1. YAO KA SIN TRADING VS.

CA
G.R. No. 53820 June 15, 1992
FACTS:
Constancio B. Maglana, President and Chairman of the Board of private respondent Prime
White Cement Corporation (PWCC) sent a letter-offer (Exhibit “A”) to Yao Ka Sin Trading (YKS)
which describes itself as a business concern of single proprietorship, and is represented by its
manager, Mr. Henry Yao regarding the delivery of bags of white cement. However, after the
signing of the letter- offer, the Board of Directors of PWCC disapproved the same. YKS then filed
with the then Court of First Instance of Leyte a complaint for Specific Performance with Damages
against PWCC.
PWCC denied under oath the material averments in the complaint and alleged that: (a)
YKS “has no legal personality to sue having no legal personality even by fiction to represent
itself;” (b) Mr. Maglana, its President and Chairman, was lured into signing Exhibit “A”; (c) such
signing was subject to the condition that Exhibit “A” be approved by the Board of Directors of
PWCC, as corporate commitments are made through it; (d) the latter disapproved it, hence
Exhibit “A” was never consummated and is not enforceable against PWCC; (e) it agreed to sell
10,000 bags of white cement, not under Exhibit “A”, but under a separate contract prepared by
the Board; (f) the rejection by the Board of Exhibit “A” was made known to YKS through various
letters sent to it, copies of which were attached to the Answer as Annexes 1, 2 and 3;[18] (g)
YKS knew, per Delivery Order[19] and Official Receipt[20] issued by PWCC, that only 10,000
bags were sold to it, without any terms or conditions, at P24.30 per bag FOB Asturias, Cebu; (h)
YKS is solely to blame for the failure to take complete delivery of 10,000 bags for it did not send
its boat or truck to PWCC's plant; and (i) YKS has, therefore, no cause of action.
The trial court disregarded PWCC's theory. The trial court interpreted the provision of the
By-Laws -- granting its Board of Directors the power to enter into an agreement or contract of
any kind with any person through the President -- to mean that the latter may enter into such
contract or agreement at any time and that the same is not subject to the ratification of the
board of directors but “subject only to the declared objects and purpose of the corporation and
existing laws
Upon, the Court of Appeals reversed and set aside the RTC decision.

ISSUE:
Whether or not the letter-offer, as accepted by YKS, is a contract that binds the PWCC.

RULING:
No. The respondent Court correctly ruled that Exhibit “A” is not binding upon the private
respondent. Mr. Maglana, its President and Chairman, was not empowered to execute it.
Since a corporation, such as the private respondent, can act only through its officers and
agents, “all acts within the powers of said corporation may be performed by agents of its
selection; and, except so far as limitations or restrictions may be imposed by special charter, by-
law, or statutory provisions, the same general principles of law which govern the relation of
agency for a natural person govern the officer or agent of a corporation, of whatever status or
rank, in respect to his power to act for the corporation; and agents when once appointed, or
members acting in their stead, are subject to the same rules, liabilities and incapacities as are
agents of individuals and private persons.” Moreover, “x x x a corporate officer or agent may
represent and bind the corporation in transactions with third persons to the extent that authority
to do so has been conferred upon him, and this includes powers which have been intentionally
conferred, and also such powers as, in the usual course of the particular business, are incidental
to, or may be implied from, the powers intentionally, conferred, powers added by custom and
usage, as usually pertaining to the particular officer or agent, and such apparent powers as the
corporation has caused persons dealing with the officer or agent to believe that it has conferred.”
While there can be no question that Mr. Maglana was an officer -- the President and
Chairman -- of private respondent corporation at the time he signed Exhibit “A”, the above
provisions of said private respondent's By-Laws do not in any way confer upon the President the
authority to enter into contracts for the corporation independently of the Board of Directors. That
power is exclusively lodged in the latter. Nevertheless, to expedite or facilitate the execution of
the contract, only the President -- and not all the members of the Board, or so much thereof as
are required for the act -- shall sign it for the corporation. This is the import of the words through
the president in Exhibit “8- A” and the clear intent of the power of the chairman “to execute and
sign for and in behalf of the corporation all contracts and agreements which the corporation may
enter into” in Exhibit “I-1”. Both powers presuppose a prior act of the corporation exercised
through the Board of Directors. No greater power can be implied from such express, but limited,
delegated authority. Neither can it be logically claimed that any power greater than that
expressly conferred is inherent in Mr. Maglana's position as president and chairman of the
corporation.
Although there is authority “that if the president is given general control and supervision
over the affairs of the corporation, it will be presumed that he has authority to make contracts
and do acts within the course of its ordinary business,” We find such inapplicable in this case. We
note that the private corporation has a general manager who, under its By-Laws has, inter alia,
the following powers: “(a) to have the active and direct management of the business and
operation of the corporation, conducting the same according to the order, directives or
resolutions of the Board of Directors or of the president.” It goes without saying then that Mr.
Maglana did not have a direct and active hand in the management of the business and
operations of the corporation. Besides, no evidence was adduced to show that Mr. Maglana had,
in the past, entered into contracts similar to that of Exhibit “A” either with the petitioner or with
other parties.
2. ABS-CBN VS. COURT OF APPEALS
G.R. No. 128690 January 21, 1999

FACTS:
In 1990, ABS CBN and Viva executed a Film Exhibition Agreement whereby Viva gave
ABS CBN an exclusive right to exhibit some Viva films. Said agreement contained a stipulation
that ABS shall have the right of first refusal to the next twenty-four (24) Viva films for TV telecast
under such terms as may be agreed upon by the parties hereto, provided, however, that such
right shall be exercised by ABS-CBN from the actual offer in writing. Hence, through this
agreement, a list of three (3) film packages (36 title) from which ABS-CBN may exercise its right
of first refusal under the afore-said agreement. ABS however, through VP Concio, did not accept
the list since she could only tick off 10 films. This rejection was embodied in a letter. In 1992,
Viva again approached ABS with a list consisting of 52 original films where Viva proposed to sell
these airing rights for P60M. Viva’s Vic del Rosario and ABS‘ general manager Eugenio Lopez III
met at the Tamarind Grill to discuss this package proposal. What transcribed at that meeting was
subject to conflicting versions.
According to Lopez, he and del Rosario agreed that ABS was granted exclusive film rights
to 14 films for P36M, and that this was put in writing in a napkin, signed by Lopez and given to
del Rosario. On the other hand, del Rosario denied the existence of the napkin in which Lopez
wrote something, and insisted that what he and Lopez discussed was Viva’s film package of the
52 original films for P60M stated above, and that Lopez refused said offer, allegedly signifying his
intent to send a counter proposal. When the counter proposal arrived, Viva’s Board of Director
rejected it; hence, he sold the rights to the 52 original films to RBS.
Thus, ABS filed before RTC a complaint for specific performance with prayer for TRO
against RBS and Viva. RTC issued the TRO enjoining the airing of the films subject of
controversy. After hearing, RTC rendered its decision in favor of RBS and Viva contending that
there was no meeting of minds on the price and terms of the offer. The agreement between
Lopez and del Rosario was subject to Viva Board of Director approval, and since this was rejected
by the board, then, there was no basis for ABS’ demand that a contract was entered into
between them. That the 1990 Agreement with the right of first refusal was already exercised by
Ms. Concio when it rejected the offer, and such 1990 Agreement was an entirely new contract
other than the 1992 alleged agreement at the Tamarind Grill.

ISSUE:
Whether or not there was a perfected contract between Lopez and del Rosario.

RULING:
No. Contracts that are consensual in nature are perfected upon mere meeting of the
minds. Once there is concurrence between the offer and the acceptance upon the subject matter,
consideration, and terms of payment, a contract is produced. The offer must be certain. To
convert the offer into a contract, the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort
from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a
counter offer and is a rejection of the original offer. Consequently, when something is desired
which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate
consent because any modification or variation from the terms of the offer annuls the offer.
In the case at bar, when Del Rosario met with Lopez at the Tamarind Grill, the package
of 52 films was Viva‘s offer to enter into a new Exhibition Agreement. But ABS, through its
counter proposal sent to Viva, actually made a counter offer. Clearly, there was no acceptance.
The acceptance should be unqualified.
Under Corporation Code, unless otherwise provided by said Code, corporate powers,
such as the power; to enter into contracts; are exercised by the Board of Directors. However, the
Board may delegate such powers to either an executive committee or officials or contracted
managers. The delegation, except for the executive committee, must be for specific
purposes, Delegation to officers makes the latter agents of the corporation; accordingly, the
general rules of agency as to the bindings effects of their acts would apply. For such officers to
be deemed fully clothed by the corporation to exercise a power of the Board, the latter must
specially authorize them to do so. That Del Rosario did not have the authority to accept ABS-
CBN's counter-offer was best evidenced by his submission of the draft contract to VIVA's Board of
Directors for the latter's approval. In any event, there was between Del Rosario and Lopez III no
meeting of minds. 
3. MARC II MARKETING, INC. AND LUCILA V. JOSON VS. ALFREDO M. JOSON
G.R. No. 171993 December 12, 2011

FACTS:
Marc II Marketing, Inc. and Lucila Joson is assailing the decision of the CA for reversing
and settling aside the Resolution of the National Labor Relations Commission. Marc II Marketing,
Inc. is a corporation duly organized and existing under and by virtue of the laws of the
Philippines. It is primarily engaged in buying, marketing, selling and distributing in retail or
wholesale for export or import household appliances and products and other items. Petitioner
Lucila is the President and majority stockholder of the corporation. Before Marc II Marketing, Inc.
was officially incorporated, Alfredo has already been engaged by Lucila, in her capacity as
President, to work as General Manager of the corporation and it was formalized through the
execution of a Management Contract dated in 1994 under Marc Marketing, Inc., as Marc II
Marketing, Inc. was yet to be incorporated. For occupying the said position, respondent was
among the corporation‘s corporate officers by the express provision of Section 1, Article IV of its
by-laws.
Alfredo was appointed as one of its officers with the designation or title of General
Manager to function as a managing director with other duties and responsibilities that the Board
may provide and authorized. However, in 1997, Marc II Marketing Inc. decided to stop and cease
its operation as evidenced by an Affidavit of Non-Operation due to poor sales collection
aggravated by the inefficient management of its affairs. Alfredo was informed of the cessation of
its business operations and the termination of his services as General Manager. He filed action for
reinstatement and money claim against petitioners.

ISSUE:
Whether or not Marc II Marketing Inc.‘s Board of Directors could create a position for
corporate officers through an enabling clause found in its corporate by-laws.

RULING:
Yes. Accordingly, in determining whether the SEC (now the RTC) has jurisdiction over the
controversy, the status or relationship of the parties and the nature of the question that is the
subject of their controversy must be taken into consideration. With all the foregoing, this Court is
fully convinced that, indeed, respondent, though occupying the General Manager position, was
not a corporate officer of Petitioner Corporation rather he was merely its employee occupying a
high-ranking position.
Accordingly, respondent‘s dismissal as Petitioner Corporation‘s General Manager did not
amount to an intra-corporate controversy. Jurisdiction therefor properly belongs with the Labor
Arbiter and not with the RTC.
Having established that respondent was not Petitioner Corporation‘s corporate officer but
merely its employee, and that, consequently, jurisdiction belongs to the Labor Arbiter.
4. RAUL C. COSARE VS. BROADCOM ASIA, INC. AND DANTE AREVALO
G.R. No. 201298 February 5, 2014
FACTS:
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo,
who was then in the business of selling broadcast equipment needed by television networks and
production houses. In December 2000, Arevalo set up the company Broadcom, still to continue
the business of trading communication and broadcast equipment. Cosare was named an
incorporator of Broadcom, having been assigned 100 shares of stock with par value of ₱1.00 per
share. In October 2001, Cosare was promoted to the position of Assistant Vice President for Sales
(AVP for Sales) and Head of the Technical Coordination.
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for
Sales and thus, became Cosare’s immediate superior. On March 23, 2009, Cosare sent a
confidential memo to Arevalo to inform him of the anomalies which were allegedly being
committed by Abiog against the company.
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was
instead called for a meeting by Arevalo on March 25, 2009, wherein he was asked to tender his
resignation in exchange for "financial assistance" in the amount of ₱300,000.00. Cosare refused
to comply with the directive, as signified in a letter dated March 26, 2009 which he sent to
Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s
Manager for Finance and Administration, a memo signed by Arevalo, charging him of serious
misconduct and willful breach of trust.
On April 1, 2009, Cosare was totally barred from entering the company premises, and
was told to merely wait outside the office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to seek the assistance of the officials
of Barangay San Antonio, Pasig City, and had the incident reported in the barangay blotter.
On April 2, 2009, Cosare attempted to furnish the company with a Memo by which he
addressed and denied the accusations cited in Arevalo’s memo dated March 30, 2009. The
respondents refused to receive the memo on the ground of late filing, prompting Cosare to serve
a copy thereof by registered mail. The following day, April 3, 2009, Cosare filed the subject labor
complaint, claiming that he was constructively dismissed from employment by the respondents.
He further argued that he was illegally suspended, as he placed no serious and imminent threat
to the life or property of his employer and co-employees.
In refuting Cosare’s complaint, the respondents argued that Cosare was neither illegally
suspended nor dismissed from employment. They also contended that Cosare committed acts
inimical to the interests of Broadcom. Furthermore, they contended that Cosare abandoned his
job by continually failing to report for work beginning April 1, 2009, prompting them to issue on
April 14, 2009 a memorandum accusing Cosare of absence without leave beginning April 1, 2009.
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision
dismissing the complaint on the ground of Cosare’s failure to establish that he was dismissed,
constructively or otherwise, from his employment. Cosare appealed the LA decision to the NLRC.
On August 24, 2010, the NLRC rendered its Decision reversing the Decision of LA
Menese. The dispositive portion of the NLRC.
The respondents’ motion for reconsideration was denied. Dissatisfied, they filed a petition
for certiorari with the CA.
On November 24, 2011, the CA rendered the assailed Decision granting the respondents’
petition.
Cosare filed a motion for reconsideration, but this was denied by the CA via the Resolution.

ISSUE:
Whether or not the case instituted by Cosare was an intra-corporate dispute that was
within the original jurisdiction of the RTC, and not of the LAs; and
RULING:
No. It is the Labor Arbiter who has original jurisdiction over the subject controvercy.
 An intra-corporate controversy, which falls within the jurisdiction of regular courts, has
been regarded in its broad sense to pertain to disputes that involve any of the following
relationships: (1) between the corporation, partnership or association and the public; (2)
between the corporation, partnership or association and the state in so far as its franchise,
permit or license to operate is concerned; (3) between the corporation, partnership or association
and its stockholders, partners, members or officers; and (4) among the stockholders, partners or
associates, themselves. Settled jurisprudence, however, qualifies that when the dispute involves
a charge of illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose
jurisdiction, as a rule, falls termination disputes and claims for damages arising from employer-
employee relations as provided in Article 217 of the Labor Code. Consistent with this
jurisprudence, the mere fact that Cosare was a stockholder and an officer of Broadcom at the
time the subject controversy developed failed to necessarily make the case an intra-corporate
dispute.
In Matling Industrial and Commercial Corporation v. Coros, the Court distinguished
between a "regular employee" and a "corporate officer" for purposes of establishing the true
nature of a dispute or complaint for illegal dismissal and determining which body has jurisdiction
over it. Succinctly, it was explained that "the determination of whether the dismissed officer was
a regular employee or corporate officer unravels the conundrum" of whether a complaint for
illegal dismissal is cognizable by the LA or by the RTC. "In case of the regular employee, the LA
has jurisdiction; otherwise, the RTC exercises the legal authority to adjudicate.
Applying the foregoing to the present case, the LA had the original jurisdiction over the
complaint for illegal dismissal because Cosare, although an officer of Broadcom for being its AVP
for Sales, was not a "corporate officer" as the term is defined by law. We emphasized in Real v.
Sangu Philippines, Inc., we held:
" ‘Corporate officers’ are those officers of the corporation who are given that character by
the Corporation Code or by the corporation’s by-laws. There are three specific officers whom a
corporation must have under Section 25 of the Corporation Code. These are the president,
secretary and the treasurer.
There are two circumstances which must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer, namely:
(1) the creation of the position is under the corporation’s charter or by-laws; and
(2) the election of the officer is by the directors or stockholders. It is only when the
officer claiming to have been illegally dismissed is classified as such corporate officer that
the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the
trial courts.
The respondents referred to Section 1, Article IV of Broadcom’s by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment – Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice-President, the Treasurer, and
the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper. Any two (2) or more compatible positions may be held concurrently by the
same person, except that no one shall act as President and Treasurer or Secretary at the same
time.
This was also the CA’s main basis in ruling that the matter was an intra-corporate dispute
that was within the trial courts’ jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the
aforequoted provision, the only officers who are specifically listed, and thus with offices that are
created under Broadcom’s by-laws are the following: the President, Vice-President, Treasurer and
Secretary. Although a blanket authority provides for the Board’s appointment of such other
officers as it may deem necessary and proper, the respondents failed to sufficiently establish that
the position of AVP for Sales was created by virtue of an act of Broadcom’s board, and that
Cosare was specifically elected or appointed to such position by the directors. No board
resolutions to establish such facts form part of the case records. Further, it was held in Marc II
Marketing, Inc. v. Joson that an enabling clause in a corporation’s by-laws empowering its board
of directors to create additional officers, even with the subsequent passage of a board resolution
to that effect, cannot make such position a corporate office. The board of directors has no power
to create other corporate offices without first amending the corporate by-laws so as to include
therein the newly created corporate office.
The CA’s heavy reliance on the contents of the General Information Sheets, which were
submitted by the respondents during the appeal proceedings and which plainly provided that
Cosare was an "officer" of Broadcom, was clearly misplaced. The said documents could neither
govern nor establish the nature of the office held by Cosare and his appointment thereto.
Furthermore, although Cosare could indeed be classified as an officer as provided in the General
Information Sheets, his position could only be deemed a regular office, and not a corporate office
as it is defined under the Corporation Code.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the
case’s filing did not necessarily make the action an intra- corporate controversy. "Not all conflicts
between the stockholders and the corporation are classified as intra-corporate. There are other
facts to consider in determining whether the dispute involves corporate matters as to consider
them as intra-corporate controversies." Time and again, the Court has ruled that in determining
the existence of an intra-corporate dispute, the status or relationship of the parties and the
nature of the question that is the subject of the controversy must be taken into account.
Considering that the pending dispute particularly relates to Cosare’s rights and obligations as a
regular officer of Broadcom, instead of as a stockholder of the corporation, the controversy
cannot be deemed intra-corporate. This is consistent with the "controversy test" explained by the
Court in Reyes v. Hon. RTC, Br. 142, to wit:
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The
controversy must not only be rooted in the existence of an intra-corporate relationship, but must
as well pertain to the enforcement of the parties’ correlative rights and obligations under the
Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If the
relationship and its incidents are merely incidental to the controversy or if there will still be
conflict even if the relationship does not exist, then no intra-corporate controversy exists.
It is then evident that the CA erred in reversing the NLRC’s ruling that favored Cosare
solely on the ground that the dispute was an intra-corporate controversy within the jurisdiction of
the regular courts.
5. G.R. No. 149454 May 28, 2004
BANK OF THE PHILIPPINE ISLANDS VS. CASA MONTESSORI INTERNATIONALE
LEONARDO T. YABUT
X ----------------------------- X
G.R. NO. 149507 MAY 28, 2004
CASA MONTESSORI INTERNATIONALE VS. BANK OF THE PHILIPPINE ISLANDS
FACTS:
“On November 8, 1982, plaintiff CASA Montessori International opened Current Account
with defendant BPI[,] with CASA’s President Ms. Ma. Carina C. Lebron as one of its authorized
signatories.
“In 1991, after conducting an investigation, plaintiff discovered that nine (9) of its checks
had been encashed by a certain Sonny D. Santos since 1990 in the total amount of ₱782,000.00.
“It turned out that ‘Sonny D. Santos’ with account at BPI’s Greenbelt Branch [was] a
fictitious name used by third party defendant Leonardo T. Yabut who worked as external auditor
of CASA. Third party defendant voluntarily admitted that he forged the signature of Ms. Lebron
and encashed the checks. “The PNP Crime Laboratory conducted an examination of the nine (9)
checks and concluded that the handwritings thereon compared to the standard signature of Ms.
Lebron were not written by the latter.
“On March 4, 1991, plaintiff filed the herein Complaint for Collection with Damages
against defendant bank praying that the latter be ordered to reinstate the amount of
₱782,500.007 in the current and savings accounts of the plaintiff with interest at 6% per annum.
“On February 16, 1999, the RTC rendered the appealed decision in favor of the plaintiff.”
Ruling of the Court of Appeals
Modifying the Decision of the Regional Trial Court (RTC), the CA apportioned the loss
between BPI and CASA. The appellate court took into account CASA’s contributory negligence
that resulted in the undetected forgery. It then ordered Leonardo T. Yabut to reimburse BPI half
the total amount claimed; and CASA, the other half. It also disallowed attorney’s fees and moral
and exemplary damages.
ISSUES:
1. was there forgery under the Negotiable Instruments Law (NIL)?
2. were any of the parties negligent and therefore precluded from setting up forgery as a
defense?
3. should moral and exemplary damages, attorney’s fees, and interest be awarded?
RULING:
First Issue: Forged Signature Wholly Inoperative (Section 23 of the NIL provides:)
“Section 23. Forged signature; effect of. — When a signature is forged or made without
the authority of the person whose signature it purports to be, it is wholly inoperative, and no
right x x x to enforce payment thereof against any party thereto, can be acquired through or
under such signature, unless the party against whom it is sought to enforce such right is
precluded from setting up the forgery or want of authority.”
Under this provision, a forged signature is a real or absolute defense, and a person
whose signature on a negotiable instrument is forged is deemed to have never become a party
thereto and to have never consented to the contract that allegedly gave rise to it. The
counterfeiting of any writing, consisting in the signing of another’s name with intent to defraud,
is forgery.
In the present case, we hold that there was forgery of the drawer’s signature on the
check.
First, both the CA and the RTC found that Respondent Yabut himself had voluntarily
admitted, through an Affidavit, that he had forged the drawer’s signature and encashed the
checks. He never refuted these findings. That he had been coerced into admission was not
corroborated by any evidence on record.
Second, the appellate and the trial courts also ruled that the PNP Crime Laboratory, after
its examination of the said checks, had concluded that the handwritings thereon — compared to
the standard signature of the drawer — were not hers. This conclusion was the same as that in
the Report that the PNP Crime Laboratory had earlier issued to BPI — the drawee bank — upon
the latter’s request.
Second Issue:  Negligence Attributable to BPI Alone
Having established the forgery of the drawer’s signature, BPI — the drawee — erred in
making payments by virtue thereof. The forged signatures are wholly inoperative, and CASA —
the drawer whose authorized signatures do not appear on the negotiable instruments — cannot
be held liable thereon. Neither is the latter precluded from setting up forgery as a real defense.
Clear Negligence in Allowing Payment Under a Forged Signature
We have repeatedly emphasized that, since the banking business is impressed with
public interest, of paramount importance thereto is the trust and confidence of the public in
general. Consequently, the highest degree of diligence is expected, and high standards of
integrity and performance are even required, of it. By the nature of its functions, a bank is “under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.”
BPI contends that it has a signature verification procedure, in which checks are honored
only when the signatures therein are verified to be the same with or similar to the specimen
signatures on the signature cards. Nonetheless, it still failed to detect the eight instances of
forgery. Its negligence consisted in the omission of that degree of diligence required of a bank. It
cannot now feign ignorance, for very early on we have already ruled that a bank is “bound to
know the signatures of its customers; and if it pays a forged check, it must be considered as
making the payment out of its own funds, and cannot ordinarily charge the amount so paid to
the account of the depositor whose name was forged.” Despite the examination procedures it
conducted, the Central Verification Unit of the bank even passed off these evidently different
signatures as genuine. Without exercising the required prudence on its part, BPI accepted and
encashed the eight checks presented to it. As a result, it proximately contributed to the fraud and
should be held primarily liable for the “negligence of its officers or agents when acting within the
course and scope of their employment.”It must bear the loss.
Third Issue: Award of Monetary Claims
We deny CASA’s claim for moral damages.
As a general rule, a corporation — being an artificial person without feelings, emotions
and senses, and having existence only in legal contemplation — is not entitled to moral damages,
because it cannot experience physical suffering and mental anguish. However, for breach of the
fiduciary duty required of a bank, a corporate client may claim such damages when its good
reputation is besmirched by such breach, and social humiliation results therefrom.  CASA was
unable to prove that BPI had debased the good reputation of, and consequently caused
incalculable embarrassment to, the former. CASA’s mere allegation or supposition thereof,
without any sufficient evidence on record, is not enough.
We also deny CASA’s claim for exemplary damages. But Attorney’s Fees Granted and
Interest Allowed.
6. BENJIE B. GEORG VS. HOLY TRINITY COLLEGE, INC.
G.R. No. 190408 July 20, 2016

FACTS:
The Holy Trinity College Grand Chorale and Dance Company (the Group) was organized
in 1987 by Sister Teresita Medalle (Sr. Medalle), the President of respondent Holy Trinity College
in Puerto Princesa City. The Grand Chorale and Dance Company were two separate groups but
for the purpose of performing locally or abroad, they were usually introduced as one entity. The
Group was composed of students from Holy Trinity College.
In 2001, the Group was slated to perform in Greece, Italy, Spain and Germany. Edward
Enriquez, who allegedly represented Sr. Medalle, contacted petitioner Benjie B. Georg to seek
assistance for payment of the Group's international airplane tickets. Petitioner is the Filipino wife
of a German national Heinz Georg. She owns a German travel agency named DTravellers
Reiseburo Georg. Petitioner, in turn, requested her brother, Atty. Benjamin Belarmino, Jr. to
represent her in the negotiation with Enriquez. Enriquez was referred to petitioner by Leonora
Dietz, another Filipino-German who has helped Philippine cultural groups obtain European
engagements, including financial assistance.
On 24 April 2001, a MOA with Deed of Assignment was executed between petitioner,
represented by Atty. Belarmino, as first party-assignee; the Group, represented by Sr. Medalle,
O.P. and/or its Attorney-in-Fact Enriquez, as second-party assignor and S.C. Roque Group of
Companies Holding Limited Corporation and S.C. Roque Foundation Incorporated, represented by
Violeta P. Buenaventura, as foundation-grantor. Under the said Agreement, petitioner, through
her travel agency, will advance the payment of international airplane tickets amounting to
P4,624,705.00 in favor of the Group on the assurance of the Group represented by Sr. Medalle
through Enriquez that there is a confirmed financial allocation of P4,624,705.00 from the
foundation-grantor, S.C. Roque Foundation. The second-party assignor assigned said amount in
favor of petitioner. Petitioner paid for the Group's domestic and international airplane tickets.
Petition claimed that the second-party assignor/respondent and the foundation-grantor
have not paid and refused to pay their obligation under the MOA. Petitioner prayed that they be
ordered to solidarily pay the amount of P4,624,705.00 representing the principal amount
mentioned in the Agreement, moral, exemplary, and actual damages, legal fees, and cost of suit.
ISSUE:
The primordial issue is whether respondent is liable under the MOA.
RULING:
The trial court categorically ruled that Sr. Medalle affixed her thumbmark as President of
Holy Trinity College and therefore, respondent is a party to the MOA, viz:
From the foregoing discussion and gathering also from the circumstances that is more or
less contemporaneous and subsequent to the execution of the Memorandum of Agreement, this
[c]ourt holds the view that when Sr. Teresita Medalle, O.P. affixed her thumb mark in the
Memorandum of Agreement, that it was in her capacity as the President of the Holy Trinity
College and not that of the Holy Trinity College Grand Chorale and Dance Company.

As aptly found the adjective "ITS" in the Memorandum of Agreement which describes the Parties
thereat as:
HOLY TRINITY COLLEGE GRAND CHORALE & DANCE COMPANY Co., with postal address at Holy
Trinity College. Puerto Princesa City, Palawan, herein represented by its President Sister
TERESITA M. MEDALLE, O.P. and/or its attorney-in-fact EDWARD V. ENRIQUEZ...
is descriptive that the entity being referred to is indeed the Holy Trinity College.
Otherwise, if what were represented to by Sr. Teresita Medalle, O.P. was the Holy Trinity College
Grand Chorale and Dance Co., it might have been written as:
Holy Trinity College Grand Chorale & Dance Company., represented by its President
Sister Medalle, O.P., and/or its attorney-in-fact Edward V. Enriquez, with postal address at Holy
Trinity College, Puerto Princesa City Palawan.
The [c]ourt gives credence though to the testimony of Jearold Loyola that indeed the
said Grand Chorale and Dance Company are not registered with the Securities and Exchange
Commission and is therefore possessing no juridical personality and merely owe its life and
existence through the school administration of the Holy Trinity College through its President, Holy
Trinity College. There is no doubt indeed, that Sister Teresita Medalle was the President of the
Holy Trinity College. She was never at any given time the President of the Holy Trinity Collge
Grand Chorale & Dance Company, which is just similar to any science or math club in the school.
We do not expect much less find it absurb that Sister Teresita Medalle, O.P. being the school
President and Vice Chairman of the Board of Trustees would allow herself to go down to her level
and hold a position as a President of student organization.
With the foregoing disquisitions, the import of the participation of Sister Teresita Medalle.
O.P. in that Memorandum of Agreement, was in her capacity as the Holy Trinity College, Inc.,
Puerto Princesa City, Palawan. This Court cannot isolate the fact that right at the very
commencement of conceptualization of the said European Tour 2001 sometime in 2001, it was
Sister Teresita Medalle who spearheaded the whole activity. As above-mentioned, Sister Teresita
Medalle personally communicated with Leonor Dietz, their coordinator in Germany and has
herself made arrangement for the procurement of the visa of the group. The Grand Chorale and
Dance Co., as testified to by Jearold Loyola have no hands (sic) at all in the financial aspect of
the group. It was also Sister Teresita Medalle who arranges for the itinerary of the group and
they have no discretion of disobeying. This makes clear to the understanding of the [cjourt that
[njot all contracts are drawn in perfection. Otherwise, there would have been no case at all that
reached the courts of law.
Per records, it appears that the Holy Trinity Grand Chorale and Dance Company were
actually two separate entities formed and organized by Sr. Medalle in her capacity as President of
Holy Trinity College. Sr. Medalle made the following admission in her deposition.
Moreover, it was established, through the testimonies of the Group's Artistic Director,
Jearold Loyola, the Musical Director, and Vocal Coach Errol Gallespen, that they were hired and
given honorarium by Sr. Medalle. The costumes of the Group were financed by respondent. They
also testified that all the performances of the group were directly under the supervision of the
school administration. Effectively, respondent has control and supervision of the Group
particularly in the selection, hiring and termination of the members. The trial court was convinced
that the Group derived its existence and continuous operation from the school administration.
Pertinently, the Court found:
The [c]ourt also found from the testimony of Jearold Loyola that in fact, the name Holy
Trinity College Grand Chorale and Dance Company, is a joint common calling of two (2) separate
performing groups, that is:
Holy Trinity College Grand Chorale, and Holy Trinity College Dance Company.
The Holy Trinity College Grand Chorale is being headed by Errol Gallespen as the Musical
Director while the Holy Trinity College Dance Company is headed by Jearold Loyola as the Artistic
Director. Because they usually perform together; that for brevity they were commonly called as
Holy Trinity College Grand Chorale and Dance Company.
The nature of the said performing groups as well as their relation with the Memorandum
of Agreement under consideration, is briefly described by Jearold Loyola.
In fine, the school administration of the Holy Trinity College has control and supervision
of the Grand Chorale and Dance Company particularly in the selection and hiring of its trainers
but as to their termination as well. A fortiori, Jearold Loyola and Errol Gallespen were formally
severed per April 30, 2001 Letter of Sr. Estrella Tangan. This clearly shows that indeed, the Holy
Trinity College Grand Chorale and Dance Company were both under the power of the school
administration. Moreover, it is also clear that the costumes were likewise financed by the school
administration.
With the foregoing, the [c]ourt is convinced that the indeed the Holy Trinity College
Grand Chorale and Dance Company do not have a life of its own and merely derive its creation,
existence and continued operation or performance at the hands of the school administration.
Without the decision of the school administration, the said Chorale and Dance Company is
completely inoperative.
Sr. Aurelia Navarro (Sr. Navarro) claimed that she was appointed as Acting President on
21 March 2001. The trial court correctly observed some inconsistencies in the statements of Sr.
Tangan and Sr. Navarro, to wit:
This [c]ourt also finds it confusing as well, when and if at all Sister Teresita Medalle,
ceased to be the President of the Holy Trinity College. The own testimonial and documentary
evidence of the [respondent] Holy Trinity College is seemingly conflicting and more so that the
defense is conflicting. It was admitted, though by both parties that the thumb mark in the
Memorandum of Agreement dated April 24, 2001, was that of Sister Teresita Medalle during
which period Sister Aurelia Navarro so testified that Sister Teresita Medalle was the President per
appointment dated March 27, 2001 issued by Sr. Ma. Aurora R. Villanueva, Prioress General of
Congregation of St. Catherine of Siena (Exhibit 1). She knows this because she was the Secretary
attesting to the said appointment and considering that she was still a member of the Board of
Trustees during that date and until the year 2003.
The said appointment letter states, thus:
I direct you to accept the office of President of the Holy Trinity College and to full your
duties with love and diligence for the good of the congregation and for the welfare of our Holy
Mother Church. It did not appear though that Sister Estrella Tangan accepted (as required) the
said appointment. No evidence was on this matter was presented.
On the other hand, the April 23, 2001 Letter of Estrella Tangan (Exhibit G) herself to Jearold
Loyola and Errol Gallespen, was clear to say that, it was not Sister Estrella Tangan who
succeeded as the President or acted as President but Sister Lina Tuyac, O.P.
Sr. Medalle, as President of Holy Trinity, is clothed with sufficient authority to enter into a loan
agreement. As held by the trial court, the Holy Trinity College's Board of Trustees never
contested the standing of the Dance and Chorale Group and had in fact lent its support in the
form of sponsoring uniforms or freely allowed the school premises to be used by the group for
their practice sessions. Assuming arguendo that Sr. Medalle was not authorized by the Holy
Trinity College Board, the doctrine of apparent authority applies in this case.
The doctrine of apparent authority provides that a corporation will be estopped from
denying the agent's authority if it knowingly permits one of its officers or any other agent to act
within the scope of an apparent authority, and it holds him out to the public as possessing the
power to do those acts.
The existence of apparent authority may be ascertained through (1) the general manner
in which the corporation holds out an officer or agent as having the power to act or, in other
words, the apparent authority to act in general, with which it clothes him; or (2) the
acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof,
whether within or beyond the scope of his ordinary powers.
In this case, Sr. Medalle formed and organized the Group. She had been giving financial
support to the Group, in her capacity as President of Holy Trinity College. Sr. Navarro admitted
that the Board of Trustees never questioned the existence and activities of the Group. Thus, any
agreement or contract entered into by Sr. Medalle as President of Holy Trinity College relating to
the Group bears the consent and approval of respondent. It is through these dynamics that we
cannot fault petitioner for relying on Sr. Medalle's authority to transact with petitioner.
Finding that Sr. Medalle possessed full mental faculty in affixing her thumbmark in the
MOA and that respondent is hereby bound by her actions, we reverse the ruling of the Court of
Appeals.
7. MITA PARDO DE TAVERA vs. PHILIPPINE TUBERCULOSIS SOCIETY, INC., et al
GR. No. L-48928 February 25, 1982

FACTS:
The plaintiff alleges that she is a doctor of Medicine by profession and a recognized
specialist in the treatment of tuberculosis and that she was a member of the Board of Directors
of the defendant Society, in representation of the Philippine Charity Sweepstakes Office. She was
also duly appointed as Executive Secretary of the Society. However, she was removed from such
position without any cause. This was denied by the respondents. The appellate courts rendered
decision in favor of respondents.
ISSUE:
Whether or not the petitioner is an officer of the corporation.
RULING:
No. Although the minutes of the organizational meeting show that the Chairman
mentioned the need of appointing a "permanent" Executive Secretary, such statement alone
cannot characterize the appointment of petitioner without a contract of employment definitely
fixing her term because of the specific provision of Section 7.02 of the Code of By-Laws that:
"The Executive Secretary, the Auditor, and all other officers and employees of the Society shall
hold office at the pleasure of the Board of Directors, unless their term of employment shall have
been fixed in their contract of employment." Besides the word permanent" could have been used
to distinguish the appointment from acting capacity".
The absence of a fixed term in the letter addressed to petitioner informing her of her
appointment as Executive Secretary is very significant. This could have no other implication than
that petitioner held an appointment at the pleasure of the appointing power.
An appointment held at the pleasure of the appointing power is in essence temporary in
nature. It is co-extensive with the desire of the Board of Directors. Hence, when the Board opts
to replace the incumbent, technically there is no removal but only an expiration of term and in an
expiration of term, there is no need of prior notice, due hearing or sufficient grounds before the
incumbent can be separated from office. The protection afforded by Section 7.04 of the Code of
By-Laws on Removal of Officers and Employees, therefore, cannot be claimed by petitioner.
9. G.R. Nos. 163356-57               July 10, 2015
JOSE A. BERNAS, CECILE H. CHENG, VICTOR AFRICA, JESUS B. MARAMARA, JOSE T.
FRONDOSO, IGNACIO T. MACROHON, JR., AND PAULINO T. LIM, ACTING IN THEIR
CAP A CITY AS INDIVIDUAL DIRECTORS OF MAKATI SPORTS CLUB, INC., AND ON
BEHALF OF THE BOARD OF DIRECTORS OF MAKATI SPORTS CLUB, 
VS.
JOVENCIO F. CINCO, VICENTE R. AYLLON, RICARDO G. LIBREA, SAMUEL L.
ESGUERRA, ROLANDO P. DELA CUESTA, RUBEN L. TORRES, ALEX Y. PARDO, MA.
CRISTINA SIM, ROGER T. AGUILING, JOSE B. QUIMSON, CELESTINO L. ANG, ELISEO
V. VILLAMOR, FELIPE L. GOZON, CLAUDIO B. ALTURA, ROGELIO G. VILLAROSA,
MANUEL R. SANTIAGO, BENJAMIN A. CARANDANG, REGINA DE LEON-HERLIHY,
CARLOS Y. RAMOS, JR., ALEJANDRO Z. BARIN, EFRENILO M. CAYANGA AND JOHN
DOES.
x-----------------------x
G.R. Nos. 163368-69
JOVENCIO F. CINCO, RICARDO G. LIBREA AND ALEX Y. PARDO VS.
JOSE A BERNAS, CECILE H. CHENG AND IGNACIO A. MACROHON

FACTS:
Makati Sports Club (MSC) is a domestic corporation duly organized and existing under
Philippine laws for the primary purpose of establishing, maintaining, and providing social,
cultural, recreational and athletic activities among its members.
Petitioners in G.R. Nos. 163356-57, Jose A. Bernas (Bernas), Cecile H. Cheng, Victor Africa, Jesus
Maramara, Jose T. Frondoso, Ignacio T. Macrohon and Paulino T. Lim (Bernas Group) were
among the Members of the Board of Directors and Officers of the corporation whose terms were
to expire either in 1998 or 1999.
Petitioners in G.R. Nos. 163368-69 Jovencio Cinco, Ricardo Librea · and Alex Y. Pardo
(Cinco Group) are the members and stockholders of the corporation who were elected Members
of the Board of Directors and Officers of the club during the 17 December 1997 Special
Stockholders Meeting.
Alarmed with the rumored anomalies in handling the corporate funds, the MSC Oversight
Committee (MSCOC), composed of the past presidents of the club, demanded from the Bernas
Group, who were then incumbent officers of the corporation, to resign from their respective
positions to pave the way for the election of new set of officers. Resonating this clamor were the
stockholders of the corporation representing at least 100 shares who sought the assistance of the
MSCOC to call for a special stockholders meeting for the purpose of removing the sitting officers
and electing new ones. Pursuant to such request, the MSCOC called a Special Stockholders'
Meeting and sent out notices to all stockholders and members stating therein the time, place and
purpose of the meeting. For failure of the Bernas Group to secure an injunction before the
Securities Commission (SEC), the meeting proceeded wherein Jose A. Bernas, Cecile H. Cheng,
Victor Africa, Jesus Maramara, Jose T. Frondoso, Ignacio T. Macrohon, Jr. and Paulino T. Lim
were removed from office and, in their place and stead, Jovencio F. Cinco, Ricardo G. Librea,
Alex Y. Pardo, Roger T. Aguiling, Rogelio G. · Villarosa, Armando David, Norberto Maronilla,
Regina de Leon-Herlihy and Claudio B. Altura, were elected.
Aggrieved by the turn of events, the Bernas Group initiated an action before the
Securities Investigation and Clearing Department (SICD) of the SEC docketed as SEC Case No.
5840 seeking for the nullification of the 17 December 1997 Special Stockholders Meeting on the
ground that it was improperly called.
For their part, the Cinco Group insisted that the 17 December 1997 Special Stockholders'
Meeting is sanctioned by the Corporation Code and the MSC by-laws.
Meanwhile, the newly elected directors initiated an investigation on the alleged anomalies in
administering the corporate affairs and after finding Bernas guilty of irregularities, the Board
resolved to expel him from the club by selling his shares at public auction. After the
notice requirement was complied with, Bernas' shares was accordingly sold for ₱902,000.00 to
the highest bidder:
 An Annual Stockholders' Meeting was held on 20 April 1998 pursuant to Section 8 of the
MSC bylaws. During the said meeting, which was attended by 1,017 stockholders representing
2/3 of the outstanding shares, the majority resolved to approve, confirm and ratify, among
others, the calling and holding of 17 December 1997 Special Stockholders' Meeting, the acts and
resolutions adopted therein including the removal of Bernas Group from the Board and the
election of their replacements.
Due to the filing of several petitions for and against the removal of the Bernas Group
from the Board pending before the SEC resulting in the piling up of legal controversies involving
MSC, the SEC En Banc, in its Decision dated 30 March 1999, resolved to supervise the holding of
the 1999 Annual Stockholders' Meeting. During the said meeting, the stockholders once again
approved, ratified and confirmed the holding of the 17 December 1997 Special Stockholders'
Meeting.
The conduct of the 17 December 1997 Special Stockholders' Meeting was likewise ratified
by the stockholders during the 2000 Annual Stockholders' Meeting which was held on 17 April
2000.
On 9 May 2000, the SICD rendered a Decision in SEC Case No. 12-. 97-5840 finding, among
others, that the 17 December 1997 Special Stockholders' Meeting and the Annual Stockholders'
Meeting conducted on 20 April 1998 and 19 April 1999 are invalid. The SICD likewise nullified the
expulsion of Bernas from the corporation and the sale of his share at the public auction. The
dispositive portion of the said decision reads:
WHEREFORE, in view of the foregoing considerations this Office, through the undersigned
Hearing Officer, hereby declares as follows:
(1) The supposed Special Stockholders' Meeting of December 17, 1997 was prematurely
or invalidly called by the [the Cinco Group]. It therefore failed to produce any legal
effects and did not effectively remove [the Bernas Group] as directors of the Makati
Sports Club, Inc.
(2) The April 20, 1998 meeting was not attended by a sufficient number of valid proxies.
No quorum could have been present at the said meeting. No corporate business could
have been validly completed and/or transacted during the said meeting. Further, it was
not called by the validly elected Corporate Secretary Victor Africa nor presided over by
the validly elected president Jose A. Bernas. Even if the April 20, 1998 meeting was valid,
it could not ratify the December 17, 1997 meeting because being a void meeting, the
December 1 7, 1997 meeting may not be ratified.
(3) The April 1998 meeting was null and void and therefore produced no legal effect.
(4) The April 1999 meeting has not been raised as a defense in the Answer nor assailed
in a supplemental complaint. However, it has been raised by [the Cinco Group] in a
manifestation dated April 21, 1999 and in their position paper dated April 8, 2000. Its
legal effects must be the subject of this Decision in order to put an end to the
controversy at hand. In the first place, by [the Cinco Group's] own admission, the alleged
attendance at the April 1999 meeting amounted to less than 2/3 of the stockholders
entitled to vote, the minimum number required to effect a removal. No removal or
ratification of a removal may be effected by less than 2/3 vote of the stockholders.
Further, it cannot ratify the December 1997 meeting for failure to adhere to the
requirement of the By-laws on notice as explained in paragraph (2) above, even if it was
accompanied by valid proxies, which it was not.
(5) The [the Cinco Group], their agents, representatives and all persons acting for and
conspiring on their behalf, are hereby permanently enjoined from carrying into effect the
resolutions and actions adopted during the 17 December 1997 and April 20, 1998
meetings and of the Board of Directors and/or other stockholders' meetings resulting
therefrom, and from performing acts of control and management of the club.
(6) The expulsion of complainant Jose A. Bernas as well as the public auction of his share
is hereby declared void and without legal effect, as prayed for. While it is true that [the
Cinco Group] were no.t restrained from acting as directors during the pendency of this
case, their tenure as directors prior to this Decision is in the nature of de facto directors
of a de facto Board. Only the ordinary acts of administration which [the Cinco Group]
carried out de facto in good faith are valid. Other acts, such as political acts and the
expulsion or other disciplinary acts imposed on the [the Bernas Group] may not be
appropriately taken by de facto officers because the legality of their tenure as directors is
not complete and subject to the outcome of this case.
 (7) No awards for damages and attorney's fees.
On appeal, the SEC En Banc, in its 12 December 2000 Decision 19 reversed the findings of
the SICD and validated the holding of the 17 December 1997 Special Stockholders' Meeting as
well as the Annual Stockholders' Meeting held on 20 April 1998 and 19 April 1999.
On 28 April 2003, the Court of Appeals rendered a Decision declaring the 17 December
1997 Special Stockholders' Meeting invalid for being improperly called but affirmed the actions
taken during the Annual Stockholders' Meeting held on 20 April 1998, 19 April 1999 and 17 April
2000.
In a Resolution dated 27 April 2004, the appellate court refused to reconsider its earlier
decision.
Aggrieved by the disquisition of the Court of Appeals, both parties elevated the case
before this Court by filing their respective Petitions for Review on Certiorari. While the Bernas
Group agrees with the disquisition of the appellate court that the Special Stockholders' Meeting is
invalid for being called by the persons not authorized to do so, they urge the Court to likewise
invalidate the holding of the subsequent Annual Stockholders' Meetings invoking the application
of the holdover principle. The Cinco Group, for its part, insists that the holding. of 17 December
1997 Special Stockholders' Meeting is valid and binding underscoring the overwhelming
ratification made by the stockholders during the subsequent annual stockholders' meetings and
the previous refusal of the Corporate Secretary to call a special stockholders' meeting despite
demand. For the resolution of the Court are the following issues:
ISSUE:
(1) WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
17 DECEMBER 1997 SPECIAL STOCKHOLDERS' MEETING IS INVALID; AND
(2) WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO
NULLIFY THE HOLDING OF THE ANNUAL STOCKHOLDERS' MEETING ON 20 APRIL 1998,
19 APRIL 1999 AND 17 APRIL 2000.
RULING:
(1) No, the 17 December 1997 Special Stockholders' Meeting is null and void and produces
no effect.
Both the Corporation Code (on the provisions on Removal of Directors and Meetings) and the
MSC by-laws which govern the manner of calling and sending of notices of the annual
stockholders’ meeting and the special stockholders’ meeting were not followed.
Textually, only the President and the Board of Directors are authorized by the by-laws to call
a special meeting. In cases where the person authorized to call a meeting refuses, fails or
neglects to call a meeting, then the stockholders representing at least 100 shares, upon written
request, may file a petition to call a special stockholder's meeting.
The subsequent ratification made by the stockholders did not cure the substantive infirmity,
the defect having set in at the time the void act was done. The defect goes into the very
authority of the persons who made the call for the meeting. It is apt to recall that illegal acts of a
corporation which contemplate the doing of an act which is contrary to law, morals or public
order, or contravenes some rules of public policy or public duty, are, like similar transactions
between individuals, void. They cannot serve as basis for a court action, nor acquire validity by
performance, ratification or estoppel. The same principle can apply in the present case. The void
election of 17 December 1997 cannot be ratified by the subsequent Annual Stockholders'
Meeting.
A distinction should be made between corporate acts or contracts which are illegal and those
which are merely ultra vires. The former contemplates the doing of an act which are contrary to
law, morals or public policy or public duty, and are, like similar transactions between individuals,
void: They cannot serve as basis of a court action nor acquire validity by performance, ratification
or estoppel. Mere ultra vires acts, on the other hand, or those which are not illegal or void ab
initio, but are not merely within the scope of the articles of incorporation, are merely voidable
and may become binding and enforceable when ratified by the stockholders. The 1 7 December
1997 Meeting belongs to the category of the latter, that is, it is void ab initio and cannot be
validated.
Consequently, such Special Stockholders' Meeting called by the Oversight Committee cannot
have any legal effect. The removal of the Bernas Group, as well as the election of the Cinco
Group, effected by the assembly in that improperly called meeting is void, and since the Cinco
Group has no legal right to sit in the board, their subsequent acts of expelling Bernas from the
club and the selling of his shares. at the public auction, are likewise invalid.

(2) The subsequent Annual Stockholders' Meeting held on 20 April 1998, 19 April 1999 and
17 April 2000 are valid and binding except the ratification of the removal of the Bernas
Group and the sale of Bernas' shares at the public auction effected by the body during
the said meetings.
First, the 20 April 1998 Annual Stockholders Meeting was valid because it was sanctioned by
Section 845 of the MSC bylaws. Unlike in Special Stockholders Meeting wherein the bylaws
mandated that such meeting shall be called by specific persons only, no such specific
requirement can be obtained under Section 8.
Second, the 19 April 1999 Annual Stockholders Meeting is likewise valid because in addition to
the fact that it was conducted in accordance to Section 8 of the MSC bylaws, such meeting was
supervised by the SEC in the exercise of its regulatory and administrative powers to implement
the Corporation Code.
Needless to say, the conduct of SEC supervised Annual Stockholders Meeting gave rise to the
presumption that the corporate officers who won the election were duly elected to their positions
and therefore can be rightfully considered as de jure officers. As de jure officials, they can
lawfully exercise functions and legally perform such acts that are within the scope of the business
of the corporation except ratification of actions that are deemed void from the beginning.
Considering that a new set of officers were already duly elected in 1998 and 1999 Annual
Stockholders Meetings, the Bernas Group cannot be permitted to use the holdover principle as a
shield to perpetuate in office. Members of the group had no right to continue as directors of the
corporation unless reelected by the stockholders in a meeting called for that purpose every
year. They had no right to hold-over brought about by the failure to perform the duty incumbent
upon them. If they were sure to be reelected, why did they fail, neglect, or refuse to call the
meeting to elect the members of the board?
8. RANIEL V JOCHICO (G.R. NO. 153413)
Petitioners: NECTARINA S. RANIEL and MA. VICTORIA R. PAG-ONG
Respondents: PAUL JOCHICO, JOHN STEFFENS and SURYA VIRIYA

FACTS:
-Petitioners, together with respondents Paul Jochico (Jochico), John Steffens and Surya Viriya,
were incorporators and directors of Nephro, with Raniel acting as Corporate Secretary and
Administrator.
-Conflict started when petitioners questioned respondents' plan to enter into a joint venture with
the Butuan Doctors' Hospital and College, Inc.
-Petitioners claim that respondents tried to compel them to waive and assign their shares with
Nephro but they refused.
-Raniel sought an indefinite leave of absence due to stress, but was denied by Jochico, as Nephro
President.
-Raniel, nevertheless, did not report for work, causing Jochico to demand an explanation from
her why she should not be removed as Administrator and Corporate Secretary.
-Raniel replied, expressing her sentiments over the disapproval of her request for leave and
respondents' decision with regard to the Butuan venture.
-Jochico issued a Notice of Special Board Meeting.
-The Board passed several resolutions ratifying the disapproval of Raniel's request for leave,
dismissing her as Administrator of Nephro, declaring the position of Corporate Secretary vacant,
appointing Otelio Jochico as the new Corporate Secretary and authorizing the call of a Special
Stockholders' Meeting for the purpose of the removal of petitioners as directors of Nephro.
-Jochico issued the corresponding notices for the Special Stockholders' Meeting to be held on
February 16, 1998 which were received by petitioners on February 2, 1998. Again, they did not
attend the meeting. The stockholders who were present removed the petitioners as directors of
Nephro.
-Petitioners filed a case in SEC questioning their removal.
-SEC rendered its Decision in favor of the respondents.
-Petitioners filed a petition for review with the CA.
-CA affirmed SEC's decision with the modification that the renewal of petitioners as directors of
Nephro is declared valid.
-Respondents filed a Manifestation and Motion to Correct Typographical Error, stating that the
term "renewal" as provided in the CA Decision should be "removal."
-Petitioners filed a petition for review on certiorari.
-Petitioners raised basically the same argument they had before the SEC and the CA, i.e., their
removal from Nephro was not valid.

ISSUE:
Whether or not Pag-ong's removal as director and Raniel's removal as director and officer of
Nephro were valid.

HELD:
Yes, the removal was valid.
A corporation exercises its powers through its board of directors and/or its duly authorized
officers and agents, except in instances where the Corporation Code requires stockholders’
approval for certain specific acts.
Section 23 of the Corporation Code provides:
...a corporation’s board of directors is understood to be that body which (1) exercises all powers
provided for under the Corporation Code; (2) conducts all business of the corporation; and (3)
controls and holds all property of the corporation. Its members have been characterized as
trustees or directors clothed with a fiduciary character. Moreover, the directors may appoint
officers and agents and as incident to this power of appointment, they may discharge those
appointed.
Section 28 of the Corporation Code provides that only stockholders or members have the power
to remove the directors or trustees elected by them.
SEC. 28. Removal of directors or trustees. -- Any director or trustee of a corporation may be
removed from office by a vote of the stockholders holding or representing at least two-thirds
(2/3) of the outstanding capital stock, or if the corporation be a non-stock corporation, by a vote
of at least two-thirds (2/3) of the members entitled to vote: Provided, that such removal shall
take place either at a regular meeting of the corporation or at a special meeting called for the
purpose, and in either case, after previous notice to stockholders or members of the corporation
of the intention to propose such removal at the meeting. A special meeting of the stockholders or
members of a corporation for the purpose of removal of directors or trustees or any of them,
must be called by the secretary on order of the president or on the written demand of the
stockholders representing or holding at least a majority of the outstanding capital stock, or if it
be a non-stock corporation, on the written demand of a majority of the members entitled to vote.
Removal may be with or without cause: Provided, That removal without cause may not be used
to deprive minority stockholders or members of the right of representation to which they may be
entitled under Section 24 of this Code.
Furthermore, it was stressed that the settled rule that the findings of fact of administrative
bodies, such as the SEC, will not be interfered with by the courts in the absence of grave abuse
of discretion on the part of said agencies, or unless the aforementioned findings are not
supported by substantial evidence. They carry even more weight when affirmed by the CA. 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.
9. BERNAS V. CINCO (G.R. NO. 163356-57)
Petitioners: JOSE A. BERNAS, CECILE H. CHENG, VICTOR AFRICA, JESUS B.
MARAMARA, JOSE T. FRONDOSO, IGNACIO T. MACROHON, JR., AND PAULINO T. LIM,
ACTING IN THEIR CAP A CITY AS INDIVIDUAL DIRECTORS OF MAKATI SPORTS CLUB,
INC., AND ON BEHALF OF THE BOARD OF DIRECTORS OF MAKATI SPORTS CLUB
Respondents: JOVENCIO F. CINCO, VICENTE R. AYLLON, RICARDO G. LIBREA,
SAMUEL L. ESGUERRA, ROLANDO P. DELA CUESTA, RUBEN L. TORRES, ALEX Y.
PARDO, MA. CRISTINA SIM, ROGER T. AGUILING, JOSE B. QUIMSON, CELESTINO L.
ANG, ELISEO V. VILLAMOR, FELIPE L. GOZON, CLAUDIO B. ALTURA, ROGELIO G.
VILLAROSA, MANUEL R. SANTIAGO, BENJAMIN A. CARANDANG, REGINA DE LEON-
HERLIHY, CARLOS Y. RAMOS, JR., ALEJANDRO Z. BARIN, EFRENILO M. CAYANGA AND
JOHN DOES

FACTS:
-The issue revolves around Makati Sports Club (MSC).
-The Bernas Group were then incumbent officers of the corporation.
-Due to rumored anomalies in handling the corporate funds, the MSC Oversight Committee
(MSCOC), composed of the past presidents of the club, demanded from the Bernas Group to
resign from their respective positions to pave the way for the election of new set of officers.
-The stockholders of the corporation representing at least 100 shares sought the assistance of
the MSCOC to call for a special stockholders meeting for the purpose of removing the sitting
officers and electing new ones.
-MSCOC called a Special Stockholders' Meeting
-The meeting proceeded and the Bernas group was removed from office.
-The Bernas Group initiated an action before the Securities Investigation and Clearing
Department (SICD) with regards to the Special Stockholders' meeting on the ground that it was
improperly called.
-The Cinco Group insisted that the Special Stockholders' Meeting is sanctioned by the Corporation
Code and the MSC by-laws. They said that Section 25 of the MSC by-laws merely authorized the
Corporate Secretary to issue notices of meetings and nowhere does it state that such authority
solely belongs to him. It was further asseverated by the Cinco Group that it would be useless to
course the request to call a meeting thru the Corporate Secretary because he repeatedly refused
to call a special stockholders' meeting despite demands and even "filed a suit to restrain the
holding of a special meeting.
-The newly elected directors initiated an investigation on the alleged anomalies and after finding
Bernas guilty of irregularities, the Board resolved to expel him from the club by selling his shares
at public auction. After the notice requirement was complied with, Bernas' shares was accordingly
sold for ₱902,000.00 to the highest bidder.
-Prior to the resolution of SEC Case filed by the Bernas group, an Annual Stockholders' Meeting
was held pursuant to Section 8 of the MSC bylaws. During the said meeting, which was attended
by 1,017 stockholders representing 2/3 of the outstanding shares, the majority resolved to
approve, confirm and ratify, among others, the calling and holding of the Special Stockholders'
Meeting, the acts and resolutions adopted therein including the removal of Bernas Group from
the Board and the election of their replacements.
-SICD rendered a decision stating that both Special and Annual Meetings are invalid. It likewise
nullified the expulsion of Bernas from the corporation and the sale of his share at the public
auction.
-However, on appeal, SEC reversed the decision of SICD and validated the conduct of both
meetings.
-CA rendered a decision invalidating the Special Stockholder's meeting but affirmed the actions
taken during the Annual Stockholders' Meeting.
-Petitioners lifted the case to the High Court.
ISSUES:
1. Whether or not the CA erred in ruling that Special Stockholder's Meeting is invalid.
2. Whether or not the CA erred in failing to nullify the holing of the Annual Stockholders'
meeting.

HELD:
1. The High Court ruled that the Special Stockholders' Meeting is null and void and produces no
effect. It quoted Section 28 of the Corporation Code which sates the rules on the removal of the
Directors of the corporation by providing, inter alia, the persons authorized to call the meeting
and the number of votes required for the purpose of removal.
Any director or trustee of a corporation may be removed from office by a vote of the
stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or
if the corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the
members entitled to vote: Provided, That such removal shall take place either at a regular
meeting of the corporation or at a special meeting called for the purpose, and in either case,
after previous notice to stockholders or members of the corporation of the intention to propose
such removal at the meeting.
This was also reinforced by the MSC by-laws especially Sections 8, 10, and 25.
Only the President and the Board of Directors are authorized by the by-laws to call a special
meeting. In cases where the person authorized to call a meeting refuses, fails or neglects to call
a meeting, then the stockholders representing at least 100 shares, upon written request, may file
a petition to call a special stockholder's meeting.
The Special Stockholders' Meeting was called neither by the President nor by the Board of
Directors but by the MSCOC. While the MSCOC, as its name suggests, is created for the purpose
of overseeing the affairs of the corporation, nowhere in the by-laws does it state that it is
authorized to exercise corporate powers, such as the power to call a special meeting, solely
vested by law and the MSC by-laws on the President or the Board of Directors.
The underlying policy of the Corporation Code is that the business and affairs of a corporation
must be governed by a board of directors whose members have stood for election, and who have
actually been elected by the stockholders, on an annual basis. Only in that way can the continued
accountability to shareholders, and the legitimacy of their decisions that bind the corporation's
stockholders, be assured. The shareholder vote is critical to the theory that legitimizes the
exercise of power by the directors or officers over the properties that they do not own.
2. The Annual Stockholders' Meeting is valid because aside from the fact that it was conducted in
accordance to Section 8 of the MSC bylaws, the meeting was supervised by the SEC in the
exercise of its regulatory and administrative powers to implement the Corporation Code.
However, the ratification of the removal of the Bernas Group and the sale of Bernas' shares at
the public auction are invalid. These were void from the beginning. A void act cannot be the
subject of ratification.
10. VALLE VERDE COUNTRY CLUB INC V AFRICA (G.R. NO. 151969)
Petitioners: VALLE VERDE COUNTRY CLUB, INC., ERNESTO VILLALUNA, RAY GAMBOA,
AMADO M. SANTIAGO, JR., FORTUNATO DEE, AUGUSTO SUNICO, VICTOR SALTA,
FRANCISCO ORTIGAS III, ERIC ROXAS, in their capacities as members of the Board
of Directors of Valle Verde Country Club, Inc., and JOSE RAMIREZ
Respondents: VICTOR AFRICA

FACTS:
-During the 1996 Annual Stockholders’ Meeting of petitioner Valle Verde Country Club, Inc.
(VVCC), the VVCC Board of Directors were elected including Eduardo Makalintal (Makalintal) and
Jaime C. Dinglasan (Dinglasan) among others.
-From 1997-2001, the requisite quorum for the holding of the stockholders’ meeting could not be
obtained. Consequently, the directors continued to serve in the VVCC Board in a hold-over
capacity.
-In 1998, Makalintal and Dinglasan resigned as members of the boeard and were replaced by
Roxas and Ramirez, respectively, elected by the remaining members of the VVCC Board.
-Respondent Africa, a member of VVCC, questioned the election of Roxas and Ramirez as
members of the VVCC Board with the Securities and Exchange Commission (SEC) Regional Trial
Court (RTC), respectively.
-Africa claimed that a year after Makalintal’s and Dinglasans election as member of the VVCC
Board, their term – as well as those of the other members of the VVCC Board – should be
considered to have already expired. Thus, according to Africa, the resulting vacancy should have
been filled by the stockholders in a regular or special meeting called for that purpose, and not by
the remaining members of the VVCC Board, as was done in this case.
-In his complaint, Africa emphasized that the election of Roxas was contrary to Section 29, in
relation to Section 23, of the Corporation Code of the Philippines (Corporation Code).
-Both SEC and RTC sustained Africa’s complaint.
-No petition was actually filed with the Court of Appeals; thus, the appellate court considered the
case closed and terminated and the SEC’s ruling final and executory.
-VVCC appealed to the High Court to assail the decision.

ISSUE:
Whether or not the remaining directors of the corporation’s Board, still constituting a quorum,
can elect another director to fill in a vacancy caused by the resignation of a hold-over director.

HELD:
No.
The holdover period is not part of the term of office of a member of the board of directors.
Term is distinguished from tenure in that an officer’s "tenure" represents the term during which
the incumbent actually holds office. The tenure may be shorter (or, in case of holdover, longer)
than the term for reasons within or beyond the power of the incumbent.
When Section 23 of the Corporation Code declares that "the board of directors…shall hold office
for one (1) year until their successors are elected and qualified," the court construe the provision
to mean that the term of the members of the board of directors shall be only for one year; their
term expires one year after election to the office. The holdover period – that time from the lapse
of one year from a member’s election to the Board and until his successor’s election and
qualification – is not part of the director’s original term of office, nor is it a new term; the
holdover period, however, constitutes part of his tenure. Corollary, when an incumbent member
of the board of directors continues to serve in a holdover capacity, it implies that the office has a
fixed term, which has expired, and the incumbent is holding the succeeding term.
To assume that the vacancy is caused by resignation in 1998, and not by the expiration of term
in 1997, is both illogical and unreasonable. The resignation as a holdover director did not change
the nature of the vacancy; the vacancy due to the expiration of term had been created long
before his resignation.
There was no more unexpired term to speak of, as the one-year term had already expired.
Pursuant to law, the authority to fill in the vacancy caused by leaving lies with the VVCC’s
stockholders, not the remaining members of its board of directors.
11. WESTERN INSTITUTE OF TECHNOLOGY, INC. V SALAS (G.R. NO. 113032)
Petitioners: WESTERN INSTITUTE OF TECHNOLOGY, INC., HOMERO L. VILLASIS,
DIMAS ENRIQUEZ, PRESTON F. VILLASIS & REGINALD F. VILLASIS
Respondents: RICARDO T. SALAS, SALVADOR T. SALAS, SOLEDAD SALAS-TUBILLEJA,
ANTONIO S. SALAS, RICHARD S. SALAS & HON. JUDGE PORFIRIO PARIAN

FACTS:
-Private respondents, Ricardo T. Salas, Salvador T. Salas, Soledad Salas-Tubilleja, Antonio S.
Salas, and Richard S. Salas, belonging to the same family, are the majority and controlling
members of the Board of Trustees of Western Institute of Technology, Inc. (WIT), a stock
corporation engaged in the operation, among others, of an educational institution. According to
Homero L. Villasis, Dimas Enriquez, peston F. Villasis, and Reginald F. Villasis, the minority
stockholders of WIT, sometime in June 1986 in the principal office of WIT, a Special Board
Meeting was held.
-In attendance were other members of the Board including Reginald Villasis. Prior to said Special
Board Meeting, copies of notice thereof, dated 24 May 1986, were distributed to all Board
Members. The notice allegedly indicated that the meeting to be held on 1 June 1986 included
Item 6 which states that “Possible implementation of Art. III, Sec. 6 of the Amended By-Laws of
Western Institute of Technology, Inc. on compensation of all officers of the corporation.”
-In said meeting, the Board of Trustees passed Resolution 48, series 1986, granting monthly
compensation to Salas, et. al. as corporate officers retroactive 1 June 1985, in the following
amounts:
“Chairman 9,000.00/month, Vice Chairman P3,500.00/month, Corporate Treasurer
P3,500.00/month and Corporate Secretary -P3,500.00/month, retroactive June 1, 1985 and the
ten percentum of the net profits shall be distributed equally among the ten members of the
Board of Trustees. This shall amend and supercede any previous resolution.”
-On 13 March 1991, Homero Villasis, Preston Villasis, Reginald Villasis and Dimas Enriquez filed
an affidavit-complaint against Salas, et. al. before the Office of the City Prosecutor of Iloilo, as a
result of which 2 separate criminal informations, one for falsification of a public document under
Article 171 of the Revised Penal Code and the other for estafa under Article 315, par. 1(b) of the
RPC, were filed.
-The charge for falsification of public document was anchored on Salas, et. al.’s submission of
WIT’s income statement for the fiscal year 1985-1986 with the Securities and Exchange
Commission (SEC) reflecting therein the disbursement of corporate funds for the compensation of
Salas, et. al. based on Resolution 4, series of 1986, making it appear that the same was passed
by the board on 30 March 1986, when in truth, the same was actually passed on 1 June 1986, a
date not covered by the corporation’s fiscal year 1985-1986 (beginning May 1, 1995 and ending
April 30, 1986).
-Thereafter, trial for the two criminal cases (Criminal Cases 37097 and 37098), was consolidated.
After a full-blown hearing, Judge Porfirio Parian handed down a verdict of acquittal on both
counts dated 6 September 1993 without imposing any civil liability against the accused therein.
Villasis, et. al. filed a Motion for Reconsideration of the civil aspect of the RTC Decision which
was, however, denied in an Order dated 23 November 1993. Villasis, et. al. filed the petition for
review on certiorari.
-Significantly on 8 December 1994, a Motion for Intervention, dated 2 December 1994, was filed
before this Court by Western Institute of Technology, Inc., disowning its inclusion in the petition
and submitting that Atty. Tranquilino R. Gale, counsel for Villasis, et. al., had no authority
whatsoever to represent the corporation in filing the petition. Intervenor likewise prayed for the
dismissal of the petition for being utterly without merit. The Motion for Intervention was granted
on 16 January 1995.

ISSUE:
Whether or not he grant of compensation to Salas, et. al. is valid.

HELD:
Directors or trustees, as the case may be, are not entitled to salary or other compensation when
they perform nothing more than the usual and ordinary duties of their office.
This rule is founded upon a presumption that directors/trustees render service gratuitously, and
that the return upon their shares adequately furnishes the motives for service, without
compensation. Under Section 30 of the Corporation Code, there are only two (2) ways by which
members of the board can be granted compensation apart from reasonable per diems:
(1) when there is a provision in the by-laws fixing their compensation; and
(2) when the stockholders representing a majority of the outstanding capital stock at a regular or
special stockholders’ meeting agree to give it to them.
Also, the proscription, however, against granting compensation to director/trustees of a
corporation is not a sweeping rule. Worthy of note is the clear phraseology of Section 30 which
state:
“[T]he directors shall not receive any compensation, as such directors.”
The phrase as such directors is not without significance for it delimits the scope of the prohibition
to compensation given to them for services performed purely in their capacity as directors or
trustees. The unambiguous implication is that members of the board may receive compensation,
in addition to reasonable per diems, when they render services to the corporation in a capacity
other than as directors/trustees. Herein, resolution 48, s. 1986 granted monthly compensation to
Salas, et. al. not in their capacity as members of the board, but rather as officers of the
corporation, more particularly as Chairman, Vice-Chairman, Treasurer and Secretary of Western
Institute of Technology.
Clearly, therefore, the prohibition with respect to granting compensation to corporate
directors/trustees as such under Section 30 is not violated in this particular case.
Consequently, the last sentence of Section 30 which provides that “In no case shall the total
yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income
before income tax of the corporation during the preceding year” does not likewise find application
in this case since the compensation is being given to Salas, et. al. in their capacity as officers of
WIT and not as board members.
12. VIRATA ET AL V ALEJANDRO NG WEE, WESTMONT INVESTMENT CORP
(WINCORP)., ET AL (G.R. NO. 220926)
Petitioners: LUIS JUAN L. VIRATA and UEMMARA PHILIPPINES CORPORATION (now
known as CAVITEXINFRASTRUCTURE CORPORATION)
Respondents: ALEJANDRO NG WEE, WESTMONT INVESTMENT CORP., ANTHONY T.
REYES, SIMEON CUA, VICENTE CUALOPING, HENRY CUALOPING, MARIZA
SANTOSTAN, and MANUEL ESTRELLA

FACTS:
-The case arose from the complaint of Alejandro Ng Wee that Wincorp defrauded him of
investments by pairing him up with accredited borrower Power Merge Corporation despite its
“glaring inability to pay” back the loans as shown by its measly subscribed capital of P37.5
million.
-Wincorp extended a credit line to Power Merge and allowed the latter to make drawdowns
despite signs that would show Power Merge’s inability to pay.
-To secure the Credit Line Agreement and the Amendment to the Credit Line Agreement, Power
Merge executed promissory notes obliging itself to pay Wincorp, for itself or as agent for and on
behalf of certain investors the amount of the drawdowns with interest on the maturity of the
promissory note.
-However, unknown to Ng Wee, the promissory notes were rendered useless by the Side
Agreements, simultaneously executed by Ong and Reyes with the Credit Line Agreement and the
Amendment to Credit Line Agreement, which virtually exonerated Power Merge of its liability on
the promissory notes.

ISSUE:
-Considering Power Merge’s receipt of the said amount, whether it would be iniquitous and
immoral to require Santos-Tan and her co¬-directors in Wincorp to reimburse Virata of whatever
the latter would be required to pay Ng Wee.

HELD:
The Supreme Court has upheld the lower courts’ order for Westmont Investment Corporation
(Wincorp) and its executives to pay P213.29 million the Filipino-Chinese businessman.
It is well-settled that the juridical personality of a corporation may be removed or its corporate
veil pierced when the corporation is just an alter ego of a person or of another corporation. When
the corporation becomes a shield for fraud, illegality or inequity committed against third persons,
the corporate veil will, as a result, be disregarded for the interest of justice.
On the basis of fraud, the Court pierced the corporate veil of Wincorp and held the directors and
officers of the latter as personally liable to Ng Wee.
The basis of their liability was grounded on Section 31 of the Corporation Code when they
assented to the grant of the Credit Line Agreement and Amendment to the Credit Line
Agreement to Power Merge.
Section 31 of the Corporation Code expressly states:
Section 31. Liability of directors, trustees or officers. – Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly
and severally for all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
The SC rejected Wincorp’s argument that as a mere broker, it cannot be held liable in case of an
unsuccessful or failed match in its sans recourse transactions with Ng Wee.
It said Wincorp’s transactions “cannot be oversimplified as mere brokering of loans,” as the
Securities and Exchange Commission (SEC) discovered the firm was actually selling unregistered
securities in the form of shares in Power Merge credit.
The sans recourse loan transaction was deemed an investment contract because Ng Wee was
promised a return of 13.5% yield when Power Merge’s obligations mature.
The SC noted that under the guise of merely brokering loans, Wincorp “conveniently failed to
disclose” the necessary information that would have been required if it were treated as an
investment contract under Batas Pambansa Bilang 48, or the Revised Securities Act.
The non-disclosure of such information “resulted in the failure of the investors to pay heed to the
red flags that the enterprise was doomed,” read the decision penned by Associate Justice
Presbitero Velasco Jr.
13. IRENE MARTEL FRANCISCO V MALLEN (G.R. NO. 173169)
Petitioner: IRENE MARTEL FRANCISCO
Respondent: NUMERIANO MALLEN, JR.

FACTS:
-In 1994, respondent was hired as a waiter for VIPS Coffee Shop and Restaurant.
-On 30 January 1998 to 1 February 1998, respondent took an approved sick leave.
-On 15 February 1998, respondent took a vacation leave. Thereafter, he availed of his paternity
leave.
-On 18 April 1998, respondent suffered from tonsillitis, forcing him to take a three-day sick leave
from 18 April 1998 to 20 April 1998. However, instead of his applied three-day sick leave,
respondent was given three months leave.
-Respondent filed before the Department of Labor and Employment-National Capital Region
(DOLE-NCR) a complaint for underpayment of wages and non-payment of holiday pay.
-Respondent tried reported back to work with a medical certificate stating he was fit to work but
he was refused work.
-DOLE-NCR endorsed respondent’s complaint to the NLRC when it determined that the issue of
constructive dismissal was involved. Respondent then filed a complaint for illegal dismissal before
the NLRC-NCR.
-Respondent again attempted to return to work but was refused again.
-The Labor Arbiter rendered a decision in favor of respondent.
-The NLRC found respondent’s filing of a complaint for illegal dismissal premature. It also found
out that during the pendency of the instant case, VIPS Coffee Shop and Restaurant closed down.
They directed respondents to pay complainant his separation pay equivalent to one half month
pay for every year of service.
-CA found respondent constructively dismissed for having been granted an increased three
months leave instead of the three days leave he applied for. It reinstated the decision of Labor
Arbiter.

ISSUE:
Whether or not petitioner is personally liable for the monetary awards granted in favor of
respondent arising from his alleged illegal termination.

HELD:
NO.
Petitioner Irene Martel Francisco not liable for the monetary awards specified in the reinstated
Labor Arbiter’s Decision.
To hold a director or officer personally liable for corporate obligations, two requisites must
concur: (1) complainant must allege in the complaint that the director or officer assented to
patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad
faith; and (2) complainant must clearly and convincingly prove such unlawful acts, negligence or
bad faith.
To hold a director personally liable for debts of the corporation, and thus pierce the veil of
corporate fiction, the bad faith or wrongdoing of the director must be established clearly and
convincingly.
In this case, the Labor Arbiter, whose decision was reinstated by the Court of Appeals, stated
that petitioner acted with malice and bad faith in constructively dismissing respondent. Thus, the
Labor Arbiter held petitioner personally liable for the monetary awards to respondent.
This finding lacks basis. Based on the records, respondent failed to allege either in his complaint
or position paper that petitioner, as Vice-President of VIPS Coffee Shop and Restaurant, acted in
bad faith. Neither did respondent clearly and convincingly prove that petitioner, as Vice-President
of VIPS Coffee Shop and Restaurant, acted in bad faith. In fact, there was no evidence
whatsoever to show petitioner’s participation in respondent’s alleged illegal dismissal. Clearly, the
twin requisites of allegation and proof of bad faith, necessary to hold petitioner personally liable
for the monetary awards to respondent, are lacking.
14. MAM REALTY DEV CORP V NLRC (G.R. NO. 114787)
Petitioners: MAM REALTY DEVELOPMENT CORPORATION and MANUEL CENTENO
Respondents: NATIONAL LABOR RELATIONS COMMISSION and CELSO B. BALBASTRO

FACTS:
-The case originated from a complaint filed with the Labor Arbiter by private respondent Celso B.
Balbastro against herein petitioners, MAM Realty Development Corporation ("MAM") and its Vice
President Manuel P. Centeno, for wage differentials, "ECOLA," overtime pay, incentive leave pay,
13th month pay, holiday pay and rest day pay.
-Balbastro was employed by MAM as a pump operator in 1982 and had since performed such
work at its Rancho Estate, Marikina, Metro Manila. He earned a basic monthly salary of P1,590.00
for seven days of work a week that started from 6:00 a.m. to up until 6:00 p.m. daily.
-MAM countered that Balbastro had previously been employed by Francisco Cacho and Co., Inc.,
the developer of Rancho Estates. Sometime in May 1982, his services were contracted by MAM
for the operation of the Rancho Estates' water pump. He was engaged, however, not as an
employee, but as a service contractor, at an agreed fee of P1,590.00 a month. Similar
arrangements were likewise entered into by MAM with one Rodolfo Mercado and with a security
guard of Rancho Estates III Homeowners' Association. Under the agreement, Balbastro was
merely made to open and close on a daily basis the water supply system of the different phases
of the subdivision in accordance with its water rationing scheme. He worked for only a maximum
period of three hours a day, and he made use of his free time by offering plumbing services to
the residents of the subdivision. He was not at all subject to the control or supervision of MAM
for, in fact, his work could so also be done either by Mercado or by the security guard. On 23
May 1990, prior to the filing of the complaint, MAM executed a Deed of Transfer,1 effective 01
July 1990, in favor of the Rancho Estates Phase III Homeowners Association, Inc., conveying to
the latter all its rights and interests over the water system in the subdivision.
-Labor Arbiter dismissed the complaint for lack of merit.
-On appeal, National Labor Relations Commission (NLRC) rendered judgment in favor of
complainant and directed opposing party to pay jointly and severally complainant the sum of
P86,641.05 as above-computed.
-Case was raised to SC.

ISSUE:
Whether or not the NLRC erred in holding Centeno jointly and severally liable with MAM.

HELD:
YES.
A corporation, being a juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, acting as such corporate agents, are not theirs but the direct
accountabilities of the corporation they represent. True, solidary liabilities may at times be
incurred but only when exceptional circumstances warrant such as, generally, in the following
cases:
1. When directors and trustees or, in appropriate cases, the officers of a corporation —
a. vote for or assent to patently unlawful acts of the corporation;
b. act in bad faith or with gross negligence in directing the corporate affairs;
c. are guilty of conflict of interest to the prejudice of the corporation, its stockholders or
members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the Corporation.
4 When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action.
In labor cases, for instance, the Court has held corporate directors and officers solidarily liable
with the corporation for the termination of employment of employees done with malice or in bad
faith.
In the case at Bench, there is nothing substantial on record that can justify, prescinding from the
foregoing, petitioner Centeno's solidary liability with the corporation.
Respondent shall be shall be paid solely by petitioner MAM Realty Development Corporation.
15. CEBU COUNTRY CLUB V ELIZAGAQUE (G.R. NO. 160273)
Petitioners: CEBU COUNTRY CLUB, INC., SABINO R. DAPAT, RUBEN D. ALMENDRAS,
JULIUS Z. NERI, DOUGLAS L. LUYM, CESAR T. LIBI, RAMONTITO* E. GARCIA and
JOSE B. SALA
Respondent: RICARDO F. ELIZAGAQUE

FACTS:
-Cebu Country Club, Inc. (CCCI), petitioner, is a domestic corporation operating as a non-profit
and non-stock private membership club, having its principal place of business in Banilad, Cebu
City. Petitioners herein are members of its Board of Directors.
-In 1996, respondent filed with CCCI an application for proprietary membership. The application
was indorsed by CCCI’s two (2) proprietary members, namely: Edmundo T. Misa and Silvano
Ludo. As the price of a proprietary share was around the P5 million range, Benito Unchuan, then
president of CCCI, offered to sell respondent a share for only P3.5 million. Respondent, however,
purchased the share of a certain Dr. Butalid for only P3 million. Consequently, on September 6,
1996, CCCI issued Proprietary Ownership Certificate No. 1446 to respondent.
-During the meetings dated April 4, 1997 and May 30, 1997 of the CCCI Board of Directors,
action on respondent’s application for proprietary membership was deferred. In another Board
meeting held on July 30, 1997, respondent’s application was voted upon. As shown by the
records, the Board adopted a secret balloting known as the “black ball system” of voting wherein
each member will drop a ball in the ballot box. A white ball represents conformity to the
admission of an applicant, while a black ball means disapproval. Pursuant to Section 3(c), as
amended, cited above, a unanimous vote of the directors is required. When respondent’s
application for proprietary membership was voted upon during the Board meeting on July 30,
1997, the ballot box contained one (1) black ball. Thus, for lack of unanimity, his application was
disapproved.
-On August 6, 1997, Edmundo T. Misa, on behalf of respondent, wrote CCCI a letter of
reconsideration. As CCCI did not answer, respondent, on October 7, 1997, wrote another letter of
reconsideration. Still, CCCI kept silent. On November 5, 1997, respondent again sent CCCI a
letter inquiring whether any member of the Board objected to his application. Again, CCCI did not
reply. Consequently, on December 23, 1998, respondent filed with the Regional Trial Court
(RTC), Branch 71, Pasig City a complaint for damages against petitioners

ISSUE:
Whether in disapproving respondent's application for proprietary membership with CCCI,
petitioners are liable to respondent for damages, and if so, whether their liability is joint and
several.

HELD:
YES.
In rejecting respondent’s application for proprietary membership, we find that petitioners violated
the rules governing human relations, the basic principles to be observed for the rightful
relationship between human beings and for the stability of social order. The trial court and the
Court of Appeals aptly held that petitioners committed fraud and evident bad faith in
disapproving respondent’s applications. This is contrary to morals, good custom or public policy.
Hence, petitioners are liable for damages pursuant to Article 19 in relation to Article 21 of the
same Code.
It bears stressing that the amendment to Section 3(c) of CCCI’s Amended By-Laws requiring the
unanimous vote of the directors present at a special or regular meeting was not printed on the
application form respondent filled and submitted to CCCI. What was printed thereon was the
original provision of Section 3(c) which was silent on the required number of votes needed for
admission of an applicant as a proprietary member.
Petitioners explained that the amendment was not printed on the application form due to
economic reasons. We find this excuse flimsy and unconvincing. Such amendment, aside from
being extremely significant, was introduced way back in 1978 or almost twenty (20) years before
respondent filed his application. We cannot fathom why such a prestigious and exclusive golf
country club, like the CCCI, whose members are all affluent, did not have enough money to
cause the printing of an updated application form.
It is thus clear that respondent was left groping in the dark wondering why his application was
disapproved. He was not even informed that a unanimous vote of the Board members was
required. When he sent a letter for reconsideration and an inquiry whether there was an
objection to his application, petitioners apparently ignored him. Certainly, respondent did not
deserve this kind of treatment. Having been designated by San Miguel Corporation as a special
non-proprietary member of CCCI, he should have been treated by petitioners with courtesy and
civility. At the very least, they should have informed him why his application was disapproved.
The exercise of a right, though legal by itself, must nonetheless be in accordance with the proper
norm. When the right is exercised arbitrarily, unjustly or excessively and results in damage to
another, a legal wrong is committed for which the wrongdoer must be held responsible.
Section 31 of the Corporation Code provides:
SEC. 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of
gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly
and severally for all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
The challenged Decision and Resolution of the Court of Appeals are AFFIRMED with modification
in the sense that (a) the award of moral damages is reduced fromP2,000,000.00 to P50,000.00;
(b) the award of exemplary damages is reduced from P1,000,000.00 toP25,000.00; and (c) the
award of attorney’s fees and litigation expenses is reduced from P500,000.00 andP50,000.00 to
P50,000.00 and P25,000.00, respectively.
16. ESPIRITU V PETRON CORP ET AL (G.R. NO. 170891)
Petitioners: MANUEL C. ESPIRITU, JR., AUDIE LLONA, FREIDA F. ESPIRITU, CARLO F.
ESPIRITU, RAFAEL F. ESPIRITU, ROLANDO M. MIRABUNA, HERMILYN A. MIRABUNA,
KIM ROLAND A. MIRABUNA, KAYE ANN A. MIRABUNA, KEN RYAN A. MIRABUNA,
JUANITO P. DE CASTRO, GERONIMA A. ALMONITE and MANUEL C. DEE, who are the
officers and directors of BICOL GAS REFILLING PLANT CORPORATION
Respondents: PETRON CORPORATION and CARMEN J. DOLOIRAS, doing business
under the name "KRISTINA PATRICIA ENTERPRISES

FACTS:
-This case is about the reloading of the liquefied petroleum gas cylinder container of one brand
with the liquefied petroleum gas of another brand.
-Petron Corporation (PETRON) sold and distributed liquefied petroleum gas (LPG) in cylinder
tanks that carried its trademark Gasul.
-Carmen J. Doloiras owned and operated Kristina Patricia Enterprises (KPE), the exclusive
distributor of Gasul LPGs in the whole of Sorsogon, managed by Jose Nelson Doloiras (JOSE).
-Bicol Gas Refilling Plant Corporation (BICOL GAS), also in the business of selling and distributing
LPGs in Sorsogon, their tanks carry the trademark Bicol Savers Gas, managed by Audie Llona
(LLONA).
-Due to trade and competition, any distributor of LPGs at times acquired possession of LPG
cylinder tanks belonging to other distributors operating in the same area (a.k.a. captured
cylinders).
-April 2001 Bicol Gas agreed with KPE for the swapping of captured cylinders (one distributor
could not refill captured cylinders with its own brand of LPG).
-In the course of implementing this arrangement, JOSE visited the BICOL GAS refilling plant and
he noticed several Gasul tanks in Bicol Gas possession.
-They agreed to have a swap (after LLONA was given permission for the swap) involving around
30 Gasul tanks held by Bicol Gas in exchange for assorted tanks held by KPE.
-JOSE noticed that Bicol Gas still had a number of Gasul tanks in its yard --- offered to make a
swap for these but LLONA declined --- Bicol Gas owners wanted to send those tanks to Batangas.
-JOSE observed on almost a daily basis that Bicol Gas trucks carried a load of Gasul tanks (he
noted that KPEs volume of sales dropped significantly from June to July 2001).
-August 4, 2001 - JOSE saw a Bicol Gas truck on the Maharlika Highway --- it had on it one
unsealed 50-kg Gasul tank and one 50-kg Shellane tank.
-JOSE followed the truck and when it stopped at a store, he asked the driver, Jun Leorena, and
the Bicol Gas sales representative, Jerome Misal, about the Gasul tank in their truck (JOSE found
that it wasn’t empty) --- Misal and Leorena then admitted that the Gasul and Shellane tanks on
their truck belonged to a customer who had them filled up by Bicol Gas.
-Because of the incident, KPE filed a complaint for violations of R.A. 623 (illegally filling up
registered cylinder tanks), as amended, and Sections 155 (infringement of trade marks) and
169.1 (unfair competition) of the Intellectual Property Code (R.A. 8293).
-Provincial Prosecutor found Probable Cause only for violation of R.A. 623, only Mirabena, Misal,
Leorena, and petitioner Llona, could be charged.
-Office of the Regional State Prosecutor, Region V (Pet. For Review) - ordered the filing of
additional informations against the four employees of Bicol Gas for unfair competition, no case
for trademark
infringement was present.
-Secretary of Justice denied appeal of Petron and KPE and their motion for reconsideration.
-CA reversed the Secretary of Justices ruling.
ISSUE:
Whether or not the stockholders and members of the board of directors of Bicol Gas are liable
with respect to the charge of unlawfully filling up a steel cylinder or tank that belonged to Petron.

HELD:
Bicol Gas is a corporation. As such, it is an entity separate and distinct from the persons of its
officers, directors, and stockholders. It has been held, however, that corporate officers or
employees, through whose act, default or omission the corporation commits a crime, may
themselves be individually held answerable for the crime.
Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with
Bicol Gas, its manager, petitioner Audie Llona, claimed that he would be consulting with the
owners of Bicol Gas about it. Subsequently, Bicol Gas declined the offer to swap cylinders for the
reason that the owners wanted to send their captured cylinders to Batangas. The Court of
Appeals seized on this as evidence that the employees of Bicol Gas acted under the direct orders
of its owners and that "the owners of Bicol Gas have full control of the operations of the
business."
The "owners" of a corporate organization are its stockholders and they are to be distinguished
from its directors and officers. The petitioners here, with the exception of Audie Llona, are being
charged in their capacities as stockholders of Bicol Gas. But the Court of Appeals forgets that in a
corporation, the management of its business is generally vested in its board of directors, not its
stockholders. Stockholders are basically investors in a corporation. They do not have a hand in
running the day-to-day business operations of the corporation unless they are at the same time
directors or officers of the corporation. Before a stockholder may be held criminally liable for acts
committed by the corporation, therefore, it must be shown that he had knowledge of the criminal
act committed in the name of the corporation and that he took part in the same or gave his
consent to its commission, whether by action or inaction
The finding of the Court of Appeals that the employees "could not have committed the crimes
without the consent, [abetment], permission, or participation of the owners of Bicol Gas" is a
sweeping speculation especially since, as demonstrated above, what was involved was just one
Petron Gasul tank found in a truck filled with Bicol Gas tanks. Although the KPE manager heard
petitioner Llona say that he was going to consult the owners of Bicol Gas regarding the offer to
swap additional captured cylinders, no indication was given as to which Bicol Gas stockholders
Llona consulted. It would be unfair to charge all the stockholders involved, some of whom were
proved to be minors.19 No evidence was presented establishing the names of the stockholders
who were charged with running the operations of Bicol Gas. The complaint even failed to allege
who among the stockholders sat in the board of directors of the company or served as its
officers.
The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C. Espiritu,
Jr. as the registered owner of the truck that the KPE manager brought to the police for
investigation because that truck carried a tank of Petron Gasul. But the act that R.A. 623
punishes is the unlawful filling up of registered tanks of another. It does not punish the act of
transporting such tanks. And the complaint did not allege that the truck owner connived with
those responsible for filling up that Gasul tank with Bicol Gas LPG.