Corpo (p.10-11) 1EN BANC[G.R. No. L-18216. October 30, 1962.]STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitioners-appellants, vs. REGISTER OF DEEDS OF MANILA, respondent-appellee.1. CORPORATIONS; LIQUIDATION AND DISTRIBUTION OF ASSETS FOR TRANSFER TO STOCKHOLDERS; CERTIFICATE OF LIQUIDATION IN THE NATURE OF TRANSFER OR CONVEYANCE. — Where the purpose of the liquidation, as well as the distribution of the assets of the corporation, is to transfer their title from the corporation to the stockholders in proportion to their shareholdings, that transfer cannot be affected without the corresponding deed of conveyance from the corporation to the stockholders, and the certificate should be considered as one in the nature of a transfer or conveyance.BAUTISTA ANGELO, J p:On September 19, 1960, the five stockholders of the F. Guanzon and Sons, Inc. executed a certificate of liquidation of the assets of the corporation reciting, among other things, that by virtue of a resolution of the stockholders adopted on September 17, 1960, dissolving the corporation, they have distributed among themselves in proportion to their shareholdings, as liquidating dividends, the assets of said corporation, including real properties located in Manila.The certificate of liquidation, when presented to the Register of Deeds of Manila, was denied registration on seven grounds, of which the following were disputed by the stockholders:"3. The number of parcels not certified to in the acknowledgment;"5. P430.50 Reg. fees need be paid;"6. P940.45 documentary stamps need be attached to the document;"7. The judgment of the Court approving the dissolution and directing the disposition of the assets of the corporation need be presented (Rules of Court, Rule 104, Sec. 3)."Deciding the consulta elevated by the stockholders, the Commissioner of Land Registration overruled ground No. 7 and sustained requirements Nos. 3, 5 and 6.The stockholders interposed the present appeal.As correctly stated by the Commissioner of Land Registration, the propriety or impropriety of the three grounds on which the denial of the registration of the certificate of liquidation was predicated hinges on whether or not that certificate merely involves a distribution of the corporation assets or should be considered a transfer or conveyance.Appellants contend that the certificate of liquidation is not a conveyance or transfer but merely a distribution of the assets of the corporation which has ceased to exist for having been dissolved. This is apparent in the minutes of dissolution attached to the document. Not being a conveyance the certificate need not contain a statement of the numbers of parcels of land involved in the distribution in the acknowledgment appearing therein. Hence the amount of documentary stamps to be affixed thereon should only be P0.30 and not P940.45, as required by the register of deeds. Neither is it correct to require appellants to pay the amount of P430.50 as registration fee.The Commissioner of Land Registration, however, entertained a different opinion. He concurred in the view expressed by the register of deeds to the effect that the certificate of liquidation in question, though it involves a distribution of the corporation's assets, in the last analysis represents a transfer of said assets from the corporation to the stockholders. Hence, in substance it is a transfer or conveyance.We agree with the opinion of these two officials. A corporation is a juridical person distinct from the members composing it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. While shares of stock constitute personal property, they do not represent property of the corporation. The corporation has property of its own which consists chiefly of real estate (Nelson vs. Owen, 113 Ala., 372, 21 So. 75; Morrow vs. Gould, 145 Iowa 1, 123 N. W. 743). A share of stock only typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that extent when distributed according to law and equity (Hall & Faley vs. Alabama Terminal, 173 Ala., 398, 56 So., 235), but its holder is not the owner of any part of the capital of the corporation (Bradley vs. Bauder, 36 Ohio St., 28). Nor is he entitled to the possession of any definite portion of its property or assets (Gottfried vs. Miller, 104 U.S., 521; Jones vs. Davis, 35 Ohio St., 474). The stockholder is not a co-owner or tenant in common of the corporate property (Harton vs. Johnston, 166 Ala., 317, 51 So., 992).On the basis of the foregoing authorities, it is clear that the act of liquidation made by the stockholders of the F. Guanzon and Sons, Inc. of the latter's assets is not and cannot be considered a partition of community property, but rather a transfer or conveyance of the title of its assets to the individual stockholders. Indeed, since the purpose of the liquidation, as well as the distribution of the assets of the corporation, is to transfer their title from the corporation to the stockholders in proportion to their shareholdings, — and this is in effect the purpose which they seek to obtain from the Register of Deeds of Manila, — that transfer cannot be effected without the corresponding deed of conveyance from the corporation to the stockholders. It is, therefore, fair and logical to consider the certificate of liquidation as one in the nature of a transfer or conveyance.WHEREFORE, we affirm the resolution appealed from, with costs against appellants.G.R. No. 147062-64 December 14, 2001REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), petitioner, vs.COCOFED, ET AL. and BALLARES, ET AL.,1 EDUARDO M. COJUANGCO JR. and the SANDIGANBAYAN (First Division) respondents.PANGANIBAN, J.:The right to vote sequestered shares of stock registered in the names of private individuals or entitles and alleged to have been acquired with ill-gotten wealth shall, as a rule, be exercised by the registered owner. The PCGG may, however, be granted such voting right provided in can (1) show prima facie evidence that the wealth and/or the shares are indeed ill-gotten; and (2) demonstrate imminent danger of dissipation of the assets, thus necessitating their continued sequestration and voting by the government until a decision, ruling with finality on their ownership, is promulgated by the proper court.1âwphi1.nêtHowever, the foregoing "two-tiered" test does not apply when the sequestered stocks are acquired with funds that are prima facie public in character or, at least, are affected with public interest. Inasmuch as the subject UCPB shares in the present case were undisputably acquired with coco levy funds which are public in character, then the right to vote them shall be exercised by the PCGG. In sum, the "public character" test, not the "two-tiered" one, applies in the instant controversy.

The CaseBefore us is a Petition for Certiorari with a prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction under Rule 65 of the Rules of Court, seeking to set aside the February 28, 2001 Order2 of the First Division of the Sandiganbayan3 in Civil Case Nos. 0033-A, 0033-B and 0033-F. The pertinent portions of the assailed Order read as follows:

"In view hereof, the movants COCOFED, et al. and Ballares, et al. as well as Eduardo Cojuangco, et al., who were acknowledged to be registered stockholders of the UCPB are authorized, as are all other registered stockholders of the United Coconut Planters Bank, until further orders from this Court, to exercise their rights to vote their shares of stock and themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the scheduled Stockholders' Meeting on March 6, 2001 or on any subsequent continuation or resetting thereof, and to perform such acts as will normally follow in the exercise of these rights as registered stockholders."Since by way of form, the pleadings herein had been labeled as praying for an injunction, the right of the movants to exercise their right as abovementioned will be subject to the posting of a nominal bond in the amount of FIFTY THOUSAND PESOS (P50,000.00) jointly for the

defendants COCOFED, et al. and Ballares, et al., as well as all other registered stockholders of sequestered shares in that bank, and FIFTY THOUSAND PESOS (P50,000.00) for Eduardo Cojuangco, Jr., et al., to answer for any undue damage or injury to the United Coconut Planters Bank as may be attributed to their exercise of their rights as registered stockholders."4

The AntecedentsThe very roots of this case are anchored on the historic events that transpired during the change of government in 1986. Immediately after the 1986 EDSA Revolution, then President Corazon C. Aquino issued Executive Order (EO) Nos. 1,5 26 and 14.7

"On the explicit premise that 'vast resources of the government have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad,' the Presidential Commission on Good Government (PCGG) was created by Executive Order No. 1 to assist the President in the recovery of the ill-gotten wealth thus accumulated whether located in the Philippines or abroad."8

Executive Order No. 2 states that the ill-gotten assets and properties are in the form of bank accounts, deposits, trust accounts, shares of stocks, buildings, shopping centers, condominiums, mansions, residences, estates, and other kinds of real and personal properties in the Philippines and in various countries of the world.9

Executive Order No. 14, on the other hand, empowered the PCGG, with the assistance of the Office of the Solicitor General and other government agencies, inter alia, to file and prosecute all cases investigated by it under EO Nos. 1 and 2.Pursuant to these laws, the PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal.10

Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank (UCPB) registered in the names of the alleged "one million coconut farmers," the so-called Coconut Industry Investment Fund companies (CIIF companies) and Private Respondent Eduardo Cojuangco Jr. (hereinafter "Cojuangco").In connection with the sequestration of the said UCPB shares, the PCGG, on July 31, 1987, instituted an action for reconveyance, reversion, accounting, restitution and damages docketed as Case No. 0033 in the Sandiganbayan.On November 15, 1990, upon Motion11 of Private Respondent COCOFED, the Sandiganbayan issued a Resolution12 lifting the sequestration of the subject UCPB shares on the ground that herein private respondents – in particular, COCOFED and the so-called CIIF companies – had not been impleaded by the PCGG as parties-defendants in its July 31, 1987 Complaint for reconveyance, reversion, accounting, restitution and damages. The Sandiganbayan ruled that the Writ of Sequestration issued by the Commission was automatically lifted for PCGG's failure to commence the corresponding judicial action within the six-month period ending on August 2, 1987 provided under Section 26, Article XVIII of the 1987 Constitution. The anti-graft court noted that though these entities were listed in an annex appended to the Complaint, they had not been named as parties-respondents.This Sandiganbayan Resolution was challenged by the PCGG in a Petition for Certiorari docketed as GR No. 96073 in this Court. Meanwhile, upon motion of Cojuangco, the anti-graft court ordered the holding of elections for the Board of Directors of UCPB. However, the PCGG applied for and was granted by this Court a Restraining Order enjoining the holding of the election. Subsequently, the Court lifted the Restraining Order and ordered the UCPB to proceed with the election of its board of directors. Furthermore, it allowed the sequestered shares to be voted by their registered owners.The victory of the registered shareholders was fleeting because the Court, acting on the solicitor general's Motion for Clarification/Manifestation, issued a Resolution on February 16, 1993, declaring that "the right of petitioners [herein private respondents] to vote stock in their names at the meetings of the UCPB cannot be conceded at this time. That right still has to be established by them before the Sandiganbayan. Until that is done, they cannot be deemed legitimate owners of UCPB stock and cannot be accorded the right to vote them."13 The dispositive portion of the said Resolution reads as follows:

"IN VIEW OF THE FOREGOING, the Court recalls and sets aside the Resolution dated March 3, 1992 and, pending resolution on the merits of the action at bar, and until further orders, suspends the effectivity of the lifting of the sequestration decreed by the Sandiganbayan on November 15, 1990, and directs the restoration of the status quo ante, so as to allow the PCGG to continue voting the shares of stock under sequestration at the meetings of the United Coconut Planters Bank."14

On January 23, 1995, the Court rendered its final Decision in GR No. 96073, nullifying and setting aside the November 15, 1990 Resolution of the Sandiganbayan which, as earlier stated, lifted the sequestration of the subject UCPB shares. The express impleading of herein Respondents COCOFED et al. was deemed unnecessary because "the judgment may simply be directed against the shares of stock shown to have been issued in consideration of ill-gotten wealth."15 Furthermore, the companies "are simply the res in the actions for the recovery of illegally acquires wealth, and there is, in principle, no cause of action against them and no ground to implead them as defendants in said case."16

A month thereafter, the PCGG – pursuant to an Order of the Sandiganbayan – subdivided Case No. 0033 into eight Complaints and docketed them as Case Nos. 0033-A to 0033-H.Six years later, on February 13, 2001, the Board of Directors of UCPB received from the ACCRA Law Office a letter written on behalf of the COCOFED and the alleged nameless one million coconut farmers, demanding the holding of a stockholders' meeting for the purpose of, among others, electing the board of directors. In response, the board approved a Resolution calling for a stockholders' meeting on March 6, 2001 at three o'clock in the afternoon.On February 23, 2001, "COCOFED, et al. and Ballares, et al." filed the "Class Action Omnibus Motion"17 referred to earlier in Sandiganbayan Civil Case Nos. 0033-A, 0033-B and 0033-F, asking the court a quo:

"1. To enjoin the PCGG from voting the UCPB shares of stock registered in the respective names of the more than one million coconut farmers; and"2. To enjoin the PCGG from voting the SMC shares registered in the names of the 14 CIIF holding companies including those registered in the name of the PCGG."18

On February 28, 2001, respondent court, after hearing the parties on oral argument, issued the assailed Order.Hence, this Petition by the Republic of the Philippines represented by the PCGG.19

The case had initially been raffled to this Court's Third Division which, by a vote of 3-2,20 issued a Resolution21requiring the parties to maintain the status quo existing before the issuance of the questioned Sandiganbayan Order dated February 28, 2001. On March 7, 2001, Respondent COCOFED et al. moved that the instant Petition be heard by the Court en banc.22 The Motion was unanimously granted by the Third Division.On March 13, 2001, the Court en banc resolved to accept the Third Division's referral.23 It heard the case on Oral Argument in Baguio City on April 17, 2001. During the hearing, it admitted the intervention of a group of coconut farmers and farm worker organizations, the Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa ng Niyugan (PKSMMN). The coalition claims that its members have been excluded from the benefits of the coconut levy fund. Inter alia, it joined petitioner in praying for the exclusion of private respondents in voting the sequestered shares.

IssuesPetitioner submits the following issues for our consideration:24

"A.Despite the fact that the subject sequestered shares were purchased with coconut levy funds (which were declared public in character) and the continuing effectivity of Resolution dated February 16, 1993 in G.R. No. 96073 which allows the PCGG to vote said sequestered shares, Respondent Sandiganbayan, with grave abuse of discretion, issued its Order dated February 20, 2001 enjoining PCGG from voting the sequestered shares of stock in UCPB.

Corpo (p.10-11) 2"B.

The Respondent Sandiganbayan violated petitioner's right to due process by taking cognizance of the Class Action Omnibus Motion dated 23 February 2001 despite gross lack of sufficient notice and by issuing the writ of preliminary injunction despite the obvious fact that there was no actual pressing necessity or urgency to do so."

In its Resolution dated April 17, 2001, the Court defined the issue to be resolved in the instant case simply as follows:This Court's Ruling

The Petition is impressed with merit.Main Issue:

Who May Vote the Sequestered Shares of Stock?Simply stated, the gut substantive issue to be resolved in the present Petition is: "Who may vote the sequestered UCPB shares while the main case for their reversion to the State is pending in the Sandiganbayan?"This Court holds that the government should be allowed to continue voting those shares inasmuch as they were purchased with coconut levy funds – that are prima facie public in character or, at the very least, are "clearly affected with public interest."General Rule: Sequestered SharesAre Voted by the Registered HolderAt the outset, it is necessary to restate the general rule that the registered owner of the shares of a corporation exercises the right and the privilege of voting.25 This principle applies even to shares that are sequestered by the government, over which the PCGG as a mere conservator cannot, as a general rule, exercise acts of dominion.26On the other hand, it is authorized to vote these sequestered shares registered in the names of private persons and acquired with allegedly ill-gotten wealth, if it is able to satisfy the two-tiered test devised by the Court inCojuangco v. Calpo27 and PCGG v. Cojuangco Jr.,28 as follows:

(1) Is there prima facie evidence showing that the said shares are ill-gotten and thus belong to the State?(2) Is there an imminent danger of dissipation, thus necessitating their continued sequestration and voting by the PCGG, while the main issue is pending with the Sandiganbayan?

Sequestered Shares Acquired with Public Funds are an ExceptionFrom the foregoing general principle, the Court in Baseco v. PCGG29 (hereinafter "Baseco") and Cojuangco Jr. v. Roxas30 ("Cojuangco-Roxas") has provided two clear "public character" exceptions under which the government is granted the authority to vote the shares:

(1) Where government shares are taken over by private persons or entities who/which registered them in their own names, and(2) Where the capitalization or shares that were acquired with public funds somehow landed in private hands.

The exceptions are based on the common-sense principle that legal fiction must yield to truth; that public property registered in the names of non-owners is affected with trust relations; and that the prima facie beneficial owner should be given the privilege of enjoying the rights flowing from the prima facie fact of ownership.In Baseco, a private corporation known as the Bataan Shipyard and Engineering Co. was placed under sequestration by the PCGG. Explained the Court:

"The facts show that the corporation known as BASECO was owned and controlled by President Marcos 'during his administration, through nominees, by taking undue advantage of his public office and/or using his powers, authority, or influence,' and that it was by and through the same means, that BASECO had taken over the business and/or assets of the National Shipyard and Engineering Co., Inc., and other government-owned or controlled entities."31

Given this factual background, the Court discussed PCGG's right over BASECO in the following manner:"Now, in the special instance of a business enterprise shown by evidence to have been 'taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos,' the PCGG is given power and authority, as already adverted to, to 'provisionally take (it) over in the public interest or to prevent * * (its) disposal or dissipation;' and since the term is obviously employed in reference to going concerns, or business enterprises in operation, something more than mere physical custody is connoted; the PCGG may in this case exercise some measure of control in the operation, running, or management of the business itself."32

Citing an earlier Resolution, it ruled further:"Petitioner has failed to make out a case of grave abuse or excess of jurisdiction in respondents' calling and holding of a stockholders' meeting for the election of directors as authorized by the Memorandum of the President * * (to the PCGG) dated June 26, 1986, particularly, where as in this case, the government can, through its designated directors, properly exercise control and management over what appear to be properties and assets owned and belonging to the government itself and over which the persons who appear in this case on behalf of BASECO have failed to show any right or even any shareholding in said corporation."33 (Italics supplied)

The Court granted PCGG the right to vote the sequestered shares because they appeared to be "assets belonging to the government itself." The Concurring Opinion of Justice Ameurfina A. Melencio-Herrera, in which she was joined by Justice Florentino P. Feliciano, explained this principle as follows:

"I have no objection to according the right to vote sequestered stock in case of a take-over of business actually belonging to the government or whose capitalization comes from public funds but which, somehow, landed in the hands of private persons, as in the case of BASECO. To my mind, however, caution and prudence should be exercised in the case of sequestered shares of an on-going private business enterprise, specially the sensitive ones, since the true and real ownership of said shares is yet to be determined and proven more conclusively by the Courts."34 (Italics supplied)

The exception was cited again by the Court in Cojuangco-Roxas35 in this wise:"The rule in this jurisdiction is, therefore, clear. The PCGG cannot perform acts of strict ownership of sequestered property. It is a mere conservator. It may not vote the shares in a corporation and elect the members of the board of directors. The only conceivable exception is in a case of a takeover of a business belonging to the government or whose capitalization comes from public funds, but which landed in private hands as in BASECO."36 (Italics supplied)

The "public character" test was reiterated in many subsequent cases; most recently, in Antiporda v. Sandiganbayan.37 Expressly citing Conjuangco-Roxas,38 this Court said that in determining the issue of whether the PCGG should be allowed to vote sequestered shares, it was crucial to find out first whether these were purchased with public funds, as follows:

"It is thus important to determine first if the sequestered corporate shares came from public funds that landed in private hands."39

In short, when sequestered shares registered in the names of private individuals or entities are alleged to have been acquired with ill-gotten wealth, then the two-tiered test is applied. However, when the sequestered shares in the name of private individuals or entities are shown, prima facie, to have been (1) originally government shares, or (2) purchased with public funds or those affected with public interest, then the two-tiered test does not apply. Rather, the public character exceptions in Baseco v. PCGG and Cojuangco Jr. v. Roxas prevail; that is, the government shall vote the shares.UCPB Shares Were Acquired With Coconut Levy FundsIn the present case before the Court, it is not disputed that the money used to purchase the sequestered UCPB shares came from the Coconut Consumer Stabilization Fund (CCSF), otherwise known as the coconut levy funds.

This fact was plainly admitted by private respondent's counsel, Atty. Teresita J. Herbosa, during the Oral Arguments held on April 17, 2001 in Baguio City, as follows:

"Justice Panganiban:"In regard to the theory of the Solicitor General that the funds used to purchase [both] the original 28 million and the subsequent 80 million came from the CCSF, Coconut Consumers Stabilization Fund, do you agree with that?"Atty. Herbosa:"Yes, Your Honor.

x x x x x x x x x"Justice Panganiban:"So it seems that the parties [have] agreed up to that point that the funds used to purchase 72% of the former First United Bank came from the Coconut Consumer Stabilization Fund?"Atty. Herbosa:"Yes, Your Honor."40

Indeed in Cocofed v. PCGG,41 this Court categorically declared that the UCPB was acquired "with the use of the Coconut Consumers Stabilization Fund in virtue of Presidential Decree No. 755, promulgated on July 29, 1975."

Coconut Levy Funds Are Affected With Public InterestHaving conclusively shown that the sequestered UCPB shares were purchased with coconut levies, we hold that these funds and shares are, at the very least, "affected with public interest."The Resolution issued by the Court on February 16, 1993 in Republic v. Sandiganbayan42 stated that coconut levy funds were "clearly affected with public interest"; thus, herein private respondents – even if they are the registered shareholders – cannot be accorded the right to vote them. We quote the said Resolution in part, as follows:

"The coconut levy funds being 'clearly affected with public interest, it follows that the corporations formed and organized from those funds, and all assets acquired therefrom should also be regarded as 'clearly affected with public interest.'"43

x x x x x x x x x"Assuming, however, for purposes of argument merely, the lifting of sequestration to be correct, may it also be assumed that the lifting of sequestration removed the character of the coconut levy companies of being affected with public interest, so that they and their stock and assets may now be considered to be of private ownership? May it be assumed that the lifting of sequestration operated to relieve the holders of stock in the coconut levy companies – affected with public interest – of the obligation of proving how that stock had been legitimately transferred to private ownership, or that those stockholders who had had some part in the collection, administration, or disposition of the coconut levy funds are now deemed qualified to acquire said stock, and freed from any doubt or suspicion that they had taken advantage of their special or fiduciary relation with the agencies in charge of the coconut levies and the funds thereby accumulated? The obvious answer to each of the questions is a negative one. It seems plain that the lifting of sequestration has no relevance to the nature of the coconut levy companies or their stock or property, or to the legality of the acquisition by private persons of their interest therein, or to the latter's capacity or disqualification to acquire stock in the companies or any property acquired from coconut levy funds."This being so, the right of the [petitioners] to vote stock in their names at the meetings of the UCPB cannot be conceded at this time. That right still has to be established by them before the Sandiganbayan. Until that is done, they cannot be deemed legitimate owners of UCPB stock and cannot be accorded the right to vote them."44 (Italics supplied)

It is however contended by respondents that this Resolution was in the nature of a temporary restraining order. As such, it was supposedly interlocutory in character and became functus oficio when this Court decided GR No. 96073 on January 23, 1995.This argument is aptly answered by petitioner in its Memorandum, which we quote:

"The ruling made in the Resolution dated 16 February 1993 confirming the public nature of the coconut levy funds and denying claimants their purported right to vote is an affirmation of doctrines laid down in the cases of COCOFED v. PCGG supra, Baseco v. PCGG, supra, and Cojuangco v. Roxas, supra. Therefore it is of no moment that the Resolution dated 16 February 1993 has not been ratified. Its jurisprudential based remain."45 (Italics supplied)

To repeat, the foregoing juridical situation has not changed. It is still the truth today: "the coconut levy funds are clearly affected with public interest." Private respondents have not "demonstrated satisfactorily that they have legitimately become private funds."If private respondents really and sincerely believed that the final Decision of the Court in Republic v. Sandiganbayan (GR No. 96073, promulgated on January 23, 1995) granted them the right to vote, why did they wait for the lapse of six long years before definitively asserting it (1) through their letter dated February 13, 2001, addressed to the UCPB Board of Directors, demanding the holding of a shareholders' meeting on March 6, 2001; and (2) through their Omnibus Motion dated February 23, 2001 filed in the court a quo, seeking to enjoin PCGG from voting the subject sequestered shares during the said stockholders' meeting? Certainly, if they even half believed their submission now – that they already had such right in 1995 – why are they suddenly and imperiously claiming it only now?It should be stressed at this point that the assailed Sandiganbayan Order dated February 28, 2001 – allowing private respondents to vote the sequestered shares – is not based on any finding that the coconut levies and the shares have "legitimately become private funds." Neither is it based on the alleged lifting of the TRO issued by this Court on February 16, 1993. Rather, it is anchored on the grossly mistaken application of the two-tiered test mentioned earlier in this Decision.To stress, the two-tiered test is applied only when the sequestered asset in the hands of a private person is alleged to have been acquired with ill-gotten wealth. Hence, in PCGG v. Cojuangco,47 we allowed Eduardo Cojuangco Jr. to vote the sequestered shares of the San Miguel Corporation (SMC) registered in his name but alleged to have been acquired with ill-gotten wealth. We did so on his representation that he had acquired them with borrowed funds and upon failure of the PCGG to satisfy the "two-tiered" test. This test was, however, not applied to sequestered SMC shares that were purchased with coco levy funds.In the present case, the sequestered UCPB shares are confirmed to have been acquired with coco levies, not with alleged ill-gotten wealth. Hence, by parity of reasoning, the right to vote them is not subject to the "two-tiered test" but to the public character of their acquisition, which per Antiporda v. Sandiganbayan cited earlier, must first be determined.Coconut Levy Funds Are Prima Facie Public FundsTo avoid misunderstanding and confusion, this Court will even be more categorical and positive than its earlier pronouncements: the coconut levy funds are not only affected with public interest; they are, in fact,prima facie public funds.Public funds are those moneys belonging to the State or to any political subdivision of the State; more specifically, taxes, customs duties and moneys raised by operation of law for the support of the government or for the discharge of its obligations.48 Undeniably, coconut levy funds satisfy this general definition of public funds, because of the following reasons:

1. Coconut levy funds are raised with the use of the police and taxing powers of the State.2. They are levies imposed by the State for the benefit of the coconut industry and its farmers.3. Respondents have judicially admitted that the sequestered shares were purchased with public funds.

Corpo (p.10-11) 34. The Commission on Audit (COA) reviews the use of coconut levy funds.5. The Bureau of Internal Revenue (BIR), with the acquiescence of private respondents, has treated them as public funds.6. The very laws governing coconut levies recognize their public character.

We shall now discuss each of the foregoing reasons, any one of which is enough to show their public character.1. Coconut Levy Funds Are Raised Through the State's Police and Taxing Powers.Indeed, coconut levy funds partake of the nature of taxes which, in general, are enforced proportional contributions from persons and properties, exacted by the State by virtue of its sovereignty for the support of government and for all public needs.49

Based on this definition, a tax has three elements, namely: a) it is an enforced proportional contribution from persons and properties; b) it is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall squarely into these elements for the following reasons:

(a) They were generated by virtue of statutory enactments imposed on the coconut farmers requiring the payment of prescribed amounts. Thus, PD No. 276, which created the Coconut Consumer Stabilization Fund (CCSF), mandated the following:"a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other coconut products, shall be imposed on every first sale, in accordance with the mechanics established under RA 6260, effective at the start of business hours on August 10, 1973."The proceeds from the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the Coconut Consumers Stabilization Fund, as a separate trust fund which shall not form part of the general fund of the government."50

The coco levies were further clarified in amendatory laws, specifically PD No. 96151 and PD No. 146852 – in this wise:"The Authority (Philippine Coconut Authority) is hereby empowered to impose and collect a levy, to be known as the Coconut Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada, or its equivalent in other coconut products delivered to, and/or purchased by, copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products. The levy shall be paid by such copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products under such rules and regulations as the Authority may prescribe. Until otherwise prescribed by the Authority, the current levy being collected shall be continued."53

Like other tax measures, they were not voluntary payments or donations by the people. They were enforced contributions exacted on pain of penal sanctions, as provided under PD No. 276:"3. Any person or firm who violates any provision of this Decree or the rules and regulations promulgated thereunder, shall, in addition to penalties already prescribed under existing administrative and special law, pay a fine of not less than P2,500 or more than P10,000, or suffer cancellation of licenses to operate, or both, at the discretion of the Court."54

Such penalties were later amended thus:"Whenever any person or entity willfully and deliberately violates any of the provisions of this Act, or any rule or regulation legally promulgated hereunder by the Authority, the person or persons responsible for such violation shall be punished by a fine of not more than P20,000.00 and by imprisonment of not more than five years. If the offender be a corporation, partnership or a juridical person, the penalty shall be imposed on the officer or officers authorizing, permitting or tolerating the violation. Aliens found guilty of any offenses shall, after having served his sentence, be immediately deported and, in the case of a naturalized citizen, his certificate of naturalization shall be cancelled."55

(b) The coconut levies were imposed pursuant to the laws enacted by the proper legislative authorities of the State. Indeed, the CCSF was collected under PD No. 276, issued by former President Ferdinand E. Marcos who was then exercising legislative powers.56

(c) They were clearly imposed for a public purpose. There is absolutely no question that they were collected to advance the government's avowed policy of protecting the coconut industry. This Court takes judicial notice of the fact that the coconut industry is one of the great economic pillars of our nation, and coconuts and their byproducts occupy a leading position among the country's export products; that it gives employment to thousands of Filipinos; that it is a great source of the state's wealth; and that it is one of the important sources of foreign exchange needed by our country and, thus, pivotal in the plans of a government committed to a policy of currency stability.

Taxation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabilization of a threatened industry, which is so affected with public interest as to be within the police power of the State, as held in Caltex Philippines v. COA57 and Osmeña v. Orbos.58

Even if the money is allocated for a special purpose and raised by special means, it is still public in character. In the case before us, the funds were even used to organize and finance State offices. In Cocofed v. PCGG,59 the Court observed that certain agencies or enterprises "were organized and financed with revenues derived from coconut levies imposed under a succession of laws of the late dictatorship x x x with deposed Ferdinand Marcos and his cronies as the suspected authors and chief beneficiaries of the resulting coconut industry monopoly."60The Court continued: "x x x. It cannot be denied that the coconut industry is one of the major industries supporting the national economy. It is, therefore, the State's concern to make it a strong and secure source not only of the livelihood of a significant segment of the population, but also of export earnings the sustained growth of which is one of the imperatives of economic stability. x x x."61

2. Coconut Funds Are Levied for the Benefit of the Coconut Industry and Its Farmers.Just like the sugar levy funds, the coconut levy funds constitute state funds even though they may be held for a special public purpose.In fact, Executive Order No. 481 dated May 1, 1998 specifically likens the coconut levy funds to the sugar levy funds, both being special public funds acquired through the taxing and police powers of the State. The sugar levy funds, which are strikingly similar to the coconut levies in their imposition and purpose, were declared public funds by this Court in Gaston v. Republic Planters Bank,62 from which we quote:

"The stabilization fees collected are in the nature of a tax which is within the power of the state to impose for the promotion of the sugar industry (Lutz vs. Araneta, 98 Phil. 148). They constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made accrue to a 'Special Fund,' a 'Development and Stabilization Fund,' almost identical to the 'Sugar Adjustment and Stabilization Fund' created under Section 6 of Commonwealth Act 567. The tax collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State. (Lutz vs. Araneta, supra.)."63

The Court further explained:64

"The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose – that of 'financing the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market.' The fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them as state funds, even though they are held for a special purpose (Lawrence v. American Surety Co., 263 Mich 586. 294 ALR 535, cited in 42 Am. Jur., Sec. 2., p. 718). Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, 'administered in trust' for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be transferred to the general funds of the Government. That is the essence of the trust intended (see 1987 Constitution, Art. VI, Sec. 29[3], lifted from the 1935 Constitution, Article VI, Sec. 23[1]. (Italics supplied)"The character of the Stabilization Fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law (1987 Constitution, Article VI, Sec. 29[1], 1973 Constitution, Article VIII, Sec. 18[1]).

"That the fees were collected from sugar producers, planters and millers, and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fund for their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from them since it is also they who are to be benefited from the expenditure of the funds derived from it. The investment in shares of respondent Bank is not alien to the purpose intended because of the Bank's character as a commodity bank for sugar conceived for the industry's growth and development. Furthermore, of note is the fact that one-half (1/2) or P0.50 per picul, of the amount levied under P.D. No. 388 is to be utilized for the 'payment of salaries and wages of personnel, fringe benefits and allowances of officers and employees of PHILSUCOM' thereby immediately negating the claim that the entire amount levied is in trust for sugar, producers, planters and millers."To rule in petitioners' favor would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, 'and all its components, stabilization of the domestic market including the foreign market,' the industry being of vital importance to the country's economy and to national interest."

In the same manner, this Court has also ruled that the oil stabilization funds were public in character and subject to audit by COA. It ruled in this wise:"Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a 'trust liability account,' the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a 'special fund.' Indeed, the practice is not without precedent."65

In his Concurring Opinion in Kilosbayan v. Guingona,66 Justice Florentino P. Feliciano explained that the funds raised by the On-line Lottery System were also public in nature. In his words:

"x x x. In the case presently before the Court, the funds involved are clearly public in nature. The funds to be generated by the proposed lottery are to be raised from the population at large. Should the proposed operation be as successful as its proponents project, those funds will come from well-nigh every town and barrio of Luzon. The funds here involved are public in another very real sense: they will belong to the PCSO, a government owned or controlled corporation and an instrumentality of the government and are destined for utilization in social development projects which, at least in principle, are designed to benefit the general public. x x x. The interest of a private citizen in seeing to it that public funds, from whatever source they may have been derived, go only to the uses directed and permitted by law is as real and personal and substantial as the interest of a private taxpayer in seeing to it that tax monies are not intercepted on their way to the public treasury or otherwise diverted from uses prescribed or allowed by law. It is also pertinent to note that the more successful the government is in raising revenues by non-traditional methods such as PAGCOR operations and privatization measures, the lesser will be the pressure upon the traditional sources of public revenues, i.e., the pocket books of individual taxpayers and importers."67

Thus, the coconut levy funds – like the sugar levy and the oil stabilization funds, as well as the monies generated by the On-line Lottery System – are funds exacted by the State. Being enforced contributions, the are prima faciepublic funds.3. Respondents Judicially Admit That the Levies Are Government Funds.Equally important as the fact that the coconut levy funds were raised through the taxing and police powers of the State is respondents' effective judicial admission that these levies are government funds. As shown by the attachments to their pleadings,68 respondents concede that the Coconut Consumers Stabilization Fund (CCSF) and the Coconut Investment Development Fund "constitute government funds x x x for the benefit of coconut farmers."

"Collections on both levies constitute government funds. However, unlike other taxes that the Government levies and collects such as income tax, tariff and customs duties, etc., the collections on the CCSF and CIDF are, by express provision of the laws imposing them, for a definite purpose, not just for any governmental purpose. As stated above part of the collections on the CCSF levy should be spent for the benefit of the coconut farmers. And in respect of the collections on the CIDF levy, P.D. 582 mandatorily requires that the same should be spent exclusively for the establishment, operation and maintenance of a hybrid coconut seed garden and the distribution, for free, to the coconut farmers of the hybrid coconut seednuts produced from that seed garden."On the other hand, the laws which impose special levies on specific industries, for example on the mining industry, sugar industry, timber industry, etc., do not, by their terms, expressly require that the collections on those levies be spent exclusively for the benefit of the industry concerned. And if the enabling law thus so provide, the fact remains that the governmental agency entrusted with the duty of implementing the purpose for which the levy is imposed is vested with the discretionary power to determine when and how the collections should be appropriated."69

4. The COA Audit Shows the Public Nature of the Funds.Under COA Office Order No. 86-9470 dated April 15, 1986,70 the COA reviewed the expenditure and use of the coconut levies allocated for the acquisition of the UCPB. The audit was aimed at ascertaining whether these were utilized for the purpose for which they had been intended.71 Under the 1987 Constitution, the powers of the COA are as follows:

"The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities x x x."72

Because these funds have been subjected to COA audit, there can be no other conclusion than that are prima facie public in character.5. The BIR Has Pronounced That the Coconut Levy Funds Are Taxes.In response to a query posed by the administrator of the Philippine Coconut Authority regarding the character of the coconut levy funds, the Bureau of Internal Revenue has affirmed that these funds are public in character. It held as follows: "[T]he coconut levy is not a public trust fund for the benefit of the coconut farmers, but is in the nature of a tax and, therefore, x x x public funds that are subject to government administration and disposition."73

Furthermore, the executive branch treats the coconut levies as public funds. Thus, Executive Order No. 277, issued on September 24, 1995, directed the mode of treatment, utilization, administration and management of the coconut levy funds. It provided as follows:

'(a) The coconut levy funds, which include all income, interests, proceeds or profits derived therefrom, as well as all assets, properties and shares of stocks procured or obtained with the use of such funds, shall be treated, utilized, administered and managed as public funds consistent with the uses and purposes under the laws which constituted them and the development priorities of the government, including the government's coconut productivity, rehabilitation, research extension, farmers organizations, and market promotions programs, which are designed to advance the development of the coconut industry and the welfare of the coconut farmers."74 (Italics supplied)

Doctrinally, acts of the executive branch are prima facie valid and binding, unless declared unconstitutional or contrary to law.6. Laws Governing Coconut Levies Recognize Their Public Nature.Finally and tellingly, the very laws governing the coconut levies recognize their public character. Thus, the thirdWhereas clause of PD No. 276 treats them as special funds for a specific public purpose. Furthermore, PD No. 711 transferred to the general funds of the State all existing special and fiduciary funds including the CCSF. On the other hand, PD No. 1234 specifically declared the CCSF as a special fund for a special purpose, which should be treated as a special account in the National Treasury.

Corpo (p.10-11) 4Moreover, even President Marcos himself, as the sole legislative/executive authority during the martial law years, struck off the phrase which is a private fund of the coconut farmers from the original copy of Executive Order No. 504 dated May 31, 1978, and we quote:

"WHEREAS, by means of the Coconut Consumers Stabilization Fund ('CCSF'), which is the private fund of the coconut farmers (deleted), essential coconut-based products are made available to household consumers at socialized prices." (Emphasis supplied)

The phrase in bold face -- which is the private fund of the coconut farmers – was crossed out and duly initialed by its author, former, President Marcos. This deletion, clearly visible in "Attachment C" of petitioner's Memorandum,75 was a categorical legislative intent to regard the CCSF as public, not private, funds.Having Been Acquired With Public Funds, UCPB Shares Belong, Prima Facie, to the GovernmentHaving shown that the coconut levy funds are not only affected with public interest, but are in fact prima faciepublic funds, this Court believes that the government should be allowed to vote the questioned shares, because they belong to it as the prima facie beneficial and true owner.As stated at the beginning, voting is an act of dominion that should be exercised by the share owner. One of the recognized rights of an owner is the right to vote at meetings of the corporation. The right to vote is classified as the right to control.76 Voting rights may be for the purpose of, among others, electing or removing directors, amending a charter, or making or amending by laws.77 Because the subject UCPB shares were acquired with government funds, the government becomes their prima facie beneficial and true owner.Ownership includes the right to enjoy, dispose of, exclude and recover a thing without limitations other than those established by law or by the owner.78 Ownership has been aptly described as the most comprehensive of all real rights.79 And the right to vote shares is a mere incident of ownership. In the present case, the government has been shown to be the prima facie owner of the funds used to purchase the shares. Hence, it should be allowed the rights and privileges flowing from such fact.And paraphrasing Cocofed v. PCGG, already cited earlier, the Republic should continue to vote those shares until and unless private respondents are able to demonstrate, in the main cases pending before the Sandiganbayan, that "they [the sequestered UCPB shares] have legitimately become private."

Procedural and Incidental Issues:Grave Abuse of Discretion, Improper Arguments and Intervenors' Relief

Procedurally, respondents argue that petitioner has failed to demonstrate that the Sandiganbayan committed grave abuse of discretion, a demonstration required in every petition under Rule 65.80

We disagree. We hold that the Sandiganbayan gravely abused its discretion when it contravened the rulings of this Court in Baseco and Cojuangco-Roxas – thereby unlawfully, capriciously and arbitrarily depriving the government of its right to vote sequestered shares purchased with coconut levy funds which are prima facie public funds.Indeed, grave abuse of discretion may arise when a lower court or tribunal violates or contravenes the Constitution, the law or existing jurisprudence. In one case,81 this Court ruled that the lower court's resolution was "tantamount to overruling a judicial pronouncement of the highest Court x x x and unmistakably a very grave abuse of discretion."82

The Public Character of Shares Is a Valid IssuePrivate respondents also contend that the public nature of the coconut levy funds was not raised as an issue before the Sandiganbayan. Hence, it could not be taken up before this Court.Again we disagree. By ruling that the two-tiered test should be applied in evaluating private respondents' claim of exercising voting rights over the sequestered shares, the Sandiganbayan effectively held that the subject assets were private in character. Thus, to meet this issue, the Office of the Solicitor General countered that the shares were not private in character, and that quite the contrary, they were and are public in nature because they were acquired with coco levy funds which are public in character. In short, the main issue of who may vote the shares cannot be determined without passing upon the question of the public/private character of the shares and the funds used to acquire them. The latter issue, although not specifically raised in the Court a quo, should still be resolved in order to fully adjudicate the main issue.Indeed, this Court has "the authority to waive the lack of proper assignment of errors if the unassigned errors closely relate to errors properly pinpointed out or if the unassigned errors refer to matters upon which the determination of the questions raised by the errors properly assigned depend."83

Therefore, "where the issues already raised also rest on other issues not specifically presented as long as the latter issues bear relevance and close relation to the former and as long as they arise from matters on record, the Court has the authority to include them in its discussion of the controversy as well as to pass upon them."84

No Positive Relief For IntervenorsIntervenors anchor their interest in this case on an alleged right that they are trying to enforce in another Sandiganbayan case docketed as SB Case No. 0187.85 In that case, they seek the recovery of the subject UCPB shares from herein private respondents and the corporations controlled by them. Therefore, the rights sought to be protected and the reliefs prayed for by intervenors are still being litigated in the said case. The purported rights they are invoking are mere expectancies wholly dependent on the outcome of that case in the Sandiganbayan.Clearly, we cannot rule on intervenors' alleged right to vote at this time and in this case. That right is dependent upon the Sandiganbayan's resolution of their action for the recovery of said sequestered shares. Given the patent fact that intervenors are not registered stockholders of UCPB as of the moment, their asserted rights cannot be ruled upon in the present proceedings. Hence, no positive relief can be given them now, except insofar as they join petitioner in barring private respondents from voting the subject shares.

EpilogueIn sum, we hold that the Sandiganbayan committed grave abuse of discretion in grossly contradicting and effectively reversing existing jurisprudence, and in depriving the government of its right to vote the sequestered UCPB shares which are prima facie public in character.In making this ruling, we are in no way preempting the proceedings the Sandiganbayan may conduct or the final judgment it may promulgate in Civil Case Nos. 0033-A, 0033-B and 0033-F. Our determination here is merelyprima facie, and should not bar the anti-graft court from making a final ruling, after proper trial and hearing, on the issues and prayers in the said civil cases, particularly in reference to the ownership of the subject shares.We also lay down the caveat that, in declaring the coco levy funds to be prima facie public in character, we are not ruling in any final manner on their classification – whether they are general or trust or special funds – since such classification is not at issue here. Suffice it to say that the public nature of the coco levy funds is decreed by the Court only for the purpose of determining the right to vote the shares, pending the final outcome of the said civil cases.Neither are we resolving in the present case the question of whether the shares held by Respondent Cojuangco are, as he claims, the result of private enterprise. This factual matter should also be taken up in the final decision in the cited cases that are pending in the court a quo. Again suffice it to say that the only issue settled here is the right of PCGG to vote the sequestered shares, pending the final outcome of said cases.This matter involving the coconut levy funds and the sequestered UCPB shares has been straddling the courts for about 15 years. What we are discussing in the present Petition, we stress, is just an incident of the main cases which are pending in the anti-graft court – the cases for the reconveyance, reversion and restitution to the State of these UCPB shares.The resolution of the main cases has indeed been long overdue. Every effort, both by the parties and the Sandiganbayan, should be exerted to finally settle this controversy.

WHEREFORE, the Petition is hereby GRANTED and the assailed Order SET ASIDE. The PCGG shall continue voting the sequestered shares until Sandiganbayan Civil Case Nos. 0033-A, 0033-B and 0033-F are finally and completely resolved. Furthermore, the Sandiganbayan is ORDERED to decide with finality the aforesaid civil cases within a period of six (6) months from notice. It shall report to this Court on the progress of the said cases every three (3) months, on pain of contempt. The Petition in Intervention is DISMISSED inasmuch as the reliefs prayed for are not covered by the main issues in this case. No costs.SO ORDERED.

G.R. No. 133197 January 27, 1999PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, petitioner, vs.EDUARDO COJUANGCO, JR., AGR'L. CONSULTANCY SERV., INC., ARCHIPELAGO REALTY CORP., BALETE RANCH, INC., BLACK STALLION RANCH, INC., CHRISTENSEN PLANTATION COMPANY, DISCOVERY REALTY CORP., DREAM PASTURES, INC., ECHO RANCH, INC., FAR EAST RANCH, INC., FIRST UNITED TRANSPORT, INC., HABAGAT REALTY DEVELOPMENT, INC., KALAWAKAN RESORTS, INC., KAUNLARAN AGRICULTURAL CORP., LABAYUG AIR TERMINALS, INC., LANDAIR INT'L. MARKETING CORP., LHL CATTLE CORPORATION, LUCENA OIL FACTORY, INC., MEADOW LARK PLANTATIONS, INC., METROPLEX COMMODITIES, INC., MISTY MOUNTAIN AGRI'L. CORP., NORTHEAST CONTRACT TRADERS, INC., NORTHERN CARRIERS CORPORATION, OCEANSIDE MARITIME ENT., INC., ORO VERDE SERVICES, INC., PASTORAL FARMS, INC., PCY OIL MANUFACTURING CORP., PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC., PUNONG-BAYAN HOUSING DEV'T. CORP., PURA ELECTRIC COMPANY, INC., RADIO AUDIENCE DEVELOPERS., INTEGRATED ORGANIZATION, INC., RADYO PILIPINO CORPORATION, RANCHO GRANDE, INC., REDDEE DEVELOPERS, INC., SAN ESTEBAN DEVELOPMENT, INC., SILVER LEAF PLANTATIONS, INC., SOUTHERN SERVICE TRADERS, INC., SOUTHERN STAR CATTLE CORP., SPADE ONE RESORTS CORP., UNEXPLORED LAND DEVELOPERS, INC., VERDANT PLANTATIONS, INC., VESTA AGRICULTURAL CORP., WINGS RESORTS CORPORATION, SAN MIGUEL CORPORATION and SANDIGANBAYAN, respondents. MARTINEZ, J.:Private respondents (herein respondent Stockholders) other than San Miguel Corporation (SMC) are registered Stockholders of the latter corporation. A stockholders meeting was scheduled on April 21, 1998 at 2 p.m. During the pendency of the sequestration suit involving the sequestered shares of SMC, respondent stockholders filed a motion before the Sandiganbayan (SB) to enjoin petitioner Presidential Commission on Good Government (PCGG) from voting the PCGG-sequestered shares of stock and instead allow the movants a quo to vote those shares. Subject to the posting of a bond, the SB granted the motion in a resolution dated April 20, 1998, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, there being no legal basis for preventing the defendants/movants from voting their sequestered shares of stock in the San Miguel Corporation, the plaintiff Presidential Commission on Good Government, its assignees, agents, representatives or servants are enjoined from voting the shares of stock of herein defendants/movants at the scheduled stockholders meeting of said corporation scheduled for April 21, 1998 at 2:00 p.m. or at any other time to which said stockholders meeting may be continued or reset. The chairman of the meeting and the secretary thereof will acknowledge the right of the following stockholders to vote the shares of stock registered in their names:

(names of respondent stockholders deleted)The movants shall post a bond of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250,000.00) to answer for any undue damage that the plaintiff or the San Miguel Corporation shall suffer by reason of the sequestered shares of stock having been voted by or for said movants.SO ORDERED. 1

Due to the urgency of the matter and for lack of material time, petitioner, without filing a motion for reconsideration, assailed the said resolution before this Court thru a petition for certiorari and mandamus with application for issuance of a temporary restraining order (TRO). The petition was filed on April 20, 1998 before the Supreme Court office in Baguio City during its summer session. 2 Petitioner attached thereto a fax copy of the said SB resolution, although a certified copy was submitted later. The next day, the Court required respondents to file their Comment but declined to issue the TRO prayed for. 3 With the denial of the TRO, respondent stockholders were able to elect in said stockholders meeting three (3) nominees to the SMC Board of Directors(BOD). 4

Before proceeding to the main issue, the Court notes that an uncertified fax 5 copy of the assailed resolution appended to the petition cannot be considered as compliance with the requirement of Rule 65 of the Rules of Court that a certified true copy must be attached and is sufficient reason to warrant the outright dismissal of the petition. However, due to the extraordinary situation of the case, particularly the date of the promulgation of the SB resolution, the date of the stockholders meeting, the summer session of the Supreme Court in Baguio City, and the subsequent submission by petitioner of a certified copy of the assailed SB resolution suffice to relax that particular rule of procedure.The only query in this petition may be simplified as follows: In the SMC stockholders meeting of April 20, 1998 who between petitioner and respondent stockholders should vote the sequestered shares of stock.Since 1986, petitioner had been voting the sequestered SMC shares and continued to exercise such right until 1997, except for some period in the year 1991. During the latter year, the Court in the case of Cojuangco, Jr. vs. Roxas, 6 on which both respondent stockholders and SB anchor their position in this case, ruled that the PCGG had no right to vote the said shares. As said by the Court:

The PCGG cannot perform acts of strict ownership of sequestered property. It is mere conservator. It may not vote the shares in a corporation and elect the members of the board of directors. The only conceivable exception is in a case of a takeover of a business belonging to the government or whose capitalization comes from public funds, but which landed in private hands as in BASECO. The constitutional right against deprivation of life, liberty and property without due process of law is so well-known and too precious so that the hand of the PCGG must be stayed in its indiscriminate takeover of and voting of shares allegedly ill-gotten in these cases. It is only after appropriate judicial proceedings when a clear determination is made that said shares are truly ill-gotten when such a takeover and exercise of acts of strict ownership by the PCGG are justified.In the light of the foregoing discussion, the Court finds and so holds that the PCGG has no right to vote the sequestered shares of petitioners including the sequestered corporate shares. Only their owners, duly authorized representatives or proxies may vote the said shares.

The Roxas case was disposed by the Court as follows:WHEREFORE, the Petitions are GIVEN DUE COURSE and GRANTED. Private respondents Adolfo Azcuna, Edison Coseteng and Patricio Pineda are hereby DIRECTED to vacate their respective offices as members of the Board of Directors of the SMC as soon as this decision is implemented. Contemporaneously with the installation of the safeguards above-required to enable the PCGG to perform its statutory role as conservator of the sequestered shares of stock or assets, the respondent SMC is hereby ORDERED to

Corpo (p.10-11) 5allow the petitioners to vote their shares in person or by proxy and to be voted for as members of the Board of Directors of the SMC and otherwise to enjoy the rights and privileges of shareholders: and the PCGG is hereby ENJOINED from voting the sequestered shares of stock except as otherwise authorized in the safeguards above-required. The questioned order of the Sandiganbayan dated 16 November 1989 is hereby SET ASIDE; however, the implementation of this decision shall be carried out under the supervision and control of the Sandiganbayan. The Court makes no pronouncement as to costs.SO ORDERED.

In 1995, however, the Court en banc promulgated the consolidated sequestration cases which includes PCGG v. Sandiganbayan. 7 Among others, the Court nullified in the latter case an earlier resolution issued by the SB lifting the sequestration over the shares of stock in the name of said stockholders. The respondents in the latter case and in this case are the same because the former case is merely an offshot of the main sequestration suit. The fact that the sequestration remains does not automatically deprive the stockholders of their right to vote those shares which is basic feature of their ownership — although questioned. But in resolving who should vote the sequestered shares, necessitates a determination of the alleged ill-gotten character of those shares and consequently the rightful ownership thereof, which issue is still the subject of the main case still pending in the courts. In any case, what is involved herein is merely an incident of the main case and is limited only to the stockholders meeting scheduled for April 20, 1998. This resolution is without prejudice to the final disposition of the merits of the main suit.Until the main sequestration suit is resolved, the right to vote the SMC sequestered shares depends on whether the two-tiered test set by the Court in its June 10, 1993 Resolution in G.R. No. 115352 (Cojuangco v. Calpo) concurs. Those guidelines must be observed by the SB in resolving similar motions involving the right to vote the said shares, which are:

1. whether there is prima facie evidence showing that the said shares are ill-gotten and thus belong to the state; and2. whether there is an immediate danger of dissipation thus necessitating their continued sequestration and voting by the PCGG while

the main issue pends with the Sandiganbayan.There is therefore "a need for some factual moorings" to resolve the issues raised herein and since the Court is not a trier of facts, it is proper to refer the matter to the appropriate tribunal.With respect to the bond, it appears that the same is too minimal if compared to the value of the subject shares of stock and the voting power of the members of the BOD represented/elected by such shares. It is just but fair that the bond should reasonably be increased.ACCORDING, the case is REMANDED to the Sandiganbayan for further proceedings. However, respondent stockholders are ORDERED to furnish an additional bond upon receipt of notice hereof, which is herein set at TWENTY-FIVE MILLION PESOS (P25,000,000.00) for the same purpose as mentioned by the Sandiganbayan, which shall strictly enforce this resolution.1âwphi1.nêtG.R. No. L-37281 November 10, 1933W. S. PRICE and THE SULU DEVELOPMENT COMPANY, plaintiffs-appellants, vs.H. MARTIN, defendant-appellant. THE AGUSAN COCONUT COMPANY, defendant-appellee.J.W. Ferrier for plaintiff-appellants.G.E. Campbell and W.A. Caldwell for defendant-appellant.DeWitt, Perkins and Brady for appellee. HULL, J.: Plaintiffs brought suit in the Court of First Instance of Manila praying that a mortgage executed by the Sulu Development Company on its properties in favor of the Agusan Coconut Company be dissolved and declared null and void, the principal contentions being that at the stockholders' meeting in which the officers of the Sulu Development Company were elected and at which the proposed mortgage was approved of, 97 shares of stock of the Sulu Development Company were voted by the proxy of Mrs. Worcester, in whose name the stock at that time stood upon the books of the company, whereas defendant Martin claimed that he was the true owner and that he should have voted the stock. From the records of the Sulu Development Company it appears that at the meeting of November 12, 1925, Martin presented evidence to the effect that he, and not Mrs. Worcester, was the owner of the 97 shares of stock. Copies of the documents relied upon by Martin were made a part of the record, but apparently no action was taken by the stockholders or by the directors, and at the meetings of November 12, 17, and 19, Mrs. Worcester's proxy apparently voted the stock without protest on the part of Martin or any other stockholder. As far as the record shows, every formal action taken at those three meetings was unanimous, and Martin at the last two meetings was accompanied by two members of the Bar of the Philippine Islands as his counsel. The Sulu Development Company from its inception up to the time of executing the contract was virtually owned and controlled by Martin. Prince purchased one share of stock about a month before the called meeting but was not present at the meetings in question. Another ground relied upon by plaintiffs is a claim that the mortgage was without consideration. The evidence shows that for years the Agusan Coconut Company, through its general manager, had been advancing sums through Martin in order that the Sulu Development Company might secure good and sufficient title to a large tract of land situated near Siasi and thereon develop a coconut plantation. The amount of money so advanced was in dispute, but between the meeting on November 12 and the final action on November 19, the attorney of the Sulu Development Company, one of whom was also an accountant, and the attorneys of the Agusan Coconut Company went over the mutual accounts with care and arrived at the sum set forth in the mortgaged. Had there been no agreement, suit would have been instituted by the Agusan Company against the Sulu Development Company. There is also a claim that there was a parol agreement between Martin and Worcester, representing the two companies, that after the death of Mr. Worcester on May 2, 1924, the Agusan Coconut Company failed to comply with the terms and conditions of the so-called cultivation agreement, and Martin prayed in his special cross-complaint and counter-claim that the Defendant Agusan Coconut Company be required to make such further cash advances to "carry out the full scale development of the tract of land in the cultivation agreement and as contemplated therein." The trial court, on timely objection, refused to receive the parol evidence as to the cultivation agreement, and after trial and a lengthy opinion, held that the mortgage in question was valid and refused to order its cancellation. From that decision plaintiff appeal and make the following assignments of error:

The trial court erred:1. In refusing appellants the right to introduce evidence as to the "cultivation agreement" extensively referred to by the parties herein.2. In refusing to reopen the case on motion filed in due form and manner by the plaintiffs and appellants herein, on the ground of newly discovered evidence, such motion having been filed the rendition of the judgment herein.3. In finding that the plaintiff, W.S. Price, did not appear here as a plaintiff to depend his own right but for the purpose of giving aid to the defendant, Harry Martin.

4. In ruling that although the 97 shares voted by Mrs. Nanon L. Worcester at the meetings in question thru her proxy belonged to Harry Martin and were only held in trust by her late husband, Dean C. Worcester, yet such trusteeship was for the benefit of the Agusan Coconut Company, and that such company is the actual cestui que trust thereunder, in violation of the express terms of the trust agreement.5. In holding that Mrs. Nanon L. Worcester could legally vote the said 97 shares she actually voted at the meeting in question, notwithstanding the facts as found by said court, that said shares belonged to H. Martin and were merely held in trust by her deceased husband.6. In finding that the 97 shares of stock in question had been adjudicated to Mrs. Nanon L. Worcester by the commissioners on claims against the estate of her deceased husband; that such adjudication had been approved by the Court of First Instance of the City of Manila, and that the said Nanon L. Worcester had inherited said shares by virtue of the will of her deceased husband.7. In holding the effect that there was a quorum in the pretended meetings of the stockholders of the Sulu Development Company alleged to have taken place on November 12, 17 and 19, 1925, particularly that one asserted to have been held on November 19, 1925, when in law and in fact there was no such quorum.8. In finding in effect that the meetings pretended to be held by Sulu Development on the dates aforementioned were validly and legally held and that the action taken and proceedings had thereat were valid and effective.9. In finding that if the defendant H. Martin had had the 97 shares in question in his own name at the alleged meetings of the Sulu Development Company, he would have voted them in the same way and to the same effect as the said Nanon L. Worcester voted them.10. In not finding that there was attendant fraud, misrepresentation and deceit in the execution and issuance of the mortgage contract, Exhibit U.11. In not holding that said mortgage is null and void for want of legal consideration.12. In finding that the plaintiffs and appellants herein are legally bound by the said mortgage contract Exhibit U.13. In holding that the plaintiffs and appellants herein are legally estopped to contest the efficacy and validity of the mortgage contract, Exhibit, U.14. In dismissing plaintiffs' complaint herein.15. In denying plaintiffs' motion for a new trial.

While defendant Martin appeals and assigns the following errors:1. The trial court erred in refusing to find that the one hundred shares of the capital stock of the appellant, the Sulu Development Company, delivered on November 23, 1922, by the appellant, H. Martin, to the late Dean C. Worcester, were so delivered in trust to be held and used for the benefit of the said H. Martin.2. The trial court erred in finding that the voting by Mrs. Nanon L. Worcester, in the meeting held by the stockholders of the appellant, the Sulu Development Company, on November 12, 17, and 19, 1925, was legal.3. The trial court erred in refusing to find that the mortgage involved in this litigation, purported to have been executed by the appellant, the Sulu Development Company, in favor of the appellee, the Agusan Coconut Company, is null and void.4. The trial court erred in excluding, as being within the statute of frauds, testimony regarding a certain verbal agreement entered into by and between the appellee, the Agusan Coconut Company, and the appellant, H. Martin, which agreement had been fully performed by the latter.5. The trial court erred in excluding as "Hearsay Evidence", testimony regarding statements made by certain officials of the appellee, the Agusan Company.6. The trial court erred in excluding the testimony of the appellant, H. Martin, regarding matters of fact which occurred between him and certain officials of the appellee, the Agusan Coconut Company, who had died prior to the trial of this action.

An examination of the assignments of error will show that although this case in its main aspects is a simple one and confined to the questions, first, as to whether the mortgage was duly executed by the Sulu Development Company and, second, whether it was given for a valuable consideration, many side issues of no moment were urged upon the trial court, which probably accounts for the voluminous record with which we are confronted and numerous assignments of error which we do not deem it necessary to discuss in detail. Plaintiffs contend that the transference on the books of the company of 97 shares of stock in the name of Mrs. Worcester was fraudulent and illegal. The evidence of record, however, under all the circumstances of the case, fails to demonstrate the allegation of fraud, and this court believes that she acted in good faith and in the honest belief that she had not only a legal right but a duty to participate in the stockholders meeting. As to whether the stock was rightfully the property of Martin, that is a question for the courts and for a stockholder's meeting. Until challenged in a proper proceeding, a stockholder according to the books of the company has a right to participate in that meeting, and in the absence of fraud the action of the stockholders' meeting cannot be collaterally attacked on account of such participation. "A person who has purchased stock, and who desires to be recognized as a stockholder, for the purpose of voting, must secure such a standing by having the transfer recorder upon the books. If the transfer is not duly made upon request, he has, as his remedy, to compel it to be made." (Morrill vs. Little Falls Mfg. Co., 53 Minn., 371; 21 L.R.A., 175-178, citing Cook, Stock & Stockholders, par. 611; People vs. Robinson, 64 Cal., 373; Downing vs. Potts, 23 N.J.L., 66; State vs. Ferris, 42 Conn., 560; New York & N.H.R. Co. vs. Schuyler, 34 N.Y., 80; Bank of Commerce's App., 73 Pa., 59; Hoppin vs. Buffum, 9 R.I., 513; 11 Am. Rep., 219; Re St. Lawrence S.R. Co., 44 N. J. L., 529.) As to the question of lack of consideration for the mortgage, throughout the brief for appellants it appears by the constant reiteration of the phrase that all the advances were made "by the Agusan Coconut Company and/or its then General Manager, the late Dean C. Worcester, to H. Martin and/or the Sulu Development Company." It must be remembered that there is no dispute between the Worcester interests and the Agusan Coconut Company as to who advanced the money, namely, the Agusan Coconut Company, nor is there any difficulty in determining to whom the money was advanced. Although Martin was virtually the owner of all the capital stock of the Sulu Development Company, business was carried on in the name of the company, and the land and properties were secured in the name of the company, and up to the time of the execution of the mortgage and some time thereafter there was no claim from anybody the money had been advanced to Martin instead of the company. Even a repeated use of the questionable phrase "and/or" as to the grantor "and/or" as to the grantee, will not fabricate a life-raft on which a recalcitrant debtor can reach a safe harbor of repudiation.lawphil.net We are therefore convinced that the contention that the mortgage was made without consideration was a afterthought without foundation in fact and in a vain attempt to avoid a legal and binding obligation. We find no merit in the contention that the trial court should have concerned itself with an alleged parol contract between Martin and Dean C. Worcester, deceased. The alleged contract not being in writing or to be executed within a year, it is within the statute of frauds. The value of the rule is shown in this case as it was some time after Mr. Worcester's death before anything was heard of such an alleged agreement. Even if such an agreement had been made and it had been proper to receive proof thereof, it would not benefit plaintiffs as the mortgage was executed pursuant to a compromise agreement to settle the affairs between the two companies, and all the transactions between the two companies were merged and settle by that compromise. The contention that a new trial should have been granted in order that plaintiffs could present in evidence a letter from Mr. Worcester to the late Governor-General Wood, is likewise without merit. The letter, even if admitted, would not have changed the result of these proceedings, as a fair reading of the letter is not repugnant to a single contention of defendant-appellee. The judgment appealed from is therefore affirmed. Costs against appellants. So ordered.G.R. No. 91925 April 16, 1991

Corpo (p.10-11) 6EDUARDO M. COJUANGCO, JR., MANUEL M. COJUANGCO and RAFAEL G. ABELLO, petitioners, vs.ANTONIO J. ROXAS, JOSE L. CUISIA, JR., OSCAR HILADO, Presidential Commission on Good Government (PCGG), SAN MIGUEL CORPORATION (SMC) and SANDIGANBAYAN (First Division),respondents.G.R. No. 93005 April 16, 1991EDUARDO M. COJUANGCO, JR., ENRIQUE M. COJUANGCO and MANUEL M. COJUANGCO, petitioners, vs.ADOLFO AZCUNA, EDISON COSETENG, PATRICIO PINEDA, Presidential Commission on Good Government (PCGG), and SAN MIGUEL CORPORATION (SMC), respondents.Estelito P. Mendoza and Villareal Law Offices for petitioners. GANCAYCO, J.:pThe issue squarely presented by the petitioners is whether or not the Presidential Commission on Good Government (PCGG) may vote the sequestered shares of stock of San Miguel Corporation (SMC) and elect its members of the board of directors.In G.R. No. 91925 the facts alleged are undisputed. Petitioners are stockholders of record of SMC as follows —

Stockholders No. of SharesEduardo M. Cojuangco, Jr. 13,225Manuel M. Cojuangco 5,750Rafael G. Abello 5,750

On April 18, 1989, the annual meeting of shareholders of SMC was held. Among the matters taken up was the election of fifteen (15) members of the board of directors for the ensuing year. Petitioners were among the twenty four (24) nominees to the board, namely ––

1 Mr. Rafael G. Abello2 Mr. Eduardo M. Cojuangco, Jr.3 Mr. Enrique M. Cojuangco4 Mr. Manuel M. Cojuangco5 Mr. Marcos O. Cojuangco6 Mr. Jose C. Concepcion7 Mr. Amado C. Mamuric8 Mr. Rodolfo M. Tinsay9 Mr. Danilo S. Ursua10 Mr. Eduardo De Los Angeles11 Mr. Feliciano Belmonte, Jr.12 Mr. Teodoro L. Locsin13 Mr. Domingo Lee14 Mr. Philip Ella Juico15 Mr. Patrick Pineda16 Mr. Adolfo Azcuna17 Mr. Edison Coseteng18 Mr. Jose L. Cuisia, Jr.19 Mr. Oscar Hilado20 Mr. Andres Soriano III21 Mr. Eduardo J. Soriano22 Mr. Francisco C. Eizmendi, Jr.23 Mr. Benigno P. Toda, Jr.24 Mr. Antonio J. Roxas

On the date of the annual meeting, there were 140,849,970 shares outstanding, of which 133,224,130 shares, or 94.58%, were present at the meeting, either in person or by proxy. Because of PCGG's claim that the shares of stock were under sequestration, PCGG was allowed to represent and vote the shares of stocks of the following shareholders.

STOCKHOLDER NO. OF SHARESPRIMAVERA FARMS, INC. 5,381,543BLACK STALLION RANCH, INC. 3,587,695MISTY MOUNTAINS AGRI'L CORP. 3,587,695PASTORAL FARMS, INC. 3,587,695MEADOW LARK PLANTATION, INC. 2,690,771SILVER LEAF PLANTATION, INC. 2,690,771LUCENA OIL FACTORY, INC. 169,174PCY OIL FACTORY, INC. 167,867METROPLEX COMMODITIES, INC. 167,777KAUNLARAN AGRICULTURAL CORP. 145,475REDDEE DEVELOPERS, INC. 169,071AGR'L CONSULTANCY SERV., INC. 167,907FIRST UNITED TRANSPORT, INC. 168,963VERDANT PLANTATIONS, INC. 145,475CHRISTENSEN PLANTATIONS, INC. 168,920NORTHERN CARRIERS CORPORATION 167,891VESTA AGRICULTURAL CORP. 145,475OCEAN SIDE MARITIME ENT., INC. 132,250PURA ELECTRIC COMPANY, INC. 99,587UNEXPLORED LAND DEVELOPERS, INC. 102,823PUNONG-BAYAN HOUSING DEVT. CORP. 132,250

HABAGAT REALTY DEVELOPMENT, INC. 145,822SPADE ONE RESORTS CORP. 147,040WINGS RESORTS CORPORATION 104,885KALAWAKAN RESORTS, INC. 132,250LABAYUG AIR TERMINALS, INC. 159,106LANDAIR INT'L MARKETING CORP. 168,965SAN ESTEBAN DEVELOPMENT CORP. 167,679PHILIPPINE TECHNOLOGIES, INC. 132,250BALETE RANCH, INC. 166,395DISCOVERY REALTY CORP. 169,203ARCHIPELAGO REALTY CORP. 167,761SOUTHERN SERVICE TRADERS, INC. 120,480ORO VERDE SERVICES, INC. 132,250NORTHEAST CONTRACT TRADERS, INC. 159,536DREAM PASTURES, INC. 169,237LHL CATTLE CORPORATION 169,216RANCHO GRANDE, INC. 167,614ECHO RANCH, INC. 167,897FAR EAST RANCH, INC. 169,227SOUTHERN STAR CATTLE CORP. 169,095RADIO AUDIENCE DEVELOPERSINTEGRATED ORGANIZATION, INC 167,787RADYO PILIPINO CORPORATION 167,777

EDUARDO M. COJUANGCO, JR. 13,225————TOTAL 27,211,770

The above shares are collectively referred to as "corporate shares" in the petition.Representatives of the corporate shares present at the meeting claimed that the shares are not under sequestration; or that if they are under sequestration, the PCGG had no right to vote the same. They were overruled.With PCGG voting the corporate shares, the following was the result of the election for members of the SMC board of directors:

Stockholder No. of Votes1. Mr. Eduardo De Los Angeles 135,115,5212. Mr. Feliciano Belmonte, Jr. 135,312,2543. Mr. Teodoro L. Locsin 132,309,5204. Mr. Domingo lee 132,308,3555. Mr. Philip Ella Juico 132,301,5696. Mr. Patrick Pineda 132,284,3657. Mr. Adolfo Azcuna 132,284,3648. Mr. Edison Coseteng 132,284,3649. Mr. Andres Soriano III 132,182,00010. Mr. Eduardo Soriano 132,173,94311. Mr. Francisco C. Eizmendi, Jr. 132,164,47012. Mr. Benigno P. Toda, Jr. 132,147,31913. Mr. Antonio J. Roxas 132,146,10714. Mr. Jose L. Cuisia, Jr. 132,141,77515. Mr. Oscar Hilado 132,110,40216. Mr. Eduardo M. Cojuangco, Jr. 2,280,61817. Mr. Enrique M. Cojuangco 2,279,72918. Mr. Manuel M. Cojuangco 2,279,71919. Mr. Rafael G. Abello 2,278,86320. Mr. Jose C. Concepcion 1,59621. Mr. Marcos O. Cojuangco 87522. Mr. Danilo S. Ursua 65023. Mr. Rodolfo M. Tinsay 2324. Mr. Amado C. Mamuric 0

The fifteen individuals who received the highest number of votes were declared elected.The PCGG claimed it represented 85,756,279 shares at the meeting including the corporate shares which corresponded to 1,286,744,185 votes which in turn were distributed equally among the fifteen (15) candidates who were declared elected.Petitioners allege that the 27,211,770 shares or a total of 408,176,550 votes representing the corporate shares, were illegally cast by PCGG and should be counted in favor of petitioners so that the results of the election would be as follows ––

Add:Votes 408,176,550Originally divided by 3 ResultingStockholder Credited (136,058,850) Votes1. Mr. Eduardo M.Cojuangco, Jr. 2,280,618 136,058,850 138,339,4682. Mr. Manuel M.Cojuangco 2,279,719 136,058,850 138,338,5693. Mr. Rafael G.Abello 2,278,863 136,058,850 138,337,713

Corpo (p.10-11) 7Less:Votes 408,176,550Originally divided by 15 ResultingStockholder Credited (27,211,770) Votes4. Mr. EduardoDe Los Angeles 135,115,521 27,211,770 107,903,7515. Mr. FelicianoBelmonte, Jr. 132,312,254 27,211,770 105,100,4846. Mr. TeodoroL. Locsin 132,309,520 27,211,770 105,097,7507. Mr. DomingoLee 132,308,355 27,211,770 105,096,5858. Mr. PhilipElla Juico 132,301,569 27,211,770 105,089,7999. Mr. PatrickPineda 132,284,365 27,211,770 105,072,59510. Mr. AdolfoAzcuna 132,284,364 27,211,770 105,072,59411. Mr. EdisonCoseteng 132,284,364 27,211,770 105,072,59412. Mr. AndresSoriano III 132,182,000 27,211,770 104,970,23013. Mr. EduardoSoriano 132,173,943 27,211,770 104,962,17314. Mr. FranciscoC. Eizmendi, Jr. 132,164,470 27,211,770 104,952,70015. Mr. BenignoP. Toda, Jr. 132,147,319 27,211,770 104,935,54916. Mr. AntonioJ. Roxas 132,146,107 27,211,770 104,934,33717. Mr. Jose L.Cuisia, Jr. 132,141,775 27,211,770 104,930,00518. Mr. OscarHilado 132,110,402 27,211,770 104,898,63219. Mr. Enrique M.Cojuangco 2,279,72920. Mr. Jose C.Concepcion 1,59621. Mr. Marcos O.Cojuangco 87522. Mr. Danilo S.Ursua 65023. Mr. RodolfoM. Tinsay 2324. Mr. AmadoC. Mamuric 0

The petitioners assert that is they were allowed to vote their corresponding shares accordingly, then they would obtain enough votes to be elected.On May 31, 1989, petitioners filed with the Sandiganbayan a petition for quo warranto impleading as respondents the fifteen (15) candidates who were declared elected members of the board of directors of SMC for the year 1989-1990. Summons was issued only as to respondents Antonio J. Roxas, Jose L. Cuisia, Jr. and Oscar T. Hilado whose election will be affected by the claim of petitioners if the same were upheld.In due course, a resolution was rendered by the Sandiganbayan on November 16, 1989, affirming its jurisdiction over the petition but dismissing it for lack of cause of action on the ground that the PCGG has the right to vote sequestered shares.Hence, this petition for certiorari, the main thrust of which is that the right to vote sequestered shares of stock is vested in the actual shareholders not in the PCGG.Respondents were required to comment on the petition while petitioners were required to comment on the motion to dismiss filed by respondent SMC. The required comments and consolidated reply thereto have all now been submitted.In G.R. No. 93005, the facts alleged are substantially similar in nature. Petitioners are stockholders of SMC as follows ––

STOCKHOLDER NO. OF SHARESEDUARDO M. COJUANGCO, JR. 52,900ENRIQUE M. COJUANGCO 23,000MANUEL M. COJUANGCO 23,000

On April 17, 1990, the annual meeting of the SMC shareholders was held. Among the matters taken up was the election of the fifteen (15) members of the board of directors of SMC for the ensuing year. Petitioners were among the twenty (20) nominees to the board, namely ––

1. Mr. Andres Soriano III2. Mr. Francisco C. Eizmendi, Jr.3. Mr. Eduardo J. Soriano4. Mr. Antonio J. Roxas5. Mr. Benigno P. Toda, Jr.6. Mr. Eduardo De Los Angeles7. Mr. Feliciano Belmonte, Jr.

8. Mr. Renato Valencia9. Mr. Domingo Lee10. Mr. Teodoro L. Locsin11. Mr. Oscar Hilado12. Mr. Philip Ella Juico13. Mr. Adolfo Azcuna14. Mr. Edison Coseteng15. Mr. Patricio Pineda16. Mr. Eduardo M. Cojuangco, Jr.17. Mr. Marcos O. Cojuangco18. Mr. Rafael G. Abello19. Mr. Enrique M. Cojuangco20. Mr. Manuel M. Cojuangco

On the date of the meeting, there were 565,916,550 shares outstanding, of which 531,598,051 shares, or 93.58%, were present at the meeting, either in person or by proxy. 1 The PCGG was allowed to represent and vote the following shares of stock under sequestration:

STOCKHOLDER NO. OF SHARESNORTHEAST CONTRACT TRADERS, INC. 638,144LABAYUG AIR TERMINALS, INC. 636,416SPADE ONE RESORTS CORP. 588,280HABAGAT REALTY DEVELOPMENT, INC. 583,280PUNONG-BAYAN HOUSING DEV'T CORP. 529,000OCEAN SIDE MARITIME ENT., INC. 529,000PHILIPPINE TECHNOLOGIES, INC. 529,000SOUTHERN SERVICE TRADERS, INC. 481,916WINGS RESORTS CORPORATION 419,536UNEXPLORED LAND DEVELOPERS, INC. 411,288PURA ELECTRIC COMPANY, INC. 398,336PRIMAVERA FARMS, INC. 21,526,164BLACK STALLION RANCH, INC. 14,350,772MISTY MOUNTAIN AGR'L. CORP. 14,350,772PASTORAL FARMS, INC. 14,350,772MEADOW LARK PLANTATION, INC. 10,763,080SILVER LEAF PLANTATION, INC 10,763,080PCY OIL MANUFACTURING CORP. 671,464METROPLEX COMMODITIES, INC. 671,104LUCENA OIL FACTORY, INC. 676,696DISCOVERY REALTY CORP. 676,808DREAM PASTURES, INC. 676,948FAR EAST RANCH, INC. 676,908LHL CATTLE CORPORATION 676,860ARCHIPELAGO REALTY CORP. 671,040SOUTHERN STAR CATTLE CORP. 676,376REDDEE DEVELOPERS, INC. 676,280LANDAIR INT'L. MARKETING CORP. 675,856FIRST UNITED TRANSPORT, INC. 675,848CHRISTENSEN PLANTATION COMPANY 675,680AGR'L. CONSULTANCY SERV. INC. 671,624ECHO RANCH, INC. 671,584NORTHERN CARRIERS CORPORATION 671,560RADIO AUDIENCE DEVELOPERSINTEGRATED ORGANIZATION, INC 671,148RADYO PILIPINO CORPORATION 671,104SAN ESTEBAN DEVELOPMENT CORP. 670,452BALETE RANCH, INC. 665,576VERDANT PLANTATIONS, INC. 581,900KAUNLARAN AGRICULTURAL CORP. 581,900VESTA AGRICULTURAL CORP. 581,900ORO VERDE SERVICES, INC. 529,000KALAWAKAN RESORTS, INC. 529,000EDUARDO M. COJUANGCO, JR. 52,900TOTAL 108,846,948

The above shares are once again referred to as "corporate shares" in the petition. At the meeting, a representative of the corporate share maintained that they are not under sequestration, or if they are under sequestration, the PCGG had no authority to vote them. Nevertheless, the PCGG was allowed to vote the corporate shares and the result of the election was as follows ––

Stockholder No. of Votes1. Andres Soriano III 549,648,6612. Francisco C. Eizmendi,Jr. 549,105,3183. Eduardo J. Soriano 548,864,7334. Antonio J. Roxas 548,809,2715. Benigno Toda, Jr. 548,751,713

Corpo (p.10-11) 86. Eduardo De Los Angeles 522,678,5277. Feliciano Belmonte 517,170,3738. Renato Valencia 517,048,5219. Domingo Lee 517,014,89510. Teodoro L. Locsin, Jr. 516,361,12011. Oscar Hilado 516,197,45012. Philip Ella Juico 516,118,72313. Adolfo S. Azcuna 516,105,14714. Edison Coseteng 516,047,82515. Patricio Pineda 515,990,25016. Eduardo M. Cojuangco, Jr. 37,335,36517. Marcos O Cojuangco 73,40418. Rafael G. Abello 40,40419. Enrique M. Cojuangco 34,95020. Manuel M. Cojuangco 30,955Uncast votes 3,150,231Invalid votes 381,865TOTAL 7,956,960,120

The fifteen individuals who received the highest number of votes were declared elected.Representatives of the corporate shares manifested that if they were allowed to vote their shares, the votes corresponding to their shares, a total of 108,846,948 shares, amounting to 1,632,704,220 votes, would have been cast equally, or 544,234, 740 votes each for petitioners Eduardo Cojuangco, Jr., Enrique M. Cojuangco and Manuel M. Cojuangco, all of whom would have been among those who received 15 highest number of votes, and that respondents Adolfo S. Azcuna, Edison Coseteng and Patricio Pineda would not be included therein, and should thus be ousted from the board of directors.As the petition under G.R. No. 91925 which was decided adversely by the Sandiganbayan is now before this Court, and since time is of the essence as petitioners have been denied the right to vote since 1986, instead of seeking relief from the Sandiganbayan, the petitioners filed this petition for quo warranto (G.R. No. 93005), the issues in which are the same as those raised in G.R. No. 91925.The petitions are impressed with merit.Nothing is more settled than the ruling of this Court in BASECO VS. PCGG, 2 that the PCGG cannot exercise acts of dominion over property sequestered. It may not vote sequestered shares of stock or elect the members of the board of directors of the corporation concerned —

a. PCGG May Not Exercise Acts of OwnershipOne thing is certain, and should be stated at the outset: the PCGG cannot exercise acts of dominion over property sequestered, frozen or provisionally taken over. As already earlier stressed with no little insistence, the act of sequestration, freezing or provisional takeover of property does not import or bring about a divestment of title over said property; does not make the PCGG the owner thereof. In relation to the property sequestered, frozen or provisionally taken over, the PCGG is a conservator, not an owner. Therefore, it can not perform acts of strict ownership; and this is specially true in the situations contemplated by the sequestration rules where, unlike cases of receivership, for example, no court exercises effective supervision or can upon due application and hearing, grant authority for the performance of acts of dominion.Equally evident is that the resort to the provisional remedies in question should entail the least possible interference with business operations or activities so that, in the event that the accusation of the business enterprise being "ill-gotten" be not proven, it may be returned to its rightful owner as far as possible in the same condition as it was at the time of sequestration.b. PCGG Has Only Powers of AdministrationThe PCGG may thus exercise only powers of administration over the property or business sequestered or provisionally taken over, much like a court-appointed receiver, such as to bring and defend actions in its own name; receive rents; collect debts due; pay outstanding debts; and generally do such other acts and things as may be necessary to fulfill its mission as conservator and administrator. In this context, it may in addition enjoin or restrain any actual or threatened commission of acts by any person or entity that may render moot and academic, or frustrate or otherwise make ineffectual its efforts to carry out its task; punish for direct or indirect contempt in accordance with the Rules of Court; and seek and secure the assistance of any office, agency or instrumentality of the government. In the case of sequestered businesses generally, (i.e., going concerns, businesses in current operation), as in the case of sequestered objects, its essential role, as already discussed, is that of conservator, caretaker, "watchdog" or overseer, it is not that of manager, or innovator, much less an owner.c. Powers over Business Enterprises Taken Over by Marcos or Entities or Persons Close to him, Limitations ThereonNow, in the special instance of a business enterprise shown by evidence to have been "taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos," the PCGG is given power and authority, as already adverted to, to "provisionally take (it) over in the public interest or to prevent . . . (its) disposal or dissipation" and since the term is obviously employed in reference to going concerns, or business enterprises in operation, something more than mere physical custody is connoted; the PCGG may in this case exercise some measure of control in the operation, running, or management of the business itself. But even in this special situation, the intrusion into management should be restricted to the minimum degree necessary to accomplish the legislative will, which is "to prevent the disposal or dissipation" of the business enterprise. There should be no hasty, indiscriminate, unreasoned replacement or substitution of management officials, or change of policies, particularly in respect of viable establishments. In fact, such a replacement or substitution should be avoided if at all possible, and undertaken only when justified by demonstrably tenable grounds and in line with the stated objectives of the PCGG. And it goes without saying that where replacement of management officers may be called for, the greatest prudence, circumspection, care and attention should accompany that undertaking to the end that truly competent, experienced and honest managers may be recruited. There should be no role to be played in this area by rank amateurs, no matter how well meaning. The road to hell, it has been said, is paved with good intentions. The business is not to be experimented or played around with, not run into the ground, not driven to the bankruptcy, not fleeced not ruined. Sight should never be lost sight of the ultimate objective of the whole exercise, which is to turn over the business to the Republic, once judicially established to be "ill-gotten." Reason dictates that it is only under these conditions and circumstances that the supervision, administration and control of business enterprises provisionally taken over may legitimately be exercised.

G.R. No. 95696 March 3, 1992ALFONSO S. TAN, Petitioner, vs.SECURITIES AND EXCHANGE COMMISSION, VISAYAN EDUCATIONAL SUPPLY CORP., TAN SU CHING, ALFREDO B. UY, ANGEL S. TAN and PATRICIA AGUILAR, Respondents.

PARAS, J.:Petitioner filed a petition for certiorari against the public respondent Securities and Exchange Commission and its co-respondents, after the former in an en banc Order, overturned with modification, the decision of its Cebu SEC Extension hearing officer, Felix Chan, in SEC Case No. C-0096, dated May 23, 1989, on October 10, 1990, under SEC-AC No. 263. (Rollo, pp. 3 and 4)Sought to be reversed by petitioner, is the ruling of the Commission, specifically declaring that:

1. Confirming the validity of the resolution of the board of directors of the Visayan Educational Supply Corporation so far as it cancelled Stock Certificate No. 2 and split the same into Stock Certificates No. 6 (for Angel S. Tan) and No. 8 (for Alfonso S. Tan);2. Invalidating the sale of shares represented under Stock Certificate No. 8 between Alfonso S. Tan and the respondent corporation which converted the said stocks into treasury shares, as well as those transactions involved in the withdrawal of the stockholders from the respondent corporation for being contrary to law, but ordering the neither party may recover pursuant to Article 1412 (1) Civil Code of the Philippines; and3. Revoking the Order of Hearing Officer Felix Chan to reinstate complainant's original 400 shares of stock in the books of the corporation in view of the validity of the sale of 50 shares represented under stock certificate No. 6; and the nullity of the sale 350 shares represented under stock certificate No. 8, pursuant to the "in pari delicto" doctrine aforecited. (Rollo, p. 4)

The antecedent facts of the case are as follows:Respondent corporation was registered on October 1, 1979. As incorporator, petitioner had four hundred (400) shares of the capital stock standing in his name at the par value of P100.00 per share, evidenced by Certificate of Stock No. 2. He was elected as President and subsequently reelected, holding the position as such until 1982 but remained in the Board of Directors until April 19, 1983 as director. (Rollo, p. 5)On January 31, 1981, while petitioner was still the president of the respondent corporation, two other incorporators, namely, Antonia Y. Young and Teresita Y. Ong, assigned to the corporation their shares, represented by certificate of stock No. 4 and 5 after which, they were paid the corresponding 40% corporate stock-in-trade. (Rollo, p. 43)Petitioner's certificate of stock No. 2 was cancelled by the corporate secretary and respondent Patricia Aguilar by virtue of Resolution No. 1981 (b), which was passed and approved while petitioner was still a member of the Board of Directors of the respondent corporation. (Rollo, p. 6)Due to the withdrawal of the aforesaid incorporators and in order to complete the membership of the five (5) directors of the board, petitioner sold fifty (50) shares out of his 400 shares of capital stock to his brother Angel S. Tan. Another incorporator, Alfredo B. Uy, also sold fifty (50) of his 400 shares of capital stock to Teodora S. Tan and both new stockholders attended the special meeting, Angel Tan was elected director and on March 27, 1981, the minutes of said meeting was filed with the SEC. These facts stand unchallenged. (Rollo, p. 43)Accordingly, as a result of the sale by petitioner of his fifty (50) shares of stock to Angel S. Tan on April 16, 1981, Certificate of Stock No. 2 was cancelled and the corresponding Certificates Nos. 6 and 8 were issued, signed by the newly elected fifth member of the Board, Angel S. Tan as Vice-president, upon instruction of Alfonso S. Tan who was then the president of the Corporation.(Memorandum of the Private Respondent, p. 15)With the cancellation of Certificate of stock No. 2 and the subsequent issuance of Stock Certificate No. 6 in the name of Angel S. Tan and for the remaining 350 shares, Stock Certificate No. 8 was issued in the name of petitioner Alfonso S. Tan, Mr. Buzon, submitted an Affidavit (Exh. 29), alleging that:

9. That in view of his having taken 33 1/3 interest, I was personally requested by Mr. Tan Su Ching to request Mr. Alfonso Tan to make proper endorsement in the cancelled Certificate of Stock No. 2 and Certificate No. 8, but he did not endorse, instead he kept the cancelled (1981) Certificate of Stock No. 2 and returned only to me Certificate of Stock No. 8, which I delivered to Tan Su Ching.10. That the cancellation of his stock (Stock No. 2) was known by him in 1981; that it was Stock No. 8, that was delivered in March 1983 for his endorsement and cancellation. (Ibid, p. 18)

From the same Affidavit, it was alleged that Atty. Ramirez prepared a Memorandum of Agreement with respect to the transaction of the fifty (50) shares of stock part of the Stock Certificate No. 2 of petitioner, which was submitted to its former owner, Alfonso Tan, but which the purposely did not return. (Ibid., p. 18)On January 29, 1983, during the annual meeting of the corporation, respondent Tan Su Ching was elected as President while petitioner was elected as Vice-president. He, however, did not sign the minutes of said meeting which was submitted to the SEC on March 30, 1983. (Rollo, p. 43)When petitioner was dislodged from his position as president, he withdrew from the corporation on February 27, 1983, on condition that he be paid with stocks-in-trade equivalent to 33.3% in lieu of the stock value of his shares in the amount of P35,000.00. After the withdrawal of the stocks, the board of the respondent corporation held a meeting on April 19, 1983, effecting the cancellation of Stock Certificate Nos. 2 and 8 (Exh. 278-C) in the corporate stock and transfer book 1 (Exh. 1-1-A) and submitted the minutes thereof to the SEC on May 18, 1983. (Rollo, p. 44)Five (5) years and nine (9) months after the transfer of 50 shares to Angel S. Tan, brother of petitioner Alfonso S. Tan, and three (3) years and seven (7) months after effecting the transfer of Stock Certificate Nos. 2 and 8 from the original owner (Alfonso S. Tan) in the stock and transfer book of the corporation, the latter filed the case before the Cebu SEC Extension Office under SEC Case No. C-0096, more specifically on December 3, 1983, questioning for the first time, the cancellation of his aforesaid Stock Certificates Nos. 2 and 8. (Rollo, p. 44)The bone of centention raised by the petitioner is that the deprivation of his shares despite the non-endorsement or surrender of his Stock Certificate Nos. 2 and 8, was without the process contrary to the provision of Section 63 of the Corporation Code (Batas Pambansa Blg. 68), which requires that:

. . . No transfer, however, shall be valid, except as between the parties, until the transfer is recorded to the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.

After hearing, the Cebu SEC Extension Office Hearing Officer, Felix Chan ruled, that:a) The cancellation of the complainant's shares of stock with the Visayan Educational Supply Corporation is null and void;b) The earlier cancellation of stock certificate No. 2 and the subsequent issuance of stock certificate No. 8 is also hereby declared null and void;c) The Secretary of the Corporation is hereby ordered to make the necessary corrections in the books of the corporation reinstating thereto complainant's original 400 shares of stock. (Rollo, pp. 39-40)

Private respondent in the original complaint went to the Securities and Exchange and Commission on appeal, and on October 10, 1990, the commission en banc unanimously overturned the Decision of the Hearing Officer under SEC-AC No. 263. (Order, Rollo, pp. 42-49)The petition for certiorari centered on three major issues, with other issues considered as subordinate to them, to wit:1. The meaning of shares of stock are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. (Rollo, p. 10)The case of Nava vs. peers Marketing corporation (74 SCRA 65) was cited by petitioner making the reference to commentaries taken from 18 C.J.S. 928-930, that the transfer by delivery to the transferee of the certificate should be properly indorsed, and that "There should be compliance with the mode of transfer prescribed by law." Using Section 35, now Section 63 of the Corporation Code, the provision of the law, reads:

Corpo (p.10-11) 9SEC. 63. Certificate of stock and transfer of shares. — The capital stock and stock and corporations shall be divided into shares for which certificates signed by the president and vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stocks so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.No shares of stocks against which the corporation holds any unpaid claim shall be transferable in the books of the corporations.

There is no doubt that there was delivery of Stock Certificate No. 2 made by the petitioner to the Corporation before its replacement with the Stock Certificate No. 6 for fifty (50) shares to Angel S. Tan and Stock Certificate No. 8 for 350 shares to the petitioner, on March 16, 1981. The problem arose when petitioner was given back Stock Certificate No. 2 for him to endorse and he deliberately witheld it for reasons of his own. That the Stock Certificate in question was returned to him for his purpose was attested to by Mr. Buzon in his Affidavit, the pertinent portion of which has been earlier quoted.The proof that Stock Certificate No. 2 was split into two (2) consisting of Stock Certificate No. 6 for fifty (50) shares and Stock Certificate No. 8 for 350 shares, is the fact that petitioner surrendered the latter stock (No. 8) in lieu of P2 million pesos 1 worth of stocks, which the board passed in a resolution in its meeting on April 19, 1983. Thus, on February 27, 1983, petitioner indicated he was withdrawing from the corporation on condition that he be paid with stock-in-trade corresponding to 33.3% (Exh. 294), which had only a par value of P35,000.00. In this same meeting, the transfer of Stock Certificate Nos. 2 and 8 from the original owner, Alfonso S. Tan was ordered to be recorded in the corporate stock and transfer book (Exh. "I-1-A") thereafter submitting the minutes of said meeting to the SEC on May 18, 1983 (Exhs. 12 and I). (Order, Rollo, p. 44)It is also doubtless that Stock Certificate No. 8 was exchanged by petitioner for stocks-in-trade since he was operating his own enterprise engaged in the same business, otherwise, why would a businessman be interested in acquiring P2,000,000.00 worth of goods which could possibly at that time, fill up warehouse? In fact, he even padlocked the warehouse of the respondent corporation, after withdrawing the thirty-three and one-third (33 1/3%) percent stocks. Accordingly, the Memorandum of Agreement prepared by the respondents' counsel, Atty. Ramirez evidencing the transaction, was also presented to petitioner for his signature, however, this document was never returned by him to the corporate officer for the signature of the other officers concerned. (Rollo, p. 28)At the time the warehouse was padlocked by the petitioner, the remaining stock inventory was valued at P7,454,189.05 of which 66 2/3 percent thereof belonged to the private respondents. (Ibid., p. 28)It was very obvious that petitioner devised the scheme of not returning the cancelled Stock Certificate No. 2 which was returned to him for his endorsement, to skim off the largesse of the corporation as shown by the trading of his Stock Certificate No. 8 for goods of the corporation valued at P2 million when the par value of the same was only worth P35,000.00. (Ibid., p. 470) He also used this scheme to renege on his indebtedness to respondent Tan Su Ching in the amount of P1 million. (Decision, p. 6)It is not remote that if petitioner could have cashed in on Stock Certificate No. 2 with the remainder of the goods that he padlocked, he would have done so, until the respondent corporation was bled entirely.Along this line, petitioner put up the argument that he was responsible for the growth of the corporation by the alleging that during his incumbency, the corporation grew, prospered and flourished in the court of business as evidenced by its audited financial statements, and grossed the following incomes from: 1980 — P8,658,414.10, 1981 — P8,039,816.67, 1982 — P7,306,168.67, 1983 — P5,874,453.55, 1984 — P3,911,667.76. (Ibid., Rollo, p. 24)Moreover, petitioner asserted that he was ousted from the corporation by reason of his efforts to establish fiscal controls and to demand an accounting of corporate funds which were accordingly being transferred and diverted to certain of private respondents' personal accounts which were allegedly misapplied, misappropriated and converted to their own personal use and benefit. (Ibid., p. 125)2. Petitioner further claims that "(T)he cancellation and transfer of petitioner's shares and Certificate of Stock No. 2 (Exh. A) as well as the issuance and cancellation of Certificate of Stock No. 8 (Exh. M) was patently and palpably unlawful, null and void, invalid and fraudulent." (Rollo, p. 9) And, that Section 63 of the Corporation Code of the Philippines is "mandatory in nature", meaning that without the actual delivery and endorsement of the certificate in question, there can be no transfer, or that such transfer is null and void. (Rollo, p. 10)These arguments are all motivated by self-interest, using foreign authorities that are slanted in his favor and even misquoting local authorities to prop up his erroneous posture and all these attempts are intended to stifle justice, truth and equity.Contrary to the understanding of the petitioner with respect to the use of the word "may", in the case of Shauf v. Court of Appeals, (191 SCRA 713, 27 November 1990), this Court held, that "Remedial law statues are to be construed liberally." The term 'may' as used in adjective rules, is only permissive and not mandatory. In several earlier cases, the usage of the word "may" was described as follows:

The word "may"is an auxilliary verb showing among others, opportunity or possibility. Under ordinary circumstances, the phrase "may be" implies the possible existence of something. In this case, the "something" is a law governing sectoral representation. The phrase in question should, therefore, be understood to mean as prescribed by such law that governs the matter at the time . . . The phrase does not and cannot, by its very wording, restrict itself to the uncertainly of future legislation. (Legaspi v. Estrella, 189 SCRA 58, 24 Aug. 1990, En Banc)

Years before the above rulings concerning the interpretation of the word "may", this Court held in Chua v. Samahang Magsasaka, that "the word "may" indicates that the transfer may be effected in a manner different from that provided for in the law." (62 Phil. 472)Moreover, it is safe to infer from the facts deduced in the instant case that, there was already delivery of the unendorsed Stock Certificate No. 2, which is essential to the issuance of Stock Certificate Nos. 6 and 8 to angel S. Tan and petitioner Alfonso S. Tan, respectively. What led to the problem was the return of the cancelled certificate (No. 2) to Alfonso S. Tan for his endorsement and his deliberate non-endorsement.For all intents and purposes, however, since this was already cancelled which cancellation was also reported to the respondent Commission, there was no necessity for the same certificate to be endorsed by the petitioner. All the acts required for the transferee to exercise its rights over the acquired stocks were attendant and even the corporation was protected from other parties, considering that said transfer was earlier recorded or registered in the corporate stock and transfer book.Following the doctrine enunciated in the case of Tuazon v. La Provisora Filipina, where this Court held, that:

But delivery is not essential where it appears that the persons sought to be held as stockholders are officers of the corporation, and have the custody of the stock book . . . (67 Phi. 36).

Furthermore, there is a necessity to delineate the function of the stock itself from the actual delivery or endorsement of the certificate of stock itself as is the question in the instant case. A certificate of stock is not necessary to render one a stockholder in corporation.Nevertheless, a certificate of stock is the paper representative or tangible evidence of the stock itself and of the various interests therein. The certificate is not stock in the corporation but is merely evidence of the holder's interest and status in the corporation, his ownership of the share represented thereby, but is not in law the equivalent of such ownership. It expresses the contract between the corporation and the stockholder, but is not essential to the existence of a share in stock or the nation of the relation of shareholder to the corporation. (13 Am. Jur. 2d, 769)

Under the instant case, the fact of the matter is, the new holder, Angel S. Tan has already exercised his rights and prerogatives as stockholder and was even elected as member of the board of directors in the respondent corporation with the full knowledge and acquiescence of petitioner. Due to the transfer of fifty (50) shares, Angel S. Tan was clothed with rights and responsibilities in the board of the respondent corporation when he was elected as officer thereof.Besides, in Philippine jurisprudence, a certificate of stock is not a negotiable instrument. "Although it is sometime regarded as quasi-negotiable, in the sense that it may be transferred by endorsement, coupled with delivery, it is well-settled that it is non-negotiable, because the holder thereof takes it without prejudice to such rights or defenses as the registered owner/s or transferror's creditor may have under the law, except insofar as such rights or defenses are subject to the limitations imposed by the principles governing estoppel." (De los Santos vs. McGrath, 96 Phil. 577)To follow the argument put up by petitioner which was upheld by the Cebu SEC Extension Office Hearing Officer, Felix Chan, that the cancellation of Stock Certificate Nos. 2 and 8 was null and void for lack of delivery of the cancelled "mother" Certificate No. 2 whose endorsement was deliberately withheld by petitioner, is to prescribe certain restrictions on the transfer of stock in violation of the corporation law itself as the only law governing transfer of stocks. While Section 47(s) grants a stock corporations the authority to determine in the by-laws "the manner of issuing certificates" of shares of stock, however, the power to regulate is not the power to prohibit, or to impose unreasonable restrictions of the right of stockholders to transfer their shares. (Emphasis supplied)In Fleisher v. Botica Nolasco Co., Inc., it was held that a by-law which prohibits a transfer of stock without the consent or approval of all the stockholders or of the president or board of directors is illegal as constituting undue limitation on the right of ownership and in restraint of trade. (47 Phil. 583)3. Attempt to mislead — Petitioner should be held guilty of manipulating the provision of Section 63 of the Corporation Law for contumaciously withholding the endorsement of Stock Certificate No. 2 which was returned to him for the purpose, wasting time and resources of the Court, even after he had received the stocks-in-trade equivalent to P2,000,000.00 in lieu of his 350 shares of stock with a par value of P35,000.00 only, and thereafter withdrawing from the respondent corporation.Not content with the fantastic return of his investment in the corporation and bent on sucking out the corporate resources by filing the instant case for damages and seeking the nullity of the cancellation of his Certificate of Stock Nos. 2 and 8, petitioner even attempted to mislead the Court by erroneously quoting the ruling of the Court in C. N. Hodges v. Lezama, which has some parallelism with the instant case was the parties involved therein were also close relatives as in this case.The quoted portion appearing on p. 11 of the petition, was cut short in such a way that relevant portions thereof were purposely left out in order to impress upon the Court that the unendorsed and uncancelled stock certificate No. 17, was unconditionally declared null and void, flagrantly omitting the justifying circumstances regarding its acquisition and the reason given by the Court why it was declared so. The history of certificate No. 17 is quoted below, showing the reason why the certificate in question was considered null and void, as follows:

(P)etitioner Hodges did not cause to be entered in the books of the corporation as he had his stock certificate No. 17 which, therefore had not been endorsed by him to anybody or cancelled and which he considered still subsisting. On September 18, 1958, petitioner Hodges again sold his aforesaid 2,230 shares of stock covered by his stock certificate No. 17 on installment basis to his co-petitioner Ricardo Gurrea, but continued keeping the stock certificate in his possession without endorsing it to Gurrea or causing the sale to be entered in the books of the corporation, believing that said shares of stock were his until fully paid for. Up to the present, petitioner Hodges has in his possession and under his control his aforesaid stock certificate No. 17, unendorsed and uncancelled (Exhs. A & A-1), a fact known to the respondents. (14 SCRA p. 1032)

The pertinent misquoted portion follows:Before the stockholders' meeting of the La Paz ice Plant & Cold Storage Co., Inc., — hereinafter referred to as the Corporation - which was scheduled to be held on August 6, 1959, petitioners C.N. Hodges and Ricardo Gurrea filed with the CFI of Iloilo, a petition — docketed as Civil Case No. 5261 of said court — for a writ of prohibition with preliminary injunction, to restrain respondents Jose Manuel Lezama, as president and secretary, respectively, of said Corporation from allowing their brother-in-law and brother, respectively, respondent Benjamin L. Borja, to vote in said meeting on the aforementioned 2,230 shares of stock. Upon the filing of said petition and of a bond in the sum of P1,000, the writ of preliminary injunction prayed for was issued. After due trial, or on March 28, 1960, (start of petitioner's quotation) "The court of origin rendered a decision holding that, in view of the provision in stock certificate no. 17, in the name of Hodges, to the effect that he

. . . is the owner of Two Thousand Two Hundred Thirty shares of the capital stock of La Paz Ice Plant & Cold Storage Co., Inc., transferrable only on the books of the corporation by the holder hereof in person or by attorney upon surrender of this certificate properly endorsed.

stock certificate no. 18, issued in favor of Borja and the entry thereof at his instance in the books of the corporation without stock certificate no. 17 being first properly endorsed, surrendered and cancelled, is null and void. . . . " (end of quotation by petitioner, but the ruling, continues without the period after the word void.) "and that it would be unconscionable and for Borja to vote on said shares of stock, knowing that he had ceased to have actual interest therein since September 17, 1958, when Hodges bought such interest at the public auction held in the proceedings for the foreclosure of his chattel was rendered making said preliminary injunction permanent and declaring Hodges as the one entitled to vote on the shares of stock in question.

Petitioner ought to have even included the following which was the reason for declaring the following which was the reason for declaring the unedorsed, unsurrendered and uncancelled stock certificate, null and void:

. . . It is, moreover, obvious that Hodges retained it (stock certificate no. 17) with Borja's consent. It was evidently part of their agreement, or implied therein, that Hodges would keep the stock certificate and thus remain in the records of the Corporation as owner of the shares, despite the aforementioned sale thereof and the chattel mortgage thereon. In other words, the parties thereto intended Hodges to continue, for all intents and purposes, as owner of said share, until Borja shall have fully paid its stipulated price. (Ibid, pp. 1033-1034)

Other issues raised by the petitioner, subordinate to the principal issues above, (except the ruling by the respondent Commission with respect to the "pari delicto" doctrine which is not acceptable to this Court) are of no moment.Considering the circumstances of the case, it appearing that petitioner is guilty of manipulation, and high-handedness, circumventing the clear provisions of law in shielding himself from his wrongdoing contrary to the protective mantle that the law intended for innocent parties, the Court finds the excuses of the petitioner as unworthy of belief.WHEREFORE, in view of the foregoing, the Order of the Commission under SEC-AC No. 263 dated October 10, 1990 is hereby AFFIRMED but modified with respect to the "nullity of the sale of 350 shares represented under stock certification No. 8, pursuant to the "in pari delicto" doctrine. The court holds that the conversion of the 350 shares with a par value of only P35,000.00 at P100.00 per share into treasury stocks after petitioner exchanged them with P2,000,000.00 worth of stocks-in-trade of the corporation, is valid and lawful. With regard to the damages being claimed by the petitioner, the respondent Commission is not empowered to award such, other than the imposition of fine and imprisonment under Section 56 of the Corporation Code of the Philippines, as amended.SO ORDERED.

d. Voting of Sequestered Stock; Conditions Therefor

Corpo (p.10-11) 10So, too, it is within the parameters of these conditions and circumstances that the PCGG may properly exercise the prerogative to vote sequestered stock of corporations, granted to it by the President of the Philippines through a memorandum dated June 26, 1986. That memorandum authorizes the PCGG "pending the outcome of proceedings to determine the ownership of . . . (sequestered) shares of stock," "to vote such shares of stock as it may have sequestered in corporations at all stockholders" meetings called for the election of directors, declaration of dividends, amendment of the Articles of Incorporation, etc." The Memorandum should be construed in such a manner as to be consistent with, and not contradictory of the Executive Orders earlier promulgated on the same matter. There should be no exercise of the right to vote simply because the right exists, or because the stocks sequestered constitute the controlling or a substantial part of the corporate voting power. The stock is not to be voted to replace directors, or revise the articles or by-laws, or otherwise bring about substantial changes in policy, program of practice of the corporation except for demonstrably weighty and defensible grounds, and always in the context of the stated purposes of sequestration or provisional takeover, i.e., to prevent the dispersion or undue disposal of the corporate assets. Directors are not to be voted out simply because the power to do so exists. Substitution of directors is not to be done without reason or rhyme, should indeed be shunned if at all possible, and undertaken only when essential to prevent disappearance or wastage of corporate property, and always under such circumstances as to assure that the replacements are truly possessed of competence, experience and probityIn the case at bar, there was adequate justification to vote the incumbent directors out of office and elect others in their stead because the evidence showed prima facie that the former were just tools of President Marcos and were no longer owners of any stock in the firm, if they ever were at all. This is why, in its Resolution of October 28, 1986; this Court declared that ––Petitioner has failed to make out a case of grave abuse or excess of jurisdiction in respondents' calling and holding of a stockholders meeting for the election of directors as authorized by the Memorandum of the President . . . (to the PCGG) dated June 26, 1986, particularly, where as in this case, the government can, through its designated directors, properly exercise control and management over what appear to be properties and assets owned and belonging to the government itself and over which the persons who appear in this case on behalf of BASECO have failed to show any right or even any shareholding in said corporation.It must however be emphasized that the conduct of the PCGG nominees in the BASECO Board in the management of the company's affairs should henceforth be guided and governed by the norms herein laid down. They should never for a moment allow themselves to forget that they are conservators, not owners of the business; they are fiduciaries trustees, of whom the highest degree of diligence and rectitude is, in the premises, required. 3

In BASECO, Mr. Justice Padilla, in his concurring opinion 4 asserted that the removal and election of members of the board of directors are clear acts of ownership on the part of the shareholders of the corporation, a right that should be denied the PCGG under ordinary circumstances. Of course, in BASECO, wherein it appears that Mr. Marcos took possession and control of 95% of the total ownership thereof which he could not have acquired out of his lawfully gotten wealth, the PCGG was allowed by the Court to vote the sequestered shares.Madame Justice Melencio-Herrera in a concurring opinion which in turn was concurred in by Justice Feliciano, stated that she has no objection to according the right to vote sequestered stock in case of a take-over of business actually belonging to the government and whose capitalization comes from public funds but which, somehow, landed in the hands of private persons, as in the case of BASECO. She advised caution and prudence in the case of sequestered shares of an on-going private business enterprise, specially the sensitive ones, since the true and real ownership of said shares is yet to be determined and proved more conclusively before the courts. 5

Mr. Justice Gutierrez, in a concurring and dissenting opinion, reiterated that the election of the board of directors is distinctly and unqualifiedly an act of ownership. He would disallow the voting of shares by the PCGG on the ground that the same is authoritarian and ultra vires. 6

Mr. Justice Cruz also dissented, He asserted that the acts of voting the shares and reorganizing the board of directors are acts of ownership which clash with the implacable principles of a free society, foremost of which is due process. 7

The Solicitor General, however, contends in these two cases that if the purpose of sequestration is to "help prevent the dissipation of the corporation's assets" or to "preserve" the said assets, the PCGG may resort to "acts of strict ownership," such as voting the sequestered shares. 8

There is no proof or indications showing that the petitioners seek to exercise their right as stockholders to dissipate, dispose, conceal, destroy, transfer or encumber their sequestered shares. On the other hand, there is no doubt that petitioners have the right to vote their shares at the shareholders meeting even if they are sequestered and that they as stockholders have a right to be voted for as members of the board of directors of SMC. 9

Besides, there are other means by which the said shares may be preserved and their dissipation prevented. The PCGG may restrain their sale, encumbrance, assignment or any other disposition during the period of sequestration. It may monitor the business operations of petitioners as to said shares. It need not vote the shares in order to accomplish its role as conservator.The rule in this jurisdiction is, therefore, clear. The PCGG cannot perform acts of strict ownership of sequestered property. It is a mere conservator. It may not vote the shares in a corporation and elect the members of the board of directors. The only conceivable exception is in a case of a takeover of a business belonging to the government or whose capitalization comes from public funds, but which landed in private hands as in BASECO.The constitutional right against deprivation of life, liberty and property without due process of law is so well-known and too precious so that the hand of the PCGG must be stayed in its indiscriminate takeover of and voting of shares allegedly ill-gotten in these cases. It is only after appropriate judicial proceedings when a clear determination is made that said shares are truly ill-gotten when such a takeover and exercise of acts of strict ownership by the PCGG are justified.It is true that in G.R. No. 91925 the term of office of the term of office of the assailed members of the board of directors, private respondents therein, for 1989-1990 had expired. To this extent said petition may be considered moot and academic. However, the issue of whether public respondent Sandiganbayan committed a grave abuse of discretion in rendering the resolution dated November 16, 1989, which affects all subsequent shareholders' meetings and elections of the members of the board of directors of SMC, is a justiciable controversy that must be resolved.As to G.R. No. 93005 the term of office of private respondents as members of the SMC board of directors will expire on or after another election is held in April 1991.Thus, the issue raised in G.R. No. 93005 relating to the election of the members of the board for 1990-1991 pursuant to sequestered shares of stock is a justiciable issue which should be determined once and for all.In the light of the foregoing discussion, the Court finds and so holds that the PCGG has no right to vote the sequestered shares of petitioners including the sequestered corporate shares. Only their owners, duly authorized representatives or proxies may vote the said shares. Consequently, the election of private respondents Adolfo Azcuna, Edison Coseteng and Patricio Pineda as members of the board of directors of SMC for 1990-1991 should be set aside.However, petitioners cannot be declared duly elected members of the board of directors thereby. An election for the purpose should be held where the questioned shares may be voted by their owners and/or their proxies. Such election may be held at the next shareholders' meeting in April 1991 or at such date as may be set under the by-laws of SMC.Private respondents in both cases are hereby declared to be de facto officers who in good faith assumed their duties and responsibilities as duly elected members of the board of directors of the SMC. They are thereby legally entitled to the emoluments of the office including salary, fees and other compensation attached to the office until they vacate the same. 10

Nevertheless, the right of the Government, represented by the PCGG, as conservator of sequestered assets must be adequately protected.

The important rights of stockholders are the following:a) the right to vote;b) the right to receive dividends;c) the right to receive distributions upon liquidation of the corporation; andd) the right to inspect the books of the corporation.

It is through the right to vote that the stockholder participates in the management of the corporation. The right to vote, unlike the rights to receive dividends and liquidating distributions, is not a passive thing because management or administration is, under the Corporation Code, vested in the board of directors, with certain reserved powers residing in the stockholders directly. The board of directors and executive committee (or management committee) and the corporate officers selected by the board may make it very difficult if not impossible for the PCGG to carry out its duties as conservator if the Board or officers do not cooperate, are hostile or antagonistic to the conservator's objectives.Thus, it is necessary to achieve a balancing of or reconciliation between the stockholder's right to vote and the conservator's statutory duty to recover and in the process thereof, to conserve assets, thought to be ill-gotten wealth, until final judicial determination of the character of such assets or until a final compromise agreement between the parties is reached.There are, in the main, two (2) types of situations that need to be addressed. The first situation arises where the sequestered shares of stock constitute a distinct minority of the voting shares of the corporation involved, such that the registered owners of such sequestered shares would in any case be able to vote in only a minority of the Board of Directors of the corporation. The second situation arises where the sequestered shares of stock constitute a majority of the voting shares of the corporation concerned, such that the registered owners of such shares of stock would in any case be entitled to elect a majority of the Board of Directors of the corporation involved.Turning to the first situation, the Court considers and so holds that in order to enable the PCGG to perform its functions as conservator of the sequestered shares of stock pending final determination by the courts as to whether or not the same constitute ill-gotten wealth or a final compromise agreement between the parties, the PCGG must be represented in the Board of Directors of the corporation and of its majority-owned subsidiaries or affiliates and in the Executive Committee (or its equivalent) and the Audit Committee thereof, in at least an ex officio (i.e., non-voting) capacity. The PCGG representative must have a right of full access to and inspection of (including the right to obtain copies of) the books, records and all other papers of the corporation relating to its business, as well as a right to receive copies of reports to the Board of Directors, its Executive (or equivalent) and Audit Committees. By such representation and rights of full access, the PCGG must be able so to observe and monitor the carrying out of the business of the corporation as to discover in a timely manner any move or effort on the part of the registered owners of the sequestered stock, alone or in concert with other shareholders, to conceal, waste and dissipate the assets of the corporation, or the sequestered shares themselves, and seasonably to bring such move or effort to the attention of the Sandiganbayan for appropriate action.In the second situation above referred to, the Court considers and so holds that the following minimum safeguards must be set in place and carefully maintained until final judicial resolution of the question of whether or not the sequestered shares of stock (or, in a proper case, the underlying assets of the corporation concerned) constitute ill-gotten wealth or until a final compromise agreement between the parties is reached:

a. An independent comptroller must be appointed by the Board of Directors upon nomination of the PCGG as conservator. The comptroller shall not be removable (nor shall his position be abolished or his compensation changed) without the consent of the conservator. The comptroller shall, in addition to his other functions as Such, have charge of internal audit.b. The corporate secretary must be acceptable to the conservator. If the corporate secretary ceases to be acceptable to the conservator, a new one must be appointed by the Board of Directors upon nomination of the conservator.c. The external auditors of the corporation must be independent and must be acceptable to the conservator. The independent external auditors shall not be changed without the consent of the conservator.d. The conservator must be represented in the Board of Directors and in the Executive (or equivalent) and Audit Committees of the corporation involved and of its majority-owned subsidiaries or affiliates. The representative of the conservator must be a full director (not merely an honorary or ex oficiodirector) with the right to vote and all other rights and duties of a member of the Board of Directors under the Corporation Code. The conservator's representative shall not be removed from the Board of Directors (or the mentioned Committees) without the consent of the conservator. The conservator shall, however, have the right to remove and change its representative at any time, and the new representative shall be promptly elected to the Board and its mentioned Committees.e. All transactions involving the disbursement of corporate funds in excess of P5 million must have the prior approval of the director representing the conservator, in order to be valid and effective.f. The incurring of debt by the corporation, whether in the form of bonds, debentures commercial paper or any other form, in excess of P5 million, must have the prior approval of the director representing the conservator, in order to be valid and effective.g. The disposition of a substantial part of assets of the corporation (substantial meaning in excess of P5 million) shall require the prior approval of the director representing the conservator, in order to be valid and effective.h. The above safeguards must be written into the articles of incorporation and by-laws of the company involved. In other words, the articles of incorporation and by-laws of the company must be amended so as to incorporate the above safeguards.i. Any amendment of the articles of incorporation or by-laws of the company that will modify in any way any of the above safeguards, shall need the prior approval of the director representing the conservator.

The amount of P5,000,000.00 referred to in paragraphs (e), (f) and (g) above is intended merely to be indicative. The precise amount may differ depending upon the size of the corporation involved and the reasonable operating requirements of its business.Whether a particular case falls within the first or the second type of situation described above, the following safeguards are indispensably necessary:

1. The sequestered shares and any stock dividends pertaining to such shares, may not be sold, transferred, alienated, mortgaged, or otherwise disposed of and no such sale, transfer or other disposition shall be registered in the books of the corporation, pending final judicial resolution of the question of ill-gotten wealth or a final compromise agreement between the parties; and2. Dividend and liquidating distributions shall not be delivered to the registered stockholders of the sequestered shares, including stock dividends pertaining to such shares, but shall instead be deposited in an escrow, interest-bearing, account in a first class bank or banks, acceptable to the Sandiganbayan, to be held by such banks for the benefit of whoever is held by final judicial decision or final compromise agreement, to be entitled to the shares involved.

The Court is aware that implementation of some of the above safeguards may require agreement between the registered stockholders and the PCGG as well as action on the part of the Securities and Exchange Commission. The Court, therefore, directs petitioners and the PCGG to effect the implementation of this decision under the supervision and control of the Sandiganbayan so that the right to vote the sequestered shares and the installation and operation of the safeguards above-specified may be exercised and effected in a substantially contemporaneous manner and with all deliberate dispatch.WHEREFORE, the Petitions are GIVEN DUE COURSE and GRANTED. Private respondents Adolfo Azcuna, Edison Coseteng and Patricio Pineda are hereby DIRECTED to vacate their respective offices as members of the Board of Directors of the SMC as soon as this decision is implemented. Contemporaneously with the installation of the safeguards above-required to enable the PCGG to perform its statutory role as conservator of the sequestered shares of stock or assets, the

Corpo (p.10-11) 11respondent SMC is hereby ORDERED to allow the petitioners to vote their shares in person or by proxy and to be voted for as members of the Board of Directors of the SMC and otherwise to enjoy the rights and privileges of shareholders; and the PCGG is hereby ENJOINED from voting the sequestered shares of stock except as otherwise authorized in the safeguards above-required. The questioned order of the Sandiganbayan dated 16 November 1989 is hereby SET ASIDE; however, the implementation of this decision shall be carried out under the supervision and control of the Sandiganbayan. The Court makes no pronouncement as to costs.SO ORDERED.EN BANC[G.R. No. L-12282. March 31, 1959.]THE BOARD OF DIRECTORS and ELECTION COMMITTEE OF THE SMB WORKERS SAVINGS AND LOAN ASSOCIATION, INC., ET AL., petitioners, vs. HON BIENVENIDO A. TAN, ETC., ET AL., respondent.Panfilo M. Manguera and Restituto L. Opiz for petitioners.Cipriano Cid & Associates for respondents.SYLLABUS1. CORPORATION LAW; LABOR ASSOCIATIONS; PROVISIONS OF CONSTITUTION AND BY-LAWS SHOULD BE COMPLIED WITH. — The constitution and by-laws of the petitioner association provide that notice of a special meeting of members should be given at least five days before the date of the meeting. It appears that the notice was posted on 26 March and the election was set for 28 March. Therefore, the five days previous notice required would not be complied with.2. ID.; ID.; AUTHORITY OF COURTS TO APPOINT COMMITTEE TO SUPERVISE ELECTION OF OFFICIALS.--When it appears that a fair election cannot be had, the court in the exercise of its equity jurisdiction may appoint a committee with the authority to call, conduct and supervise the election of the directors or the association.D E C I S I O NPADILLA, J p:Petitioners pray for a writ of certiorari with preliminary injunction.On 17 January 1957 John de Castillo et al., commenced a suit in the Court of First Instance of Manila to declare null and void the election of the members of the board of directors of the SMB Workers Savings and Loan Association, Inc. and of the members of the Election Committee for the year 1957 held on 11 12 January; to compel the board of directors of the association to call for and hold another election in accordance with its constitution and by-laws and the Corporation Law; to restrain the defendants who had been illegally elected as members of the board of directors from exercising the functions of their office; to order the defendants to pay the plaintiffs attorney's fees and costs of the suit; and to grant them other just equitable relief (civil No. 31584, Annex A). The defendants filed an answer (Annex B), and after joinder of issues the Court set the case for trial. On the day set for trial of the case, neither the defendants nor their attorney appeared. The Court proceeded to receive the plaintiffs' evidence. On 11 February, the Court rendered judgment declaring the election held on 11 and 12 January null and void, ordering the defendants to call for and hold another election in accordance with the constitution and by-laws of the association and the Corporation Law, and sentencing the defendants to pay the plaintiffs the sum of P1,500 as attorney's fees, and to pay the costs of the suit (Annex C). 1 On 15 February, before the expiration of the time to appeal, the plaintiffs moved for immediate execution of the judgment (Annex F). On 4 March the Court granted the plaintiffs motion and issued the writ of execution prayed for (Annex G). On 9 March the defendants moved for stay of execution of the judgment, for which they offered to file a supersedeas bond in the amount to be fixed by the Court (Annex H). On 23 March the Court denied the defendants' motion. In compliance with the judgment rendered by the Court, on 26 March the election committee composed of Quintin Tesalona, Manuel Dumaup and Jose Capino Santos set the meeting of the members of the association for 28 March at 5:30 o'clock in the afternoon to elect the new members of the board of directors (Annex J & 4). On 27 March the plaintiffs filed an ex-parte motion alleging that the election committee that had called the meeting of members of the association is composed of the same members that had conducted and supervised the election of the members of the board of directors that was declared null and void by the Court; that in view thereof it would be inequitable to allow them to conduct and supervise again the forth-coming election; that the election to be conducted and supervised by the said committee would not be held in accordance with the constitution and by-laws of the association providing for five days notice to the members before the election, since the notice was posted and sent out only on 26 March, and the election would be held on 28 March, or two days after notice; that the notice that beginning 26 March any member could secure his ballot and proxy from the office of the association is in violation of section 5, article III of the constitution and by-laws, which prohibits voting by proxy in the election of members of the board of directors, 2 and that the defendants did not show that arrangement is being made "to guarantee that the election will be held in accordance with the constitution and by-laws and by the law." They prayed that the Court appoint its representative or representatives, whose compensation shall be paid out of the funds of the association, to supervise and conduct the election ordered by it (Annex 4). On the same day, 27 March, the Court entered an order providing as follows:. . . the Court hereby orders that the election scheduled for March 28, 1957 be, as it hereby is, cancelled, and a committee of three is hereby constituted and appointed to call, conduct and supervise the election of the members of the board of directors of the association for 1957, said committee to be composed of: Mr. Candido C. Viernes as representative of the Court and to act as Chairman; and one representative each from the plaintiffs and defendants, as members, as members. The committee is vested with the sole and exclusive power and authority to call conduct and supervise the election of the members of the board of directors of the association for the year 1957.The chairman of the committee shall receive a compensation of P50.00 per day and the members thereof P30.00 each per day, said compensation to be paid by the association.SO ORDERED. (Annex E & 3.)On 28 March the defendants moved for reconsideration of the foregoing order (Annex L). On 30 March the Court denied the motion for reconsideration.Claiming that in issuing the order of 27 March 1957 (Annexes E & 3) and in denying their motion for reconsideration, the Court acted without or in excess of jurisdiction or with grave abuse of discretion; and that there being no appeal or any plain, speedy and adequate remedy in the ordinary course of law, the petitioners pray for a writ of certiorari to annul and set aside the order assailed, and a writ of preliminary injunction to restrain the respondent court from enforcing its order of 27 March 1957 (Annexes E & 3) after the filing of a bond in the amount to be fixed by this Court; for costs to be taxed against the respondents, and for such other just and equitable relief as may be granted to them. On 14 May 1957, after the petitioners had filed a bond in the sum of P200, this Court issued the writ of preliminary injunction prayed for.Section 3, article III, of the constitution and by-laws of the association provides:Notice of the time and place of holding of any annual meeting, or any special meeting, of the members, shall be given either by posting the same in a postage prepaid envelope, addressed to each member on record at the address left by such member with the Secretary of the Association, or at his known post-office address, or by delivering the same in person, at least five (5) days before the date set for such meeting. . . . In lieu of addressing or serving personal notices to the members, notice of a regular annual meeting or of a special meeting of the members may be given by posting copies of said notice at the different departments and plants of the San Miguel Brewery Inc., not less than five (5) days prior to the date of the meeting. (Annex K.)Notice of a special meeting of members should be given at least five days before the date of the meeting. It appears that the notice was posted on 26 March and the election was set for 28 March. Therefore, the five days previous notice required would not be complied with.

As regards the creation of a committee of three vested with the authority to call, conduct and supervise the election, and the appointment thereto of Candido C. Viernes as chairman and representative of the court and one representative each from the parties, the Court in the exercise of its equity jurisdiction may appoint such committee, it having been shown that the Election Committee provided for in section 7 of the by-laws of the association that conducted the election annulled by the respondent court if allowed to act as such may jeopardize the rights of the respondents.In a proper proceeding a court of equity may direct the holding of a stockholders' meeting under the control of a special master, and the action taken at such a meeting will not be set aside because of a wrongful use of the court's interlocutory decree, where not brought to the attention of the court prior to the meeting. (18 C. J. S. 1270.)A court equity may, on showing of good reason, appoint a master to conduct and supervise an election of directors when it appears that a fair election cannot otherwise be had. Such a court cannot make directions contrary to statute and public policy with respect to the conduct of such election. (19 C. J. S. 41)The writ prayed for is denied and the writ of preliminary injunction heretofore issued dissolved, with costs against the petitioners.G.R. No. 126891 August 5, 1998LIM TAY, petitioner, vs.COURT OF APPEALS, GO FAY AND CO. INC., SY GUIOK, and THE ESTATE OF ALFONSO LIM, respondents. PANGANIBAN, J.:The duty of a corporate secretary to record transfers of stocks is ministerial. However, he cannot be compelled to do so when the transferee's title to said shares has no prima facie validity or is uncertain. More specifically, a pledgor, prior to foreclosure and sale, does not acquire ownership rights over the pledged shares and thus cannot compel the corporate secretary to record his alleged ownership of such shares on the basis merely of the contract of pledge. Similarly, the SEC does not acquire jurisdiction over a dispute when a party's claim to being a shareholder is, on the face of the complaint, invalid or inadequate or is otherwise negated by the very allegations of such complaint. Mandamus will not issue to establish a right, but only to enforce one that is already established.

Statement of the CaseThere are the principles, used by this Court in resolving this Petition for Review on Certiorari before us, assailing the October 24, 1996 Decision 1 of the Court of Appeals 2 in CA-GR SP No. 40832, the dispositive portion of which reads:

IN THE LIGHT OF ALL THE FOREGOING, the Petition at bench is DENIED DUE COURSE and is hereby DISMISSED. With costs against the [p]etitioner. 3

By the foregoing disposition, the Court of Appeals effectively affirmed the March 7, 1996 Decision 4 of the Securities and Exchange Commission (SEC) en banc:WHEREFORE, in view of all the foregoing, judgment is hereby rendered dismissing the appeal on the ground that mandamus will only issue upon a clear showing of ownership over the assailed shares of stock, [t]he determination of which, on the basis of the foregoing facts, is within the jurisdiction of the regular courts and not with the SEC. 5

The SEC en banc upheld the August 16, 1993 Decision 6 of SEC Hearing Officer Rolando C. Malabonga, which dismissed the action for mandamus filed by petitioner.

The FactsAs found by the Court of Appeals, the facts of the case are as follows:

. . . On January 8, 1980, Respondent-Appellee Sy Guiok secured a loan from the [p]etitioner in the amount of P40,000 payable within six (6) months. To secure the payment of the aforesaid loan and interest thereon, Respondent Guiok executed a Contract of Pledge in favor of the [p]etitioner whereby he pledged his three hundred (300) shares of stock in the Go Fay & Company Inc., Respondent Corporation, for brevity's sake. Respondent Guiok obliged himself to pay interest on said loan at the rate of 10% per annum from the date of said contract of pledge. On the same date, Alfonso Sy Lim secured a loan from the [p]etitioner in the amount of P40,000 payable in six (6) months. To secure the payment of his loan, Sy Lim executed a "Contract of Pledge" covering his three hundred (300) shares of stock in Respondent Corporation. Under said contract, Sy Lim obliged himself to pay interest on his loan at the rate of 10% per annum from the date of the execution of said contract.Under said "Contracts of Pledge," Respondent[s] Guiok and Sy Lim covenanted, inter alia, that:

3. In the event of the failure of the PLEDGOR to pay the amount within a period of six (6) months from the date hereof, the PLEDGEE is hereby authorized to foreclose the pledge upon the said shares of stock hereby created by selling the same at public or private sale with or without notice to the PLEDGOR, at which sale the PLEDGEE may be the purchaser at his option; and the PLEDGEE is hereby authorized and empowered at his option to transfer the said shares of stock on the books of the corporation to his own name and to hold the certificate issued in lieu thereof under the terms of this pledge, and to sell the said shares to issue to him and to apply the proceeds of the sale to the payment of the said sum and interest, in the manner hereinabove provided;4. In the event of the foreclosure of this pledge and the sale of the pledged certificate, any surplus remaining in the hands of the PLEDGEE after the payment of the said sum and interest, and the expenses, if any, connected with the foreclosure sale, shall be paid by the PLEDGEE to the PLEDGOR;5. Upon payment of the said amount and interest in full, the PLEDGEE will, on demand of the PLEDGOR, redeliver to him the said shares of stock by surrendering the certificate delivered to him by the PLEDGOR or by retransferring each share to the PLEDGOR, in the event that the PLEDGEE, under the option hereby granted, shall have caused such shares to be transferred to him upon the books of the issuing company."(idem, supra)

Respondent Guiok and Sy Lim endorsed their respective shares of stock in blank and delivered the same to the [p]etitioner. 7

However, Respondent Guiok and Sy Lim failed to pay their respective loans and the accrued interests thereon to the [p]etitioner. In October, 1990, the [p]etitioner filed a "Petition for Mandamus" against Respondent Corporation, with the SEC entitled "Lim Tay versus Go Fay & Company. Inc., SEC Case No. 03894", praying that:

PRAYERWHEREFORE, premises considered, it is respectfully prayed that an order be issued directing the corporate secretary of [R]espondent Go Fay & Co., Inc. to register the stock transfers and issue new certificates in favor of Lim Tay. It is likewise prayed that [R]espondent Go Fay & Co., Inc[.] be ordered to pay all dividends due and unclaimed on the said certificates to [P]laintiff Lim Tay.Plaintiff further prays for such other relief just and equitable in the premises. ( page 34,Rollo)

Corpo (p.10-11) 12The [p]etitioner alleged, inter alia, in his Petition that the controversy between him as stockholder and the Respondent Corporation was intra-corporate in view of the obstinate refusal of the corporate secretary of Respondent Corporation to record the transfer of the shares of stock of Respondent Guiok and Sy Lim in favor of and under the name of the [p]etitioner and to issue new certificates of stock to the [p]etitioner.The Respondent Corporation filed its Answer to the Complaint and alleged, as Affirmative Defense, that:

AFFIRMATIVE DEFENSE7. Respondent repleads and incorporates herein by reference the foregoing allegations.8. The Complaint states no cause of action against [r]espondent.9. Complainant is not a stockholder of [r]espondent. Hence, the Honorable Commission has no jurisdiction to enter the present controversy since their [sic] is no intracorporate relationship between complainant and respondent.10. Granting arguendo that a pledge was constituted over the shareholdings of Sy Guiok in favor of the complainant and that the former defaulted in the payment of his obligations to the latter, the same did not automatically vest [i]n complainant ownership of the pledged shares. ( pace 37, Rollo)

In the interim, Sy Lim died. Respondents Guiok and the Intestate Estate of Alfonso Sy Lim, represented by Conchita Lim, filed their Answer-In-Intervention with the SEC alleging, inter alia, that:

xxx xxx xxx3. Deny specifically the allegation under paragraph 5 of the Complaint that, failure to pay the loan within the contract period automatically foreclosed the pledged shares of stocks and that the share of stocks are automatically purchased by the plaintiff, for being false and distorted, the truth being that pursuant to the [sic] paragraph 3 of the contract of pledges, Annexes "A" and "B", it is clear that upon failure to pay the amount within the stipulated period, the pledgee is authorized to foreclose the pledge and thereafter, to sell the same to satisfy the loan. [H]owever, to this point in time, plaintiff has not performed any operative act of foreclosing the shares of stocks of [i]ntervenors in accordance with the Chattel Mortgage law, [n]either was there any sale of stocks — by way of public or private auction — made after foreclosure in favor of the plaintiff to speak about, and therefore, the respondent company could not be force[d] to [sic] by way of mandamus, to transfer the subject shares of stocks from the name of your [i]ntervenors to that of the plaintiff in the absence of clear and legal basis for such;4. DENY specifically the allegations under paragraphs 6, 7 and 8 of the complaint as to the existence of the alleged intracorporate dispute between plaintiff and company for being without proper and legal basis. In the first place, plaintiff is not a stockholder of the respondent corporation; there was no foreclosure of shares executed in accordance with the Chattel Mortgage Law whatsoever; there were no sales consummated that would transfer to the plaintiff the subject shares of stocks and therefore, any demand to transfer the shares of stocks to the name of the plaintiff has no legal basis. In the second place, [i]ntervenors had been in the past negotiating possible compromise and at the same time, had tendered payment of the loan secured by the subject pledges but plaintiff refused unjustifiably to oblige and accept payment o[r] even agree on the computation of the principal amount of the loan and interest on top of a substantial amount offered just to settle and compromise the indebtedness of [i]ntervenors;

II. SPECIAL AFFIRMATIVE DEFENSESIntervenors replead by way of reference all the foregoing allegations to form part of the special affirmative defenses;5. This Honorable Commission has no jurisdiction over the person of the respondent and nature of the action, plaintiff having no personality at all to compel respondent by way of mandamus to perform certain corporate function[s];6. The complaint states no cause of action;7. That respondent is not [a] real party in interest;8. The appropriation of the subject shares of stocks by plaintiff, without compliance with the formality of law, amounted to "[p]actum commis[s]orium" therefore, null and void;9. Granting for the sake of argument only that there was a valid foreclosure and sale of the subject st[o]cks in favor of the plaintiff — which [i]ntervenors deny — still paragraph 5 of the contract allows redemption, for which intervenors are willing to redeem the share of stocks pledged;10. Even the Chattel Mortgage law allowed redemption of the [c]hattel foreclosed;11. As a matter of fact, on several occasions, [i]ntervenors had made representations with the plaintiff for the compromise and settlement of all the obligations secured by the subject pledges — even offering to pay compensation over and above the value of the obligations, interest[s] and dividends accruing to the share of stocks but, plaintiff unjustly refused to accept the offer of payment; ( pages 39-42, Rollo)

The [r]espondents-[i]ntervenors prayed the SEC that judgment be rendered in their favor, as follows:IV. PRAYER

It is respectfully prayed to this Honorable Commission after due hearing, to dismiss the case for lack of merit, ordering plaintiff to accept payment for the loans secured by the subject shares of stocks and to pay plaintiff:

1. The sum of P50,000.00, as moral damages;2. the sum of P50,000.00, as attorneys fees; and,3. costs of suit.

Other reliefs just and equitable [are] likewise prayed for.( pages 42-43, Rollo)

After due proceedings, the [h]earing [o]fficer promulgated a Decision dismissing [p]etitioner's Complaint on the ground that although the SEC had jurisdiction over the action, pursuant to the Decision of the Supreme Court in the case of "Rural Bank of Salinas, et al. vs. Court of Appeals, et al., 210 SCRA 510", he failed to prove the legal basis for the secretary of the Respondent Corporation to be

compelled to register stock transfers in favor of the [p]etitioner and to issue new certificates of stock under his name ( pages 67-77, Rollo). The [p]etitioner appealed the Decision of the [h]earing [o]fficer to the SEC, but, on March 7, 1996, the SEC promulgated a Decision, dismissing [p]etitioner's appeal on the grounds that: (a) the issue between the [p]etitioner and the [r]espondents being one involving the ownership of the shares of stock pledged by Respondent Guiok and Sy Lim, the SEC had no jurisdiction over the action filed by the [p]etitioner; (b) the latter had no cause of action for mandamus against the Respondent Corporation, the right of ownership of the [p]etitioner over the 300 shares of stock pledged by Respondent Guiok and Sy Lim not having been as yet, established, preparatory to the institution of said Petition for Mandamus with the SEC.

Ruling of the Court of AppealsOn the issue of jurisdiction, the Court of Appeals ruled:

In ascertaining whether or not the SEC had exclusive jurisdiction over [p]etitioner's action, the [a]ppellate [c]ourt must delve into and ascertain: (a) whether or not there is a need to enlist the expertise and technical know-how of the SEC in resolving the issue of the ownership of the shares of stock; (b) the status of the relationships of the parties; [and] (c) the nature of the question that is the subject of the controversy. Where the controversy is purely a civil matter resoluble by civil law principles and there is no need for the application of the expertise and technical know-how of the SEC, then the regular courts have jurisdiction over the action. 8 [citations omitted]

On the issue of whether mandamus can be availed of by the petitioner, the Court of Appeals agreed with the SEC,viz.:. . . [T]he [p]etitioner failed to establish a clear and legal right to the writ of mandamus prayed for by him. . . . Mandamus will not issue to enforce a right which is in substantial dispute or to which a substantial doubt exists . . . . The principal function of the writ of mandamus is to command and expedite, and not to inquire and adjudicate and, therefore it is not the purpose of the writ to establish a legal right, but to enforce one which has already been established. 9 [citations omitted]

The Court of Appeals debunked petitioner's claim that he had acquired ownership over the shares by virtue of novation, holding that respondents' indorsement and delivery of the shares were pursuant to Articles 2093 and 2095 of the Civil Code and that petitioner's receipt of dividends was in compliance with Article 2102 of the same Code. Petitioner's claim that he had acquired ownership of the shares by virtue of prescription was likewise dismissed by Respondent Court in this wise:

The prescriptive period for the action of Respondent[s] Guiok and Sy Lim to recover the shares of stock from the [p]etitioner accrued only from the time they paid their loans and the interests thereon and [made] a demand for their return. 10

Hence, the petitioner brought before us this Petition for Review on Certiorari in accordance with Rule 45 of the Rules of Court.11

Assignment of ErrorsPetitioner submits, for the consideration of this Court, these issues: 12

(a) Whether the Securities and Exchange Commission had jurisdiction over the complaint filed by the petitioner; and(b) Whether the petitioner is entitled to the relief of mandamus as against the respondent Go Fay & Co., Inc.

In addition, petitioner contends that it has acquired ownership of the shares "through extraordinary prescription," pursuant to Article 1132 of the Civil Code, and through respondents' subsequent acts, which amounted to a novation of the contracts of pledge. Petitioner also claims that there was dacion en pago, in which the shares of stock were deemed sold to petitioner, the consideration for which was the extinguishment of the loans and the interests thereon. Petitioner likewise claims that laches bars respondents from recovering the subject shares.

The Court's RulingThe petition has no merit.

First Issue: Jurisdiction of the SECClaiming that the present controversy is intra-corporate and falls within the exclusive jurisdiction of the SEC, petitioner relies heavily on Abejo v. De la Cruz, 13 which upheld the jurisdiction of the SEC over a suit filed by an unregistered stockholder seeking to enforce his rights. He also seeks support from Rural Bank of Salinas, Inc. v. Court of Appeals, 14 which ruled that the right of a transferee or an assignee to have stocks transferred to his name was an inherent right flowing from his ownership of the said stocks.The registration of shares in a stockholder's name, the issuance of stock certificates, and the right to receive dividends which pertain to the said shares are all rights that flow from ownership. The determination of whether or not a shareholder is entitled to exercise the above-mentioned rights falls within the jurisdiction of the SEC. However, if ownership of the shares is not clearly established and is still unresolved at the time the action for mandamus is filed, then jurisdiction lies with the regular courts.Sec. 5 of Presidential Decree No. 902-A sets forth the jurisdiction of the SEC as follows:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:(a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of stockholders, partners, members of associations or organizations registered with the Commission;(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity;(c) Controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnerships or associations.(d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the Management Committee created pursuant to this decree. 15

Thus, a controversy "among stockholders, partners or associates themselves" 16 is intra-corporate in nature and falls within the jurisdiction of the SEC.As a general rule, the jurisdiction of a court or tribunal over the subject matter is determined by the allegations in the complaint. 17 In the present case, however, petitioner's claim that he was the owner of the shares of stock in question has no prima facie basis.In his Complaint, petitioner alleged that, pursuant to the contracts of pledge, he became the owner of the shares when the term for the loans expired. The Complaint contained the following pertinent averments:

xxx xxx xxx

Corpo (p.10-11) 133. On [J]anuary 8, 1990, under a Contract of Pledge, Lim Tay received three hundred (300) shares of stock of Go Fay & Co., Inc., from Sy Guiok as security for the payment of a loan of [f]orty [t]housand [p]esos (P40,000.00) Philippine currency, the sum of which was payable within six (6) months [with interest] at ten percentum (10%) per annum from the date of the execution of the contract; a copy of this Contract of Pledge is attached as Annex "A" and made part hereof;4. On the same date January 8, 1980, under a similar Contract of Pledge, Lim Tay received three hundred (300) shares of stock of Go Pay & Co., Inc. from Alfonso Sy Lim as security for the payment of a loan of [f]orty [t]housand [p]esos (P40,000.00) Philippine currency, the sum of which was payable within six (6) months [with interest] at ten percentum (10%) per annum from the date of the execution of the contract; a copy of this Contract of Pledge is attached as Annex "B" and made part hereof;5. By the express terms of the agreements, upon failure of the borrowers to pay the stated amounts within the contract period, the pledge is foreclosed and the shares of stock are purchased by [p]laintiff, who is expressly authorized and empowered to transfer the duly endorsed shares of stock on the books of the corporation to his own name; . . . 18 (emphasis supplied)

However, the contracts of pledge, which were made integral parts of the Complaint, contain this common proviso:3. In the event of the failure of the PLEDGOR to pay the amount within a period of six (6) months from the date hereof, the PLEDGEE is hereby authorized to foreclose the pledge upon the said shares of stock hereby created by selling the same at public or private sale with or without notice to the PLEDGOR, at which sale the PLEDGEE may be the purchaser at his option; and the PLEDGEE is hereby authorized and empowered at his option, to transfer the said shares of stock on the books of the corporation to his own name and to hold the certificate issued in lieu thereof under the terms of this pledge, and to sell the said shares to issue to him and to apply the proceeds of the sale to the payment of the said sum and interest, in the manner hereinabove provided;

This contractual stipulation, which was part of the Complaint, shows that plaintiff was merely authorized to foreclose the pledge upon maturity of the loans, not to own them. Such foreclosure is not automatic, for it must be done in a public or private sale. Nowhere did the Complaint mention that petitioner had in fact foreclosed the pledge and purchased the shares after such foreclosure. His status as a mere pledgee does not, under civil law, entitle him to ownership of the subject shares. It is also noteworthy that petitioner's Complaint did not aver that said shares were acquired through extraordinary prescription, novation or laches. Moreover, petitioner's claim, subsequent to the filing of the Complaint, that he acquired ownership of the said shares through these three modes is not indubitable and still has to be resolved. In fact, as will be shown, such allegation-has no merit. Manifestly, the Complaint by itself did not contain any prima facie showing that petitioner was the owner of the shares of stocks. Quite the contrary, it demonstrated that he was merely a pledgee, not an owner. Accordingly, it failed to lay down a sufficient basis for the SEC to exercise jurisdiction over the controversy. In fact, the very allegations of the Complaint and its annexes negated the jurisdiction of the SEC.Petitioner's reliance on the doctrines set forth in Abejo v. De la Cruz and Rural Bank of Salinas, Inc. v. Court of Appeals is misplaced. In Abejo, he Abejo spouses sold to Telectronic Systems, Inc. shares of stock in Pocket Bell Philippines, Inc. Subsequent to such contract of sale, the corporate secretary, Norberto Braga, refused to record the transfer of the shares in the corporate books and instead asked for the annulment of the sale, claiming that he and his wife had a preemptive right over some of the shares, and that his wife's shares were sold without consideration or consent.At the time the Bragas questioned the validity of the sale, the contract had already been perfected, thereby demonstrating that Telectronic Systems, Inc. was already the prima facie owner of the shares and, consequently, a stockholder of Pocket Bell Philippines, Inc. Even if the sale were to be annulled later on, Telectronic Systems, Inc. had, in the meantime, title over the shares from the time the sale was perfected until the time such sale was annulled. The effects of an annulment operate prospectively and do not, as a rule, retroact to the time the sale was made. Therefore, at the time the Bragas questioned the validity of the tranfers made by the Abejos, Telectronic Systems, Inc. was already a prima facie shareholder of the corporation, thus making the dispute between the Bragas and the Abejos "intra-corporate" in nature. Hence, the Court held that "the issue is not on ownership of shares but rather the non-performance by the corporate secretary of the ministerial duty of recording transfers of shares of stock of the corporation of which he is secretary." 19

Unlike Abejo, however, petitioner's ownership over the shares in this case was not yet perfected when the Complaint was filed. The contract of pledge certainly does not make him the owner of the shares pledged. Further, whether prescription effectively transferred ownership of the shares, whether there was a novation of the contracts of pledge, and whether laches had set in were difficult legal issues, which were unpleaded and unresolved when herein petitioner asked the corporate secretary of Go Fay to effect the transfer, in his favor, of the shares pledged to him.In Rural Bank of Salinas, Melenia Guerrero executed deeds of assignment for the shares in favor of the respondents in that case. When the corporate secretary refused to register the transfer, an action for mandamus was instituted. Subsequently, a motion for intervention was filed, seeking the annulment of the deeds of assignment on the grounds that the same were fictitious and antedated, and that they were in fact donations because the considerations therefor were below the book value of the shares.Like the Abejo spouses, the respondents in Rural Bank of Salinas were already prima facie shareholders when the deeds of assignment were questioned. If the said deeds were to be annulled later on, respondents would still be considered shareholders of the corporation from the time of the assignment until the annulment of such contracts.

Second Issue: Mandamus Will NotIssue to Establish a Right

Petitioner prays for the issuance of a writ of mandamus, directing the corporate secretary of respondent corporation to have the shares transferred to his name in the corporate books, to issue new certificates of stock and to deliver the corresponding dividends to him. 20

In order that a writ of mandamus may issue, it is essential that the person petitioning for the same has a clear legal right to the thing demanded and that it is the imperative duty of the respondent to perform the act required. It neither confers powers nor imposes duties and is never issued in doubtful cases. It is simply a command to exercise a power already possessed and to perform a duty already imposed. 21

In the present case, petitioner has failed to establish a clear legal right. Petitioner's contention that he is the owner of the said shares is completely without merit. Quite the contrary and as already shown, he does not have any ownership rights at all. At the time petitioner instituted his suit at the SEC, his ownership claim had no prima facieleg to stand on. At best, his contention was disputable and uncertain Mandamus will not issue to establish a legal right, but only to enforce one that is already clearly established.

Without Foreclosure andPurchase at Auction, PledgorIs Not the Owner of Pledged Shares

Petitioner initially argued that ownership of the shares pledged had passed to him, upon Respondents Sy Guiok and Sy Lim's failure to pay their respective loans. But on appeal, petitioner claimed that ownership over the shares had passed to him, not via the contracts of pledge, but by virtue of prescription and by respondents' subsequent acts which amounted to a novation of the contracts of pledge. We do not agree.At the outset, it must be underscored that petitioner did not acquire ownership of the shares by virtue of the contracts of pledge. Article 2112 of the Civil Code states:

The creditor to whom the credit has not been satisfied in due time, may proceed before a Notary Public to the sale of the thing pledged. This sale shall be made at a public auction, and with notification to the debtor and the owner of the thing pledged in a proper

case, stating the amount for which the public sale is to be held. If at the first auction the thing is not sold, a second one with the same formalities shall be held; and if at the second auction there is no sale either, the creditor may appropriate the thing pledged. In this case he shall be obliged to give an acquittance for his entire claim.

Furthermore, the contracts of pledge contained a common proviso, which we quote again for the sake of clarity:3. In the event of the failure of the PLEDGOR to pay the amount within a period of six (6) months from the date hereof, the PLEDGEE is hereby authorized to foreclose the pledge upon the said shares of stock hereby created by selling the same at public or private sale with or without notice to the PLEDGOR, at which sale the PLEDGEE may be the purchaser at his option; and "the PLEDGEE is hereby authorized and empowered at his option to transfer the said shares of stock on the books of the corporation to his own name, and to hold the certificate issued in lieu thereof under the terms of this pledge, and to sell the said shares to issue to him and to apply the proceeds of the sale to the payment of the said sum and interest, in the manner hereinaboveprovided; 22

There is no showing that petitioner made any attempt to foreclose or sell the shares through public or private auction, as stipulated in the contracts of pledge and as required by Article 2112 of the Civil Code. Therefore, ownership of the shares could not have passed to him. The pledgor remains the owner during the pendency of the pledge and prior to foreclosure and sale, as explicitly provided by Article 2103 of the same Code:

Unless the thing pledged is expropriated, the debtor continues to be the owner thereof.Nevertheless, the creditor may bring the actions which pertain to the owner of the thing pledged in order to recover it from, or defend it against a third person.

No Ownershipby Prescription

Petitioner did not acquire the shares by prescription either. The period of prescription of any cause of action is reckoned only from the date the cause of action accrued.Since a cause of action requires as an essential element not only a legal right of the plaintiff and a correlative obligation of the defendant, but also an act or omission of the defendant in violation of said legal right, the cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty." 23 Accordingly, a cause of action on a written contract accrues when a breach or violation thereof occurs.Under the contracts of pledge, private respondents would have a right to ask for the redelivery of their certificates of stock upon payment of their debts to petitioner, consonant with Article 2105 of the Civil Code, which reads:

The debtor cannot ask for the return of the thing pledged against the will of the creditor, unless and until he has paid the debt and its interest, with expenses in a proper case. 24

Thus, the right to recover the shares based on the written contract of pledge between petitioner and respondents would arise only upon payment of their respective loans. Therefore, the prescriptive period within which to demand the return of the thing pledged should begin to run only after the payment of the loan and a demand for the thing has been made, because it is only then that respondents acquire a cause of action for the return of the thing pledged.Prescription should not begin to run on the action to demand the return of the thing pledged while the loan still exists. This is because the right to ask for the return of the thing pledged will not arise so long as the loan subsists. In the present case, the prescriptive period did not begin to run when the loan became due. On the other hand, it is petitioner's right to demand payment that may be in danger of prescription.Petitioner contends that he can be deemed to have acquired ownership over the certificates of stock through extraordinary prescription, as provided for in Article 1132 of the Civil Code which states:

Art. 1132. The ownership of movables prescribes through uninterrupted possession for four years in good faith.The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition. . . . .

Petitioner's argument is untenable. What is required by Article 1132 is possession in the concept of an owner. In the present case, petitioner's possession of the stock certificates came about because they were delivered to him pursuant to the contracts of pledge. His possession as a pledgee cannot ripen into ownership by prescription. As aptly pointed out by Justice Jose C. Vitug:

Acquisitive prescription is a mode of acquiring ownership by a possessor through the requisite lapse of time. In order to ripen into ownership, possession must be in the concept of an owner, public, peaceful and uninterrupted. Thus, possession with a juridical title, such as by a usufructory, a trustee, a lessee, agent or a pledgee, not being in the concept of an owner, cannot ripen into ownership by acquisitive prescription unless the juridical relation is first expressly repudiated and such repudiation has been communicated to the other party. 25

Petitioner expressly repudiated the pledge, only when he filed his Complaint and claimed that he was not a mere pledgee, but that he was already the owner of the shares. Based on the foregoing, petitioner has not acquired the certificates of stock through extraordinary prescription.

No Novationin Favor of Petitioner

Neither did petitioner acquire the shares by virtue of a novation of the contract of pledge. Novation is defined as "the extinguishment of an obligation by a subsequent one which terminates it, either by changing its object or principal conditions, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor."26 Novation of a contract must not be presumed. "In the absence of an express agreement, novation takes place only when the old and the new obligations are incompatible on every point." 27

In the present case, novation cannot be presumed by (a) respondents' indorsement and delivery of the certificates of stock covering the 600 shares, (b) petitioner's receipt of dividends from 1980 to 1983, and (c) the fact that respondents have not instituted any action to recover the shares since 1980.Respondents' indorsement and delivery of the certificates of stock were pursuant to paragraph 2 of the contract of pledge which reads:

2. The said certificates had been delivered by the PLEDGOR endorsed in blank to be held by the PLEDGEE under the pledge as security for the payment of the aforementioned sum and interest thereonaccruing. 28

This stipulation did not effect the transfer of ownership to petitioner. It was merely in compliance with Article 2093 of the Civil Code, 29 which requires that the thing pledged be placed in the possession of the creditor or a third person of common agreement; and Article 2095, 30 which states that if the thing pledged are shares of stock, then the "instrument proving the right pledged" must be delivered to the creditor.Moreover, the fact that respondents allowed the petitioner to receive dividends pertaining to the shares was not meant to relinquish ownership thereof. As stated by respondent corporation, the same was done pursuant to an agreement between the petitioner and Respondents Sy Guiok and Sy Lim, following Article 2102 of the civil Code which provides:

It the pledge earns or produces fruits, income, dividends, or interests, the creditor shall compensate what he receives with those which are owing him; but if none are owing him, or insofar as the amount may exceed that which is due, he shall apply it to the principal. Unless there is a stipulation to the contrary, the pledge shall extend to the interest and the earnings of the right pledged.

Corpo (p.10-11) 14Novation cannot be inferred from the mere fact that petitioner has not, since 1980, instituted any action to recover the shares. Such action is in fact premature, as the loan is still outstanding. Besides, as already pointed out, novation is never presumed or inferred.

No Dacion en Pagoin Favor of Petitioner

Neither can there be dacion en pago, in which the certificates of stock are deemed sold to petitioner, the consideration for which is the extinguishment of the loans and the accrued interests thereon. Dacion en pago is a form of novation in which a change takes place in the object involved in the original contract. Absent an explicit agreement, petitioner cannot simply presume dacion en pago.

Laches Nota Bar to Petitioner

Petitioner submits that "the inaction of the individual respondents with respect to the recovery of the shares of stock serves to bar them from asserting rights over said shares on the basis of laches." 31

Laches has been defined as "the failure or neglect, for an unreasonable length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it." 32

In this case, it is in fact petitioner who may be guilty of laches. Petitioner had all the time to demand payment of the debt. More important, under the contracts of pledge, petitioner could have foreclosed the pledges as soon as the loans became due. But for still unknown or unexplained reasons, he failed to do so, preferring instead to pursue his baseless claim to ownership.WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. Costs against petitioner.SO ORDERED.G.R. No. 151925 February 6, 2003CHAS REALTY AND DEVELOPMENT CORPORATION, petitioner, vs.HON. TOMAS B. TALAVERA, in his capacity as Presiding Judge of the Regional Trial Court of Cabanatuan City, Branch 28, and ANGEL D. CONCEPCION, SR., respondents.

D E C I S I O NVITUG, J.:Petitioner Chas Realty and Development Corporation (CRDC) is a domestic corporation engaged in property development and management. It is the owner and developer of a three-hectare shopping complex, also known as the Megacenter Mall (Megacenter), in Cabanatuan City.The construction of Megacenter commenced in January 1996, but by the time of its so-called "soft opening" in July 1998, it was only partly completed due to lack of funds, said to have been brought about by construction overages due to the massive devaluation of the peso during the economic crisis in 1997, low occupancy, and rental arrearages of tenants. The opening of the upper ground floor and the second floor of the building followed, respectively, in August 1998 and towards the end of 1998. Eventually, Megacenter opened its third floor in 1999.l^vvphi1.netPurportedly on account of factors beyond the control of CRDC, such as high interest rates on its loans, unpaid rentals of tenants, low occupancy rate, sluggishness of the economy and the freezing of its bank account by its main creditor, the Land Bank of the Philippines, CRDC encountered difficulty in paying its obligations as and when they fell due and had to contend with collection suits and related cases.On 04 June 2001, CRDC filed a petition for rehabilitation attaching thereto a proposed rehabilitation plan, accompanied by a secretary’s certificate, consonantly with paragraph 2(k), Section 2, Rule 4, of the Interim Rules of Procedure on Corporate Rehabilitation. CRDC claimed that it had sufficient assets and a workable rehabilitation plan both of which showed that the continuance of its business was still feasible. It alleged that, prior to the filing of the petition for rehabilitation, a special meeting of its stockholders was held on 18 April 2001 during which the majority of the outstanding capital stock of CRDC approved the resolution authorizing the filing of a petition for rehabilitation.On 08 June 2001, the Regional Trial Court, Branch 28, of Cabanatuan City, to which the petition was assigned, issued an order staying all claims against CRDC and prohibited it from making any payment on its outstanding obligations and selling, or otherwise disposing or encumbering, its property. Forthwith, the court appointed a rehabilitation receiver.On 20 July 2001, Angel D. Concepcion, Sr., herein private respondent, filed a complaint in intervention opposing the appointment of CRDC’s nominee for the post of rehabilitation receiver. He belied CRDC’s factual allegations and claimed that the predicament of the corporation was due to serious "mismanagement, fraud, embezzlement, misappropriation and gross/evident violation of the fiduciary duties of CHAS officers." Concepcion moved to dismiss and/or to deny the petition for rehabilitation on the ground that there was no approval by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock which, according to him, would be essential under paragraph 2(k), Section 2, Rule 4, of the Interim Rules on Corporate Rehabilitation. Concepcion further asserted that the supposed approval of the directors of the filing of the petition for rehabilitation was inaccurate considering that the membership of petitioner CRDC’s board of directors was still then being contested and pending final resolution.On 10 August 2001, CRDC submitted its opposition ex abundante cautelam contending that the complaint in intervention was a prohibited pleading and that there was no need for it to secure the irrevocable consent and approval of its stockholders representing at least two-thirds (2/3) of its outstanding capital stock because the petition did not include in its plan for rehabilitation acts that would need any amendment of its articles of incorporation and/or by-laws, increase or decrease in the authorized capital stock, issuance of bonded indebtedness, or the like, where such two-thirds (2/3) vote would be required.The trial court issued an order, dated 15 October 2001, the decretal portion of which was to the following effect;viz:"WHEREFORE, premises considered, in the absence of any showing that the petitioner has complied with the certification required under Section 2, Rule 4(K) of the Interim Rules of Procedure on Corporate Rehabilitation, the petitioner is hereby given a period of 15 days from receipt of a copy of this order to secure from its directors and stockholders the desired certification and submit the same to this Court in accordance with the above-mentioned provision of the Interim Rules of Procedure on Corporate Rehabilitation."With respect to the other oppositions to the petition for rehabilitation including the opposition to the appointment of the rehabilitation receiver, opposition filed by the land bank and the EEI, Inc., the resolution of the same is hereby held in abeyance till after the period given to the petitioner to comply with this order as it may become moot and academic after the expiration of the period given to the petitioner."1

On 29 October 2001, CRDC filed before the Court of Appeals a petition for certiorari, with prayer for temporary restraining order and/or preliminary injunction, which sought to have the 15th October 2001 order of the trial court set aside.The Court of Appeals rendered a decision on 18 January 2002 and held:"WHEREFORE, the foregoing premises considered, the petition for certiorari, with prayer for temporary restraining order and/or writ of preliminary injunction, is DENIED for lack of merit."2

Hence, the instant petition on the following grounds:"I

"Public respondent acted with grave abuse of discretion amounting to lack and/or excess of jurisdiction in issuing the assailed order considering that:

"A. The petition for rehabilitation and the proposed rehabilitation plan do not require extraordinary corporate actions."B. Since no extraordinary corporate actions are required or even contemplated as necessary and desirable for the rehabilitation of CRDC, the requirements of the corporation code for the approval of such actions cannot be complied with."C. The rehab rules and the corporation code do not allow or intend blind blanket approvals of extraordinary corporate actions."D. To require 2/3 stockholders’ approval for corporate actions requiring only a majority violates the right of the majority stockholders.

"II"Public respondent acted with grave abuse of discretion amounting to lack and/or excess of jurisdiction in requiring CRDC’s compliance with paragraph 2(k), Section 2, Rule 4 of the Rehab rules when CRDC already complied therewith."3

Rule 4, Section 2(k), of the Interim Rules on Corporate Rehabilitation provides:"Sec. 2. Contents of the Petition. – The petition filed by the debtor must be verified and must set forth with sufficient particularity all the following material facts: (a) the name and business of the debtor; (b) the nature of the business of the debtor; (c) the history of the debtor; (d) the cause of its inability to pay its debts; (e) all the pending actions or proceedings known to the debtor and the courts or tribunals where they are pending; (f) threats or demands to enforce claims or liens against the debtor; and (g) the manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors, employees, and stockholders."The petitioner shall be accompanied by the following documents:

"x x x x x x x x x."k. A Certificate attesting, under oath, that (a) the filing of the petition has been duly authorized; and (b) the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness; alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholders’ rights."4

Rule 4, Section 2(k), distinctly provides that, first, under letter (a), the filing of the petition has been duly authorized; and, second, under letter (b), the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness, alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholder’s rights.Observe that Rule 4, Section 2(k), prescribes the need for a certification; one, to state that the filing of the petition has been duly authorized, and two, to confirm that the directors and stockholders have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the corporate debtor, including, as and when called for, such extraordinary corporate actions as may be marked out.1awphi1.nét The phrase, "in accordance with existing laws," obviously would refer to that which is, or to those that are, intended to be done by the corporation in the pursuit of its plan for rehabilitation. Thus, if any extraordinary corporate action (mentioned in Rule 4, Section 2(k), of the Interim Rules on Corporate Rehabilitation) are to be done under the proposed rehabilitation plan, the petitioner would be bound to make it known that it has received the approval of a majority of the directors and the affirmative votes of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the corporation. Where no such extraordinary corporate acts (or one that under the law would call for a two-thirds (2/3) vote) are contemplated to be done in carrying out the proposed rehabilitation plan, then the approval of stockholders would only be by a majority, not necessarily a two-thirds (2/3), vote, as long as, of course, there is a quorum5 a fact which is not here being disputed.The trial court and appellate court, unfortunately, have taken an inaccurate understanding of the memorandum to the Supreme Court of Justice Reynato S. Puno, the committee chair on the draft of the rules on corporate rehabilitation, still then being proposed; the memorandum reads, in part, thusly:"3. Rule 4. – Rehabilitation"The following are the principal deviation from the SEC Rules:"a) The proposed Rules now require, as an attachment to the petition, a Certificate attesting, among others, that the governing body and owners of the petitioning debtor have approved and consented to whatever is necessary or desirable (including but not limited to increasing or decreasing the authorized capital stock of the company and modification of stockholders’ right) to rehabilitate the debtor (Sec. 2, par. (k), Rule 4). This is to avoid a situation where a rehabilitation plan, after being developed for years, cannot be implemented because of the refusal of shareholders to approve the arrangements necessary for its implementation."6

Nowhere in the aforequoted paragraph can it be inferred that an affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding stock is invariably necessary for the filing of a petition for rehabilitation regardless of the corporate action that the plan envisions. Just to the contrary, it only requires in the filing of the petition that the corporate actions therein proposed have been duly approved or consented to by the directors and stockholders "in consonance with existing laws." The requirement is designed to avoid a situation where a rehabilitation plan, after being developed and judicially sanctioned, cannot ultimately be seen through because of the refusal of directors or stockholders to cooperate in the full implementation of the plan. In fine, a certification on the approval of stockholders is required but the question, whether such approval should be by a majority or by a two-thirds (2/3) vote of the outstanding capital stock, would depend on the existing law vis-à-vis the corporate act or acts proposed to be done in the rehabilitation of the distressed corporation.The rehabilitation plan7 submitted by petitioner merely consists of a repayment or re-structuring scheme of CRDC’s bank loans to Land Bank of the Philippines and Equitable-PCI Bank and of leasing out most of the available spaces in the Megacenter, including the completion of the construction of the fourth floor, to increase rental revenues. None of the proposed corporate actions would require a vote of approval by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock.Relative to the contention that a motion for reconsideration is required prior to bringing up the petition for certiorari(with the Court of Appeals), it should suffice to say that the filing of a motion for reconsideration before availing of the remedy of certiorari is not always sine qua non such as when the issue raised is one purely of law, or where the error is patent or the questions raised on certiorari are exactly the same as those already squarely presented to and passed upon by the court a quo.8

WHEREFORE, the instant petition is GRANTED and the questioned decision of the Court of Appeals, dated 18 January 2002, and the order of the Regional Trial Court, Branch 28, Cabanatuan City, dated 15 October 2001, in Civil Case No. 4036-AF, are REVERSED and SET ASIDE. The Regional Trial Court is directed to give due course to the Petition for Rehabilitation and conduct with dispatch the necessary proceedings still required thereon. No costs.SO ORDERED.G.R. No. L-60502 July 16, 1991PEDRO LOPEZ DEE, petitioner, vs.SECURITIES AND EXCHANGE COMMISSION, HEARING OFFICER EMMANUEL SISON, NAGA TELEPHONE CO., INC., COMMUNICATION SERVICES, INC., LUCIANO MAGGAY, AUGUSTO FEDERIS, NILDA RAMOS, FELIPA JAVALERA, DESIDERIO SAAVEDRA, respondents.G.R. No. L-63922 July 16, 1991JUSTINO DE JESUS, SR., PEDRO LOPEZ DEE, JULIO LOPEZ DEE, and VICENTE TORDILLA, JR., petitioners, vs.

Corpo (p.10-11) 15INTERMEDIATE APPELLATE COURT, LUCIANO MAGGAY, NILDA I. RAMOS, DESIDERIO SAAVEDRA, AUGUSTO FEDERIS, ERNESTO MIGUEL, COMMUNICATION SERVICES, INC., and NAGA TELEPHONE COMPANY, INC., respondents. PARAS, J.:pThese are petitions for certiorari with preliminary injunction and/or restraining order which seek to annul and set aside in: (1) G.R. No. 60502, the order * of the hearing officer dated May 4, 1982, setting the date for the election of the directors to be held by the stockholders on May 22, 1982, in SEC Case No. 1748 entitled "Pedro Lopez Dee v. Naga Telephone Co., Inc. et al."; and (2) G.R. No. 63922, the decision ** of the Intermediate Appellate Court dated April 14, 1983 which annulled the judgment of the trial court on the contempt charge against the private respondents in G.R. No. SP-14846-R, entitled "Luciano Maggay, et al. v. Hon. Delfin Vir Sunga, et al."As gathered from the records, the facts of these cases are as follows:Naga Telephone Company, Inc. was organized in 1954, the authorized capital was P100,000.00. In 1974 Naga Telephone Co., Inc. (Natelco for short) decided to increase its authorized capital to P3,000,000.00. As required by the Public Service Act, Natelco filed an application for the approval of the increased authorized capital with the then Board of Communications under BOC Case No. 74-84. On January 8, 1975, a decision was rendered in said case, approving the said application subject to certain conditions, among which was:

3. That the issuance of the shares of stocks will be for a period of one year from the date hereof, "after which no further issues will be made without previous authority from this Board."

Pursuant to the approval given by the then Board of Communications, Natelco filed its Amended Articles of Incorporation with the Securities and Exchange Commission (SEC for short). When the amended articles were filed with the SEC, the original authorized capital of P100,000.00 was already paid. Of the increased capital of P2,900,000.00 the subscribers subscribed to P580,000.00 of which P145,000 was fully paid.The capital stock of Natelco was divided into 213,000 common shares and 87,000 preferred shares, both at a par value of P10.00 per shares.On April 12, 1977, Natelco entered into a contract with Communication Services, Inc. (CSI for short) for the "manufacture, supply, delivery and installation" of telephone equipment. In accordance with this contract, Natelco issued 24,000 shares of common stocks to CSI on the same date as part of the downpayment. On May 5, 1979, another 12,000 shares of common stocks were issued to CSI. In both instances, no prior authorization from the Board of Communications, now the National Telecommunications Commission, was secured pursuant to the conditions imposed by the decision in BOC Case NO. 74-84 aforecited (Rollo, Vol. III, Memorandum for private respondent Natelco, pp. 814-816).On May 19, 1979, the stockholders of the Natelco held their annual stockholders' meeting to elect their seven directors to their Board of Directors, for the year 1979-1980. In this election Pedro Lopez Dee (Dee for short) was unseated as Chairman of the Board and President of the Corporation, but was elected as one of the directors, together with his wife, Amelia Lopez Dee (Rollo, Vol. III, Memorandum for private respondents, p. 985; p. 2).In the election CSI was able to gain control of Natelco when the latter's legal counsel, Atty. Luciano Maggay (Maggay for short) won a seat in the Board with the help of CSI. In the reorganization Atty. Maggay became president (Ibid., Memorandum for Private Respondent Natelco, p. 811).The following were elected in the May 19, 1979 election: Atty. Luciano Maggay, Mr. Augusto Federis, Mrs. Nilda Ramos, Ms. Felipa Javalera, Mr. Justino de Jesus, Sr., Mr. Pedro Lopez Dee and Mrs Amelia C. Lopez Dee. The last three named directors never attended the meetings of the Maggay Board. The members of the Maggay Board who attended its meetings were Maggay. Federis, Ramos and Javalera. The last two were and are CSI representatives (Ibid., p. 812).Petitioner Dee having been unseated in the election, filed a petition in the SEC docketed as SEC Case No. 1748, questioning the validity of the elections of May 19, 1979 upon the main ground that there was no valid list of stockholders through which the right to vote could be determined (Rollo, Vol. I, pp. 254-262-A). As prayed for in the petition (Ibid., p. 262), a restraining order was issued by the SEC placing petitioner and the other officers of the 1978-1979 Natelco Board in hold-over capacity (Rollo, Vol. II, Reply, p. 667).The SEC restraining order was elevated to the Supreme Court in G.R. No. 50885 where the enforcement of the SEC restraining order was restrained. Private respondents therefore, replaced the hold-over officers (Rollo, Vol. 11, p. 897).During the tenure of the Maggay Board, from June 22, 1979 to March 10, 1980, it did not reform the contract of April 12, 1977, and entered into another contract with CSI for the supply and installation of additional equipment but also issued to CSI 113,800 shares of common stock (Ibid., p. 812).The shares of common stock issued to CSI are as follows:

NO. OF SHARES DATE ISSUED24,000 shares April 12, 197712,000 shares May 5, 197928,000 shares October 2, 197928,500 shares November 5, 197920,000 shares November 14, 197920,000 shares January 7, 198016,500 shares January 26, 1980149,000 shares (Ibid., pp. 816-817).

Subsequently, the Supreme Court dismissed the petition in G.R. No. 50885 upon the ground that the same was premature and the Commission should be allowed to conduct its hearing on the controversy. The dismissal of the petition resulted in the unseating of the Maggay group from the board of directors of Natelco in a "hold-over" capacity (Rollo, Vol. II, p. 533).In the course of the proceedings in SEC Case No. 1748, respondent hearing officer issued an order on June 23, 1981, declaring: (1) that CSI is a stockholder of Natelco and, therefore, entitled to vote; (2) that unexplained 16,858 shares of Natelco appear to have been issued in excess to CSI which should not be allowed to vote; (3) that 82 shareholders with their corresponding number of shares shall be allowed to vote; and (4) consequently, ordering the holding of special stockholder' meeting to elect the new members of the Board of Directors for Natelco based on the findings made in the order as to who are entitled to vote (Rollo, Vol. 1, pp. 288-299).From the foregoing order dated June 23, 1981, petitioner Dee filed a petition for certiorari/appeal with the SEC en banc. The petition/appeal was docketed as SEC-AC NO. 036. Thereafter, the Commission en banc rendered a decision on April 5, 1982, the dispositive part of which leads:

Now therefore, the Commission en banc resolves to sustain the order of the Hearing Officer; to dismiss the petition/appeal for lack of merit; and order new elections as the Hearing Officer shall set after consultations with Natelco officers. For the protection of minority stockholders and in the interest of fair play and justice, the Hearing Officer shall order the formation of a special committee of three, one from the respondents (other than Natelco), one from petitioner, and the Hearing Officer as Chairman to supervise the election.It remains to state that the Commission en banc cannot pass upon motions belatedly filed by petitioner and respondent Natelco to introduce newly discovered evidence — any such evidence may be introduced at hearings on the merits of SEC Case No. 1748.SO ORDERED. (Rollo, Vol. I, p. 24).

On April 21, 1982, petitioner filed a motion for reconsideration (Rollo, Vol. I, pp. 25-30). Likewise, private respondent Natelco filed its motion for reconsideration dated April 21, 1982 (Ibid., pp. 32-51).

Pending resolution of the motions for reconsideration, on May 4, 1982, respondent healing officer without waiting for the decision of the commission en banc to become final and executory rendered an order stating that the election for directors would be held on May 22, 1982 (Ibid., pp. 300-301).On May 20, 1982, the SEC en banc denied the motions for reconsideration (Rollo, Vol. II, pp. 763-765).Meanwhile on May 20, 1982 (G.R. No. 63922), petitioner Antonio Villasenor (as plaintiff) filed Civil Case No. 1507 with the Court of First Instance of Camarines Sur, Naga City, against private respondents and co-petitioners, de Jesus, Tordilla and the Dee's all defendants therein, which was raffled to Branch I, presided over by Judge Delfin Vir Sunga (Rollo, G.R. No. 63922; pp. 25-30). Villasenor claimed that he was an assignee of an option to repurchase 36,000 shares of common stocks of Natelco under a Deed of Assignment executed in his favor (Rollo, p. 31). The defendants therein (now private respondents), principally the Maggay group, allegedly refused to allow the repurchase of said stocks when petitioner Villasenor offered to defendant CSI the repurchase of said stocks by tendering payment of its price (Rollo, p. 26 and p. 78). The complaint therefore, prayed for the allowance to repurchase the aforesaid stocks and that the holding of the May 22, 1982 election of directors and officers of Natelco be enjoined (Rollo, pp. 28-29).A restraining order dated May 21, 1982 was issued by the lower court commanding desistance from the scheduled election until further orders (Rollo, p. 32).Nevertheless, on May 22, 1982, as scheduled, the controlling majority of the stockholders of the Natelco defied the restraining order, and proceeded with the elections, under the supervision of the SEC representatives (Rollo, Vol. III, p. 985); p. 10; G.R. No. 60502).On May 25, 1982, the SEC recognized the fact that elections were duly held, and proclaimed that the following are the "duly elected directors" of the Natelco for the term 1982-1983:

1. Felipa T. Javalera2. Nilda I. Ramos3. Luciano Maggay4. Augusto Federis5. Daniel J. Ilano6. Nelin J. Ilano Sr.7. Ernesto A. Miguel

And, the following are the recognized officers to wit:1. President Luciano Maggay2. Vice-President Nilda I. Ramos3. Secretary Desiderio Saavedra4. Treasurer Felipa Javalera5. Auditor Daniel Ilano(Rollo, Vol. 1, pp. 302-303)

Despite service of the order of May 25, 1982, the Lopez Dee group headed by Messrs. Justino De Jesus and Julio Lopez Dee kept insisting no elections were held and refused to vacate their positions (Rollo, Vol. III, p. 985; p. 11).On May 28, 1982, the SEC issued another order directing the hold-over directors and officers to turn over their respective posts to the newly elected directors and officers and directing the Sheriff of Naga City, with the assistance of PC and INP of Naga City, and other law enforcement agencies of the City or of the Province of Camarines Sur, to enforce the aforesaid order (Rollo, Vol. 11, pp. 577-578).On May 29, 1982, the Sheriff of Naga City, assisted by law enforcement agencies, installed the newly elected directors and officers of the Natelco, and the hold-over officers peacefully vacated their respective offices and turned-over their functions to the new officers (Rollo, Vol. III, p. 985; pp. 12-13).On June 2, 1982, a charge for contempt was filed by petitioner Villasenor alleging that private respondents have been claiming in press conferences and over the radio airlanes that they actually held and conducted elections on May 22, 1982 in the City of Naga and that they have a new set of officers, and that such acts of herein private respondents constitute contempt of court (G.R. 63922; Rollo, pp. 35-37).On September 7, 1982, the lower court rendered judgment on the contempt charge, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:1. Declaring respondents, CSI Nilda Ramos, Luciano Maggay, Desiderio Saavedra, Augusto Federis and Ernesto Miguel, guilty of contempt of court, and accordingly punished with imprisonment of six (6) months and to pay fine of P1,000.00 each; and2. Ordering respondents, CSI Nilda Ramos, Luciano Maggay, Desiderio Saavedra, Augusto Federis and Ernesto Miguel, and those now occupying the positions of directors and officers of NATELCO to vacate their respective positions therein, and ordering them to reinstate the hold-over directors and officers of NATELCO, such as Pedro Lopez Dee as President, Justino de Jesus, Sr., as Vice President, Julio Lopez Dee as Treasurer and Vicente Tordilla, Jr. as Secretary, and others referred to as hold-over directors and officers of NATELCO in the order dated May 28, 1982 of SEC Hearing Officer Emmanuel Sison, in SEC Case No. 1748 (Exh. 6), by way of RESTITUTION, and consequently, ordering said respondents to turn over all records, property and assets of NATELCO to said hold-over directors and officers. (Ibid., Rollo, p. 49).

The trial judge issued an order dated September 10, 1982 directing the respondents in the contempt charge to "comply strictly, under pain of being subjected to imprisonment until they do so" (Ibid., p. 50). The order also commanded the Deputy Provincial Sheriff, with the aid of the PC Provincial Commander of Camarines Sur and the INP Station Commander of Naga City to "physically remove or oust from the offices or positions of directors and officers of NATELCO, the aforesaid respondents (herein private respondents) . . . and to reinstate and maintain, the hold-over directors and officers of NATELCO referred to in the order dated May 28, 1982 of SEC Hearing Officer Emmanuel Sison." (Ibid.).Private respondents filed on September 17, 1982, a petition for certiorari and prohibition with preliminary injunction or restraining order against the CFI Judge of Camarines Sur, Naga City and herein petitioners, with the then Intermediate Appellate Court which issued a resolution ordering herein petitioners to comment on the petition, which was complied with, and at the same time temporarily refrained from implementing and/or enforcing the questioned judgment and order of the lower court (Rollo, p. 77), Decision of CA, p. 2).On April 14, 1983, the then Intermediate Appellate Court, rendered a decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:1. Annuling the judgment dated September 7, 1982 rendered by respondent judge on the contempt charge, and his order dated September 10, 1982, implementing said judgment;2. Ordering the "hold-over" directors and officers of NATELCO to vacate their respective offices;3. Directing respondents to restore or re-establish petitioners (private respondents in this case) who were ejected on May 22, 1982 to their respective offices in the NATELCO, . . .;4. Prohibiting whoever may be the successor of respondent Judge from interfering with the proceedings of the Securities and Exchange Commission in SE-CAC No. 036;

xxx xxx xxx(Rollo, p. 88).

Corpo (p.10-11) 16The order of re-implementation was issued, and, finally, the Maggay group has been restored as the officers of the Natelco (Rollo, G.R. No. 60502, p. 985; p. 37).Hence, these petitions involve the same parties and practically the same issues. Consequently, in the resolution of the Court En Banc dated August 23, 1983, G.R. No. 63922 was consolidated with G.R. No. 60502.In G.R. No. 60502 — In a resolution issued by the Court En Banc dated March 22, 1983, the Court gave due course to the petition and required the parties to submit their respective memoranda (Rollo, Resolution, p. 638-A; Vol. II).In G.R. No. 60502The main issues in this case are:(1) Whether or not the Securities and Exchange Commission has the power and jurisdiction to declare null and void shares of stock issued by NATELCO to CSI for violation of Sec. 20 (h) of the Public Service Act;(2) Whether or not the issuance of 113,800 shares of Natelco to CSI made during the pendency of SEC Case No. 1748 in the Securities and Exchange Commission was valid;(3) Whether or not Natelco stockholders have a right of preemption to the 113,800 shares in question; and(4) Whether or not the private respondents were duly elected to the Board of Directors of Natelco at an election held on May 22, 1982.In G.R. No. 63922The crucial issue to be resolved is whether or not the trial judge has jurisdiction to restrain the holding of an election of officers and directors of a corporation. The petitions are devoid of merit.In G.R. No. 60502

IIt is the contention of petitioner that the Securities and Exchange Commission En Banc committed grave abuse of discretion when, in its decision dated April 5, 1982, in SEC-AC No. 036, it refused to declare void the shares of stock issued by Natelco to CSI allegedly in violation of Sec. 20 (h) of the Public Service Act. This section requires prior administrative approval of any transfer or sale of shares of stock of any public service which vest in the transferee more than forty percentum of the subscribed capital of the said public service.Section 5 of P.D. No. 902-A, as amended, enumerates the jurisdiction of the Securities and Exchange Commission:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over Corporations, partnerships and other forms of associations, registered with it as expressly granted under the existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission.(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity;c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree, (As added by PD 1758)

In other words, in order that the SEC can take cognizance of a case, the controversy must pertain to any of the following relationships: (a) between corporation, partnership or association and the public; (b) between the corporation, partnership, or association and its stockholders, partners, members or officers; (c) between the corporation, partnership or association and the state insofar as its franchise, permit or license to operate is concerned; and (d) among the stockholders, partners, or associates themselves (Union Glass & Container Corp. vs. SEC, 126 SCRA 31 [1983]).The jurisdiction of the SEC is limited to matters intrinsically connected with the regulation of corporations, partnerships and associations and those dealing with internal affairs of such entities; P.D. 902-A does not confer jurisdiction to SEC over all matters affecting corporations (Pereyra vs. IAC, 181 SCRA 244 [1990]; Sales vs. SEC, 169 SCRA 121 [1989]).The jurisdiction of the SEC in SEC Case No. 1748 is limited to deciding the controversy in the election of the directors and officers of Natelco. Thus, the SEC was correct when it refused to rule on whether the issuance of the shares of Natelco stocks to CSI violated Sec. 20 (h) of the Public Service Act.The SEC ruling as to the issue involving the Public Service Act, Section 20 (h), asserts that the Commission En Banc is not empowered to grant much less cancel franchise for telephone and communications, and therefore has no authority to rule that the issuance and sale of shares would in effect constitute a violation of Natelco's secondary franchise. It would be in excess of jurisdiction on our part to decide that a violation of our public service laws has been committed. The matter is better brought to the attention of the appropriate body for determination. Neither can the SEC provisionally decide the issue because it is only vested with the power to grant or revoke the primary corporate franchise. The SEC is empowered by P.D. 902-A to decide intra-corporate controversies and that is precisely the only issue in this case.

IIThe issuance of 113,800 shares of Natelco stock to CSI made during the pendency of SEC Case No. 1748 in the Securities and Exchange Commission was valid. The findings of the SEC En Banc as to the issuance of the 113,800 shares of stock was stated as follows:

But the issuance of 113,800 shares were (sic) pursuant to a Board Resolution and stockholders' approval prior to May 19, 1979 when CSI was not yet in control of the Board or of the voting shares. There is distinction between an order to issue shares on or before May 19, 1979 and actual issuanceof the shares after May 19, 1979. The actual issuance, it is true, came during the period when CSI was in control of voting shares and the Board (if they were in fact in control but only pursuant to the original Board and stockholders' orders, not on the initiative to the new Board, elected May 19, 1979, which petitioners are questioning. The Commission en banc finds it difficult to see how the one who gave the orders can turn around and impugn the implementation of the orders lie had previously given. The reformation of the contract is understandable for Natelco lacked the corporate funds to purchase the CSI equipment.

xxx xxx xxxAppellant had raise the issue whether the issuance of 113,800 shares of stock during the incumbency of the Maggay Board which was allegedly CSI controlled, and while the case was sub judice, amounted to unfair and undue advantage. This does not merit consideration in the absence of additional evidence to support the proposition.

In effect, therefore, the stockholders of Natelco approved the issuance of stock to CSI

IIIWhile the group of Luciano Maggay was in control of Natelco by virtue of the restraining order issued in G.R. No. 50885, the Maggay Board issued 113,800 shares of stock to CSI Petitioner said that the Maggay Board, in issuing said shares without notifying Natelco stockholders, violated their right of pre-emption to the unissued shares.This Court in Benito vs. SEC, et al., has ruled that:

Petitioner bewails the fact that in view of the lack of notice to him of such subsequent issuance, he was not able to exercise his right of pre-emption over the unissued shares. However, the general rule is that pre-emptive right is recognized only with respect to new issues of shares, and not with respect to additional issues of originally authorized shares. This is on the theory that when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue. An original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares. When the shares left unsubscribed are later re-offered, he cannot therefore (sic) claim a dilution of interest (Benito vs. SEC, et al., 123 SCRA 722).

The questioned issuance of the 113,800 stocks is not invalid even assuming that it was made without notice to the stockholders as claimed by the petitioner. The power to issue shares of stocks in a corporation is lodged in the board of directors and no stockholders meeting is required to consider it because additional issuance of shares of stocks does not need approval of the stockholders. Consequently, no pre-emptive right of Natelco stockholders was violated by the issuance of the 113,800 shares to CSI.

IVPetitioner insists that no meeting and election were held in Naga City on May 22, 1982 as directed by respondent Hearing Officer. This fact is shown by the Sheriffs return of a restraining order issued by the Court of First Instance of Camarines Sur in Case No. 1505 entitled "Antonio Villasenor v. Communications Service Inc, et al." (Rollo, Vol. 1, p. 309).There is evidence of the fact that the Natelco special stockholders' meeting and election of members of the Board of Directors of the corporation were held at its office in Naga City on May 22, 1982 as shown when the Hearing Officer issued an order on May 25, 1982, declaring the stockholders named therein as corporate officers duly elected for the term 1982-1983.More than that, private respondents were in fact charged with contempt of court and found guilty for holding the election on May 22, 1982, in defiance of the restraining order issued by Judge Sunga (Rollo, Vol. II, p. 750).It is, therefore, very clear from the records that an election was held on May 22, 1982 at the Natelco Offices in Naga City and its officers were duly elected, thereby rendering the issue of election moot and academic, not to mention the fact that the election of the Board of Directors/Officers has been held annually, while this case was dragging for almost a decade.The contempt charge against herein private respondents was predicated on their failure to comply with the restraining order issued by the lower court on May 21, 1982, enjoining them from holding the election of officers and directors of Natelco scheduled on May 22, 1982. The SEC en banc, in its decision of April 5, 1982, directed the holding of a new election which, through a conference attended by the hold-over directors of Natelco accompanied by their lawyers and presided by a SEC hearing officer, was scheduled on May 22, 1982 (Rollo, p. 59). Contrary to the claim of petitioners that the case is within the jurisdiction of the lower court as it does not involve an intra-corporate matter but merely a claim of a private party of the right to repurchase common shares of stock of Natelco and that the restraining order was not meant to stop the election duly called for by the SEC, it is undisputed that the main objective of the lower court's order of May 21, 1982 was precisely to restrain or stop the holding of said election of officers and directors of Natelco, a matter purely within the exclusive jurisdiction of the SEC (P.D. No. 902-A, Section 5). The said restraining order reads in part:

. . . A temporary restraining order is hereby issued, directing defendants (herein respondents), their agents, attorneys as well as any and all persons, whether public officers or private individuals to desist from conducting and holding, in any manner whatsoever, an election of the directors and officers of the Naga Telephone Co. (Natelco). . . . (Rollo, P. 32).

Indubitably, the aforesaid restraining order, aimed not only to prevent the stockholders of Natelco from conducting the election of its directors and officers, but it also amounted to an injunctive relief against the SEC, since it is clear that even "public officers" (such as the Hearing Officer of the SEC) are commanded to desist from conducting or holding the election "under pain of punishment of contempt of court" (Ibid.) The fact that the SEC or any of its officers has not been cited for contempt, along with the stockholders of Natelco, who chose to heed the lawful order of the SEC to go on with the election as scheduled by the latter, is of no moment, since it was precisely the acts of herein private respondents done pursuant to an order lawfully issued by an administrative body that have been considered as contemptuous by the lower court prompting the latter to cite and punish them for contempt (Rollo, p. 48).Noteworthy is the pertinent portion of the judgment of the lower court which states:

Certainly, this Court will not tolerate, or much less countenance, a mere Hearing Officer of the Securities and Exchange Commission, to render a restraining order issued by it (said Court) within its jurisdiction, nugatory and ineffectual and abet disobedience and even defiance by individuals and entities of the same. . . . (Rollo, p. 48).

Finally, in the case of Philippine Pacific Fishing Co., Inc. vs. Luna, 12 SCRA 604, 613 [1983], this Tribunal stated clearly the following rule:Nowhere does the law (P.D. No. 902-A) empower any Court of First Instance to interfere with the orders of the Commission (SEC). Not even on grounds of due process or jurisdiction. The Commission is, conceding arguendo a possible claim of respondents, at the very least, a co-equal body with the Courts of First Instance. Even as such co-equal, one would have no power to control the other. But the truth of the matter is that only the Supreme Court can enjoin and correct any actuation of the Commission.

Accordingly, it is clear that since the trial judge in the lower court (CFI of Camarines Sur) did not have jurisdiction in issuing the questioned restraining order, disobedience thereto did not constitute contempt, as it is necessary that the order be a valid and legal one. It is an established rule that the court has no authority to punish for disobedience of an order issued without authority (Chanco v. Madrilejos, 9 Phil. 356; Angel Jose Realty Corp. v. Galao, et al., 76 Phil. 201).Finally, it is well-settled that the power to punish for contempt of court should be exercised on the preservative and not on the vindictive principle. Only occasionally should the court invoke its inherent power in order to retain that respect without which the administration of justice must falter or fail (Rivera v. Florendo, 144 SCRA 643, 662-663 [1986]; Lipata v. Tutaan, 124 SCRA 880 [1983]).PREMISES CONSIDERED, both petitioners are hereby DISMISSED for lack of merit.SO ORDERED.

G.R. No. L-56655 July 25, 1983DATU TAGORANAO BENITO, petitioner, vs.SECURITIES AND EXCHANGE COMMISSION and JAMIATUL PHILIPPINE-AL ISLAMIA, INC., respondents.The Solicitor General for respondent.Tacod D. Macaraya for private respondent.

Corpo (p.10-11) 17RELOVA, J.:On February 6, 1959, the Articles of Incorporation of respondent Jamiatul Philippine-Al Islamia, Inc. (originally Kamilol Islam Institute, Inc.) were filed with the Securities and Exchange Commission (SEC) and were approved on December 14, 1962. The corporation had an authorized capital stock of P200,000.00 divided into 20,000 shares at a par value of P10.00 each. Of the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for. Herein petitioner Datu Tagoranao Benito subscribed to 460 shares worth P4,600.00.On October 28, 1975, the respondent corporation filed a certificate of increase of its capital stock from P200,000.00 to P1,000,000.00. It was shown in said certificate that P191,560.00 worth of shares were represented in the stockholders' meeting held on November 25, 1975 at which time the increase was approved. Thus, P110,980.00 worth of shares were subsequently issued by the corporation from the unissued portion of the authorized capital stock of P200,000.00. Of the increased capital stock of P1,000,000.00, P160,000.00 worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto.On November 18, 1976, petitioner Datu Tagoranao filed with respondent Securities and Exchange Commission a petition alleging that the additional issue (worth P110,980.00) of previously subscribed shares of the corporation was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital stock of the corporation from P200,000.00 to P1,000,000.00 was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda. Petitioner prayed that the additional issue of shares of previously authorized capital stock as well as the shares issued from the increase in capital stock of respondent corporation be cancelled; that the secretary of respondent corporation be ordered to register the 2,540 shares acquired by him (petitioner) from Domocao Alonto and Moki-in Alonto; and that the corporation be ordered to render an accounting of funds to the stockholders.In their answer, respondents denied the material allegations of the petition and, by way of special defense, claimed that petitioner has no cause of action and that the stock certificates covering the shares alleged to have been sold to petitioner were only given to him as collateral for the loan of Domocao Alonto and Moki-in Alonto.On July 11, 1980, Hearing Officer Ledor E. Macalalag of the Securities and Exchange Commission, after due proceedings, rendered a decision which was affirmed by the Commission En Banc during its executive session held on March 9, 1981, as follows:

RESOLVED, That the decision of the hearing Officer in SEC Case No. 1392, dated July 11, 1980, the dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing considerations, this Commission hereby rules: (a) That the issuance by the corporation of its unissued shares was validly made and was not subject to the pre-emptive rights of stockholders, including the petitioner, herein; (b) That there is no sufficient legal basis to set aside the certificate issued by this Commission authorizing the increase in capital stock of respondent corporation from P200,000.00 to Pl,000,000.00. Considering, however, that petitioner has not waived his pre-emptive right to subscribe to the increased capitalization, respondent corporation is hereby directed to allow petitioner to subscribe thereto, at par value, proportionate to his present shareholdings, adding thereto the 2,540 shares transferred to him by Mr. Domocao Alonto and Mrs. Moki-in Alonto; (c) To direct as it hereby directs, the respondent corporation to immediately cancel Certificates of Stock Nos. 216, 223, 302, all in the name of Domocao Alonto, and Certificate of Stock No. 217, in the name of Moki-in Alonto, upon their presentation by the petitioner and to issue new certificates corresponding thereto in the name of petitioner herein; (d) To direct, as it hereby directs, respondent corporation to religiously comply with the requirement of filing annual financial statements under pain of a more drastic action; (e) To declare, as it hereby declares, as irregular, the election of the nine (9) members of the Board of Trustees of respondent corporation on October 30, 1976, for which reason, respondent corporation is hereby ordered to call a stockholders' meeting to elect a new set of five (5) members of the Board of Trustees, unless in the meantime the said number is accordingly increased and the requirement of law to make such increase effective have been complied with. It is understood that the said stockholders' meeting be called within thirty (30) days from the time petitioner shall have subscribed to the increased capitalization.'

be, as the same is hereby AFFIRMED, the same being in accordance with law and the facts of the case. (pp. 28-29, Reno)Hence, this petition for review by way of appeal from the aforementioned decision of the Securities and Exchange Commission, petitioner contending that (1) the issuance of the 11,098 shares without the consent of the stockholders or of the Board of Directors, and in the absence of consideration, is null and void; (2) the increase in the authorized capital stock from P200,000.00 to P1,000,000.00 without the consent or express waiver of the stockholders, is null and void; (3) he is entitled to attorneys' fees, damages and expenses of litigation in filing this suit against the directors of respondent corporation.We are not persuaded. As aptly stated by the Securities and Exchange Commission in its decision:

xxx xxx xxx... the questioned issuance of the unsubscribed portion of the capital stock worth P110,980.00 is ' not invalid even if assuming that it was made without notice to the stockholders as claimed by petitioner. The power to issue shares of stocks in a corporation is lodged in the board of directors and no stockholders' meeting is necessary to consider it because additional issuance of shares of stocks does not need approval of the stockholders. The by-laws of the corporation itself states that 'the Board of Trustees shall, in accordance with law, provide for the issue and transfer of shares of stock of the Institute and shall prescribe the form of the certificate of stock of the Institute. (Art. V, Sec. 1).Petitioner bewails the fact that in view of the lack of notice to him of such subsequent issuance, he was not able to exercise his right of pre-emption over the unissued shares. However, the general rule is that pre-emptive right is recognized only with respect to new issue of shares, and not with respect to additional issues of originally authorized shares. This is on the theory that when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue. An original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares. When the shares left unsubscribed are later re-offered, he cannot therefore claim a dilution of interest. (Campos and Lopez-Campos Selected Notes and Cases on Corporation Law, p. 855, citing Yasik V. Wachtel 25 Del. Ch. 247,17A. 2d 308 (1941). (pp. 33-34, Rollo)

With respect to the claim that the increase in the authorized capital stock was without the consent, expressed or implied, of the stockholders, it was the finding of the Securities and Exchange Commission that a stockholders' meeting was held on November 25,1975, presided over by Mr. Ahmad Domocao Alonto, Chairman of the Board of Trustees and, among the many items taken up then were the change of name of the corporation from Kamilol Islam Institute Inc. to Jamiatul Philippine-Al Islamia, Inc., the increase of its capital stock from P200,000.00 to P1,000,000.00, and the increase of the number of its Board of Trustees from five to nine. "Despite the insistence of petitioner, this Commission is inclined to believe that there was a stockholders' meeting on November 25, 1975 which approved

the increase. The petitioner had not sufficiently overcome the evidence of respondents that such meeting was in fact held. What petitioner successfully proved, however, was the fact that he was not notified of said meeting and that he never attended the same as he was out of the country at the time. The documentary evidence of petitioner conclusively proved that he was attending the Mecca pilgrimage when the meeting was held on November 25, 1975. (Exhs. 'Q', 'Q-14', 'R', 'S' and 'S-l'). While petitioner doubts the authenticity of the alleged minutes of the proceedings (Exh. '4'), the Commission notes with significance that said minutes contain numerous details of various items taken up therein that would negate any claim that it was not authentic. Another thing that petitioner was able to disprove was the allegation in the certificate of increase (Exh. 'E-l') that all stockholders who did not subscribe to the increase of capital stock have waived their pre-emptive right to do so. As far as the petitioner is concerned, he had not waived his pre-emptive right to subscribe as he could not have done so for the reason that he was not present at the meeting and had not executed a waiver, thereof. Not having waived such right and for reasons of equity, he may still be allowed to subscribe to the increased capital stock proportionate to his present shareholdings." (pp. 36-37, Rollo)Well-settled is the rule that the findings of facts of administrative bodies 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. (Gokongwei, Jr. vs. SEC, 97 SCRA 78). In a long string of cases, the Supreme Court has consistently adhered to the rule that decisions of administrative officers are not to be disturbed by the courts except when the former have acted without or in excess of their jurisdiction or with grave abuse of discretion (Sichangco vs. Board of Commissioners of Immigration, 94 SCRA 61). Thus, in the case ofDeluao vs. Casteel ( L-21906, Dec. 24, 1968, 26 SCRA 475, 496, citing Pajo vs. Ago, et al., L-15414, June 30, 1960) and Genitano vs. Secretary of Agriculture and Natural Resources, et al. (L-2ll67, March 31, 1966), the Supreme Court held that:

... Findings of fact by an administrative board or official, following a hearing, are binding upon the courts and win not be disturbed except where the board or official has gone beyond his statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion. ...ACCORDINGLY, this petition is hereby dismissed for lack of merit.

SO ORDERED.G.R. No. 183278 April 24, 2009IMELDA O. COJUANGCO, PRIME HOLDINGS, INC., AND THE ESTATE OF RAMON U. COJUANGCOPetitioners, vs.SANDIGANBAYAN, REPUBLIC OF THE PHILIPPINES, AND THE SHERIFF OF SANDIGANBAYAN, Respondents.

D E C I S I O NCARPIO MORALES, J.:The present petition is one for Certiorari.Petitioners Imelda O. Cojuangco, Prime Holdings, Inc., and the Estate of Ramon Cojuangco assail via certiorari the Resolutions dated November 7, 20071 and June 13, 20082 of the Sandiganbayan in Civil Case No. 0002, Republic of the Philippines v. Ferdinand Marcos, et. al.A brief recital of the antecedent facts is in order.On July 16, 1987, respondent Republic of the Philippines (Republic) filed before the Sandiganbayan a "Complaint for Reconveyance, Reversion, Accounting, Restitution and Damages," docketed as Civil Case 0002, praying for the recovery of alleged ill-gotten wealth from the late President Marcos and former First Lady Imelda Marcos and their cronies, including some 2.4 million shares of stock in the Philippine Long Distance Telephone Company (PLDT).The complaint, which was later amended to implead herein petitioners Ramon and Imelda Cojuangco (the Cojuangcos), alleged that the Marcoses’ ill-gotten wealth included shares in the PLDT covered by shares of stock in the Philippine Telecommunications Investment Corporation (PTIC), registered in the name of Prime Holdings, Inc. (Prime Holdings).The Sandiganbayan dismissed the complaint with respect to the recovery of the PLDT shares, hence, the Republic appealed to this Court, docketed as G.R. No. 153459, which appeal was later consolidated with pending cases of similar import – G.R. Nos. 149802, 150320, and 150367.By Decision3 dated January 20, 2006, this Court, in G.R. No. 153459, ruled in favor of the Republic, declaring it to be the owner of 111,415 PTIC shares registered in the name of Prime Holdings. The dispositive portion of the Decision reads:WHEREFORE, the petition of the Republic of the Philippines in G.R. No. 153459 is GRANTED to the extent that it prays for the reconveyance to the Republic of 111,415 PTIC shares registered in the name of PHI. The petitions in G.R. Nos. 149802, 150320, 150367, and 153207 are DENIED for lack of merit.SO ORDERED.The Decision became final and executory on October 26, 2006, hence, the Republic filed on November 20, 2006 with the Sandiganbayan a Motion for the Issuance of a Writ of Execution, praying for the cancellation of the 111,415 shares/certificates of stock registered in the name of Prime Holdings and the annotation of the change of ownership on PTIC’s Stock and Transfer Book. The Republic further prayed for the issuance of an order for PTIC to account for all cash and stock dividends declared and/or issued by PLDT in favor of PTIC from 1986 up to the present including compounded interests appurtenant thereto.By Resolution dated December 14, 2006, the Sandiganbayan granted the Motion for the Issuance of a Writ of Execution with respect to the reconveyance of the shares, but denied the prayer for accounting of dividends.On Motion for Reconsideration of the Republic, the Sandiganbayan, by the first assailed Resolution dated November 7, 2007, directed PTIC to deliver the cash and stock dividends pertaining to the 111,415 shares, including compounded interests, ratiocinating that the same were covered by this Court’s Decision in G.R. No. 153459, since the Republic was therein adjudged the owner of the shares and, therefore, entitled to the fruits thereof.The Cojuangcos (hereafter petitioners) moved to reconsider the November 7, 2007 Sandiganbayan Resolution, alleging that this Court’s Decision in G.R. No. 153459 did not include a disposition of the dividends and interests accruing to the shares adjudicated in favor of the Republic.By the other challenged Resolution dated June 13, 2008, the Sandiganbayan partly granted petitioners’ Motion for Reconsideration by including legal interests, but not compounding the same, from the accounting and remittance to the Republic. The Sandiganbayan thereupon issued a Writ of Execution,4 hence, spawned the present petition for certiorari.From the myriad assignments of error proffered by petitioners, the pivotal issues for the Court’s resolution are: (1) whether the Sandiganbayan gravely abused its discretion in ordering the accounting, delivery, and remittance to the Republic of the stock, cash, and property dividends pertaining to the 111,415 PTIC shares of Prime Holdings, this Court’s Decision in G.R. No. 153459 not having even discussed the same; and (2) whether the Republic, having transferred the shares to a third party, is entitled to the dividends, interests, and earnings thereof.Petitioners insist on a literal reading of the dispositive portion of this Court’s Decision in G.R. No. 153459 as excluding the dividends, interests, and earnings accruing to the shares of stock from being accounted for and remitted.The term "dividend" in its technical sense and ordinary acceptation is that part or portion of the profits of the enterprise which the corporation, by its governing agents, sets apart for ratable division among the holders of the capital stock.5 It is a payment to the stockholders of a corporation as a return upon their investment,6 and the right thereto is an incident of ownership of stock.7

This Court, in directing the reconveyance to the Republic of the 111,415 shares of PLDT stock owned by PTIC in the name of Prime Holdings, declared the Republic as the owner of said shares and, necessarily, the dividends and interests accruing thereto.Ownership is a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will in everything not prohibited by law or the concurrence with the rights of another. Its traditional elements or attributes include jus utendi or the right to receive from the thing what it produces .81avvphi1

Corpo (p.10-11) 18Contrary to petitioners’ contention, while the general rule is that the portion of a decision that becomes the subject of execution is that ordained or decreed in the dispositive part thereof, there are recognized exceptions to this rule, viz: (a).where there is ambiguity or uncertainty, the body of the opinion may be referred to for purposes of construing the judgment, because the dispositive part of a decision must find support from the decision’s ratio decidendi;and (b).where extensive and explicit discussion and settlement of the issue is found in the body of the decision.9

In G.R. No. 153459, although the inclusion of the dividends, interests, and earnings of the 111,415 PTIC shares as belonging to the Republic was not mentioned in the dispositive portion of the Court’s Decision, it is clear from its body that what was being adjudicated in favor of the Republic was the whole block of shares and the fruits thereof, said shares having been found to be part of the Marcoses’ ill-gotten wealth, and therefore, public money.It would be absurd to award the shares to the Republic as their owner and not include the dividends and interests accruing thereto. An owner who cannot exercise the "juses" or attributes of ownership -- the right to possess, to use and enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate, and to the fruits - is a crippled owner.10

Respecting petitioners’ argument that the Republic has yielded its right to the fruits of the shares when it sold them to Metro Pacific Assets Holdings, Inc., (Metro Pacific), the same does not lie.Dividends are payable to the stockholders of record as of the date of the declaration of dividends or holders of record on a certain future date, as the case may be, unless the parties have agreed otherwise.11 And a transfer of shares which is not recorded in the books of the corporation is valid only as between the parties, hence, the transferor has the right to dividends as against the corporation without notice of transfer but it serves as trustee of the real owner of the dividends, subject to the contract between the transferor and transferee as to who is entitled to receive the dividends.12

It is thus clear that the Republic is entitled to the dividends accruing from the subject 111,415 shares since 1986 when they were sequestered up to the time they were transferred to Metro Pacific via the Sale and Purchase Agreement of February 28, 2007;13 and that the Republic has since the latter date been serving as trustee of those dividends for the Metro Pacific up to the present, subject to the terms and conditions of the said agreement they entered into.WHEREFORE, the petition is DENIED. The challenged Resolutions dated November 7, 2007 and June 13, 2008 of the Sandiganbayan in Civil Case No. 0002 are, in light of the foregoing, AFFIRMED.SO ORDERED.G.R. No. 51765 March 3, 1997REPUBLIC PLANTERS BANK, petitioner, vs.HON. ENRIQUE A. AGANA, SR., as Presiding Judge, Court of First Instance of Rizal, Branch XXVIII, Pasay City, ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION and ADALIA F. ROBES, respondents. HERMOSISIMA, JR., J.:This is a petition for certiorari seeking the annulment of the Decision 1 of the then Court of First Instance of Rizal 2for having been rendered in grave abuse of discretion. Private respondents Robes-Francisco Realty and Development Corporation (hereafter, "the Corporation") and Adalia F. Robes filed in the court a quo, an action for specific performance to compel petitioner to redeem 800 preferred shares of stock with a face value of P8,000.00 and to pay 1% quarterly interest thereon as quarterly dividend owing them under the terms and conditions of the certificates of stock.The court a quo rendered judgment in favor of private respondents; hence, this instant petition.Herein parties debate only legal issues, no issues of fact having been raised by them in the court a quo. For ready reference, however, the following narration of pertinent transactions and events is in order:On September 18, 1961, private respondent Corporation secured a loan from petitioner in the amount of P120,000.00. As part of the proceeds of the loan, preferred shares of stocks were issued to private respondent Corporation, through its officers then, private respondent Adalia F. Robes and one Carlos F. Robes. In other words, instead of giving the legal tender totaling to the full amount of the loan, which is P120,000.00, petitioner lent such amount partially in the form of money and partially in the form of stock certificates numbered 3204 and 3205, each for 400 shares with a par value of P10.00 per share, or for P4,000.00 each, for a total of P8,000.00. Said stock certificates were in the name of private respondent Adalia F. Robes and Carlos F. Robes, who subsequently, however, endorsed his shares in favor of Adalia F. Robes.Said certificates of stock bear the following terms and conditions:

The Preferred Stock shall have the following rights, preferences, qualifications and limitations, to wit:1. Of the right to receive a quarterly dividend of One Per Centum (1%), cumulative and participating.

xxx xxx xxx2. That such preferred shares may be redeemed, by the system of drawing lots, at any time after two (2) years from the date of issue at the option of the Corporation. . . .

On January 31, 1979, private respondents proceeded against petitioner and filed a Complaint anchored on private respondents' alleged rights to collect dividends under the preferred shares in question and to have petitioner redeem the same under the terms and conditions of the stock certificates. Private respondents attached to their complaint, a letter-demand dated January 5, 1979 which, significantly, was not formally offered in evidence.Petitioner filed a Motion to Dismiss 3 private respondents' Complaint on the following grounds: (1) that the trial court had no jurisdiction over the subject-matter of the action; (2) that the action was unenforceable under substantive law; and (3) that the action was barred by the statute of limitations and/or laches.Petitioner's Motion to Dismiss was denied by the trial court in an Order dated March 16, 1979. 4 Petitioner then filed its Answer on May 2, 1979. 5 Thereafter, the trial court gave the parties ten (10) days from July 30, 1979 to submit their respective memoranda after the submission of which the case would be deemed submitted for resolution. 6

On September 7, 1979, the trial court rendered the herein assailed decision in favor of private respondents. In ordering petitioner to pay private respondents the face value of the stock certificates as redemption price, plus 1% quarterly interest thereon until full payment, the trial court ruled:

There being no issue of fact raised by either of the parties who filed their respective memoranda delineating their respective contentions, a judgment on the pleadings, conformably with an earlier order of the Court, appears to be in order.From a further perusal of the pleadings, it appears that the provision of the stock certificates in question to the effect that the plaintiffs shall have the right to receive a quarterly dividend of One Per Centum (1%), cumulative and participating, clearly and unequivocably [sic] indicates that the same are "interest bearing stocks" which are stocks issued by a corporation under an agreement to pay a certain rate of interest thereon (5 Thompson, Sec. 3439). As such, plaintiffs become entitled to the payment thereof as a matter of right without necessity of a prior declaration of dividend.On the question of the redemption by the defendant of said preferred shares of stock, the very wordings of the terms and conditions in said stock certificates clearly allows the same.To allow the herein defendant not to redeem said preferred shares of stock and/or pay the interest due thereon despite the clear import of said provisions by the mere invocation of alleged Central Bank Circulars prohibiting the same is tantamount to an impairment of the obligation of contracts enshrined in no less than the fundamental law itself.

Moreover, the herein defendant is considered in estoppel from taking shelter behind a General Banking Act provision to the effect that it cannot buy its own shares of stocks considering that the very terms and conditions in said stock certificates allowing their redemption are its own handiwork.As to the claim by the defendant that plaintiffs' cause of action is barred by prescription, suffice it to state that the running of the prescriptive period was considered interrupted by the written extrajudicial demands made by the plaintiffs from the defendant. 7

Aggrieved by the decision of the trial court, petitioner elevated the case before us essentially on pure questions of law. Petitioner's statement of the issues that it submits for us to adjudicate upon, is as follows:

A. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ORDERING PETITIONER TO PAY RESPONDENT ADALIA F. ROBES THE AMOUNT OF P8213.69 AS INTERESTS FROM 1961 TO 1979 ON HER PREFERRED SHARES.B. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ORDERING PETITIONER TO REDEEM RESPONDENT ADALIA F. ROBES' PREFERRED SHARES FOR P8,000.00.C. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE ORDER OF THE CENTRAL BANK TO PETITIONER TO DESIST FROM REDEEMING ITS PREFERRED SHARES AND FROM PAYING DIVIDENDS THEREON . . . .D. THE TRIAL COURT ERRED IN NOT HOLDING THAT THE COMPLAINT DOES NOT STATE A CAUSE OF ACTION.E. THE TRIAL COURT ERRED IN NOT HOLDING THAT THE CLAIM OF RESPONDENT ADALIA F. ROBES IS BARRED BY PRESCRIPTION OR LACHES. 8

The petition is meritorious.Before passing upon the merits of this petition, it may be pertinent to provide an overview on the nature of preferred shares and the redemption thereof, considering that these issues lie at the heart of the dispute.A preferred share of stock, on one hand, is one which entitles the holder thereof to certain preferences over the holders of common stock. The preferences are designed to induce persons to subscribe for shares of a corporation. 9 Preferred shares take a multiplicity of forms. The most common forms may be classified into two: (1) preferred shares as to assets; and (2) preferred shares as to dividends. The former is a share which gives the holder thereof preference in the distribution of the assets of the corporation in case of liquidation; 10 the latter is a share the holder of which is entitled to receive dividends on said share to the extent agreed upon before any dividends at all are paid to the holders of common stock. 11 There is no guaranty, however, that the share will receive any dividends. Under the old Corporation Law in force at the time the contract between the petitioner and the private respondents was entered into, it was provided that "no corporation shall make or declare any dividend except from the surplus profits arising from its business, or distribute its capital stock or property other than actual profits among its members or stockholders until after the payment of its debts and the termination of its existence by limitation or lawful dissolution." 12 Similarly, the present Corporation Code 13 provides that the board of directors of a stock corporation may declare dividends only out of unrestricted retained earnings. 14 The Code, in Section 43, adopting the change made in accounting terminology, substituted the phrase "unrestricted retained earnings," which may be a more precise term, in place of "surplus profits arising from its business" in the former law. Thus, the declaration of dividends is dependent upon the availability of surplus profit or unrestricted retained earnings, as the case may be. Preferences granted to preferred stockholders, moreover, do not give them a lien upon the property of the corporation nor make them creditors of the corporation, the right of the former being always subordinate to the latter. Dividends are thus payable only when there are profits earned by the corporation and as a general rule, even if there are existing profits, the board of directors has the discretion to determine whether or not dividends are to be declared. 15 Shareholders, both common and preferred, are considered risk takers who invest capital in the business and who can look only to what is left after corporate debts and liabilities are fully paid. 16

Redeemable shares, on the other hand, are shares usually preferred, which by their terms are redeemable at a fixed date, or at the option of either issuing corporation, or the stockholder, or both at a certain redemption price.17 A redemption by the corporation of its stock is, in a sense, a repurchase of it for cancellation. 18 The present Code allows redemption of shares even if there are no unrestricted retained earnings on the books of the corporation. This is a new provision which in effect qualifies the general rule that the corporation cannot purchase its own shares except out of current retained earnings. 19 However, while redeemable shares may be redeemed regardless of the existence of unrestricted retained earnings, this is subject to the condition that the corporation has, after such redemption, assets in its books to cover debts and liabilities inclusive of capital stock. Redemption, therefore, may not be made where the corporation is insolvent or if such redemption will cause insolvency or inability of the corporation to meet its debts as they mature. 20

We come now to the merits of the case. The petitioner argues that it cannot be compelled to redeem the preferred shares issued to the private respondent. We agree. Respondent judge, in ruling that petitioner must redeem the shares in question, stated that:

On the question of the redemption by the defendant of said preferred shares of stock, the very wordings of the terms and conditions in said stock certificates clearly allows the same. 21

What respondent judge failed to recognize was that while the stock certificate does allow redemption, the option to do so was clearly vested in the petitioner bank. The redemption therefore is clearly the type known as "optional". Thus, except as otherwise provided in the stock certificate, the redemption rests entirely with the corporation and the stockholder is without right to either compel or refuse the redemption of its stock. 22Furthermore, the terms and conditions set forth therein use the word "may". It is a settled doctrine in statutory construction that the word "may" denotes discretion, and cannot be construed as having a mandatory effect. We fail to see how respondent judge can ignore what, in his words, are the "very wordings of the terms and conditions in said stock certificates" and construe what is clearly a mere option to be his legal basis for compelling the petitioner to redeem the shares in question.

The redemption of said shares cannot be allowed. As pointed out by the petitioner, the Central Bank made a finding that said petitioner has been suffering from chronic reserve deficiency, 23 and that such finding resulted in a directive, issued on January 31, 1973 by then Gov. G.S. Licaros of the Central Bank, to the President and Acting Chairman of the Board of the petitioner bank prohibiting the latter from redeeming any preferred share, on the ground that said redemption would reduce the assets of the Bank to the prejudice of its depositors and creditors.24 Redemption of preferred shares was prohibited for a just and valid reason. The directive issued by the Central Bank Governor was obviously meant to preserve the status quo, and to prevent the financial ruin of a banking institution that would have resulted in adverse repercussions, not only to its depositors and creditors, but also to the banking industry as a whole. The directive, in limiting the exercise of a right granted by law to a corporate entity, may thus be considered as an exercise of police power. The respondent judge insists that the directive constitutes an impairment of the obligation of contracts. It has, however, been settled that the Constitutional guaranty of non-impairment of obligations of contract is limited by the exercise of the police power of the state, the reason being that public welfare is superior to private rights. 25

The respondent judge also stated that since the stock certificate granted the private respondents the right to receive a quarterly dividend of One Per Centum (1%) cumulative and participating, it "clearly and unequivocably (sic) indicates that the same are "interest bearing stocks" or stocks issued by a corporation under an agreement to pay a certain rate of interest thereon. As such, plaintiffs (private respondents herein) become entitled to the payment thereof as a matter of right without necessity of a prior declaration of dividend." 26 There is no legal basis for this observation. Both Sec. 16 of the Corporation Law and Sec. 43 of the present Corporation Code prohibit the issuance of any stock dividend without the approval of stockholders, representing not less than two-thirds (2/3) of the outstanding

Corpo (p.10-11) 19capital stock at a regular or special meeting duly called for the purpose. These provisions underscore the fact that payment of dividends to a stockholder is not a matter of right but a matter of consensus. Furthermore, "interest bearing stocks", on which the corporation agrees absolutely to pay interest before dividends are paid to common stockholders, is legal only when construed as requiring payment of interest as dividends from net earnings or surplus only. 27 Clearly, the respondent judge, in compelling the petitioner to redeem the shares in question and to pay the corresponding dividends, committed grave abuse of discretion amounting to lack or excess of jurisdiction in ignoring both the terms and conditions specified in the stock certificate, as well as the clear mandate of the law.Anent the issue of prescription, this Court so holds that the claim of private respondent is already barred by prescription as well as laches. Art. 1144 of the New Civil Code provides that a right of action that is founded upon a written contract prescribes in ten (10) years. The letter-demand made by the private respondents to the petitioner was made only on January 5, 1979, or almost eighteen years after receipt of the written contract in the form of the stock certificate. As noted earlier, this letter-demand, significantly, was not formally offered in evidence, nor were any other evidence of demand presented. Therefore, we conclude that the only time the private respondents saw it fit to assert their rights, if any, to the preferred shares of stock, was after the lapse of almost eighteen years. The same clearly indicates that the right of the private respondents to any relief under the law has already prescribed. Moreover, the claim of the private respondents is also barred by laches. Laches has been defined as the failure or neglect, for an unreasonable length of time, to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 28

Considering that the terms and conditions set forth in the stock certificate clearly indicate that redemption of the preferred shares may be made at any time after the lapse of two years from the date of issue, private respondents should have taken it upon themselves, after the lapse of the said period, to inquire from the petitioner the reason why the said shares have not been redeemed. As it is, not only two years had lapsed, as agreed upon, but an additional sixteen years passed before the private respondents saw it fit to demand their right. The petitioner, at the time it issued said preferred shares to the private respondents in 1961, could not have known that it would be suffering from chronic reserve deficiency twelve years later. Had the private respondents been vigilant in asserting their rights, the redemption could have been effected at a time when the petitioner bank was not suffering from any financial crisis.WHEREFORE, the instant petition, being impressed with merit, is hereby GRANTED. The challenged decision of respondent judge is set aside and the complaint against the petitioner is dismissed.Costs against the private respondents.SO ORDERED.February 27, 1924

G.R. No. L-21186FREDERICK C. FISHER, plaintiff-appellee,vs.WENCESLAO TRINIDAD, Collector of International Revenue, defendant-appellant.

Attorney-General Villa-Real for appellant.Fisher DeWitt, Perkins and Brady and Johns R. McFie, Jr., for appellee.

, J.:

I. The court below erred in holding that the Philippine Legislature had no power to tax a stock dividend as income in an income tax law.

II. The court below erred in not passing on the constitutional question raised.

III. The court below erred in rendering judgment for the plaintiff.

JOHNS, J.:

December 14, 1923, after the appeal was perfected, the plaintiff wrote the defendant a letter in which he said:

Please be advised that I hereby withdraw the protest heretofore made by me on the 30th day of March, 1920, in connection with income tax in the amount of P899.91 assessed by you on shares of the Philippine-American Drug Company of the par value of P24,800.

This was later confirmed by another letter addressed to this court stating in substance that the plaintiff had withdrawn and did not rely upon his protest because he had since sold the stock in question. Notwithstanding that fact, the Attorney-General insists upon a decision by this court on the merits, and in particular as to the constitutionality of the law and the legal right of the defendant to levy and collect the tax in question.

The plaintiff contends that the record now presents a moot case, and for such there is nothing left for this court to decide. That contention must be sustained. The payment of the money under protest was the basis of plaintiff's action, without which it could not be sustained. His protest is now withdrawn. The legal effect of it is to withdraw his complaint and to place the whole matter in the same position as if no protest had ever been made. It must be conceded that in the absence of a protest the action could not be maintained. In other words, the plaintiff is now in court seeking to recover money which was not paid under protest. It is true that the plaintiff obtained judgment against the defendant in the lower court, but in legal effect the withdrawal of the protest was a waiver of all of plaintiff's rights under that judgment. For such reason, there is nothing left for this court to decide.

Without passing upon the merits of the question involved or the constitutionality of the act or the right of the defendant to levy the tax in question, the judgment of the lower court is reversed, and plaintiff's complaint is dismissed, with judgment for costs in both this and the lower court against the plaintiff and in favor of the defendant. So ordered.

G.R. No. 152578 November 23, 2005REPUBLIC OF THE PHILIPPINES, Represented by the Presidential Commission on Good Government,Petitioner, vs.

ESTATE OF HANS MENZI (Through its Executor, MANUEL G. MONTECILLO), EMILIO T. YAP, EDUARDO M. COJUANGCO, JR., ESTATE OF FERDINAND MARCOS, SR., and IMELDA R. MARCOS, Respondents.x----------------------------------------- xG.R. No. 154487EDUARDO M. COJUANGCO, JR., Petitioner, vs.REPUBLIC OF THE PHILIPPINES, Respondent.x ------------------------------------xG.R. No. 154518ESTATE OF HANS M. MENZI (Through its Executor, Manuel G. Montecillo), and HANS M. MENZI HOLDINGS AND MANAGEMENT, INC. (HMHMI), Petitioners, vs.REPUBLIC OF THE PHILIPPINES, (represented by the PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT), Respondents.

D E C I S I O NTinga, J.:In the hope-filled but problem-laden aftermath of the EDSA Revolution, President Corazon C. Aquino issued Executive Order (EO) No. 1, creating the Presidential Commission on Good Government (PCGG) tasked with, among others, the recovery of all ill-gotten wealth accumulated by former President Ferdinand Marcos, his immediate family, relatives, subordinates and close associates. This was followed by EO Nos. 2 and 14, respectively freezing all assets and properties in the Philippines in which the former President, his wife, their close relatives, subordinates, business associates, dummies, agents or nominees have any interest or participation, and defining the jurisdiction over cases involving the ill-gotten wealth. Pursuant to the executive orders, several writs of sequestration were issued by the PCGG in pursuit of the reputedly vast Marcos fortune.Following a lead that Marcos had substantial holdings in Bulletin Publishing Corporation (Bulletin), the PCGG issued a Writ of Sequestration dated April 22, 1986, sequestering the shares of Marcos, Emilio T. Yap (Yap), Eduardo M. Cojuangco, Jr. (Cojuangco), and their nominees and agents in Bulletin.This was followed by another Writ of Sequestration issued on February 12, 1987, this time sequestering the shares of stock, assets, properties, records and documents of Hans Menzi Holdings and Management, Inc. (HMHMI).The Republic then instituted before the Sandiganbayan on July 29, 1987, a complaint for reconveyance, reversion, accounting, restitution and damages entitled "Republic of the Philippines v. Emilio T. Yap, Manuel G. Montecillo, Eduardo M. Cojuangco, Jr., Cesar C. Zalamea, Ferdinand E. Marcos and Imelda R. Marcos" and docketed as Civil Case No. 0022. The complaint substantially averred that Yap knowingly and willingly acted as the dummy, nominee or agent of the Marcos spouses in appropriating shares of stock in domestic corporations such as the Bulletin, and for the purpose of preventing disclosure and recovery of illegally obtained assets. It also averred that Cesar Zalamea (Zalamea) acted, together with Cojuangco, as dummies, nominees and/or agents of the Marcos spouses in acquiring substantial shares in Bulletin in order to prevent disclosure and recovery of illegally obtained assets, and that Zalamea established, together with third persons, HMHMI which acquired Bulletin.On March 10, 1988, the complaint was amended joining Cojuangco as Zalamea’s co-actor instead of mere collaborator. The complaint was amended for the second time on October 17, 1990. The amendment consisted of dropping Zalamea as defendant in view of the Deed of Assignment dated October 15, 1987 which he executed, assigning, transferring and ceding to the Government the 121,178 Bulletin shares registered in his name. These shares, as will be explained forthwith, formed part of the 214,424.5 shares (214 block) which became the subject of a case1 that reached this Court.The Second Amended Complaint also included the Estate of Hans M. Menzi (Estate of Menzi), through its executor, Atty. Manuel G. Montecillo (Atty. Montecillo), as one of the defendants.The issues presented for resolution as stated in the Sandiganbayan’s Pre-Trial Order dated November 11, 1991 were:1) Whether or not the sale of 154,470 shares of stock of Bulletin Publishing Co., Inc., subject of this case by the late Hans M. Menzi to the U.S. Automotive Co. Inc. is valid and legal; and2) Whether or not the shares of stock of Bulletin Publishing Co. Inc. registered and/or issued in the name of defendants Emilio T. Yap, Eduardo Cojuangco, Jr., Cesar Zalamea and the late Hans M. Menzi (and/or his estate and/or his holding company, HM Holding & Investment Corp.) are ill-gotten wealth of the defendants Marcos spouses.Make of record the oral manifestation of Atty. Estelito Mendoza, counsel for defendant Eduardo Cojuangco. That: (a) whether or not the said 154,470 shares of stock of Bulletin Publishing Co. Inc. legally belonged to the late Hans Menzi before he sold the same to U.S. Automotive Co. Inc. and (b) whether or not plaintiff Republic is entitled to the same, should also be threshed out during the trial on the merits.2

After protracted proceedings which spawned a number of cases3 that went up to this Court, the Sandiganbayan rendered a Decision4 dated March 14, 2002,5 the dispositive portion of which states:WHEREFORE, judgment is hereby rendered:1. Declaring that the following Bulletin shares are the ill-gotten wealth of the defendant Marcos spouses:A. The 46,626 Bulletin shares in the name of defendant Eduardo M. Cojuangco, Jr., subject of the Resolution of the Supreme Court dated April 15, 1988 in G.R. No. 79126.Pursuant to alternative "A" mentioned therein, plaintiff Republic of the Philippines through the PCGG is hereby declared the legal owner of these shares, and is further directed to execute, in accordance with the Agreement which is entered into with Bulletin Publishing Corporation on June 9, 1988, the necessary documents in order to effect transfer of ownership over these shares to the Bulletin Publishing Corporation.B. The 198,052.5 Bulletin shares in the names of:No. of SharesJose Y. Campos 90,866.5Eduardo M. Cojuangco, Jr. 90,877Cesar C. Zalamea 16,309Total 198,052.5which they transferred to HM Holdings and Management, Inc. on August 17, 1983, and which the latter sold to Bulletin Publishing Corporation on February 21, 1986. The proceeds from this sale are frozen pursuant to PCGG’s Writ of Sequestration dated February 12, 1987, and this writ is the subject of the Decision of the Supreme Court dated January 31, 2002 in G.R. No. 135789.Accordingly, the proceeds from the sale of these 198,052.5 Bulletin shares, under Philtrust Bank Time Deposit Certificate No. 136301 dated March 3, 1986 in the amount of P19,390,156.68 plus interest earned, in the amount of P104,967,112.62 as of February 28, 2002, per Philtrust Bank’s Motion for Leave to Intervene and to consign the Proceeds of Time Deposits of HMHMI, filed on February 28, 2002 with the Supreme Court in G.R. No. 135789, are hereby declared forfeited in favor of the plaintiff Republic of the Philippines.

Corpo (p.10-11) 202. Ordering the defendant Estate of Hans M. Menzi through its Executor, Manuel G. Montecillo, to surrender for cancellation the original eight Bulletin certificates of stock in its possession, which were presented in court as Exhibits …., which are part of the 212,424.5 Bulletin shares subject of the Resolution of the Supreme Court dated April 15, 1988 in G.R. No. 79126.3. Declaring that the following Bulletin shares are not the ill-gotten wealth of the defendant Marcos spouses:a. The 154,472 Bulletin shares sold by the late Hans M. Menzi to U.S. Automotive Co., Inc., the sale thereof being valid and legal;b. The 2,617 Bulletin shares in the name of defendant Emilio T. Yap which he owns in his own right; andc. The 1 Bulletin share in the name of the Estate of Hans M. Menzi which it owns in its own right.4. Dismissing, for lack of sufficient evidence, plaintiff’s claim for damages, and defendants’ respective counterclaims.SO ORDERED.6

In the present consolidated petitions, the foregoing Sandiganbayan Decision is assailed on different grounds.The Republic, in G.R. No. 152758, assails the afore-quoted Decision insofar as it declared as not ill-gotten wealth of the Marcos spouses the 154,472 shares (154 block) sold by Menzi to U.S. Automotive Co., Inc. (US Automotive) and dismissed the Republic’s claim for damages.In G.R. No. 154487, Cojuangco questions paragraphs 1 and 2 of the Sandiganbayan Decision.In G.R. No. 154518, on the other hand, the Estate of Menzi imputes grave error and misinterpretation of facts and evidence against the Sandiganbayan in declaring that the 46,626 Bulletin shares in the name of Cojuangco, and the 198,052.5 shares (198 block) in the names of Jose Campos (Campos), Cojuangco and Zalamea are ill-gotten wealth of the Marcoses.The three blocks of Bulletin shares of stock subject of these consolidated petitions are:1. 154,472 shares (154 block) sold by the late Menzi and/or Atty. Montecillo to US Automotive on May 15, 1985 forP24,969,200.09;2. 198,052.50 (198 block) issued and registered in the names of Campos, Cojuangco, and Zalamea which were transferred to HMHMI and subsequently sold by HMHMI (through Atty. Montecillo) to Bulletin on February 21, 1986 for P23,675,195.85; and3. 214,424.5 shares (214 block) issued and registered in the names of Campos, Cojuangco, and Zalamea which were the subject of the unanimous Resolution of this Court, through Mr. Chief Justice Claudio Teehankee, inBulletin v. PCGG7 (Teehankee Resolution) dated April 15, 1988 and the Sandiganbayan Resolutions dated January 2, 1995 and April 25, 1996 in Civil Case No. 0022.For clarity of presentation, the 154 block, which is the subject of the Republic’s petition in G.R. No. 152578, is treated separately from the 198 and 214 blocks, which are the subjects of the petitions in G.R. No. 154487 and G.R. No. 154518.154 BlockIn 1957, Menzi purchased the entire interest in Bulletin from its founder and owner, Mr. Carson Taylor. In 1961, Yap, owner of US Automotive, purchased Bulletin shares from Menzi and became one of the corporation’s major stockholders.On April 2, 1968, a stock option was executed by and between Menzi and Menzi and Co. on the one hand, and Yap and US Automotive on the other, whereby the parties gave the each other preferential right to buy the other’s Bulletin shares.On April 22, 1968, the stockholders of Bulletin approved certain amendments to Bulletin’s Articles of Incorporation, consisting of some restrictions on the transfer of Bulletin shares to non-stockholders.8 The amendments were approved by the Board of Directors of Bulletin and by the Securities and Exchange Commission (SEC).Several years later, on June 5, 1984, Atty. Amorsolo V. Mendoza (Atty. Mendoza), Vice President of US Automotive, executed a promissory note with his personal guarantee in favor of Menzi, promising to pay the latter the sum of P21,304,921.16 with interest at 18% per annum as consideration for Menzi’s sale of his 154 block on or before December 31, 1984.One day after Menzi’s death on June 27, 1984, a petition for the probate of his last will and testament was filed in the Regional Trial Court (RTC) of Manila, Branch 29, by the named executor, Atty. Montecillo, and docketed as Special Proceeding No. 84-25244.On January 10, 1985, Atty. Montecillo filed a motion praying for the confirmation of the sale to US Automotive of Menzi’s 154 block. The probate court confirmed the sale in its Order dated February 1, 1985.Accordingly, on May 15, 1985, Atty. Montecillo received from US Automotive two (2) checks in the amounts ofP21,304,778.24 and P3,664,421.85 in full payment of the agreed purchase price and interest for the sale of the 154 block. On the same day, Atty. Montecillo signed a company voucher acknowledging receipt of the payment for the shares, indicating on the dorsal portion thereof the certificate numbers of the 12 stock certificates covering the 154 block, the number of shares covered by each certificate and the date of issuance thereof.Atty. Montecillo also wrote on the lower portion of the promissory note executed by Atty. Mendoza the words "Paid May 15, 1985 (signed) M.G. Montecillo, Executor of the Estate of Hans M. Menzi."Upon these facts, the Sandiganbayan ruled that the sale of the 154 block to US Automotive is valid and legal. According to the Sandiganbayan, the sale was made pursuant to the stock option executed in 1968 between the parties to the sale. Negotiations took place and were concluded before Menzi’s death, and full payment was made only after the probate court had judicially confirmed the sale.The Sandiganbayan dismissed the Republic’s claim, based on the affidavit of Mariano B. Quimson, Jr. (Quimson) dated October 9, 1986, that the sale should be nullified because US Automotive only acted as a dummy of Marcos who was the real buyer of the shares. According to the court, the Republic failed to overcome its burden of proof since Quimson’s affidavit was not corroborated by other evidence and was, in fact, refuted by Atty. Montecillo.In its Memorandum9 dated July 7, 2003 in G.R. No. 152578, the Republic argues that the Sandiganbayan failed to take into account the fact that despite Menzi’s claim that he acquired Bulletin in 1957, he did not include any Bulletin shares in his Last Will and Testament executed in 1977. Atty. Montecillo, the executor of Menzi’s estate, likewise did not include any Bulletin share in the initial inventory of Menzi’s properties filed on May 15, 1985. Neither were any Bulletin shares declared by Atty. Montecillo even after the probate court issued an Order dated November 17, 1992 for the submission of an updated inventory of Menzi’s assets.The Republic claims that despite these circumstances, coupled with Quimson’s affidavit detailing how Marcos used his dummies to conceal his control over Bulletin, as well as the letters and correspondence between Marcos and Menzi indicating that Menzi consistently updated Marcos on the affairs of Bulletin, the Sandiganbayan ruled that the 154 block was not ill-gotten wealth of the Marcoses. The Sandiganbayan’s erroneous inference allegedly warrants a review of its findings.Moreover, the Republic disputes the Sandiganbayan’s ruling that it heavily leaned on the affidavit of Quimson without presenting any other corroborating evidence.10 It argues that in the proceedings before the PCGG, Quimson was subjected to cross-examination by the lawyers of Bulletin which is controlled by Yap. Further, the evidence it presented before the PCGG purportedly showing that the transfer of Bulletin shares from Menzi to US Automotive was undertaken due to pressure exerted by Marcos on Menzi should have been taken into account.The Republic insists that the sale between Menzi and U.S. Automotive was a sham because the parties failed to comply with the basic requirement of a deed of sale in the transfer of the subject shares. Further, a number of questions were allegedly not resolved, such as: (a) Who was the seller of the subject shares—the late Menzi as the alleged owner or Atty. Montecillo as then special administrator and later executor of Menzi’s estate; (b) If Menzi sold the shares, was there a need to confirm the sale? If Atty. Montecillo was the one who sold them, what was his authority to sell the said shares?The Republic also contends that Menzi and Yap were both dummies of the late President Marcos, used by the latter in order to conceal his interest in Bulletin. Hence, the 154 block should also have been declared ill-gotten wealth and forfeited in favor the Government.

The foregoing allegedly warrants the award of damages in favor of the Republic which the Sandiganbayan erroneously failed to do.The Republic, therefore, prays that the Sandiganbayan Decision, insofar as it declares the sale of the 154 block to be valid and legal, be reconsidered and judgment accordingly rendered declaring the 154 block as ill-gotten wealth, forfeiting the same or the proceeds thereof in favor of the Republic, and awarding actual, temperate and nominal damages in the Court’s discretion, moral damages in the amount of 50 Billion Pesos, exemplary damages of 1 Billion Pesos, attorney’s fees, litigation expenses and treble judicial costs.The Estate of Menzi and HMHMI filed a Memorandum11 dated March 10, 2005, averring that the Republic failed to adduce evidence of any kind that the 154 block was ill-gotten wealth of the Marcoses. They claim that the requirements for a valid transfer of stocks, namely: (1) there must be delivery of the stock certificate; (2) the certificate must be indorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and (3) the transfer must be recorded in the books of the corporation in order to be valid against third parties, have all been met.The parties to the sale allegedly confirm the indorsement and delivery of the Bulletin shares of stock representing the 154 block. The requirement that the transfer be recorded in the books of the corporation was also met because US Automotive exercised its rights as shareholder.It is also allegedly immaterial whether it was Menzi or Atty. Montecillo who indorsed the stock certificates. If it was Menzi, then his indorsement was an act of ownership; if it was Montecillo, then the indorsement was pursuant to the duly executed General Power of Attorney filed with the SEC and, subsequently, on the basis of his authority as Special Administrator and Executor of Menzi’s estate.In his Memorandum12 dated May 10, 2005, Yap also maintains that the sale of the 154 block was valid and legal. The non-inclusion of the said block of shares in the inventory of Menzi’s estate was purportedly due to the fact that the same had, by then, been sold to US Automotive. Yap also claims that Atty. Montecillo was duly authorized to effect the sale by virtue of the General Power of Authority and the Last Will and Testament executed by Menzi.The absence of a deed of sale evidencing the sale is allegedly not irregular because the law itself does not require any deed for the validity of the transfer of shares of stock, it being sufficient that such transfer be effected by delivery of the stock certificates duly indorsed. At any rate, a duly notarized Receipt covering the sale was executed.13

Moreover, the BIR certified that the Estate of Menzi paid the final tax on capital gains derived from the sale of the 154 block and authorized the Corporate Secretary to register the transfer of the said shares in the name of US Automotive. Further, a stock certificate covering the 154 block was issued to US Automotive by Quimson himself as Corporate Secretary.Sec. 63 of the Corporation Code provides the requisites for a valid transfer of shares:Sec. 63. Certificate of stock and transfer of shares.—The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. [Emphasis supplied]The Corporation Code acknowledges that the delivery of a duly indorsed stock certificate is sufficient to transfer ownership of shares of stock in stock corporations. Such mode of transfer is valid between the parties. In order to bind third persons, however, the transfer must be recorded in the books of the corporation.Clearly then, the absence of a deed of assignment is not a fatal flaw which renders the transfer invalid as the Republic posits. In fact, as has been held in Rural Bank of Lipa City, Inc. v. Court of Appeals,14 the execution of a deed of sale does not necessarily make the transfer effective.In that case, petitioners argued that by virtue of the deed of assignment, private respondents had relinquished to them all their rights as stockholders of the bank. This Court, however, ruled that the delivery of the stock certificate duly indorsed by the owner is the operative act that transfers the shares. The absence of delivery is a fatal defect which is not cured by mere execution of a deed of assignment. Consequently, petitioners, as mere assignees, cannot enjoy the status of a stockholder, cannot vote nor be voted for, and will not be entitled to dividends, insofar as the assigned shares are concerned.There appears to be no dispute in this case that the stock certificates covering the 154 block were duly indorsed and delivered to the buyer, US Automotive. The parties to the sale, in fact, do not question the validity and legality of the transfer.The objection raised by the Republic actually concerns the authority of Atty. Montecillo, the executor of Menzi’s estate, to indorse the said certificates. However, Atty. Montecillo’s authority to negotiate the transfer and execute the necessary documents for the sale of the 154 block is found in the General Power of Attorney executed by Menzi on May 23, 1984, which specifically authorizes Atty. Montecillo "[T]o sell, assign, transfer, convey and set over upon such consideration and under such terms and conditions as he may deem proper, any and all stocks or shares of stock, now standing or which may thereafter stand in my name on the books of any and all company or corporation, and for that purpose to make, sign and execute all necessary instruments, contracts, documents or acts of assignment or transfer."15

Atty. Montecillo’s authority to accept payment of the purchase price for the 154 block sold to US Automotive after Menzi’s death springs from the latter’s Last Will and Testament and the Order of the probate court confirming the sale and authorizing Atty. Montecillo to accept payment therefor. Hence, before and after Menzi’s death, Atty. Montecillo was vested with ample authority to effect the sale of the 154 block to US Automotive.That the 154 block was not included in the inventory is plausibly explained by the fact that at the time the inventory of the assets of Menzi’s estate was taken, the sale of the 154 block had already been consummated. Besides, the non-inclusion of the proceeds of the sale in the inventory does not affect the validity and legality of the sale itself.At any rate, the Sandiganbayan’s factual findings that the 154 block was sold to US Automotive while Menzi was still alive, and that Atty. Montecillo merely accepted payment by virtue of the authority conferred upon him by Menzi himself are conclusive upon this Court, supported, as they are, by the evidence on record.16 As held by the Sandiganbayan:… The sale was made pursuant to the Stock Option executed in 1968 between the parties to the sale, considering the restrictions contained in Bulletin’s Articles of Incorporation as amended in 1968 limiting the transferability of its shares. Negotiations for the sale took place and were concluded before the death of Menzi. After his death, full payment of the entire consideration of the sale, principal and interest, was made only after judicial confirmation thereof in the Probate Case. The transaction was duly supported by the corresponding receipt, voucher, cancelled checks, cancelled promissory note, and BIR certification of payment of the corresponding taxes due thereon.17

The Supreme Court is not a trier of facts. It is not our function to examine and weigh all over again the evidence presented by the parties in the proceedings before the Sandiganbayan.18

It is also significant that even Quimson’s affidavit does not state, in a categorical manner, that Yap was a Marcos dummy used by the latter to conceal his Bulletin shareholdings. In contrast, Quimson unqualifiedly declared that Campos, Cojuangco and Zalamea were the former dictator’s nominees to Bulletin.19

We, therefore, agree with the Sandiganbayan that the sale of the 154 block to US Automotive was valid and legal.198 and 214 blocksHMHMI was incorporated on May 20, 1982 by Menzi, Campos, Cojuangco, Rolando C. Gapud (Gapud) and Zalamea, with an authorized capital stock of P1,000,000.00 divided into 100,000 shares with par value of P10.00 each.

Corpo (p.10-11) 21A Deed of Transfer and Conveyance was executed by Menzi, Campos, Cojuangco and Zalamea on August 17, 1983, transferring the shares of stock registered in their names in various corporations to HMHMI in exchange for 6,000,000 shares of the latter’s capital stock, subject to the approval by the SEC of HMHMI’s Certificate of Increase of Capital Stock. The shares of stock transferred included the 198 block of Bulletin shares, 90,866.5 of which were registered in the name of Campos; 90,877 in the name of Cojuangco; and 16,309 in the name of Zalamea.On February 14, 1984, HMHMI amended its Articles of Incorporation by increasing its authorized capital stock toP100,000,000.00 divided into 10,000,000 shares with par value of P10.00 per share.On January 15, 1986, the law firm of Siguion Reyna, Montecillo & Ongsiako wrote a letter to Bulletin’s corporate secretary, Atty. Mendoza, requesting that three (3) certificates of stock representing 90,866.5, 90,877, and 16,309 Bulletin shares be issued in favor of HMHMI in exchange for 21 certificates of stock in HMHMI.Atty. Mendoza acknowledged receipt of the 21 certificates of stock but replied that the transfer by Campos, Cojuangco and Zalamea of their Bulletin shares to HMHMI cannot be recorded in the books of Bulletin because it was made in violation of Bulletin’s Articles of Incorporation which provides restrictions and limitations on the transferability of the shares of the company by its stockholders. Bulletin, however, offered to buy the shares at the price fixed in the Articles of Incorporation. The offer appears to have been accepted by HMHMI through its President, Atty. Montecillo.Thus, on January 30, 1986, HMHMI’s Board of Directors passed a resolution approving the sale to Bulletin of the 198 block and authorizing its President or Corporate Secretary to sign and execute the corresponding deed of sale. Accordingly, a Deed of Sale was executed on February 21, 1986 by Atty. Montecillo whereby HMHMI sold the 198 block to Bulletin for the amount of P23,675,195.85.On April 22, 1986, the shares of Marcos, Yap, Cojuangco and their nominees or agents in the Bulletin were sequestered by virtue of a Sequestration Order issued by the PCGG.

The SEC issued a certification to the effect that as of February 21, 1986, the total subscribed shares of Bulletin was 756,861. Of these, 198,052.5 were treasury shares, leaving the total outstanding shares at 567,808.5. The stockholders of Bulletin and the shares of stock held by each of them were listed as follows:

Name No. of SharesEmilio T. Yap 2,617Menzi Trust Fund 28,977Estate of Hans M. Menzi 1U.S. Automotive Co. Inc. 318,084xxx xxxCesar Zalamea 121,178Jose Campos 46,620.5Eduardo Cojuangco 46,626Xxx xxxTotal 567,808.5On February 12, 1987, another Writ of Sequestration was issued by the PCGG, sequestering all the shares of stock, as well as the assets, properties, records and documents of HMHMI. Because of this Sequestration Order, the proceeds from the sale of the 198 block which were deposited with Philtrust Bank were frozen.20

On March 16, 1987, the sequestration of the 2,617 Bulletin shares of Yap was lifted upon the latter’s motion.On April 14, 1987, the PCGG wrote a letter/order to the Corporate Secretary of Bulletin, asking for the schedule of the annual stockholders’ meeting of the corporation because the sequestered shares consisting of the 214 block will be voted by the Commission. This letter became the subject of a petition21 filed by Bulletin with this Court questioning the validity of the PCGG’s letter/order and seeking to compel PCGG to accept Bulletin’s offer of a cash deposit in the amount of P34,592,903.34 representing the value of the 214 block of sequestered Bulletin shares. The Court issued a temporary restraining order.On July 31, 1987, the PCGG received from Bulletin the amount of P8,173,506.06 as full payment of 46,620.5 Bulletin shares registered in the name of Campos. The receipt stated that "Mr. Jose Y. Campos has waived the ownership of said shares in favor of the Republic of the Philippines through the Presidential Commission on Good Government."A Deed of Assignment was likewise executed by Zalamea on October 15, 1987, assigning and waiving in favor of the Republic his rights to 121,178 Bulletin shares registered in his name. On the same day, Bulletin issued in favor of PCGG a check in the amount of P21,244,926.96 as full payment of Zalamea’s shares.This Court, on April 15, 1988, issued the Teehankee Resolution, the dispositive portion of which pertinently states:2. Directing the Commission to accept the cash deposit of P8,174,470.32 offered by petitioner for the 46,626 sequestered shares in the name of Mr. Eduardo M. Cojuangco, Jr. expressly subject to the alternative conditions (A and B) hereinabove set forth, and likewise directing the Commission to accept the cash deposit, if it has not actually sold the Cesar C. Zalamea Bulletin shares to petitioner (supra, p. 13, par [2]) of P21,244,926.96 for the sequestered shares of Bulletin in the name of Mr. Cesar Zalamea under the same alternatives already mentioned; and3. Remanding the case regarding the issue of ownership of the said sequestered Bulletin shares for determination and adjudication to the Sandiganbayan.22

An agreement was thereafter executed between PCGG and Bulletin on June 9, 1988 regarding the 46,626 Bulletin shares of Cojuangco whereby PCGG accepted Bulletin’s deposit in the amount of P8,174,470.32, subject to the alternatives set forth in the Teehankee Resolution, as follows:Alternative "A"—To standby as full payment plus whatever interest earnings thereon upon final judgment of the Court declaring the Republic of the Philippines as owners of the 46,626 shares, accompanied by the corresponding original stock certificates, issued in the name of the government, duly endorsed in favor of the Bulletin Publishing Corporation, free from liens and encumbrances; orAlternative "B"—To immediately return to Bulletin Publishing Corporation the cash deposit in the amount of P8,174,470.32 plus whatever interest earnings thereon upon final judgment by the Court declaring that Mr. Eduardo Cojuangco, Jr. is the true owner of the 46,626 shares.23

With this factual backdrop, the Sandiganbayan ruled that Campos, Cojuangco and Zalamea were nominees and dummies of Marcos. Hence, the 198 block which these nominees transferred to HMHMI and which, in turn, were sold to Bulletin are ill-gotten wealth.The Sandiganbayan anchored its finding on the Deposition of Campos taken on November 25, 1994 before the Philippine Consulate General in Vancouver, British Columbia, Canada, that he held shares in Bulletin and HMHMI "per instruction of President Marcos;" that the beneficial owner of these shares "must be President Marcos;" and that he received three (3) dividend checks from Bulletin "for the benefit of President Marcos."Based on the Deed of Assignment executed by Zalamea on October 15, 1987, wherein he manifested that he "does not claim true and beneficial ownership" of the 121,178 Bulletin shares registered in his name and that he voluntarily waived and assigned these shares in favor of PCGG, the Sandiganbayan concluded that Zalamea could not have been a nominee of Menzi, as the latter’s estate claims, but of Marcos.

The Sandiganbayan likewise rejected Cojuangco’s contention that the Bulletin and HMHMI shares registered in his name "were not acquired and held by him as dummy, nominee and/or agent of defendants Ferdinand E. Marcos and Imelda Romualdez Marcos, but upon the request, and as nominee, of the late Hans Menzi who owned and delivered to him said shares." According to the Sandiganbayan, Cojuangco failed to present evidence necessary to establish his affirmative defense.As regards the 214 block, the Sandiganbayan ruled that there is no longer any dispute concerning the ownership of the 46,620.5 shares held by Campos and the 121,178 shares held by Zalamea in view of the Teehankee Resolution and the fact that these shares have been waived and assigned to PCGG.The Sandiganbayan went on to declare that the only remaining issue pertaining to Cojuangco’s claim to his alleged portion of the 214 block should be resolved in favor of the Republic because of Cojuangco’s consistent disavowal of any "proprietary interest in the shares which are the subject matter of the instant case" and his claim that he held the shares as nominee of Menzi.The Sandiganbayan further ruled that Yap’s shares, which were acquired by him in 1961 before Marcos became President, are not ill-gotten wealth of the Marcoses. Moreover, the one (1) Bulletin share for which dividend checks were issued to and received by the Estate of Menzi was deemed to belong to the latter.In G.R. No. 154487, petitioner Cojuangco assails paragraphs 1 and 2 of the Sandiganbayan Decision. Allegedly, the Government does not claim that in acquiring the Bulletin shares registered in Cojuangco’s name, the late President Marcos used government funds or resources. Cojuangco raises several issues, namely: (a) Were the Bulletin shares, at any time, of government ownership? (b) Were the Bulletin shares acquired by Marcos and, if so, did he use government funds to acquire them? (c) Did petitioner Cojuangco act as the "dummy" or "nominee" of Marcos to acquire, or to conceal the acquisition of the shares by the latter?In the Memorandum for Eduardo M. Cojuangco, Jr.24 dated May 6, 2005, Cojuangco argues that the Republic neither alleged nor presented evidence to prove that that the Bulletin shares registered in his name were owned by the Republic but were taken by the Marcoses "by taking advantage of their public office and/or using their powers, authority, influence, connections or relationship" or that they were acquired by the Marcoses from Menzi with the use of government or public funds. Hence, the conclusion should be sustained that the shares were owned by Menzi and never by the Republic, and no public funds were used in their acquisition.Cojuangco attacks the Sandiganbayan’s reliance on Quimson’s affidavit saying that it is hearsay because Quimson was not presented in court to affirm the contents of his affidavit and was not subjected to cross-examination as he had already passed away when Civil Case No. 0022 was tried. Quimson’s affidavit is allegedly double hearsay insofar as it alleges that Marcos owned the Bulletin shares and that Cojuangco was merely Marcos’ nominee because Quimson had no contact with Marcos and his knowledge of the latter’s purported ownership of the Bulletin shares was merely relayed to him by Menzi.Even the supposed corroborating evidence, consisting of the affidavits of Pedro Teodoro, Evelyn S. Singson, Gapud, and Angelita Reyes, have allegedly been declared as having no probative value inasmuch as the affiants did not take the witness stand and could not be cross-examined.The Republic likewise allegedly failed to prove its contention that Bulletin issued checks in favor of Campos, Cojuangco and Zalamea which were deposited into numbered accounts in Security Bank & Trust Company owned by the Marcoses. Moreover, the dividend checks supposedly indorsed by Cojuangco in blank do not conclusively demonstrate that they were indorsed in favor of the Marcoses.On the other hand, there is allegedly sufficient evidence on record to prove that Cojuangco was a nominee of Menzi. These documents consist of the testimony of Atty. Montecillo to the effect that, as far as he knew, Cojuangco "really acted as nominee for the General," and the originals of the stock certificates covering the Bulletin shares registered in Cojuangco’s name.Cojuangco further avers that the allegation that the Bulletin shares were registered in his name upon the request, and as nominee, of Menzi is a specific denial and not an affirmative defense as the Sandiganbayan declared. As a specific denial, the allegation need not be proven unless the Republic presents adequate evidence proving the allegations in its complaint which, Cojuangco insists, the Republic failed to do.He likewise argues that the Republic is not entitled to damages of any kind because it failed to establish that it has any proprietary interest in the Bulletin shares registered in his name; that the said shares are owned by the Marcoses; and that it suffered any pecuniary loss by reason of such ownership.Based on these allegations, Cojuangco prays that he be declared the owner of the 46,626 Bulletin shares registered in his name, together with all cash and stock dividends which have accrued in favor of said shares from October 15, 1987, and ordering the PCGG to return the cash deposit of P8,174,470.32 plus interest to Bulletin.In its Memorandum25 dated March 17, 2005, the Republic maintains that Cojuangco has consistently denied any proprietary interest in the Bulletin shares. Hence, he cannot claim ownership of the Bulletin shares registered in his name. His allegation that that he was a nominee of Menzi was pleaded by way of defense. Thus, he has the burden of proving this material allegation, set up as new matter, that the shares were not his but Menzi’s.Since the Bulletin shares were not included in the inventory of Menzi’s assets, it allegedly follows that Cojuangco could not have been a nominee of Menzi who did not own the subject Bulletin shares.As regards the contention that the Republic failed to show that the shares belong to the Government or were acquired using public funds, the Republic maintains that Marcos acquired the Bulletin shares using his political clout. His very act of participating in a business enterprise using nominees to conceal his ownership of Bulletin shares is already a violation of the Constitution.Furthermore, Campos and Zalamea, who, like Cojuangco, held shares in the 198 and 214 blocks, have already surrendered and assigned their respective shares to the Government and acknowledged the right of the Government over the Bulletin registered in their names. Such is allegedly a clear indication that they acted as dummies of Marcos. The admission of Campos and Zalamea that their shares in the 214 block belonged to Marcos may allegedly be used to prove that the 198 block was likewise held by them as dummies of the former dictator.The Sandiganbayan also allegedly did not rely on the Teehankee Resolution to support its conclusion that the 198 and 214 blocks are ill-gotten wealth but made its own finding after a full-blown trial at which all the parties, except Cojuangco, presented their respective evidence.Moreover, the evidence presented by the Republic allegedly preponderates in favor of its theory that the Bulletin shares in the names of Campos, Cojuangco and Zalamea were actually held in trust for the benefit of the Marcoses. Notably, the PCGG Resolution dated May 22, 1987, presented by the Republic as its Exhibit "I" declares that Quimson and Teodoro, close associates of Menzi, stated under oath that when Marcos allowed the Bulletin to reopen during Martial Law, Menzi was allowed only 20% participation, and that Marcos put his shares in the names of Campos, Cojuangco and Zalamea.Besides, Menzi did not execute any deed of trust in his favor as trustor and Campos, Cojuangco and Zalamea as trustees. Neither did the Estate of Menzi claim that Campos, Cojuangco and Zalamea were nominees of Menzi as no cross-claim was filed by the Estate of Menzi even as it claimed ownership of the 198 and 214 blocks.In their Memorandum26 dated March 10, 2005 in G.R. Nos. 154487 and 154518, the Estate of Menzi and HMHMI argue that the Sandiganbayan erred in not resolving the issue of the ownership of the 198 and 214 blocks. The Sandiganbayan instead allegedly relied on its misinterpretation of the Teehankee Resolution to the effect that there is no longer any controversy as regards the ownership of the portion of the 214 block held by Zalamea. According to said respondents, the Teehankee Resolution clearly directed the Sandiganbayan to resolve the issue of ownership of both the Zalamea and Cojuangco portions of the 214 block.Respondents Estate of Menzi and HMHMI also contend that the Quimson affidavit should have been treated as having no probative value with respect to the 154 block and the 198 and 214 blocks alike. The affidavit was allegedly not at all corroborated by the other documents presented by the Republic and cited in the assailedDecision.

Corpo (p.10-11) 22They insist that Campos, Cojuangco and Zalamea were nominees of Menzi, not dummies of Marcos, because, as allegedly established during trial, the stock certificates covering the contested blocks of shares were indorsed in blank and remained in Menzi’s possession. Even Campos allegedly testified that he was never in possession of the stock certificates.Assuming that Campos was indeed a Marcos dummy, his admission should apply solely to the Bulletin shares registered in his name. Likewise, Zalamea allegedly never declared himself to be a Marcos nominee, only that he does not claim true and beneficial ownership of the Bulletin shares recorded in his name. The dividend checks for Zalamea’s shareholdings, in fact, allegedly indicate the Estate of Menzi as the payee, proving that Zalamea was Menzi’s nominee.Respondents Estate of Menzi and HMHMI further claim that the 198 and 214 blocks were not mentioned in Menzi’s Last Will and Testament because Menzi knew of the impending promulgation of a decree which would limit to only 20% the ownership of media enterprises by one person or family. Allegedly, in order to get around this restriction, Menzi devised the nominee structure whereby he used three (3) nominees to enable him to retain his 80% stake in Bulletin. Besides, there was allegedly a legal question as to whether sequestered shares need to be declared for estate tax purposes in the meantime that a case involving these shares was pending.Said respondents finally posit that assuming that the 198 and 214 blocks are ill-gotten, the shares themselves, and not merely the proceeds, should be forfeited in favor of the Government.Yap, on the other hand, claims in his Memorandum27 dated May 10, 2005 filed in G.R. Nos. 154487 and 154518 that Cojuangco may not raise in his petition a new specific relief consisting of the prayer that he be declared the owner of the 46,626 Bulletin shares registered in his name which Cojuangco never asked for during the proceedings before the Sandiganbayan. Cojuangco is allegedly bound by his judicial admission that he has no proprietary interest over the said Bulletin shares.Purportedly, because of this judicial admission, Alternative B mentioned in the Teehankee Resolution was eliminated. The only option which remained was, as held by the Sandiganbayan, to declare that the Government is the legal owner of the shares and direct the PCGG to execute the necessary documents to effect the transfer thereof in accordance with Alternative A.As regards the prayer that the shares themselves be forfeited in favor of the Government, Yap contends that this cannot be done because the Government is barred by the Constitution from acquiring ownership of private mass media.The Estate of Menzi and HMHMI should also not be allowed to claim the portion of the 214 block held by Campos and Zalamea whose ownership has allegedly been settled by this Court in the Teehankee Resolution.Yap also claims that the Estate of Menzi and HMHMI have unlawfully concealed the stock certificates representing a portion of the shares held by Campos and Zalamea. Their lawyers, specifically Atty. Montecillo, have also allegedly staked an unfounded claim on the Bulletin shares in violation of their duty, as lawyers of Bulletin for several years, to protect the latter’s interests.Cojuangco filed a Reply Memorandum28 dated October 17, 2005, substantially reiterating his argument that the Sandiganbayan failed to make a finding that the Bulletin shares are ill-gotten as defined by the pertinent executive orders and that they were owned by the Marcoses. Consequently, he insists that there is no basis for the Sandiganbayan’s conclusion that the Republic is the legal owner of the said shares.The Republic also filed a Memorandum29 dated March 17, 2005 in G.R. No. 154518, averring that the petition raises factual issues not proper in a petition for review under Rule 45 of the Rules of Court.The Republic insists that the Decision of the Sandiganbayan relative to the 198 and 214 blocks was not based on Quimson’s affidavit alone but on the totality of the evidence presented to support the complaint. Quimson’s affidavit was allegedly given prominence because it related in detail how Campos, Cojuangco and Zalamea came to be nominees of Marcos. The allegations in Quimson’s affidavit were allegedly confirmed by Menzi’s Last Will and Testament, the initial inventory of his assets, the letters and correspondence between Marcos and Menzi, Campos’ deposition, and the dividend checks issued to Campos, Cojuangco and Zalamea even after they have supposedly transferred their Bulletin shares to HMHMI.Moreover, Atty. Montecillo did not institute any action against Campos, Cojuangco and Zalamea to recover the shares. This allegedly indicates that the shares were not owned by Menzi and that Campos, Cojuangco and Zalamea did not act as Menzi’s nominees.As regards the claim that Menzi owned the shares registered in the names of Campos, Cojuangco and Zalamea because the stock certificates covering them were in Menzi’s possession, the Republic maintains that mere possession of the stock certificates does not operate to vest ownership on Menzi considering that Campos already declared that Marcos owned those shares and Zalamea surrendered his shares to the Government.Furthermore, the Republic alleges that the Sandiganbayan had already ruled with finality that the Estate of Menzi and HMHMI cannot recover the Campos and Zalamea portions of the 214 block. Specifically, in the Resolution dated January 2, 1995, the Sandiganbayan declared that the Estate of Menzi cannot recover the Campos shares because the latter, who was not a co-defendant in the case, had already voluntarily surrendered the same to the PCGG. Zalamea’s shares could likewise not be recovered because he was also not a party, either as defendant, cross-defendant or third-party defendant. Moreover, in another Resolution dated July 10, 1993, the Sandiganbayan held that the Estate of Menzi has not pleaded any claim of ownership over the Bulletin shares in the names of Campos, Cojuangco and Zalamea, much less has it intervened to express any prejudice to it should any judgment be rendered for or against Campos, Cojuangco and Zalamea.We again affirm the ruling of the Sandiganbayan.It should be noted at the outset that there is no more dispute as regards the Bulletin shares registered in the name of Campos. In fact, Campos was not included as a defendant in Civil Case No. 0022. The Bulletin shares registered in his name have been voluntarily surrendered to the PCGG and the proceeds thereof have accordingly been forfeited in favor of the Government.The Pre-Trial Order of the Sandiganbayan dated November 11, 1991 likewise does not mention as an issue the ownership of the Campos-held Bulletin shares.The same cannot be said, however, of the Bulletin shares registered in the name of Zalamea. Although he was dropped as a party-defendant in the Second Amended Complaint dated October 17, 1990 purportedly by reason of the Deed of Assignment he executed on October 15, 1987, the Zalamea-held shares are clearly still covered by the Teehankee Resolution remanding the issue on the ownership of the sequestered Cojuangco and Zalamea shares for determination and adjudication by the Sandiganbayan.Having said that, we now proceed to determine whether the Sandiganbayan committed reversible error in rendering the assailed Decision.As with the 154 block, the issues raised by the petitioners assailing the Sandiganbayan’s disposition of the 198 and 214 blocks are largely factual and, therefore, generally beyond the scope of our review under Rule 45 of the Rules of Court. Nonetheless, as will be shown in the following disquisition, there is no cause for this Court to reverse the Sandiganbayan because the evidence on record amply supports its findings and conclusions.The 46,626 shares registered in the name of Cojuangco which formed part of the 214 block were declared to be ill-gotten wealth based on the evidence presented by the Republic to show that Cojuangco acted as a nominee of Marcos and on Cojuangco’s unsubstantiated allegation that he acted as a nominee not of Marcos but of Menzi.Cojuangco counters, however, that the allegation that he acted as Menzi’s nominee is a specific denial which he does not have the burden of proving.Notably, in the Answer of Defendant Eduardo M. Cojuangco, Jr. dated March 16, 1989, Cojuangco claimed as part of his denial that "whatever shares of stock he may have in Bulletin Publishing Corporation and/or H.M. Holdings and Management, Inc. were not acquired and held by him as dummy, nominee and/or agent of defendants Ferdinand E. Marcos and Imelda Romualdez Marcos, but upon the request, and as nominee, of the late Hans Menzi who owned and delivered to him said shares."30

Likewise, in his Pre-Trial Brief dated January 15, 1992, Cojuangco stated that "[I]n regard shares of stock in the name of defendant Cojuangco in Bulletin Publishing Corporation and/or HM Holdings & Management, Inc., he was never, and is not, a nominee of any other person but the late Brig. Gen. Hans M. Menzi. Defendant Cojuangco therefore reiterates that he has no proprietary interest in the shares which are the subject matter of the instant case. They properly belong to the estate of the late Hans Menzi."31

It is procedurally required for each party in a case to prove his own affirmative allegations by the degree of evidence required by law. In civil cases such as this one, the degree of evidence required of a party in order to support his claim is preponderance of evidence, or that evidence adduced by one party which is more conclusive and credible than that of the other party. It is therefore incumbent upon the plaintiff who is claiming a right to prove his case. Corollarily, the defendant must likewise prove its own allegations to buttress its claim that it is not liable.32

The party who alleges a fact has the burden of proving it. The burden of proof33 may be on the plaintiff or the defendant. It is on the defendant if he alleges an affirmative defense which is not a denial of an essential ingredient in the plaintiff’s cause of action, but is one which, if established, will be a good defense – i.e., an "avoidance" of the claim.34

In the instant case, Cojuangco’s allegations are in the nature of affirmative defenses which should be adequately substantiated. He did not deny that Bulletin shares were registered in his name but alleged that he held these shares not as nominee of Marcos, as the Republic claimed, but as nominee of Menzi. He did not, however, present any evidence to support his claim and, in fact, filed a Manifestation dated July 20, 1999 stating that he "sees no need to present any evidence in his behalf."35

In contrast to Cojuangco’s consistent, albeit unsupported, disclaimer, the Sandiganbayan found the Republic’s evidence to be preponderant. These pieces of evidence consist of: the affidavit of Quimson detailing how Campos, Cojuangco and Zalamea became Marcos’ nominees in Bulletin; the affidavit Teodoro relative to the circumstances surrounding the sale of Menzi’s substantial shares in Bulletin to Marcos’ nominees and Menzi’s retention of only 20% of the corporation; the sworn statement of Gapud describing the business interests and associates of Marcos and stating that Bulletin checks were periodically issued to Campos, Cojuangco and Zalamea but were deposited after indorsement to Security Bank numbered accounts owned by the Marcoses dividend checks issued to Campos, Cojuangco and Zalamea even after their shares have been transferred to HMHMI; the Certificate of Incorporation, Articles of Incorporation and Amended Articles of Incorporation of HMHMI showing that Bulletin shares held by Campos, Cojuangco and Zalamea were used to set up HMHMI; Deed of Transfer and Conveyance showing that Campos, Cojuangco, Zalamea and Menzi transferred several shares, including Bulletin shares, to HMHMI in exchange for shares of stock in the latter which shares were not issued; the Inventory of Menzi’s assets as of May 15, 1985 which does not include Bulletin shares; notes written by Marcos regarding Menzi’s resignation as aide-de-camp to devote his time to run Bulletin’s operations and the reduction of his shares in the corporation to 12%; and letters and correspondence between Marcos and Menzi regarding the affairs of Bulletin.These pieces of uncontradicted evidence suffice to establish that the 198 and 214 blocks are indeed ill-gotten wealth as defined under the Rules and Regulations of the PCGG, viz:Sec. 1. Definition.—(A) "Ill-gotten wealth is hereby defined as any asset, property, business enterprise or material possession of persons within the purview of Executive Orders Nos. 1 and 2, acquired by them directly, or indirectly thru dummies, nominees, agents, subordinates and/or business associates by any of the following means or similar schemes:(1) Through misappropriation, conversion, misuse or malversation of public funds or raids on the public treasury;(2) Through the receipt, directly or indirectly, of any commission, gift, share, percentage, kickbacks or any other form of pecuniary benefit from any person and/or entity in connection with any government contract or project or by reason of the office or position of the official concerned;(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the government or any of its subdivisions, agencies or instrumentalities or government-owned or controlled corporations;(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any other form of interest or participation in any business enterprise or undertaking;(5) Through the establishment of agricultural, industrial or commercial monopolies or other combination and/or by the issuance, promulgation and/or implementation of decrees and orders intended to benefit particular persons or special interests; and(6) By taking undue advantage of official position, authority, relationship or influence for personal gain or benefit.Cojuangco’s disavowal of any proprietary interest in the Bulletin shares is conclusive upon him. His prayer that he be declared the owner of the said shares, together with all the cash and stock dividends which have accrued thereto since October 15, 1987, and that the PCGG be ordered to return the cash deposit of P8,174,470.32 to Bulletin, therefore, has no legal basis and should perforce be denied.In this connection, it should be said that Cojuangco apparently desisted from presenting evidence and chose instead to stake his claim with the Estate of Menzi and HMHMI. As found by the Sandiganbayan, however, the Estate of Menzi and HMHMI failed to prove their allegation that Campos, Cojuangco and Zalamea were Menzi’s nominees. Neither did the Estate of Menzi and HMHMI institute an action to recover the shares from Menzi’s nominees.Significantly, even as they claimed ownership of the Bulletin shares in their Answer to the Republic’s Second Amended Complaint, the Estate of Menzi and HMHMI did not file any cross-claim against the purported Menzi nominees.Quite revealing, too, is the fact that Campos, in his Answers to Direct Interrogatories36 taken before the Consul General at the Philippine Consulate General in Vancouver, British Columbia, Canada on November 25, 1994, repeatedly declared that he owned a portion of the 198 block "per instruction of President Marcos"37 and that he "became the shareholder, per instruction of President Marcos."38

Likewise, in his Deed of Assignment dated October 15, 1987, Zalamea manifested that he "does not claim true and beneficial ownership" of the Bulletin shares registered in his name and that he voluntarily waived and assigned the same in favor of the PCGG.These declarations should have alerted the Estate of Menzi and HMHMI to file cross-claims against Campos and Zalamea. The fact that they did not enfeebles their claim of ownership.It is also important to note that the Estate of Menzi did not include the 198 and 214 blocks in the inventory of the estate’s assets dated May 15, 1985. If, as it claims, the Bulletin shares of Campos, Cojuangco and Zalamea were held by them as nominees of Menzi, then these shares should have been included in the inventory. The justification advanced for the said non-inclusion, which is that the stock certificates covering them were not in the possession of Atty. Montecillo, is nothing but a hollow pretext given the fact that even after the certificates came to Atty. Montecillo’s possession in 1987, an updated inventory declaring the said shares as part of Menzi’s estate was not filed pursuant to the Order of the probate court dated November 17, 1992.Further, the claim that Menzi would need dummies because of the impending promulgation of a decree which would limit to 20% the ownership of media enterprises by one person or family is incredulous since no such decree was ever issued.Parenthetically, the fact that the stock certificates covering the shares registered under the names of Campos, Cojuangco and Zalamea were found in Menzi’s possession does not necessarily prove that the latter owned the shares. A stock certificate is merely a tangible evidence of ownership of shares of stock.39 Its presence or absence does not affect the right of the registered owner to dispose of the shares covered by the stock certificate. Hence, as registered owners, Campos and Zalamea validly ceded their shares in favor of the Government. This assignment is now a fait accompli for the benefit of the entire nation.The contention that the sale of the 214 block to the Bulletin was null and void as the PCGG failed to obtain approval from the Sandiganbayan is likewise unmeritorious. While it is true that the PCGG is not empowered to sell sequestered assets without prior Sandiganbayan approval,40 this case presents a clear exception because this Court itself, in the Teehankee Resolution, directed the PCGG to accept the cash deposit offered by Bulletin in payment for the Cojuangco

Corpo (p.10-11) 23and Zalamea sequestered shares subject to the alternatives mentioned therein and the outcome of the remand to the Sandiganbayan on the question of ownership of these sequestered shares.In light of the foregoing, we are not inclined to disturb the Sandiganbayan’s evaluation of the weight and sufficiency of the evidence presented by the Republic and its finding that the evidence adduced by the Estate of Menzi and HMHMI do not prove their allegation that Campos, Cojuangco and Zalamea are Menzi’s nominees, taking into account the express admission of Campos that he owned the shares upon Marcos’ instruction, the declaration of Zalamea that he does not claim true and beneficial ownership of the shares, and the absolute dearth of evidence regarding Cojuangco’s assertion that he is Menzi’s nominee.With regard to the Republic’s prayer for damages, we find the same not supported by sufficient evidence.An award of actual or compensatory damages requires proof of pecuniary loss. In this case, the Republic has not proven with a reasonable degree of certainty, premised on competent proof and the best evidence obtainable, that it has suffered any actual pecuniary loss by reason of the acts of the defendants. Hence, actual or compensatory damages may not be awarded.41

On the other hand, while no proof of pecuniary loss is necessary in order that moral, temperate, nominal and exemplary damages may be adjudicated, proof of damage or injury should nonetheless be adduced. As found by the Sandiganbayan, however, the Republic failed to show the factual basis for the award of moral damages and its causal connection to defendants’ acts. Thus, moral damages, which are designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer,42 may not be awarded. Temperate, nominal, and exemplary damages, attorney’s fees, litigation expenses and judicial costs may likewise not be adjudicated for failure to present sufficient evidence to establish entitlement to these awards.WHEREFORE, the petitions in G.R. No. 152578, G.R. No. 154487 and G.R. No. 154518 are DENIED. TheDecision of the Sandiganbayan dated March 14, 2002 is AFFIRMED.SO ORDERED.G.R. No. 124535 September 28, 2001THE RURAL BANK OF LIPA CITY, INC., THE OFFICERS AND DIRECTORS, BERNARDO BAUTISTA, JAIME CUSTODIO, OCTAVIO KATIGBAK, FRANCISCO CUSTODIO, and JUANITA BAUTISTA OF THE RURAL BANK OF LIPA CITY, INC., petitioners, vs.HONORABLE COURT OF APPEALS, HONORABLE COMMISSION EN BANC, SECURITIES AND EXCHANGE COMMISSION, HONORABLE ENRIQUE L. FLORES, JR., in his capacity as Hearing Officer, REYNALDO VILLANUEVA, SR, AVELINA M. VILLANUEVA, CATALINO VILLANUEVA, ANDRES GONZALES, AURORA LACERNA, CELSO LAYGO, EDGARDO REYES, ALEJANDRA TONOGAN and ELENA USI, respondents.YNARES-SANTIAGO, J.:Before us is a petition for review on certiorari assailing the Decision of the Court of Appeals dated February 27, 1996, as well as the Resolution dated March 29, 1996, in CA-G.R. SP No. 38861.The instant controversy arose from a dispute between the Rural Bank of Lipa City, Incorporated (hereinafter referred to as the Bank), represented by its officers and members of its Board of Directors, and certain stockholders of the said bank. The records reveal the following antecedent facts:Private respondent Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of Lipa City, executed a Deed of Assignment,1 wherein he assigned his shares, as well as those of eight (8) other shareholders under his control with a total of 10,467 shares, in favor of the stockholders of the Bank represented by its directors Bernardo Bautista, Jaime Custodio and Octavio Katigbak. Sometime thereafter, Reynaldo Villanueva, Sr. and his wife, Avelina, executed an Agreement2 wherein they acknowledged their indebtedness to the Bank in the amount of Four Million Pesos (P4,000,000.00), and stipulated that said debt will be paid out of the proceeds of the sale of their real property described in the Agreement.At a meeting of the Board of Directors of the Bank on November 15, 1993, the Villanueva spouses assured the Board that their debt would be paid on or before December 31 of that same year; otherwise, the Bank would be entitled to liquidate their shareholdings, including those under their control. In such an event, should the proceeds of the sale of said shares fail to satisfy in full the obligation, the unpaid balance shall be secured by other collateral sufficient therefor.When the Villanueva spouses failed to settle their obligation to the Bank on the due date, the Board sent them a letter3 demanding: (1) the surrender of all the stock certificates issued to them; and (2) the delivery of sufficient collateral to secure the balance of their debt amounting to P3,346,898.54. The Villanuevas ignored the bank's demands, whereupon their shares of stock were converted into Treasury Stocks. Later, the Villanuevas, through their counsel, questioned the legality of the conversion of their shares.4

On January 15, 1994, the stockholders of the Bank met to elect the new directors and set of officers for the year 1994. The Villanuevas were not notified of said meeting. In a letter dated January 19, 1994, Atty. Amado Ignacio, counsel for the Villanueva spouses, questioned the legality of the said stockholders' meeting and the validity of all the proceedings therein. In reply, the new set of officers of the Bank informed Atty. Ignacio that the Villanuevas were no longer entitled to notice of the said meeting since they had relinquished their rights as stockholders in favor of the Bank.Consequently, the Villanueva spouses filed with the Securities and Exchange Commission (SEC), a petition for annulment of the stockholders' meeting and election of directors and officers on January 15, 1994, with damages and prayer for preliminary injunction5 , docketed as SEC Case No. 02-94-4683. Joining them as co-petitioners were Catalino Villanueva, Andres Gonzales, Aurora Lacerna, Celso Laygo, Edgardo Reyes, Alejandro Tonogan, and Elena Usi. Named respondents were the newly-elected officers and directors of the Rural Bank, namely: Bernardo Bautista, Jaime Custodio, Octavio Katigbak, Francisco Custodio and Juanita Bautista.The Villanuevas' main contention was that the stockholders' meeting and election of officers and directors held on January 15, 1994 were invalid because: (1) they were conducted in violation of the by-laws of the Rural Bank; (2) they were not given due notice of said meeting and election notwithstanding the fact that they had not waived their right to notice; (3) they were deprived of their right to vote despite their being holders of common stock with corresponding voting rights; (4) their names were irregularly excluded from the list of stockholders; and (5) the candidacy of petitioner Avelina Villanueva for directorship was arbitrarily disregarded by respondent Bernardo Bautista and company during the said meetingOn February 16, 1994, the SEC issued a temporary restraining order enjoining the respondents, petitioners herein, from acting as directors and officers of the Bank, and from performing their duties and functions as such.6

In their joint Answer,7 the respondents therein raised the following defenses:1) The petitioners have no legal capacity to sue;2) The petition states no cause of action;3) The complaint is insufficient;4) The petitioners' claims had already been paid, waived, abandoned, or otherwise extinguished;5) The petitioners are estopped from challenging the conversion of their shares.

Petitioners, respondents therein, thus moved for the lifting of the temporary restraining order and the dismissal of the petition for lack of merit, and for the upholding of the validity of the stockholders' meeting and election of directors and officers held on January 15, 1994. By way of counterclaim, petitioners prayed for actual, moral and exemplary damages.On April 6, 1994, the Villanuevas' application for the issuance of a writ of preliminary injunction was denied by the SEC Hearing Officer on the ground of lack of sufficient basis for the issuance thereof. However, a motion for reconsideration8 was granted on December 16, 1994, upon finding that since the Villanuevas' have

not disposed of their shares, whether voluntarily or involuntarily, they were still stockholders entitled to notice of the annual stockholders' meeting was sustained by the SEC. Accordingly, a writ of preliminary injunction was issued enjoining the petitioners from acting as directors and officers of the bank.9

Thereafter, petitioners filed an urgent motion to quash the writ of preliminary injunction,10 challenging the propriety of the said writ considering that they had not yet received a copy of the order granting the application for the writ of preliminary injunction.With the impending 1995 annual stockholders' meeting only nine (9) days away, the Villanuevas filed an Omnibus Motion11 praying that the said meeting and election of officers scheduled on January 14, 1995 be suspended or held in abeyance, and that the 1993 Board of Directors be allowed, in the meantime, to act as such. One (1) day before the scheduled stockholders meeting, the SEC Hearing Officer granted the Omnibus Motion by issuing a temporary restraining order preventing petitioners from holding the stockholders meeting and electing the board of directors and officers of the Bank.12

A petition for Certiorari and Annulment with Damages was filed by the Rural Bank, its directors and officers before the SEC en banc,13 naming as respondents therein SEC Hearing Officer Enrique L. Flores, Jr., and the Villanuevas, erstwhile petitioners in SEC Case No. 02-94-4683. The said petition alleged that the orders dated December 16, 1994 and January 13, 1995, which allowed the issuance of the writ of preliminary injunction and prevented the bank from holding its 1995 annual stockholders' meeting, respectively, were issued by the SEC Hearing Officer with grave abuse of discretion amounting to lack or excess of jurisdiction. Corollarily, the Bank, its directors and its officers questioned the SEC Hearing Officer's right to restrain the stockholders' meeting and election of officers and directors considering that the Villanueva spouses and the other petitioners in SEC Case No. 02-94-4683 were no longer stockholders with voting rights, having already assigned all their shares to the Bank.In their Comment/Opposition, the Villanuevas and other private respondents argued that the filing of the petition for certiorari was premature and there was no grave abuse of discretion on the part of the SEC Hearing Officer, nor did he act without or in excess of his jurisdiction.On June 7, 1995, the SEC en banc denied the petition for certiorari in an Order,14 which stated:

In the case now before us, petitioners could not show any proof of despotic or arbitrary exercise of discretion committed by the hearing officer in issuing the assailed orders save and except the allegation that the private respondents have already transferred their stockholdings in favor of the stockholders of the Bank. This, however, is the very issue of the controversy in the case a quo and which, to our mind, should rightfully be litigated and proven before the hearing officer. This is so because of the undisputed fact the (sic) private respondents are still in possession of the stock certificates evidencing their stockholdings and as held by the Supreme Court in Embassy Farms, Inc. v. Court of Appeals, et al., 188 SCRA 492, citingNava v. Peers Marketing Corp., the non-delivery of the stock certificate does not make the transfer of the shares of stock effective. For an effective transfer of stock, the mode of transfer as prescribed by law must be followed.We likewise find that the provision of the Corporation Code cited by the herein petitioner, particularly Section 83 thereof, to support the claim that the private respondents are no longer stockholders of the Bank is misplaced. The said law applies to acquisition of shares of stock by the corporation in the exercise of a stockholder's right of appraisal or when the said stockholder opts to dissent on a specific corporate act in those instances provided by law and demands the payment of the fair value of his shares. It does not contemplate a "transfer" whereby the stockholder, in the exercise of his right to dispose of his shares (jus disponendi) sells or assigns his stockholdings in favor of another person where the provisions of Section 63 of the same Code should be complied with.The hearing officer, therefore, had a basis in issuing the questioned orders since the private respondents' rights as stockholders may be prejudiced should the writ of injunction not be issued. The private respondents are presumably stockholders of the Bank in view of the fact that they have in their possession the stock certificates evidencing their stockholdings. Until proven otherwise, they remain to be such and the hearing officer, being the one directly confronted with the facts and pieces of evidence in the case, may issue such orders and resolutions which may be necessary or reasonable relative thereto to protect their rights and interest in the meantime that the said case is still pending trial on the merits.

A subsequent motion for reconsideration15 was likewise denied by the SEC en banc in a Resolution16 dated September 29, 1995.A petition for review was thus filed before the Court of Appeals, which was docketed as CA-G.R. SP No. 38861, assailing the Order dated June 7, 1995 and the Resolution dated September 29, 1995 of the SEC en banc in SEC EB No. 440. The ultimate issue raised before the Court of Appeals was whether or not the SEC en banc erred in finding:

1. That the Hon. Hearing Officer in SEC Case No. 02-94-4683 did not commit any grave abuse of discretion that would warrant the filing of a petition for certiorari;2. That the private respondents are still stockholders of the subject bank and further stated that "it does not contemplate a transfer" whereby the stockholders, in the exercise of his right to dispose of his shares (Jus Disponendi) sells or assigns his stockholdings in favor of another person where the provisions of Sec. 63 of the same Code should be complied with; and3. That the private respondents are presumably stockholders of the bank in view of the fact that they have in their possession the stock certificates evidencing their stockholdings.

On February 27, 1996, the Court of Appeals rendered the assailed Decision17 dismissing the petition for review for lack of merit. The appellate court found that:The public respondent is correct in holding that the Hearing Officer did not commit grave abuse of discretion. The officer, in exercising his judicial functions, did not exercise his judgment in a capricious, whimsical, arbitrary or despotic manner. The questioned Orders issued by the Hearing Officer were based on pertinent law and the facts of the case.Section 63 of the Corporation Code states: "x x x Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner x x x. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred."In the case at bench, when private respondents executed a deed of assignment of their shares of stocks in favor of the Stockholders of the Rural Bank of Lipa City, represented by Bernardo Bautista, Jaime Custodio and Octavio Katigbak, title to such shares will not be effective unless the duly indorsed certificate of stock is delivered to them. For an effective transfer of shares of stock, the mode and manner of transfer as prescribed by law should be followed. Private respondents are still presumed to be the owners of the shares and to be stockholders of the Rural Bank.We find no reversible error in the questioned orders.

Petitioners' motion for reconsideration was likewise denied by the Court of Appeals in an Order18 dated March 29, 1996.Hence, the instant petition for review seeking to annul the Court of Appeals' decision dated February 27, 1996 and the resolution dated March 29, 1996. In particular, the decision is challenged for its ruling that notwithstanding the execution of the deed of assignment in favor of the petitioners, transfer of title to such shares is ineffective until and unless the duly indorsed certificate of stock is delivered to them. Moreover, petitioners faulted the Court of Appeals for not taking into consideration the acts of disloyalty committed by the Villanueva spouses against the Bank.We find no merit in the instant petition.The Court of Appeals did not err or abuse its discretion in affirming the order of the SEC en banc, which in turn upheld the order of the SEC Hearing Officer, for the said rulings were in accordance with law and jurisprudence.The Corporation Code specifically provides:

Corpo (p.10-11) 24SECTION 63. Certificate of stock and transfer of shares. — The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stocks so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. (Emphasis ours)

Petitioners argue that by virtue of the Deed of Assignment,19 private respondents had relinquished to them any and all rights they may have had as stockholders of the Bank. While it may be true that there was an assignment of private respondents' shares to the petitioners, said assignment was not sufficient to effect the transfer of shares since there was no endorsement of the certificates of stock by the owners, their attorneys-in-fact or any other person legally authorized to make the transfer. Moreover, petitioners admit that the assignment of shares was not coupled with delivery, the absence of which is a fatal defect. The rule is that the delivery of the stock certificate duly endorsed by the owner is the operative act of transfer of shares from the lawful owner to the transferee.20Thus, title may be vested in the transferee only by delivery of the duly indorsed certificate of stock.21

We have uniformly held that for a valid transfer of stocks, there must be strict compliance with the mode of transfer prescribed by law.22 The requirements are: (a) There must be delivery of the stock certificate: (b) The certificate must be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and (c) To be valid against third parties, the transfer must be recorded in the books of the corporation. As it is, compliance with any of these requisites has not been clearly and sufficiently shown.It may be argued that despite non-compliance with the requisite endorsement and delivery, the assignment was valid between the parties, meaning the private respondents as assignors and the petitioners as assignees. While the assignment may be valid and binding on the petitioners and private respondents, it does not necessarily make the transfer effective. Consequently, the petitioners, as mere assignees, cannot enjoy the status of a stockholder, cannot vote nor be voted for, and will not be entitled to dividends, insofar as the assigned shares are concerned Parenthetically, the private respondents cannot, as yet, be deprived of their rights as stockholders, until and unless the issue of ownership and transfer of the shares in question is resolved with finality.There being no showing that any of the requisites mandated by law23 was complied with, the SEC Hearing Officer did not abuse his discretion in granting the issuance of the preliminary injunction prayed for by petitioners in SEC Case No. 02-94-4683 (herein private respondents). Accordingly, the order of the SEC en banc affirming the ruling of the SEC Hearing Officer, and the Court of Appeals decision upholding the SEC en banc order, are valid and in accordance with law and jurisprudence, thus warranting the denial of the instant petition for review.To enable the shareholders of the Rural Bank of Lipa City, Inc. to meet and elect their directors, the temporary restraining order issued by the SEC Hearing Officer on January 13, 1995 must be lifted. However, private respondents shall be notified of the meeting and be allowed to exercise their rights as stockholders thereat.While this case was pending, Republic Act No. 879924 was enacted, transferring to the courts of general jurisdiction or the appropriate Regional Trial Court the SEC's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A.25 One of those cases enumerated is any controversy "arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates, between any and/or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity." The instant controversy clearly falls under this category of cases which are now cognizable by the Regional Trial Court.Pursuant to Section 5.2 of R.A. No. 8799, this Court designated specific branches of the Regional Trial Courts to try and decide cases formerly cognizable by the SEC. For the Fourth Judicial Region, specifically in the Province of Batangas, the RTC of Batangas City, Branch 32 is the designated court.26

WHEREFORE, in view of all the foregoing, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 38861 are hereby AFFIRMED. The case is ordered REMANDED to the Regional Trial Court of Batangas City, Branch 32, for proper disposition. The temporary restraining order issued by the SEC Hearing Officer dated January 13, 1995 is ordered LIFTED.SO ORDERED.G.R. No. 86963 August 6, 1999BATONG BUHAY GOLD MINES, INC., petitioner, vs.HONORABLE DIONISIO DELA SERNA IN HIS CAPACITY AS THE UNDERSECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO MENDELEBAR, MA. CONCEPCION Q. REYES, AND THE OTHER COMPLAINANTS* IN CASE NO. NCR-LSED-CI-2047-87; MFT CORPORATION AND SALTER HOLDINGS PTY. LTD., respondents.

R E S O L U T I O NPURISIMA, J.:At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court with a Prayer for Preliminary Injunction and or Restraining Order brought by Batong Buhay Gold Mines, Inc. (BBGMI for brevity) to annul three orders issued by respondent Undersecretary Dionisio dela Serna of the Department of Labor and Employment, dated September 16, 1988, December 14, 1988 and February 13, 1989, respectively.The Order of September 16, 1988 stated the facts as follows:

. . . on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O. Reyes and 1,247 others filed a complaint against Batong Buhay Gold Mines, Inc. for: (1) Non-payment of their basic pay and allowances for the period of 6 July 1983 to 5 July 1984, inclusive, under Wage Order No. 2; (2) Non-payment of their basic pay and allowances for the period 16 June 1984 to 5 October 1986, inclusive under Wage Order No. 5; (3) Non-payment of their salaries for the period 16 March 1986 to the present; (4) Non-payment of their 13th month pay for 1985, 1986 and 1987; (5) Non-payment of their vacation and sick leave, and the compensatory leaves of mine site employees; and (6) Non-payment of the salaries of employees who were placed on forced leaves since November, 1985 to the present, if this is not feasible, the affected employees be awarded corresponding separation pay.On 9 February 1987, the Regional Director set the case for hearing on 17 February 1987.On 17 February 1987, the respondent moved for the resetting of the case to 2 March 1987.On 27 February 1987, the complainants filed a Motion for the issuance of an inspection authority.

x x x x x x x x xOn 13 July 1987, the Labor Standards and Welfare Officers submitted their report with the following recommendations:

WHEREFORE, premises considered this case is hereby submitted with the recommendation that an Order of Compliance be issued directing respondent Batong Buhay Gold Mines Inc. to pay complainants' Elsie Rosalina Ty, et al. FOUR MILLION EIGHT HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED FORTY-SIX PESOS AND FORTY CENTAVOS (P4,818,746.40) by way of unpaid salaries of workers from March 16, 1987 to present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th months pay for 1985 and 1986, and unpaid (sic) vacation/sick/compensatory leave benefits.

On 31 July 1987, the Regional Director1 adopted the recommendation of the LSWOs and issued an order directing the respondent to pay the complainants the sum of P4,818,746.40 representing their unpaid 13th month pay for 1985 and 1986, wage and ECOLA differentials under wage order Nos. 2 and 5, unpaid salaries from 16 March 1986 to present and vacation/sick leave benefits for 1984, 1985 and 1986.On 19 August 1987, the complainants filed an ex-parte motion for the issuance of a writ of execution and appointment of special sheriff.

x x x x x x x x xOn 21 August 1987, the Regional Director issued an Order directing the respondent to put up a cash or surety bond otherwise a writ of execution will be issued.

x x x x x x x x xWhen the respondent failed to post a cash/surety bond, and upon motion for the issuance of a writ of execution by the complainants, the Regional Director, on 14 September 1987 issued a writ of execution appointing Mr. John Espiridion C. Ramos as Special Sheriff and directing him to do the following:

You are to collect the above-stated amount from the respondent and deposit the same with Cashier of this Office for appropriate disposition to herein complainants under the supervision of the office of the Director. Otherwise, you are to execute this writ by attaching the goods and chattels of the respondent not exempt from execution or in case of insufficiency thereof against the real or immovable property of the respondent.

The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and seized three (3) units of Peterbuilt trucks and then sold the same by public auction. Various materials and motor vehicles were also seized on different dates and sold at public auction by said sheriff.

x x x x x x x x xOn 11 December 1987, the respondent finally posted a supersedeas bond which prompted this Office to issue an Order dated 26 January 1988, restraining the complainants and sheriff Ramos from enforcing the writ of execution. . . .2

BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to respondent Undersecretary Dionisio de la Serna, contending that the Regional Director had no jurisdiction over the case.On September 16, 1988, the public respondent issued the first challenged Order upholding the jurisdiction of the Regional Director and annulling all the auction sales conducted by Special Sheriff John Ramos. The decretal portion of the said Order ruled:

WHEREFORE, the Order dated 31 July 1987 of the Regional Director, National Capital Region, is hereby AFFIRMED. Accordingly, the writ of execution dated 14 September 1987 issued in connection thereto is hereby declared VALID.However, the public auction sales conducted by special sheriff John Ramos pursuant to the writ of execution dated 14 September 1987 on 24 September 2, 20, 23 and 29 October 1987 are all hereby declared NULL AND VOID. Furthermore, the personal properties sold and the proceeds thereof which have been turned over to the complainants thru their legal counsel are hereby ordered returned to the custody of the respondent and the buyers respectively.SO ORDERED.3

On October 13, 1988, a Motion for Reconsideration of the aforesaid order was presented by the complainants in Case No. NCR-LSED-CI-2047-87 but the same was denied.On November 7, 1988, a Motion for Intervention was filed by MFT Corporation, inviting attention to a Deed of Sale executed in its favor by Fidel Bermudez, the highest bidder in the auction sale conducted on October 29, 1987.On December 2, 1988, another Motion for Intervention was filed, this time by Salter Holdings Pty., Ltd., claiming that MFT Corporation assigned its rights over the subject properties in favor of movant as evidenced by a Sales Agreement between MFT Corp. and Salter Holdings Pty., Ltd.The two Motions for intervention were granted in the second questioned order dated December 14, 1988, directing the exclusion from annulment of the properties sold at the October 29, 1987 auction sale and claimed by the intervenors, including one cluster of junk mining machineries, equipment and supplies, and disposing thus:

WHEREFORE, in view of the foregoing, the motions for reconsideration filed by intervenors MFT and Salter are hereby granted. Correspondingly, this Office's Order dated 16 September 1988 is hereby modified to exclude from annulment "the one lot of junk mining machineries, equipment and supplies as-is-where-is" sold by Sheriff John C. Ramos in the auction sale of 29 October 1987.1âwphi1.nêt

x x x x x x x x xMotions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and the respondent employees but to no avail. The same were likewise denied in the third assailed Order dated February 13, 1989.Hence, the petition under scrutiny, ascribing grave abuse of discretion amounting to lack or excess of jurisdiction to the public respondent in issuing the three Orders under attack.The questioned Orders aforementioned have given rise to the issues: (1) whether the Regional Director has jurisdiction over the complaint filed by the employees of BBGMI; and (2) whether or not the auction sales conducted by the said Special Sheriff are valid.Anent the first issue, an affirmative ruling is indicated. The Regional Director has jurisdiction over the BBGMI employees who are the complainants in Case Number NCR-LSED-CI-2047-87.The subject labor standards case of the petition arose from the visitorial and enforcement powers by the Regional Director of Department of Labor and Employment (DOLE). Labor standards refers to the minimum requirements prescribed by existing laws, rules and regulations relating to wages, hours of work, cost of living allowance and other monetary and welfare benefits, including occupational, safety and health standards.4 Labor standards cases are governed by Article 128(b) of the Labor Code.The pivot of inquiry here is whether the Regional Director has jurisdiction over subject labor standards case.As can be gleaned from the records on hand, subject labor standards case was filed on February 5, 1987 at which time Article 128 (b) read as follows5:

Art. 128 (b) Visitorial and enforcement powers —(b) The Minister of Labor or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.

Petitioner theorizes that the Regional Director is without jurisdiction over subject case, placing reliance on the ruling in Zambales Base Inc. vs. Minister of Labor6 and Oreshoot Mining Company vs. Arellano.7

Respondent Undersecretary Dionisio C. Dela Serna, on the other hand, upheld the jurisdiction of Regional Director Luna C. Piezas by relying on E.O. 111, to quote:

Considering therefore that there still exists an employer-employee relationship between the parties; that the case involves violations of the labor standard provisions of the labor code; that the issues therein could be resolved without considering evidentiary matters that are not verifiable in the

Corpo (p.10-11) 25normal course of inspection; and, if only to give meaning and not render nugatory and meaningless the visitorial and enforcement powers of the Secretary of Labor and Employment as provided by Article 128(b) of the Labor Code, as amended by Section 2 of Executive Order No. 111 which states:

The provisions of article 217 of this code to the contrary notwithstanding and in cases where the relationship of employer-employee still exists, the Minister of Labor and Employment or his duly authorized representative shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provision of this Code based on the findings of the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officers and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary course of inspection.

We agree with the complainants that the regional office a quo has jurisdiction to hear and decide the instant labor standard case.x x x x x x x x x8

The Court agrees with the public respondent. In the case of Maternity Children's Hospital vs. Secretary of Labor(174 SCRA 632), the Court in upholding the jurisdiction of the Regional Director over the complaint on underpayment of wages and ECOLAs filed on May 23, 1986, by the employees of Maternity Children's Hospital, held:

This is a labor standards case and is governed by Art. 128(b) of the Labor Code, as amended by E.O. 111.x x x x x x x x x

Prior to the promulgation of E.O. 111 on December 24, 1986, the Regional Director's authority over money claims was unclear. The complaint in the present case was filed on May 23, 1986 when E.O. 111 was not yet in effect. . . .We believe, however, that even in the absence of E.O. 111, Regional Directors already had enforcement powers over money claims, effective under P.D. 850, issued on December 16, 1975, which transferred labor standards cases from the arbitration system to the enforcement system.

In the aforecited case, the Court in reinforcing its conclusion that Regional Director has jurisdiction over labor standards cases, treated E.O. 111 as a curative statute, ruling as follows:

E.O. No. 111 was issued on December 24, 1986 or three (3) months after the promulgation of the Secretary of Labor's decision upholding private respondents' salary differentials and ECOLAs on September 24, 1986. The amendment of the visitorial and enforcement powers of the Regional Director (Article 128(b)) by said E.O. 111 reflects the intention enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional Directors to resolve uncontested money claims in cases where an employer-employee relationship still exists. This intention must be given weight and entitled to great respect. As held in Progressive Worker's Union, et al. vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:

. . . The interpretation by officers of laws which are entrusted to their administration is entitled to great respect. We see no reason to detract from this rudimentary rule in administrative law, particularly when later events have proved said interpretation to be in accord with the legislative intent. . .

The proceedings before the Regional Director must, perforce be upheld on the basis of Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive order "to be considered in the nature of a curative statute with retrospective application." (Progressive Workers' Union, et al. vs. Hon. Aguas, et al. (Supra); M. Garcia vs. Judge A. Martinez, et al. G.R. No. I-47629, may 28, 1979, 90 SCRA 331).

With regard to the petitioner's reliance on the cases of Zambales Base, Inc. vs. Minister of Labor (supra) andOreshoot Mining Company vs. Arellano, (supra), this is misplaced. In the case of Zambales Base, Inc., the court has already ruled that:

. . ., in view of the promulgation of Executive Order No. 111, Zambales Base Metals vs. Minister of Labor is no longer good law. (Emphasis supplied) Executive Order No. 111 is in the character of a curative law, that is to say, it was intended to remedy a defect that, in the opinion of the Legislature (the incumbent Chief Executive in this case, in the exercise of her lawmaking powers under the Freedom Constitution) had attached to the provision under the amendment.

x x x x x x x x x9

The case of Oreshoot Mining Corporation, on the other hand, involved money claims of illegally dismissed employees. As the employer-employee relationship has already ceased and reinstatement is sought, jurisdiction necessarily falls under the Labor Arbiter. Petitioner should not have used this to support its theory as this petition involves labor standards cases and not monetary claims of illegally dismissed employees.The Court would have ruled differently had the petitioner shown that subject labor standards case is within the purview of the exception clause in Article 128 (b) of the Labor Code. Said provision requires the concurrence of the following elements in order to divest the Regional Director or his representatives of jurisdiction, to wit: (a) that the petitioner (employer) contests the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection.10

Nowhere in the records does it appear that the petitioner alleged any of the aforestated grounds. In fact, in its Motion for Reconsideration of the Order of the Regional Director dated August 20, 1987, the grounds which petitioner raised were the following:

1. This Honorable Office has no jurisdiction to hear this case and its Order of 31 October 1987 is therefore null and void;2. Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole party respondent, the complaint should have been directed also against the Asset Privatization Trust.

In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as the Urgent Omnibus Motion to declare void the Writ of Execution for lack of jurisdiction and the Oppositions it filed on the Motions for Intervention questioning the legal personality of the intervenors, questions as to the amounts complained of by the employees or absence of violation of labor standards laws were never raised. Raising lack of jurisdiction in a Motion to Dismiss is not the contest contemplated by the exception clause under Article 128(b) of the Labor Code which would take the case out of the jurisdiction of the Regional Director and bring it before the Labor Arbiter.The only instance when there was a semblance of raising the aforestated grounds, was when they filed an Appeal Memorandum dated January 14, 1988, before the respondent undersecretary. In the said Appeal Memorandum, petitioner comes up with the defense that the Regional Director was without jurisdiction, as employer-employee relationship was absent, since petitioner had ceased doing business since 1985.Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint Inspection Authority No. CI-2-047-87, were not allowed to look into records, vouchers and other related documents. The officers of the petitioner alleged that the company is presently under receivership of the Development Bank of the Philippines.11In lieu of this, the Regional Director had ordered that a summary investigation be conducted.12 Despite proper notices, the petitioner refused to appear before the Regional Director. To give it another chance, an order to file its position paper was issued to substantiate its defenses. Notwithstanding all these opportunities to be heard, petitioner chose not to avail of such.As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, (266 SCRA 111):

. . . Under Art. 128(a) of the Labor Code, the Secretary of Labor of his duly authorized representatives, such as the Regional Directors, has visitorial powers which authorize him to inspect the records and premises of an employer at any time of the day or night whenever work is being undertaken therein, to question any employee and investigate any fact, condition or matter, and to determine violations of labor laws, wage orders or rules and

regulations. If the employer refuses to attend the inspection or conference or to submit any record, such as payrolls and daily time records, he will be deemed to have waived his right to present evidence. (emphasis supplied)

Petitioner's refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the premises of their head office in Makati and the failure to file their position paper is equivalent to a waiver of its right to contest the claims of the employees. This Court had occasion to hold there is no violation of due process where the Regional Director merely required the submission of position papers and resolved the case summarily thereafter.13 Furthermore, the issuance of the compliance order was well within the jurisdiction of the Regional Director, as Section 14 of the Rules on the Disposition of Labor Standards Cases provides:

Sec. 14. Failure to Appear — Where the employer or the complainant fails or refuses to appear during the investigation, despite proper notice, for two (2) consecutive hearings without justifiable reasons, the hearing officer may recommend to the Regional Director the issuance of a compliance order based on the evidence at hand or an order of dismissal of the complaint as the case may be. (Emphasis supplied)

It bears stressing that this petition involves a labor standards case and it is in keeping with the law that "the worker need not litigate to get what legally belongs to him, for the whole enforcement machinery of the Department of Labor exists to insure its expeditious delivery to him free of charge."14

Thus, their claim of closure for business, among other things, are factual issues which cannot be brought here for the first time. As petitioner refused to participate in the proceedings below where it could have ventilated the appropriate defenses, to do so in this petition is unavailing. The reason for this is that factual issues are not proper subjects of a special civil action for certiorari to the Supreme Court.15

It is therefore abundantly clear that at the time of the filing of the claims of petitioner's employees, the Regional Director was already exercising visitorial and enforcement powers.Regional Director's visitorial and enforcement powers under Art. 128 (b) has undergone series of amendments which the Court feels to be worth mentioning.Confusion was engendered by the promulgation of the decision in the case of Servando's Inc. vs. Secretary of Labor and Employment and the Regional Director, Region VI, Department of Labor and Employment.16 In the said case, the Regional Director took cognizance of the labor standards cases of the employees of Servando's Inc., but this Court held that:

In the case of Briad Agro Development Corporation vs. Dela Cerna and Camus Engineering Corp. vs. Sec.Of labor applying E.O. 111 the Court recognized the concurrent jurisdiction of the Secretary of labor (or Regional Directors) and the labor Arbiters to pass on employees money claims, including those cases which the labor Arbiters had previously exercised jurisdiction. However, in a subsequent modificatory resolution in the Briad Agro Case, dated 9 November 1989, the Court modified its original decision in view of the enactment of RA 6715, and upheld the power of the Regional Directors to adjudicate money claims subject to the conditions set forth in Section 2 of said law (RA 6715).The power then of the Regional Director (under the present state of law) to adjudicate employees money claims is subject to the concurrence of all the requisites provided under Sec. 2 of RA 6715, to wit:

(a) the claim is represented by an employer or person employed in domestic or household service, or househelper;(b) the claim arises from employer-employee relationship;(c) the claimant does not seek reinstatement; and(d) the aggregate money claim of each employee or househelper does not exceed P5,000.

x x x x x x x x x17

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by RA 6715 as to include labor standards cases under Article 128 (b) and no longer limited to ordinary monetary claims under Article 129.In fact, in the Motion for Reconsideration18 presented by the private respondents in the Servando case, the court applied more squarely the P5,000 limit to the visitorial and enforcement power of the Regional Director, to wit:

To construe the visitorial power of the Secretary of Labor to order and enforce compliance with labor laws as including the power to hear and decide cases involving employee's claims for wages, arising from employer-employee relations, even if the amount of said claims exceed P5,000 for each employee, would, in our considered opinion, emasculate and render meaningless, if not useless, the provisions of Art. 217 (a) and (6) and Article 129 of the Labor Code which, as above-pointed out, confer exclusive jurisdiction on the Labor Arbiter to hear and decide such employees' claims, regardless of amount, can be heard and determined by the Secretary of Labor his visitorial power. This does not, however, appear to be the legislative intent.

But prevailing law and jurisprudence rendered the Servando ruling inapplicable. In the recent case of Francisco Guico, Jr. versus The Honorable Secretary of Labor & Employment Leonardo A. Quisumbing, GR # 131750, promulgated on November 16, 1998, this Court upheld the jurisdiction of the Regional Director notwithstanding the fact that the amounts awarded exceeded P5,000.Republic Act 7730, the law governing the visitorial and enforcement powers of the Labor Secretary and his representatives reads:

Art. 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

x x x x x x x x x(emphasis supplied)The present law, RA 7730, can be considered a curative statute to reinforce the conclusion that the Regional Director has jurisdiction over the present labor standards case.Well-settled is the rule that jurisdiction over the subject matter is determined by the law in force when the action was commenced, unless a subsequent statute provides for its retroactive application, as when it is a curative legislation.19

Curative statutes are intended to supply defects, abridge superfluities in existing laws and curb certain evils. They are intended to enable persons to carry into effect that which they have designed and intended, but has failed of expected legal consequence by reason of some statutory disability or irregularity in their own action. They make valid that which, before the enactment of the statute, was invalid.20

In arriving at this conclusion, the case of Briad Agro Development vs. De La Cerna21 comes to the fore. In the said case, RA 6115 was held to be a curative statute. There, the Court ruled that RA 6715 is deemed a curative statute and should be applied to pending cases. The rationale of the ruling of the Court was that prior to RA 6715, Article 217 as amended by E.O. 111, created a scenario where the Labor Arbiter and the Regional Director of DOLE had overlapping jurisdiction over money claims. Such a situation was viewed as a defect in the law so that when RA 6715 was passed, it was treated or interpreted by the Court as a rectification of the infirmity of the law, and therefore curative in nature, with retroactive application.Parenthetically, the same rationale applies in treating RA 7730 as a curative statute. Explicit in its title22 is the legislative intent to rectify the error brought about by this Court's ruling that RA 6715 covers even labor standards cases where the amounts to be awarded by the Regional Director exceed P5,000 as provided for under RA 6715. Congressional records relative to Republic Act 7730 reveal that, "this bill seeks to do away with the jurisdictional limitations imposed thru said ruling (referring to Servando) and to finally settle any lingering doubts on the visitorial and enforcement powers of the Secretary of Labor and Employment."23

Corpo (p.10-11) 26All the foregoing studiedly considered, the ineluctable conclusion is that the application of RA 7730 to the case under consideration is proper.Thus, it is decisively clear that the public respondent did not act with grave abuse of discretion in issuing the Order dated September 16, 1988.The second issue for resolution is the validity of the auction sales conducted by Special Sheriff Ramos. It bears stressing that the writ of execution issued by the Regional Director led to the several auction sales conducted on September 24, 1987, October 2, 1987, October 23, 1987, October 29, 1987 and October 30, 1987.In the first Order of public respondent, the five (5) auction sales were declared null and void. As the public respondent put it, "the scandalously low price for which the personal properties of the respondent were sold leads us to no other recourse but to invalidate the auction sales conducted by the special sheriff."24

In the September 16, 1988 Order25 of public respondent, the personal properties and corresponding prices for which they were sold were as follows:Personal properties sold on September 24, 1987:

1. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A4102-65, Chassis No. 139155-P not running condition.2. One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-8040, Chassis No. 6A410235, truck with Engine No. (Truck 4) not running condition.3. One (1) unit 1978 Model peterbuilt truck with Engine No. 6A410319, Chassis No. 139163-P Truck No. 4 not running condition.

Proceeds of Sale P178,000.00Personal Properties Sold on October 2, 1987

1. One (1) unit peterbuilt truck model 1978, with Engine No. 6A410347, Chassis No. 1391539-P.2. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A410325, Chassis No. 139149.3. One (1) unit payloader (caterpillar with Engine No. (not visible) 966.4. One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not visible); and one (1) Lot of scarp irons impounded inside the Batong Buhay Compound, Calanan, Kalinga Apayao.5. One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate No. PBV 386.

Proceeds of Sale P228,750.00Personal Properties Sold on October 23, 1987:

1. One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340, Chassis No. 81400500227 Plate No. BAT 353, burned, damage not running condition, type of body jeep motor not visible.2. Two (2) units peterbuilts, damaged, burned motor Nos. (not visible) and Chassis Nos. not visible.3. One (1) Unit Layland, burned, damaged and Motor No. not visible.4. Two (units) air compressor, burned, damaged and one (1) generator.5. One (1) Unit Loader Michigan 50, damaged and burned, and6. One (1) rock crasher, damaged, burned, scrap iron junk.

Proceeds of Sale P98,000.00Properties sold on October 29, 1987

1. One (1) lot of scrap construction materials.2. One (1) lot of scrap mining machineries equipments and supplies.3. One (1) lot of junk machineries, equipments and supplies.

Proceeds of Sale P1,699,999.99Personal Properties Sold on October 20, 1987*

1. One (1) lot of scrap construction materials.2. One (1) lot of scrap mining machineries, equipments and supplies.

Proceeds of Sale P2,185,000.00Total Proceeds Sale P4,389,749.99

to satisfy the judgment award in the amount of P4,818,746.00.As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial agencies are not to be disturbed absent any showing of grave abuse of discretion tainting the same. But in the case under scrutiny, there was grave abuse of discretion when the public respondent, without any evidentiary support, adjudged such prices as "scandalously low". He merely relied on the self-serving assertion by the petitioner that the value of the auctioned properties was more than the price bid. Obviously, this ratiocination did not suffice to set aside the auction sales.The presumption of regularity in the performance of official function is applicable here. Conformably, any party alleging irregularity vitiating auction sales must come forward with clear and convincing proof.Furthermore, it is a well-settled principle that:

Mere inadequacy of price is not, of itself sufficient ground to set aside an execution sale where the sale is regular, proper and legal in other respects, the parties stand on an equal footing, there are no confidential relation between them, there is no element of fraud, unfairness, or oppression, and there is no misconduct, accident, mistake or surprise connected with, and tending to cause, the inadequacy.26

Consequently, in declaring the nullity of the subject auction sales on the ground of inadequacy of price, the public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction.But, this is not to declare the questioned auction sales as valid. The same are null and void since on the properties of petitioner involved was constituted a mortgage between petitioner and the Development Bank of the Philippines, as shown by the:

(a) Deed of Mortgage dated December 28, 1973;(b) Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975;(c) Amendment to Joint Mortgage dated October 18, 1976.(d) Confirmation of Mortgage dated March 27, 1979; and(e) Additional Joint First Mortgage dated March 31, 1981.27

The aforementioned documents were executed between the petitioner and Development Bank of the Philippines (DBP) even prior to the filing of the complaint of petitioner's employees. The properties having been mortgaged to DBP, the applicable law is Section 14 of Executive Order No. 81, dated 3 December 1986, otherwise known as the "The 1986 Revised Charter of the Development Bank of the Philippines," which exempts the properties of petitioner mortgaged to DBP from attachment or execution sales. Section 14 of E.O. 81, reads:

Sec. 14. Exemption from Attachment. The provisions of any law to the contrary notwithstanding, securities on loans and/or other accommodations granted by the Bank or its predecessor-in-interest shall not be subject to attachment, execution or any other court process, nor shall they be included in the property of insolvent persons or institutions, unless all debts and obligations of the Bank or its predecessor-in-interest, penalties, collection of expenses, and other charges, subject to the provisions of paragraphs (e) of Sec. 9 of this Charter.

In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive Trustee of the Asset Privatization Trust, to the Office of the Clerk of Court of the Supreme Court, certified that the petitioner is covered by Proclamation No. 50 issued on December 8, 1986 by President Corazon C. Aquino.Quoted hereunder are the pertinent portions of the said letter:28

RE: BBGMI vs. Hon. dela Serna, GR No. 86963Supreme Court CertiorariSIR:

x x x x x x x x x. . . all the assets (real and personal/chattel) of Batong Buhay Gold Mines, Inc. (BBGMI) have been transferred and entrusted to the Asset Privatization Trust (APT) by virtue of Proclamation No. 50 dated December 8, 1986 of her Excellency, President Corazon C. Aquino. All the said assets of BBGMI are covered by real and chattel mortgages executed in favor of the Philippine National Bank ("PNB"), the Development Bank of the Philippines ("DBP") and the National Investment and Development Corporation ("NIDC").

x x x x x x x x xSec. 14, Executive Order No. 81:

x x x x x x x x xPursuant to the above-quoted provision of law, you are hereby warned that all the assets (real and personal/chattel) of BBGMI are exempted from writs of execution, attachment, or any other lien or court processes. The Government, through APT, shall initiate any administrative measures and remedies against you for any violation of the vested rights of PNB, DBP and APT.

x x x x x x x x x(sgd).

JOSE C. SISONThe exemption referred to in the aforecited letter is one of the circumstances contemplated by Rule 39 of the Revised Rules of Court, to wit:

Sec. 13. Property exempt from execution. — Except as otherwise expressly provided by law, the following properties, and no other, shall be exempt from execution:

x x x x x x x x x(m) Properties specially exempted by law.

x x x x x x x x xPrivate respondents contend that even if subject properties were mortgaged to DBP (now under Asset Privatization Trust), Article 11029 of the Labor Code, as amended by RA 6715, applies just the same. According to them, the said provision of law grants preference to money claims of workers over and above all credits of the petitioner. This contention is untenable. In the case of DBP vs. NLRC,30 the Supreme Court held that the workers preference regarding wages and other monetary claims under Article 110 of the Labor Code, as amended, contemplates bankruptcy or liquidation proceedings of the employer's business. What is more, it does not disregard the preferential lien of mortgagees considered as preferred credits under the provisions of the New Civil Code on the classification, concurrence and preference of credits.We now come to the issue with respect to the second Order, dated December 14, 1988, which declared as valid the auction sale conducted on October 29, 1987 by Special Sheriff John Ramos. Public respondent had no authority to validate the said auction sale on the ground that the intervenors, MFT Corporation and Salter Holdings Pty., Ltd., as purchasers for value, acquired legal title over subject properties.It is well to remember that the said properties were transferred to the intervenors, when Fidel Bermudez, the highest bidder at the auction sale, sold the properties to MFT Corporation which, in turn, sold the same properties to Salter Holdings Pty., Ltd. Public respondent opined that the contract of sale between the intervenors and the highest bidder should be respected as these sales took place during the interregnum after the auction sale was conducted on October 29, 1987 and before the issuance of the first disputed Order declaring all the auction sales null and void.On this issue, the Court rules otherwise.As regards personal properties, the general rule is that title, like a stream, cannot rise higher than its source.31Consequently, a seller without title cannot transfer a title better than what he holds. MFT Corporation and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest bidder of a void auction sale over properties exempt from execution. Such being the case, the subsequent sale made by him (Fidel Bermudez) is incapable of vesting title or ownership in the vendee.The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as valid, was issued with grave abuse of discretion amounting to lack or excess of jurisdiction.WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated December 14, 1988 of Undersecretary Dionisio dela Serna is concerned, which Order is SET ASIDE. The Order of September 16, 1988, upholding the jurisdiction of the Regional Director, is AFFIRMED. No pronouncement as to costs.1âwphi1.nêtSO ORDERED.

December 21, 1933

G.R. No. L-38684CYRUS PADGETT, plaintiff-appellee,vs.BABCOCK & TEMPLETON, INC., and W. R. BABCOCK, defendants-appellants.

J. F. Boomer for appellant Babcock & Templeton, Inc.W. R. Babcock in his own behalf.

, J.:

By resolution approved on November 25, 1933, this court set aside its decision in this case, which was promulgated on October 13th of the same year, and thereby granted a rehearing before the second division. The defendant W. R. Babcock and his counsel J. F. Boomer, both of whom were present during the said rehearing again argued the merits of the case. Nobody appeared for the plaintiff.

The facts of the case have not suffered any change. They remain the same as those which we stated in the original decision as follows: "The appellee was an employee of the appellant corporation and rendered services as such from January 1, 1923, to April 15, 1929. During that period he bought 35 shares thereof at

Corpo (p.10-11) 27P100 a share at the suggestion of the president of said corporation. He was also the recipient of 9 shares by way of bonus during Christmas seasons. In this way the said appellee became the owner of 44 shares for which the 12 certificates, Exhibits F to F-11, were issued in his favor. The word "nontransferable" appears on each and every one of these certificates. Before severing his connections with the said corporation, the appellee proposed to the president that the said corporation buy his 44 shares at par value plus the interest thereon, or that he be authorized to sell them to other persons. The corporation bought similar shares belonging to other employees, at par value. Sometime later, the said president offered to buy the appellee's shares first at P85 each and then at P80. The appellee did not agree thereto."

The defendants admit that the 44 shares in question have become the property of the plaintiff. They likewise grant that under the law the said appellee has the right to have the restriction "nontransferable" appearing on the 12 certificates eliminated therefrom. However, they vigorously contend that there is no existing law nor authority in support of the proposition that they are bound to redeem or buy said shares at par value. Their admission is only limited to the proposition that after the restriction appearing thereon is eliminated, the plaintiff may sell the said shares to anybody, at their market value or at any price he sees fit.

We have not had the opportunity of hearing the opinion of the counsel for the plaintiff. We have again studied the laws applicable thereto and have searched for more authorities on the subject under discussion, but we have not found anything that bears directly on the question whether or not the defendants may be compelled, in this case, to buy the shares in question at par value. However, the opinion seems to be unanimous that a restriction imposed upon a certificate of shares, similar to the ones under consideration, is null and void on the ground that it constitutes and unreasonable limitation of the right of ownership and is in restraint of trade.

Shares of corporate stock being regarded as property, the owner of such shares may, as a general rule, dispose of them as he sees fit, unless the corporation has been dissolved, or unless the right to do so is properly restricted, or the owner's privilege of disposing of his shares has been hampered by his own action. (14 C. J., sec. 1033, pp. 663, 664.)

Any restriction on a stockholder's right to dispose of his shares must be construed strictly; and any attempt to restrain a transfer of shares is regarded as being in restraint of trade, in the absence of a valid lien upon its shares, and except to the extent that valid restrictive regulations and agreements exist and are applicable. Subject only to such restrictions, a stockholder cannot be controlled in or restrained from exercising his right to transfer by the corporation or its officers or by other stockholders, even though the sale is to a competitor of the company, or to an insolvent person, or even though a controlling interest is sold to one purchaser. (Ibid., sec. 1035, pp. 665, 666.)

In the case of Fleischer vs. Botica Nolasco Co. (47 Phil. 583), we have discussed the validity of a clause in the by-laws of the defendant corporation, which provided that, under the same conditions, the owner of a share of stock could not sell it to another person except to the defendant corporation. In deciding the legality and validity of said restriction, we held:

The only restraint imposed by the Corporation Law upon transfer of shares is found in section 35 of Act No. 1459, quoted above, as follows: "No transfer, however, shall be valid, except as between the parties, until the transfer is entered and noted upon the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate, and the number of shares transferred." This restriction is necessary in order that the officers of the corporation may know who are the stockholders, which is essential in conducting elections of officers, in calling meetings of stockholders, and for other purposes. But any restriction of the nature of that imposed in the by-law now in question, is ultra vires, violative of the property rights of shareholders, and in restraint of trade. (Id., p. 592.)

It is obvious, therefore, that the restriction consisting in the word "nontransferable", appearing on the 12 certificates, Exhibits F to F-11, is illegal and should be eliminated pkf02N.

As we have hereinbefore stated, there is no existing law nor authority in support of the plaintiff's claim to the effect that the defendants are obliged to buy his shares of stock value at par value, plus the interest demanded thereon. In this respect, we hold that there has been no such contract, either express or implied, between the plaintiff and the defendants. In the absence of a similar contractual obligation and of a legal provision applicable thereto, it is logical to conclude that it would be unjust and unreasonable to compel the said defendants to comply with a non-existent or imaginary obligation. Whereupon, we are likewise compelled to conclude that the judgment originally rendered to that effect is untenable and should be set aside.

Wherefore, the judgment appealed from is hereby reversed, and the restriction consisting in the word "nontransferable" appearing on the 12 certificates of shares of stock, is declared null and void. The defendants herein are hereby ordered to cancel the certificates in question and to issue in lieu thereof new ones without any restriction whatsoever, with the costs of both instances against the said defendant-appellants. So ordered.

SECOND DIVISION[G.R. No. L-60066. July 31, 1986.]FELISA RIVERA and GODOFREDO RIVERA, petitioners, vs. HON. ALFREDO C. FLORENDO Presiding Judge, Court, of First Instance of Manila, Branch XXXVI, and PACIFICO AQUINO, respondents.D E C I S I O NFERNAN, J p:The sole legal issue involved in this petition for review is whether or not the period of the verbal lease agreement between petitioners and private respondent has expired within the meaning of Section 5(c) of Batas Pambansa Bilang 25. 1 In the light of our pronouncement in Baens vs. Court of Appeals, 125 SCRA 634, We rule in the affirmative.Petitioners-spouses Felisa and Godofredo Rivera were the owners of apartment units bearing numbers 2034, 2036 and 2038 on Quirino Avenue, Pandacan, Manila. Sometime in 1965, private respondent Pacifico Aquino started occupying the apartment unit designated as No. 2034 under a verbal lease agreement with petitioners. Although a monthly rent of P120.00 was agreed upon, no stipulation was made as to the period of lease.In 1979, after having judicially ejected the tenant of unit No. 2036, petitioners moved into said premises. In December of the same year, however, petitioners sold unit No. 2036 to one Mister Mistar in order to raise enough money to pay their loan with the Monte de Piedad Loan and Savings Bank and thereby save the whole apartment building from foreclosure. Petitioners thereafter moved to an apartment in Guadalupe, Makati, which they rented at P500.00 a month.

On January 24, 1980, petitioners notified private respondent thru a letter of their need of the premises being occupied by the latter and asked that he vacate the same after ninety (90) days from notice. When private respondent refused to vacate the premises at the end of said period, petitioners filed on May 2, 1980 before the then City Court of Manila a complaint for ejectment against private respondent docketed as Civil Case No. 054962-CV. 2 After trial, the City Court rendered a decision on January 27, 1981, the dispositive portion of which reads:"Premises considered, judgment is hereby rendered in favor of plaintiffs and against defendant, ordering the latter:1. and all other persons claiming under him to vacate the premises in question and surrender possession thereof to plaintiffs;2. to pay plaintiffs the rental from January, 1981 at the rate of P120.00 a month until the premises in question shall have been fully vacated and possession thereof surrendered to plaintiffs;3. to pay plaintiff the sum of P1,000.00 as attorney s fees; and4. to pay the cost of suit." 3 On appeal by private respondent, however, the then Court of First Instance in a decision dated May 28, 1981, reversed the decision of the city court and dismissed the complaint. It concluded that since the contract of lease had not yet expired, petitioners could not repossess the apartment unit notwithstanding their need to use the same as their dwelling place. 4 Upon denial of their motion for reconsideration, petitioners elevated the case to the then Court of Appeals on a petition for review. In a resolution dated November 12, 1981, the Court of Appeals gave due course to the petition and required private respondent to file an answer. 5 In view, however, of the failure of service of said resolution upon Atty. Ephraim Serquina; counsel for private respondent, and private respondent himself, both of whom could not be found at the addresses stated in the petition, the appellate court on January 28, 1982 resolved to consider the petition submitted for resolution without respondent's answer. 6 On February 17, 1982, the Court of Appeals certified the petition to this Court as one involving pure question of law. 7 On March 15, 1982, We accepted the petition and required private respondent to file an answer within ten (10) days from notice. 8 When service of said resolution could not be made on counsel for private respondent, We required counsel for petitioners to furnish the Court with the new address of Atty. Serquina, but he, too, did not have the information required. Thus, service was made on private respondent himself.On December 8, 1982, Atty. Nicomedes R. Martelino, Jr. entered his appearance as counsel for private respondent. 9 On June 29, 1983, We gave due course to the petition and reiterated our resolution of March 15, 1982 requiring private respondent to file an answer within ten (10) days from notice. No answer was filed. For such failure, We required Atty. Martelino, Jr. to show cause why no disciplinary action should be taken against him and to file the required Answer. 10 Still, no answer was forthcoming. Hence, on January 16, 1984, We fined Atty. Martelino, Jr. P200.00 for his failure to comply with our resolution. 11 He paid the fine only after he was ordered arrested.On September 3, 1984, We required private respondent himself to file an answer in view of his counsel's failure to do so. 12 On October 17, 1984, Ricardo Aquino, in behalf of his father, the private respondent, requested this Court for an extension of fifteen (15) days within which to file the answer. 13 On October 31, 1984, Atty. Jaime N. de la Cruz appearing as counsel for private respondent, filed another motion for extension of sixty (60) days, followed by a similar motion on November 2, 1984. On November 28, 1984, We granted counsel for private respondent only thirty (30) days instead of the sixty-day extension requested, with a warning that no further extension would be given. 14 Regrettably, still, no answer was filed. Thus, on March 25, 1985, We resolved to suspend Atty. de la Cruz from the practice of law until further orders. 15 Atty. de la Cruz filed a motion for reconsideration of said resolution, alleging that he prepared the required answer in the first week of January, 1985 and gave all the copies to Ricardo Aquino for submission to the Court, with the instruction to furnish all the parties concerned with their respective copies. De la Cruz alleged further that without his knowledge, Ricardo Aquino left in the third week of January for the United States as an immigrant to join his father, Pacifico Aquino, without submitting the Answer to this Court; and that diligent search for the answer as well as the records of the case in the last known address of Ricardo Aquino had proven futile. 16 Attached to his motion was the certification of Barangay Chairman Zenaida de la Cruz of Barangay 856, City of Manila, stating that:"Messrs. Pacifico Aquino and Ricardo Aquino, who are members of this Barangay are no longer residing in their last known address at 2034 Pres. Quirino, Pandacan, Manila Information gathered revealed that said persons had already left for the United States as immigrants." 17 On August 1, 1985, Atty. de la Cruz filed a motion to withdraw as counsel for private respondent. In our resolution dated September 4, 1985, We granted said motion and likewise lifted the suspension imposed on Atty. de la Cruz. 18 Meanwhile, petitioner Felisa Rivera by herself or thru counsel had filed motions or sent several letters to this court, to wit: letters dated June 3, 1983, May 7, 1984, August 30, 1984, June 18, 1985, February 27, 1986 and May 21, 1986 19 requesting for an early resolution of the case and informing the Court that since private respondent and his son had left for the United States, the premises in question had been occupied by a relative of private respondent, without any rent being paid therefor.In denying petitioners' right to repossess the premises in question the then Court of First Instance reasoned out as follows:". . . Since there is no fixed or definite period of the verbal lease contract, it is clear that the applicability of Article 1673 of the Civil Code is suspended. Article 1673 provides:'Art. 1673. The lessor may judicially eject the lessee for any of the following causes:1. When the period agreed upon, or that which is fixed for the duration of leases under Article 1682 and 1687, has expired:xxx xxx xxx"In view of the findings of the court that the contract of lease is on a month to month basis, the duration of the lease is fixed by Article 1687, which provides partly that if the period for the lease has not been fixed, it is understood to be from month to month if it is monthly."If we apply the aforesaid provision of Article 1687 to the case at bar, it is obvious that the contract of lease had already expired considering that plaintiffs-appellees have given notice to the defendant-appellant three months in advance. However, this particular provision of the Civil Code has been suspended by Sec. 6 of Batas Pambansa Blg. 25 as quoted above. So, it is crystal clear that the contract of lease has not expired. The reason for the suspension of Article 1673 and 1687 insofar as they refer to residential units can be gleaned from the case of Salaria vs. Buenviaje, L-45642, February 28, 1978, 81 SCRA 722." 20 The conclusion reached by the respondent court is erroneous. Section 6 of Batas Pambansa Blg. 25 provides:"Sec. 6. Application of the Civil Code and Rules of Court of the Philippines. — Except when the lease is for a definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar as they refer to residential units covered by this Act shall be suspended during the effectivity of this Act, but other provisions of the Civil Code and the Rules of Court on lease contracts, insofar as they are not in conflict with the provisions of this Act, shall apply."What is suspended under the aforequoted provision of law is Article 1673 of the Civil Code of the Philippines and not Article 1687 of the same Code. The effect of said suspension is that independently of the grounds for ejectment enumerated in Batas Pambansa Blg. 25, the owner/lessor cannot eject the tenant by reason of the expiration of the period of lease as fixed or determined under Article 1687. It does not mean that the provisions of Article 1687 itself had been suspended. Thus, the determination of the period of a lease agreement can still be made in accordance with said Article 1687.Admittedly, no definite period for the lease was agreed upon by petitioners and private respondent. However, as the rent was paid on a monthly basis, the period of lease is considered to be from month to month in accordance with Article 1687. When petitioners gave private respondent notice to vacate the premises in question, the contract of lease is deemed to have expired as of the end of the month. As We have ruled in Baens v. Court of Appeals, supra, "even if the month to month arrangement is on a verbal basis, if it is shown that the lessor needs the property for his own use or for the use of an immediate member of the family or for

Corpo (p.10-11) 28any of the other statutory grounds to eject under Section 5 of Batas Pambansa Blg. 25, which happens to be applicable, then the lease is considered terminated as of the end of the month, after proper notice or demand to vacate has been given. [See Crisostomo v. Court of Appeals, 116 SCRA 199]."Respondent Court evidently overlooked a crucial factor in applying the Salaria case, supra, to the case at bar. It must be noted that the law involved therein was Presidential Decree No. 20. As said presidential decree did not recognize as a ground for ejectment the need of the lessor/owner of the leased premises, the only ground that therein plaintiff Buenviaje could legally rely upon was the expiration of the lease agreement under par. 1 of Article 1673, in relation to Article 1687 of the Civil Code. But precisely because said par. 1 of Article 1673 had been suspended by P.D. No. 20, it was obvious that therein plaintiff did not have any legal ground for ejecting petitioner Salaria.The law invoked in the case at bar, on the other hand, is Batas Pambansa Blg. 25. Section 5(c) thereof allows ejectment on the ground of need by the owner/lessor of the leased premises for his own use or that of a member of his immediate family. The inclusion of this ground was obviously intended to correct the inequity and hardship imposed by P.D. 20 on small landowners/lessors, whose property rights, protected as they are by the fundamental law itself, We upheld even during the effectivity of P.D. No. 20. 21 To adopt, therefore, the construction given by respondent court is to render Section 5(c) of Batas Pambansa Blg. 25 illusory in cases where the lease agreement is verbal and for an indefinite period, because in this case, the owner/lessor, notwithstanding his pressing and urgent need for the premises could never successfully eject the tenant as the period of lease would never expire during the effectivity of Batas Pambansa Blg. 25.Private respondent had migrated to the United States. He clearly had no need for the premises under consideration. Despite this, he obstinately and unmercifully resisted the right of petitioner to repossess said apartment unit, not only to the grave prejudice of the latter, but likewise at the risk of jeopardizing the career of the two counsels who represented him before this Court. We condemn this attitude of private respondent.The instant case, which is summary in nature, had dragged on for over five [5] years. To obviate further delay, the decision rendered herein is final and immediately executory.WHEREFORE, the petition is hereby granted. Private respondent and all other persons claiming under him are hereby ordered to vacate the premises known as No. 2034 Quirino Avenue, Pandacan, Manila, and to surrender possession thereof to petitioners. Private respondent is likewise ordered: a) to pay petitioners the rental from January, 1981 at the rate of P120.00 a month until the premises in question shall have been fully vacated and possession thereof surrendered to petitioners; b) to pay petitioners the sum of P1,000.00 as attorney's fees; and c) to pay treble costs. This decision is final and immediately executory.SO ORDERED.FIRST DIVISION[G.R. No. L-2808. August 31, 1951.]JOSEFA SANTAMARIA, assisted by her husband FRANCISCO SANTAMARIA, Jr., plaintiff-appellee, vs. The HONGKONG AND SHANGHAI BANKING CORPORATION and R. W. TAPLIN, defendants-appellants.Nicodemus L. Dasig and Sotto & Sotto for plaintiff and appellee.Quijano, Rosete & Tizon for defendants and appellants.SYLLABUS1. CORPORATIONS; STOCK CERTIFICATES; INDORSEMENT IN BLANK; STREET CERTIFICATE. — The certificate of stock in question was made out in the name of W, a broker, duly indorsed in blank by him and delivered to S for valuable consideration paid by the latter. Then S delivered it, as it was, to C, another broker, to comply with the latter's requirement that S deposit something on account if she wanted to buy shares of another mining corporation. C thereafter delivered to a bank the said certificate duly indorsed to said bank pursuant to a letter of hypothecation executed by C in favor of said bank. The said certificate was delivered to the bank in the ordinary course of business, together with many other securities, and at the time it was delivered the bank had no knowledge that the shares represented by the certificate belonged to S for it was in the form of a street certificate transferable by mere delivery. Held: S could have asked the corporation that had issued said certificate to cancel it and issue another in lieu thereof in her name to apprise the holder that she was the owner of said certificate. This she failed to do, and instead she delivered said certificate to C indorsed in blank, thereby clothing the latter with apparent title to the shares represented by said certificate including apparent authority to negotiate it. This was the proximate cause of the damage suffered by her. She is, therefore, estopped from claiming further title to or interest therein as against a bona fide pledgee or transferee thereof. A bona fide pledgee or transferee of a stock from the apparent owner is not chargeable with knowledge of the limitations placed on it by the real owner, or of any secret agreement relating to the use which might be made of the stock by the holder (12 Fletcher, Corporations, section 5562, p. 521). "Where one of two innocent parties must suffer by reason of a wrongful or unauthorized act, the loss must fall on the one who first trusted the wrongdoer and put in his hands the means of inflicting such loss". (Id.)2. ID.; ID.; ID,; STREET CERTIFICATE. — The certificate of stock in question was issued in the name of W, a broker, who indorsed it in blank, the bank would still have been justified in believing the previous indorsement being therefore guaranteed by the last indorser. Held: This certificate is what is known as street certificate. Upon its face, the holder was entitled to demand its transfer to his name from the issuing corporation. The bank is not obligated to look beyond the certificate to ascertain the ownership of the stock at the time he received it from C, it having been given pursuant to a letter of hypothecation. Even if said certificate had been in the name of S but indorsed in blank, the bank would still have been justified in believing that C had title thereto. It is a well-known practice that a certificate of stock, indorsed in blank, is deemed quasi negotiable, and as such the transferee thereof is justified in believing that it belongs to the holder and transferer (Reyman vs. Hamilton National Bank, 266 SW 1043; 12 Fletcher, Corporations, pp. 521-524; 525-527; McNeil vs. Tenth National Bank, 7 Am. Rep., 341).3. ID.; ID.; NOTATIONS IN HANDWRITING ON CERTIFICATE. — The fact that, on the right margin of the said certificate, the name of S appeared written, granting it to be true, cannot be considered sufficient reason to indicate that its owner was S, considering that said certificate was indorsed in blank by W, in whose name it had been issued, indorsement which was guaranteed by C's indorsement in blank and was transferred in due course by the latter to the Bank under a letter of hypothecation. Said indicium could at best give the impression that S was the original holder of the certificate.4. ID.; ID.; CLAIMS OF OWNERSHIP ADVERSE TO WHAT APPEARS ON CERTIFICATE. — Even assuming that S had really approached the proper official of the Bank demanding the return of the certificate or its value, such an incident would merely show that S has an adverse claim to the ownership of said certificate of stock, but that would not necessarily place the bank in a position to inquire as to the real basis of her claim, nor would it place the bank in the obligation to recognize her claim and return to her the certificate outright. A mere claim of ownership does not establish the fact of ownership.5. ID.; ID.; POSSESSION OF CERTIFICATE IS THE MOST THAT STOCKHOLDER CAN CLAIM. — The most that S could claim is the return to her of the said certificate of stock (Howison vs. Mechanics Sav. Bank, 183 Atl., p. 697). The defendant bank having expressed its willingness from the very beginning to compromise the case by delivering to S the new certificate of stock issued to the bank by the issuing corporation in lieu of the original, the defendant bank should be ordered to deliver to S the said new certificate of stock.D E C I S I O NBAUTISTA ANGELO, J p:This is an appeal from a decision of the Court of First Instance of Manila ordering the Hongkong and Shanghai Banking Corporation to pay to the plaintiff the sum of P8,041.20 plus the costs of suit. The case was certified to this Court by the Court of Appeals.The facts of this case as found by the Court of Appeals are as follows:

"Sometime in February, 1937, Mrs. Josefa T. Santamaria bought 10,000 shares of the Batangas Minerals, Inc. thru the offices of Woo, Uy-Tioco & Naftaly, a stock brokerage firm and paid therefor the sum of P8,041.20 as shown by receipt Exh. B. The buyer received Stock Certificate No. 517, Exh. "F", issued in the name of Woo, Uy-Tioco & Naftaly and indorsed in blank by this firm."On March 9, 1937, Mrs. Santamaria placed an order for the purchase of 10,000 shares of the Crown Mines, Inc. with R. J. Campos & Co., a brokerage firm, and delivered Certificate No. 517 to the latter as security therefor with the understanding that said certificate would be returned to her upon payment of the 10,000 Crown Mines, Inc. shares. Exh. D is the receipt of the certificate in question signed by one Mr. Cosculluela, Manager of the R. J. Campos & Co., Inc. According to certificate Exh. E, R. J. Campos & Co., Inc. bought for Mrs. Josefa T. Santamaria 10,000 shares of the Crown Mines, Inc. at .225 a share, or the total amount of P2,250."At the time of the delivery of stock Certificate No. 517 to R. J. Campos & Co., Inc., this certificate was in the same condition as that when Mrs. Santamaria received it from Woo, Uy-Tioco & Naftaly, with the sole difference that her name was later written in lead pencil on the upper right hand corner thereof."Two days later, on March 11, Mrs. Santamaria went to R. J. Campos & Co., Inc. to pay for her order of 10,000 Crown Mines shares and to get back Certificate No. 517. Cosculluela then informed her that R. J. Campos & Co., Inc. was no longer allowed to transact business due to a prohibition order from the Securities and Exchange Commission. She was also informed that her Stock certificate was in the possession of the Hongkong & Shanghai Banking Corporation."Certificate No. 517 came into the possession of the Hongkong & Shanghai Banking Corporation because R. J. Campos & Co., Inc. had opened an overdraft account with this bank and to this effect it had executed on April 16, 1936 a document of hypothecation, Exhibit 1, by the term of which R. J. Campos & Co., Inc. pledged to the said bank 'all stocks, shares and securities which I/we may hereafter come into their possession on my/our account and whether originally deposited for safe custody only or for any other purpose whatever or which may hereafter be deposited by me/us in lieu of or in addition to the Stocks, Shares and Securities now deposited or for any other purposes whatsoever.'"On March 11, 1937, as shown by Exhibit G, Certificate No. 517, already indorsed by R. J. Campos & Co., Inc. to the Hongkong & Shanghai Banking Corporation, was sent by the latter to the office of the Batangas Minerals, Inc. with the request that the same be cancelled and a new certificate be issued in the name of R. W. Taplin as trustee and nominee of the banking corporation. Robert W. Taplin was an officer of this institution in charge of the securities belonging to or claimed by the bank. As per this request the Batangas Minerals, Inc. on March 12, 1937, issued Certificate No. 715 in lieu of Certificate No. 517, in the name of Robert W. Taplin as trustee and nominee of the Hongkong & Shanghai Banking Corporation. (Exhibits G, H, I, J, 1, 4 and 5.)According to Mrs. Santamaria, she made the claim to the bank for her certificate, though she did not remember the exact date, but it was most likely on the following day of that when she went to Cosculluela for the purpose of paying her order for 10,000 shares of the Crown Mines, Inc., or else on March 13, 1937. In her interview with Taplin, the bank's representative, she informed him that the certificate belonged to her, and she demanded that it be returned to her. Taplin then replied that the bank did not know anything about the transaction had between her and R. J. Campos & Co., Inc., and that he could not do anything until the case of the bank with Campos shall have been terminated. This declaration was not contradicted by the adverse party."In Civil Case No. 51224, R. J. Campos & Co., Inc. was declared insolvent, and on July 12, 1937, the Hongkong & Shanghai Banking Corporation asked permission in the insolvency court to sell the R. J. Campos & Co., Inc., securities listed in its motion by virtue of the document of hypothecation Exhibit 1. In an order dated July 15, 1937, the insolvency court granted this motion."On June 3, 1938, to 10,000 shares of Batangas Minerals, Inc. represented by Certificate No. 715, were sold to the same bank by the Sheriff for P300 at the foreclosure sale authorized by said order. (Exhibits F, 2 and 3.)"R. J. Campos, the president of R. J. Campos & Co., Inc., was prosecuted for estafa and found guilty of this crime and was sentenced by the Manila Court of First Instance in Criminal Case No. 54428, to an imprisonment and to indemnify the offended party, Mrs. Josefa Santamaria, in the amount of P8,041.20 representing the value of the 10,000 shares of Batangas Minerals, Inc. (Exhibits I and J.) The decision was later confirmed by the Court of Appeals. (Exhibit J.) The offended party and R. W. Taplin were among the witnesses for the prosecution in this criminal case No. 54428. (Exhibit 4.)"When Mrs. Santamaria failed in her efforts to force the civil judgment rendered in her favor in the criminal case because the accused became insolvent, she filed her complaint in this case on October 11, 1940. At the trial both parties agreed that the 10,000 Batangas Minerals shares formerly represented by Certificate No. 517 and thereafter by Certificate No. 715, have no actual market value."The errors assigned by the defendants-appellants as committed by the lower court are:"IThe trial court erred in finding that the plaintiff-appellee was not chargeable with negligence in the transaction which gave rise to this case.IIThe trial court erred in holding that it was the obligation of the bank to have inquired into the ownership of the certificate when it received it from R. J. Campos & Company and in concluding that the bank was negligent for not having done so.IIIThe trial court erred in ordering defendants-appellants to pay to plaintiff the sum of P8,041.20".1. Defendants-appellants contend in the first place that the trial court erred in finding that the plaintiff-appellee was not chargeable with negligence in the transaction which gave rise to this case.A careful analysis of the facts seems to justify this contention. Certificate of stock No. 517 was made out in the name of Wo, Uy-Tioco & Naftaly, brokers, and was duly indorsed in blank by said brokers. This certificate of stock was delivered by plaintiff to R. J. Campos & Co., Inc. to comply with a requirement that she deposit something on account if she wanted to buy 10,000 shares of Crown Mines Inc. In making said deposit, plaintiff did not take any precaution to protect herself against the possible misuse of the shares represented by the certificate of stock. Plaintiff could have asked the corporation that had issued said certificate to cancel it and issue another in lieu thereof in her name to apprise the holder that she was the owner of said certificate. This she failed to do, and instead she delivered said certificate, as it was, to R. J. Campos & Co., Inc., thereby clothing the latter with apparent title to the shares represented by said certificate including apparent authority to negotiate it by delivering it to said company while it was indorsed in blank by the person or firm appearing on its face as the owner thereof. The defendant Bank had no knowledge of the circumstances under which the certificate of stock was delivered to R. J. Campos & Co., Inc., and had a perfect right to assume that R. J. Campos & Co., Inc. was lawfully in possession of the certificate in view of the fact that it was a street certificate, and was in such form as would entitle any possessor thereof to a transfer of the stock on the books of the corporation concerned. There is no question that, in this case, plaintiff made the negotiation of the certificate of stock to other parties possible and the confidence she placed in R. J. Campos & Co., Inc. made the wrong done possible. This was the proximate cause of the damage suffered by her. She is, therefore, estopped from claiming further title to or interest therein as against a bona fide pledgee or transferree thereof, for it is a well-known rule that a bona fide pledgee or transferree of a stock from the apparent owner is not chargeable with knowledge of the limitations placed on it by the real owner, or of any secret agreement relating to the use which might be made of the stock by the holder (Fletcher, Cyclopedia of Corporations, section 5562, Vol. 12, p. 521).On the other hand, it appears that this certificate of stock, indorsed as it was in blank by Woo, Uy-Tioco & Naftaly, stock brokers, was delivered to The Hongkong and Shanghai Banking Corporation by R. J. Campos & Co., Inc, duly indorsed by the latter, pursuant to a letter of hypothecation executed by R. J. Campos & Co., Inc., in favor of said Bank (Exhibit "1"). The said certificate was delivered to the Bank in the ordinary course of business, together with many other securities, and at the time it was delivered, the Bank had no knowledge that the shares represented by the certificate belonged to the plaintiff for, as already said, it was in the form of street certificate which was transferable by mere delivery. The rule is "where one of two innocent parties must suffer by reason of a wrongful or

Corpo (p.10-11) 29unauthorized act, the loss must fall on the one who first trusted the wrongdoer and put in his hands the means of inflicting such loss" (Fletcher, Cyclopedia of Corporations, supra).It is therefore clear that plaintiff, in failing to take the necessary precautions upon delivering the certificate of stock to her broker, was chargeable with negligence in the transaction which resulted to her own prejudice, and as such, she is estopped from asserting title to it as against the defendant Bank.2. The next contention of the defendant is that the trial court erred in holding that it was the obligation of the defendant Bank to have inquired into the ownership of the certificate when it received it from R. J. Campos & Co., Inc. and in concluding that the Bank was negligent for not having done so, contrary to the claim of the plaintiff that defendant Bank acted negligently, if not in bad faith, in accepting delivery of said certificate from R. J. Campos & Co., Inc.Let us now see the material facts on this point. Certificate No. 517 came into the possession of the defendant Bank because R. J. Campos & Co., Inc. had opened an overdraft account with said Bank and to this effect it had executed on April 16, 1946, a letter of hypothecation by the terms of which R. J. Campos & Co., Inc. pledged to the said Bank "all Stocks, Shares and Securities which I/we may hereafter come into their possession on my/our account and whether originally deposited for safe custody only or for any other purpose whatever or which may hereafter be deposited by me/us in lieu of or in addition to the Stocks, Shares, and Securities now deposited or for any other purpose whatsoever." On March 13,1937, plaintiff went to the office of the Bank to claim for her certificate. In her interview with one Robert W. Taplin, the officer in charge of the securities of that institution, she informed him that the certificate belonged to her and she demanded that it be returned to her. Taplin then replied that the Bank did not know anything about the transaction had between her and R. J. Campos & Co., Inc. and that he could not do anything until the case of the Bank with R. J. Campos & Co., Inc. had been terminated. It further appears that when the certificate of stock was delivered by plaintiff to R. J. Campos & Co., Inc., the manager thereof, Sebastian Cosculluela, wrote in pencil on the right margin the name of Josefa T. Santamaria, pursuant to the practice followed by said firm to write on that part of the certificate the name of the owner for purposes of identification. Upon the facts thus stated, the question that asserts itself is: was the defendant Bank obligated to inquire who was the real owner of the shares represented by the certificate of stock, and could it be charged with negligence for having failed to do so?It should be noted that the certificate of stock in question was issued in the name of the brokerage firm — Woo, Uy-Tioco & Naftaly and that it was duly indorsed in blank by said firm, and that said indorsement was guaranteed by R. J. Campos & Co., Inc., which in turn indorsed it in blank. This certificate is what it is known as street certificate. Upon its face, the holder was entitled to demand its transfer into his name from the issuing corporation. The Bank was not obligated to look beyond the certificate to ascertain the ownership of the stock at the time it received the same from R. J. Campos & Co., Inc., for it was given to the Bank pursuant to their letter of hypothecation. Even if said certificate had been in the name of the plaintiff but indorsed in blank, the Bank would still have been justified in believing that R. J. Campos & Co., Inc. had title thereto for the reason that it is a well-known practice that a certificate of stock, indorsed in blank, is deemed quasi negotiable, and as such the transferree thereof is justified in believing that it belongs to the holder and transferor (Heyman vs. Hamilton National Bank, 266 S.W. 1043; Fletcher, Cyclopedia of Corporations, Vol. 12, pp. 521-524, 525- 527; McNeil vs. Tenth National Bank, 7 Am. Rep. 341).

The only evidence in the record to show that the certificate of stock in question may not have belonged to R. J. Campos & Co., Inc. is the testimony of the plaintiff to the effect that she had approached Robert W. Taplin on March 13, 1937, and informed him that she was the true owner of said certificate and demanded the return thereof, or its value, but even assuming for the sake of argument that what plaintiff has stated is true, such an incident would merely show that plaintiff has an adverse claim to the ownership of said certificate of stock, but that would not necessarily place the Bank in the position to inquire as to the real basis of her claim, nor would it place the Bank in the obligation to recognize her claim and return to her the certificate outright. A mere claim of ownership does not establish the fact of ownership. The right of the plaintiff in such a case would be against the transferor. In fact, this is the attitude plaintiff has adopted when she filed a charge for estafa against Rafael J. Campos, which culminated in his prosecution and conviction, and it is only when she found him to be insolvent that she decided to go against the Bank. The fact that on the right margin of the said certificate the name of the plaintiff appeared written, granting it to be true, can not be considered sufficient reason to indicate that its owner was the plaintiff considering that said certificate was indorsed in blank by her brokers Woo, Uy-Tioco & Naftaly, was guaranteed by indorsement in blank by R. J. Campos & Co., Inc., and was transferred in due course by the latter to the Bank under their letter of hypothecation. Said indicium could at best give the impression that the plaintiff was the original holder of the certificate.The Court has noticed that the defendant Bank was willing from the very beginning to compromise this case by delivering to the plaintiff certificate of stock No. 715 that was issued to said Bank by the issuer corporation in lieu of the original as alleged and prayed for in its amended answer to the complaint dated April 2, 1941. Considering that in the light of the law and precedents applicable in this case, the most that plaintiff could claim is the return to her of the said certificate of stock (Howson vs. Mechanics Sav. Bank, 183 Atl., p. 697), the Court, regardless of the conclusions arrived at as above stated, is inclined to grant the formal tender made by the defendant to the plaintiff of said certificate.Wherefore, the decision of the lower court is hereby modified in the sense of ordering the defendant to deliver to the plaintiff certificate of stock No. 715, without pronouncement as to costs.G.R. No. 112941 February 18, 1999NEUGENE MARKETING INC., LEONCIO TAN, NICANOR MARTIN, SONNY MORENO, JOHNSON LEE and SECURITIES AND EXCHANGE COMMISSION, petitioners, vs.COURT OF APPEALS, ARSENIO YANG, JR., CHARLES O. SY, LOK CHUN SUEN, BAN HUA U. FLORES, BAN HA U. CHUA and ROGER REYES, respondents. PURISIMA, J.:At bar is a petition for review of the decision 1 of the Special Fifth Division of the Court of Appeals which reversed the decision of the Securities and Exchange Commission (SEC) annulling the dissolution of Neugene Marketing, Inc. (NEUGENE, for short).The SEC Hearing Panel gathered the facts, as follows:

On January 27, 1978, NEUGENE was duly registered with this Commission to engage in trading business for a term of fifty (50) years with the following as incorporators/directors, namely:

1. Johnson Lee (one of the petitioners);2. Lok Chun Suen (one of the respondents);3. Charles O. Sy (one of the respondents);4. Eugenio Flores, Jr. (husband of respondent Ban Hua U. Flores)5. Arsenio Yang, Jr. (one of the respondents)

The authorized capital stock of NEUGENE is THREE MILLION PESOS (P3,000.000.00) divided into THIRTY THOUSAND (P30,000) shares with a par value of ONE HUNDRED PESOS (P100.00) each. Out of this authorized capital stock, SIX HUNDRED THOUSAND PESOS (P600.000.00) had been subscribed by the following subscribers, namely:

NAME NO. OF AMOUNT———SHARES SUBSCRIBED

————— ———————Johnson Lee 600 P 60,000.00Lok Chun Suen 1,200 120,000.00Charles O. Sy 1,800 180,000.00Eugenio Flores, Jr. 2,100 210,000.00Arsenio Yang, Jr. 300 30,000.00——————————————TOTAL 6,000.00 P600,000.00====== ==========

Out of the aforesaid subscription, ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00) had been paid by the following subscribers as follows:

NAME AMOUNT PAID UP——— ——————————

Johnson Lee P15,000.00Lok Chun Suen 30,000.00Charles O. Sy 45,000.00Eugenio Flores, Jr. 52,500.00Arsenio Yang, Jr. 7,500.00——————TOTAL P150,000.00===========

The original shareholdings of the incorporators/stockholders of NEUGENE were increased by ten percent (10%) each by virtue of stock dividend declaration in the amount of SIXTY THOUSAND PESOS (P60,000.00) made by its board of directors in a special meeting held on June 7, 1980. . . .Again, on May 2, 1981, the Board of directors of NEUGENE declared a stock dividend in the amount of FORTY THOUSAND PESOS (P40,000.00) in proportion to the shareholdings of the stockholders of record of NEUGENE as of April 30, 1981. . . .

xxx xxx xxxThe outstanding capital stock of NEUGENE became, SEVEN HUNDRED THOUSAND PESOS (P700,000.00) represented by SEVEN THOUSAND (7,000) shares.On May 15, 1986, Eugenio Flores, Jr. assigned transferred and conveyed his entire shareholdings of TWO THOUSAND FOUR HUNDRED FIFTY (2,450) shares in NEUGENE to the following, to wit.

Pet. Sonny Moreno 1,050 shares (Exh. "B")Resp. Arsenio Yang, Jr., 700 shares (Exh. "C")Resp. Charles O. Sy 700 shares (Exh. "D")—————————TOTAL 2,450====

Thus, immediately after the assignment of the entire shareholdings of Egenio Flores, Jr, to petitioner Sonny Moreno and respondents Arsenio Yang, Jr., and Charles O. Sy, the stockholders of record of NEUGENE, as appearing in the Stock and Transfer Book (Exhibit, "A"), particularly Exhihits "A-8 " to "A-12 " thereof were as follows:

NAME NO. OF SHARES——— ————————

Johnson Lee. 700Lok Chun Suen 1,400Sonny Moreno 1,050Charles O. Sy 2,800Arsenio Yang, Jr. 1,050————TOTAL 7,000 2

======On October 24, 1987, the private respondents, Charles O. Sy, Arsenio Yang, Jr. and Lok Chun Suen, holders of 5,250 shares of NEUGENE (representing at least two-thirds (2/3) of the outstanding capital stock of 7,000 shares) sent notice to the directors of NEUGENE for a board meeting to be held on November 30, 1987. They also sent notice for a special stockholders' meeting on the same day, November 30, 1987, to consider the dissolution of NEUGENE.At the said meetings held on November 30, 1987, the private respondents, Charles O. Sy, Arsenio Yang, Jr. and Lok Chun Suen, the directors and stockholders then present, voted for and approved a resolution dissolving NEUGENE.On March 1, 1988, acting upon private respondents's Petition for Dissolution, SEC issued a Certificate of Dissolution of NEUGENE.On March 22, 1988, the petitioners brought an action to annul or set aside the said SEC Certification on the Dissolution of Neugene. In their Amended Petition, petitioners stated, among others, that they are the majority stockholders of NEUGENE, owning eighty percent (80%) of its outstanding capital stock, at the time of the adoption and approval of the Resolution for the Dissolution of NEUGENE, on November 30, 1987; that prior thereto or on July 1, 1987, to be precise, the private respondents had divested themselves of their stockholdings when they endorsed their stock certificates in blank and delivered the same to the Uy Family, the beneficial owners of NEUGENE; that at the meetings held on February 11, 12 and 13, 1987, in order to settle family squabbles, the Uy family agreed to award NEUGENE's stock certificates to Johnny K. H. Uy, who, in turn, authorized Johnson Lee to dispose of the same; and that Johnson Lee sold the said shares of stock to the petitioners, Leoncio Tan and Nicanor Martin, such that, as reflected in the Stock and Transfer Book of NEUGENE, respondent Lok Chun Suen had assigned all of his 1,400 shares of stock to petitioner Nicanor Martin, respondent Charles O. SY assigned 2,100 shares out of his 2,800 shares of stock to petitioner Leoncio Tan, and respondent Arsenio Yang, Jr. assigned 350 shares of his 1,050 shares of stock to petitioner Leoncio Tan; that in view of the said transfers of shares of stock, private respondents Arsenio Yang, Jr., and Charles O. Sy (each the holder of only 700 shares or 10% each of the outstanding capital stock of NEUGENE) and Lok Chun Suen (who had ceased to be a stockholder as July 1, 1987) could no longer validly vote for the dissolution of EUGENE on November 30, 1987, under Section 118 of the Corporation Code, and all the proceedings of the meetings held on November 30, 1987, which were improperly called and held without a quorum, are null void. 3

Corpo (p.10-11) 30On the other hand, the private respondents, Charles O. Sy, Arsenio Yang, Jr. and Lok Chun Suen, theorized that the alleged assignments of shares of stock in favor of petitioners were simulated and fraudulently effected, as there never was any agreement entered into by the Uy family to award NEUGENE'S stock certificates to Johnny K. H. Uy, because subject stock certificates of the private respondents covering their shares of stock were endorsed in blank by them and delivered to the Uy family, who were the beneficial owners of NEUGENE, for safe keeping and the said certificates of stock were kept inside the confidential vault of the Uy family at 225 D. Tuazon St., Quezon City, but the same were stolen by the spouses, Johnny K. H. Uy and Magdalena Go-Uy, without the knowledge and authority of the Uy family; that petitioner Sonny Moreno, a co-conspirator in such fraudulent transfer of stocks in question, recorded the Simulated and fraudulent assignments in the Stock and Transfer Book of the corporation, which book he obtained from Johnny K. H. Uy and Magdalena Go-Uy, together with other corporate records of NEUGENE, including the stock certificates endorsed in blank by petitioner Johnson Lee and respondents Arsenio Yang, Jr., Charles O. Sy and Lok Chun Suen; that the petitioners, Nicanor Martin and Leoncio Tan, are co-conspirators of Johnson Lee and Sonny Moreno in effecting the said simulated and fraudulent transfers of shares of stock; that the private respondents never sold their shares of stock in NEUGENE to any of the petitioners or other stockholders of record, prior to the dissolution of the corporation, so that they (private respondents) represented at least two-thirds (2/3) of the outstanding capital stock of NEUGENE when they voted to dissolve NEUGENE, on November 30, 1987. 4

In its decision of June 19, 1990, the SEC Panel of Hearing Officers nullified the Certification on the Dissolution of NEUGENE issued by SEC, holding that the private respondents were no longer holders of at least two-thirds (2/3) of the outstanding capital stock of NEUGENE at the time they presented the petition for dissolution, as required under Section 118 of the Corporation Code. (Annex "O"). The said decision of the SEC Panel of Hearing Officers was affirmed in toto by the SEC En Banc in a Decision promulgated on January 14, 1993. 5 Portions of the decision of the SEC Hearing Panel read:

The resolution to dissolve NEUGENE was adopted by only two (2) of its incumbent directors, namely: respondent Charles O. Sy and Arsenio Yang, Jr. Respondent Lok Chun Suen had already ceased to be a stockholder of NEUGENE as of July 1, 1987, by the endorsement and delivery and cancellation of his stock certificates (Exhs. "E", "F", and "G") and the entries in the Stock and Transfer Book (Exhs. "A", "A-1" to "A-24"). Hence, there was no quorum at said board of directors' meeting on November 30, 1987. There was no quorum also at the November 30, 1987 meeting of the stockholders of NEUGENE since only the following stockholders, namely: respondent Charles O. Sy and Arsenio Yang, Jr., who own 10% each of the stockholding of NEUGENE, could be considered officially present at said meeting. On this score alone, the case for the petitioners should be upheld.

xxx xxx xxxWHEREFORE, judgement is hereby rendered:1. Declaring as null and void the Certificate of Filing of Resolution of Voluntary Dissolution of NEUGENE MARKETING, INC. issued by this Commission on March 1, 1988 for violation of Section 118 of the Corporate Code of the Philippines;2. Ordering the respondents, particularly respondent Roger Z. Reyes or any other persons acting as trustees of NEUGENE from representing himself/themeselves from acting as such;3. Directing the respondents, particularly respondents Ban Ha U. Chua, Ban Hua U. Flores, Charles O. Sy and Arsenio Yang, Jr., or whoever is in possession of the corporate books and records of NEUGENE, to turn over the same to its Secretary, petitioner Sonny Moreno, within ten (10) days from the finality of this Decision; and to revert back NEUGENE the Cash on Hand appearing in the Balance Sheet as of November 30, 1987 in the amount of P860,591.98;4. Ordering the respondents to pay attorney's fees to the petitioners in the amount of FOUR HUNDRED THOUSAND PESOS (P400,000.00). 6

xxx xxx xxxOn June 10, 1993, the aforesaid judgment of SEC was reversed by the Court of Appeals. Upholding the validity of NEUGENE's dissolution, the Court of Appeals found that at the time of dissolution of NEUGENE on November 30, 1987, the private respondents owned at least two-thirds (2/3) of NEUGENE's stocks, it appearing that the certificates of stock of private respondents, which were endorsed in blank, as earlier mentioned, were not validly transferred to petitioners herein.The Court of Appeals ratiocinated and concluded:

xxx xxx xxxThe constitute a valid transfer, a stock certificate must be delivered and its delivery must be coupled with an intention of constituting the person to whom the stock is delivered the transferred (sic) thereof. (Fetcher Cyc Corp., Sec. 5484)Furthermore, in order that there is a valid transfer, the person to whom the stock certificates are endrosed (sic) must be a bona fide transferee and for value.In the case at bar, Nicanor Martin and Leoncio Tan were not bona fide trasferees for value and in good faith. Private respondent alleged that petitioners Sy, Lok and Yang, Jr. indorsed and delivered their stock certificates to Nicanor Martin and Leoncio Tan. However, private respondent Johnson Lee testified that he acquired his shares of stock from Johnny Uy, who in turn sold them to Nocanor Martin and Leoncio Tan (tsn, pp., 49-50, July 18, 1989). Likewise, evidence shows that no consideration was paid by Leoncio Tan and Nicanor Martin when they allegedly acquired the stock certificates from the Uy Family. Johnson Lee failed to produce any document evidencing the transaction or a receipt showing his payment for the stocks. Therefore, it is clear that they were not bona fide transferees for value and in good faith. Consequently, they cannot be considered stockholders for the purpose of determining the 2/3 votes of the outstanding capital stock required to dissolve Neugene, in accordance with Sec. 118 of the Corporate Code.

xxx xxx xxxAfter a careful examination of the documentary evidence, We find that the supposed document evidencing the partition and division of the properties of the Uy Family (Exh. "A"), is a mere xerox copy whose original copy was never produced before the hearing panel. Moreover, it contained erasures and/or insertions, and it is written in the Chinese Language, with no official translation submitted. Consequently, We find no basis for the respondent Commission's finding that Neugene belongs to Johnny K. H. Uy.Considering the above findings, there is likewise no basis for the Commission's ruling that the amount of P60,591.98 should be returned by the petitioners to Neugene. Lastly, the award of attorney's fees has no basis, considering Our findings that private respondent have no cause of action against the petitioners, hence, they are not entitled to attorney's fees.WHEREFORE, the decision dated January 14, 1992 of the respondent Commission is hereby REVERSED and SET ASIDE. Nocosts. 7

In Its Resolution dated December 9, 1993, the Court of Appeals denied petitioners' motion for reconsideration, and further ruled that the transfers of stock in question could not be valid and effective for the simple reason that there is a complete absence of proof that the alleged transfers were recorded in the books of the corporation. It relied on Section 63 of the Corporation Code of the Philippines which provides that no transfer shall be valid except as between the parties, until the transfer is recorded in the books of the corporation. 8

In the Petition under scrutiny, petitioners contend that the Court of Appeals: "(1) misapprehended the facts of the case and (2) failed to consider the evidence on record showing that the private respondents were no longer holders of the necessary number of shares of stock at the time of the dissolution of NEUGENE. 9

The pivot of inquiry here is whether or not the private respondents lacked the requisite number of shares of stock or had divested themselves of their stockholdings as of November 30, 1987 when they voted for the resolution dissolving NEUGENE.After a careful study, a finding in favor of private respondents is indicated. In short, the Petition is barren of merit.Entries in the Stock and Transfer Book of NEUGENE, particularly on the right hand portion of Exhibits "A-9", "A-10" and "A-12", support the disquisition and conclusion arrived at by the Court of Appeals that at the time of dissolution of NEUGENE on November 30, 1987, the private respondents, Lok Chun Suen, Charles O. Sy and Arsenio Yang, Jr., owned at least two-thirds (2/3) of NEUGENE's outstanding capital stock, in sufficient compliance with the germane provision of Section 118 of the Corporation Code of the Philippines.As shown in the Stock and Transfer Book of NEUGENE, the right hand portion of Exhibit "A-9", under the column "Certificates Issued", private respondent Lok Chun Suen is the holder of a total of 1,400 shares of stock, issued on February 23, 1979, October 1, 1980 and May 2, 1981, respectively. (Records, p. 662) Exhibit "A-10", on its right hand portion and under the column "Certificates Issued" reflects private respondent Charles O. Sy as the holder of a total of 2,800 shares of stock, issued on the abovementioned dates except those acquired from Eugenio Flores, Jr. which were issued on May 15, 1986. (Records, p. 663) While the right hand portion of Exhibit "A-12", under the column "Certificates Issued", shows that private respondent Arsenio Yang, Jr. is the holder of 1,050 shares, issued on the abovementioned dates, except those acquired from Eugenio Flores, Jr. which were issued on May 15, 1986. (Records, p. 665)Therefore, the entries on the right hand portion of NEUGENE'S Stock and Transfer Book, under the column "Certificates Issued", indubitably record the private respondents as the holders of 5,250 shares, constituting at least two-thirds (2/3) of NEUGENE's outstanding capital stock of 7,000 shares.Petitioners introduced in evidence the very same exhibits pertaining to the Stock and Transfer Book of NEUGENE (more specifically Exhibits "A-9", "A-10", and "A-12") to prove that the private respondents were no longer the majority stockholders at the time of the dissolution of NEUGENE. It should be noted, however, that on the left hand portion of the said exhibits, under the colum "Certificates Cancelled", entries on July 1, 1987 disclose that all of Lok Chun Suen's 1,400 certificates of stock were cancelled, Charles O. Sy's 2, 100 shares out of 2,800 shares were cancelled, and Arsenio Yang, Jr.'s 350 shares out of his 1,050 shares were likewise cancelled, thereby leaving Arsenio Yang, Jr. and Charles O. Sy the holders of only 700 shares each or 10 % of the outstanding capital stock of NEUGENE when its dissolution was approved and voted for.In light of the foregoing and after a careful examination of the evidence on record, and a judicious study of the provisions of law and jurisprudence in point, we are with the Court of Appeals on the finding and conclusion that the certificates of stock of the private respondents were stolen and therefore not validly transferred, and the transfers of stock relied upon by petitioners were fraudulently recorded in the Stock and Transfer Book of NEUGENE under the column "Certificates Cancelled".Although well-established is the rule that the appellate court will not generally disturb the factual findings by the trial court for the reason that the trial court heard the testimonies of the witnesses and observed their deportment and manner of testifying during the trial and was afforded the singular chance to assess the probative value of the evidence. The rule does not apply where, as in this case, the SEC overlooked certain facts of substance and value which if considered would affect the result of the case. (Tomas vs. CA, 185 SCRA 627 [1990]; People vs. Alforte, 219 SCRA 458 [1993])In the case under consideration, records reveal that the SEC En Banc and its Panel Of Hearing Officers misappreciated the true nature of the relationship between the stockholders of NEUGENE and the Uy family, who had the understanding that the beneficial ownership of NEUGENE would remain with the Uy family, such that subject shares of stock were, immediately upon issuance, endorsed in blank by the shareholders and entrusted to the Uy family, through Ban Ha Chua, for safekeeping. Such beneficial ownership of the Uy family is admitted not only in the testimonies of private respondents but also of the petitioners, Sonny Moreno and Johnson Lee. 10

Both the petitioners Johnson Lee (a member of the Uy family himself), and Sony Moreno, the corporate secretary, were aware of the real import or significance of the indorsements in blank on the stock certificates of the private respondent. Obviously, then, they (Lee and Moreno) acted in bad faith in assigning subject certificates of stock to the petitioners, Nicanor Martin and Leoncio Tan, and in recording the said transfers in dispute in the Stock and Transfer book of NEUGENE.Then, too, as nominees of the Uy family, the approval by the private respondents, Charles O. Sy, Lok Chun Suen and Arsenio Yang, Jr., Jr., was necessary for the validity and effectivity of the transfer of the stock certificates registered under their (private respondents) names. In the case under consideration, not only did the transfers of stock in question lack the requisite approval, the private respondents categorically declared under oath that subject certificates of stock of theirs were stolen from the confidential vault of the Uy family and illegally transferred to the names of petitioners in the Stock and Transfer Book of NEUGENE.As stressed by the Court of Appeals, there is no reliable showing of any valuable consideration for the supposed transfer of subject stocks to petitioners. Fundamental and crucial is the rule that if a contract has no cause, it does not produce any effect whatsoever and is inexistent or void from the beginning. The complete absence of a cause or consideration renders the contract absolutely void and inexistent. (Robleza vs. Court of Appeals, 174 SCRA 362 [1989]), citing Arts. 1352 and 1409 of the New Civil Code)All things studiedly evaluated in proper perspective, we are of the irresistible conclusion that the private respondents herein are the legitimate holders and owners of at least-two-thirds (2/3) of the outstanding capital stock of NEUGENE, with the corresponding right to vote for its dissolution, in accordance with Section 118 of the Corporation Code of the Philippines.WHEREFORE, the Petition is DISMISSED for lack of merit and the Decision of the Court of Appeals AFFIRMED, in its entirety, No pronouncement as to costs.SO ORDERED.G.R. No. 137934 August 10, 2001BATANGAS LAGUNA TAYABAS BUS COMPANY, INC., DOLORES A. POTENCIANO, MAX JOSEPH A. POTENCIANO, MERCEDELIN A. POTENCIANO, and DELFIN C. YORRO, petitioners, vs.BENJAMIN M. BITANGA, RENATO L. LEVERIZA, LAUREANO A. SIY, JAMES A. OLAYVAR, EDUARDO A. AZUCENA, MONINA GRACE S. LIM, and GEMMA M. SANTOS, respondents.x---------------------------------------------------------xG.R. No. 137936 August 10, 2001DANILO L. CONCEPCION, FE ELOISA GLORIA and EDIJER A. MARTINEZ, in their capacities as ASSOCIATE COMMISSIONERS OF THE SECURITIES AND EXCHANGE COMMISSION, BATANGAS LAGUNA TAYABAS BUS COMPANY, INC., MICHAEL A. POTENCIANO, CANDIDIO A. POTENCIANO, HENRY JOHN A. POTENCIANO, REYNALDO MAGTIBAY, LORNA NAVARRO and RESTITUTO BAYLON, petitioners, vs.THE COURT OF APPEALS, BATANGAS LAGUNA TAYABAS BUS COMPANY, INC., BENJAMIN M. BITANGA, RENATO L. LEVERIZA, LAUREANO A. SIY, JAMES A. OLAYVAR, EDUARDO A. AZUCENA, MONINA GRACE S. LIM, and GEMMA M. SANTOS, respondents.YNARES-SANTIAGO, J.:These cases involve the Batangas Laguna Tayabas Bus Company, Inc., which has been owned by four generations of the Potenciano family. Immediately prior to the events leading to this controversy, the Potencianos owned 87.5% of the outstanding capital stock of BLTB.1

Corpo (p.10-11) 31On October 28, 1997, Dolores A. Potenciano, Max Joseph A. Potenciano, Mercedelin A. Potenciano, Delfin C. Yorro, and Maya Industries, Inc., entered into a Sale and Purchase Agreement,2 whereby they sold to BMB Property Holdings, Inc., represented by its President, Benjamin Bitanga, their 21,071,114 shares of stock in BLTB. The said shares represented 47.98% of the total outstanding capital stock of BLTB.The purchase price for the shares of stock was P72,076,425.00, the downpayment of which, in the sum of P44,354,723.00, was made payable upon signing of Agreement, while the balance of P27,721,702.00 was payable on November 26, 1997. The contracting parties stipulated that the downpayment was conditioned upon receipt by the buyer of certain documents upon signing of the Agreement, namely, the Secretary's Certificate stating that the Board of Directors of Maya Industries, Inc. authorized the sale of its shares in BLTB and the execution of the Agreement, and designating Dolores A. Potenciano as its Attorney-in-Fact; the Special Power of Attorney executed by each of the sellers in favor of Dolores A. Potenciano for purposes of the Agreement; the undated written resignation letters of the Directors of BLTB, except Henry John A. Potenciano, Michael A. Potericiano and Candido A. Potenciano); a revocable proxy to vote the subject shares made by the sellers in favor of the buyer; a Declaration of Trust made by the sellers in favor of the buyer acknowledging that the subject shares shall be held in trust by the sellers for the buyer pending their transfer to the latter's name; and the duly executed capital gains tax return forms covering the sale, indicating no taxable gain on the same.3

Furthermore, the buyer guaranteed that it shall take over the management and operations of BLTB but shall immediately surrender the same to the sellers in case it fails to pay the balance of the purchase price on November 26, 1997.4

Barely a month after the Agreement was executed, on November 21, 1997, at a meeting of the stockholders of BLTB, Benjamin Bitanga and Monina Grace Lim were elected as directors of the corporation, replacing Dolores and Max Joseph Potenciano. Subsequently, on November 28, 1997, another stockholders' meeting was held, wherein Laureano A. Siy and Renato L. Leveriza were elected as directors, replacing Candido Potenciano and Delfin Yorro who had both resigned as such. At the same meeting, the Board of Directors of BLTB elected the following officers: Benjamin Bitanga as Chairman of the Board, President and Chief Executive Officer; Monina Grace Lim as Vice President for Finance and Supply and Treasurer; James Olayvar as Vice President for Operations and Maintenance: Eduardo Azucena as Vice President for Administration; Evelio Custodia as Corporate Secretary; and Gemma Santos as Assistant Corporate Secretary.5

During a meeting of the Board of Directors on April 14, 1998, the newly elected directors of BLTB scheduled the annual stockholders' meeting on May 19, 1998, to be held at the principal office of BLTB in San Pablo, Laguna. Before the scheduled meeting, on May 16, 1998, Michael Potenciano wrote Benjamin Bitanga, requesting for a postponement of the stockholders' meeting due to the absence of a thirty-day advance notice. However, there was no response from Bitanga on whether or not the request for postponement was favorably acted upon.On the scheduled date of the meeting, May 19, 1998, a notice of postponement of the stockholders' meeting was published in the Manila Bulletin. Inasmuch as there was no notice of postponement prior to that, a total of two hundred eighty six stockholders, representing 87% of the shares of stock of BLTB, arrived and attended the meeting. The majority of the stockholders present rejected the postponement and voted to proceed with the meeting. The Potenciano group was re-elected to the Board of Directors,6 and a new set of officers was thereafter elected.7

However, the Bitanga group refused to relinquish their positions and continued to act as directors and officers of BLTB. The conflict between the Potencianos and the Bitanga group escalated to levels of unrest and even violence among laborers and employees of the bus company.On May 21, 1998, the Bitanga group filed with the Securities and Exchange Commission a Complaint for Damages and Injunction, docketed as SEC Case No. 05-98-5973.8 Their prayer for the issuance of a temporary restraining order was, however, denied at the ex-parte summary hearing conducted by SEC Chairman Perfecto Yasay, Jr.Likewise, the Potenciano group filed on May 25, 1998, a Complaint for Injunction and Damages with Preliminary Injunction and Temporary Restraining Order with the SEC, docketed as SEC Case No. 05-98-5978.9 SEC Chairman Perfecto Yasay, Jr. issued a temporary restraining order enjoining the Bitanga group from acting as officers and directors of BLTB.On June 8, 1998, the Bitanga group filed another complaint with application for a writ of preliminary injunction and prayer for temporary restraining order, seeking to annul the May 19, 1998 stockholders' meeting. The complaint was docketed as SEC Case No. 06-98-5994.A Hearing Panel of the SEC conducted joint hearings of SEC Cases Nos. 05-98-5973 and 05-98-5978. On June 17, 1998, the SEC Hearing Panel granted the Bitanga group's application for a writ of preliminary injunction upon the posting of a bond in the amount of P20,000,000.00.10 It declared that the May 19, 1998 stockholders' meeting was void on the grounds that, first, Michael Potenciano had himself asked for its postponement due to improper notice; and, second, there was no quorum, since BMB Holdings, Inc., represented by the Bitanga group, which then owned 50.26% of BLTB's shares having purchased the same from the Potenciano group, was not present at the said meeting. The Hearing Panel further held that the Bitanga Board remains the legitimate Board in a hold-over capacity.The Potenciano group filed a petition for certiorari11 with the SEC En Banc on June 29, 1998, seeking a writ of preliminary injunction to restrain the implementation of the Hearing Panel's assailed Order.On July 21, 1998, the SEC En Banc set aside the June 17, 1998 Order of the Hearing Panel and issued the writ of preliminary injunction prayed for.12

The Bitanga group immediately filed a petition for certiorari13 with the Court of Appeals on July 22, 1998, followed by a Supplemental Petition on August 10, 1998. The petition was docketed as CA-G.R. SP No. 48374.Meanwhile, on July 29, 1998, the SEC En Banc issued a writ of preliminary injunction against the Bitanga group, after the Potencianos posted the required bond of P20,000,000.00.14

On November 23, 1998, the Court of Appeals rendered the now assailed Decision, reversing the assailed Orders of the SEC En Banc and reinstating the Order of the Hearing Panel ordered dated June 17, 1998.15 The Court of Appeals denied the Motions for Reconsideration in a Resolution dated March 25, 1999.16

Petitioners Batangas Laguna Tayabas Bus Company, Inc., Dolores A. Potenciano, Max Joseph A. Potenciano, Mercedelin A. Potenciano and Delfin C. Yorro filed the instant petition for review, docketed as G.R. No. 137934, against respondents Benjamin M. Bitanga, Renato L. Leveriza, Laureano A. Siy, James A. Olayvar, Eduardo A. Azucena, Monina Grace S. Lim and Gemma M. Santos. Petitioners contend that —

IWITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT DISREGARDED, CONTRARY TO WELL-ESTABLISHED JURISPRUDENCE, THE FACTUAL FINDINGS OF THE SEC WHICH IS A SPECIALIZED QUASI-JUDICIAL AGENCY, AND INVALIDATED THE PRELIMINARY INJUNCTION ISSUED BY THE LATTER. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BECAUSE THERE IS NO SHOWING THAT THE SEC MADE ANY ERROR IN EITHER JURISDICTION OR JUDGMENT.

IIWITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS WERE DEPRIVED OF THEIR RIGHT TO DUE PROCESS BECAUSE: (1) A FULL-BLOWN HEARING WAS CONDUCTED ON 6 JULY 1998 WHERE THE PARTIES FULLY ARGUED THEIR POSITIONS AND WERE HEARD BY THE SEC EN BANC; (2) THE LAW DOES NOT REQUIRE A SEPARATE HEARING FOR THE FIXING OF THE AMOUNT OF THE INJUNCTION BOND; AND (3) IN ANY CASE, THE ALLEGED FAILURE OF THE SEC TO FIX THE AMOUNT OF THE INJUNCTION BOND IN ITS 21 JULY 1998 ORDER AND SUBSEQUENT FIXING THEREOF IN ITS 26 JULY 1998 ORDER IS NOT A FATAL ERROR.

III

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE 21 JULY 1998 ORDER OF THE SEC RESOLVED THE MAIN CASE. THE SEC, ACTING WITHIN THE BOUNDS OF ITS JURISDICTION, MERELY MADE A PRELIMINARY EVALUATION TO RESOLVE THE PRAYER FOR PRELIMINARY INJUNCTION, WHICH, BY ITS VERY NATURE, IS AN ANCILLARY REMEDY. THE MAIN PETITION REMAINS PENDING BEFORE THE SEC FOR THE RESOLUTION OF ITS MERITS.17

Another petition for review, docketed as G.R. No. 137936, was filed by petitioners Danilo L. Concepcion, Fe Eloisa Gloria and Edijer A. Martinez, in their capacities as Associate Commissioners of the Securities and Exchange Commission, Batangas Laguna Tayabas Bus Company, Inc., Dolores A. Potenciano, Max Joseph A. Potenciano, Michael A. Potenciano, Mercedelin A. Potenciano, Candido A. Potenciano, Henry John A. Potenciano, Delfin C. Yorro, Reynaldo Magtibay, Lorna Navarro and Restituto Baylon based on the following grounds:

ITHE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT THE JULY 21, 1998 ORDER OF THE SEC IN SEC EN BANC CASE NO. 611 RESOLVED THE MAIN CASE.

IITHE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT THE PRIVATE RESPONDENTS WERE DENIED THEIR RIGHT TO DUE PROCESS.

IIITHE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE SEC ORDER OF JULY 21, 1998 IS VALID AND IN DISREGARDING THE FACTUAL FINDINGS OF THE SEC.18

The two petitions for review were consolidated.We find that the petitions are impressed with merit. Contrary to the findings of the Court of Appeals, the Bitanga group was not deprived of due process when the SEC En Banc issued its Order dated July 21, 1998.Due process, in essence, is simply an opportunity to be heard.19 It cannot be denied that in the case at bar, a hearing on the prayer for injunction was held on July 9, 1998. Both parties were represented at the said hearing, and the Bitanga group presented its arguments in opposition to the injunctive relief. This alone negates any proposition that the Bitanga group was denied due process.In applications for preliminary injunction, the requirement of hearing and prior notice before injunction may issue has been relaxed to the point that not all petitions for preliminary injunction must undergo a trial-type hearing, it being hornbook doctrine that a formal or trial-type is not at all times and in all instances essential to due process. Due process simply means giving every contending party the opportunity to be heard and the court to consider every piece of evidence presented in their favor. Accordingly, this Court has recently rejected a claim of denial of due process where such claimant was given the opportunity to be heard, having submitted his counter-affidavit and memorandum in support of his position.20

Much ado has been made over the fact that the injunction order was issued with "deliberate speed" even before the Bitanga group filed its Comment to the Potenciano group's Petition. However, the said Comment is rather directed to the petition of the Potenciano group; it is not essential to the resolution of the prayer for injunction. The Rules of Court do not require that issues be joined before preliminary injunction may issue. Preliminary injunction may be granted at any stage of an action or proceeding prior to the judgment or final order, ordering a party or a court, agency or a person to refrain from a particular act or acts. For as long as the requisites for its issuance are present in the case, the injunctive writ was properly issued.21

Respondents argue that the SEC En Banc's July 21, 1998 Order amounted to a ruling on the main case. We disagree.A reading of the said Order readily reveals that it merely delved on the propriety of granting a writ of preliminary injunction against the Bitanga group. The main case is far from being disposed of as there are several issues still awaiting resolution, including, whether or not the Bitanga group has taken funds and assets of BLTB and if so, in what amount and consisting of what assets; and whether or not the Potenciano group is entitled to the payment of exemplary damages, attorney's fees and costs of suit. There is no merit, therefore, in the statement that the SEC En Banc's ruling is a prejudgment of the main case, as several matters need yet to be addressed.The fact that the aforesaid Order was merely provisional in character may be gleaned from the very nature of the injunctive writ granted. Generally, injunction is a preservative remedy for the protection of one's substantive right or interest. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit.22 Thus, it has been held that an order granting a writ of preliminary injunction is an interlocutory order.23 As distinguished from a final order which disposes of the subject matter in its entirety or terminates a particular proceeding or action, leaving nothing else to be done but to enforce by execution what has been determined by the court, an interlocutory order does not dispose of a case completely, but leaves something more to be adjudicated upon.24

In the case at bar, it cannot be said that the July 21, 1998 Order of the SEC En Banc terminated the Potenciano group's petition in its entirety. As mentioned above, there remain several issues which have yet to be resolved and adjudicated upon by the SEC.The next issue — whether or not the SEC En Banc committed error in jurisdiction as to entitle the Bitanga group to the extraordinary remedy of certiorari — should likewise be resolved in the negative.In the July 21, 1998 Order of the SEC En Banc, the validity of the BLTB stockholders' meeting held on May 19, 1998 was sustained, in light of the time-honored doctrine in corporation law that a transfer of shares is not valid unless recorded in the books of the corporation. The SEC En Banc went on to rule that —

It is not disputed that the transfer of the shares of the group of Dolores Potenciano to the Bitanga group has not yet been recorded in the books of the corporation. Hence, the group of Dolores Potenciano, in whose names those shares still stand, were the ones entitled to attend and vote at the stockholders' meeting of the BLTB on 19 May 1998. This being the case, the Hearing Panel committed grave abuse of discretion in holding otherwise and in concluding that there was no quorum in said meeting.25

Based on the foregoing premises, the SEC En Banc issued a writ of preliminary injunction against the Bitanga group. In so ruling, the SEC En Banc merely exercised its wisdom and competence as a specialized administrative agency specifically tasked to deal with corporate law issues. We are in full accord with the SEC En Banc on this matter. Indeed, until registration is accomplished, the transfer, though valid between the parties, cannot be effective as against the corporation. Thus, the unrecorded transferee, the Bitanga group in this case, cannot vote nor be voted for. The purpose of registration, therefore, is two-fold: to enable the transferee to exercise all the rights of a stockholder, including the right to vote and to be voted for, and to inform the corporation of any change in share ownership so that it can ascertain the persons entitled to the rights and subject to the liabilities of a stockholder.26 Until challenged in a proper proceeding, a stockholder of record has a right to participate in any meeting;27 his vote can be properly counted to determine whether a stockholders' resolution was approved, despite the claim of the alleged transferee.28 On the other hand, a person who has purchased stock, and who desires to be recognized as a stockholder for the purpose of voting, must secure such a standing by having the transfer recorded on the corporate books.29 Until the transfer is registered, the transferee is not a stockholder but an outsider.30

We find no error either in jurisdiction or judgment on the part of the SEC En Banc, since its conclusions of law were anchored on established principles and jurisprudence.Indeed, nowhere in the Bitanga group's petition for certiorari before the Court of Appeals was it shown that the SEC En Banc committed such patent, gross and prejudicial errors of law or fact, or a capricious disregard of settled law and jurisprudence, as to amount to a grave abuse of discretion or lack of jurisdiction on its part. Absent such showing, neither the Court of Appeals nor this Court should engage in a review of the facts found nor even of the law as interpreted or applied by the SEC En Banc, for the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. The main thrust

Corpo (p.10-11) 32of a petition for certiorari under Rule 65 of the Rules of Court is only the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction. However, for this Court or the Court of Appeals to properly exercise the power of judicial review over a decision of an administrative agency, such as the SEC, it must first be shown that the tribunal, board or officer exercising judicial or quasi judicial functions has indeed acted without or in excess of its or his jurisdiction, and that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law. In the absence of any showing of lack of jurisdiction or grave abuse tantamount to lack or excess of jurisdiction, judicial review may not be had over an administrative agency's decision.31 We have gone over the records of the case at bar and we see no cogent reason to hold that the SEC En Banc had abused its discretion.Moreover, it is a fundamental rule that factual findings of quasi-judicial agencies like the SEC, if supported by substantial evidence, are generally accorded not only great respect but even finality, and are binding upon this Court, unless petitioner is able to show that it had arbitrarily disregarded evidence before it or had misapprehended evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated. This rule is rooted in the doctrine that this Court is not a trier of facts, as well as in the respect to be accorded the determinations made by administrative bodies in general on matters falling within their respective fields of specialization or expertise.32

In light of all the foregoing, we find that the Court of Appeals erred in granting the extraordinary remedy of certiorari to the Bitanga group. It is elementary that a special civil action for certiorari is limited to correcting errors of jurisdiction or grave abuse of discretion.33 None of these have been found to obtain in the petition before the Court of Appeals. What is more, it is also settled that the issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law. The exercise of sound judicial discretion by the lower court in injunctive matters should not be interfered with except in cases of manifest abuse.34

WHEREFORE, in view of all the foregoing, the instant petitions for review are GRANTED. The Decision of the Court of Appeals dated November 23, 1998 in CA-G.R. SP No. 48374 and its resolution dated March 25, 1999 are SET ASIDE. The Orders of the SEC En Banc dated July 21, 1998 and July 27, 1998 in SEC Case No. EB 611 are ordered REINSTATED.SO ORDERED.G.R. No. L-19441 March 27, 1923FUA CUN (alias Tua Cun), plaintiff-appellee, vs.RICARDO SUMMERS, in his capacity as Sheriff ex-oficio of the City of Manila, and the CHINA BANKING CORPORATION, defendants-appellants.Araneta and Zaragoza for appellants.Canillas and Cardenas for appellee.OSTRAND, J.:It appears from the evidence that on August 26, 1920, one Chua Soco subscribed for five hundred shares of stock of the defendant Banking Corporation at a par value of P100 per share, paying the sum of P25,000, one-half of the subscription price, in cash, for which a receipt was issued in the following terms:

This is to certify, That Chua Soco, a subscriber for five hundred shares of the capital stock of the China Banking Corporation at its par value of P100 per share, has paid into the Treasury of the Corporation, on account of said subscription and in accordance with its terms, the sum of twenty-five thousand pesos (P25,000), Philippine currency.Upon receipt of the balance of said subscription in accordance with the terms of the calls of the Board of Directors, and surrender of this certificate, duly executed certificates for said five hundred shares of stock will be issued to the order of the subscriber.It is expressly understood that the total number of shares specified in this receipt is subject to sale by theChina Banking Corporation for the payment of any unpaid subscriptions, should the subscriber fail to pay the whole or any part of the balance of his subscription upon 30 days' notice issued therefor by the Board of Directors.Witness our official signatures at Manila, P. I., this 25th day of August, 1920.(Sgd.) MERVIN WEBSTERCashier(Sgd.) DEE C. CHUANPresident

On May 18, 1921, Chua Soco executed a promissory note in favor of the plaintiff Fua Cun for the sum of P25,000 payable in ninety days and drawing interest at the rate of 1 per cent per month, securing the note with a chattel mortgage on the shares of stock subscribed for by Chua Soco, who also endorsed the receipt above mentioned and delivered it to the mortgagee. The plaintiff thereupon took the receipt to the manager of the defendant Bank and informed him of the transaction with Chua Soco, but was told to await action upon the matter by the Board of Directors.In the meantime Chua Soco appears to have become indebted to the China Banking Corporation in the sum of P37,731.68 for dishonored acceptances of commercial paper and in an action brought against him to recover this amount, Chua Soco's interest in the five hundred shares subscribed for was attached and the receipt seized by the sheriff. The attachment was levied after the defendant bank had received notice of the facts that the receipt had been endorsed over to the plaintiff.Fua Cun thereupon brought the present action maintaining that by virtue of the payment of the one-half of the subscription price of five hundred shares Chua Soco in effect became the owner of two hundred and fifty shares and praying that his, the plaintiff's, lien on said shares, by virtue of the chattel mortgage, be declared to hold priority over the claim of the defendant Banking Corporation; that the defendants be ordered to deliver the receipt in question to him; and that he be awarded the sum of P5,000 in damages for wrongful attachment.The trial court rendered judgment in favor of the plaintiff declaring that Chua Soco, through the payment of the P25,000, acquired the right to two hundred and fifty shares fully paid up, upon which shares the plaintiff holds a lien superior to that of the defendant Banking Corporation and ordering that the receipt be returned to said plaintiff. From this judgment the defendants appeal.Though the court below erred in holding that Chua Soco, by paying one-half of the subscription price of five hundred shares, in effect became the owner of two hundred and fifty shares, the judgment appealed from is in the main correct.The claim of the defendant Banking Corporation upon which it brought the action in which the writ of attachment was issued, was for the non-payment of drafts accepted by Chua Soco and had no direct connection with the shares of stock in question. At common law a corporation has no lien upon the shares of stockholders for any indebtedness to the corporation (Jones on Liens, 3d ed., sec. 375) and our attention has not been called to any statute creating such lien here. On the contrary, section 120 of the Corporation Act provides that "no bank organized under this Act shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith, and stock so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale, or, in default thereof, a receiver may be appointed to close up the business of the bank in accordance with law."Section 35 of the United States National Banking Act of 1864 contains a similar provision and it has been held in various decisions of the United States Supreme Court that a bank organized under that Act can have no lien on its own stock for the indebtedness of the stockholders even when the by-laws provide that the shares shall be transferable only on the books of the corporation and that no such transfer shall be made if the holder of the shares is indebted to the corporation.

(Jones on Liens, 3d ed., sec. 384; First National Bank of South Bend vs.Lanier and Handy, 11 Wall., 369; Bullard vs. National Eagle Bank, 18 Wall., 589; First National Bank of Xenia vs.Stewart and McMillan, 107 U.S., 676.) The reasons for this doctrine are obvious; if banking corporations were given a lien on their own stock for the indebtedness of the stockholders, the prohibition against granting loans or discounts upon the security of the stock would become largely ineffective.Turning now to the rights of the plaintiff in the stock in question, it is argued that the interest held by Chua Soco was merely an equity which could not be made the subject of a chattel mortgage. Though the courts have uniformly held that chattel mortgages on shares of stock and other choses in action are valid as between the parties, there is still much to be said in favor of the defendants' contention that the chattel mortgage here in question would not prevail over liens of third parties without notice; an equity in shares of stock is of such an intangible character that it is somewhat difficult to see how it can be treated as a chattel and mortgaged in such a manner that the recording of the mortgage will furnish constructive notice to third parties. As said by the court in the case of Spalding vs. Paine's Adm'r. (81 Ky., 416), in regard to a chattel mortgage of shares of stock:

These certificates of stock are in the pockets of the owner, and go with him where he may happen to locate, as choses in action, or evidence of his right, without any means on the part of those with whom he proposes to deal on the faith of such a security of ascertaining whether or not this stock is in pledge or mortgaged to others. He finds the name of the owner on the books of the company as a subscriber of paid-up stock, amounting to 180 shares, with the certificates in his possession, pays for these certificates their full value, and has the transfer to him made on the books of the company, thereby obtaining a perfect title. What other inquiry is he to make, so as to make his investment certain and secure? Where is he to look, in order to ascertain whether or not this stock has been mortgaged? The chief office of the company may be at one place to-day and at another tomorrow. The owner may have no fixed or permanent abode, and with his notes in one pocket and his certificates of stock in the other — the one evidencing the extent of his interest in the stock of the corporation, the other his right to money owing him by his debtor, we are asked to say that the mortgage is effectual as to the one and inoperative as to the other.

But a determination of this question is not essential in the present case. There can be no doubt that an equity in shares of stock may be assigned and that the assignment is valid as between the parties and as to persons to whom notice is brought home. Such an assignment exists here, though it was made for the purpose of securing a debt. The endorsement to the plaintiff of the receipt above mentioned reads:

For value received, I assign all my rights in these shares in favor of Mr. Tua Cun.Manila, P. I., May 18, 1921.(Sgd.) CHUA SOCO

This endorsement was accompanied by the delivery of the receipt to the plaintiff and further strengthened by the execution of the chattel mortgage, which mortgage, at least, operated as a conditional equitable assignment.As against the rights of the plaintiff the defendant bank had, as we have seen, no lien unless by virtue of the attachment. But the attachment was levied after the bank had received notice of the assignment of Chua Soco's interests to the plaintiff and was therefore subject to the rights of the latter. It follows that as against these rights the defendant bank holds no lien whatever.As we have already stated, the court erred in holding the plaintiff as the owner of two hundred and fifty shares of stock; "the plaintiff's rights consist in an equity in five hundred shares and upon payment of the unpaid portion of the subscription price he becomes entitled to the issuance of certificate for said five hundred shares in his favor."The judgment appealed from is modified accordingly, and in all other respects it is affirmed, with the costs against the appellants Banking Corporation. So ordered.

G.R. No. 133969 January 26, 2000NEMESIO GARCIA, petitioner, vs.NICOLAS JOMOUAD, Ex-officio Provincial Sheriff of Cebu and SPOUSES JOSE ATINON & SALLY ATINON,respondents.KAPUNAN, J.:In this petition for review on certiorari, Nemesio Garcia (herein petitioner) seeks the reversal of the Decision, dated 27 October 1997, of the Court of Appeals in CA G.R. CV No. 52255 and its Resolution, dated 22 April 1998, denying petitioner's motion for reconsideration of said decision.Petitioner filed with the Regional Trial Court, Branch 23 of Cebu, an action for injunction with prayer for preliminary injunction against respondents spouses Jose and Sally Atinon and Nicolas Jomouad, ex-officio sheriff of Cebu. Said action stemmed from an earlier case for collection of sum of money, docketed as Civil Case No. CEB-10433, before the RTC, Branch 10 of Cebu, filed by the spouses Atinon against Jaime Dico. In that case (collection of sum of money), the trial court rendered judgment ordering Dico to pay the spouses Atinon the sum of P900,000.00 plus interests. After said judgment became final and executory, respondent sheriff proceeded with its execution. In the course thereof, the Proprietary Ownership Certificate (POC) No. 0668 in the Cebu Country Club, which was in the name of Dico, was levied on and scheduled for public auction. Claiming ownership over the subject certificate, petitioner filed the aforesaid action for injunction with prayer for preliminary injunction to enjoin respondents from proceeding with the auction.After trial, the lower court rendered its Decision, dated 28 July 1995, dismissing petitioner's complaint for injunction for lack of merit. On appeal, the CA affirmed in toto the decision of the RTC upon finding that it committed no reversible error in rendering the same. Hence, this petition.1âwphi1.nêtPetitioner avers that Dico, the judgment debtor of the spouses Atinon, was employed as manager of his (petitioner's) Young Auto Supply. In order to assist him in entertaining clients, petitioner "lent" his POC, then bearing the number 1459, in the Cebu Country Club to Dico so the latter could enjoy the "signing" privileges of its members. The Club issued POC No. 0668 in the name of Dico. Thereafter, Dico resigned as manager of petitioner's business. Upon demand of petitioner, Dico returned POC No. 0668 to him. Dico then executed a Deed of Transfer, dated 18 November 1992, covering the subject certificate in favor of petitioner. The Club was furnished with a copy of said deed but the transfer was not recorded in the books of the Club because petitioner failed to present proof of payment of the requisite capital gains tax.In assailing the decision of the CA, petitioner mainly argues that the appellate court erroneously relied on Section 63 of the Corporation Code in upholding the levy on the subject certificate to satisfy the judgment debt of Dico in Civil Case No. CEB-14033. Petitioner contends that the subject stock of certificate, albeit in the name of Dico, cannot be levied upon the execution to satisfy his judgment debt because even prior to the institution of the case for collection of sum of money against him:

1. The spouses Atinon had knowledge that Dico already conveyed back the ownership of the subject, certificate to petitioner;2. Dico executed a deed of transfer, dated 18 November 1992, covering the subject certificate in favor of petitioner and the Club was furnished with a copy thereof; and3. Dico resigned as a proprietary member of the Club and his resignation was accepted by the board of directors at their meeting on 4 May 1993.

The petition is without merit.Sec. 63 of the Corporation Code reads:

Sec. 63 Certificate of stock and transfer of shares. — The capital stock of corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates

Corpo (p.10-11) 33indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.The sole issue in this case is similar to that raised in Uson vs. Diosomito,1 i.e., "whether a bona fide transfer of the shares of a corporation, not registered or noted in the books of the corporation, is valid as against a subsequent lawful attachment of said shares, regardless of whether the attaching creditor had actual notice of said transfer or not."2 In that case, we held that the attachment prevails over the unrecorded transfer stating thus —

[w]e think that the true meaning of the language is, and the obvious intention of the legislature in using it was, that all transfers of shares should be entered, as here required, on the books of the corporation. And it is equally clear to us that all transfers of shares not so entered are invalid as to attaching or execution creditors of the assignors, as well as to the corporation and to subsequent purchasers in good faith, and, indeed, as to all persons interested, except the parties to such transfers. All transfers not so entered on the books of the corporation are absolutely void; not because they are without notice or fraudulent in law or fact, but because they are made so void by statute.3

Applying the foregoing jurisprudence in this case, we hold that the transfer of the subject certificate made by Dico to petitioner was not valid as to the spouses Atinon, the judgment creditors, as the same still stood in the name of Dico, the judgment debtor, at the time of the levy on execution. In addition, as correctly ruled by the CA, the entry in the minutes of the meeting of the Club's board of directors noting the resignation of Dico as proprietary member thereof does not constitute compliance with Section 63 of the Corporation Code. Said provision of law strictly requires the recording of the transfer in the books of the corporation, and not elsewhere, to be valid as against third parties. Accordingly, the CA committed no reversible error in rendering the assailed decision.IN VIEW OF THE FOREGOING, the Court RESOLVED to DENY the petition.SO ORDERED.1âwphi1.nêtG.R. Nos. 112438-39 December 12, 1995CHEMPHIL EXPORT & IMPORT CORPORATION (CEIC), petitioner, vs.THE HONORABLE COURT OF APPEALS JAIME Y. GONZALES, as Assignee of the Bank of the Philippine Islands (BPI), RIZAL COMMERCIAL BANKING CORPORATION (RCBC), LAND BANK OF THE PHILIPPINES (LBP), PHILIPPINE COMMERCIAL & INTERNATIONAL BANK (PCIB) and THE PHILIPPINE INVESTMENT SYSTEM ORGANIZATION (PISO), respondents.G.R. No. 113394 December 12, 1995PHILIPPINE COMMERCIAL INDUSTRIAL BANK (AND ITS ASSIGNEE JAIME Y. GONZALES) petitioner, vs.HONORABLE COURT OR APPEALS and CHEMPHIL EXPORT AND IMPORT CORPORATION (CEIC),respondents. KAPUNAN, J.:Before us is a legal tug-of-war between the Chemphil Export and Import Corporation (hereinafter referred to as CEIC), on one side, and the PISO and Jaime Gonzales as assignee of the Bank of the Philippine Islands (BPI), Rizal Commercial Banking Corporation (RCBC), Land Bank of the Philippines (LBP) and Philippine Commercial International Bank (PCIB), on the other (hereinafter referred to as the consortium), over 1,717,678 shares of stock (hereinafter referred to as the "disputed shares") in the Chemical Industries of the Philippines (Chemphil/CIP).Our task is to determine who is the rightful owner of the disputed shares.Pursuant to our resolution dated 30 May 1994, the instant case is a consolidation of two petitions for review filed before us as follows:In G.R. Nos. 112438-39, CEIC seeks the reversal of the decision of the Court of Appeals (former Twelfth Division) promulgated on 30 June 1993 and its resolution of 29 October 1993, denying petitioner's motion for reconsideration in the consolidated cases entitled "Dynetics, Inc., et al. v. PISO, et al." (CA-G.R. No. 20467) and "Dynetics, Inc., et al. v. PISO, et al.; CEIC, Intervenor-Appellee" (CA-G.R. CV No. 26511).The dispositive portion of the assailed decision reads, thus:

WHEREFORE, this Court resolves in these consolidated cases as follows:1. The Orders of the Regional Trial Court, dated March 25, 1988, and May 20, 1988, subject of CA-G.R. CV No. 10467, are SET ASIDE and judgment is hereby rendered in favor of the consortium and against appellee Dynetics, Inc., the amount of the judgment, to be determined by Regional Trial Court, taking into account the value of assets that the consortium may have already recovered and shall have recovered in accordance with the other portions of this decision.2. The Orders of the Regional Trial Court dated December 19, 1989 and March 5, 1990 are hereby REVERSED and SET ASIDE and judgment is hereby rendered confirming the ownership of the consortium over the Chemphil shares of stock, subject of CA-G.R. CV No. 26511, and the Order dated September 4, 1989, is reinstated.No pronouncement as to costs.SO ORDERED. 1

In G.R. No. 113394, PCIB and its assignee, Jaime Gonzales, ask for the annulment of the Court of Appeals' decision (former Special Ninth Division) promulgated on 26 March 1993 in "PCIB v. Hon. Job B. Madayag & CEIC" (CA-G.R. SP NO. 20474) dismissing the petition for certiorari, prohibition and mandamus filed by PCIB and of said court's resolution dated 11 January 1994 denying their motion for reconsideration of its decision. 2

The antecedent facts leading to the aforementioned controversies are as follows:On September 25, 1984, Dynetics, Inc. and Antonio M. Garcia filed a complaint for declaratory relief and/or injunction against the PISO, BPI, LBP, PCIB and RCBC or the consortium with the Regional Trial Court of Makati, Branch 45 (Civil Case No. 8527), seeking judicial declaration, construction and interpretation of the validity of the surety agreement that Dynetics and Garcia had entered into with the consortium and to perpetually enjoin the latter from claiming, collecting and enforcing any purported obligations which Dynetics and Garcia might have undertaken in said agreement. 3

The consortium filed their respective answers with counterclaims alleging that the surety agreement in question was valid and binding and that Dynetics and Garcia were liable under the terms of the said agreement. It likewise applied for the issuance of a writ of preliminary attachment against Dynetics and Garcia. 4

Seven months later, or on 23 April 1985, Dynetics, Antonio Garcia and Matrix Management & Trading Corporation filed a complaint for declaratory relief and/or injunction against the Security Bank & Trust Co. (SBTC case) before the Regional Trial Court of Makati, Branch 135 docketed as Civil Case No. 10398. 5

On 2 July 1985, the trial court granted SBTC's prayer for the issuance of a writ of preliminary attachment and on 9 July 1985, a notice of garnishment covering Garcia's shares in CIP/Chemphil (including the disputed shares) was served on Chemphil through its then President. The notice of garnishment was duly annotated in the stock and transfer books of Chemphil on the same date. 6

On 6 September 1985, the writ of attachment in favor of SBTC was lifted. However, the same was reinstated on 30 October 1985. 7

In the meantime, on 12 July 1985, the Regional Trial Court in Civil Case No. 8527 (the consortium case) denied the application of Dynetics and Garcia for preliminary injunction and instead granted the consortium's prayer for a consolidated writ of preliminary attachment. Hence, on 19 July 1985, after the consortium

had filed the required bond, a writ of attachment was issued and various real and personal properties of Dynetics and Garcia were garnished, including the disputed shares. 8 This garnishment, however, was not annotated in Chemphil's stock and transfer book.On 8 September 1987, PCIB filed a motion to dismiss the complaint of Dynetics and Garcia for lack of interest to prosecute and to submit its counterclaims for decision, adopting the evidence it had adduced at the hearing of its application for preliminary attachment. 9

On 25 March 1988, the Regional Trial Court dismissed the complaint of Dynetics and Garcia in Civil Case No. 8527, as well as the counterclaims of the consortium, thus:

Resolving defendant's, Philippine Commercial International Bank, MOTION TO DISMISS WITH MOTION TO SUBMIT DEFENDANT PCIBANK's COUNTERCLAIM FOR DECISION, dated September 7, 1987:(1) The motion to dismiss is granted; and the instant case is hereby ordered dismissed pursuant to Sec. 3, Rule 17 of the Revised Rules of Court, plaintiff having failed to comply with the order dated July 16, 1987, and having not taken further steps to prosecute the case; and(2) The motion to submit said defendant's counterclaim for decision is denied; there is no need; said counterclaim is likewise dismissed under the authority of Dalman vs. City Court of Dipolog City, L-63194, January 21, 1985, wherein the Supreme Court stated that if the civil case is dismissed, so also is the counterclaim filed therein. "A person cannot eat his cake and have it at the same time" (p. 645, record, Vol. I).10

The motions for reconsideration filed by the consortium were, likewise, denied by the trial court in its order dated 20 May 1988:The Court could have stood pat on its order dated 25 March 1988, in regard to which the defendants-banks concerned filed motions for reconsideration. However, inasmuch as plaintiffs commented on said motions that: "3). In any event, so as not to unduly foreclose on the rights of the respective parties to refile and prosecute their respective causes of action, plaintiffs manifest their conformity to the modification of this Honorable Court's order to indicate that the dismissal of the complaint and the counterclaims is without prejudice." (p. 2, plaintiffs' COMMENT etc. dated May 20, 1988). The Court is inclined to so modify the said order.WHEREFORE , the order issued on March 25, 1988, is hereby modified in the sense that the dismissal of the complaint as well as of the counterclaims of defendants RCBC, LBP, PCIB and BPI shall be considered as without prejudice (p. 675, record, Vol. I). 11

Unsatisfied with the aforementioned order, the consortium appealed to the Court of Appeals, docketed as CA-G.R. CV No. 20467.On 17 January 1989 during the pendency of consortium's appeal in CA-G.R. CV No. 20467, Antonio Garcia and the consortium entered into a Compromise Agreement which the Court of Appeals approved on 22 May 1989 and became the basis of its judgment by compromise. Antonio Garcia was dropped as a party to the appeal leaving the consortium to proceed solely against Dynetics, Inc. 12 On 27 June 1989, entry of judgment was made by the Clerk of Court. 13

Hereunder quoted are the salient portions of said compromise agreement:xxx xxx xxx

3. Defendants, in consideration of avoiding an extended litigation, having agreed to limit their claim against plaintiff Antonio M. Garcia to a principal sum of P145 Million immediately demandable and to waive all other claims to interest, penalties, attorney's fees and other charges. The aforesaid compromise amount of indebtedness of P145 Million shall earn interest of eighteen percent (18%) from the date of this Compromise.4. Plaintiff Antonio M. Garcia and herein defendants have no further claims against each other.5. This Compromise shall be without prejudice to such claims as the parties herein may have against plaintiff Dynetics, Inc.6. Plaintiff Antonio M. Garcia shall have two (2) months from date of this Compromise within which to work for the entry and participation of his other creditor, Security Bank and Trust Co., into this Compromise. Upon the expiration of this period, without Security Bank and Trust Co. having joined, this Compromise shall be submitted to the Court for its information and approval (pp. 27, 28-31, rollo, CA-G.R. CV No. 10467). 14

It appears that on 15 July 1988, Antonio Garcia under a Deed of Sale transferred to Ferro Chemicals, Inc. (FCI) the disputed shares and other properties for P79,207,331.28. It was agreed upon that part of the purchase price shall be paid by FCI directly to SBTC for whatever judgment credits that may be adjudged in the latter's favor and against Antonio Garcia in the aforementioned SBTC case. 15

On 6 March 1989, FCI, through its President Antonio M. Garcia, issued a Bank of America Check No. 860114 in favor of SBTC in the amount of P35,462,869.62. 16 SBTC refused to accept the check claiming that the amount was not sufficient to discharge the debt. The check was thus consigned by Antonio Garcia and Dynetics with the Regional Trial Court as payment of their judgment debt in the SBTC case. 17

On 26 June 1989, FCI assigned its 4,119,614 shares in Chemphil, which included the disputed shares, to petitioner CEIC. The shares were registered and recorded in the corporate books of Chemphil in CEIC's name and the corresponding stock certificates were issued to it. 18

Meanwhile, Antonio Garcia, in the consortium case, failed to comply with the terms of the compromise agreement he entered into with the consortium on 17 January 1989. As a result, on 18 July 1989, the consortium filed a motion for execution which was granted by the trial court on 11 August 1989. Among Garcia's properties that were levied upon on execution were his 1,717,678 shares in Chemphil (the disputed shares) previously garnished on 19 July 1985. 19

On 22 August 1989, the consortium acquired the disputed shares of stock at the public auction sale conducted by the sheriff for P85,000,000.00. 20 On same day, a Certificate of Sale covering the disputed shares was issued to it.On 30 August 1989, 21 the consortium filed a motion (dated 29 August 1989) to order the corporate secretary of Chemphil to enter in its stock and transfer books the sheriff's certificate of sale dated 22 August 1989, and to issue new certificates of stock in the name of the banks concerned. The trial court granted said motion in its order dated 4 September 1989, thus:

For being legally proper, defendant's MOTION TO ORDER THE CORPORATE SECRETARY OF CHEMICAL INDUSTRIES OF THE PHILS., INC. (CHEMPIL) TO ENTER IN THE STOCK AND TRANSFER BOOKS OF CHEMPHIL THE SHERIFF'S CERTIFICATE OF SALE DATED AUGUST 22, 1989 AND TO ISSUE NEW CERTIFICATES OF STOCK IN THE NAME OF THE DEFENDANT BANKS, dated August 29, 1989, is hereby granted.WHEREFORE, the corporate secretary of the aforesaid corporation, or whoever is acting for and in his behalf, is hereby ordered to (1) record and/or register the Certificate of Sale dated August 22, 1989 issued by Deputy Sheriff Cristobal S. Jabson of this Court; (2) to cancel the certificates of stock of plaintiff Antonio M. Garcia and all those which may have subsequently been issued in replacement and/or in substitution thereof; and (3) to issue in lieu of the said shares new shares of stock in the name of the defendant Banks, namely, PCIB, BPI, RCBC, LBP and PISO bank in such proportion as their respective claims would appear in this suit (p. 82, record, Vol. II). 22

On 26 September 1989, CEIC filed a motion to intervene (dated 25 September 1989) in the consortium case seeking the recall of the abovementioned order on grounds that it is the rightful owner of the disputed shares. 23 It further alleged that the disputed shares were previously owned by Antonio M. Garcia but subsequently sold by him on 15 July 1988 to Ferro Chemicals, Inc. (FCI) which in turn assigned the same to CEIC in an agreement dated 26 June 1989.

Corpo (p.10-11) 34On 27 September 1989, the trial court granted CEIC's motion allowing it to intervene, but limited only to the incidents covered by the order dated 4 September 1989. In the same order, the trial court directed Chemphil's corporate secretary to temporarily refrain from implementing the 4 September 1989order. 24

On 2 October 1989, the consortium filed their opposition to CEIC's motion for intervention alleging that their attachment lien over the disputed shares of stocks must prevail over the private sale in favor of the CEIC considering that said shares of stock were garnished in the consortium's favor as early as 19 July 1985. 25

On 4 October 1989, the consortium filed their opposition to CEIC's motion to set aside the 4 September 1989 order and moved to lift the 27 September 1989 order. 26

On 12 October 1989, the consortium filed a manifestation and motion to lift the 27 September 1989 order, to reinstate the 4 September 1989 order and to direct CEIC to surrender the disputed stock certificates of Chemphil in its possession within twenty-four (24) hours, failing in which the President, Corporate Secretary and stock and transfer agent of Chemphil be directed to register the names of the banks making up the consortium as owners of said shares, sign the new certificates of stocks evidencing their ownership over said shares and to immediately deliver the stock certificates to them. 27

Resolving the foregoing motions, the trial court rendered an order dated 19 December 1989, the dispositive portion of which reads as follows:WHEREFORE, premises considered, the Urgent Motion dated September 25, 1989 filed by CEIC is hereby GRANTED. Accordingly, the Order of September 4, 1989, is hereby SET ASIDE, and any and all acts of the Corporate Secretary of CHEMPHIL and/or whoever is acting for and in his behalf, as may have already been done, carried out or implemented pursuant to the Order of September 4, 1989, are hereby nullified.PERFORCE, the CONSORTIUM'S Motions dated October 3, 1989 and October 11, 1989, are both hereby denied for lack of merit.The Cease and Desist Order dated September 27, 1989, is hereby AFFIRMED and made PERMANENT.SO ORDERED. 28

In so ruling, the trial court ratiocinated in this wise:xxx xxx xxx

After careful and assiduous consideration of the facts and applicable law and jurisprudence, the Court holds that CEIC's Urgent Motion to Set Aside the Order of September 4, 1989 is impressed with merit. The CONSORTIUM has admitted that the writ of attachment/garnishment issued on July 19, 1985 on the shares of stock belonging to plaintiff Antonio M. Garcia was not annotated and registered in the stock and transfer books of CHEMPHIL. On the other hand, the prior attachment issued in favor of SBTC on July 2, 1985 by Branch 135 of this Court in Civil Case No. 10398, against the same CHEMPHIL shares of Antonio M. Garcia, was duly registered and annotated in the stock and transfer books of CHEMPHIL. The matter of non-recording of the Consortium's attachment in Chemphil's stock and transfer book on the shares of Antonio M. Garcia assumes significance considering CEIC's position that FCI and later CEIC acquired the CHEMPHIL shares of Antonio M. Garcia without knowledge of the attachment of the CONSORTIUM. This is also important as CEIC claims that it has been subrogated to the rights of SBTC since CEIC's predecessor-in-interest, the FCI, had paid SBTC the amount of P35,462,869.12 pursuant to the Deed of Sale and Purchase of Shares of Stock executed by Antonio M. Garcia on July 15, 1988. By reason of such payment, sale with the knowledge and consent of Antonio M. Garcia, FCI and CEIC, as party-in-interest to FCI, are subrogated by operation of law to the rights of SBTC. The Court is not unaware of the citation in CEIC's reply that "as between two (2) attaching creditors, the one whose claims was first registered on the books of the corporation enjoy priority." (Samahang Magsasaka, Inc. vs. Chua Gan, 96 Phil. 974.)The Court holds that a levy on the shares of corporate stock to be valid and binding on third persons, the notice of attachment or garnishment must be registered and annotated in the stock and transfer books of the corporation, more so when the shares of the corporation are listed and traded in the stock exchange, as in this case. As a matter of fact, in the CONSORTIUM's motion of August 30, 1989, they specifically move to "order the Corporate Secretary of CHEMPHIL to enter in the stock and transfer books of CHEMPHIL the Sheriff's Certificate of Sale dated August 22, 1989." This goes to show that, contrary to the arguments of the CONSORTIUM, in order that attachment, garnishment and/or encumbrances affecting rights and ownership on shares of a corporation to be valid and binding, the same has to be recorded in the stock and transfer books.Since neither CEIC nor FCI had notice of the CONSORTIUM's attachment of July 19, 1985, CEIC's shares of stock in CHEMPHIL, legally acquired from Antonio M. Garcia, cannot be levied upon in execution to satisfy his judgment debts. At the time of the Sheriff's levy on execution, Antonio M. Garcia has no more in CHEMPHIL which could be levied upon. 29

xxx xxx xxxOn 23 January 1990, the consortium and PCIB filed separate motions for reconsideration of the aforestated order which were opposed by petitionerCEIC. 30

On 5 March 1990, the trial court denied the motions forreconsideration. 31

On 16 March 1990, the consortium appealed to the Court of Appeals (CA-G.R. No. 26511). In its Resolution dated 9 August 1990, the Court of Appeals consolidated CA-G.R. No. 26511 with CA-G.R. No. 20467. 32

The issues raised in the two cases, as formulated by the Court of Appeals, are as follows:I

WHETHER OR NOT, UNDER THE PECULIAR CIRCUMSTANCES OF THE CASE, THE TRIAL COURT ERRED IN DISMISSING THE COUNTERCLAIMS OF THE CONSORTIUM IN CIVIL CASE NO. 8527;

IIWHETHER OR NOT THE DISMISSAL OF CIVIL CASE NO. 8527 RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT ISSUED THEREIN EVEN AS THE CONSORTIUM APPEALED THE ORDER DISMISSING CIVIL CASE NO. 8527;

IIIWHETHER OR NOT THE JUDGMENT BASED ON COMPROMISE RENDERED BY THIS COURT ON MAY 22, 1989 HAD THE EFFECT OF DISCHARGING THE ATTACHMENTS ISSUED IN CIVIL CASE NO. 8527;

IVWHETHER OR NOT THE ATTACHMENT OF SHARES OF STOCK, IN ORDER TO BIND THIRD PERSONS, MUST BE RECORDED IN THE STOCK AND TRANSFER BOOK OF THE CORPORATION; AND

VWHETHER OR NOT FERRO CHEMICALS, INC. (FCI), AND ITS SUCCESSOR-IN-INTEREST, CEIC, WERE SUBROGATED TO THE RIGHTS OF SECURITY BANK & TRUST COMPANY (SBTC) IN A SEPARATE CIVIL ACTION. (This issue appears to be material as SBTC is alleged to have obtained an earlier attachment over the same Chemphil shares that the consortium seeks to recover in the case at bar). 33

On 6 April 1990, the PCIB separately filed with the Court of Appeals a petition for certiorari, prohibition andmandamus with a prayer for the issuance of a writ of preliminary injunction (CA-G.R. No. SP-20474), likewise, assailing the very same orders dated 19 December 1989 and 5 March 1990, subject of CA-G.R. No. 26511. 34

On 30 June 1993, the Court of Appeals (Twelfth Division) in CA-G.R. No. 26511 and CA-G.R. No. 20467 rendered a decision reversing the orders of the trial court and confirming the ownership of the consortium over the disputed shares. CEIC's motion for reconsideration was denied on 29 October 1993. 35

In ruling for the consortium, the Court of Appeals made the following ratiocination: 36

On the first issue, it ruled that the evidence offered by the consortium in support of its counterclaims, coupled with the failure of Dynetics and Garcia to prosecute their case, was sufficient basis for the RTC to pass upon and determine the consortium's counterclaims.The Court of Appeals found no application for the ruling in Dalman v. City Court of Dipolog, 134 SCRA 243 (1985) that "a person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the counterclaim filed therein" because the factual background of the present action is different. In the instant case, both Dynetics and Garcia and the consortium presented testimonial and documentary evidence which clearly should have supported a judgment on the merits in favor of the consortium. As the consortium correctly argued, the net atrocious effect of the Regional Trial Court's ruling is that it allows a situation where a party litigant is forced to plead and prove compulsory counterclaims only to be denied those counterclaims on account of the adverse party's failure to prosecute his case. Verily, the consortium had no alternative but to present its counterclaims in Civil Case No. 8527 since its counterclaims are compulsory in nature.On the second issue, the Court of Appeals opined that unless a writ of attachment is lifted by a special order specifically providing for the discharge thereof, or unless a case has been finally dismissed against the party in whose favor the attachment has been issued, the attachment lien subsists. When the consortium, therefore, took an appeal from the Regional Trial Court's orders of March 25, 1988 and May 20, 1988, such appeal had the effect of preserving the consortium's attachment liens secured at the inception of Civil Case No. 8527, invoking the rule in Olib v. Pastoral,188 SCRA 692 (1988) that where the main action is appealed, the attachment issued in the said main case is also considered appealed.Anent the third issue, the compromise agreement between the consortium and Garcia dated 17 January 1989 did not result in the abandonment of its attachment lien over his properties. Said agreement was approved by the Court of Appeals in a Resolution dated 22 May 1989. The judgment based on the compromise agreement had the effect of preserving the said attachment lien as security for the satisfaction of said judgment (citing BF Homes, Inc. v. CA, 190 SCRA 262, [1990]).As to the fourth issue, the Court of Appeals agreed with the consortium's position that the attachment of shares of stock in a corporation need not be recorded in the corporation's stock and transfer book in order to bind third persons.Section 7(d), Rule 57 of the Rules of Court was complied with by the consortium (through the Sheriff of the trial court) when the notice of garnishment over the Chemphil shares of Garcia was served on the president of Chemphil on July 19, 1985. Indeed, to bind third persons, no law requires that an attachment of shares of stock be recorded in the stock and transfer book of a corporation. The statement attributed by the Regional Trial Court to the Supreme Court in Samahang Magsasaka, Inc.vs. Gonzalo Chua Guan, G.R. No. L-7252, February 25, 1955 (unreported), to the effect that "as between two attaching creditors, the one whose claim was registered first on the books of the corporation enjoys priority," is an obiter dictum that does not modify the procedure laid down in Section 7(d), Rule 57 of the Rules of Court.Therefore, ruled the Court of Appeals, the attachment made over the Chemphil shares in the name of Garcia on July 19, 1985 was made in accordance with law and the lien created thereby remained valid and subsisting at the time Garcia sold those shares to FCI (predecessor-in-interest of appellee CEIC) in 1988.Anent the last issue, the Court of Appeals rejected CEIC's subrogation theory based on Art. 1302 (2) of the New Civil Code stating that the obligation to SBTC was paid by Garcia himself and not by a third party (FCI).The Court of Appeals further opined that while the check used to pay SBTC was a FCI corporate check, it was funds of Garcia in FCI that was used to pay off SBTC. That the funds used to pay off SBTC were funds of Garcia has not been refuted by FCI or CEIC. It is clear, therefore, that there was an attempt on the part of Garcia to use FCI and CEIC as convenient vehicles to deny the consortium its right to make itself whole through an execution sale of the Chemphil shares attached by the consortium at the inception of Civil Case No. 8527. The consortium, therefore, is entitled to the issuance of the Chemphil shares of stock in its favor. The Regional Trial Court's order of September 4, 1989, should, therefore, be reinstated in toto.Accordingly, the question of whether or not the attachment lien in favor of SBTC in the SBTC case is superior to the attachment lien in favor of the consortium in Civil Case No. 8527 becomes immaterial with respect to the right of intervenor-appellee CEIC. The said issue would have been relevant had CEIC established its subrogation to the rights of SBTC.

On 26 March 1993, the Court of Appeals (Special Ninth Division) in CA-G.R. No. SP 20474 rendered a decision denying due course to and dismissing PCIB's petition for certiorari on grounds that PCIB violated the rule against forum-shopping and that no grave abuse of discretion was committed by respondent Regional Trial Court in issuing its assailed orders dated 19 December 1989 and 5 March 1990. PCIB's motion for reconsideration was denied on 11 January 1994. 37

On 7 July 1993, the consortium, with the exception of PISO, assigned without recourse all its rights and interests in the disputed shares to Jaime Gonzales. 38

On 3 January 1994, CEIC filed the instant petition for review docketed as G.R. Nos. 112438-39 and assigned the following errors:I.

THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE AND REVERSING THE ORDERS OF THE REGIONAL TRIAL COURT DATED DECEMBER 5, 1989 AND MARCH 5, 1990 AND IN NOT CONFIRMING PETITIONER'S OWNERSHIP OVER THE DISPUTED CHEMPHIL SHARES AGAINST THE FRIVOLOUS AND UNFOUNDED CLAIMS OF THE CONSORTIUM.

II.THE RESPONDENT COURT OF APPEALS GRAVELY ERRED:

(1) In not holding that the Consortium's attachment over the disputed Chemphil shares did not vest any priority right in its favor and cannot bind third parties since admittedly its attachment on 19 July 1985 was not recorded in the stock and transfer books of Chemphil, and subordinate to the attachment of SBTC which SBTC registered and annotated in the stock and transfer books of Chemphil on 2 July 1985, and that the Consortium's attachment failed to comply with Sec. 7(d), Rule 57 of the Rules as evidenced by the notice of garnishment of the deputy sheriff of the trial court dated 19 July 1985 (annex "D") which the sheriff served on a certain Thelly Ruiz who was neither President nor managing agent of Chemphil;

Corpo (p.10-11) 35(2) In not applying the case law enunciated by this Honorable Supreme Court inSamahang Magsasaka, Inc. vs. Gonzalo Chua Guan, 96 Phil. 974 that as between two attaching creditors, the one whose claim was registered first in the books of the corporation enjoys priority, and which respondent Court erroneously characterized as mere obiter dictum;(3) In not holding that the dismissal of the appeal of the Consortium from the order of the trial court dismissing its counterclaim against Antonio M. Garcia and the finality of the compromise agreement which ended the litigation between the Consortium and Antonio M. Garcia in the Dynetics case had ipso jure discharged the Consortium's purported attachment over the disputed shares.

III.THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT CEIC HAD BEEN SUBROGATED TO THE RIGHTS OF SBTC SINCE CEIC'S PREDECESSOR IN INTEREST HAD PAID SBTC PURSUANT TO THE DEED OF SALE AND PURCHASE OF STOCK EXECUTED BY ANTONIO M. GARCIA ON JULY 15, 1988, AND THAT BY REASON OF SUCH PAYMENT, WITH THE CONSENT AND KNOWLEDGE OF ANTONIO M. GARCIA, FCI AND CEIC, AS PARTY IN INTEREST TO FCI, WERE SUBROGATED BY OPERATION OF LAW TO THE RIGHTS OF SBTC.

IV.THE RESPONDENT COURT OF APPEALS GRAVELY ERRED AND MADE UNWARRANTED INFERENCES AND CONCLUSIONS, WITHOUT ANY SUPPORTING EVIDENCE, THAT THERE WAS AN ATTEMPT ON THE PART OF ANTONIO M. GARCIA TO USE FCI AND CEIC AS CONVENIENT VEHICLES TO DENY THE CONSORTIUM ITS RIGHTS TO MAKE ITSELF WHOLE THROUGH AN EXECUTION OF THE CHEMPHIL SHARES PURPORTEDLY ATTACHED BY THE CONSORTIUM ON 19 JULY 1985. 39

On 2 March 1994, PCIB filed its own petition for review docketed as G.R. No. 113394 wherein it raised the following issues:I. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF LAW AND JURISPRUDENCE BY FINDING RESPONDENT CEIC AS HAVING BEEN SUBROGATED TO THE RIGHTS OF SBTC BY THE PAYMENT BY FCI OF GARCIA'S DEBTS TO THE LATTER DESPITE THE FACT THAT —

A. FCI PAID THE SBTC DEBT BY VIRTUE OF A CONTRACT BETWEEN FCI AND GARCIA, THUS, LEGAL SUBROGATION DOES NOT ARISE;B. THE SBTC DEBT WAS PAID BY GARCIA HIMSELF AND NOT BY FCI, HENCE, SUBROGATION BY PAYMENT COULD NOT HAVE OCCURRED;C. FCI DID NOT ACQUIRE ANY RIGHT OVER THE DISPUTED SHARES AS SBTC HAD NOT YET LEVIED UPON NOR BOUGHT THOSE SHARES ON EXECUTION. ACCORDINGLY, WHAT FCI ACQUIRED FROM SBTC WAS SIMPLY A JUDGMENT CREDIT AND AN ATTACHMENT LIEN TO SECURE ITS SATISFACTION.

II. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN SUSTAINING THE ORDERS OF THE TRIAL COURT DATED DECEMBER 19, 1989 AND MARCH 5, 1990 WHICH DENIED PETITIONER'S OWNERSHIP OVER THE DISPUTED SHARES NOTWITHSTANDING PROVISIONS OF LAW AND EXTANT JURISPRUDENCE ON THE MATTER THAT PETITIONER AND THE CONSORTIUM HAVE PREFERRED SENIOR RIGHTS THEREOVER.III. RESPONDENT COURT OF APPEAL COMMITTED SERIOUS ERROR IN CONCLUDING THAT THE DISMISSAL OF THE COMPLAINT AND THE COUNTERCLAIM IN CIVIL CASE NO. 8527 ALSO RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT DESPITE THE RULINGS OF THIS HONORABLE COURT IN BF HOMES VS. COURT OF APPEALS, G.R. NOS. 76879 AND 77143, OCTOBER 3, 1990, 190 SCRA 262, AND IN OLIB VS. PASTORAL, G.R. NO. 81120, AUGUST 20, 1990, 188 SCRA 692 TO THE CONTRARY.IV. RESPONDENT COURT OF APPEALS EXCEEDED ITS JURISDICTION IN RULING ON THE MERITS OF THE MAIN CASE NOTWITHSTANDING THAT THOSE MATTERS WERE NOT ON APPEAL BEFORE IT.V. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT PETITIONER IS GUILTY OF FORUM SHOPPING DESPITE THE FACT THAT SC CIRCULAR NO. 28-91 WAS NOT YET IN FORCE AND EFFECT AT THE TIME THE PETITION WAS FILED BEFORE RESPONDENT APPELLATE COURT, AND THAT ITS COUNSEL AT THAT TIME HAD ADEQUATE BASIS TO BELIEVE THATCERTIORARI AND NOT AN APPEAL OF THE TRIAL COURT'S ORDERS WAS THE APPROPRIATE RELIEF.40

As previously stated, the issue boils down to who is legally entitled to the disputed shares of Chemphil. We shall resolve this controversy by examining the validity of the claims of each party and, thus, determine whose claim has priority.

CEIC's claimCEIC traces its claim over the disputed shares to the attachment lien obtained by SBTC on 2 July 1985 against Antonio Garcia in Civil Case No. 10398. It avers that when FCI, CEIC's predecessor-in-interest, paid SBTC the due obligations of Garcia to the said bank pursuant to the Deed of Absolute Sale and Purchase of Shares of Stock, 41FCI, and later CEIC, was subrogated to the rights of SBTC, particularly to the latter's aforementioned attachment lien over the disputed shares.CEIC argues that SBTC's attachment lien is superior as it was obtained on 2 July 1985, ahead of the consortium's purported attachment on 19 July 1985. More importantly, said CEIC lien was duly recorded in the stock and transfer books of Chemphil.CEIC's subrogation theory is unavailing.By definition, subrogation is "the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts; this is the subrogation referred to in article 1302. Conventional subrogation is that which takes place by agreement of the parties . . ." 42

CEIC's theory is premised on Art. 1302 (2) of the Civil Code which states:Art. 1302. It is presumed that there is legal subrogation:(1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge;(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. (Emphasis ours.)

Despite, however, its multitudinous arguments, CEIC presents an erroneous interpretation of the concept of subrogation. An analysis of the situations involved would reveal the clear inapplicability of Art. 1302 (2).Antonio Garcia sold the disputed shares to FCI for a consideration of P79,207,331.28. FCI, however, did not pay the entire amount to Garcia as it was obligated to deliver part of the purchase price directly to SBTC pursuant to the following stipulation in the Deed of Sale:

Manner of PaymentPayment of the Purchase Price shall be made in accordance with the following order of preferenceprovided that in no instance shall the total amount paid by the Buyer exceed the Purchase Price:a. Buyer shall pay directly to the Security Bank and Trust Co. the amount determined by the Supreme Court as due and owing in favor of the said bank by the Seller.The foregoing amount shall be paid within fifteen (15) days from the date the decision of the Supreme Court in the case entitled "Antonio M. Garcia, et al. vs. Court of Appeals, et al." G.R. Nos. 82282-83 becomes final and executory. 43 (Emphasis ours.)

Hence, when FCI issued the BA check to SBTC in the amount of P35,462,869.62 to pay Garcia's indebtedness to the said bank, it was in effect paying with Garcia's money, no longer with its own, because said amount was part of the purchase price which FCI owed Garcia in payment for the sale of the disputed shares by the latter to the former. The money "paid" by FCI to SBTC, thus properly belonged to Garcia. It is as if Garcia himself paid his own debt to SBTC but through a third party — FCI.It is, therefore, of no consequence that what was used to pay SBTC was a corporate check of FCI. As we have earlier stated, said check no longer represented FCI funds but Garcia's money, being as it was part of FCI's payment for the acquisition of the disputed shares. The FCI check should not be taken at face value, the attendant circumstances must also be considered.The aforequoted contractual stipulation in the Deed of Sale dated 15 July 1988 between Antonio Garcia and FCI is nothing more but an arrangement for the sake of convenience. Payment was to be effected in the aforesaid manner so as to prevent money from changing hands needlessly. Besides, the very purpose of Garcia in selling the disputed shares and his other properties was to "settle certain civil suits filed against him." 44

Since the money used to discharge Garcia's debt rightfully belonged to him, FCI cannot be considered a third party payor under Art. 1302 (2). It was but a conduit, or as aptly categorized by respondents, merely an agent as defined in Art. 1868 of the Civil Code:

Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

FCI was merely fulfilling its obligation under the aforementioned Deed of Sale.Additionally, FCI is not a disinterested party as required by Art. 1302 (2) since the benefits of the extinguishment of the obligation would redound to none other but itself. 45 Payment of the judgment debt to SBTC resulted in the discharge of the attachment lien on the disputed shares purchased by FCI. The latter would then have a free and "clean" title to said shares.In sum, CEIC, for its failure to fulfill the requirements of Art. 1302 (2), was not subrogated to the rights of SBTC against Antonio Garcia and did not acquire SBTC's attachment lien over the disputed shares which, in turn, had already been lifted or discharged upon satisfaction by Garcia, through FCI, of his debt to the said bank. 46

The rule laid down in the case of Samahang Magsasaka, Inc. v. Chua Guan, 47 that as between two attaching creditors the one whose claim was registered ahead on the books of the corporation enjoys priority, clearly has no application in the case at bench. As we have amply discussed, since CEIC was not subrogated to SBTC's right as attaching creditor, which right in turn, had already terminated after Garcia paid his debt to SBTC, it cannot, therefore, be categorized as an attaching creditor in the present controversy. CEIC cannot resurrect and claim a right which no longer exists. The issue in the instant case, then, is priority between an attaching creditor (the consortium) and a purchaser (FCI/CEIC) of the disputed shares of stock and not between two attaching creditors — the subject matter of the aforestated Samahang Magsasaka case.CEIC, likewise, argues that the consortium's attachment lien over the disputed Chemphil shares is null and void and not binding on third parties due to the latter's failure to register said lien in the stock and transfer books of Chemphil as mandated by the rule laid down by the Samahang Magsasaka v. Chua Guan. 48

The attachment lien acquired by the consortium is valid and effective. Both the Revised Rules of Court and the Corporation Code do not require annotation in the corporation's stock and transfer books for the attachment of shares of stock to be valid and binding on the corporation and third party.Section 74 of the Corporation Code which enumerates the instances where registration in the stock and transfer books of a corporation provides:

Sec. 74. Books to be kept; stock transfer agent. —xxx xxx xxx

Stock corporations must also keep a book to be known as the stock and transfer book, in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any settlement; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours on business days. (Emphasis ours.)

xxx xxx xxxSection 63 of the same Code states:

Sec. 63. Certificate of stock and transfer of shares. — The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. (Emphasis ours.)

Are attachments of shares of stock included in the term "transfer" as provided in Sec. 63 of the Corporation Code? We rule in the negative. As succinctly declared in the case of Monserrat v. Ceron, 49 "chattel mortgage over shares of stock need not be registered in the corporation's stock and transfer book inasmuch as chattel mortgage over shares of stock does not involve a "transfer of shares," and that only absolute transfers of shares of stock are required to be recorded in the corporation's stock and transfer book in order to have "force and effect as against third persons."

xxx xxx xxxThe word "transferencia" (transfer) is defined by the "Diccionario de la Academia de la Lengua Castellana" as "accion y efecto de transfeir" (the act and effect of transferring); and the verb "transferir", as "ceder or renunciar en otro el derecho o dominio que se tiene sobre una cosa, haciendole dueno de ella" (to assign or waive the right in, or absolute ownership of, a thing in favor of another, making him the owner thereof).In the Law Dictionary of "Words and Phrases", third series, volume 7, p. 5867, the word "transfer" is defined as follows:

Corpo (p.10-11) 36"Transfer" means any act by which property of one person is vested in another, and "transfer of shares", as used in Uniform Stock Transfer Act (Comp. St. Supp. 690), implies any means whereby one may be divested of and another acquire ownership of stock. (Wallach vs. Stein [N.J.], 136 A., 209, 210.)

xxx xxx xxxIn the case of Noble vs. Ft. Smith Wholesale Grocery Co. (127 Pac., 14, 17; 34 Okl., 662; 46 L.R.A. [N.S.], 455), cited in Words and Phrases, second series, vol. 4, p. 978, the following appears:

A "transfer" is the act by which the owner of a thing delivers it to another with the intent of passing the rights which he has in it to the latter, and a chattel mortgage is not within the meaning of such term.

xxx xxx xxx. 50

Although the Monserrat case refers to a chattel mortgage over shares of stock, the same may be applied to the attachment of the disputed shares of stock in the present controversy since an attachment does not constitute an absolute conveyance of property but is primarily used as a means "to seize the debtor's property in order to secure the debt or claim of the creditor in the event that a judgment is rendered." 51

Known commentators on the Corporation Code expound, thus:xxx xxx xxx

Shares of stock being personal property, may be the subject matter of pledge and chattel mortgage. Suchcollateral transfers are however not covered by the registration requirement of Section 63, since our Supreme Court has held that such provision applies only to absolute transfers thus, the registration in the corporate books of pledges and chattel mortgages of shares cannot have any legal effect. 52 (Emphasis ours.)

xxx xxx xxxThe requirement that the transfer shall be recorded in the books of the corporation to be valid as against third persons has reference only to absolute transfers or absolute conveyance of the ownership or title to a share.Consequently, the entry or notation on the books of the corporation of pledges and chattel mortgages on shares is not necessary to their validity (although it is advisable to do so) since they do not involve absolute alienation of ownership of stock (Monserrat vs. Ceron, 58 Phil. 469 [1933]; Chua Guan vs. Samahang Magsasaka, Inc., 62 Phil. 472 [1935].) To affect third persons, it is enough that the date and description of the shares pledged appear in a public instrument. (Art. 2096, Civil Code.) With respect to a chattel mortgage constituted on shares of stock, what is necessary is its registration in the Chattel Mortgage Registry. (Act No. 1508 and Art. 2140, Civil Code.) 53

CEIC's reliance on the Samahang Magsasaka case is misplaced. Nowhere in the said decision was it categorically stated that annotation of the attachment in the corporate books is mandatory for its validity and for the purpose of giving notice to third persons.The only basis, then, for petitioner CEIC's claim is the Deed of Sale under which it purchased the disputed shares. It is, however, a settled rule that a purchaser of attached property acquires it subject to an attachment legally and validly levied thereon. 54

Our corollary inquiry is whether or not the consortium has indeed a prior valid and existing attachment lien over the disputed shares.Jaime Gonzales' /Consortium's Claim

Is the consortium's attachment lien over the disputed shares valid?CEIC vigorously argues that the consortium's writ of attachment over the disputed shares of Chemphil is null and void, insisting as it does, that the notice of garnishment was not validly served on the designated officers on 19 July 1985.To support its contention, CEIC presented the sheriff's notice of garnishment 55 dated 19 July 1985 which showed on its face that said notice was received by one Thelly Ruiz who was neither the president nor managing agent of Chemphil. It makes no difference, CEIC further avers, that Thelly Ruiz was the secretary of the President of Chemphil, for under the above-quoted provision she is not among the officers so authorized or designated to be served with the notice of garnishment.We cannot subscribe to such a narrow view of the rule on proper service of writs of attachment.A secretary's major function is to assist his or her superior. He/she is in effect an extension of the latter. Obviously, as such, one of her duties is to receive letters and notices for and in behalf of her superior, as in the case at bench. The notice of garnishment was addressed to and was actually received by Chemphil's president through his secretary who formally received it for him. Thus, in one case, 56 we ruled that the secretary of the president may be considered an "agent" of the corporation and held that service of summons on him is binding on the corporation.Moreover, the service and receipt of the notice of garnishment on 19 July 1985 was duly acknowledged and confirmed by the corporate secretary of Chemphil, Rolando Navarro and his successor Avelino Cruz through their respective certifications dated 15 August 1989 57 and 21 August 1989. 58

We rule, therefore, that there was substantial compliance with Sec. 7(d), Rule 57 of the Rules of Court.Did the compromise agreement between Antonio Garcia and the consortium discharge the latter's attachment lien over the disputed shares?CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the case, dies a natural death. Thus, when the consortium entered into a compromise agreement, 59 which resulted in the termination of their case, the disputed shares were released from garnishment.We disagree. To subscribe to CEIC's contentions would be to totally disregard the concept and purpose of a preliminary attachment.

A writ of preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the Sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the defendant. 60 (Emphasis ours.)Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue of a civil obligation emanating from contract or from law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granted it, is executed by attaching and safely keeping all the movable property of the defendant, or so much thereof may be sufficient to satisfy the plaintiff's demands . . . 61 (Emphasis ours.)The chief purpose of the remedy of attachment is to secure a contingent lien on defendant's property until plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or concealed, or otherwise placed beyond the reach of creditors. 62 (Emphasis ours.)

We reiterate the rule laid down in BF Homes, Inc. v. CA 63 that an attachment lien continues until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in the same manner provided by law. We expounded in said case that:

The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution of the attachment. This should not be permitted.

Having previously obtained the issuance of the writ in good faith, they should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed.

xxx xxx xxxAs we ruled in Government of the Philippine Islands v. Mercado:

Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in some manner provided by law.It has been held that the lien obtained by attachment stands upon as high equitable grounds as a mortgage lien:The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien, and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (Corpus Juris Secundum, 433, and authorities therein cited.)

xxx xxx xxxThe case at bench admits of a peculiar character in the sense that it involves a compromise agreement. Nonetheless, the rule established in the aforequoted cases still applies, even more so since the terms of the agreement have to be complied with in full by the parties thereto. The parties to the compromise agreement should not be deprived of the protection provided by an attachment lien especially in an instance where one reneges on his obligations under the agreement, as in the case at bench, where Antonio Garcia failed to hold up his own end of the deal, so to speak.Moreover, a violation of the terms and conditions of a compromise agreement entitles the aggrieved party to a writ of execution.In Abenojar & Tana v. CA, et al., 64 we held:

The non-fulfillment of the terms and conditions of a compromise agreement approved by the Court justifies execution thereof and the issuance of the writ for said purpose is the Court's ministerial duty enforceable by mandamus.

Likewise we ruled in Canonizado v. Benitez: 65

A judicial compromise may be enforced by a writ of execution. If a party fails or refuses to abide by the compromise, the other party may enforce the compromise or regard it as rescinded and insist upon his original demand.

If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape his creditors. Consequently, we would be faced with an anomalous situation where a debtor, in order to buy time to dispose of his properties, would enter into a compromise agreement he has no intention of honoring in the first place. The purpose of the provisional remedy of attachment would thus be lost. It would become, in analogy, a declawed and toothless tiger.From the foregoing, it is clear that the consortium and/or its assignee Jaime Gonzales have the better right over the disputed shares. When CEIC purchased the disputed shares from Antonio Garcia on 15 July 1988, it took the shares subject to the prior, valid and existing attachment lien in favor of and obtained by the consortium.

Forum Shopping in G.R. No. 113394We uphold the decision of the Court of Appeals finding PCIB guilty of forum-shopping. 66

The Court of Appeals opined:True it is, that petitioner PCIB was not a party to the appeal made by the four other banks belonging to the consortium, but equally true is the rule that where the rights and liabilities of the parties appealing are so interwoven and dependent on each other as to be inseparable, a reversal of the appealed decision as to those who appealed, operates as a reversal to all and will inure to the benefit of those who did not join the appeal (Tropical Homes vs. Fortun, 169 SCRA 80, p. 90, citing Alling vs. Wenzel, 133 111. 264-278; 4 C.J. 1206). Such principal, premised upon communality of interest of the parties, is recognized in this jurisdiction (Director of Lands vs. Reyes, 69 SCRA 415). The four other banks which were part of the consortium, filed their notice of appeal under date of March 16, 1990, furnishing a copy thereof upon the lawyers of petitioner. The petition for certiorari in the present case was filed on April 10, 1990, long after the other members of the consortium had appealed from the assailed order of December 19, 1989.

We view with skepticism PCIB's contention that it did not join the consortium because it "honestly believed thatcertiorari was the more efficacious and speedy relief available under the circumstances." 67 Rule 65 of the Revised Rules of Court is not difficult to understand. Certiorari is available only if there is no appeal or other plain, speedy and adequate remedy in the ordinary course of law. Hence, in instituting a separate petition for certiorari, PCIB has deliberately resorted to forum-shopping.PCIB cannot hide behind the subterfuge that Supreme Court Circular 28-91 was not yet in force when it filed thecertiorari proceedings in the Court of Appeals. The rule against forum-shopping has long been established. 68Supreme Court Circular 28-91 merely formalized the prohibition and provided the appropriate penalties against transgressors.It alarms us to realize that we have to constantly repeat our warning against forum-shopping. We cannot over-emphasize its ill-effects, one of which is aptly demonstrated in the case at bench where we are confronted with two divisions of the Court of Appeals issuing contradictory decisions 69 one in favor of CEIC and the other in favor of the consortium/Jaime Gonzales.Forum-shopping or the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum (other than by appeal or the special civil action of certiorari), or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition, 70 has been characterized as an act of malpractice that is prohibited and condemned as trifling with the Courts and abusing their processes. It constitutes improper conduct which tends to degrade the administration of justice. It has also been aptly described as deplorable because it adds to the congestion of the already heavily burdened dockets of the courts. 71

WHEREFORE, premises considered the appealed decision in G.R. Nos. 112438-39 is hereby AFFIRMED and the appealed decision in G.R. No. 113394, insofar as it adjudged the CEIC the rightful owner of the disputed shares, is hereby REVERSED. Moreover, for wantonly resorting to forum-shopping, PCIB is hereby REPRIMANDED and WARNED that a repetition of the same or similar acts in the future shall be dealt with more severely.SO ORDERED.

Corpo (p.10-11) 37

G.R. No. 120138 September 5, 1997MANUEL A. TORRES, JR., (Deceased), GRACIANO J. TOBIAS, RODOLFO L. JOCSON, JR., MELVIN S. JURISPRUDENCIA, AUGUSTUS CESAR AZURA and EDGARDO D. PABALAN, petitioners, vs.COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION, TORMIL REALTY & DEVELOPMENT CORPORATION, ANTONIO P. TORRES, JR., MA. CRISTINA T. CARLOS, MA. LUISA T. MORALES and DANTE D. MORALES, respondents. KAPUNAN, J.:In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, petitioners seek to annul the decision of the Court of Appeals in CA-G.R. SP. No. 31748 dated 23 May 1994 and its subsequent resolution dated 10 May 1995 denying petitioners' motion for reconsideration.The present case involves two separate but interrelated conflicts. The facts leading to the first controversy are as follows:The late Manuel A. Torres, Jr. (Judge Torres for brevity) was the majority stockholder of Tormil Realty & Development Corporation while private respondents who are the children of Judge Torres' deceased brother Antonio A. Torres, constituted the minority stockholders. In particular, their respective shareholdings and positions in the corporation were as follows:

Name of Stockholder Number of Percentage Position(s)SharesManuel A. Torres, Jr. 100,120 57.21 Dir./Pres./ChairMilagros P. Torres 33,430 19.10 Dir./TreasurerJosefina P. Torres 8,290 4.73 Dir./Ass. Cor-Sec.Ma. Cristina T. Carlos 8,290 4.73 Dir./Cor-Sec.Antonio P. Torres, Jr. 8,290 4.73 DirectorMa. Jacinta P. Torres 8,290 4.73 DirectorMa. Luisa T. Morales 7,790 4.45 DirectorDante D. Morales 500 .28 Director 1

In 1984, Judge Torres, in order to make substantial savings in taxes, adopted an "estate planning" scheme under which he assigned to Tormil Realty & Development Corporation (Tormil for brevity) various real properties he owned and his shares of stock in other corporations in exchange for 225,972 Tormil Realty shares. Hence, on various dates in July and August of 1984, ten (10) deeds of assignment were executed by the late Judge Torres:

ASSIGNMENT DATE PROPERTY ASSIGNED LOCATION SHARES TO BEISSUED1. July 13, 1984 TCT 81834 Quezon City 13,252TCT 144240 Quezon City2. July 13, 1984 TCT 77008 ManilaTCT 65689 Manila 78,493TCT 109200 Manila3. July 13, 1984 TCT 374079 Makati 8,3074. July 24, 1984 TCT 41527 PasayTCT 41528 Pasay 9,855TCT 41529 Pasay5. Aug. 06, 1984 El Hogar Filipino Stocks 2,0006. Aug. 06, 1984 Manila Jockey Club Stocks 48,7377. Aug. 07, 1984 San Miguel Corp. Stocks 50,2838. Aug. 07, 1984 China banking Corp. Stocks 6,3009. Aug. 20, 1984 Ayala Corp. Stocks 7,46810. Aug. 29, 1984 Ayala Fund Stocks 1,322———225,972 2

Consequently, the aforelisted properties were duly recorded in the inventory of assets of Tormil Realty and the revenues generated by the said properties were correspondingly entered in the corporation's books of account and financial records.Likewise, all the assigned parcels of land were duly registered with the respective Register of Deeds in the name of Tormil Realty, except for the ones located in Makati and Pasay City.At the time of the assignments and exchange, however, only 225,000 Tormil Realty shares remained unsubscribed, all of which were duly issued to and received by Judge Torres (as evidenced by stock certificates Nos. 17, 18, 19, 20, 21, 22, 23, 24 & 25). 3

Due to the insufficient number of shares of stock issued to Judge Torres and the alleged refusal of private respondents to approve the needed increase in the corporation's authorized capital stock (to cover the shortage of 972 shares due to Judge Torres under the "estate planning" scheme), on 11 September 1986, Judge Torres revoked the two (2) deeds of assignment covering the properties in Makati and Pasay City. 4

Noting the disappearance of the Makati and Pasay City properties from the corporation's inventory of assets and financial records private respondents, on 31 March 1987, were constrained to file a complaint with the Securities and Exchange Commission (SEC) docketed as SEC Case No. 3153 to compel Judge Torres to deliver to Tormil corporation the two (2) deeds of assignment covering the aforementioned Makati and Pasay City properties which he had unilaterally revoked and to cause the registration of the corresponding titles in the name of Tormil. Private respondents alleged that following the disappearance of the properties from the corporation's inventory of assets, they found that on October 24, 1986, Judge Torres, together with Edgardo Pabalan and Graciano Tobias, then General Manager and legal counsel, respectively, of Tormil, formed and organized a corporation named "Torres-Pabalan Realty and Development Corporation" and that as part of Judge Torres' contribution to the new corporation, he executed in its favor a Deed of Assignment conveying the same Makati and Pasay City properties he had earlier transferred to Tormil.The second controversy — involving the same parties — concerned the election of the 1987 corporate board of directors.The 1987 annual stockholders meeting and election of directors of Tormil corporation was scheduled on 25 March 1987 in compliance with the provisions of its by-laws.Pursuant thereto, Judge Torres assigned from his own shares, one (l) share each to petitioners Tobias, Jocson, Jurisprudencia, Azura and Pabalan. These assigned shares were in the nature of "qualifying shares," for the sole purpose of meeting the legal requirement to be able to elect them (Tobias and company) to the Board of Directors as Torres' nominees.

The assigned shares were covered by corresponding Tormil Stock Certificates Nos. 030, 029, 028, 027, 026 and at the back of each certificate the following inscription is found:

The present certificate and/or the one share it represents, conformably to the purpose and intention of the Deed of Assignment dated March 6, 1987, is not held by me under any claim of ownership and I acknowledge that I hold the same merely as trustee of Judge Manuel A. Torres, Jr. and for the sole purpose of qualifying me as Director;

(Signature of Assignee) 5

The reason behind the aforestated action was to remedy the "inequitable lopsided set-up obtaining in the corporation, where, notwithstanding his controlling interest in the corporation, the late Judge held only a single seat in the nine-member Board of Directors and was, therefore, at the mercy of the minority, a combination of any two (2) of whom would suffice to overrule the majority stockholder in the Board's decision making functions." 6

On 25 March 1987, the annual stockholders meeting was held as scheduled. What transpired therein was ably narrated by Attys. Benito Cataran and Bayani De los Reyes, the official representatives dispatched by the SEC to observe the proceedings (upon request of the late Judge Torres) in their report dated 27 March 1987:

xxx xxx xxxThe undersigned arrived at 1:55 p.m. in the place of the meeting, a residential bungalow in Urdaneta Village, Makati, Metro Manila. Upon arrival, Josefina Torres introduced us to the stockholders namely: Milagros Torres, Antonio Torres, Jr., Ma. Luisa Morales, Ma. Cristina Carlos and Ma. Jacinta Torres. Antonio Torres, Jr. questioned our authority and personality to appear in the meeting claiming subject corporation is a family and private firm. We explained that our appearance there was merely in response to the request of Manuel Torres, Jr. and that SEC has jurisdiction over all registered corporations. Manuel Torres, Jr., a septuagenarian, argued that as holder of the major and controlling shares, he approved of our attendance in the meeting.At about 2:30 p.m., a group composed of Edgardo Pabalan, Atty. Graciano Tobias, Atty. Rodolfo Jocson, Jr., Atty. Melvin Jurisprudencia, and Atty. Augustus Cesar Azura arrived.Atty. Azura told the body that they came as counsels of Manuel Torres, Jr. and as stockholders having assigned qualifying shares by Manuel Torres, Jr.The stockholders' meeting started at 2:45 p.m. with Mr. Pabalan presiding after verbally authorized by Manuel Torres, Jr., the President and Chairman of the Board. The secretary when asked about the quorum, said that there was more than a quorum. Mr. Pabalan distributed copies of the president's report and the financial statements. Antonio Torres, Jr. requested time to study the said reports and brought out the question of auditing the finances of the corporation which he claimed was approved previously by the board. Heated arguments ensued which also touched on family matters. Antonio Torres, Jr. moved for the suspension of the meeting but Manuel Torres, Jr. voted for the continuation of the proceedings.Mr. Pabalan suggested that the opinion of the SEC representatives be asked on the propriety of suspending the meeting but Antonio Torres, Jr. objected reasoning out that we were just observers.When the Chairman called for the election of directors, the Secretary refused to write down the names of nominees prompting Atty. Azura to initiate the appointment of Atty. Jocson, Jr. as Acting Secretary.Antonio Torres, Jr. nominated the present members of the Board. At this juncture, Milagros Torres cried out and told the group of Manuel Torres, Jr. to leave the house.Manuel Torres, Jr., together with his lawyers-stockholders went to the residence of Ma. Jacinta Torres in San Miguel Village, Makati, Metro Manila. The undersigned joined them since the group with Manuel Torres, Jr. the one who requested for S.E.C. observers, represented the majority of the outstanding capital stock and still constituted a quorum.At the resumption of the meeting, the following were nominated and elected as directors for the year 1987-1988:1. Manuel Torres, Jr.2. Ma. Jacinta Torres3. Edgardo Pabalan4. Graciano Tobias5. Rodolfo Jocson, Jr.6. Melvin Jurisprudencia7. Augustus Cesar Azura8. Josefina Torres9. Dante MoralesAfter the election, it was resolved that after the meeting, the new board of directors shall convene for the election of officers.

xxx xxx xxx 7

Consequently, on 10 April 1987, private respondents instituted a complaint with the SEC (SEC Case No. 3161) praying in the main, that the election of petitioners to the Board of Directors be annulled.Private respondents alleged that the petitioners-nominees were not legitimate stockholders of Tormil because the assignment of shares to them violated the minority stockholders' right of pre-emption as provided in the corporation's articles and by-laws.Upon motion of petitioners, SEC Cases Nos. 3153 and 3161 were consolidated for joint hearing and adjudication.On 6 March 1991, the Panel of Hearing Officers of the SEC rendered a decision in favor of private respondents. The dispositive portion thereof states, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:1. Ordering and directing the respondents, particularly respondent Manuel A. Torres, Jr., to turn over and deliver to TORMIL through its Corporate Secretary, Ma. Cristina T. Carlos: (a) the originals of the Deeds of Assignment dated July 13 and 24, 1984 together with the owner's duplicates of Transfer Certificates of Title Nos. 374079 of the Registry of Deeds for Makati, and 41527, 41528 and 41529 of the Registry of Deeds for Pasay City and/or to cause the formal registration and transfer of title in and over such real properties in favor of TORMIL with the proper government agency; (b) all corporate books of account, records and papers as may be necessary for the conduct of a comprehensive audit examination, and to allow the examination and inspection of such accounting books, papers and records by any or all of the corporate directors, officers and stockholders and/or their duly authorized representatives or auditors;2. Declaring as permanent and final the writ of preliminary injunction issued by the Hearing Panel on February 13, 1989;3. Declaring as null and void the election and appointment of respondents to the Board of Directors and executive positions of TORMIL held on March 25, 1987, and all their acts and resolutions made for and in behalf of TORMIL by authority of and pursuant to such invalid appointment & election held on March 25, 1987;4. Ordering the respondents jointly and severally, to pay the complainants the sum of ONE HUNDRED THOUSAND PESOS (P100,000.00) as and by way of attorney's fees. 8

Corpo (p.10-11) 38Petitioners promptly appealed to the SEC en banc (docketed as SEC-AC No. 339). Thereafter, on 3 April 1991, during the pendency of said appeal, petitioner Manuel A. Torres, Jr. died. However, notice thereof was brought to the attention of the SEC not by petitioners' counsel but by private respondents in a Manifestation dated 24 April 1991. 9

On 8 June 1993, petitioners filed a Motion to Suspend Proceedings on grounds that no administrator or legal representative of the late Judge Torres' estate has yet been appointed by the Regional Trial Court of Makati where Sp. Proc. No. M-1768 ("In Matter of the Issuance of the Last Will and Testament of Manuel A Torres, Jr.") was pending. Two similar motions for suspension were filed by petitioners on 28 June 1993 and 9 July 1993.On 19 July 1993, the SEC en banc issued an Order denying petitioners' aforecited motions on the following ground:

Before the filing of these motions, the Commission en banc had already completed all proceedings and had likewise ruled on the merits of the appealed cases. Viewed in this light, we thus feel that there is nothing left to be done except to deny these motions to suspend proceedings. 10

On the same date, the SEC en banc rendered a decision, the dispositive portion of which reads, thus:WHEREFORE, premises considered, the appealed decision of the hearing panel is hereby affirmed and all motions pending before us incident to this appealed case are necessarily DISMISSED.SO ORDERED. 11

Undaunted, on 10 August 1993, petitioners proceeded to plead its cause to the Court of Appeals by way of a petition for review (docketed as CA-G.R. SP No. 31748).On 23 May 1994, the Court of Appeals rendered a decision, the dispositive portion of which states:

WHEREFORE, the petition for review is DISMISSED and the appealed decision is accordingly affirmed.SO ORDERED. 12

From the said decision, petitioners filed a motion for reconsideration which was denied in a resolution issued by the Court of Appeals dated 10 May 1995. 13

Insisting on their cause, petitioners filed the present petition for review alleging that the Court of Appeals committed the following errors in its decision:(1)

WHEN IT RENDERED THE MAY 23, 1994 DECISION, WHICH IS A FULL LENGTH DECISION, WITHOUT THE EVIDENCE AND THE ORIGINAL RECORD OF S.E.C. — AC NO. 339 BEING PROPERLY BROUGHT BEFORE IT FOR REVIEW AND RE-EXAMINATION, AN OMISSION RESULTING IN A CLEAR TRANSGRESSION OR CURTAILMENT OF THE RIGHTS OF THE HEREIN PETITIONERS TO PROCEDURAL DUE PROCESS;

(2)WHEN IT SANCTIONED THE JULY 19, 1993 DECISION OF THE RESPONDENT S.E.C., WHICH IS VOID FOR HAVING BEEN RENDERED WITHOUT THE PROPER SUBSTITUTION OF THE DECEASED PRINCIPAL PARTY-RESPONDENT IN S.E.C.-AC NO. 339 AND CONSEQUENTLY, FOR WANT OF JURISDICTION OVER THE SAID DECEASED'S TESTATE ESTATE, AND MOREOVER, WHEN IT SOUGHT TO JUSTIFY THE NON-SUBSTITUTION BY ITS APPLICATION OF THE CIVIL LAW CONCEPT OF NEGOTIORUM GESTIO;

(3)WHEN IT FAILED TO SEE, AS A CONSEQUENCE OF THE EVIDENCE AND THE ORIGINAL RECORD OF S.E.C. — AC NO. 339 NOT HAVING ACTUALLY BEEN RE-EXAMINED, THAT S.E.C. CASE NO. 3153 INVOLVED A SITUATION WHERE PERFORMANCE WAS IMPOSSIBLE (AS CONTEMPLATED UNDER ARTICLE 1191 OF THE CIVIL CODE) AND WAS NOT A MERE CASE OF LESION OR INADEQUACY OF CAUSE (UNDER ARTICLE 1355 OF THE CIVIL CODE) AS SO ERRONEOUSLY CHARACTERIZED BY THE RESPONDENT S.E.C.; and,

(4)WHEN IT FAILED TO SEE, AS A CONSEQUENCE OF THE EVIDENCE AND THE ORIGINAL RECORD OF S.E.C. — AC NO. 339 NOT HAVING ACTUALLY BEEN EXAMINED, THAT THE RECORDING BY THE LATE JUDGE MANUEL A. TORRES, JR. OF THE QUESTIONED ASSIGNMENT OF QUALIFYING SHARES TO HIS NOMINEES, WAS AFFIRMED IN THE STOCK AND TRANSFER BOOK BY AN ACTING CORPORATE SECRETARY AND MOREOVER, THAT ACTUAL NOTICE OF SAID ASSIGNMENT WAS TIMELY MADE TO THE OTHER STOCKHOLDERS. 14

We shall resolve the issues in seriatim.I

Petitioners insist that the failure to transmit the original records to the Court of Appeals deprived them of procedural due process. Without the evidence and the original records of the proceedings before the SEC, the Court of Appeals, petitioners adamantly state, could not have possibly made a proper appreciation and correct determination of the issues, particularly the factual issues, they had raised on appeal. Petitioners also assert that since the Court of Appeals allegedly gave due course to their petition, the original records should have been forwarded to said court.Petitioners anchor their argument on Secs. 8 and 11 of SC Circular 1-91 (dated 27 February 1991) which provides that:

8. WHEN PETITION GIVEN DUE COURSE. — The Court of Appeals shall give due course to the petition only when it shows prima facie that the court, commission, board, office or agency concerned has committed errors of fact or law that would warrant reversal or modification of the order, ruling or decision sought to be reviewed. The findings of fact of the court commission, board, office or agency concerned when supported by substantial evidence shall be final.

xxx xxx xxx11. TRANSMITTAL OF RECORD. — Within fifteen (15) days from notice that the petition has been given due course, the court, commission, board, office or agency concerned shall transmit to the Court of Appeals the original or a certified copy of the entire record of the proceeding under review. The record to be transmitted may be abridged by agreement of all parties to the proceeding. The Court of Appeals may require or permit subsequent correction or addition to the record.

Petitioners contend that the Court of Appeals had given due course to their petition as allegedly indicated by the following acts:a) it granted the restraining order applied for by the herein petitioners, and after hearing, also the writ of preliminary injunction sought by them; under the original SC Circular No. 1-91, a petition for review may be given due course at the onset (paragraph 8) upon a mere prima facie finding of errors of fact or law having been committed, and such prima facie finding is but consistent with the grant of the extra-ordinary writ of preliminary injunction;b) it required the parties to submit "simultaneous memoranda" in its resolution dated October 15, 1993 (this is in addition to the comment required to be filed by the respondents) and furthermore declared in the same resolution that the petition will be decided "on the merits," instead of outrightly dismissing the same;

c) it rendered a full length decision, wherein: (aa) it expressly declared the respondent S.E.C. as having erred in denying the pertinent motions to suspend proceedings; (bb) it declared the supposed error as having become a non-issue when the respondent C.A."proceeded to hear (the) appeal"; (cc) it formulated and applied its own theory of negotiorum gestio in justifying the non-substitution of the deceased principal party in S.E.C. — AC No. 339 and moreover, its theory of di minimis non curat lex (this, without first determining the true extent of and the correct legal characterization of the so-called "shortage" of Tormil shares;and, (dd) it expressly affirmed the assailed decision of respondent S.E.C. 15

Petitioners' contention is unmeritorious.There is nothing on record to show that the Court of Appeals gave due course to the petition. The fact alone that the Court of Appeals issued a restraining order and a writ of preliminary injunction and required the parties to submit their respective memoranda does not indicate that the petition was given due course. The office of an injunction is merely to preserve the status quo pending the disposition of the case. The court can require the submission of memoranda in support of the respective claims and positions of the parties without necessarily giving due course to the petition. The matter of whether or not to give due course to a petition lies in the discretion of the court.It is worthy to mention that SC Circular No. 1-91 has been replaced by Revised Administrative Circular No. 1-95 (which took effect on 1 June 1995) wherein the procedure for appeals from quasi-judicial agencies to the Court of Appeals was clarified thus:

10. Due course. — If upon the filing of the comment or such other pleadings or documents as may be required or allowed by the Court of Appeals or upon the expiration of the period for the filing thereof, and on the bases of the petition or the record the Court of Appeals finds prima facie that the court or agency concerned has committed errors of fact or law that would warrant reversal or modification of the award, judgment, final order or resolution sought to be reviewed, it may give due course to the petition; otherwise, it shall dismiss the same. The findings of fact of the court or agency concerned, when supported by substantial evidence, shall be binding on the Court of Appeals.11. Transmittal of record. — Within fifteen (15) days from notice that the petition has been given due course, the Court of Appeals may require the court or agency concerned to transmit the original or a legible certified true copy of the entire record of the proceeding under review. The record to be transmitted may be abridged by agreement of all parties to the proceeding. The Court of Appeals may require or permit subsequent correction of or addition to the record. (Emphasis ours.)

The aforecited circular now formalizes the correct practice and clearly states that in resolving appeals from quasi judicial agencies, it is within the discretion of the Court of Appeals to have the original records of the proceedings under review be transmitted to it. In this connection petitioners' claim that the Court of Appeals could not have decided the case on the merits without the records being brought before it is patently lame. Indubitably, the Court of Appeals decided the case on the basis of the uncontroverted facts and admissions contained in the pleadings, that is, the petition, comment, reply, rejoinder, memoranda, etc. filed by the parties.

IIPetitioners contend that the decisions of the SEC and the Court of Appeals are null and void for being rendered without the necessary substitution of parties (for the deceased petitioner Manuel A. Torres, Jr.) as mandated by Sec. 17, Rule 3 of the Revised Rules of Court, which provides as follows:

Sec. 17. Death of party. — After a party dies and the claim is not thereby extinguished, the court shall order, upon proper notice, the legal representative of the deceased to appear and to be substituted for the deceased, within a period of thirty (30) days, or within such time as may be granted. If the legal representative fails to appear within said time, the court may order the opposing party to procure the appointment of a legal representative of the deceased within a time to be specified by the court, and the representative shall immediately appear for and on behalf of the interest of the deceased. The court charges involved in procuring such appointment, if defrayed by the opposing party, may be recovered as costs. The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator and the court may appoint guardian ad litem for the minor heirs.

Petitioners insist that the SEC en banc should have granted the motions to suspend they filed based as they were on the ground that the Regional Trial Court of Makati, where the probate of the late Judge Torres' will was pending, had yet to appoint an administrator or legal representative of his estate.We are not unaware of the principle underlying the aforequoted provision:

It has been held that when a party dies in an action that survives, and no order is issued by the Court for the appearance of the legal representative or of the heirs of the deceased to be substituted for the deceased, and as a matter of fact no such substitution has ever been effected, the trial held by the court without such legal representative or heirs, and the judgment rendered after such trial, are null and void because the court acquired no jurisdiction over the persons of the legal representative or of the heirs upon whom the trial and the judgment are not binding. 16

As early as 8 April 1988, Judge Torres instituted Special Proceedings No. M-1768 before the Regional Trial Court of Makati for the ante-mortem probate of his holographic will which he had executed on 31 October 1986. Testifying in the said proceedings, Judge Torres confirmed his appointment of petitioner Edgardo D. Pabalan as the sole executor of his will and administrator of his estate. The proceedings, however, were opposed by the same parties, herein private respondents Antonio P. Torres, Jr., Ma. Luisa T. Morales and Ma. Cristina T. Carlos, 17 who are nephew and nieces of Judge Torres, being the children of his late brother Antonio A. Torres.It can readily be observed therefore that the parties involved in the present controversy are virtually the same parties fighting over the representation of the late Judge Torres' estate. It should be recalled that the purpose behind the rule on substitution of parties is the protection of the right of every party to due process. It is to ensure that the deceased party would continue to be properly represented in the suit through the duly appointed legal representative of his estate. In the present case, this purpose has been substantially fulfilled (despite the lack of formal substitution) in view of the peculiar fact that both proceedings involve practically the same parties. Both parties have been fiercely fighting in the probate proceedings of Judge Torres' holographic will for appointment as legal representative of his estate. Since both parties claim interests over the estate, the rights of the estate were expected to be fully protected in the proceedings before the SEC en banc and the Court of Appeals. In either case, whoever shall be appointed legal representative of Judge Torres' estate (petitioner Pabalan or private respondents) would no longer be a stranger to the present case, the said parties having voluntarily submitted to the jurisdiction of the SEC and the Court of Appeals and having thoroughly participated in the proceedings.The foregoing rationate finds support in the recent case of Vda. de Salazar v. CA, 18 wherein the Court expounded thus:

The need for substitution of heirs is based on the right to due process accruing to every party in any proceeding. The rationale underlying this requirement in case a party dies during the pendency of proceedings of a nature not extinguished by such death, is that . . . the exercise of judicial power to hear and determine a cause implicitly presupposes in the trial court, amongst other essentials, jurisdiction over the persons of the parties. That jurisdiction was inevitably impaired upon the death of the protestee pending the proceedings below such that unless and until a legal representative is for him duly named and within the jurisdiction of

Corpo (p.10-11) 39the trial court, no adjudication in the cause could have been accorded any validity or binding effect upon any party, in representation of the deceased, without trenching upon the fundamental right to a day in court which is the very essence of the constitutionally enshrined guarantee of due process.We are not unaware of several cases where we have ruled that a party having died in an action that survives, the trial held by the court without appearance of the deceased's legal representative or substitution of heirs and the judgment rendered after such trial, are null and void because the court acquired no jurisdiction over the persons of the legal representatives or of the heirs upon whom the trial and the judgment would be binding. This general rule notwithstanding, in denying petitioner's motion for reconsideration, the Court of Appeals correctly ruled that formal substitution of heirs is not necessary when the heirs themselves voluntarily appeared, participated in the case and presented evidence in defense of deceased defendant. Attending the case at bench, after all, are these particular circumstances which negate petitioner's belated and seemingly ostensible claim of violation of her rights to due process. We should not lose sight of the principle underlying the general rule that formal substitution of heirs must be effectuated for them to be bound by a subsequent judgment. Such had been the general rule established not because the rule on substitution of heirs and that on appointment of a legal representative are jurisdictional requirements per se but because non-compliance therewith results in the undeniable violation of the right to due process of those who, though not duly notified of the proceedings, are substantially affected by the decision rendered therein . . . .

It is appropriate to mention here that when Judge Torres died on April 3, 1991, the SEC en banc had already fully heard the parties and what remained was the evaluation of the evidence and rendition of the judgment.Further, petitioners filed their motions to suspend proceedings only after more than two (2) years from the death of Judge Torres. Petitioners' counsel was even remiss in his duty under Sec. 16, Rule 3 of the Revised Rules of Court. 19 Instead, it was private respondents who informed the SEC of Judge Torres' death through a manifestation dated 24 April 1991.For the SEC en banc to have suspended the proceedings to await the appointment of the legal representative by the estate was impractical and would have caused undue delay in the proceedings and a denial of justice. There is no telling when the probate court will decide the issue, which may still be appealed to the higher courts.In any case, there has been no final disposition of the properties of the late Judge Torres before the SEC. On the contrary, the decision of the SEC en banc as affirmed by the Court of Appeals served to protect and preserve his estate. Consequently, the rule that when a party dies, he should be substituted by his legal representative to protect the interests of his estate in observance of due process was not violated in this case in view of its peculiar situation where the estate was fully protected by the presence of the parties who claim interests therein either as directors, stockholders or heirs.Finally, we agree with petitioners' contention that the principle of negotiorum gestio 20 does not apply in the present case. Said principle explicitly covers abandoned or neglected property or business.

IIIPetitioners find legal basis for Judge Torres' act of revoking the assignment of his properties in Makati and Pasay City to Tormil corporation by relying on Art. 1191 of the Civil Code which provides that:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

Petitioners' contentions cannot be sustained. We see no justifiable reason to disturb the findings of SEC, as affirmed by the Court of Appeals:We sustain the ruling of respondent SEC in the decision appealed from (Rollo, pp. 45-46) that —

. . . the shortage of 972 shares would not be valid ground for respondent Torres to unilaterally revoke the deeds of assignment he had executed on July 13, 1984 and July 24, 1984 wherein he voluntarily assigned to TORMIL real properties covered by TCT No. 374079 (Makati) and TCT No. 41527, 41528 and 41529 (Pasay) respectively.A comparison of the number of shares that respondent Torres received from TORMIL by virtue of the "deeds of assignment" and the stock certificates issued by the latter to the former readily shows that TORMIL had substantially performed what was expected of it. In fact, the first two issuances were in satisfaction to the properties being revoked by respondent Torres. Hence, the shortage of 972 shares would never be a valid ground for the revocation of the deeds covering Pasay and Quezon City properties.In Universal Food Corp. vs. CA, the Supreme Court held:

The general rule is that rescission of a contract will not be permitted for a slight or carnal breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement.

The shortage of 972 shares definitely is not substantial and fundamental breach as would defeat the very object of the parties in entering into contract. Art. 1355 of the Civil Code also provides: "Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influences." There being no fraud, mistake or undue influence exerted on respondent Torres by TORMIL and the latter having already issued to the former of its 225,000 unissued shares, the most logical course of action is to declare as null and void the deed of revocation executed by respondent Torres. (Rollo, pp. 45-46.) 21

The aforequoted Civil Code provision does not apply in this particular situation for the obvious reason that a specific number of shares of stock (as evidenced by stock certificates) had already been issued to the late Judge Torres in exchange for his Makati and Pasay City properties. The records thus disclose:

DATE OF PROPERTY LOCATION NO. OF SHARES ORDER OFASSIGNMENT ASSIGNED TO BE ISSUED COMPLIANCE*1. July 13, 1984 TCT 81834 Quezon City) 13,252 3rdTCT 144240 Quezon City)

2. July 13, 1984 TCT 77008 Manila)TCT 65689 Manila) 78,493 2ndTCT 102200 Manila)3. July 13, 1984 TCT 374079 Makati 8,307 1st4. July 24, 1984 TCT 41527 PasayTCT 41528 Pasay) 9,855 4thTCT 41529 Pasay)5. August 6, 1984 El Hogar Filipino Stocks 2,000 7th6. August 6, 1984 Manila Jockey Club Stocks 48,737 5th7. August 7, 1984 San Miguel Corp. Stocks 50,238 8th8. August 7, 1984 China Banking Corp. Stocks 6,300 6th9. August 20, 1984 Ayala Corp. Stocks 7,468.2) 9th10. August 29, 1984 Ayala Fund Stocks 1,322.1)—————TOTAL 225,972.3

*Order of stock certificate issuances by TORMIL to respondent Torres relative to the Deeds of Assignment he executed sometime in July and August, 1984. 22 (Emphasis ours.)

Moreover, we agree with the contention of the Solicitor General that the shortage of shares should not have affected the assignment of the Makati and Pasay City properties which were executed in 13 and 24 July 1984 and the consideration for which have been duly paid or fulfilled but should have been applied logically to the last assignment of property — Judge Torres' Ayala Fund shares — which was executed on 29 August 1984. 23

IVPetitioners insist that the assignment of "qualifying shares" to the nominees of the late Judge Torres (herein petitioners) does not partake of the real nature of a transfer or conveyance of shares of stock as would call for the "imposition of stringent requirements (with respect to the) recording of the transfer of said shares." Anyway, petitioners add, there was substantial compliance with the above-stated requirement since said assignments were entered by the late Judge Torres himself in the corporation's stock and transfer book on 6 March 1987, prior to the 25 March 1987 annual stockholders meeting and which entries were confirmed on 8 March 1987 by petitioner Azura who was appointed Assistant Corporate Secretary by Judge Torres.Petitioners further argue that:

10.10. Certainly, there is no legal or just basis for the respondent S.E.C. to penalize the late Judge Torres by invalidating the questioned entries in the stock and transfer book, simply because he initially made those entries (they were later affirmed by an acting corporate secretary) and because the stock and transfer book was in his possession instead of the elected corporate secretary, if the background facts herein-before narrated and the serious animosities that then reigned between the deceased Judge and his relatives are to be taken into account;

xxx xxx xxx10.12. Indeed it was a practice in the corporate respondent, a family corporation with only a measly number of stockholders, for the late judge to have personal custody of corporate records; as president, chairman and majority stockholder, he had the prerogative of designating an acting corporate secretary or to himself make the needed entries, in instances where the regular secretary, who is a mere subordinate, is unavailable or intentionally defaults, which was the situation that obtained immediately prior to the 1987 annual stockholders meeting of Tormil, as the late Judge Torres had so indicated in the stock and transfer book in the form of the entries now in question;10.13. Surely, it would have been futile nay foolish for him to have insisted under those circumstances, for the regular secretary, who was then part of a group ranged against him, to make the entries of the assignments in favor of his nominees; 24

Petitioners' contentions lack merit.It is precisely the brewing family discord between Judge Torres and private respondents — his nephew and nieces that should have placed Judge Torres on his guard. He should have been more careful in ensuring that his actions (particularly the assignment of qualifying shares to his nominees) comply with the requirements of the law. Petitioners cannot use the flimsy excuse that it would have been a vain attempt to force the incumbent corporate secretary to register the aforestated assignments in the stock and transfer book because the latter belonged to the opposite faction. It is the corporate secretary's duty and obligation to register valid transfers of stocks and if said corporate officer refuses to comply, the transferor-stockholder may rightfully bring suit to compel performance.25 In other words, there are remedies within the law that petitioners could have availed of, instead of taking the law in their own hands, as the cliche goes.Thus, we agree with the ruling of the SEC en banc as affirmed by the Court of Appeals:

We likewise sustain respondent SEC when it ruled, interpreting Section 74 of the Corporation Code, as follows (Rollo, p. 45):In the absence of (any) provision to the contrary, the corporate secretary is the custodian of corporate records. Corollarily, he keeps the stock and transfer book and makes proper and necessary entries therein.Contrary to the generally accepted corporate practice, the stock and transfer book of TORMIL was not kept by Ms. Maria Cristina T. Carlos, the corporate secretary but by respondent Torres, the President and Chairman of the Board of Directors of TORMIL. In contravention to the above cited provision, the stock and transfer book was not kept at the principal office of the corporation either but at the place of respondent Torres.These being the obtaining circumstances, any entries made in the stock and transfer book on March 8, 1987 by respondent Torres of an alleged transfer of nominal shares to Pabalan and Co. cannot therefore be given any valid effect. Where the entries made are not valid, Pabalan and Co. cannot therefore be considered stockholders of record of TORMIL. Because they are not stockholders, they cannot therefore be elected as directors of TORMIL. To rule otherwise would not only encourage violation of clear mandate of Sec. 74 of the Corporation Code that stock and transfer book shall be kept in the principal office of the corporation but would likewise open the flood gates of confusion in the corporation as to who has the proper custody of the stock and transfer book and who are the real stockholders of records of a certain corporation as any holder of the stock and transfer book, though not the corporate secretary, at pleasure would make entries therein.

Corpo (p.10-11) 40The fact that respondent Torres holds 81.28% of the outstanding capital stock of TORMIL is of no moment and is not a license for him to arrogate unto himself a duty lodged to (sic) the corporate secretary. 26

All corporations, big or small, must abide by the provisions of the Corporation Code. Being a simple family corporation is not an exemption. Such corporations cannot have rules and practices other than those established by law.WHEREFORE, premises considered, the petition for review on certiorari is hereby DENIED.SO ORDERED.

G.R. No. 58168 December 19, 1989CONCEPCION MAGSAYSAY-LABRADOR, SOLEDAD MAGSAYSAY-CABRERA, LUISA MAGSAYSAY-CORPUZ, assisted be her husband, Dr. Jose Corpuz, FELICIDAD P. MAGSAYSAY, and MERCEDES MAGSAYSAY-DIAZ, petitioners, vs.THE COURT OF APPEALS and ADELAIDA RODRIGUEZ-MAGSAYSAY, Special Administratrix of the Estate of the late Genaro F. Magsaysay respondents. FERNAN, C.J.:In this petition for review on certiorari, petitioners seek to reverse and set aside [1] the decision of the Court of Appeals dated July l3, 1981, 1 affirming that of the Court of First Instance of Zambales and Olongapo City which denied petitioners' motion to intervene in an annulment suit filed by herein private respondent, and [2] its resolution dated September 7, 1981, denying their motion for reconsideration.Petitioners are raising a purely legal question; whether or not respondent Court of Appeals correctly denied their motion for intervention.The facts are not controverted.On February 9, 1979, Adelaida Rodriguez-Magsaysay, widow and special administratix of the estate of the late Senator Genaro Magsaysay, brought before the then Court of First Instance of Olongapo an action against Artemio Panganiban, Subic Land Corporation (SUBIC), Filipinas Manufacturer's Bank (FILMANBANK) and the Register of Deeds of Zambales. In her complaint, she alleged that in 1958, she and her husband acquired, thru conjugal funds, a parcel of land with improvements, known as "Pequena Island", covered by TCT No. 3258; that after the death of her husband, she discovered [a] an annotation at the back of TCT No. 3258 that "the land was acquired by her husband from his separate capital;" [b] the registration of a Deed of Assignment dated June 25, 1976 purportedly executed by the late Senator in favor of SUBIC, as a result of which TCT No. 3258 was cancelled and TCT No. 22431 issued in the name of SUBIC; and [c] the registration of Deed of Mortgage dated April 28, 1977 in the amount of P 2,700,000.00 executed by SUBIC in favor of FILMANBANK; that the foregoing acts were void and done in an attempt to defraud the conjugal partnership considering that the land is conjugal, her marital consent to the annotation on TCT No. 3258 was not obtained, the change made by the Register of Deeds of the titleholders was effected without the approval of the Commissioner of Land Registration and that the late Senator did not execute the purported Deed of Assignment or his consent thereto, if obtained, was secured by mistake, violence and intimidation. She further alleged that the assignment in favor of SUBIC was without consideration and consequently null and void. She prayed that the Deed of Assignment and the Deed of Mortgage be annulled and that the Register of Deeds be ordered to cancel TCT No. 22431 and to issue a new title in her favor.On March 7, 1979, herein petitioners, sisters of the late senator, filed a motion for intervention on the ground that on June 20, 1978, their brother conveyed to them one-half (1/2 ) of his shareholdings in SUBIC or a total of 416,566.6 shares and as assignees of around 41 % of the total outstanding shares of such stocks of SUBIC, they have a substantial and legal interest in the subject matter of litigation and that they have a legal interest in the success of the suit with respect to SUBIC.On July 26, 1979, the court denied the motion for intervention, and ruled that petitioners have no legal interest whatsoever in the matter in litigation and their being alleged assignees or transferees of certain shares in SUBIC cannot legally entitle them to intervene because SUBIC has a personality separate and distinct from its stockholders.On appeal, respondent Court of Appeals found no factual or legal justification to disturb the findings of the lower court. The appellate court further stated that whatever claims the petitioners have against the late Senator or against SUBIC for that matter can be ventilated in a separate proceeding, such that with the denial of the motion for intervention, they are not left without any remedy or judicial relief under existing law.Petitioners' motion for reconsideration was denied. Hence, the instant recourse.Petitioners anchor their right to intervene on the purported assignment made by the late Senator of a certain portion of his shareholdings to them as evidenced by a Deed of Sale dated June 20, 1978. 2 Such transfer, petitioners posit, clothes them with an interest, protected by law, in the matter of litigation.Invoking the principle enunciated in the case of PNB v. Phil. Veg. Oil Co., 49 Phil. 857,862 & 853 (1927), 3petitioners strongly argue that their ownership of 41.66% of the entire outstanding capital stock of SUBIC entitles them to a significant vote in the corporate affairs; that they are affected by the action of the widow of their late brother for it concerns the only tangible asset of the corporation and that it appears that they are more vitally interested in the outcome of the case than SUBIC.Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, this Court affirms the respondent court's holding that petitioners herein have no legal interest in the subject matter in litigation so as to entitle them to intervene in the proceedings below. In the case of Batama Farmers' Cooperative Marketing Association, Inc. v. Rosal, 4 we held: "As clearly stated in Section 2 of Rule 12 of the Rules of Court, to be permitted to intervene in a pending action, the party must have a legal interest in the matter in litigation, or in the success of either of the parties or an interest against both, or he must be so situated as to be adversely affected by a distribution or other disposition of the property in the custody of the court or an officer thereof ."To allow intervention, [a] it must be shown that the movant has legal interest in the matter in litigation, or otherwise qualified; and [b] consideration must be given as to whether the adjudication of the rights of the original parties may be delayed or prejudiced, or whether the intervenor's rights may be protected in a separate proceeding or not. Both requirements must concur as the first is not more important than the second. 5

The interest which entitles a person to intervene in a suit between other parties must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. Otherwise, if persons not parties of the action could be allowed to intervene, proceedings will become unnecessarily complicated, expensive and interminable. And this is not the policy of the law. 6

The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and which would put the intervenor in a legal position to litigate a fact alleged in the complaint, without the establishment of which plaintiff could not recover. 7

Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural, consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations.While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person. 8

Petitioners further contend that the availability of other remedies, as declared by the Court of appeals, is totally immaterial to the availability of the remedy of intervention.We cannot give credit to such averment. As earlier stated, that the movant's interest may be protected in a separate proceeding is a factor to be considered in allowing or disallowing a motion for intervention. It is significant to note at this juncture that as per records, there are four pending cases involving the parties herein, enumerated as follows: [1] Special Proceedings No. 122122 before the CFI of Manila, Branch XXII, entitled "Concepcion Magsaysay-Labrador, et al. v. Subic Land Corp., et al.", involving the validity of the transfer by the late Genaro Magsaysay of one-half of his shareholdings in Subic Land Corporation; [2] Civil Case No. 2577-0 before the CFI of Zambales, Branch III, "Adelaida Rodriguez-Magsaysay v. Panganiban, etc.; Concepcion Labrador, et al. Intervenors", seeking to annul the purported Deed of Assignment in favor of SUBIC and its annotation at the back of TCT No. 3258 in the name of respondent's deceased husband; [3] SEC Case No. 001770, filed by respondent praying, among other things that she be declared in her capacity as the surviving spouse and administratrix of the estate of Genaro Magsaysay as the sole subscriber and stockholder of SUBIC. There, petitioners, by motion, sought to intervene. Their motion to reconsider the denial of their motion to intervene was granted; [4] SP No. Q-26739 before the CFI of Rizal, Branch IV, petitioners herein filing a contingent claim pursuant to Section 5, Rule 86, Revised Rules of Court. 9 Petitioners' interests are no doubt amply protected in these cases.Neither do we lend credence to petitioners' argument that they are more interested in the outcome of the case than the corporation-assignee, owing to the fact that the latter is willing to compromise with widow-respondent and since a compromise involves the giving of reciprocal concessions, the only conceivable concession the corporation may give is a total or partial relinquishment of the corporate assets. 10

Such claim all the more bolsters the contingent nature of petitioners' interest in the subject of litigation.The factual findings of the trial court are clear on this point. The petitioners cannot claim the right to intervene on the strength of the transfer of shares allegedly executed by the late Senator. The corporation did not keep books and records. 11 Perforce, no transfer was ever recorded, much less effected as to prejudice third parties. The transfer must be registered in the books of the corporation to affect third persons. The law on corporations is explicit. Section 63 of the Corporation Code provides, thus: "No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred."And even assuming arguendo that there was a valid transfer, petitioners are nonetheless barred from intervening inasmuch as their rights can be ventilated and amply protected in another proceeding.WHEREFORE, the instant petition is hereby DENIED. Costs against petitioners.SO ORDERED.G.R. No. 123553 July 13, 1998(CA-G.R. No. 33291) July 13, 1998NORA A. BITONG, petitioner,vs.COURT OF APPEALS (FIFTH DIVISION), EUGENIA D. APOSTOL, JOSE A. APOSTOL, MR. & MS. PUBLISHING CO., LETTY J. MAGSANOC, AND ADORACION G. NUYDA, respondents.(CA-G.R. No. 33873) July 13, 1998NORA A. BITONG, petitioner,vs.COURT OF APPEALS (FIFTH DIVISION) and EDGARDO B. ESPIRITU, respondents. BELLOSILLO, J.:These twin cases originated from a derivative suit 1 filed by petitioner Nora A. Bitong before the Securities and Exchange Commission (SEC hereafter) allegedly for the benefit of private respondent Mr. & Ms. Publishing Co., Inc. (Mr. & Ms. hereafter), among others, to hold respondent spouses Eugenia D. Apostol and Jose A. Apostol 2liable for fraud, misrepresentation, disloyalty, evident bad faith, conflict of interest and mismanagement in directing the affairs of Mr. & Ms. to the damage and prejudice of Mr. & Ms. and its stockholders, including petitioner.Alleging before the SEC that she had been the Treasurer and a Member of the Board of Directors of Mr. & Ms. from the time it was incorporated on 29 October 1976 to 11 April 1989, and was the registered owner of 1,000 shares of stock out of the 4,088 total outstanding shares, petitioner complained of irregularities committed from 1983 to 1987 by Eugenia D. Apostol, President and Chairperson of the Board of Directors. Petitioner claimed that except for the sale of the name Philippine Inquirer to Philippine Daily Inquirer (PDI hereafter) all other transactions and agreements entered into by Mr. & Ms. with PDI were not supported by any bond and/or stockholders' resolution. And, upon instructions of Eugenia D. Apostol, Mr. & Ms. made several cash advances to PDI on various occasions amounting to P3.276 million. On some of these borrowings PDI paid no interest whatsoever. Despite the fact that the advances made by Mr. & Ms. to PDI were booked as advances to an affiliate, there existed no board or stockholders' resolution, contract nor any other document which could legally authorize the creation of and support to an affiliate.Petitioner further alleged that respondents Eugenia and Jose Apostol were stockholders, directors and officers in both Mr. & Ms. and PDI. In fact on 2 May 1986 respondents Eugenia D. Apostol, Leticia J. Magsanoc and Adoracion G. Nuyda subscribed to PDI shares of stock at P50,000.00 each or a total of P150,000.00. The stock subscriptions were paid for by Mr. & Ms. and initially treated, as receivables from officers and employees. But, no payments were ever received from respondents, Magsanoc and Nuyda.The petition principally sought to (a) enjoin respondents Eugenia D. Apostol and Jose A. Apostol from further acting as president-director and director, respectively, of Mr. & Ms. and disbursing any money or funds except for the payment of salaries and similar expenses in the ordinary course of business, and from disposing of their Mr. & Ms. shares; (b) enjoin respondents Apostol spouses, Magsanoc and Nuyda from disposing of the PDI shares of stock registered in their names; (c) compel respondents Eugenia and Jose Apostol to account for and reconvey all profits and benefits accruing to them as a result of their improper and fraudulent acts; (d) compel respondents Magsanoc and Nuyda to account for and reconvey to Mr. & Ms. all shares of stock paid from cash advances from it and all accessions or fruits thereof; (e) hold respondents Eugenia and Jose Apostol liable for damages suffered by Mr. & Ms. and the other stockholders, including petitioner, by reason of their improper and fraudulent acts; (f) appoint a management committee for Mr. & Ms. during the pendency of the suit to prevent further dissipation and loss of its assets and funds as well as paralyzation of business operations; and, (g) direct the management committee for Mr. & Ms. to file the necessary action to enforce its rights against PDI and other third parties.Private respondents Apostol spouses, Magsanoc, Nuyda, and Mr. & Ms., on the other hand, refuted the allegations of petitioner by starting with a narration of the beginnings of Mr. & Ms. They recounted that on 9 March 1976 Ex Libris Publishing Co., Inc. (Ex Libris hereafter) was incorporated for the purpose of publishing a weekly magazine. Its original principal stockholders were spouses Senator Juan Ponce Enrile (then Minister of National Defense) and Cristina Ponce Enrile through Jaka Investments Corporation (JAKA hereafter), and respondents Eugenia and Jose Apostol. When Ex Libris suffered financial difficulties, JAKA and the Apostols, together with new investors Luis Villafuerte and Ramon Siy, restructured Ex Libris by organizing a new corporation known as Mr. & Ms.The original stockholders of Mr. & Ms., i.e., JAKA, Luis Villafuerte, Ramon Siy, the Apostols and Ex Libris continued to be virtually the same up to 1989. Thereafter it was agreed among them that, they being close friends, Mr. & Ms.would be operated as a partnership or a close corporation; respondent Eugenia D.

Corpo (p.10-11) 41Apostol would manage the affairs of Mr. & Ms.; and, no shares of stock would be sold to third parties without first offering the shares to the other stockholders so that transfers would be limited to and only among the original stockholders.Private respondents also asserted that respondent Eugenia D. Apostol had been informing her business partners of her actions as manager, and obtaining their advice and consent. Consequently the other stockholders consented, either expressly or impliedly, to her management. They offered no objections. As a result, the business prospered. Thus, as shown in a statement prepared by the accounting firm Punongbayan and Araullo, there were increases from 1976 to 1988 in the total assets of Mr. & Ms. from P457,569.00 to P10,143,046.00; in the total stockholders' equity from P203,378.00 to P2,324,954.00; and, in the net sales, from P301,489.00 to P16,325,610.00. Likewise, cash dividends were distributed and received by the stockholders.Private respondents further contended that petitioner, being merely a holder-in-trust of JAKA shares, only represented and continued to represent JAKA in the board. In the beginning, petitioner cooperated with and assisted the management until mid-1986 when relations between her and her principals on one hand, and respondent Eugenia D. Apostol on the other, became strained due to political differences. Hence from mid-1986 to mid-1988 petitioner refused to speak with respondent Eugenia D. Apostol, and in 1988 the former became openly critical of the management of the latter. Nevertheless, respondent Eugenia D. Apostol always made available to petitioner and her representatives all the books of the corporation.Private respondents averred that all the PDI shares owned by respondents Eugenia and Jose Apostol were acquired through their own private funds and that the loan of P750,000.00 by PDI from Mr. & Ms. had been fully paid with 20% interest per annum. And, it was PDI, not Mr. & Ms., which loaned off P250,000.00 each to respondents Magsanoc and Nuyda. Private respondents further argued that petitioner was not the true party to this case, the real party being JAKA which continued to be the true stockholder of Mr. & Ms.; hence, petitioner did not have the personality to initiate and prosecute the derivative suit which, consequently, must be dismissed.On 6 December 1990, the SEC Hearing Panel 3 issued a writ of preliminary injunction enjoining private respondents from disbursing any money except for the payment of salaries and other similar expenses in the regular course of business. The Hearing Panel also enjoined respondent Apostol spouses, Nuyda and Magsanoc from disposing of their PDI shares, and further ruled —

. . . respondents' contention that petitioner is not entitled to the provisional reliefs prayed for because she is not the real party in interest . . . is bereft of any merit. No less than respondents' Amended Answer, specifically paragraph V, No. 8 on Affirmative Allegations/Defenses states that "The petitioner being herself a minor stockholder and holder-in-trust of JAKA shares represented and continues to represent JAKA in the Board." This statement refers to petitioner sitting in the board of directors of Mr. & Ms. in two capacities, one as a minor stockholder and the other as the holder in trust of the shares of JAKA in Mr. & Ms. Such reference alluded to by the respondents indicates an admission on respondents' part of the petitioner's legal personality to file a derivative suit for the benefit of the respondent Mr. & Ms. Publishing Co., Inc.

The Hearing Panel however denied petitioner's prayer for the constitution of a management committee.On 25 March 1991 private respondents filed a Motion to Amend Pleadings to Conform to Evidence alleging that the issue of whether petitioner is the real party-in-interest had been tried by express or implied consent of the parties through the admission of documentary exhibits presented by private respondents proving that the real party-in-interest was JAKA, not petitioner Bitong. As such, No. 8, par. V (Affirmative Allegations/Defenses), Answer to the Amended Petition, was stipulated due to inadvertence and excusable mistake and should be amended. On 10 October 1991 the Hearing Panel denied the motion for amendment.Petitioner testified at the trial that she became the registered and beneficial owner of 997 shares of stock of Mr. & Ms. out of the 4,088 total outstanding shares after she acquired them from JAKA through a deed of sale executed on 25 July 1983 and recorded in the Stock and Transfer Book of Mr. & Ms. under Certificate of Shares of Stock No. 008. She pointed out that Senator Enrile decided that JAKA should completely divest itself of its holdings in Mr. & Ms. and this resulted in the sale to her of JAKA's interest and holdings in that publishing firm.Private respondents refuted the statement of petitioner that she was a stockholder of Mr. & Ms. since 25 July 1983 as respondent Eugenia D. Apostol signed Certificate of Stock No. 008 only on 17 March 1989, and not on 25 July 1983. Respondent Eugenia D. Apostol explained that she stopped using her long signature (Eugenia D. Apostol) in 1987 and changed it to E.D. Apostol, the signature which appeared on the face of Certificate of Stock No. 008 bearing the date 25 July 1983. And, since the Stock and Transfer Book which petitioner presented in evidence was not registered with the SEC, the entries therein including Certificate of Stock No. 008 were fraudulent. Respondent Eugenia D. Apostol claimed that she had not seen the Stock and Transfer Book at anytime until 21 March 1989 when it was delivered by petitioner herself to the office of Mr. & Ms., and that petitioner repeatedly referred to Senator Enrile as "my principal" during the Mr. & Ms. board meeting of 22 September 1988, seven (7) times no less.On 3 August 1993, after trial on the merits, the SEC Hearing Panel dismissed the derivative suit filed by petitioner and dissolved the writ of preliminary injunction barring private respondents from disposing of their PDI shares and any of Mr. & Ms. assets. The Hearing Panel ruled that there was no serious mismanagement of Mr. & Ms. which would warrant drastic corrective measures. It gave credence to the assertion of respondent Eugenia D. Apostol that Mr. & Ms. was operated like a close corporation where important matters were discussed and approved through informal consultations at breakfast conferences. The Hearing Panel also concluded that while the evidence presented tended to show that the real party-in-interest indeed was JAKA and/or Senator Enrile, it viewed the real issue to be the alleged mismanagement, fraud and conflict of interest on the part of respondent Eugenia D. Apostol, and allowed petitioner to prosecute the derivative suit if only to resolve the real issues. Hence, for this purpose, the Hearing Panel considered petitioner to be the real party-in-interest.On 19 August 1993 respondent Apostol spouses sold the PDI shares registered in the name of their holding company, JAED Management Corporation, to Edgardo B. Espiritu. On 25 August 1993 petitioner Bitong appealed to the SEC En Banc.On 24 January 1994 the SEC En Banc 4 reversed the decision of the Hearing Panel and, among others, ordered private respondents to account for, return and deliver to Mr. & Ms. any and all funds and assets that they disbursed from the coffers of the corporation including shares of stock, profits, dividends and/or fruits that they might have received as a result of their investment in PDI, including those arising from the P150,000.00 advanced to respondents Eugenia D. Apostol, Leticia J. Magsanoc and Adoracion G. Nuyda; account for and return any profits and fruits of all amounts irregularly or unlawfully advanced to PDI and other third persons; and, cease and desist from managing the affairs of Mr. & Ms. for reasons of fraud, mismanagement, disloyalty and conflict of interest.The SEC En Banc also declared the 19 August 1993 sale of the PDI shares of JAED Management Corporation to Edgardo B. Espiritu to be tainted with fraud, hence, null and void, and considered Mr. & Ms. as the true and lawful owner of all the PDI shares acquired by respondents Eugenia D. Apostol, Magsanoc and Nuyda. It also declared all subsequent transferees of such shares as trustees for the benefit of Mr. & Ms. and ordered them to forthwith deliver said shares to Mr. & Ms.Consequently, respondent Apostol spouses, Magsanoc, Nuyda, and Mr. & Ms. filed a petition for review before respondent Court of Appeals, docketed as CA-GR No. SP 33291, while respondent Edgardo B. Espiritu filed a petition for certiorari and prohibition also before respondent Court of Appeals, docketed as CA-GR No. SP 33873. On 8 December 1994 the two (2) petitions were consolidated.On 31 August 1995 respondent appellate court rendered a decision reversing the SEC En Banc and held that from the evidence on record petitioner was not the owner of any share of stock in Mr. & Ms. and therefore not the real party-in-interest to prosecute the complaint she had instituted against private respondents. Accordingly, petitioner alone and by herself as an agent could not file a derivative suit in behalf of her principal. For not being the real party-in-interest, petitioner's complaint did not state a cause of action, a defense which was never waived; hence, her petition should have been dismissed. Respondent appellate court ruled that the assailed orders of the SEC were issued in excess of jurisdiction, or want of it, and thus were null and void. 5 On 18 January 1996, petitioner's motion for reconsideration was denied for lack of merit.

Before this Court, petitioner submits that in paragraph 1 under the caption "I. The Parties" of her Amended Petitionbefore the SEC, she stated that she was a stockholder and director of Mr. & Ms. In par. 1 under the caption "II. The Facts" she declared that she "is the registered owner of 1,000 shares of stock of Mr. & Ms. out of the latter's 4,088 total outstanding shares" and that she was a member of the Board of Directors of Mr. & Ms. and treasurer from its inception until 11 April 1989. Petitioner contends that private respondents did not deny the above allegations in their answer and therefore they are conclusively bound by this judicial admission. Consequently, private respondents' admission that petitioner has 1,000 shares of stock registered in her name in the books of Mr. & Ms. forecloses any question on her status and right to bring a derivative suit on behalf of Mr. & Ms.Not necessarily. A party whose pleading is admitted as an admission against interest is entitled to overcome by evidence the apparent inconsistency, and it is competent for the party against whom the pleading is offered to show that the statements were inadvertently made or were made under a mistake of fact. In addition, a party against whom a single clause or paragraph of a pleading is offered may have the right to introduce other paragraphs which tend to destroy the admission in the paragraph offered by the adversary. 6

The Amended Petition before the SEC alleges —I. THE PARTIES

1. Petitioner is a stockholder and director of Mr. & Ms. . . . .II. THE FACTS

1. Petitioner is the registered owner of 1,000 shares of stock of Mr. & Ms. out of the latter's 4,088 total outstanding shares. Petitioner, at all times material to this petition, is a member of the Board of Directors of Mr. & Ms. and from the inception of Mr. & Ms. until 11 April 1989 was its treasurer . . .

On the other hand, the Amended Answer to the Amended Petition states —I. PARTIES

1. Respondents admit the allegations contained in Caption I, pars. 1 to 4 of the Petition referring to the personality, addresses and capacity of the parties to the petition except . . . but qualify said admission insofar as they are limited, qualified and/or expanded by allegations in the Affirmative Allegations/Defenses . . .

II. THE FACTS1. Respondents admit paragraph 1 of the Petition, but qualify said admission as to the beneficial ownership of the shares of stock registered in the name of the petitioner, the truth being as stated in the Affirmative Allegations/Defenses of this Answer . . .

V. AFFIRMATIVE ALLEGATIONS/DEFENSESRespondents respectfully allege by way of Affirmative Allegations/Defenses, that . . . .3. Fortunately, respondent Apostol was able to convince Mr. Luis Villafuerte to take interest in the business and he, together with the original investors, restructured the Ex Libris Publishing Company by organizing a new corporation known as Mr. & Ms. Publishing Co., Inc. . . . Mr. Luis Villafuerte contributed his own P100,000.00. JAKA and respondent Jose Z. Apostol, original investors of Ex Libris contributed P100,000.00 each; Ex Libris Publishing Company was paid 800 shares for the name of Mr. & Ms. magazine and goodwill. Thus, the original stockholders of respondent Mr. & Ms. were:

Cert./No./Date Name of Stockholder No. of Shares %001-9-15-76 JAKA Investments Corp. 1,000 21%002-9-15-76 Luis Villafuerte 1,000 21%003-9-15-76 Ramon L. Siy 1,000 21%004-9-15-76 Jose Z. Apostol 1,000 21%005-9-15-76 Ex Libris Publishing Co. 800 16%—— ——4,800 96%

4. The above-named original stockholders of respondent Mr. & Ms. continue to be virtually the same stockholders up to this date . . . .8. The petitioner being herself a minor stockholder and holder-in-trust of JAKA shares, represented and continues to represent JAKA in the Board . . . .21. Petitioner Nora A. Bitong is not the true party to this case, the true party being JAKA Investments Corporation which continues to be the true stockholder of respondent Mr. & Ms. Publishing Co., Inc., consequently, she does not have the personality to initiate and prosecute this derivative suit, and should therefore be dismissed . . . .

The answer of private respondents shows that there was no judicial admission that petitioner was a stockholder of Mr. & Ms. to entitle her to file a derivative suit on behalf of the corporation. Where the statements of the private respondents were qualified with phrases such as, "insofar as they are limited, qualified and/or expanded by," "the truth being as stated in the Affirmative Allegations/Defenses of this Answer" they cannot be considered definite and certain enough, cannot be construed as judicial admissions. 7

More so, the affirmative defenses of private respondents directly refute the representation of petitioner that she is a true and genuine stockholder of Mr. & Ms. by stating unequivocally that petitioner is not the true party to the case but JAKA which continues to be the true stockholder of Mr. & Ms. In fact, one of the reliefs which private respondents prayed for was the dismissal of the petition on the ground that petitioner did not have the legal interest to initiate and prosecute the same.When taken in its totality, the Amended Answer to the Amended Petition, or even the Answer to the Amended Petition alone, clearly raises an issue as to the legal personality of petitioner to file the complaint. Every alleged admission is taken as an entirety of the fact which makes for the one side with the qualifications which limit, modify or destroy its effect on the other side. The reason for this is, where part of a statement of a party is used against him as an admission, the court should weigh any other portion connected with the statement, which tends to neutralize or explain the portion which is against interest.In other words, while the admission is admissible in evidence, its probative value is to be determined from the whole statement and others intimately related or connected therewith as an integrated unit. Although acts or facts admitted do not require proof and cannot be contradicted, however, evidence aliunde can be presented to show that the admission was made through palpable mistake. 8 The rule is always in favor of liberality in construction of pleadings so that the real matter in dispute may be submitted to the judgment of the court. 9

Petitioner also argues that since private respondents failed to appeal the 6 December 1990 Order and the 3 August 1993 Decision of the SEC Hearing Panel declaring that she was the real party-in-interest and had legal personality to sue, they are now estopped from questioning her personality.Not quite. The 6 December 1990 Order is clearly an interlocutory order which cannot be considered as having finally resolved on the merits the issue of legal capacity of petitioner. The SEC Hearing Panel discussed the issue of legal capacity solely for the purpose of ruling on the application for writ of preliminary injunction as an incident to the main issues raised in the complaint. Being a mere interlocutory order, it is not appealable.For, an interlocutory order refers to something between the commencement and end of the suit which decides some point or matter but it is not the final decision of the whole controversy. 10 Thus, even though the 6 December 1990 Order was adverse to private respondents, they had the legal right and option not to elevate

Corpo (p.10-11) 42the same to the SEC En Banc but rather to await the decision which resolves all the issues raised by the parties and to appeal therefrom by assigning all errors that might have been committed by the Hearing Panel.On the other hand, the 3 August 1993 Decision of the Hearing Panel dismissing the derivative suit for failure to prove the charges of mismanagement, fraud, disloyalty and conflict of interest and dissolving the writ of preliminary injunction, was favorable to private respondents. Hence, they were not expected to appeal therefrom.In fact, in the 3 August 1993 Decision, the Hearing Panel categorically stated that the evidence presented showed that the real party-in-interest was not petitioner Bitong but JAKA and/or Senator Enrile. Petitioner was merely allowed to prosecute her complaint so as not to sidetrack "the real issue to be resolved (which) was the allegation of mismanagement, fraud and conflict of interest allegedly committed by respondent Eugenia D. Apostol." It was only for this reason that petitioner was considered to be capacitated and competent to file the petition.Accordingly, with the dismissal of the complaint of petitioner against private respondents, there was no compelling reason for the latter to appeal to the SEC En Banc. It was in fact petitioner's turn as the aggrieved party to exercise her right to appeal from the decision. It is worthy to note that even during the appeal of petitioner before the SEC En Banc private respondents maintained their vigorous objection to the appeal and reiterated petitioner's lack of legal capacity to sue before the SEC.Petitioner then contends that she was a holder of the proper certificates of shares of stock and that the transfer was recorded in the Stock and Transfer Book of Mr. & Ms. She invokes Sec. 63 of The Corporation Code which provides that no transfer shall be valid except as between the parties until the transfer is recorded in the books of the corporation, and upon its recording the corporation is bound by it and is estopped to deny the fact of transfer of said shares. Petitioner alleges that even in the absence of a stock certificate, a stockholder solely on the strength of the recording in the stock and transfer book can exercise all the rights as stockholder, including the right to file a derivative suit in the name of the corporation. And, she need not present a separate deed of sale or transfer in her favor to prove ownership of stock.Sec. 63 of The Corporation Code expressly provides —

Sec. 63. Certificate of stock and transfer of shares. — The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer however shall be valid except as between the parties until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred . . . .

This provision above quoted envisions a formal certificate of stock which can be issued only upon compliance with certain requisites. First, the certificates must be signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation. A mere typewritten statement advising a stockholder of the extent of his ownership in a corporation without qualification and/or authentication cannot be considered as a formal certificate of stock. 11 Second, delivery of the certificate is an essential element of its issuance. Hence, there is no issuance of a stock certificate where it is never detached from the stock books although blanks therein are properly filled up if the person whose name is inserted therein has no control over the books of the company. 12 Third, the par value, as to par value shares, or the full subscription as to no par value shares, must first be fully paid. Fourth, the original certificate must be surrendered where the person requesting the issuance of a certificate is a transferee from a stockholder.The certificate of stock itself once issued is a continuing affirmation or representation that the stock described therein is valid and genuine and is at least prima facie evidence that it was legally issued in the absence of evidence to the contrary. However, this presumption may be rebutted. 13 Similarly, books and records of a corporation which include even the stock and transfer book are generally admissible in evidence in favor of or against the corporation and its members to prove the corporate acts, its financial status and other matters including one's status as a stockholder. They are ordinarily the best evidence of corporate acts and proceedings.However, the books and records of a corporation are not conclusive even against the corporation but are prima facie evidence only. Parol evidence may be admitted to supply omissions in the records, explain ambiguities, or show what transpired where no records were kept, or in some cases where such records were contradicted. 14The effect of entries in the books of the corporation which purport to be regular records of the proceedings of its board of directors or stockholders can be destroyed by testimony of a more conclusive character than mere suspicion that there was an irregularity in the manner in which the books were kept. 15

The foregoing considerations are founded on the basic principle that stock issued without authority and in violation of law is void and confers no rights on the person to whom it is issued and subjects him to no liabilities. 16 Where there is an inherent lack of power in the corporation to issue the stock, neither the corporation nor the person to whom the stock is issued is estopped to question its validity since an estopped cannot operate to create stock which under the law cannot have existence. 17

As found by the Hearing Panel and affirmed by respondent Court of Appeals, there is overwhelming evidence that despite what appears on the certificate of stock and stock and transfer book, petitioner was not a bona fidestockholder of Mr. & Ms. before March 1989 or at the time the complained acts were committed to qualify her to institute a stockholder's derivative suit against private respondents. Aside from petitioner's own admissions, several corporate documents disclose that the true party-in-interest is not petitioner but JAKA.Thus, while petitioner asserts in her petition that Certificate of Stock No. 008 dated 25 July 1983 was issued in her name, private respondents argue that this certificate was signed by respondent Eugenia D. Apostol as President only in 1989 and was fraudulently antedated by petitioner who had possession of the Certificate Book and the Stock and Transfer Book. Private respondents stress that petitioner's counsel entered into a stipulation on record before the Hearing Panel that the certificate was indeed signed by respondent Apostol only in 1989 and not in 1983.In her reply, petitioner admits that while respondent Eugenia D. Apostol signed the Certificate of Stock No. 008 in petitioner's name only in 1989, it was issued by the corporate secretary in 1983 and that the other certificates covering shares in Mr. & Ms. had not yet been signed by respondent Eugenia D. Apostol at the time of the filing of the complaint with the SEC although they were issued years before.Based on the foregoing admission of petitioner, there is no truth to the statement written in Certificate of Stock No. 008 that the same was issued and signed on 25 July 1983 by its duly authorized officers specifically the President and Corporate Secretary because the actual date of signing thereof was 17 March 1989. Verily, a formal certificate of stock could not be considered issued in contemplation of law unless signed by the president or vice-president and countersigned by the secretary or assistant secretary.In this case, contrary to petitioner's submission, the Certificate of Stock No. 008 was only legally issued on 17 March 1989 when it was actually signed by the President of the corporation, and not before that date. While a certificate of stock is not necessary to make one a stockholder, e.g., where he is an incorporator and listed as stockholder in the articles of incorporation although no certificate of stock has yet been issued, it is supposed to serve as paper representative of the stock itself and of the owner's interest therein. Hence, when Certificate of Stock No. 008 was admittedly signed and issued only on 17 March 1989 and not on 25 July 1983, even as it indicates that petitioner owns 997 shares of stock of Mr. & Ms., the certificate has no evidentiary value for the purpose of proving that petitioner was a stockholder since 1983 up to 1989.And even the factual antecedents of the alleged ownership by petitioner in 1983 of shares of stock of Mr. & Ms. are indistinctive if not enshrouded in inconsistencies. In her testimony before the Hearing Panel, petitioner said that early in 1983, to relieve Mr. & Ms. from political pressure, Senator Enrile decided to

divest the family holdings in Mr. & Ms. as he was then part of the government and Mr. & Ms. was evolving to be an opposition newspaper. The JAKA shares numbering 1,000 covered by Certificate of Stock No. 001 were thus transferred to respondent Eugenia D. Apostol in trust or in blank. 18

Petitioner now claims that a few days after JAKA's shares were transferred to respondent Eugenia D. Apostol, Senator Enrile sold to petitioner 997 shares of JAKA. For this purpose, a deed of sale was executed and antedated to 10 May 1983. 19 This submission of petitioner is however contradicted by the records which show that a deed of sale was executed by JAKA transferring 1,000 shares of Mr. & Ms. to respondent Apostol on 10 May 1983 and not to petitioner. 20

Then Senator Enrile testified that in May or June 1983 he was asked at a media interview if his family owned shares of stock in Mr. & Ms. Although he and his family were stockholders at that time he denied it so as not to embarrass the magazine. He called up petitioner and instructed her to work out the documentation of the transfer of shares from JAKA to respondent Apostol to be covered by a declaration of trust. His instruction was to transfer the shares of JAKA in Mr. & Ms. and Ex Libris to respondent Apostol as a nominal holder. He then finally decided to transfer the shareholdings to petitioner. 21

When asked if there was any document or any written evidence of that divestment in favor of petitioner, Senator Enrile answered that there was an endorsement of the shares of stock. He said that there was no other document evidencing the assignment to petitioner because the stocks were personal property that could be transferred even orally. 22 Contrary to Senator Enrile's testimony, however, petitioner maintains that Senator Enrile executed a deed of sale in her favor.A careful perusal of the records shows that neither the alleged endorsement of Certificate of Stock No. 001 in the name of JAKA nor the alleged deed of sale executed by Senator Enrile directly in favor of petitioner could have legally transferred or assigned on 25 July 1983 the shares of stock in favor of petitioner because as of 10 May 1983 Certificate of Stock No. 001 in the name of JAKA was already cancelled and a new one, Certificate of Stock No. 007, issued in favor of respondent Apostol by virtue of a Declaration of Trust and Deed of Sale. 23

It should be emphasized that on 10 May 1983 JAKA executed, a deed of sale over 1,000 Mr. & Ms. shares in favor of respondent Eugenio D. Apostol. On the same day, respondent Apostol signed a declaration of trust stating that she was the registered owner of 1,000 Mr. & Ms. shares covered by Certificate of Stock No. 007.The declaration of trust further showed that although respondent Apostol was the registered owner, she held the shares of stock and dividends which might be paid in connection therewith solely in trust for the benefit of JAKA, her principal. It was also stated therein that being a trustee, respondent Apostol agreed, on written request of the principal, to assign and transfer the shares of stock and any and all such distributions or dividends unto the principal or such other person as the principal would nominate or appoint.Petitioner was well aware of this trust, being the person in charge of this documentation and being one of the witnesses to the execution of thisdocument. 24 Hence, the mere alleged endorsement of Certificate of Stock No. 001 by Senator Enrile or by a duly authorized officer of JAKA to effect the transfer of shares of JAKA to petitioner could not have been legally feasible because Certificate of Stock No. 001 was already canceled by virtue of the deed of sale to respondent Apostol.And, there is nothing in the records which shows that JAKA had revoked the trust it reposed on respondent Eugenia D. Apostol. Neither was there any evidence that the principal had requested her to assign and transfer the shares of stock to petitioner. If it was true that the shares of stock covered by Certificate of Stock No. 007 had been transferred to petitioner, the person who could legally endorse the certificate was private respondent Eugenia D. Apostol, she being the registered owner and trustee of the shares of stock covered by Certificate of Stock No. 007. It is a settled rule that the trustee should endorse the stock certificate to validate the cancellation of her share and to have the transfer recorded in the books of the corporation. 25

In fine, the records are unclear on how petitioner allegedly acquired the shares of stock of JAKA. Petitioner being the chief executive officer of JAKA and the sole person in charge of all business and financial transactions and affairs of JAKA 26 was supposed to be in the best position to show convincing evidence on the alleged transfer of shares to her, if indeed there was a transfer. Considering that petitioner's status is being questioned and several factual circumstances have been presented by private respondents disproving petitioner's claim, it was incumbent upon her to submit rebuttal evidence on the manner by which she allegedly became a stockholder. Her failure to do so taken in the light of several substantial inconsistencies in her evidence is fatal to her case.The rule is that the endorsement of the certificate of stock by the owner or his attorney-in-fact or any other person legally authorized to make the transfer shall be sufficient to effect the transfer of shares only if the same is coupled with delivery. The delivery of the stock certificate duly endorsed by the owner is the operative act of transfer of shares from the lawful owner to the new transferee.Thus, for a valid transfer of stocks, the requirements are as follows: (a) There must be delivery of the stock certificate; (b) The certificate must be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the transfer; and, (c) to be valid against third parties, the transfer must be recorded in the books of the corporation. 27 At most, in the instant case, petitioner has satisfied only the third requirement. Compliance with the first two requisites has not been clearly and sufficiently shown.Considering that the requirements provided under Sec. 63 of The Corporation Code should be mandatorily complied with, the rule on presumption of regularity cannot apply. The regularity and validity of the transfer must be proved. As it is, even the credibility of the stock and transfer book and the entries thereon relied upon by petitioner to show compliance with the third requisite to prove that she was a stockholder since 1983 is highly doubtful.The records show that the original stock and transfer book and the stock certificate book of Mr. & Ms. were in the possession of petitioner before their custody was transferred to the Corporate Secretary, Atty. Augusto San Pedro. 28 On 25 May 1988, Assistant Corporate Secretary Renato Jose Unson wrote Mr. & Ms. about the lost stock and transfer book which was also noted by the corporation's external auditors, Punongbayan and Araullo, in their audit. Atty. Unson even informed respondent Eugenia D. Apostol as President of Mr. & Ms. that steps would be undertaken to prepare and register a new Stock and Transfer Book with the SEC. Incidentally, perhaps strangely, upon verification with the SEC, it was discovered that the general file of the corporation with the SEC was missing. Hence, it was even possible that the original Stock and Transfer Book might not have been registered at all.On 20 October 1988 respondent Eugenia D. Apostol wrote Atty. Augusto San Pedro noting the changes he had made in the Stock and Transfer Book without prior notice to the corporate officers. 29 In the 27 October 1988 directors' meeting, respondent Eugenia D. Apostol asked about the documentation to support the changes in the Stock and Transfer Book with regard to the JAKA shares. Petitioner answered that Atty. San Pedro made the changes upon her instructions conformably with established practice. 30

This simply shows that as of 1988 there still existed certain issues affecting the ownership of the JAKA shares, thus raising doubts whether the alleged transactions recorded in the Stock and Transfer Book were proper, regular and authorized. Then, as if to magnify and compound the uncertainties in the ownership of the shares of stock in question, when the corporate secretary resigned, the Stock and Transfer Book was delivered not to the corporate office where the book should be kept but to petitioner. 31

That JAKA retained its ownership of its Mr. & Ms. shares was clearly shown by its receipt of the dividends issued in December 1986. 32 This only means, very obviously, that Mr. & Ms. shares in question still belonged to JAKA and not to petitioner. For, dividends are distributed to stockholders pursuant to their right to share in corporate profits. When a dividend is declared, it belongs to the person who is the substantial and beneficial owner of the stock at the time regardless of when the distribution profit was earned. 33

Finally, this Court takes notice of the glaring and open admissions of petitioner made, not just seven (7) but nine (9) times, during the 22 September 1988 meeting of the board of directors that the Enriles were her principals or shareholders, as shown by the minutes thereof which she duly signed 34 —

5. Mrs. E. Apostol explained to the Directors that through her efforts, the asset base of the Company has improved and profits were realized. It is for this reason that the Company has declared a 100% cash dividend in 1986. She said that it is up for the Board to decide based on this performance whether she should continue to act as Board Chairman or not. In this regard, Ms. N.A. Bitong

Corpo (p.10-11) 43expressed her recollection of how Ex-Libris/Mr. & Ms. were organized and her participation for and on behalf of her principals, as follows: She recalled that her principals were invited by Mrs. E. Apostol to invest in Ex-Libris and eventually Mr. & Ms. The relationship between her principals and Mrs. E. Apostol made it possible for the latter to have access to several information concerning certain political events and issues. In many instances, her principals supplied first hand and newsworthy information that made Mr. & Ms. a popularpaper . . . .6. According to Ms. Bitong, her principals were instrumental in helping Mr. & Ms. survive during those years that it was cash strapped . . . . Ms. N.A. Bitong pointed out that the practice of using the former Minister's influence and stature in the government is one thing which her principals themselves are strongly against . . . .7. . . . . At this point, Ms. N. Bitong again expressed her recollection of the subject matter as follows: (a) Mrs. E. Apostol, she remembers, brought up the concept of a cooperative-ran newspaper company in one of her breakfast session with her principals sometime during the end of 1985. Her principals when asked for an opinion, said that they recognized the concept as something very noble and visible . . . . Then Ms. Bitong asked a very specific question — "When you conceptualized Ex-Libris and Mr. & Ms., did you not think of my shareholders the Ponce Enriles as liabilities? How come you associated yourself with them then and not now? What is the difference?" Mrs. Apostol did not answer the question.

The admissions of a party against his interest inscribed upon the record books of a corporation are competent and persuasive evidence against him. 35 These admissions render nugatory any argument that petitioner is abona fide stockholder of Mr. & Ms. at any time before 1988 or at the time the acts complained of were committed. There is no doubt that petitioner was an employee of JAKA as its managing officer, as testified to by Senator Enrile himself. 36 However, in the absence of a special authority from the board of directors of JAKA to institute a derivative suit for and in its behalf, petitioner is disqualified by law to sue in her own name. The power to sue and be sued in any court by a corporation even as a stockholder is lodged in the board of directors that exercises its corporate powers and not in the president or officer thereof. 37

It is well settled in this jurisdiction that where corporate directors are guilty of a breach of trust, not of mere error of judgment or abuse of discretion, and intracorporate remedy is futile or useless, a stockholder may institute a suit in behalf of himself and other stockholders and for the benefit of the corporation, to bring about a redress of the wrong inflicted directly upon the corporation and indirectly upon the stockholders. 38 The stockholder's right to institute a derivative suit is not based on any express provision of The Corporation Code but is impliedly recognized when the law makes corporate directors or officers liable for damages suffered by the corporation and its stockholders for violation of their fiduciary duties.Hence, a stockholder may sue for mismanagement, waste or dissipation of corporate assets because of a special injury to him for which he is otherwise without redress. 39 In effect, the suit is an action for specific performance of an obligation owed by the corporation to the stockholders to assist its rights of action when the corporation has been put in default by the wrongful refusal of the directors or management to make suitable measures for its protection. 40

The basis of a stockholder's suit is always one in equity. However, it cannot prosper without first complying with the legal requisites for its institution. The most important of these is the bona fide ownership by a stockholder of a stock in his own right at the time of the transaction complained of which invests him with standing to institute a derivative action for the benefit of the corporation. 41

WHEREFORE, the petition is DENIED. The 31 August 1995 Decision of the Court of Appeals dismissing the complaint of petitioner Nora A. Bitong in CA-G.R. No. SP 33291, and granting the petition for certiorari and prohibition filed by respondent Edgardo U. Espiritu as well as annulling the 5 November 1993, 24 January 1993 and 18 February 1994 Orders of the SEC En Banc in CA-G.R. No. SP 33873, is AFFIRMED. Costs against petitioner.SO ORDERED.

G.R. No. L-23145 November 29, 1968TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary administrator-appellee, vs.BENGUET CONSOLIDATED, INC., oppositor-appellant.FERNANDO, J.:Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County Trust Company of New York, United States of America, of the estate of the deceased Idonah Slade Perkins, who died in New York City on March 27, 1960, to surrender to the ancillary administrator in the Philippines the stock certificates owned by her in a Philippine corporation, Benguet Consolidated, Inc., to satisfy the legitimate claims of local creditors, the lower court, then presided by the Honorable Arsenio Santos, now retired, issued on May 18, 1964, an order of this tenor: "After considering the motion of the ancillary administrator, dated February 11, 1964, as well as the opposition filed by the Benguet Consolidated, Inc., the Court hereby (1) considers as lost for all purposes in connection with the administration and liquidation of the Philippine estate of Idonah Slade Perkins the stock certificates covering the 33,002 shares of stock standing in her name in the books of the Benguet Consolidated, Inc., (2) orders said certificates cancelled, and (3) directs said corporation to issue new certificates in lieu thereof, the same to be delivered by said corporation to either the incumbent ancillary administrator or to the Probate Division of this Court."1

From such an order, an appeal was taken to this Court not by the domiciliary administrator, the County Trust Company of New York, but by the Philippine corporation, the Benguet Consolidated, Inc. The appeal cannot possibly prosper. The challenged order represents a response and expresses a policy, to paraphrase Frankfurter, arising out of a specific problem, addressed to the attainment of specific ends by the use of specific remedies, with full and ample support from legal doctrines of weight and significance.The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc., Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among others, two stock certificates covering 33,002 shares of appellant, the certificates being in the possession of the County Trust Company of New York, which as noted, is the domiciliary administrator of the estate of the deceased.2 Then came this portion of the appellant's brief: "On August 12, 1960, Prospero Sanidad instituted ancillary administration proceedings in the Court of First Instance of Manila; Lazaro A. Marquez was appointed ancillary administrator, and on January 22, 1963, he was substituted by the appellee Renato D. Tayag. A dispute arose between the domiciary administrator in New York and the ancillary administrator in the Philippines as to which of them was entitled to the possession of the stock certificates in question. On January 27, 1964, the Court of First Instance of Manila ordered the domiciliary administrator, County Trust Company, to "produce and deposit" them with the ancillary administrator or with the Clerk of Court. The domiciliary administrator did not comply with the order, and on February 11, 1964, the ancillary administrator petitioned the court to "issue an order declaring the certificate or certificates of stocks covering the 33,002 shares issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or] considered as lost."3

It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as far as it is concerned as to "who is entitled to the possession of the stock certificates in question; appellant opposed the petition of the ancillary administrator because the said stock certificates are in existence, they are today in the possession of the domiciliary administrator, the County Trust Company, in New York, U.S.A...."4

It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or considered as lost. Moreover, it would allege that there was a failure to observe certain requirements of its by-laws before new stock certificates could be issued. Hence, its appeal.As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order constitutes an emphatic affirmation of judicial authority sought to be emasculated by the wilful conduct of the domiciliary administrator in refusing to accord obedience to a court decree. How, then, can this order be stigmatized as illegal?As is true of many problems confronting the judiciary, such a response was called for by the realities of the situation. What cannot be ignored is that conduct bordering on wilful defiance, if it had not actually reached it, cannot without undue loss of judicial prestige, be condoned or tolerated. For the law is not so lacking in flexibility and resourcefulness as to preclude such a solution, the more so as deeper reflection would make clear its being buttressed by indisputable principles and supported by the strongest policy considerations.It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary no less than that of the country. Through this challenged order, there is thus dispelled the atmosphere of contingent frustration brought about by the persistence of the domiciliary administrator to hold on to the stock certificates after it had, as admitted, voluntarily submitted itself to the jurisdiction of the lower court by entering its appearance through counsel on June 27, 1963, and filing a petition for relief from a previous order of March 15, 1963.Thus did the lower court, in the order now on appeal, impart vitality and effectiveness to what was decreed. For without it, what it had been decided would be set at naught and nullified. Unless such a blatant disregard by the domiciliary administrator, with residence abroad, of what was previously ordained by a court order could be thus remedied, it would have entailed, insofar as this matter was concerned, not a partial but a well-nigh complete paralysis of judicial authority.1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary administrator to gain control and possession of all assets of the decedent within the jurisdiction of the Philippines. Nor could it. Such a power is inherent in his duty to settle her estate and satisfy the claims of local creditors.5 As Justice Tuason speaking for this Court made clear, it is a "general rule universally recognized" that administration, whether principal or ancillary, certainly "extends to the assets of a decedent found within the state or country where it was granted," the corollary being "that an administrator appointed in one state or country has no power over property in another state or country."6

It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case, set forth by Justice Malcolm. Thus: "It is often necessary to have more than one administration of an estate. When a person dies intestate owning property in the country of his domicile as well as in a foreign country, administration is had in both countries. That which is granted in the jurisdiction of decedent's last domicile is termed the principal administration, while any other administration is termed the ancillary administration. The reason for the latter is because a grant of administration does not ex proprio vigore have any effect beyond the limits of the country in which it is granted. Hence, an administrator appointed in a foreign state has no authority in the [Philippines]. The ancillary administration is proper, whenever a person dies, leaving in a country other than that of his last domicile, property to be administered in the nature of assets of the deceased liable for his individual debts or to be distributed among his heirs."7

It would follow then that the authority of the probate court to require that ancillary administrator's right to "the stock certificates covering the 33,002 shares ... standing in her name in the books of [appellant] Benguet Consolidated, Inc...." be respected is equally beyond question. For appellant is a Philippine corporation owing full allegiance and subject to the unrestricted jurisdiction of local courts. Its shares of stock cannot therefore be considered in any wise as immune from lawful court orders.Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue8 finds application. "In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled [here]." To the force of the above undeniable proposition, not even appellant is insensible. It does not dispute it. Nor could it successfully do so even if it were so minded.2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the legality of the challenged order, how does appellant, Benguet Consolidated, Inc. propose to carry the extremely heavy burden of persuasion of precisely demonstrating the contrary? It would assign as the basic error allegedly committed by the lower court its "considering as lost the stock certificates covering 33,002 shares of Benguet belonging to the deceased Idonah Slade Perkins, ..."9 More specifically, appellant would stress that the "lower court could not "consider as lost" the stock certificates in question when, as a matter of fact, his Honor the trial Judge knew, and does know, and it is admitted by the appellee, that the said stock certificates are in existence and are today in the possession of the domiciliary administrator in New York."10

There may be an element of fiction in the above view of the lower court. That certainly does not suffice to call for the reversal of the appealed order. Since there is a refusal, persistently adhered to by the domiciliary administrator in New York, to deliver the shares of stocks of appellant corporation owned by the decedent to the ancillary administrator in the Philippines, there was nothing unreasonable or arbitrary in considering them as lost and requiring the appellant to issue new certificates in lieu thereof. Thereby, the task incumbent under the law on the ancillary administrator could be discharged and his responsibility fulfilled.Any other view would result in the compliance to a valid judicial order being made to depend on the uncontrolled discretion of the party or entity, in this case domiciled abroad, which thus far has shown the utmost persistence in refusing to yield obedience. Certainly, appellant would not be heard to contend in all seriousness that a judicial decree could be treated as a mere scrap of paper, the court issuing it being powerless to remedy its flagrant disregard.It may be admitted of course that such alleged loss as found by the lower court did not correspond exactly with the facts. To be more blunt, the quality of truth may be lacking in such a conclusion arrived at. It is to be remembered however, again to borrow from Frankfurter, "that fictions which the law may rely upon in the pursuit of legitimate ends have played an important part in its development."11

Speaking of the common law in its earlier period, Cardozo could state fictions "were devices to advance the ends of justice, [even if] clumsy and at times offensive."12 Some of them have persisted even to the present, that eminent jurist, noting "the quasi contract, the adopted child, the constructive trust, all of flourishing vitality, to attest the empire of "as if" today."13 He likewise noted "a class of fictions of another order, the fiction which is a working tool of thought, but which at times hides itself from view till reflection and analysis have brought it to the light."14

What cannot be disputed, therefore, is the at times indispensable role that fictions as such played in the law. There should be then on the part of the appellant a further refinement in the catholicity of its condemnation of such judicial technique. If ever an occasion did call for the employment of a legal fiction to put an end to the anomalous situation of a valid judicial order being disregarded with apparent impunity, this is it. What is thus most obvious is that this particular alleged error does not carry persuasion.3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its invoking one of the provisions of its by-laws which would set forth the procedure to be followed in case of a lost, stolen or destroyed stock certificate; it would stress that in the event of a contest or the pendency of an action regarding ownership of such certificate or certificates of stock allegedly lost, stolen or destroyed, the issuance of a new certificate or certificates would await the "final decision by [a] court regarding the ownership [thereof]."15

Such reliance is misplaced. In the first place, there is no such occasion to apply such by-law. It is admitted that the foreign domiciliary administrator did not appeal from the order now in question. Moreover, there is likewise the express admission of appellant that as far as it is concerned, "it is immaterial ... who is entitled to the possession of the stock certificates ..." Even if such were not the case, it would be a legal absurdity to impart to such a provision conclusiveness and finality. Assuming that a contrariety exists between the above by-law and the command of a court decree, the latter is to be followed.It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which, however, the judiciary must yield deference, when appropriately invoked and deemed applicable. It would be most highly unorthodox, however, if a corporate by-law would be accorded such a high estate in the jural order that a court must not only take note of it but yield to its alleged controlling force.

Corpo (p.10-11) 44The fear of appellant of a contingent liability with which it could be saddled unless the appealed order be set aside for its inconsistency with one of its by-laws does not impress us. Its obedience to a lawful court order certainly constitutes a valid defense, assuming that such apprehension of a possible court action against it could possibly materialize. Thus far, nothing in the circumstances as they have developed gives substance to such a fear. Gossamer possibilities of a future prejudice to appellant do not suffice to nullify the lawful exercise of judicial authority.4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with implications at war with the basic postulates of corporate theory.We start with the undeniable premise that, "a corporation is an artificial being created by operation of law...."16 It owes its life to the state, its birth being purely dependent on its will. As Berle so aptly stated: "Classically, a corporation was conceived as an artificial person, owing its existence through creation by a sovereign power."17As a matter of fact, the statutory language employed owes much to Chief Justice Marshall, who in the Dartmouth College decision defined a corporation precisely as "an artificial being, invisible, intangible, and existing only in contemplation of law."18

The well-known authority Fletcher could summarize the matter thus: "A corporation is not in fact and in reality a person, but the law treats it as though it were a person by process of fiction, or by regarding it as an artificial person distinct and separate from its individual stockholders.... It owes its existence to law. It is an artificial person created by law for certain specific purposes, the extent of whose existence, powers and liberties is fixed by its charter."19 Dean Pound's terse summary, a juristic person, resulting from an association of human beings granted legal personality by the state, puts the matter neatly.20

There is thus a rejection of Gierke's genossenchaft theory, the basic theme of which to quote from Friedmann, "is the reality of the group as a social and legal entity, independent of state recognition and concession."21 A corporation as known to Philippine jurisprudence is a creature without any existence until it has received the imprimatur of the state according to law. It is logically inconceivable therefore that it will have rights and privileges of a higher priority than that of its creator. More than that, it cannot legitimately refuse to yield obedience to acts of its state organs, certainly not excluding the judiciary, whenever called upon to do so.As a matter of fact, a corporation once it comes into being, following American law still of persuasive authority in our jurisdiction, comes more often within the ken of the judiciary than the other two coordinate branches. It institutes the appropriate court action to enforce its right. Correlatively, it is not immune from judicial control in those instances, where a duty under the law as ascertained in an appropriate legal proceeding is cast upon it.To assert that it can choose which court order to follow and which to disregard is to confer upon it not autonomy which may be conceded but license which cannot be tolerated. It is to argue that it may, when so minded, overrule the state, the source of its very existence; it is to contend that what any of its governmental organs may lawfully require could be ignored at will. So extravagant a claim cannot possibly merit approval.5. One last point. In Viloria v. Administrator of Veterans Affairs,22 it was shown that in a guardianship proceedings then pending in a lower court, the United States Veterans Administration filed a motion for the refund of a certain sum of money paid to the minor under guardianship, alleging that the lower court had previously granted its petition to consider the deceased father as not entitled to guerilla benefits according to a determination arrived at by its main office in the United States. The motion was denied. In seeking a reconsideration of such order, the Administrator relied on an American federal statute making his decisions "final and conclusive on all questions of law or fact" precluding any other American official to examine the matter anew, "except a judge or judges of the United States court."23 Reconsideration was denied, and the Administrator appealed.In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the opinion that the appeal should be rejected. The provisions of the U.S. Code, invoked by the appellant, make the decisions of the U.S. Veterans' Administrator final and conclusive when made on claims property submitted to him for resolution; but they are not applicable to the present case, where the Administrator is not acting as a judge but as a litigant. There is a great difference between actions against the Administrator (which must be filed strictly in accordance with the conditions that are imposed by the Veterans' Act, including the exclusive review by United States courts), and those actions where the Veterans' Administrator seeks a remedy from our courts and submits to their jurisdiction by filing actions therein. Our attention has not been called to any law or treaty that would make the findings of the Veterans' Administrator, in actions where he is a party, conclusive on our courts. That, in effect, would deprive our tribunals of judicial discretion and render them mere subordinate instrumentalities of the Veterans' Administrator."It is bad enough as the Viloria decision made patent for our judiciary to accept as final and conclusive, determinations made by foreign governmental agencies. It is infinitely worse if through the absence of any coercive power by our courts over juridical persons within our jurisdiction, the force and effectivity of their orders could be made to depend on the whim or caprice of alien entities. It is difficult to imagine of a situation more offensive to the dignity of the bench or the honor of the country.Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet Consolidated seems to be firmly committed as shown by its failure to accept the validity of the order complained of; it seeks its reversal. Certainly we must at all pains see to it that it does not succeed. The deplorable consequences attendant on appellant prevailing attest to the necessity of negative response from us. That is what appellant will get.That is all then that this case presents. It is obvious why the appeal cannot succeed. It is always easy to conjure extreme and even oppressive possibilities. That is not decisive. It does not settle the issue. What carries weight and conviction is the result arrived at, the just solution obtained, grounded in the soundest of legal doctrines and distinguished by its correspondence with what a sense of realism requires. For through the appealed order, the imperative requirement of justice according to law is satisfied and national dignity and honor maintained.WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of First Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appelant Benguet Consolidated, Inc.G.R. No. 170585 October 6, 2008DAVID C. LAO and JOSE C. LAO, petitioners, vs.DIONISIO C. LAO, respondents.

D E C I S I O NREYES, R.T., J.:IS the mere inclusion as shareholder in the General Information Sheet of a corporation sufficient proof that one is a shareholder in such corporation?This is the main question for resolution in this petition for review on certiorari of the Amended Decision1 of the Court of Appeals (CA) affirming the Decision2 of the Regional Trial Court (RTC), Branch 11, Cebu City in CEB-25916-SRC.

The FactsOn October 15, 1998, petitioners David and Jose Lao filed a petition with the Securities and Exchange Commission (SEC) against respondent Dionisio Lao, president of Pacific Foundry Shop Corporation (PFSC). Petitioners prayed for a declaration as stockholders and directors of PFSC, issuance of certificates of shares in their name and to be allowed to examine the corporate books of PFSC.3

Petitioners claimed that they are stockholders of PFSC based on the General Information Sheet filed with the SEC, in which they are named as stockholders and directors of the corporation. Petitioner David Lao alleged that he acquired 446 shares in PFSC from his father, Lao Pong Bao, which shares were previously purchased from a certain Hipolito Lao. Petitioner Jose Lao, on the other hand, alleged that he acquired 333 shares from respondent Dionisio Lao himself.4

Respondent denied petitioners' claim. He alleged that the inclusion of their names in the corporation's General Information Sheet was inadvertently made. He also claimed that petitioners did not acquire any shares in PFSC by any of the modes recognized by law, namely subscription, purchase, or transfer. Since they were neither stockholders nor directors of PFSC, petitioners had no right to be issued certificates or stocks or to inspect its corporate books.5

On June 19, 2000, Republic Act 8799, otherwise known as the Securities Regulation Code, was enacted, transferring jurisdiction over all intra-corporate disputes from the SEC to the RTC. Pursuant to the law, the petition with the SEC was transferred to the RTC in Cebu City and docketed as Civil Case No. CEB-25916-SRC. The case was consolidated with another intra-corporate dispute, Civil Case No. CEB-25910-SRC, filed by the Heirs of Uy Lam Tiong against respondent Dionisio Lao.6

During pre-trial, the parties agreed to submit the case for resolution based on the evidence on record.7

RTC DispositionOn December 19, 2001, the RTC rendered a Joint Decision8 with the following pertinent disposition, thus:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by the Court in these cases:(a) Denying the petition of David C. Lao and Jose C. Lao to be recognized as stockholders and directors of Pacific Foundry Shop Corporation, to be issued certificates of stock of said corporation and to be allowed to exercise rights of stockholders of the same corporation.9

In denying the petition, the RTC ratiocinated:x x x Thus, the petitioners David C. Lao and Jose C Lao do not appear to have become registered stockholders of Pacific Foundry Shop corporation, as they do not appear to have acquired shares of stock of the corporation either as subscribers or by purchase from a holder of outstanding shares or by purchase from the corporation of additionally issued shares.

x x x xSecondly, the claim or contention of the petitioners David C. Lao and Jose C. Lao is wanting in merit because they have no stock certificates in their names. A stock certificate, as we very well know, is the evidence of ownership of corporate stock. If ever the said petitioners acquired shares of stock of the corporation, there is a need for their acquisition of said shares to be registered in the Stock and Transfer Book of the corporation. Registration is necessary to entitle a person to exercise the rights of a stockholder and to hold office as director or other offices (12 Fletcher 343). That is why it is explicitly provided in Section 63 of the Corporation Code of the Philippines that no transfer of shares of stock shall be valid until the transfer is recorded in the books of the corporation. An unregistered transfer is not valid as against the corporation (Uson vs. Diosomito, 61 Phil. 535). A transfer must be registered, or at least notice thereof given to the corporation for the purpose of registration, before the transferee can acquire any right as against the corporation other than the right to have the transfer registered (12 Fletcher 339). An unrecorded transferee can not enjoy the status of a stockholder, he can not vote nor he voted for (Price & Sulu Development Corp. vs. Martin, 58 Phil. 707). Until the transfer is registered, the transferee is not a stockholder but an outsider (Rivera vs. Florendo, G.R. No. L-57586, October 8, 1986). So, a person who has acquired or purchased shares of stock of a corporation, and who desires to be recognized as stockholder for the purpose of voting and exercising other rights of a stockholder, must secure such a standing by having the acquisition or transfer recorded in the corporate books (Price & Sulu development Corp. vs. Martin, supra). Unfortunately, in the cases at bench, the petitioners David C. Lao and Jose C. Lao did not secure such a standing. Consequently, their petition to be recognized as stockholders of Pacific Foundry Shop Corporation must fail.10

Petitioners appealed to the CA.CA Disposition

On May 27, 2005, the CA rendered a Decision11 modifying that of the RTC, disposing as follows:WHEREFORE, premises considered, judgment is hereby rendered modifying the Joint Decision dated December 19, 2001 of the trial court in so far as it relates to Civil Case No. CEB-25916-SRC by:(a) Declaring that petitioners have owned since 1987 shares of stock in Pacific Foundry Shop Corporation, numbering 446 for petitioner-appellant David C. Lao and 333 for petitioner-appellant Jose C. Lao;(b) Ordering respondent-appellee through the corporate secretary to issue to petitioners-appellants the certificates of stock for the aforementioned number of shares;(c) Ordering respondent-appellee, as President of Pacific Foundry Shop Corporation, to allow petitioners-appellants to exercise their rights as stock holders;(d) Ordering respondent-appellee to call a stockholders meeting every fourth Saturday of January in accordance with the By-Laws of Pacific Foundry shop Corporation.12

The CA decision was penned by Justice Arsenio Magpale and concurred in by Justices Sesinando Villon and Enrico Lanzanas.In modifying the RTC decision, the appellate court gave credence to the General Information Sheet submitted by petitioners that names them as stockholders of PFSC, thus:

The General Information Sheet of PFSC for the years 1987-1998 state that petitioners-appellants David C. Lao and Jose C. Lao own 446 and 333 shares, respectively, in PFSC. It is also indicated therein that David C. Lao occupied various key positions in PFSC from 1987-1998 and Jose C. Lao served as Director in PFSC from 1990-1998. The Sworn Statements of Uy Lam Tiong, former corporate secretary of the PFSC, also state that petitioners-appellants David C. Lao and Jose C. Lao, per corporate records of PFSC, own shares of stock numbering 446 and 333, respectively. The minutes of the Annual Stockholders Meeting of PFSC on January 28, 1988 at 3:00 o'clock p.m. shows that among those present were petitioners-appellants David C. Lao and Jose C. Lao. During the said meeting, petitioner-appellant David C. Lao was nominated and elected Director of PFSC. Withal, the Minutes of the Meeting of the Board of Directors of PFSC at its Office at Hipodromo, Cebu City, on January 28, 1988 at 4:00 p.m. disclose that petitioner-appellant David C. Lao was elected vice-president of PFSC. Both minutes were signed by the officers of PFSC including respondent-appellee.13

Respondent filed a motion for reconsideration14 of the CA decision.On July 11, 2005, respondent moved to inhibit15 the ponente of the CA decision, Justice Magpale, from resolving his pending motion for reconsideration.On July 22, 2005, Justice Magpale issued a Resolution16 voluntarily inhibiting himself from further participating in the resolution of the pending motion for reconsideration. Justice Magpale stated:

Although the undersigned ponente does not agree with the imputations of respondent-appellee and that the same are not any of those grounds mentioned in Rule 137 of the Revised Rules of Court, nonetheless the ponente voluntarily inhibits himself from further handling this case in order to free the entire court of the slightest suspicion of bias and prejudice against the respondent-appellee.17

Amended DecisionOn August 31, 2005, the CA rendered an Amended Decision18 affirming that of the RTC, with a fallo reading:

IN VIEW OF THE FOREGOING, the May 27, 2005 Decision of this Court is hereby SET ASIDE and the Decision of the Regional Trial Court, Branch 11, Cebu City with respect to Civil Case No. 25916-SRC is hereby AFIRMED in toto.19

The Amended Decision was penned by Justice Enrico Lanzanas and concurred in by Justices Sesinando Villon and Vicente Yap. The CA stated:Petitioners-appellants maintain that they acquired their shares of stocks through transfer - the third mode mentioned by the trial court. David C. Lao claims that he acquired his 446 shares through his father, Lao Pong Bao, when the latter purchased said shares from Hipolito Lao. On the other hand, Jose C. Lao asserts that he acquired his 333 shares through Dionisio C. Lao himself from the original 1,333 shares of stocks of the latter.

Corpo (p.10-11) 45Petitioner-appellants asseverations are unavailing. To substantiate their statements, they merely relied on the General Information Sheets submitted to the Securities and Exchange Commission for the year 1987 to 1998, as well as on the Minutes of the Stockholders Meeting and Board of Directors Meeting held on January 28, 1988. They did not adduce evidence that would indubitably show that there was indeed a valid transfer of stocks, i.e. endorsement and delivery, from the transferors, Hipolito Lao and Dionisio Lao, to them as transferees.

x x x xTo our mind, David C. Lao utterly failed to confute the argument posited by respondent-appellee or demonstrate compliance with any of the statutory requirements as to warrant a favorable ruling on his part. No proof was ever shown that there was endorsement and delivery to him of the stock certificates representing the 446 shares of Hipolito Lao. Neither was the transfer registered in PFSC's Stock and Transfer Book. Conversely, Dionisio C. Lao was able to show conformity with the aforementioned requirements. Accordingly, it is but logical to conclude that the certificate of stock covering 446 shares of Hipolito Lao was in fact endorsed and delivered to Dionisio C. Lao and as such is reflected in PFSC's Stock and Transfer Book x x x.In fact, it is a rule that private transactions are presumed to have been faire and regular and that the regular course of business is presumed to have been followed. Thus, the transfer made by Hipolito Lao of the 446 shares of stocks to Dionisio C. Lao is deemed to have been valid and well-founded unless proven otherwise. David C. Lao's mere allegation that Dionisio Lao illegally appropriated upon himself the 446 shares failed to hurdle such presumption. In this jurisdiction, neither fraud nor evil is presumed and the record does not show either as to establish by clear and sufficient evidence that may lead Us to believe such allegation. The party alleging the same has the burden of proof to present evidence necessary to establish his claim, unfortunately however petitioners failed to do so. The General Information Sheets and the Minutes of the Meetings adduced by petitioners-appellants do not prove such allegation of fraud or deceit. In the absence thereof, the presumption remains that private transactions have been fair and regular.As for the alleged shares of Jose C. Lao, We find his position identically situated with David C. Lao. There is also no evidence on record that would clearly establish how he acquired said shares of PFSC. Jose C. Lao failed to show that there was endorsement and delivery to him of the stock certificates or any documents showing such transfer or assignment. In fact, the 333 shares being claimed by him is still under the name of Dionisio C. Lao was reflected by the Certificate of Stock as well as in PFSC's Stock and Transfer Book. Corollary, Jose C. Lao could not be considered a stockholder of PFSC in the absence of support reflecting his right to the 333 shares other than the inclusion of his name in the General Information Sheets from 1987 to 1998 and the Minutes of the Stockholder's Meeting and Board of Director's Meeting.20

Petitioners moved for reconsideration but their motion was denied.21 Hence, the present petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure.

IssuesPetitioners raise five (5) issues for Our consideration, thus:

1. Whether or not the inhibition of Justice Arsenio J. Magpale is proper when there is no "extrinsic evidence of bias, bad faith, malice, or corrupt purpose" on the part of Justice Magpale, which is required by this Honorable Court in its decision in Webb, et al. v. People of the Philippines, 276 SCRA 243 [1997], as basis for disqualification.2. Whether or not the inhibition of Justice Magpale constitutes, in effect, forum shopping, which is proscribed under Section 5, Rule 7 of the Rules of Court, as amended, and decisions of this Honorable Court.3. Whether or not determination of ownership of shares of stock in a corporation shall be based on the Stock and Transfer Book alone, or other evidence can be considered pursuant to the decision of thisHonorable Court in Tan v. Securities and Exchange Commission, 206 SCRA 740.4. Whether or not the admissions and representations of respondent in the General Information Sheets submitted by him to the Securities and Exchange Commission during the years 1987 to 1998 that (a) petitioners were stockholders of Pacific Foundry Shop Corporation; that (b) petitioner David C. Lao and Jose C. Lao owned 446 and 333 shares in the corporation, respectively; and that (c) petitioners had been directors and officers of the corporation, as well as the Sworn Statement of Uy Lam Tiong, former Corporate Secretary, the Minutes of the Annual Stockholders Meeting of PFSC on January 28, 1988, and the Minutes of Meeting of the Board of Directors on January 28, 1988, mentioned by Justice Magpale in his ponencia, are sufficient proof of petitioners ownership of stocks in the corporation.5. Whether or not respondent is stopped from questioning petitioners' ownership of stocks in the corporation in view of his admissions and representations in the General Information Sheets he submitted to the Securities and Exchange Commission from 1987 to 1998 that petitioners were stockholders and officers of the corporation.22

Essentially, only two (2) issues are raised in this petition. The first concerns the voluntary inhibition of Justice Magpale, while the second involves the substantive issue of whether or not petitioners are indeed stockholders of PFSC.

Our RulingWe deny the petition.Voluntary inhibition is within the sound discretion of a judge.Petitioners claim that the motion to inhibit Justice Magpale from resolving the pending motion for reconsideration was improper and unethical. They assert that the "bias and prejudice" grounds alleged by private respondent were unsubstantiated and, worse, constituted proscribed forum shopping. They argue that Justice Magpale should have resolved the pending motion, instead of voluntarily inhibiting himself from the case.In cases of voluntary inhibition, the law leaves to the sound discretion of the judge the decision to decide for himself the question of whether or not he will inhibit himself from the case. Section 1, Rule 137 of the Rules of Court provides:

Section 1. Disqualification of judges. - No judge or judicial officer shall sit in any case in which he, or his wife or child, is pecuniarily interested as heir, legatee, creditor, or otherwise, or in which he is related to either party within the sixth degree of consanguinity or affinity, or to counsel within the fourth degree, computed according to the rules of the civil law, or in which he has been executor, administrator, guardian, trustee, or counsel, or in which he has presided in any inferior court when his ruling or decision is the subject of review, without the written consent of all parties in interest, signed by them and entered upon the record.A judge may, in the exercise of his sound discretion, disqualify himself from sitting in a case, for just or valid reasons other than those mentioned above.

Here, Justice Magpale voluntarily inhibited himself "in order to free the entire court [CA] of the slightest suspicion of bias and prejudice x x x."23 We certainly cannot nullify the decision of Justice Magpale recusing himself from the case because that is a matter left entirely to his discretion. Nor can We fault him for doing so. No judge should preside in a case in which he feels that he is not wholly free, disinterested, impartial, and independent.We agree with petitioners that it may seem unpalatable and even revolting when a losing party seeks the disqualification of a judge who had previously ruled against him in the hope that a new judge might be more favorable to him. But We cannot take that basic proposition too far. That Justice Magpale opted to voluntarily recuse himself from the appealed case is already fait accompli. It is, in popular idiom, water under the bridge.Petitioners cannot bank on his voluntary inhibition to nullify the Amended Decision later issued by the appellate court. It is highly specious to assume that Justice Magpale would have ruled in favor of petitioners on the pending motion for reconsideration if he took a different course and opted to stay on with the case. It is

also illogical to presume that the Amended Decision would not have been issued with or without the participation of Justice Magpale. The Amended Decision is too far removed from the issue of voluntary inhibition. It does not follow that petitioners would be better off were it not for the voluntary inhibition.Petitioners failed to prove that they are shareholders of PSFC.Petitioners insist that they are shareholders of PFSC. They claim purchasing shares in PFSC. Petitioner David Lao alleges that he acquired 446 shares in the corporation from his father, Lao Pong Bao, which shares were previously purchased from a certain Hipolito Lao. Petitioner Jose Lao, on the other hand, alleges that he acquired 333 shares from respondent Dionisio Lao.Records, however, disclose that petitioners have no certificates of shares in their name. A certificate of stock is the evidence of a holder's interest and status in a corporation. It is a written instrument signed by the proper officer of a corporation stating or acknowledging that the person named in the document is the owner of a designated number of shares of its stock.24 It is prima facie evidence that the holder is a shareholder of a corporation.Nor is there any written document that there was a sale of shares, as claimed by petitioners. Petitioners did not present any deed of assignment, or any similar instrument, between Lao Pong Bao and Hipolito Lao; or between Lao Pong Bao and petitioner David Lao. There is likewise no deed of assignment between petitioner Jose Lao and private respondent Dionisio Lao.Absent a written document, petitioners must prove, at the very least, possession of the certificates of shares in the name of the alleged seller. Again, they failed to prove possession. They failed to prove the due delivery of the certificates of shares of the sellers to them. Section 63 of the Corporation Code provides:

Sec. 63. Certificate of stock and transfer of shares. - The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.

In contrast, respondent was able to prove that he is the owner of the disputed shares. He had in his possession the certificates of stocks of Hipolito Lao. The certificates of stocks were also properly endorsed to him. More importantly, the transfer was duly registered in the stock and transfer book of the corporation. Thus, as between the parties, respondent has proven his right over the disputed shares. As correctly ruled by the CA:

Au contraire, Dionisio C. Lao was able to show through competent evidence that he is undeniably the owner of the disputed shares of stocks being claimed by David C. Lao. He was able to validate that he has the physical possession of the certificates covering the shares of Hipolito Lao. Notably, it was Hipolito Lao who properly endorsed said certificates to herein Dionisio Lao and that such transfer was registered in PFSC's Stock and Transfer Book. These circumstances are more in accord with the valid transfer contemplated by Section 63 of the Corporation Code.25

The mere inclusion as shareholder of petitioners in the General Information Sheet of PFSC is insufficient proof that they are shareholders of the company.Petitioners bank heavily on the General Information Sheet submitted by PFSC to the SEC in which they were named as shareholders of PFSC. They claim that respondent is now estopped from contesting the General Information Sheet.While it may be true that petitioners were named as shareholders in the General Information Sheet submitted to the SEC, that document alone does not conclusively prove that they are shareholders of PFSC. The information in the document will still have to be correlated with the corporate books of PFSC. As between the General Information Sheet and the corporate books, it is the latter that is controlling. As correctly ruled by the CA:

We agree with the trial court that mere inclusion in the General Information Sheets as stockholders and officers does not make one a stockholder of a corporation, for this may have come to pass by mistake, expediency or negligence. As professed by respondent-appellee, this was done merely to comply with the reportorial requirements with the SEC. This maybe against the law but "practice, no matter how long continued, cannot give rise to any vested right."If a transferee of shares of stock who failed to register such transfer in the Stock and Transfer Book of the Corporation could not exercise the rights granted unto him by law as stockholder, with more reason that such rights be denied to a person who is not a stockholder of a corporation. Petitioners-appellants never secured such a standing as stockholders of PFSC and consequently, their petition should be denied.26

It should be stressed that the burden of proof is on petitioners to show that they are shareholders of PFSC. This is so because they do not have any certificates of shares in their name. Moreover, they do not appear in the corporate books as registered shareholders. If they had certificates of shares, the burden would have been with PFSC to prove that they are not shareholders of the corporation.As discussed, petitioners failed to hurdle their burden. There is no written document evidencing their claimed purchase of shares. We note that petitioners agreed to submit their case for decision based merely on the documents on record. Hence, no testimonial evidence was presented to prove the alleged purchase of shares. Absent any documentary or testimonial evidence, the bare assertion of petitioners that they are shareholders cannot prevail.All told, We agree with the RTC and CA decision that petitioners are not shareholders of PFSC.WHEREFORE, the petition is DENIED and the appealed Amended Decision AFFIRMED IN FULL.SO ORDERED.