Marc II Marketing, Inc. vs.

Joson
G.R. No. 171993.December 12, 2011.

Petitioner Marc II Marketing, Inc. is a corporation primarily engaged in buying, marketing, selling and
distributing in retail or wholesale for export or import household appliances and products and other
items. Respondent Alfredo Joson, on the other hand, was the General Manager, incorporator, director and
stockholder of petitioner corporation. Lucila Goson, in her capacity as President of Marc Marketing, Inc.,
to work as the General Manager of petitionercorporation. It was formalized through the execution of a
Management Contract as petitioner corporation is yet to be incorporated at the time of its execution. It
was explicitly provided therein that respondent shall be entitled to 30% of its net income for his work as
General Manager. Respondent will also be granted 30% of its net profit to compensate for the possible loss
of opportunity to work overseas. Petitioner corporation decided to stop and cease its operations, due to
poor sales collection aggravated by the inefficient management of its affairs. On the same date, it formally
informed respondent of the cessation of its business operation. Concomitantly, respondent was apprised
of the termination of his services as General Manager since his services as such would no longer be
necessary for the winding up of its affairs. Feeling aggrieved, respondent filed a Complaint for
Reinstatement and Money Claim against petitioners before the Labor Arbiter. Insisting that the Labor
Arbiter has no jurisdiction over the case, petitioners instead filed an Urgent Motion to Resolve the Motion
to Dismiss and the Motion to Suspend Filing of Position Paper.

Which between the Labor Arbiter or the RTC, has jurisdiction over respondents dismissal as General
Manager of petitioner corporation.
Whether respondent as General Manager of petitioner corporation is a corporate officer or a mere
employee of the latter.
The Labor Arbiter has jurisdiction over the case. Respondents dismissal as petitioner corporations
General Manager did not amount to an intra-corporate controversy which is exclusively cognizable by the
Regional Trial Courts. The dismissal of a corporate officer is always regarded as a corporate and/or an
intra-corporate controversy. Intra-corporate controversies also includes controversies in the election or
appointments of directors, trustees, officers or managers of such corporations, partnerships or
associations.
Respondent is not a corporate officer, but an employee of the corporation. Corporate officers are those
officers of a corporate who are given that character either by the Corporation Code or by the corporations
by-laws. The aforesaid Section 25 of the Corporation Code, particularly the phrase such other officers as
may be provided for in the by-laws, has been clarified and elaborated in this Courts recent
pronouncement in Matling Industrial and Commercial Corporation v. Coros, 633 SCRA 12 (2010), where
it held, thus: Conformably with Section 25, a position must be expressly mentioned in the [b]y-[l]aws in
order to be considered as a corporate office. Thus, the creation of an office pursuant to or under a [b]y[l]aw enabling provision is not enough to make a position a corporate office. A careful perusal of
petitioner corporations by-laws, particularly paragraph 1, Section 1, Article IV, would explicitly reveal
that its corporate officers are composed only of: (1) Chairman; (2) President; (3) one or more Vice-

President; (4) Treasurer; and (5) Secretary. The position of General Manager was not among those
enumerated. 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 corporate officers
enumerated in the by-laws are the exclusive officers of the corporation while the rest could only be
regarded as mere employees or subordinate officials.
Lapu-Lapu Foundation vs. Court of Appeals [GR 126006, 29 January 2004]
Facts: Sometime in 1977, Elias Q. Tan, then President of Lapulapu Foundation, Inc., obtained four loans
from Allied Banking Corporation covered by four promissory notes in the amounts of P100,000 each. As
of 23 January 1979, the entire obligation amounted to P493,566.61 and despite demands made on them by
the
Bank, Tan and the foundation failed to pay the same. The Bank was constrained to file with the Regional
Trial
Court of Cebu City, Branch 15, a complaint seeking payment by Tan and the foundation, jointly
and
solidarily, of the sum of P493,566.61 representing their loan obligation, exclusive of interests,
penalty
charges, attorneys fees and costs. In its answer to the complaint, the Foundation denied incurring
indebtedness from the Bank alleging that the loans were obtained by Tan in his personal capacity, for his
own
use and benefit and on the strength of the personal information he furnished the Bank. The Foundation
maintained that it never authorized Tan to co-sign in his capacity as its President any promissory note
and that
the Bank fully knew that the loans contracted were made in Tans personal capacity and for his own use
and
that the Foundation never benefited, directly or indirectly, therefrom. The Foundation then interposed a
crossclaim against Tan alleging that he, having exceeded his authority, should be solely liable for said
loans, and a
counterclaim against the Bank for damages and attorneys fees. For his part, Tan admitted that he
contracted
the loans from the Bank in his personal capacity. The parties, however, agreed that the loans were to be
paid
from the proceeds of Tans shares of common stocks in the Lapulapu Industries Corporation, a real estate
firm. The loans were covered by promissory notes which were automatically renewable (rolled-over)
every
year at an amount including unpaid interests, until such time as Tan was able to pay the same from the
proceeds of his aforesaid shares. According to Tan, the Banks employee required him to affix two
signatures
on every promissory note, assuring him that the loan documents would be filled out in accordance with
their
agreement. However, after he signed and delivered the loan documents to the Bank, these were filled out
in a
manner not in accord with their agreement, such that the Foundation was included as party thereto.
Further,
prior to its filing of the complaint, the Bank made no demand on him. After due trial, the court rendered

judgment (1) requiring Tan and the Foundation to pay jointly and solidarily to the Bank the amount of
P493,566.61 as principal obligation for the four promissory notes, including all other charges included in
the
same, with interest at 14% per annum, computed from 24 January 1979, until the same are fully paid, plus
2%
service charges and 1% monthly penalty charges; (2) requiring Tan and the Foundation to pay jointly and
solidarily, attorneys fees in the equivalent amount of 25% of the total amount due from them on the
promissory notes, including all charges; and (3) requiring Tan and the Foundation to pay jointly and
solidarily
litigation expenses of P1,000.00 plus costs of the suit. On appeal, the CA affirmed with modification the
judgment of the court a quo by deleting the award of attorneys fees in favor of the Bank for being without
basis. Tan and the foundation filed the petition for review on certiorari.
Issue [1]:Whether Tan and the foundation should be held jointly and solidarily liable.
Held [1]:The appellate court did not err in holding Tan and the foundation jointly and solidarily liable as
it
applied the doctrine of piercing the veil of corporate entity. Tan and the foundation cannot hide behind
the
corporate veil under the following circumstances: "The evidence shows that Tan has been representing
himself as the President of Lapulapu Foundation, Inc. He opened a savings account and a current account
in
the names of the corporation, and signed the application form as well as the necessary specimen
signature
cards twice, for himself and for the foundation. He submitted a notarized Secretarys Certificate from the
corporation, attesting that he has been authorized, inter alia, to sign for and in behalf of the Lapulapu
Foundation any and all checks, drafts or other orders with respect to the bank; to transact business with
the
Bank, negotiate loans, agreements, obligations, promissory notes and other commercial documents; and
to
initially obtain a loan for P100,000.00 from any bank. Under these circumstances, the foundation is liable
for
Commercial Law - Corporation Law, 2005 ( 49)
Narratives (Berne Guerrero)
the transactions entered into by Tan on its behalf.
Issue [2]: Whether the foundation gave Tan an apparent authority to deal with the Bank.
Held [2]: Per its Secretarys Certificate, the Foundation had given its President, Tan, ostensible and
apparent
authority to inter alia deal with the Bank. Accordingly, the Foundation is estopped from questioning Tans
authority to obtain the subject loans from the respondent Bank. It is a familiar doctrine that if a
corporation
knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority,
it
holds him out to the public as possessing the power to do those acts; and thus, the corporation will, as
against
anyone who has in good faith dealt with it through such agent, be estopped from denying the agents
authority.

Carag vs. National Labor Relations Commission

G.R. No. 147590. April 2, 2007
National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union
(MACLU) (collectively, complainants), on behalf of all of MACs rank and file employees, filed a complaint
against MAC for illegal dismissal brought about by its illegal closure of business. Without notice of any
kind filed in accordance with pertinent provisions of the Labor Code, [MAC], for reasons known only
to it ceased operations with the intention of completely closing its shop or factory. Such intentions were
manifested in a letter, allegedly claimed by [MAC] as its notice filed only on the same day that the
operations closed. Employees who have rendered one to two weeks work were not paid their
corresponding salaries/wages, which remain unpaid. Without any further proceedings, Arbiter
Ortiguerra rendered her Decision dated 17 June 1994 granting the motion to implead Carag and David. In
the same Decision, Arbiter Ortiguerra declared Carag and David solidarily liable with MAC to
complainants.
Whether or not individual respondents could be held personally liable.
No., the rule is that a director is not personally liable for the debts of the corporation, which has a separate legal
personality of its own. Section 31 of the Corporation Code makes a director personally liable for corporate debts if he
willfully and knowingly votes for or assents to patently unlawful acts of the corporation, or if he is guilty of gross
negligence or bad faith in directing the affairs of the corporation. Section 31 makes a director personally liable
for corporate debts if he willfully and knowingly votes for or assents to patently unlawful acts of the
corporation. Section 31 also makes a director personally liable if he is guilty of gross negligence or bad
faith in directing the affairs of the corporation. 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. The failure to give notice is not an unlawful act because the law does not define such failure as
unlawfulsuch failure to give notice is a violation of procedural due process but does not amount to an unlawful or
criminal act. It does not amount to a patently unlawful act.

Megan Sugar Corporation vs. Regional Trial Court of Iloilo

G.R. No. 170352.June 1, 2011

Respondent New Frontier Sugar Corporation (NFSC) obtained a loan from respondent Equitable PCI
Bank (EPCIB). Said loan was secured by a real estate mortgage and a chattel mortgage over NFSCs sugar
mill. Because of liquidity problems and continued indebtedness to EPCIB, NFSC entered into a
Memorandum of Agreement with Central Iloilo Milling Corporation (CIMICO), whereby the latter
agreed to take-over the operation and management of the NFSC raw sugar factory and facilities for the
period covering crop years 2000 to 2003. NFSC filed a compliant for specific performance and
collection against CIMICO for the latters failure to pay its obligations under the MOA. In response,
CIMICO filed a case against NFSC for sum of money and/or breach of contract. On May 10, 2002, because
of NFSCs failure to pay its debt, EPCIB instituted extra-judicial foreclosure proceedings over NFSCs land
and sugar mill. CIMICO filed with the the RTC an Amended Complaint 7 where it impleaded PISA and
EPCIB. The RTC issued a restraining order, directing EPCIB and PISA to desist from taking possession

over the property in dispute. Hence, CIMICO was able to continue its possession over the property.
CIMICO and petitioner Megan Sugar Corporation (MEGAN) entered into a MOA 8 whereby MEGAN
assumed CIMICOs rights, interests and obligations over the property. As a result of the foregoing
undertaking, MEGAN started operating the sugar mill. During the hearing on the motion for
intervention, Atty. Reuben Mikhail Sabig (Atty. Sabig) appeared before the RTC and entered his
appearance as counsel for MEGAN. EPCIB filed an Urgent Ex-ParteMotion for Execution,18 which was
granted by the RTC. MEGAN filed before the CA a petition for certiorari. It argued mainly on two
points; first, that the RTC erred when it determined that MEGAN was subrogated to the obligations of
CIMICO and;second, that the RTC had no jurisdiction over MEGAN. MEGAN points out that its board of
directors did not issue a resolution authorizing Atty. Sabig to represent the corporation before the RTC. It
contends that Atty. Sabig was an unauthorized agent and as such his actions should not bind the
corporation.

WHETHER OR NOT THE PETITIONER IS ESTOPPED FROM QUESTIONING THE ASSAILED ORDERS
BECAUSE OF THE ACTS OF ATTY. REUBEN MIKHAIL SABIG.
Yes, Megan is estopped from questioning the jurisdiction of the regional trial court. While it is true, as claimed by
MEGAN, that Atty. Sabig said in court that he was only appearing for the hearing of Passi Sugars motion
for intervention and not for the case itself, his subsequent acts, coupled with MEGANs inaction and
negligence to repudiate his authority, effectively bars MEGAN from assailing the validity of the RTC
proceedings under the principle of estoppel.The doctrine of estoppel is based upon the grounds of public policy,
fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or
commitments to the injury of one to whom they were directed and who reasonably relied thereon. The doctrine of
estoppel springs from equitable principles and the equities in the case. A corporation may be held in estoppel from
denying as against third persons the authority of its officers or agents who have clothed by it with ostensible or
apparent authority; Apparent authority, or what is sometimes referred to as the holding out theory, or doctrine of
ostensible agency, imposes liability, not as the result of the reality of a contractual relationship, but rather because of
the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the
authority exists. It is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular
matter to secure an affirmative relief to afterwards deny that same jurisdiction to escape a penalty.
Nielson & Co. Inc. vs. Lepanto Consolidated Mining Co. [GR L-21601, 28 December 1968]

On January 30, 1937, Nielson & Co. executed an agreement with Lepanto Consolidated Mining Co.
Lepanto owned the mining properties. Nielson operated and maintained the said properties for Php
2,500.00 / month as management fee plus 10% participation in the net profits for 5 years.
In 1940, the 10% share was disputed. Lepantos Board of Directors authorized C.A. De Witt, president to
enter with an agreement with Nielson modifying same provisions effective January 1, 1940 such that
Nielson shall receive :
10% of the dividends paid during the contract period and every end of the year;

10% of any depletion reserve that may be set up;

10% of any amount expended during the year out of surplus earnings for capital account.
In 1941, the parties renewed their contract for another 5 years but the Pacific War broke out in December
1941. In January 1942, the operation was disrupted. The U.S. Army ordered that the mill, power plant,
supplies, equipment, concentrates on hand and mines be destroyed to prevent the Japanese from using.
Thereafter, the Japanese army occupied the mining properties and was ousted only in August 1945.
Lepanto then rebuilt the mines and mills including setting up new organizations, repairs, clearings,
salvages, etc. The reconstruction was completed until 1948. On June 26, 1948 the mines resumed the
operation under the exclusive management of Lepanto. However, after the mines were liberated in 1945, a
disagreement arose between Nielson and Lepanto over the status of the operating contract which expired
in 1947. Under the terms thereof the management contract shall remain in suspension

in case of

fortuitous event or force majeure such as war, which adversely affects the work of the mining and milling.
On February 6, 1958, Nielson brought an action against Lepanto before the Court of First Instance (CFI) of
Manila to recover damages suffered in view of the refusal of Lepanto to comply with the terms of a
management contract entered into between them on January 30, 1937.
In its answer, Lepanto denied the allegations and set up certain defenses, prescription and laches as bars
against the institution of the action.
After trial, the court a quo rendered a decision dismissing the complaint with costs. The court stated that
it did not find sufficient evidence to establish the counterclaim of Lepanto therefore, dismissed the same.
Nielson appealed. The Supreme Court reversed the decision of the trial court and ordered Lepanto to pay:
10% Share of cash dividends of December 1941 in the amount of Php 17,500.00 with legal interest thereon
from the date of the filling of the complaint;

Management fee for January 1942 in the amount of Php 2,500.00 with legal interest thereon from the date
of the filing of the complaint;
Management fees for the 60-month period of extension amounting to Php 150,000.00 with legal interest;
10% Share in the cash dividends during the period of extension;
10% of the depletion reserve amounting to Php 53,928.88 with legal interest;
10% of the expenses of the capital account amounting to Php 694,364.76 with legal interest;

To issue and deliver to Nielson shares of stock at a par value equivalent to the total of Nielsons 10% share
in the stock dividends declared on November 28, 1948 and August 22, 1950; and
The sum of Php 50,000.00 as attorneys fee and the cost that Lepanto seeks for reconsideration.
ISSUE:

Whether or not the management contract is a contract of agency?

HELD:

NO. The Supreme Court ruled that the management contract is not a contract of agency as defined in
Article 1709 of the Old Civil Code, but as a contract of lease of services as defined in Article 1544 of the
same Code. Article 1709 defines the contract of agency as one person binds himself to render some
service or to do something for the account or at the request of another. While Article 1544 defines
contract of lease of service as in a lease of work or services, one of the parties binds himself to make or
construct something or to render a service to the other for a price certain. The court determined the
nature of the management contract in question wherein there was agreement for Nielson for 5 years had
the right to renew, to explore, to develop, and to operate the mining claims of Lepanto. In the
performance of this principal undertaking Nielson was not acting as an agent but one as performing
material acts for an employer, for a compensation.

Islamic Directorate of the Phils. vs. Court of Appeals

G.R. No. 117897. May 14, 1997

Petitioner IDP-Tamano Group alleges that sometime in 1971, Islamic leaders of all Muslim major tribal
groups in the Philippines headed by Dean Cesar Adib Majul organized and incorporated the ISLAMIC
DIRECTORATE OF THE PHILIPPINES (IDP), the primary purpose of which is to establish an Islamic
Center in Quezon City for the construction of a Mosque (prayer place), Madrasah (Arabic School), and
other religious infrastructures so as to facilitate the effective practice of Islamic faith in the area. 2

Towards this end, that is, in the same year, the Libyan government donated money to the IDP to purchase
land at Culiat, Tandang Sora, Quezon City, to be used as a Center for the Islamic populace. According to
the petitioner, in 1972, after the purchase of the land by the Libyan government in the name of IDP,
Martial Law was declared by the late President Ferdinand Marcos. Most of the members of the 1971
Board of Trustees like Senators Mamintal Tamano, Salipada Pendatun, Ahmad Alonto, and Congressman
Al-Rashid Lucman flew to the Middle East to escape political persecution.
Thereafter, two Muslim groups sprung, the Carpizo Group, headed by Engineer Farouk Carpizo, and
the Abbas Group, led by Mrs. Zorayda Tamano and Atty. Firdaussi Abbas. Both groups claimed to be the
legitimate IDP. SEC, in a suit between these two contending groups, came out with a Decision in SEC
Case No. 2687 declaring the election of both the Carpizo Group and the Abbas Group as IDP board
members to be null and void. Without having been properly elected as new members of the Board of
Trustees of IDP, the Carpizo Group caused to be signed an alleged Board Resolution 11 of the ID P,
authorizing the sale of the subject two parcels of land to the private respondent INC. Petitioner 1971 IDP
Board of Trustees filed a petition before the SEC seeking to declare null and void the Deed of Absolute
Sale. Private respondent INC, pursuant to the Deed of Absolute Sale executed in its favor filed an action
for Specific Performance with Damages against the vendor, Carpizo Group, before Branch 81 of the
Regional Trial Court of Quezon City, docketed as Civil Case No. Q-90-6937, to compel said group to clear
the property of squatters and deliver complete and full physical possession thereof to INC. RTC rendered
judgment ordering the IDP-Carpizo Group to comply with its obligation under the Deed of Sale of
clearing the subject lots of squatters and of delivering the actual possession thereof to INC.

Is the decision of the RTC binding upon the corporation?

No, the corporation is not properly represented by the rightful Board of Trustees. A juridical person
cannot be considered essentially a formal party to a case where it was not duly represented by its legitimate
governing board. As a necessary consequence, a case for Specific Performance with Damages, a mere
action in personam, did not become final and executory insofar as the true IDP is concerned since
petitioner corporation, for want of legitimate representation, was effectively deprived of its day in court in
said case. Neither of these concepts of res judicata find relevant application in the case at bench. While
there may be identity of subject matter (IDP property) in both cases, there is no identity of parties. Indeed,
the IDP-Tamano Group cannot be considered a principal party inG.R. No. 107751 for purposes of
applying the principles ofres judi-cata since the contrary goes against the true import of the action of
intervention as a mere subsidiary proceeding without an independent life apart from the principal action
as well as the intrinsic character of the intervenor as a mere subordinate party in the main case whose
right may be said to be only in aid of the right of the original party. It is only in the present case, actually,
where the ID P-Tamano Group became a principal party.

Jiao vs. National Labor Relations Commission

G.R. No. 182331.April 18, 2012

The petitioners were regular employees of the Philippine Banking Corporation (Philbank), each with
at least ten years of service in the company.3 Pursuant to its Memorandum dated August 28, 1970,
Philbank established a Gratuity Pay Plan (Old Plan) for its employees. Philbank merged with Global
Business Bank, Inc. (Globalbank), with the former as the surviving corporation and the latter as the
absorbed corporation, but the bank operated under the name Global Business Bank, Inc. As a result of the
merger, complainants respective positions became redundant. A Special Separation Program (SSP) was
implemented and the petitioners were granted a separation package. As their positions were included in
the redundancy declaration, the petitioners availed of the SSP, signed acceptance letters and executed
quitclaims. In August 2002, respondent Metropolitan Bank and Trust Company (Metrobank) acquired the
assets and liabilities of Globalbank through a Deed of Assignment of Assets and Assumption of
Liabilities. Subsequently, the petitioners filed separate complaints for non-payment of separation pay with
prayer for damages and attorneys fees before the National Labor Relations Commission (NLRC). The
petitioners insist that Metrobank is liable because it is the parent company of Globalbank and that
majority of the latters board of directors are also members of the formers board of directors.

Can Metrobank be held liable for the claims of petitioners?

No, considering that the petitioners have already waived their right to file an action for any of their claims
in relation to their employment with Globalbank, the question of whether Metrobank can be held liable
for these claims is now academic. However, in order to put to rest any doubt in the petitioners minds as
to Metrobanks liabilities, we shall proceed to discuss this issue. We hold that Metrobank cannot be held
liable for the petitioners claims. As a rule, a corporation that purchases the assets of another will not be
liable for the debts of the selling corporation, provided the former acted in good faith and paid adequate
consideration for such assets, except when any of the following circumstances is present: (1) where the
purchaser expressly or impliedly agrees to assume the debts; (2) where the transaction amounts to a
consolidation or merger of the corporations; (3) where the purchasing corporation is merely a
continuation of the selling corporation; and (4) where the selling corporation fraudulently enters into the
transaction to escape liability for those debts.

Vesagas vs. Court of Appeals [GR 142924, 5 December 2001]

First Division, Puno (J): 4 concur

Facts: Spouses Delfino and Helenda Raniel are members in good standing of the Luz Village Tennis Club,
Inc. Teodoro B. Vesagas, who claims to be the club's duly elected president, with Wilfred D. Asis, who, in
turn, claims to be its duly elected vice-president and legal counsel, allegedly summarily stripped them of
their lawful membership, without due process of law. Thereafter, the spouses filed a Complaint with the
SEC against the Vesagas and Asis. The spouses Raniel asked the Commission to declare as illegal their
expulsion from the club as it was allegedly done in utter disregard of the provisions of its by-laws as well
as the requirements of due process. They likewise sought the annulment of the amendments to the bylaws changing the annual meeting of the club from the last Sunday of January to November and
increasing the number of trustees from nine to fifteen. Finally, they prayed for the issuance of a
Temporary Restraining Order and Writ of Preliminary Injunction. The application for TRO was denied by
SEC. Before the hearing officer could start proceeding with the case, however, Vesagas and Asis filed a
motion to dismiss on the ground that the SEC lacks jurisdiction over the subject matter of the case. The
motion was denied. Their subsequent move to have the ruling reconsidered was likewise denied.
Unperturbed, they filed a petition for certiorari with the SEC En Banc seeking a review of the hearing
officer's orders. The petition was again denied for lack of merit. Dissatisfied with the verdict, Vesagas and
Asis promptly sought relief with the Court of Appeals contesting the ruling of the Commission en banc.
The appellate court, however, dismissed the petition for lack of merit in a Decision promulgated on 30
July 1999. Then, in a resolution rendered on 16 March 2000, it similarly denied their motion for
reconsideration. Vesagas and Asis filed the petition for review on certiorari. Petitioner claims that while
the club may have been considered a corporation during a brief spell, still, at the time of the institution of
this case with the SEC, the club was already dissolved by virtue of a Board resolution.

Whether the club has already ceased to be a corporate body.

Is the dispute between the parties a corporate matter within the jurisdiction of the SEC?

Held:
No, the question of whether a tennis club was indeed registered and issued a certification or not is one which
necessitates a factual inquiry, and on this score, the finding of the Securities and Exchange Commission, as the

administrative agency tasked with among others the function of registering and administering corporations, is given
weight and accorded high respect. The admission by a party binds him and may be taken or used against him, and
where made in the course of the proceedings in the same case, it does not require proof, and actually may be
contradicted only by showing that it was made through palpable mistake or that no such admission was made. The
requirements for dissolution mandated by the Corporation Code should be strictly complied with. The records
reveal that no proof was offered by the petitioners with regard to the notice and publication requirements.
Similarly wanting is the proof of the board memberscertification. Lastly, and most important of all, the
SEC Order of Dissolution was never submitted as evidence.

The fact that the parties involved in the controversy are all stockholders or that the parties involved
are the stockholders and the corporation, does not necessarily place the dispute within the loop of
jurisdiction of the SEC.14 Jurisdiction should be determined by considering not only the status or
relationship of the parties but also the nature of the question that is the subject of their controversy. 15
We rule that the present dispute is intra-corporate in character. In the first place, the parties here
involved are officers and members of the club. Respondents claim to be members of good standing of the
club until they were purportedly stripped of their membership in illegal fashion. Petitioners, on the other
hand, are its President and Vice-President, respectively. More significantly, the present conflict relates to,
and in fact arose from, this relation between the parties. The subject of the complaint, namely, the legality
of the expulsion from membership of the respondents and the validity of the amendments in the clubs
by-laws are, furthermore, within the Commissions jurisdiction.
At the time the action was filed, SEC still exercises exclusive jurisdictionover intra-corporate disputes.
Nonetheless, the enactment of R.A. 8799, otherwise known as the Securities Regulation Code, however,
transferred the jurisdiction to resolve intra-corporate controversies to courts of general jurisdiction or the
appropriate Regional Trial Courts.

Philippine Veterans Bank Employees Union-NUBE vs. Vega [GR 105364, 28 June 2001]

Facts: Sometime in 1985, the Central Bank of the Philippines filed with Branch 39 of the Regional Trial
Court of Manila a Petition for Assistance in the Liquidation of the Philippine Veterans Bank (Case SP32311). Thereafter,

the

Philippine

Veterans

Bank

Employees

Union-N.U.B.E.

(PVBEU-NUBE),

represented by Perfecto V. Fernandez, filed claims for accrued and unpaid employee wages and benefits
with said court in SP-3231. After lengthy proceedings, partial payment of the sums due to the employees
were made. However, due to the piecemeal hearings on the benefits, many remain unpaid. On 8 March

1991, PVBEU-NUBE Fernandez moved to disqualify the Judge Benjamin Vega, Presiding Judge of Branch
39 of the Regional Trial Court of Manila, from hearing the above case on grounds of bias and hostility
towards petitioners. On 2 January 1992, the Congress enacted Republic Act 7169 providing for the
rehabilitation of the Philippine Veterans Bank. Thereafter, PVBEU-NUBE and Fernandez filed with the
labor tribunals their residual claims for benefits and for reinstatement upon reopening of the bank.
Republic Act 7169 entitled "An Act To Rehabilitate The Philippine Veterans Bank Created Under Republic
Act 3518, Providing The Mechanisms Therefor, And For Other Purposes", which was signed into law by
President Corazon C. Aquino on 2 January 1992 and which was published in the Official Gazette on 24
February 1992, provides in part for the reopening of the Philippine Veterans Bank together with all its
branches within the period of 3 years from the date of the reopening of the head office. The law likewise
provides for the creation of a rehabilitation committee in order to facilitate the implementation of the
provisions of the same. Pursuant to said RA 7169, the Rehabilitation Committee submitted the proposed
Rehabilitation Plan of the PVB to the Monetary Board for its approval. Meanwhile, PVB filed a Motion to
Terminate Liquidation of Philippine Veterans Bank dated 13 March 1992with Judge Vega praying that the
liquidation proceedings be immediately terminated in view of the passage of RA 7169. On 10 April 1992,
the Monetary Board issued Monetary Board Resolution 348 which approved the Rehabilitation Plan
submitted by the Rehabilitation Committee. Thereafter, the Monetary Board issued a Certificate of
Authority allowing PVB to reopen. Sometime in May 1992, the Central Bank issued a certificate of
authority allowing the PVB to reopen. Despite the legislative mandate for rehabilitation and reopening of
PVB, Judge Vega continued with the liquidation proceedings of the bank. Moreover, PVBEUNUBE and
Fernandez learned that the Central Bank was set to order the payment and release of employee benefits
upon motion of another lawyer, while PVBEU-NUBE's and Fernandez's claims have been frozen to their
prejudice.

On 3 June 1992, the liquidator filed A Motion for the Termination of the Liquidation

Proceedings of the Philippine Veterans Bank with Judge Vega. PVBEU-NUBE and Fernandez, on the
other hand, filed the petition for Prohibition with Petition for Preliminary Injunction and application for
Ex Parte Temporary Restraining Order. In a Resolution, dated 8 June 1992, the Supreme Court resolved to
issue a Temporary Restraining Order enjoining the trial court from further proceeding with the case. On
22 June 1992, MOP Security & Detective Agency (VOPSDA) and its 162 security guards filed a
Motion

for Intervention with prayer that they be excluded from the operation of the Temporary

Restraining Order issued by the Court. On 3 August 1992, the Philippine Veterans Bank opened its doors
to the public and started regular banking operations.

Issue: Whether a liquidation court can continue with liquidation proceedings of the Philippine Veterans
Bank (PVB) when Congress had mandated its rehabilitation and reopening.

Held: The enactment of Republic Act 7169, as well as the subsequent developments has rendered the

liquidation court functus officio. Consequently, Judge Vega has been stripped of the authority to issue
orders involving acts of liquidation. Liquidation, in corporation law, connotes a winding up or settling
with creditors and debtors. It is the winding up of a corporation so that assets are distributed to those
entitled to receive them. It is the process of reducing assets to cash, discharging liabilities and dividing
surplus or loss. On the opposite end of the spectrum is rehabilitation which connotes a reopening or
reorganization. Rehabilitation contemplates a continuance of corporate life and activities in an effort to
restore and reinstate the corporation to its former position of successful operation and solvency. It is
crystal clear that the concept of liquidation is diametrically opposed or contrary to the concept of
rehabilitation, such that both cannot be undertaken at the same time. To allow the liquidation proceedings
to continue would seriously hinder the rehabilitation of the subject bank.

Rebollido vs. Court of Appeals

G.R. No. 81123. February 28, 1989

The petitioners filed Civil Case No. 8113 for damages against Pepsi Cola Bottling
Company of the Philippines, Inc. (hereinafter referred to as Pepsi Cola) and Alberto
Alva before the Regional Trial Court of Makati.
The case arose out of a vehicular accident on March 1, 1984, involving a Mazda
Minibus used as a schoolbus with Plate Number NWK-353 owned and driven by
petitioners Crisostomo Rebollido and Fernando Valencia, respectively and a truck
trailer with Plate Number NRH-522 owned at that time by Pepsi Cola and driven by
Alberto Alva.
On September 21, 1984, the sheriff of the lower court served the summons
addressed to the defendants. It was received by one Nenette Sison who represented
herself to be the authorized person receiving court processes as she was the
secretary of the legal department of Pepsi Cola. Pepsi Cola failed to file an answer
and was later declared in default. The lower court heard the case ex-parte and
adjudged the defendants jointly and severally liable for damages. The dissolution of
Pepsi Cola as approved by the Securities and Exchange Commission materialized on
March 2, 1984, one day after the accident occurred. The Board of Directors and the

stockholders of Pepsi Cola adopted its amended articles of incorporation to shorten

its corporate term. Realizing that the judgment of the lower court would eventually
be executed against it, respondent PEPSICO, Inc., opposed the motion for execution
and moved to vacate the judgment on the ground of lack of jurisdiction. The private
respondent questioned the validity of the service of summons to a mere clerk.

Was there valid service of summons through Nenette Sison, allegedly the secretary
of the legal department of Pepsi Cola?
Is PEPSICO, Inc. liable?

Yes, it is important to know the circumstances surrounding the service. At the time
of the issuance and receipt of the summons, Pepsi Cola was already dissolved. The
Court is of the opinion that service is allowed in such a situation. Since our law
recognizes the liability of a dissolved corporation to an aggrieved creditor, it is but
logical for the law to allow service of process upon a dissolved corporation.
Otherwise, substantive rights would be lost by the mere lack of explicit technical
rules.

It is clear that private respondent is aware that the liabilities of Pepsi Cola are
enforceable against it upon the dissolution of Pepsi Cola. As correctly stated by the
Court of Appeals, by virtue of the assumption of the debts, liabilities and obligations
of Pepsi Cola, any judgment rendered against Pepsi Cola after its dissolution is a
liability of PEPSICO, Inc., within the contemplation of the undertaking. Hence it
was incumbent upon respondent PEPSICO, Inc., to have defended the civil suit
against the corporation whose liabilities it had assumed. Failure to do so after it
received the notice by way of summons amounts to gross negligence and bad faith.
The private respondent cannot now invoke a technical defect involving improper
service upon Pepsi Cola and alleged absence of service of summons upon it. There is

the substantive right of the petitioners to be considered over and above the attempt
of the private respondent to avoid the jurisdiction of the lower court.

Panlilio vs. Regional Trial Court

G.R. No. 173846.February 2, 2011

Jose Marcel Panlilio, Erlinda Panlilio, Nicole Morris and Marlo Cristobal
(petitioners), as corporate officers of Silahis International Hotel, Inc. (SIHI), filed
with the Regional Trial Court (RTC) of Manila, Branch 24, a petition for Suspension
of Payments and Rehabilitation. RTC of Manila, Branch 24, issued an
Order5 staying all claims against SIHI upon finding the petition sufficient in form
and substance. At the time, however, of the filing of the petition for rehabilitation,
there were a number of criminal charges 7pending against petitioners in Branch 51 of
the RTC of Manila. These criminal charges were initiated by respondent Social
Security System (SSS). Consequently, petitioners filed with the RTC of Manila,
Branch 51, a Manifestation and Motion to Suspend Proceedings. 10 Petitioners argued
that the stay order issued by Branch 24 should also apply to the criminal charges
pending in Branch 51.

WHETHER OR NOT THE STAY ORDER ISSUED BY BRANCH 24, REGIONAL TRIAL
COURT OF MANILA, IN SEC CORP. CASE NO. 04-111180 COVERS ALSO VIOLATION OF
SSS LAW FOR NON-REMITTANCE OF PREMIUMS AND VIOLATION OF [ARTICLE] [3] 515
OF THE REVISED PENAL CODE.

No, the rehabilitation of SIHI and the settlement of claims against the corporation
is not a legal ground for the extinction of petitioners criminal liabilities.

To begin with, corporate rehabilitation connotes the restoration of the debtor to a

position of successful operation and solvency, if it is shown that its continued
operation is economically feasible and its creditors can recover more, by way of the
present value of payments projected in the rehabilitation plan, if the corporation
continues as a going concern than if it is immediately liquidated. 17 It contemplates a
continuance of corporate life and activities in an effort to restore and reinstate the
corporation to its former position of successful operation and solvency, the purpose
being to enable the company to gain a new lease on life and allow its creditors to be
paid their claims out of its earnings.

There is no reason why criminal proceedings should be suspended during corporate

rehabilitation, more so, since the prime purpose of the criminal action is to punish
the offender in order to deter him and others from committing the same or similar
offense, to isolate him from society, reform and rehabilitate him or, in general, to
maintain social order.26As correctly observed in Rosario,27 it would be absurd for one
who has engaged in criminal conduct could escape punishment by the mere filing of
a petition for rehabilitation by the corporation of which he is an officer. Nonetheless,
any civil indemnity awarded as a result of their conviction would be subject to the
stay order issued by the rehabilitation court. Only to this extent can the order of
suspension be considered obligatory upon any court, tribunal, branch or body where
there are pending actions for claims against the distressed corporation.

Yujuico vs. Quiambao

G.R. No. 168639. January 29, 2007