonne! <t is a r%!e that iss%es not &ro&er! bro%ght an"

;enti!ate" be!ow (a not be raise" #or the #irst ti(e on

a&&ea!, sa;e in e'ce&tiona! circ%(stances )Caso#ita. Sr/ 0/

Court of Appea#s, 275 SC 257* none o# which, howe;er,

obtain in this case Granting argueno that the iss%e is o#

s%ch e'ce&tiona! character that the Co%rt (a take

cogni@ance o# the sa(e, sti!!, it (%st #ai! Section 26 o#

e&%b!ic ct o 6: )199* &ro;i"esF

Section 26 8owers o# the /oar" Dhe /oar" o# 0irectors

sha!! ha;e the broaest powers to manage the 's#ami(

Ban , ' ' ' Dhe /oar" sha!! a"o&t &o!ic g%i"e!ines

necessar to carr o%t e##ecti;e! the &ro;isions o# thisCharter as we!! as interna# ru#es an

regu#ations necessar #or the con"%ct o# its <s!a(ic

banking b%siness an" a!! (atters re!ate" to personne

organization. offi(e fun(tions an sa#ar! aministration

)<ta!ics o%rs*

On the other han", <te( o 2 o# E'ec%ti;e Or"er o 26

)1992* entit!e" 8rescribing 8roce"%re an" Sanctions to

Ens%re S&ee" 0is&osition o# "(inistrati;e Cases

"irects, a!! a"(inistrati;e agencies to a"o&t an" inc!%"e in

their res&ecti;e %!es o# 8roce"%re &ro;isions "esigne" to

abbre;iate a"(inistrati;e &rocee"ings

Dhe abo;e two )2* &ro;isions re!ie" %&on b &etitioner

"oes not re%ire the <s!a(ic /ank [<</8] to &ro(%!gate

r%!es o# &roce"%re be#ore a"(inistrati;e "isci&!ine (a be

i(&ose" %&on its e(&!oees Dhe interna! r%!es o

&roce"%res or"aine" to be a"o&te" b the /oar" re#ers to

that necessar #or the con"%ct o# its <s!a(ic banking

b%siness an" a!! (atters re!ate" to &ersonne! organi@ation

o##ice #%nctions an" sa!ar a"(inistration On the contrar

Section 26 o# 6: gi;es the /oar" o# 0irectors o# the

<s!a(ic /ank the broa"est &owers to (anage the <s!a(ic/ank Dhis grant o# broa" &owers wo%!" be an i"!e

cere(on i# it wo%!" be &ower!ess to "isci&!ine its

e(&!oees

Dhe secon" assign(ent o# error (%st !ikewise #ai! Dhe

iss%e is raise" #or the #irst ti(e 0ia this &etition

#or (ertiorari 8etitioner s%b(itte" hi(se!# to the

.%ris"iction o# the CSC !tho%gh he co%!" ha;e raise" the

a!!ege" !ack o# .%ris"iction in his $otion #o

econsi"eration o# eso!%tion o 9:-::3 o# the CSC

he "i" not "o so / #i!ing the $otion #or econsi"eration,

he is esto&&e" #ro( "ening the CSCs .%ris"iction o;erhi(, as it is sett!e" r%!e that a &art who asks #or an

a##ir(ati;e re!ie# cannot !ater on i(&%gn the action o# the

trib%na! as witho%t .%ris"iction a#ter an a";erse res%!t was

(ete" to hi( !tho%gh .%ris"iction o;er the s%b.ect (atte

o# a case (a be ob.ecte" to at an stage o# the

&rocee"ings e;en on a&&ea!, this &artic%!ar r%!e, howe;er

(eans that .%ris"ictiona! iss%es in a case can be raise"

on! "%ring the &rocee"ings in sai" case an" "%ring the

a&&ea! o# sai" case ) Aragon 0/ Court of Appea#s, 27



SC 63* Dhe case at bar is a &etition

[#or] (ertiorari an" not an a&&ea!

/%t e;en on the (erits the arg%(ent (%st #a!ter <te( o

1 o# CSC eso!%tion o 93-237 "ate" 29 J%ne 1993,

&ro;i"esF

0ecisions in a"(inistrati;e cases in;o!;ing o##icia!s an"

e(&!oees o# the ci;i! ser;ice a&&ea!ab!e to theCo((ission &%rs%ant to Section :7 o# /ook > o# the Co"e

)i/e, "(inistrati;e Co"e o# 197* inc!%"ing &ersonne!

actions s%ch as conteste" a&&oint(ents sha!! now be

a&&ea!e" "irect! to the Co((ission an" not to the $S8/

<n Rubene(ia 0/ Ci0i# Ser0i(e Commission. 2:: SC 6:,

651, it was categorica!! he!"F

Dhe #%nctions o# the $S8/ re!ating to the

"eter(ination o# a"(inistrati;e "isci&!inar cases were, in

other wor"s, re-a!!ocate" to the Co((ission itse!#

/e that as it (a, )i*t is hornbook "octrine that in or"er

)t*o ascertain whether a co%rt )in this case, a"(inistrati;e

agenc* has .%ris"iction or not, the &ro;isions o# the !aw

sho%!" be in%ire" into %rther(ore, the .%ris"iction o#

the co%rt (%st a&&ear c!ear! #ro( the stat%te !aw or it wi!!

not be he!" to e'ist) Azar(on 0/ Saniganba!an, 26

SC 7:7, 757* ro( the &ro;ision o# !aw abo;ecite", the

Ci;i! Ser;ice Co((ission c!ear! has .%ris"iction o;er the

"(inistrati;e Case against &etitioner

nent the thir" assign(ent o# error, we !ikewise "o not #in"(erit in &etitioners &ro&osition that he sho%!" not be !iab!e,

as in the #irst &!ace, he was not %a!i#ie" to &er#or( the

#%nctions o# a&&raiser?in;estigator beca%se he !acke" the

necessar training an" e'&ertise, an" there#ore, sho%!"

not ha;e been #o%n" "ishonest b the /oar" o# 0irectors

o# <s!a(ic /ank [<</8] an" the CSC 8etitioner hi(se!#

a"(its that the &osition o# a&&raiser?ins&ector is one o# the

(ost serio%s [an"] sensiti;e .ob in the banking o&erations

e sho%!" ha;e been aware that acce&ting s%ch a

"esignation, he is ob!ige" to &er#or( the task at han" b

the e'ercise o# (ore than or"inar &r%"ence s

a&&raiser?in;estigator, he is e'&ecte", a(ong others, to

check the a%thenticit o# the "oc%(ents &resente" b the

borrower b co(&aring the( with the origina!s on #i!e with

the &ro&er go;ern(ent o##ice e sho%!" ha;e (a"e it

s%re that the technica! "escri&tions in the !ocation &!an on

#i!e with the /%rea% o# =an"s o# $arikina, .ibe with that

in"icate" in the DCD o# the co!!atera! o##ere" b C$EC,

an" that the (ortgage in #a;or o# the <s!a(ic /ank was

"%! annotate" at the back o# the co& o# the DCD ke&t b

the egister o# 0ee"s o# $arikina Dhis, &etitioner #ai!e" to

"o, #or which he (%st be he!" !iab!e Dhat he "i" not &ro#it

#ro( his #a!se re&ort is o# no (o(ent either the #act that

it was not "e!iberate or wi!!#%!, "etracts #ro( the nat%re o#

the act as "ishonest hat is a&&arent is he state"

so(ething to be a #act, when he rea!! was not s%re that it

was so

EEOE, abo;e &re(ises consi"ere", the instan

8etition is 0<S$<SSE0, an" the assai!e" eso!%tions o#

the Ci;i! Ser;ice Co((ission are hereb <$E0

On 2: $arch 1999, Sawa".aans co%nse! noti#ie" the

co%rt a uo o# his change o# a""ress,[11] b%t a&&arent!

neg!ecte" to noti# his c!ient o# this #act Dh%s, on 23 J%!

1999, Sawa".aan, b hi(se!#, #i!e" a $otion #or ew

Dria![12] in the Co%rt o# &&ea!s base" on the #o!!owing

gro%n"sF #ra%", acci"ent, (istake or e'c%sab!e neg!igence

an" new! "isco;ere" e;i"ence e c!ai(e" that he ha"

recent! "isco;ere" that at the ti(e his e(&!o(ent was

ter(inate", the <</8 ha" not et a"o&te" its cor&orate

b-!aws e attache" a Certi#ication[13] b the Sec%rities

an" E'change Co((ission )SEC* that it was on! on 27$a 1992 that the <</8 s%b(itte" its "ra#t b-!aws to the

SEC, an" that its registration was being he!" in abeance

&en"ing certain corrections being (a"e thereon

Sawa".aan arg%e" that since the <</8 #ai!e" to #i!e its b-

!aws within 6 "as #ro( the &assage o# e& ct o

6:, as re%ire" b Sec 51 o# the sai" !aw, the bank an"

its stockho!"ers ha" a!rea" #or#eite" its #ranchise o

charter, inc!%"ing its !icense to e'ist an" o&erate as a

cor&oration,[1:] an" th%s no !onger ha;e the !ega! stan"ing

an" &ersona!it to initiate an a"(inistrati;e case

Sawa".aans co%nse! s%bse%ent! a"o&te" his

(otion, b%t re%este" that it be treate" as a (otion #or

reconsi"eration[15] Dhis (otion was "enie" b the co%rt a

uo in its eso!%tion o# 15 0ece(ber 1999[16]

Sti!! "isheartene", Sawa".aan #i!e" the &resen

&etition #or (ertiorari %n"er %!e 65 o# the %!es o# Co%rt

cha!!enging the abo;e 0ecision an" eso!%tion o# the

Co%rt o# &&ea!s on the gro%n" that the co%rt a uo erre"

i* in ignoring the #acts an" e;i"ences that the a!!ege"

<s!a(ic /ank has no ;a!i" b-!awsA ii* in ignoring the #acts

an" e;i"ences that the <s!a(ic /ank !ost its .%ri"ica&ersona!it as a cor&oration on 16 &ri! 199A iii* in

ignoring the #acts an" e;i"ences that the a!!ege" <s!a(ic

/ank an" its a!!ege" /oar" o# 0irectors ha;e no

.%ris"iction to act in the (anner the "i" in the absence o#

a ;a!i" b-!awsA i;* in not correcting the acts o# the Ci;i

Ser;ice Co((ission who erroneo%s! ren"ere" the

assai!e" eso!%tions o 9:-::3 an" o 95-275: as a

res%!t o# #ra%", #a!si#ication an"?or (isre&resentations

co((itte" b aro%k Car&i@o an" his gro%&, inc!%"ing

oberto "e Oca(&oA ;* in a##ir(ing an %nconscionab!



















harsh an"?or e'cessi;e &ena!tA an" ;i* in #ai!ing to

consi"er new! "isco;ere" e;i"ence an" re;erse its

"ecision accor"ing!

S%bse%ent!, &etitioner Sawa".aan #i!e" an -,"

parte rgent $otion #or ""itiona! E'tension o# Di(e to

i!e a e&! )to the Co((ents o# es&on"ent !-(anah

<n;est(ent /ank o# the 8hi!i&&ines*,[17] e&! )to

es&on"ents Conso!i"ate" Co((ent,*

[1]

an" e&! )tothe !!ege" Co((ents o# es&on"ent !-(anah <s!a(ic

/ank o# the 8hi!i&&ines*[19] On 13 October 2, he

in#or(e" this Co%rt that he ha" ter(inate" his !awers

ser;ices, an", b hi(se!#, &re&are" an" #i!e" the #o!!owingF

1* $otion #or ew Dria!A[2] 2* $otion to 0ec!are

es&on"ents in 0e#a%!t an"?or a;ing ai;e" their ights

to <nter&ose Ob.ection to 8etitioners $otion #or ew Dria!A[21] 3* -,"*arte rgent $otions to 8%nish ttornes (a"o

0 >a!"e@, E!&i"io J >ega, !"a G ees, 0o(ina"or

<si"oro, Jr, an" O"i!on 0ia@ #or /eing in Conte(&t o#

Co%rt I to <nhibit the( #ro( &&earing in this Case nti!

the Can 8resent >a!i" E;i"ence o# =ega! %thoritA [22] :*O&&osition?e&! )to es&on"ent <</8s !!ege"

Co((ent*A[23] 5* -,"*arte rgent $otion to 8%nish tt

ena!"o 8ine"a #or Conte(&t o# Co%rt an" the

<ss%ance o# a Co((it(ent Or"er?arrant #or is rrestA[2:] 6* e&!?O&&osition )Do the or(a! otice o#

ith"rawa! o# n"ersigne" Co%nse! as =ega! Co%nse! #or

the es&on"ent <s!a(ic /ank with O&&osition to

8etitioners $otion to 8%nish n"ersigne" Co%nse! #or

Conte(&t o# Co%rt #or the <ss%ance o# a arrant o# rrest*A[25] 7* $e(oran"%( #or 8etitionerA[26] * O&&osition to

So!Gens $otion #or C!ari#ication with $otion #or 0e#a%!t

an"?or ai;er o# es&on"ents to i!e their $e(oran"%(A[27] 9* $otion #or Conte(&t o# Co%rt an"

<nhibition?0is%a!i#ication with O&&osition to OGCCs

$otion #or E'tension o# Di(e to i!e $e(oran"%(A [2] 1*

$otion #or En#orce(ent )<n 0e#ense o# the %!e o# =aw*A[29] 11* $otion an" O&&osition )$otion to 8%nish OGCCs

ttornes (a"o 0 >a!"e@, E#ren / Gon@a!es, !"a G

ees, O"i!on 0ia@ an" 0o(ina"or <si"oro, Jr, #or

Conte(&t o# Co%rt an" the <ss%ance o# a arrant #or their

rrestA an" O&&osition to their !!ege" $ani#estation an"

$otion 0ate" ebr%ar 5, 22*A[3] 12* $otion #or

econsi"eration o# <te( )a* o# eso!%tion "ate" 5ebr%ar 22 with S%&&!e(enta! $otion #or Conte(&t o#

Co%rtA[31] 13* $otion #or econsi"eration o# 8ortion o#

eso!%tion 0ate" 12 $arch 22A[32] 1:* E'-8arte rgent

$otion #or E'tension o# Di(e to i!e e&! $e(oran"%(

)DoF CSC an" <</8s $e(oran"%(*A[33] 15* e&!

$e(oran"%( )DoF CSCs $e(oran"%(* ith E'-8arte

rgent $otion #or ""itiona! E'tension o# ti(e to i!e

e&! $e(oran"%( )DoF <</8s $e(oran"%(*A [3:] an" 16*

e&! $e(oran"%( )DoF OGCCs $e(oran"%( #or

es&on"ent <</8*[35]

8etitioners e##orts are %na;ai!ing, an" we "en his

&etition #or its &roce"%ra! an" s%bstanti;e #!aws

Dhe genera! r%!e is that the re(e" to obtain re;ersa

or (o"i#ication o# the .%"g(ent on the (erits is a&&ea!

Dhis is tr%e e;en i# the error, or one o# the errors, ascribe"

to the co%rt ren"ering the .%"g(ent is its !ack o

.%ris"iction o;er the s%b.ect (atter, or the e'ercise o#

&ower in e'cess thereo#, or gra;e ab%se o# "iscretion inthe #in"ings o# #act or o# !aw set o%t in the "ecision [36]

Dhe recor"s show that &etitioners co%nse! recei;e"

the eso!%tion o# the Co%rt o# &&ea!s "ening his (otion

#or reconsi"eration on 27 0ece(ber 1999 Dhe #i#teen "a

reg!a(entar &erio" to a&&ea! %n"er %!e :5 o# the %!es

o# Co%rt there#ore !a&se" on 11 Jan%ar 2 On 23

ebr%ar 2, o;er a (onth a#ter recei&t o# the reso!%tion

"ening his (otion #or reconsi"eration, the &etitioner #i!e"

his &etition #or (ertiorari %n"er %!e 65

<t is sett!e" that a s&ecia! ci;i! action #or (ertiorari wi!

not !ie as a s%bstit%te #or the !ost re(e" o# a&&ea!, [37] an"

tho%gh there are instances[3] where the e'traor"inar

re(e" o# (ertiorari (a be resorte" to "es&ite the

a;ai!abi!it o# an a&&ea!,[39] we #in" no s&ecia! reasons #o

(aking o%t an e'ce&tion in this case

E;en i# we were to o;er!ook this #act in the broa"e

interests o# .%stice an" treat this as a s&ecia! ci;i! action

#or (ertiorari %n"er %!e 65,[:] the &etition wo%!"

ne;erthe!ess be "is(isse" #or #ai!%re o# the &etitioner to

show gra;e ab%se o# "iscretion 8etitioners rec%rrenarg%(ent, ten%o%s at its ;er best, is &re(ise" on the #act

that since res&on"ent <</8 #ai!e" to #i!e its b-!aws within

the "esignate" 6 "as #ro( the e##ecti;it o# e& ct o

6:, a!! &rocee"ings initiate" b <</8 an" a!! actions

res%!ting there#ro( are a &atent n%!!it Or, in his wor"s

the <</8 an" its o##icers an" /oar" o# 0irectors,

[]a;e no !ega! a%thorit nor .%ris"iction to (anage

(%ch !ess o&erate the <s!a(ic /ank, #i!e a"(inistrati;e

charges an" in;estigate &etitioner in the (anner the "i"

an" a!!ege"! &asse" /oar" eso!%tion o 239 on

0ece(ber 13, 1993 which is n%!! an" ;oi" #or !ack o# an)si( a%thori@e" an" ;a!i" b-!aws Dhe C<><= SE><CE

CO$$<SS<O was there#ore a##ir(ing, erroneo%s!, a n%!

an" ;oi" eso!%tion o 239 "ate" 0ece(ber 13, 1993

o# the /oar" o# 0irectors o# !-(anah <s!a(ic <n;est(en

/ank o# the 8hi!i&&ines in CSC eso!%tion o 9:-::3

"ate" %g%st 11, 199: (otion #or reconsi"eration

thereo# was "enie" b the CSC in its eso!%tion o 95-

275: "ate" &ri! 11, 1995 /oth acts?reso!%tions o# the

CSC are erroneo%s, res%!ting #ro( #ra%", #a!si#ications an"

(isre&resentations o# the a!!ege" Chair(an an" CEO



























































oberto "e Oca(&o an" the a!!ege" 0irector aro%k

Car&i@o an" his gro%& at the a!!ege" <s!a(ic /ank[:1]

owhere in &etitioners ;o!%(ino%s &!ea"ings is there

a showing that the co%rt a uo co((itte" gra;e ab%se o#

"iscretion a(o%nting to !ack or e'cess o# .%ris"iction

re;ersib!e b a &etition #or (ertiorari 8etitioner a!rea"

raise" the %estion o# <</8s cor&orate e'istence an" !ack

o# .%ris"iction in his $otion #or ew Dria!?$otion #or econsi"eration o# 27 $a 1997 an" was "enie" b the

Co%rt o# &&ea!s 0es&ite the ;o!%(e o# &!ea"ings he has

s%b(itte" th%s #ar, he has a""e" nothing s%bstantia! to his

arg%(ents

Dhe <</8 was create" b e& ct o 6: <t has a

(ain o##ice where it con"%cts b%siness, has shareho!"ers,

cor&orate o##icers, a boar" o# "irectors, assets, an"

&ersonne! <t is, in #act, here re&resente" b the O##ice o#

the Go;ern(ent Cor&orate Co%nse!, the &rinci&a! !aw

o##ice o# go;ern(ent-owne" cor&orations, one o# which is

res&on"ent bank[:2] t the ;er !east, b its #ai!%re tos%b(it its b-!aws on ti(e, the <</8 (a be consi"ere"

a e fa(to cor&oration[:3] whose right to e'ercise cor&orate

&owers (a not be in%ire" into co!!atera!! in an &ri;ate

s%it to which s%ch cor&orations (a be a &art[::]

$oreo;er, a cor&oration which has #ai!e" to #i!e its b-

!aws within the &rescribe" &erio" "oes not ipso fa(to !ose

its &owers as s%ch Dhe SEC %!es on

S%s&ension?e;ocation o# the Certi#icate o# egistration o#

Cor&orations,[:5] "etai!s the &roce"%res an" re(e"ies that

(a be a;ai!e" o# be#ore an or"er o# re;ocation can beiss%e" Dhere is no showing that s%ch a &roce"%re has

been initiate" in this case

<n an case, &etitioners arg%(ent is irre!e;ant

beca%se this case is not a cor&orate contro;ers, b%t a

!abor "is&%teA an" it is an e(&!oers basic right to #ree!

se!ect or "ischarge its e(&!oees, i# on! as a (eas%re o#

se!#-&rotection against acts ini(ica! to its interest[:6] egar"!ess o# whether <</8 is a cor&oration, a

&artnershi&, a so!e &ro&rietorshi&, or a sari"sari store, it is

an %n"is&%te" #act that <</8 is the &etitioners e(&!oer

<</8 chose to retain his ser;ices "%ring itsreorgani@ation, contro!!e" the (eans an" (etho"s b

which his work was to be &er#or(e", &ai" his wages, an",

e;ent%a!!, ter(inate" his ser;ices[:7]

n" tho%gh he has ha" a(&!e o&&ort%nit to "o so,

the &etitioner has not a!!ege" that he is anthing other

than an e(&!oee o# <</8 e has neither c!ai(e", nor

shown, that he is a stockho!"er or an o##icer o# the

cor&oration a;ing acce&te" e(&!o(ent #ro( <</8, an"

ren"ere" his ser;ices to the sai" bank, recei;e" his sa!ar,

an" acce&te" the &ro(otion gi;en hi(, it is now too !ate in

the "a #or &etitioner to %estion its e'istence an" its

&ower to ter(inate his ser;ices One who ass%(es an

ob!igation to an ostensib!e cor&oration as s%ch, cannot

resist &er#or(ance thereo# on the gro%n" that there was in

#act no cor&oration[:]

E;en i# we were to consi"er the #acts behin"

&etitioner Sawa".aans "is(issa! #ro( ser;ice, we wo%!"be har" &resse" to #in" error in the "ecision o# the <</8

s a&&raiser?in;estigator, the &etitioner was e'&ecte"

to con"%ct an oc%!ar ins&ection o# the &ro&erties o##ere"

b C$EC as co!!atera!s an" check the co&ies o# the

certi#icates o# tit!e against those on #i!e with the egistr o#

0ee"s ot on! "i" he #ai! to con"%ct these ro%tine

checks, b%t he a!so "e!iberate! (isre&resente" in his

a&&raisa! re&ort that a#ter re;iewing the "oc%(ents an"

con"%cting a site ins&ection, he #o%n" the C$EC !oan

a&&!ication to be in or"er 0es&ite the n%(ber o# &!ea"ings

he has #i!e", he has #ai!e" to o##er an a!ternati;ee'&!anation #or his actions

hen he was in#or(e" o# the charges against hi(

an" "irecte" to a&&ear an" &resent his si"e on the (atter

the &etitioner sent instea" a (e(oran"%( %estioning the

#airness an" i(&artia!it o# the (e(bers o# the

in;estigating co((ittee an" re#%sing to recogni@e thei

.%ris"iction o;er hi( e;erthe!ess, the in;estigating

co((ittee resche"%!e" the hearing to gi;e the &etitioner

another chance, b%t he sti!! re#%se" to a&&ear be#ore it

Dherea#ter, witnesses were &resente", an" a "ecision

was ren"ere" #in"ing hi( g%i!t o# "ishonest an"

"is(issing hi( #ro( ser;ice e so%ght a reconsi"eration

o# this "ecision an" the sa(e co((ittee whose

i(&artia!it he %estione" re"%ce" their reco((en"e"

&ena!t to s%s&ension #or si' (onths an" one "a Dhe

boar" o# "irectors, howe;er, o&te" to "is(iss hi( #ro(

ser;ice

On a&&ea! to the CSC, the Co((ission #o%n" tha

Sawa".aans #ai!%re to &er#or( his o##icia! "%ties great!

&re.%"ice" the <</8, #or which he sho%!" be he!"acco%ntab!e <t he!" thatF

)<*t is crsta! c!ear that res&on"ent S88

S0J was re(iss in the &er#or(ance o# his "%ties

as a&&raiser?ins&ector a" res&on"ent &er#or(e" his

"%ties as a&&raiser?ins&ector, he co%!" ha;e easi! notice"

that the &ro&ert !ocate" at /a!intawak, Ca!oocan Cit

co;ere" b DCD o C-52576 an" which is one o# the

&ro&erties o##ere" as co!!atera! b C$EC is enc%(bere"

to 0i;ina 8ab!ico a" res&on"ent re#!ecte" s%ch #act in





















his a&&raisa!?ins&ection re&ort on sai" &ro&ert the

<S=$<C /M wo%!" not ha;e a&&ro;e" C$ECs !oan

o# 85, in 197 an" C$ECs 85 $i!!ion !oan in

19, res&on"ent knowing #%!! we!! the /anks &o!ic o#

not acce&ting enc%(bere" &ro&erties as co!!atera!

es&on"ent S0Js re&rehensib!e act is #%rther

aggra;ate" when he #ai!e" to check an" ;eri# #ro( the

egistr o# 0ee"s o# $arikina the a%thenticit o# the&ro&ert !ocate" at $aa(ot, nti&o!o, i@a! co;ere" b

DCD o -13671 an" which is one o# the &ro&erties

o##ere" as co!!atera! b C$EC #or its 85 $i!!ion !oan in

19 <# he on! ;isite" an" ;eri#ie" with the egister o#

0ee"s o# $arikina the a%thenticit o# DCD o -13671

he co%!" ha;e easi! "isco;ere" that DCD o -13671 is

#ake an" the &ro&ert "escribe" therein non-e'istent

Dhis notwithstan"ing, res&on"ent cannot esca&e !iabi!it

s a";erte" to ear!ier, his #ai!%re to &er#or( his o##icia!

"%ties res%!te" to the &re.%"ice an" s%bstantia! "a(age to

the <S=$<C /M #or which he sho%!" be he!" !iab!e #or

the a"(inistrati;e o##ense o# CO0CD 8EJ0<C<=

DO DE /ESD <DEESD O DE SE><CE[:9]

ro( the #oregoing, we #in" that the CSC an" the

co%rt a uo co((itte" no gra;e ab%se o# "iscretion when

the s%staine" Sawa".aans "is(issa! #ro( ser;ice Gra;e

ab%se o# "iscretion i(&!ies s%ch ca&ricio%s an" whi(sica

e'ercise o# .%"g(ent as e%i;a!ent to !ack o# .%ris"iction

or, in other wor"s, where the &ower is e'ercise" in an

arbitrar or "es&otic (anner b reason o# &assion o

&ersona! hosti!it, an" it (%st be so &atent an" gross as to

a(o%nt to an e;asion o# &ositi;e "%t or to a ;irt%a! re#%sato &er#or( the "%t en.oine" or to act at a!! in

conte(&!ation o# !aw[5] Dhe recor"s show that the

res&on"ents "i" none o# theseA the acte" in accor"ance

with the !aw

WE!E*>!E, the &etition is 0<S$<SSE0 Dhe

0ecision o# the Co%rt o# &&ea!s o# 3 $arch 1999

a##ir(ing eso!%tions o 9:-::3 an" o 95-275: o# the

Ci;i! Ser;ice Co((ission, an" its eso!%tion o# 15

0ece(ber 1999 are hereb <$E0 Costs against the

&etitioner







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