corpolaw cases3.corporate powers

7/25/2019 CORPOLAW Cases3.Corporate Powers

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G.R. No. 113032 August 21, 1997

WESTERN INSTITUTE OF TECHNOLOGY, INC., HOMERO L.ILLASIS, !IMAS ENRI"UE#, $RESTON F. ILLASIS %REGINAL! F. ILLASIS, petitioner,vs.RICAR!O T. SALAS, SALA!OR T. SALAS, SOLE!A!SALAS&TU'ILLE(A, ANTONIO S. SALAS, RICHAR! S.SALAS % HON. (U!GE $ORFIRIO $ARIAN, respondents.

HERMOSISIMA, (R.,J.:

Up for review on certiorariare: (1) the Decision datedSeptember 6, 1993 and (2) the rder dated !ovember 23,1993 of "ranch 33 of the #e$iona% &ria% 'ort of %oi%o 'it* in'rimina% 'ases !os. 3+9+ and 3+9- for estafa andfa%sication of a pb%ic docment, respective%*. &he /d$mentac0itted the private respondents of both char$es, btpetitioners see to ho%d them civi%%* %iab%e.

rivate respondents #icardo &. Sa%as, Sa%vador &. Sa%as,So%edad Sa%as&bi%%e/a, 4ntonio S. Sa%as, and #ichard S. Sa%as,be%on$in$ to the same fami%*, are the ma/orit* and contro%%in$members of the "oard of &rstees of 5estern nstitte of

&echno%o$*, nc. (5&, for short), a stoc corporation en$a$edin the operation, amon$ others, of an edcationa% instittion.4ccordin$ to petitioners, the minorit* stocho%ders of 5&,sometime on ne 1, 19-6 in the principa% o7ce of 5& at 8a

a, %oi%o 'it*, a Specia% "oard eetin$ was he%d. nattendance were other members of the "oard inc%din$ one ofthe petitioners #e$ina%d ;i%%asis. rior to aforesaid Specia%"oard eetin$, copies of notice thereof, dated a* 2


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'!#F & 845.

%oi%o 'it*, hi%ippines, !ovember 22,1991.3GAmphasis orsH.

&he nformation, on the other hand, for estafa reads:

&he ndersi$ned 'it* rosector accses #'4#DS484S, S48;4D# &. S484S, S8AD4D S484S

&U"88A4, 4!&! S. S484S, #'@4#D S. S484S(whose dates and p%aces of birth cannot beascertained) of the crime of AS&4E4, 4rt. 31=, par. 1(b) of the #evised ena% 'ode, committed as fo%%ows:

&hat on or abot the 1st da* ofne, 19-6, in the 'it* of %oi%o,hi%ippines, and within the

/risdiction of this @onorab%e 'ort,the abovenamed accsed, bein$then the 'hairman, ;ice'hairman,

&reasrer, Secretar*, and &rstee(who %ater became Secretar*),respective%*I of the "oard of

&rstees of 5estern nstitte of&echno%o$*, nc., a corporation d%*or$anied and eCistin$ nder the%aws of the #epb%ic of thehi%ippines, conspirin$ andconfederatin$ to$ether andmta%%* he%pin$ one another tobetter rea%ie their prpose, didthen and there wi%f%%*, n%awf%%*and fe%onios%* defrad the saidcorporation (and its stocho%ders)in the fo%%owin$ manner, to wit:herein accsed, nowin$ f%%* we%%that the* have no s7cient, %awf%athorit* to disbrse > %et a%onevio%ation of app%icab%e %aws and

/risprdence, disbrsed the fndsof the corporation b* eJectin$pa*ment of their retroactivesa%aries in the amont of1-6,


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corporation, more partic%ar%* as 'hairman, ;ice'hairman,&reasrer and Secretar* of 5estern nstitte of &echno%o$*. 5e0ote once more #eso%tion !o. 9,.?month, ;ice'hairman > 3,=.?month,'orporate &reasrer >3,=.?month and 'orporateSecretar* > 3,=.?month,retroactive ne 1, 19-= and thetenper centumof the net protssha%% be distribted e0a%%* amon$the ten members of the "oard of

&rstees. &his sha%% amend andsperceed (sic) an* previosreso%tion.

&here were no other bsiness.

&he 'hairman dec%ared the meetin$ ad/orned at

=:11 ..&his is to certif* that the fore$oin$ mintes of there$%ar meetin$ of the "oard of &rstees of 5esternnstitte of &echno%o$*, nc. he%d on arch 3, 19-6is tre and correct to the best of m* now%ed$e andbe%ief.

(S$d) 4!&! S. S484S'orporate Secretar*11GAmphasis orsH

'%ear%*, therefore, the prohibition with respect to $rantin$compensation to corporate directors?trstees as suchnderSection 3 is not vio%ated in this partic%ar case.'onse0ent%*, the %ast sentence of Section 3 which provides:

. . . . . . . n no case sha%% the tota% *ear%*compensation of directors, as such directors,eCceed ten (1!" percent of the net income #eforeincome ta$of the corporation drin$ the precedin$*ear. (Amphasis orsH

does not %iewise nd app%ication in this case since thecompensation is bein$ $iven to private respondents in theircapacit* as o7cers of 5& and not as board members.

etitioners assert that the instant case is a derivative sitbro$ht b* them as minorit* shareho%ders of 5& for and onbeha%f of the corporation to ann% #eso%tion !o.


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indeed inc%ded in ther "siness, !o. 6 of the4$enda, and was taen p and passed on arch 3,19-6. &he mere fact of eCistence of ACh. M'M a%soproves that it was passed on arch 3, 19-6 for ACh.M'M is part and parce% of the who%e mintes of the"oard of &rstees #e$%ar eetin$ on arch 3,19-6. !o better and more credib%e proof can beconsidered other than the intes (ACh. M1M) itse%f ofthe #e$%ar eetin$ of the "oard of &rstees onarch 3, 19-6. &he imptation that said #eso%tion!o.


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G.R. No. 1+7*7 (-u-/ 19, 2011

RENATO REAL,etitioner,vs.SANGU $HILI$$INES, INC. - o/ IICHIA'E,#espondents.

D A ' S !

!EL CASTILLO,J.:

&he perennia% 0estion of whether a comp%aint for i%%e$a%dismissa% is intracorporate and ths be*ond the /risdiction ofthe 8abor 4rbiter is the core isse p for consideration in this

case.&his etition for #eview on Certiorariassai%s theDecision1dated ne 2-, 2= of the 'ort of 4ppea%s ('4) in'4K.#. S. !o. -61+ which dismissed the petitionfor certiorari%ed before it.

Factual Antecedents

etitioner #enato #ea% was the ana$er of respondentcorporation San$ hi%ippines, nc., a corporation en$a$ed inthe bsiness of providin$ manpower for $enera% services, %ie

/anitors, /anitresses and other maintenance personne%, tovarios c%ients. n 21, petitioner, to$ether with 29 otherswho were either /anitors, /anitresses, %eadmen andmaintenance men, a%% emp%o*ed b* respondent corporation,%ed their respective 'omp%aints2for i%%e$a% dismissa% a$ainstthe %atter and respondent Niichi 4be, the corporationOs ;ice

resident and Kenera% ana$er. &hese comp%aints were %ateron conso%idated.

5ith re$ard to petitioner, he was removed from his position asana$er thro$h "oard #eso%tion 2133adopted b*respondent corporationOs "oard of Directors. etitionercomp%ained that he was neither notied of the "oard eetin$drin$ which said board reso%tion was passed nor forma%%*char$ed with an* infraction. @e /st received fromrespondents a %etter


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thereof as shown b* the entr* M!?4M or Mnot applica#leMopposite his name in the o7cer co%mn. Said co%mn re0iresthat the partic%ar position be indicated if the person is ano7cer and if not, the entr* M!?4M. etitioner frther ar$edthat the fact that his dismissa% was eJected thro$h a boardreso%tion does not %iewise mean that he is a corporateo7cer. therwise, a%% that an emp%o*er has to do in order toavoid comp%iance with the re0isites of a va%id dismissa% nderthe 8abor 'ode is to dismiss a mana$eria% emp%o*ee thro$h aboard reso%tion. oreover, he insisted that his action fori%%e$a% dismissa% is not an intracorporate controvers* as same

stemmed from emp%o*eeemp%o*er re%ationship which is we%%within the /risdiction of the 8abor 4rbiter. &his can bededced and is bo%stered b* the %ast para$raph of thetermination %etter sent to him b* respondents statin$ that heis entit%ed to benets nder the 8abor 'ode, to wit:

n this connection (his dismissa%) *o are entit%ed toseparation pa* and other benets provided for u4/ t54L-6o/ Co4 o t54 $588::84s.-(Amphasis spp%ied)

n contrast, respondents stood rm that the action a$ainstthem is an intracorporate controvers*. t cited 2a#an& vNational 3a#or Relations Commission9wherein this 'ortdec%ared that Man intracorporate controvers* is one whicharises between a stocho%der and the corporationIM thatMGtHhere is no distinction, 0a%ication, nor an* eCemptionwhatsoeverIM and that it is Mbroad and covers a%% inds of

controversies between stocho%ders and corporations.M n viewof this r%in$ and since petitioner is ndispted%* astocho%der of the corporation, respondents contended thatthe action institted b* petitioner a$ainst them is an intracorporate controvers* co$niab%e on%* b* the appropriatere$iona% tria% cort. @ence, the !8#' correct%* dismissedpetitionerOs comp%aint for %ac of /risdiction.

n the assai%ed Decision1dated ne 2-, 2=, the '4 sidedwith respondents and a7rmed the !8#'Os ndin$ that asidefrom bein$ a stocho%der of respondent corporation, petitioneris a%so a corporate o7cer thereof and conse0ent%*, hiscomp%aint is an intracorporate controvers* over which the%abor arbiter has no /risdiction. Said cort opined that if itwas tre that petitioner is a mere emp%o*ee, the respondentcorporation wo%d not have ca%%ed a board meetin$ to pass a

reso%tion for petitionerOs dismissa% considerin$ that it wasver* tedios for the "oard of Directors to convene and toadopt a reso%tion ever* time the* decide to dismiss theirmana$eria% emp%o*ees. &o spport its ndin$, the '4 %iewisecited 2a#an&4s to petitionerOs cocomp%ainants, the '4%iewise a7rmed the !8#'OS ndin$ that the* were neverdismissed from the service. &he dispositive portion of the '4Decision reads:

5@A#AE#A, the instant petition is hereb* DSSSAD.4ccordin$%*, the assai%ed decision and reso%tion of the pb%icrespondent !ationa% 8abor #e%ations 'ommission in !8#' !'#'4 !o. 3612-3 !8#' S#4";=661-1"?=66192"?=6622"?1663+1"?16-331", S&4!DS.

S #DA#AD.

!ow a%one bt sti%% ndeterred, petitioner e%evated the case tos thro$h this etition for #eview on Certiorari

The Parties Arguments

etitioner contines to insist that he is not a corporate o7cer.@e ar$es that a corporate o7cer is one who ho%ds ane%ective position as provided in the 4rtic%es of ncorporation orone who is appointed to sch other positions b* the "oard ofDirectors as specica%%* athoried b* its "*8aws. 4nd, sincehe was neither e%ected nor is there an* showin$ that he wasappointed b* the "oard of Directors to his position asana$er, petitioner maintains that he is not a corporateo7cer contrar* to the ndin$s of the !8#' and the '4.

etitioner %iewise contends that his comp%aint for i%%e$a%dismissa% a$ainst respondents is not an intracorporate

controvers*. @e avers that for an action or sit between astocho%der and a corporation to be considered an intracorporate controvers*, same mst arise from intracorporatere%ations, ie, an action invo%vin$ the stats of a stocho%deras sch. @e be%ieves that his action a$ainst the respondentsdoes not arise from intracorporate re%ations bt rather fromemp%o*eremp%o*ee re%ations. &his, accordin$ to him, waseven imp%ied%* reco$nied b* respondents as shown b* theear%ier 0oted portion of the termination %etter the* sent tohim.

Eor their part, respondents posit that what petitioner is

essentia%%* assai%in$ before this 'ort is the ndin$ of the!8#' and the '4 that he is a corporate o7cer of respondentcorporation. &o the respondents, the 0estion of whetherpetitioner is a corporate o7cer is a 0estion of fact which, ashe%d in a %on$ %ine of /risprdence, cannot be the sb/ect ofreview nder this etition for #eview on Certiorari 4t an* raterespondents insist that petitioner who is ndispted%* astocho%der of respondent corporation is %iewise a corporateo7cer and that his action a$ainst them is an intracorporatedispte be*ond the /risdiction of the %abor tribna%s. &ospport this, the* cited severa% /risprdence sch as Pearson 5eor&e (+ *sia", 7nc v National 3a#or RelationsCommission,11Philippine +chool of -usiness *dministration v3eano,12ortune Cement Corporation v National 3a#orRelations Commission13and a$ain, 2a#an& v National 3a#or

Relations Commission1 pon receipt of the std* inna% form.

;er* tr%* *ors,

(S)4!&! '. U!S484!

(&)4!&! '. U!S484!

resident

'!E#A X #A'A;AD from 4#'4#K,

theamont of !A @U!D#AD &@US4!DASS

(1,.), this 1+th da* of ctober,19-6

as 1st nsta%%ment pa*ment of the servicea$reement

dated ctober 13, 19-6.

(S)S&AE4! '. S4W

(&)S&AE4! '. S4W

4ccordin$%*, private respondent prepared a feasibi%it* std*for petitioner which eventa%%* paid him the ba%ance of thecontract price, a%tho$h not accordin$ to the sched%e a$reed

pon.11

n December


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n Eebrar* 9, 19--, private respondent %ed a co%%ection sita$ainst petitioner. @e a%%e$e that he had prepared anoperations mana% for petitioner, condcted a seminarworshop for its emp%o*ees and de%ivered to it a compterpro$ramI bt that, despite demand, petitioner refsed to pa*him for his services.

etitioner, in its answer, denied that private respondent hadprepared an operations mana% and a compter pro$ram orcondcted a seminarworshop for its emp%o*ees. t frthera%%e$ed that the %ettera$reement was si$ned b* nsa%anwithot athorit*, Min co%%sion with Gprivate respondentH in

order to n%awf%%* $et some mone* from GpetitionerH,M anddespite his now%ed$e that a $rop of emp%o*ees of thecompan* had been commissioned b* the board of directors toprepare an operations mana%. 17

&he tria% cort dec%ared the Second 'ontract nenforceab%e orsim%ated. @owever, since private respondent had acta%%*prepared the operations mana% and condcted a trainin$seminar for petitioner and its emp%o*ees, the tria% cortawarded 6, to the former, on the $rond that no onesho%d be n/st%* enriched at the eCpense of another (4rtic%e21 Un%ess otherwise provided in this 'ode,the corporate powers of a%% corporationsformed nder this 'ode sha%% be eCercised,a%% bsiness condcted and a%% propert* ofsch corporations contro%%ed and he%d b* theboard of directors or trstees . . . .

Under this provision, the power and the responsibi%it* todecide whether the corporation sho%d enter into a contractthat wi%% bind the corporation is %od$ed in the board, sb/ect tothe artic%es of incorporaration, b*%aws, or re%evant provisionsof %aw. 2)@oweever, /st as a natra% person ma* athorieanother to do certain acts for and on his beha%f, the board ofdirectors ma* va%id%* de%e$ate some of its fnctions andpowers to o7cers, committees or a$ents. &he athorit* ofsch individa%s to bind the corporation is $enera%%* derivedfrom %aw, corporate b*%aws or athoriation from the board,either eCpress%* or imp%ied%* b* habit, cstom or ac0iescencein the $enera% corse of bsiness,viz: 2*

4 corporate o7cer or a$ent ma* representand bind the corporation in transactionswith third persons to the eCtent that GtheH

athorit* to do so has been conferred ponhim, and this inc%des powers which havebeen intentiona%%* conferred, and a%so schpowers as, in the sa% corse of thepartic%ar bsiness, are incidenta% to, or ma*be imp%ied from, the powers intentiona%%*conferred, powers added b* cstom andsa$e, as sa%%* pertainin$ to thepartic%ar o7cer or a$ent, and schapparent powers as the corporation hascased persons dea%in$ with the o7cer ora$ent to be%ieve that it has conferred.

4ccordin$%*, the appe%%ate cort r%ed in this case that theathorit* to act for and to bind a corporation ma* bepresmed from acts of reco$nition in other instances, wherein


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the power was in fact eCercised withot an* ob/ection from itsboard or shareho%ders. etitioner had previos%* a%%owed itspresident to enter into the Eirst 'ontract with privaterespondent withot a board reso%tion eCpress%* athoriin$himI ths, it had c%othed its president with apparent athorit*to eCecte the sb/ect contract.

etitioner rebts, ar$in$ that a sin$%e iso%ated a$reementprior to the sb/ect contract does not constittecorporatepractice, which 5ebster denes as Mfre0ent orcstmar* action.M t cites-oard of 3i%uidators v 0alaw,2+inwhich the practice of !4'' a%%owin$ its $enera% mana$er to

ne$otiate and eCecte contract in its copra tradin$ activitiesfor and on its beha%f, withot prior board approva%, wasinferred from siCt* contract > not one, as in present case >previos%* entered into b* the corporation withot sch boardreso%tion.

etitionerBs ar$ment is not persasive. 4pparent athorit* isderived not mere%* from practice. ts eCistence ma* beascertained thro$h (1) the $enera% manner in which thecorporation ho%ds ot an o7cer or a$ent as havin$ the powerto act or, in other words, the apparent athorit* to act in$enera%, with which it c%othes himI or (2) the ac0iescence inhis acts of a partic%ar natre, with acta% or constrctivenow%ed$e thereof, whether within or be*ond the scope of hisordinar* powers.27t re0ires presentation of evidence ofsimi%ar act(s) eCected either in its favor or in favor of other

parties. 2t is not the 0antit* of simi%ar acts whichestab%ishes apparent athorit*, bt the vestin$ of a corpora%eo7cer with the power to bind the corporation.

n the case at bar, petitioner, thro$h its president 4ntonionsa%an r., entered into the Eirst 'ontract withot rstsecrin$ board approva%. Despite sch %ac of board approva%,petitioner did not ob/ect to or repdiate said contract, thsMc%othin$M its president with the power to bind the corporation.

&he $rant of apparent athorit* to nsa%an is evident in thetestimon* of Fon$ > senior vice president, treasrer andma/or stocho%der of petitioner. &estif*in$ on the Eirst'ontract, he said: 29

4: r. Gnsa%anH to%d methat he preferGsH r. Saobecase r. Sao is ver*

inentia% with the'o%%ector of 'stomsGsH."ecase the 'o%%ector of'stomGsH wi%% be the oneto approve or pro/ectstd* and ob/ected tothat, sir. 4nd said it Gwasan eCorbitantH price. 4ndr. nsa%an he is theGpHresident, so he G$etsHhis wa*.

: 4nd so did thecompan* eventa%%* pa*this 3=,. to r.SaoY

4: Fes, sir.

&he Eirst 'ontract was consmmated, imp%ementedand paid withot a hitch.

@ence, private respondent sho%d not be fa%ted for be%ievin$that nsa%anBs conformit* to the contract in dispte was a%sobindin$ on petitioner. t is fami%iar doctrine that if acorporation nowin$%* permits one of its o7cers, or an* othera$ent, to act within the scope of an apparent athorit*, itho%ds him ot to the pb%ic as possessin$ the power to dothose actsI and ths, the corporation wi%%, as a$ainst an*onewho has in $ood faith dea%t with it thro$h sch a$ent, beestopped from den*in$ the a$entBs athorit*. 30

Erthermore, private respondent prepared an operationsmana% and condcted a seminar for the emp%o*ees ofpetitioner in accordance with their contract. etitioneraccepted the operations mana%, sbmitted it to the "rea of'stoms and a%%owed the seminar for its emp%o*ees. 4s ares%t of its aforementioned actions, petitioner was $iven b*the "rea of 'stoms a %icense to operate a bondedwarehose. Krantin$ ar$endo then that the Second 'ontractwas otside the sa% powers of the president, petitionerBsratication of said contract and acceptance of benets havemade it bindin$, nonethe%ess. &he enforceabi%it* of contracts

nder 4rtic%e 1


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1) Despite the fact that no Gdown pa*mentHand?or postdated checs Gpartia% pa*mentsH(as prported%* stip%ated in the a%%e$edcontract) Gwas $iven, private respondentHwent ahead with the servicesGIH

2) G&here was a de%a* in the %in$ of thepresent sit, more than a *ear after GprivaterespondentH a%%e$ed%* comp%eted hisservices or ei$ht months after the a%%e$ed%ast verba% demand for pa*ment made onnsa%an in ne 19-+I

3) Does not nsa%anBs writin$ a%%e$ed%* inne 19-+ on the a%%e$ed %ettera$reementof M*or emp%o*eesG,HM when it sho%d havebeen Mor emp%o*eesM, as he was then sti%%connected with GpetitionerH, indicate thatthe %ettera$reement was si$ned b*nsa%an when he was no %on$er connectedwith GpetitionerH or, as c%aimed b*GpetitionerH, that nsa%an si$ned it withotGpetitionerBsH athorit* and mst have beendone Min co%%sion with p%aintiJ in order ton%awf%%* $et some mone* fromGpetitionerHY


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G.R. No. 1))0* (u4 , 200+

E!UAR!O . LINTON(UA, (R. - ANTONIO .LITON(UA,etitioners,vs.ETERNIT COR$ORATION =o@ ETERTON MULTI&RESOURCES COR$ORATION>, ETEROUTREMER, S.A. -FAR EAST 'AN % TRUST COM$ANY, #espondents.

D A ' S !

CALLE(O, SR.,J.:

n appea% via a etition for #eview on 'ertiorari is the

Decision1

of the 'ort of 4ppea%s ('4) in '4K.#. '; !o.=122, which a7rmed the Decision of the #e$iona% &ria% 'ort(#&'), asi$ 'it*, "ranch 16=, in 'ivi% 'ase !o. =


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"oard and stocho%ders of A' never approved an* reso%tionto se%% sb/ect properties nor athoried ar0e to se%% thesameI and the te%eC dated ctober 2-, 19-6 of ac K%anvi%%ewas his own persona% main$ which did not bind A'.

n %* 3, 199=, the tria% cort rendered /d$ment in favor ofdefendants and dismissed the amended comp%aint.12&he fa%%oof the decision reads:

5@A#AE#A, the comp%aint a$ainst Aternit 'orporation nowAterton %ti#esorces 'orporation and Aterotremer, S.4. isdismissed on the $rond that there is no va%id and bindin$sa%e between the p%aintiJs and said defendants.

&he comp%aint as a$ainst Ear Aast "an and &rst 'ompan* is%iewise dismissed for %ac of case of action.

&he conterc%aim of Aternit 'orporation now Aterton %ti#esorces 'orporation and Aterotremer, S.4. is a%sodismissed for %ac of merit.13

&he tria% cort dec%ared that since the athorit* of thea$ents?rea%tors was not in writin$, the sa%e is void and notmere%* nenforceab%e, and as sch, co%d not have beenratied b* the principa%. n an* event, sch ratication cannotbe $iven an* retroactive eJect. %aintiJs co%d not assmethat defendants had a$reed to se%% the propert* withot ac%ear athoriation from the corporation concerned, that is,thro$h reso%tions of the "oard of Directors andstocho%ders. &he tria% cort a%so pointed ot that the

spposed sa%e invo%ves sbstantia%%* a%% the assets ofdefendant A' which wo%d res%t in the eventa% tota%cessation of its operation.1s Rulin&s

F8/st. etitioners Aspirit, et a%. point ot that the certicateof nonform shoppin$ that respondents NA and etronattached to the petition the* %ed with the 'ort of 4ppea%swas inade0ate, havin$ been si$ned on%* b* etron, thro$h4tt*. 'r.

"t, whi%e procedra% re0irements sch as that of sbmitta%of a certicate of nonform shoppin$ cannot be tota%%*disre$arded, the* ma* be deemed sbstantia%%* comp%ied withnder /stiab%e circmstances.+ne of these circmstancesis where the petitioners %ed a co%%ective action in which the*share a common interest in its sb/ect matter or raise acommon case of action. n sch a case, the certication b*one of the petitioners ma* be deemed s7cient.-

@ere, NA and etron shared a common case of actiona$ainst petitioners Aspirit, et a%., name%*, the vio%ation oftheir proprietar* ri$hts with respect to the se of Kas% tansand trademar. Erthermore, 4tt*. 'r said in his certicationthat he was eCectin$ it Mfor and on beha%f of the 'orporation,and copetitioner 'armen . Do%oiras.M9&hs, the ob/ect of there0irement Q to ensre that a part* taes no recorse tom%tip%e forms Q was sbstantia%%* achieved. "esides, thefai%re of NA to si$n the certicate of nonform shoppin$does not render the petition defective with respect to etronwhich si$ned it thro$h 4tt*. 'r.1&he 'ort of 4ppea%s,therefore, acted correct%* in $ivin$ de corse to the petitionbefore it.

S4o. &he 'ort of 4ppea%s he%d that nder the facts of thecase, there is probab%e case that petitioners Aspirit, et a%.committed a%% three crimes: (a) i%%e$a%%* %%in$ p an 8K tanre$istered to etron withot the %atterOs consent in vio%ation of#.4. 623, as amendedI (b) trademar infrin$ement whichconsists in "ico% KasO se of a trademar that is confsin$%*simi%ar to etronOs re$istered MKas%M trademar in vio%ation ofSection 1== of #.4. -293I and (c) nfair competition whichconsists in petitioners Aspirit, et a%. passin$ oJ "ico% Kasprodced 8Ks for etronprodced Kas% 8K in vio%ation ofSection 16-.3 of #.4. -293.

@ere, the comp%aint addced at the pre%iminar* investi$ationshows that the one =$ etron Kas% 8K tan fond on the"ico% KasO trc Mbe%on$ed to Ga "ico% KasH cstomer who hadthe same %%ed p b* "'8 K4S.M11n other words, thecstomer had that one Kas% 8K tan bro$ht to "ico% Kasfor re%%in$ and the %atter ob%i$ed.

#.4. 623, as amended,12pnishes an* person who, withot thewritten consent of the manfactrer or se%%er of $asescontained in d%* re$istered stee% c*%inders or tans, %%s thestee% c*%inder or tan, for the prpose of sa%e, disposa% ortra7cin$, other than the prpose for which the manfactreror se%%er re$istered the same. &his was what happened in thiscase, assmin$ the a%%e$ations of NAOs mana$er to be tre."ico% Kas emp%o*ees %%ed p with their rmOs $as the tanre$istered to etron and bearin$ its mar withot the %atterOs

written athorit*. 'onse0ent%*, the* ma* be prosected forthat oJense.

"t, as for the crime of trademar infrin$ement, Section 1==of #.4. -293 (in re%ation to Section 1+13) provides that it iscommitted b* an* person who sha%%, withot the consent ofthe owner of the re$istered mar:

1. Use in commerce an* reprodction, conterfeit,cop* or co%orab%e imitation of a re$istered mar orthe same container or a dominant featre thereof inconnection with the sa%e, oJerin$ for sa%e,distribtion, advertisin$ of an* $oods or servicesinc%din$ other preparator* steps necessar* to carr*ot the sa%e of an* $oods or services on or in

connection with which sch se is %ie%* to caseconfsion, or to case mistae, or to deceiveI or

2. #eprodce, conterfeit, cop* or co%orab%* imitate are$istered mar or a dominant featre thereof andapp%* sch reprodction, conterfeit, cop* orco%orab%e imitation to %abe%s, si$ns, prints, paca$es,wrappers, receptac%es or advertisements intended tobe sed in commerce pon or in connection with thesa%e, oJerin$ for sa%e, distribtion, or advertisin$ of$oods or services on or in connection with whichsch se is %ie%* to case confsion, or to case

mistae, or to deceive.NA and etron have to show that the a%%e$ed infrin$er, theresponsib%e o7cers and staJ of "ico% Kas, sed etronOs Kas%trademar or a confsin$%* simi%ar trademar on "ico% Kastans with intent to deceive the pb%ic and defrad itscompetitor as to what it is se%%in$.1


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c*%inder or tan that be%on$ed to etron. &he 'ort of 4ppea%sr%ed that the* sho%d be char$ed a%on$ with the "ico% Kasemp%o*ees who were pointed to as direct%* invo%ved in overtacts constittin$ the oJense.1avvphi1

"ico% Kas is a corporation. 4s sch, it is an entit* separate anddistinct from the persons of its o7cers, directors, andstocho%ders. t has been he%d, however, that corporateo7cers or emp%o*ees, thro$h whose act, defa%t or omissionthe corporation commits a crime, ma* themse%ves beindivida%%* he%d answerab%e for the crime.1=

ose c%aimed in his a7davit that, when he ne$otiated the

swappin$ of captred c*%inders with "ico% Kas, its mana$er,petitioner 4die 8%ona, c%aimed that he wo%d be cons%tin$with the owners of "ico% Kas abot it. Sbse0ent%*, "ico% Kasdec%ined the oJer to swap c*%inders for the reason that theowners wanted to send their captred c*%inders to "atan$as.

&he 'ort of 4ppea%s seied on this as evidence that theemp%o*ees of "ico% Kas acted nder the direct orders of itsowners and that Mthe owners of "ico% Kas have f%% contro% ofthe operations of the bsiness.M16

&he MownersM of a corporate or$aniation are its stocho%dersand the* are to be distin$ished from its directors ando7cers. &he petitioners here, with the eCception of 4die8%ona, are bein$ char$ed in their capacities as stocho%ders of"ico% Kas. "t the 'ort of 4ppea%s for$ets that in acorporation, the mana$ement of its bsiness is $enera%%*

vested in its board of directors, not itsstocho%ders.1+Stocho%ders are basica%%* investors in acorporation. &he* do not have a hand in rnnin$ the da*toda* bsiness operations of the corporation n%ess the* are atthe same time directors or o7cers of the corporation. "efore astocho%der ma* be he%d crimina%%* %iab%e for acts committedb* the corporation, therefore, it mst be shown that he hadnow%ed$e of the crimina% act committed in the name of thecorporation and that he too part in the same or $ave hisconsent to its commission, whether b* action or inaction.

&he ndin$ of the 'ort of 4ppea%s that the emp%o*ees Mco%dnot have committed the crimes withot the consent,GabetmentH, permission, or participation of the owners of "ico%KasM1-is a sweepin$ spec%ation especia%%* since, asdemonstrated above, what was invo%ved was /st one etron

Kas% tan fond in a trc %%ed with "ico% Kas tans.4%tho$h the NA mana$er heard petitioner 8%ona sa* that hewas $oin$ to cons%t the owners of "ico% Kas re$ardin$ theoJer to swap additiona% captred c*%inders, no indication was$iven as to which "ico% Kas stocho%ders 8%ona cons%ted. two%d be nfair to char$e a%% the stocho%ders invo%ved, someof whom were proved to be minors.19!o evidence waspresented estab%ishin$ the names of the stocho%ders whowere char$ed with rnnin$ the operations of "ico% Kas. &hecomp%aint even fai%ed to a%%e$e who amon$ the stocho%derssat in the board of directors of the compan* or served as itso7cers.

&he 'ort of 4ppea%s of corse specica%%* mentionedpetitioner stocho%der ane% '. Aspirit, r. as the re$isteredowner of the trc that the NA mana$er bro$ht to the po%ice

for investi$ation becase that trc carried a tan of etronKas%. "t the act that #.4. 623 pnishes is the n%awf% %%in$p of re$istered tans of another. t does not pnish the act oftransportin$ sch tans. 4nd the comp%aint did not a%%e$e thatthe trc owner connived with those responsib%e for %%in$ pthat Kas% tan with "ico% Kas 8K.

5@A#AE#A, the 'ort #A;A#SAS and SA&S 4SDA theDecision of the 'ort of 4ppea%s in '4K.#. S -++11 datedctober 1+, 2= as we%% as its #eso%tion dated anar* 6,26, the #eso%tions of the Secretar* of stice dated arch11, 2< and 4$st 31, 2


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G. R. No. 173333 August 13, 200

LUCIA MAGALING, $ARALUMAN R. MAGALING,MARCELINA MAGALING&TA'LA!A, - 'ENITO R.MAGALING =H48/s o t54 -t4 R4-oM-g-8g>, petitioners,vs.$ETER ONG,respondent.

! E C I S I O N

CHICO&NA#ARIO,J.K

"efore this 'ort is a etition for #eview on Certiorari1%ednder #%e


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Eor its part, &ermo 8oans fai%ed to %e an 4nswerI ths, ponn$Os motion, the #&' dec%ared said corporation in defa%tand a%%owed n$ to present evidence e$ parte.

rsant to the writ of pre%iminar* attachment ear%ier issed,and evidenced b* the +heriE>s Return16dated 2+ !ovember199-, the SheriJ1+of #&', "r. 13 of 8ipa 'it*, cased theattachment of two (2) parce%s of %and covered b* &ransfer'erticates of &it%e !o. &193


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"rief where he so$ht the n%%ication of the rder ofthe tria% cort dischar$in$ the writ of attachment. @ear$ed that the said rder $rantin$ sch dischar$ehad the eJect of pre/d$in$ the merits of the case ata time when &hermo (sic) 8oans and 'redit 'orp. hadnot even %ed its answer to the comp%aint. ndeed,5e nd that sch dischar$e, even before the isseswere /oined, prematre%* ad/dicated the merits ofthe case on the %ac of persona% %iabi%it* of appe%%ees,and withot the %atter even postin$ a conter bond.

&herefore, as pra*ed for b* appe%%ant, the dischar$eof attachment is dec%ared i%%e$a% and the writ of

attachment is dec%ared eJective and sbsistin$.294nd the dispositive part of the*mended ;ecisionprovides:

5@A#AE#A, the fore$oin$ considered, the partia%motion for reconsideration of appe%%ant is K#4!&AD.4ccordin$%*, the rder dischar$in$ the writ ofattachment is SA& 4SDA and the 5rit of 4ttachmentis hereb* dec%ared eJective and sbsistin$.4ppe%%eesO motion for reconsideration is DA!AD.3

@ence, the present petition premised on the fo%%owin$ar$ments31 :

.

&@A 'U#& E 4A48S 4'&AD 5&@ K#4;A 4"USAE DS'#A&! 4!D ! AT'ASS E U#SD'&! !#A8F!K ! 4 K#U!D #4SAD !8F E# &@A E#S&

&A ! 4A48, & 4NA #AF!48D 4K48!KA#S!488F 84"8A E# '##4&A 84"8&FI and

.

&@A 'U#& E 4A48S 4'&AD 5&@ K#4;A 4"USAE DS'#A&! 4!D ! AT'ASS E U#SD'&! !#A!S&4&!K &@A #A8!4#F 4&&4'@A!&.

4t the otset, we note that whi%e the instant sit isdenominated as a Metition for #eview onCertiorari,M nder#%e


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the ne$%i$ence of #e*na%do a$a%in$ in rnnin$ hisnancin$ companies.39

Erom the precedin$ ar$ments and conterar$ments, thethresho%d isses proper for this 'ortOs consideration are,$iven the facts of the case, whether or not the 'ort of4ppea%s erred in: 1) main$ the Sposes a$a%in$ and &ermo8oans /oint%* and severa%%* %iab%e to n$ for the ob%i$ationincrred b* the corporationI and 2) reinstatin$ the writ ofpre%iminar* attachment issed a$ainst two (2) rea% propertiesof the Sposes a$a%in$.

&he petition is not meritorios.

t is basic that a corporation is a /ridica% entit* with %e$a%persona%it* separate and distinct from those actin$ for and inits beha%f and, in $enera%, from the peop%e comprisin$ it.


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. 199-. @ow abot this Eirst So%id 8endin$'orporation, when was this pt pY

4. - cannot remember also !hen it startedoperating& sir.

'U#&:

. So, when did *o rst rea%ie that *o havedi7c%t* in receivin$ pa*ments from borrowersY

4. n the %ater part of ].

. 19 ]..Y

4. n 199-, For @onor.

. 4nd in 199- *o did not te%% eter n$ thatthere was di7c%t* in receivin$ pa*ments from theborrowersY

4. @e new abot it, For @onor.

. Fo cannot presme that the investor nowsthat *o have di7c%t*. Fo have to te%% the investor.Did *o te%% himY

4. t was to%d to him b* or mana$er, what washappenin$, For @onor.. For ana$er. "t *o, *orse%f did not te%%himY

4. - cannot remember& our /onor.

'U#&:

. So, there was abso%te%* no occasion for *o tote%% him even in passin$ in his store that there isdan$er in the 3,. investmentY4. No& our /onor.

. @ow abot the other investorsY Did *o not a%sote%% them of sch a sitation that *o were in in *orcompan*Y

4. No& our /onor.

. 5h* notY

4. - did not tell that to in#estors& !hat isgoing on for fear that the might be afraid of!hat is happening& our /onor.=1

C C C C

4&&F. !K:

. r. 5itness, was there a forma% banrptc*proceedin$s %ed in disso%vin$ the compan*Y

C C C C5&!ASS:

4. - do not 0no!& sir.

4&&F. !K:

. "ein$ the resident, *o do not now or *orefsed to nowY

4. !o, sir. resi$ned at that time in 199-, sir.'U#&:

. 4nd who too over as residentY

4. Nobod too0 o#er& our /onor.

. @ow abot the investorsY Did the* $et a%% theirmone*Y

5&!ASS:

4. - do not 0no!& our /onor.4&&F. !K:. 4s of the time that *o were sti%% the resident,were there other investors in the compan*, is it not,aside from eter n$Y

4. Fes, sir.

. Do *o now how mch was the investment ofthe other persons aside from eter n$Y

C C C C

5&!ASS:

4. 8ie me, have invested, sir.

4&&F. !K:

. @ow mchY

4. 1.- i%%ion, sir.

. &hat is *or share in the compan*Y

4. !o. &hat is not a share, sir.

. So, that is *or investment in the compan*Y

4. &hat is m* investment, sir.

. @ow abot the other persons who a%so investedmone* with *or compan*Y

4. - do not 0no! that& sir.

. 'an *o prodce the nancia% statement of&hermo (sic) 8oans, r. witnessY

4. (!o answer).'U#&:

. So, as resident, *o do not now who are theother investorY

4. now the Directors, bt the other investors, do not now, For @onor.

. 5ho is inchar$ed (sic) of the compan*Y

4. 4s of now, For @onorY

. 4s of nowY

4. r mana$er, For @onor.

4&&F. !K:

. "t becase *o were the resident, *o a%sospervised *or mana$er, is it notY

4. Fes, sir.

. &o *or now%ed$e, can *o name some of theother persons who a%so invested in *or compan*, if*o nowY

4. Fes, sir.

. 'an *o name themY

4. &he Directors %isted there, sir.

. @ow mch did the Directors invest in thiscompan*Y

4. That - do not 0no!& sir.

'U#&:

. Upon inso%venc*, the fact that &hermo (sic)8oans became inso%vent in 199-, did a%% the investors$et their mone*Y

4. an* are sa*in$ that the* wi%% $et their mone*,For @onor.. "t did the* acta%%* $et their mone*investmentY

4. &he others were not ab%e to $et bac, For@onor.

. Did the* %e a case a$ainst *oY

4. !o char$es were %ed a$ainst me, For @onor.

. @ow abot &hermo (sic) 8oansY

4. do not now, For @onor.

. So, this is the on%* case %ed b* an investora$ainst &hermo (sic) 8oansY

4. Fes, For @onor.

4&&F. !K:

. r. 5itness, $oin$ bac to *or re%ationshipwith r. eter n$, were *o the one who convincedeter n$ to invest in *or compan*, the &hermo(sic) 8oansY

4. - do not remember that& sir.

'U#&:

. "t *o ta%ed to him abot the interest and theprincipa%Y

4. Fes, For @onor.

. "t *o did not mention to him that *o haveother %endin$ companiesY

4. -n that matter& - do not remember& our/onor.

4&&F. !K:
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. r. 5itness, when this compan*, &hermo (sic)8oans p%%ed (sic) it p, Mna$sarado,M it was a defacto, there was no]. who $ot ho%d of the assets ofthe compan*Y

4. - do not 0no! that& sir.

. 5h*Y

4. %ecause - am not onl attending to thatcompan& - ha#e so man other companies& sir.

'U#&:

. Fo did not $o after *or 1.- i%%ionY

4. Nomore 1sic2& our /onor& because 3a0o0inu0unsensa rin ng a0ing sarili& bilang4atoli0o aa! 0o nang ma0asali pa sa ibangbaga na sa banda roo pera lang ho ion.3

. M!ansi*ens*a aM bt *o were not bein$bothered for the mone* of the other investorsY @owcan that beY For conscience bothers *oY

4. -f - !ill thin0 about it& - might get sic0. -did not bother to run after m in#estment forreason of healthC C C.

4&&F. !K:

. a*, r. 5itness, considerin$ that *o are absinessman en$a$ed in simi%ar %ines of %endin$compan* and bein$ the resident, the formerresident of &hemo (sic) 8oans, *o had ]. *o werefrnished with na%]. with nancia% statement of thecompan* was it notY4. - do not remember that& sir.

'U#&:

. Fo did not ca%% a meetin$ of the Directors andother stoc ho%ders that *or compan* is $oin$downY

4. No more& our /onor& because no 5irectorsattended the meeting.

. "t *o ca%%ed a meetin$Y

4. Fes, For @onor. ca%%ed a meetin$ bt nobod*attended the meetin$.

4&&F. !K:

. 5here are now the nancia% records of thecompan*Y

4. That - do not 0no!& sir.. @ow abot *or own persona% recordsY Forpersona% cop* of the nancia% statement of thecompan*, considerin$ that *or c%assication in#otar* '%b is nancia% servicesY

4. - do not 0no! !here it !as placed& sir.

. So, *o are te%%in$ this 'ort that *o cannotprodce an*more the nancia% statement re%ated tothis compan*, is itY

4. !o, sir. !ot %ie that.

. 5here *o tried to retrieve or wi%% *o tr* toretrieve the nancia% statement of this compan*Y

4. - ga#e all the responsibilities to themanager& sir.=2

#e*na%do a$a%in$Os ver* own testimon* $ave reason for theappe%%ate cortOs ndin$ of $ross ne$%i$ence on his part.nstead of the intended eJect of reftin$ the spposition that

&ermo 8oans was assidos%* mana$ed, #e*na%do a$a%in$Osfore$oin$ testimon* on%* convincin$%* disp%a*ed his $rossne$%i$ence in the condct of the aJairs of &ermo 8oans. Eromor standpoint, his casa% manner, insociance andnoncha%ance, na, indiJerence, to the predicament of thedistressed corporation $%arin$%* eChibited a %acadaisica%attitde from a top o7ce of a corporation, a condct tota%%*abhorrent in the corporate wor%d.

#e*na%do a$a%in$ is not a novice in the e%d of commerce.@e is a seasoned bsinessman rnnin$ severa% %endin$companies. Drin$ his cross eCamination, he admitted that

he had, aside from &ermo 8oans, varios other %endin$companies, to wit:

4&&F. !K:

. r. witness, *o said that *o are absinessman b* professionY

5&!ASS:

4. Fes, sir.

C C C C

4&&F. !K:

. n 199< when *o $ot this a%%e$ed investment

from eter n$, what were the bsinesses that *oown or contro% at that timeY

C C C C

5&!ASS:

4. did not receive the investment of eter n$, itwas the compan* who received, sir.

4&&F. !K:

. a*. %ut !hat !ere our businesses thatou had at that time6

4. Lending companies& sir.

. 5hat are the names of that %endin$ companiesthat *o hadY

4. Thermo Loans&sir.

. 4side from &hermo 8oansY

4. First )olid Lending Compan&sir.. 5hat e%seY

4. 7ediator Lending Compan&sir.

. 5hat e%seY

4. %ene8cial Lending Compan&sir.

. 5hat e%seY

4. 9intage Lending Compan&sir.

. 5hat e%seY

4. Ne! Pro8le Lending Compan&sir.

. 5hat e%seY

4. )mart Cash Lending Compan&sir.

. 5hat e%seY4. Cash Line Lending Compan&sir.

. 5hat e%seY4. -nsight Lending Compan&sir.

. 5hat e%seY

4. Antigo Lending Compan&sir.

. 5hat e%seY

4. Flagship Lending Compan&sir.

. 5hat e%seY

'U#&:

. )o& !hat happened to all these lendingcompanies no!6

4. &he* are oa*, For @onor.

4&&F. !K:

. Do *o mean to te%% this @onorab%e 'ort that

a%% these companies are now doin$ we%% and sti%%eCistin$ inc%din$ &hermo 8oansY

4. &hermo 8oans was inso%vent at that time, sir."t *o did not as those inso%vent. - ha#e so mancompanies that are alread insol#ent. %ut oudid not as0 about the compan that aresol#ent.

'U#&:

. Among those companies !hich oumentioned& !hich of those are sol#ent and!hich are not6

4. 4%% of those mentioned eCcept &hermo 8oans,For @onor.=3

C C C C
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'U#&:

. 4nd eter n$ co%d have not parted with the&hree @ndred &hosand pesos (3,.)investment if he did not ta% to *oY4. @e ta%ed to me, For @onor.

4&&F. !K:

. @e ta%ed to *oY !ow, that *o admitted ].

'U#&:

. 5ho was the one who made the oJer for him toinvestY 5as he the one who vo%ntari%* invested the

mone* or *o were the one who convinced him toinvest the 3,. mone* to &hermo 8oans8endin$ and 'redit 'orporationY

4. cannot remember, For @onor, becase de tothe %apse of time. t was in 199


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8//4gu-/ 8ssu4 o/ 4o/4, o/ t5-t t54 6o8s 8suD84t. f the attachment is eCcessive, thedischar$e sha%% be %imited to the eCcess. f the motionbe made on a7davits on the part of the movant btnot otherwise, the attachin$ part* ma* oppose themotion b* contera7davits or other evidence inaddition to that on which the attachment wasmade. At4/ u4 ot84 - 54-/8g, t54 ou/ts5- o/4/ t54 s4tt8g -s84 o/ t54o//4s:o8g 8s5-/g4 o t54 -tt-5


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G.R. No. 17073* !44


36/80

5@A#AE#A, premises considered, this 'ommissionnds, and so ho%ds, that respondents mpact'orporation and?or mmac%ada 8. Karcia, as directorand responsib%e o7cer of the said corporation, is%iab%e to pa* the SSS the amonts of


37/80

n sm, the core isse to be reso%ved in this case is whether ornot petitioner, as the on%* srvivin$ director of mpact'orporation, can be made so%e%* %iab%e for the corporateob%i$ations of mpact 'orporation pertainin$ to nremittedSSS premim contribtions and pena%ties therefore.

4s a covered emp%o*er nder the Socia% Secrit* 8aw, it is theob%i$ation of mpact 'orporation nder the provisions ofSections 1-, 19 and 22 thereof, as amended, to dedct fromits d%* covered emp%o*eeOs month%* sa%aries their shares aspremim contribtions and remit the same to the SSS,to$ether with the emp%o*erOs shares of the contribtions tothe petitioner, for and in their beha%f.

Erom a%% indications, the corporation has a%read* beendisso%ved. #espondents are now $oin$ after petitioner who isthe on%* srvivin$ director of mpact 'orporation.

4 crsor* review of the a%%e$ed $rave errors of %aw committedb* the 'ort of 4ppea%s above revea%s there seems to be nodispte as to the assessed %iabi%it* of mpact 'orporation forthe nremitted SSS premims of its emp%o*ees for the period

anar* 19- to December 19-


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Section 31 of the 'orporation 'ode, stip%atin$ on the %iabi%it*of directors, trstees, or o7cers, provides:

SA'. 31. 3ia#ilit of directors, trustees or oFcers. Directors or trstees who wi%%f%%* and nowin$%* votefor or assent to patent%* n%awf% acts of thecorporation or who are $i%t* of $ross ne$%i$ence orbad faith in directin$ the aJairs of the corporation orac0ire an* persona% or pecniar* interest in conictwith their dt* as sch directors, or trstees sha%% be%iab%e /oint%* and severa%%* for a%% dama$es res%tin$therefrom sJered b* the corporation, itsstocho%ders or members and other persons.

"asic is the r%e that a corporation is invested b* %aw with apersona%it* separate and distinct from that of the personscomposin$ it as we%% as from that of an* other %e$a% entit* towhich it ma* be re%ated. 4 corporation is a /ridica% entit* with%e$a% persona%it* separate and distinct from those actin$ forand in its beha%f and, in $enera%, from the peop%e comprisin$it. Eo%%owin$ this, the $enera% r%e app%ied is that ob%i$ationsincrred b* the corporation, actin$ thro$h its directors,o7cers and emp%o*ees, are its so%e %iabi%ities.34 director,o7cer, and emp%o*ee of a corporation are $enera%%* not he%dpersona%%* %iab%e for ob%i$ations incrred b* the corporation.

"ein$ a mere ction of %aw, however, there are pec%iarsitations or va%id $ronds that can eCist to warrant thedisre$ard of its independent bein$ and the %iftin$ of thecorporate vei%. &his sitation mi$ht arise when a corporation issed to evade a /st and de ob%i$ation or to /stif* a wron$,to shie%d or perpetrate frad, to carr* ot other simi%arn/stiab%e aims or intentions, or as a sbterf$e to commitin/stice and so circmvent the %aw.31&hs, Section 31 of the'orporation 8aw provides:

&ain$ a ce from the above provision, a corporate director, atrstee or an o7cer, ma* be he%d so%idari%* %iab%e with thecorporation in the fo%%owin$ instances:

1. 5hen directors and trstees or, in appropriatecases, the o7cers ofa corporation

(a) vote for or assent to patent%* n%awf%acts of the corporationI

(b) act in bad faith or with $ross ne$%i$encein directin$ the corporate aJairsI

(c) are $i%t* of conict of interest to thepre/dice of the corporation, its stocho%dersor members, and other persons.

2. 5hen a director or o7cer has consented to theissance of watered stocs or who, havin$now%ed$e thereof, did not forthwith %e with thecorporate secretar* his written ob/ection thereto.

3. 5hen a director, trstee or o7cer hascontracta%%* a$reed or stip%ated to ho%d himse%fpersona%%* and so%idari%* %iab%e with the 'orporation.


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&he fore$oin$ docment ne$ates petitionerOs assertion andspports the contention that drin$ the period invo%vedmpact 'orporation was sti%% en$a$ed in bsiness and was anon$oin$, viab%e, protab%e enterprise. n fact, the %atest SSSform #4 sbmitted b* mpact 'orporation is dated + a*19-


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G.R. No. 1*)*32 Oto64/ 27, 200+

$ETRON COR$ORATION AN! $ETER C.MALIGRO, petitioners,vs.NATIONAL LA'OR RELATIONS COMMISSION AN! CHITOS. MANTOS, respondents.

D A ' S !

GARCIA, (.K

4ssai%ed and so$ht to be set aside in this petition for reviewnder #%e


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b. 'ash e0iva%ent of certicate of stocs

&ota%

ins

!et 4ward

S #DA#AD. 9

ACp%ains the 8abor 4rbiter in his decision:t is an estab%ished fact that for his absences from4$st = to 4$st 2+, 1996, comp%ainant wasimposed the pena%t* of sspension for thirt* (3)da*s from !ovember 1 to 3, 1996 per the %etter ofrespondent a%i$ro to comp%ainant dated ctober 29,1996 (4nneC MDM). Erom respondentsB 4nneC M6Mwhich is a memorandm of !ovember 19, 1996containin$ the report of the nvesti$ation 'ommitteeit is shown therein that the smmons in this case wasreceived b* respondents on !ovember 1


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on%* petitioner etron si$ned the verication and certicationon nonform shoppin$ withot its copetitioner eter a%i$ro%iewise si$nin$ the same.

&heir motion for reconsideration havin$ been denied b* the'4 in its second imp$ned #eso%tion of %* 16, 22, thepetitioners are now with s viathe present recorse on thefo%%owin$ $ronds:13

4. &@A 'U#& E 4A48S A##AD ! DSSS!KA&&!A#SB A&&! E# 'A## ! &@AK#U!D &@4& &@A S4A E48AD & '8F 5&@

&@A #U8A ! 'A#&E'4&! ! !!E#U

S@!K '!SDA#!K &@4&:1. &@A#A 54S SU"S&4!&48 '84!'A"F A&&!A#S 5&@ &@A #AU#AA!&S! 'A#&E'4&! E !!E#US@!K.

2. &@A#A 54S 4 #A4S!4"8A '4USA E#A&&!A# 48K#BS E48U#A & 4&&4'@4 ;A#E'4&!?'A#&E'4&! E !!E#U S@!K.

". &@A UK@& DSSS48 E &@A A&&! "F&@A 'U#& E 4A48S 5U8D DAEA4&SU"S&4!&48 US&'A '!SDA#!K &@4& &@A !8#''&&AD K#4;A 4"USA E DS'#A&!4U!&!K & 84'N # AT'ASS E U#SD'&!! E!D!K &@4&:

1. #;4&A #AS!DA!&BS '84!& E#88AK48 DSSS48 54S !& E8AD 4S 448'US S'@AA 4K4!S& A&&!A#S,DAS&A ;A#5@A8!K A;DA!'A !#A'#D.

2. A&&!A#S DSSSAD #;4&A#AS!DA!& 4!&S 5&@U&"SA#;!K &@A #AUS&A #'ADU#48DUA #'ASS "A'4USA A&&!A#S488AKAD8F DD !& #;A &@4& 4!&S#A'A;AD &@A !&'A E ;84&! E'4!F #U8AS D4&AD 2+ 4UKUS& 19964S 5A88 4S &@A &5 &A8AK#4S#AU#!K 4!&S & #A#& E# 5#N,'!#F & SU"S&4!&48 A;DA!'A !#A'#D.

3. &@4& A&&!A#S DSSSAD 4!&S5&@U& "SA#;!K &@A #AUS&A#'ADU#48 DUA #'ASS "A'4USAA&&!A#S 488AKAD8F DD !& SA!D 4!&'A E ;84&! E '4!F #U8AS

& #;4&A #AS!DA!& E# &@AEEA!SAS &@4& @A '&&AD E# &@ASA'!D &A, DAS&A '!#FA;DA!'A ! #A'#D.


43/80

beneted a%i$ro sch that the attachment of saidcertication to the petition in C*'5R +P No 6GG:sho%d bedeemed sbstantia% comp%iance with the r%e on certicationon nonform shoppin$.

5e have, therefore, opted to $ive de corse to the presentpetition. 4nd rea%iin$ that a remand of this case to the '4wo%d on%* entai% frther de%a* in the proceedin$s, we deemedit prdent to reso%ve the controvers* to na%%* pt it to a rest.

n the review of !8#' decisions thro$h the specia% civi% actionof certiorari, reso%tion is conned on%* to isses of /risdictionand $rave abse of discretion on the part of the %abor tribna%.

&he 'ort refrains from reviewin$ facta% assessments of%ower corts and a$encies eCercisin$ ad/dicative fnctions,sch as the !8#'. 19

@ere, however, we are constrained to mae a review of therecords and a reeCamination of the 0estioned !8#' ndin$sto arrive at a comp%ete, /st and proper determination of thecase.

Assentia%%*, the isse posed is the va%idit* of privaterespondentBs dismissa%.

&he va%idit* of an emp%o*eeBs dismissa% hin$es on thesatisfaction of two sbstantive re0irements, to wit: (1) theemp%o*ee was accorded de process, basic of which are theopportnit* to be heard and to defend himse%fI and (2) thedismissa% mst be for an* of the cases provided for in 4rtic%e2-2 of the 8abor 'ode.2

&he i%%e$a%it* of the act of dismissalconstittes dischar$ewithot /st case, whi%e the i%%e$a%it* in the manner ofdismissa% is dismissa% withot de process.21

@ere, private respondent was sccessive%* char$ed with two(2) sets of oJenses and separate%* pena%ied for each set.

&he Hrst setof infractions consisted of private respondentBsbein$ 458 from 4$st = to 2+, 1996 andnsbordination?Discortes* as set forth in the !otice of;io%ation of 'ompan* #%es and #e$%ations dated 4$st 2+,1996,22for which he was pena%ied with sspension for 3da*s eJective !ovember 1 to 3, 1996 bt on%* for the char$eof bein$ 458. &he second set, as contained in the !otice of;io%ation of 'ompan* #%es and #e$%ations (A 3) dated!ovember 12, 199623consisted a%so of bein$ 458, this timebe$innin$ 4$st 2-, 1996, and nsbordination?Discortes*for main$ fa%se accsations a$ainst his sperior, for which hewas8s


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otri$ht the present comp%aint. nstead, he wroterespondent a%i$ro on ctober 1-, 1996, thrconse% asin$ an eCp%anation wh* no case for i%%e$a%dismissa% with dama$es wo%d be %ed a$ainstrespondents. 5hen he therefore na%%* %ed thepresent case on !ovemeber -, 1996, that showed his%in$erin$ be%ief that he was constrctive%* dismisseda%tho$h from the viewpoint of respondents, he wasa%read* pena%ied with M$rave sspensionM for his458 from 4$st =2+, 1996. n short, the %in$ ofthe comp%aint was not a Mma%icios schemeM on thepart of the comp%ainant contrar* to the contention of

respondents. 3etitionersB fai%re to comp%* with the twonotice re0irementas shown above, %et a%one the %ac of /st case forterminatin$ the services of private respondent, rendered the%atterBs dismissa% i%%e$a%.

n ne, we r%e and so ho%d that the !8#' did not $rave%*abse its discretion in dec%arin$ the i%%e$a%it* of privaterespondentBs dismissa%.

5e are, however, with the petitioners in their sbmission thatthe !8#' erred in ho%din$ petitioner eter a%i$ro /oint%* andsevera%%* %iab%e with petitioner etron for the mone* c%aims ofthe private respondent.

Sett%ed is the r%e in this /risdiction that a corporation isinvested b* %aw with a %e$a% persona%it* separate and distinctfrom those actin$ for and in its beha%f and, in $enera%, from

the peop%e comprisin$ it.31

&hs, ob%i$ations incrred b*corporate o7cers actin$ as corporate a$ents are not theirsbt the direct accontabi%ities of the corporation the*represent.32&re, so%idar* %iabi%ities ma* at times be incrredb* corporate o7cers, bt on%* when eCceptiona%circmstances so warrant.33Eor instance, in %abor cases,corporate directors and o7cers ma* be he%d so%idari%* %iab%ewith the corporation for the termination of emp%o*ment ifdone with ma%ice or in bad faith.3&he pena%t* of prisioncorrecciona% in its minimm period or a neran$in$ from two hndred to siC thosandpesos, or both, sha%% be imposed pon:

1. 4n* person who sha%% enter into an*contract or a$reement or sha%% tae part inan* conspirac* or combination in the formof a trst or otherwise, in restraint of tradeor commerce or to prevent b* articia%means free competition in the maret.

2. 4n* person who sha$ monopo%ie an*merchandise or ob/ect of trade orcommerce, or sha%% combine with an* otherperson or persons to monopo%ie saidmerchandise or ob/ect in order to a%ter theprice thereof b* spreadin$ fa%se rmors ormain$ se of an* other artice to restrainfree competition in the maret.

3. 4n* person who, bein$ a manfactrer,prodcer, or processor of an* merchandise


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or ob/ect of commerce or an importer of an*merchandise or ob/ect of commerce froman* forei$n contr*, either as principa% ora$ent, who%esa%e or retai%er, sha%% combine,conspire or a$ree in an* manner with an*person %iewise en$a$ed in themanfactre, prodction, processin$,assemb%in$ or importation of schmerchandise or ob/ect of commerce or withan* other persons not so simi%ar%* en$a$edfor the prpose of main$ transactions

pre/dicia% to %awf% commerce, or ofincreasin$ the maret price in an* part ofthe hi%ippines, or an* sch merchandise orob/ect of commerce manfactred,prodced, processed, assemb%ed in orimported into the hi%ippines, or of an*artic%e in the manfactre of which schmanfactred, prodced, processed, orimported merchandise or ob/ect ofcommerce is sed.

&here are other %e$is%ation in this /risdiction, which prohibitmonopo%ies and combinations in restraint of trade. 33

"asica%%*, these antitrst %aws or %aws a$ainst monopo%ies orcombinations in restraint of trade are aimed at raisin$ %eve%sof competition b* improvin$ the consmersB eJectiveness as

the na% arbiter in free marets. &hese %aws are desi$ned topreserve free and nfettered competition as the r%e of trade.Mt rests on the premise that the nrestrained interaction ofcompetitive forces wi%% *ie%d the best a%%ocation of oreconomic resorces, the %owest prices and the hi$hest0a%it* ... .M 3)the* operate to foresta%% concentration ofeconomic power. 3*&he %aw a$ainst monopo%ies andcombinations in restraint of trade is aimed at contracts andcombinations that, b* reason of the inherent natre of thecontemp%ated acts, pre/dice the pb%ic interest b* nd%*restrainin$ competition or nd%* obstrctin$ the corse oftrade. 3+

&he terms Mmonopo%*M, Mcombination in restraint of tradeM andMnfair competitionM appear to have a we%% dened meanin$ inother /risdictions. 4 Mmonopo%*M embraces an* combination

the tendenc* of which is to prevent competition in the broadand $enera% sense, or to contro% prices to the detriment of thepb%ic. 37n short, it is the concentration of bsiness in thehands of a few. &he materia% consideration in determinin$ itseCistence is not that prices are raised and competitionacta%%* eCc%ded, bt thatpowereCists to raise prices oreCc%de competition when desired. 3Erther, it mst beconsidered that the dea of monopo%* is now nderstood toinc%de a condition prodced b* the mere act of individa%s.ts dominant tho$ht is the notion of eCc%siveness or nit*, orthe sppression of competition b* the 0a%ication of interestor mana$ement, or it ma* be thr a$reement and concert ofaction. t is, in brief, nied tactics with re$ard to prices. 39

Erom the fore$oin$ denitions, it is apparent that thecontentions of petitioner are not in accord with rea%it*. &he

e%ection of petitioner to the "oard of respondent 'orporationcan brin$ abot an i%%e$a% sitation. &his is becase an eCpressa$reement is not necessar* for the eCistence of a combinationor conspirac* in restraint of trade. )0t is eno$h that aconcert of action is contemp%ated and that the defendantsconformed to the arran$ements, )1and what is to beconsidered is what the parties acta%%* did and not the wordsthe* sed. Eor instance, the '%a*ton 4ct prohibits a personfrom servin$ at the same time as a director in an* two ormore corporations, if sch corporations are, b* virte of theirbsiness and %ocation of operation, competitorsso that thee%imination of competition between them wo%d constittevio%ation of an* provision of the antitrst %aws. )2&here ishere a stattor* reco$nition of the anticompetitive dan$erswhich ma* arise when an individa% sim%taneos%* acts as a

director of two or more competin$ corporations. 4 commondirector of two or more competin$ corporations wo%d haveaccess to condentia% sa%es, pricin$ and maretin$ informationand wo%d be in a position to coordinate po%icies or to aid onecorporation at the eCpense of another, thereb* stiin$competition. &his sitation has been apt%* eCp%ained b*

&ravers, ths:

&he ar$ment for prohibitin$ competin$corporations from sharin$ even one directoris that theinterloc permits the coordinationof policies #etween nominall independent

Hrms to an e$tent that competition #etweenthem ma #e completel eliminated.ndeed, if a director, for eCamp%e, is to befaithf% to both corporations, someaccommodation mst res%t. Sppose T is adirector of both 'orporation 4 and'orporation ". T co%d hard%* vote for apo%ic* b* 4 that wo%d in/re " withotvio%atin$ his dt* of %o*a%t* to " at the sametime he co%d hard%* abstain from votin$withot deprivin$ 4 of his best /d$ment. 7fthe Hrms reall do compete > in the senseof v*in$ for economic advanta$e at theeCpense of the other >there can hardl #ean reasonfor an inter%oc between

competitors other than the sppression ofcompetition. )3(Amphasis spp%ied.)

4ccordin$ to the #eport of the @ose diciar* 'ommittee ofthe U. S. 'on$ress on section 9 of the '%a*ton 4ct, it wasestab%ished that: M"* means of the inter%ocin$ directoratesone man or $rop of men have been ab%e to dominate andcontro% a $reat nmber of corporations ... to the detriment ofthe sma%% ones dependent pon them and to the in/r* of thepb%ic. ))

Shared information on cost accontin$ ma* %ead to priceCin$. 'ertain%*, shared information on prodction, orders,shipments, capacit* and inventories ma* %ead to contro% ofprodction for the prpose of contro%%in$ prices.

bvios%*, if a competitor has access to the pricin$ po%ic* andcost conditions of the prodcts of San i$e% 'orporation, the

essence of competition in a free maret for the prpose ofservin$ the %owest priced $oods to the consmin$ pb%icwo%d be frstrated, &he competitor co%d so manip%ate theprices of his prodcts or var* its maretin$ strate$ies b*re$ion or b* brand in order to $et the most ot of theconsmers. 5here the two competin$ rms contro% asbstantia% se$ment of the maret this co%d %ead to co%%sionand combination in restraint of trade. #eason and eCperiencepoint to the inevitab%e conc%sion that the inherent tendenc*of inter%ocin$ directorates between companies that arere%ated to each other as competitors is to b%nt the ed$e ofriva%r* between the corporations, to see ot wa*s ofcompromisin$ opposin$ interests, and ths e%iminatecompetition. 4s respondent S' apt%* observes, now%ed$eb* 'E'#obina of S'Bs costs in varios indstries and re$ions

in the contr* win enab%e the former to practice pricediscrimination. 'E'#obina can se$ment the entire consmin$pop%ation b* $eo$raphica% areas or income $rops andchan$e var*in$ prices in order to maCimie prots from ever*maret se$ment. 'E'#obina co%d determine the mostprotab%e vo%me at which it co%d prodce for ever* prodct%ine in which it competes with S'. 4ccess to S' pricin$po%ic* b* 'E'#obina wo%d in eJect destro* free competitionand deprive the consmin$ pb%ic of opportnit* to b* $oodsof the hi$hest possib%e 0a%it* at the %owest prices.

Eina%%*, considerin$ that both #obina and S' are, to a certaineCtent, en$a$ed in a$ric%tre, then the e%ection of petitionerto the "oard of S' ma* constitte a vio%ation of theprohibition contained in section 13(=) of the 'orporation 8aw.


77/80

Said section provides in part that Man* stocho%der of morethan one corporation or$anied for the prpose of en$a$in$ ina$ric%tre ma* ho%d his stoc in sch corporations solel forinvestmentand not for the prpose of brin$in$ abot orattemptin$ to brin$ abot a combination to eCercise contro% ofincorporations ... .M

!either are 5e persaded b* the c%aim that the b*%aw wasntended to prevent the candidac* of petitioner for e%ection tothe "oard. f the b*%aw were to be app%ied in the case of onestocho%der bt waived in the case of another, then it co%d bereasonab%* c%aimed that the b*%aw was bein$ app%ied in a

discriminator* manner. @owever, the b* %aw, b* its terms,app%ies to a%% stocho%ders. &he e0a% protection c%ase of the'onstittion re0ires on%* that the b*%aw operate e0a%%*pon a%% persons of a c%ass. "esides, before petitioner can bedec%ared ine%i$ib%e to rn for director, there mst be hearin$and evidence mst be sbmitted to brin$ his case within theambit of the dis0a%ication. Sond princip%es of pb%ic po%ic*and mana$ement, therefore, spport the view that a b*%awwhich dis0a%ies a competition from e%ection to the "oard ofDirectors of another corporation is va%id and reasonab%e.

n the absence of an* %e$a% prohibition or overridin$ pb%icpo%ic*, wide %atitde ma* be accorded to the corporation inadoptin$ measres to protect %e$itimate corporation interests.

&hs, Mwhere the reasonab%eness of a b*%aw is a mere matterof /d$ment, and pon which reasonab%e minds mst

necessari%* diJer, a cort wo%d not be warranted insbstittin$ its /d$ment instead of the /d$ment of thosewho are athoried to mae b*%aws and who have eCpressedtheir athorit*. )*

4%tho$h it is asserted that the amended b*%aws confer onthe present "oard powers to perpeta themse%ves in powersch fears appear to be misp%aced. &his power, bt is ver*natre, is sb/ect to certain we%% estab%ished %imitations. neof these is inherent in the ver* convert and denition of theterms McompetitionM and McompetitorM. M'ompetitionM imp%iesa str$$%e for advanta$e between two or more forces, eachpossessin$, in sbstantia%%* simi%ar if not dentica% de$ree,certain characteristics essentia% to the bsiness so$ht. tmeans an independent endeavor of two or more persons toobtain the bsiness patrona$e of a third b* oJerin$ more

advanta$eos terms as an indcement to secre trade. )+&hetest mst be whether the bsiness does in fact compete, notwhether it is capab%e of an indirect and hi$h%* nsbstantia%dp%ication of an iso%ated or noncharacteristics activit*. )7tis, therefore, obvios that not ever* person or entit* en$a$edin bsiness of the same ind is a competitor. Sch factors as0antm and p%ace of bsiness, dentit* of prodcts and areaof competition sho%d be taen into consideration. t is,therefore, necessar* to show that petitionerBs bsiness coversa sbstantia% portion of the same marets for simi%ar prodctsto the eCtent of not %ess than 1L of respondent corporationBsmaret for competin$ prodcts. 5hi%e 5e here sstain theva%idit* of the amended b*%aws, it does not fo%%ow as anecessar* conse0ence that petitioner is ipsofactodis0a%ied. 'onsonant with the re0irement of de

process, there mst be de hearin$ at which the petitionermst be $iven the f%%est opportnit* to show that he is notcovered b* the dis0a%ication. 4s trstees of the corporationand of the stocho%ders, it is the responsibi%it* of directors toact with fairness to the stocho%ders.)rsant to thisob%i$ation and to remove an* sspicion that this power ma*be ti%ied b* the incmbent members of the "oard toperpetate themse%ves in power, an* decision of the "oard todis0a%if* a candidate for the "oard of Directors sho%d bereviewed b* the Secrities behind ACchan$e 'ommission enbanc and its decision sha%% be na% n%ess reversed b* this'ort on certiorari. )9ndeed, it is a sett%ed princip%e thatwhere the action of a "oard of Directors is an abse ofdiscretion, or forbidden b* statte, or is a$ainst pb%ic po%ic*,or is %tra vires, or is a frad pon minorit* stocho%ders or

creditors, or wi%% res%t in waste, dissipation or misapp%icationof the corporation assets, a cort of e0it* has the power to$rant appropriate re%ief. *0

=hether or not respondent +C &ravel a#used its discretionin denin& petitionerDs re%uest for an e$amination of therecords of +an i&uel 7nternational 7nc, a full ownedsu#sidiar of +an i&uel Corporation M

#espondent San i$e% 'orporation stated in itsmemorandm that petitionerBs c%aim that he was deniedinspection ri$hts as stocho%der of S' Mwas made in theteeth of ndispted facts that, over a specic period,petitioner had been frnished nmeros docments andinformation,M to wit: (1) a comp%ete %ist of stocho%ders andtheir stocho%din$sI (2) a comp%ete %ist of proCies $iven b* thestocho%ders for se at the anna% stocho%dersB meetin$ ofa* 1-, 19+=I (3) a cop* of the mintes of the stocho%dersBmeetin$ of arch 1-,19+6I (


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to be, that on app%ication for mandams to enforce the ri$ht,it is proper for the cort to in0ire into and consider thestocho%derBs $ood faith and his prpose and motives inseein$ inspection. *+&hs, it was he%d that Mthe ri$ht $ivenb* statte is not abso%te and ma* be refsed when theinformation is not so$ht in $ood faith or is sed to thedetriment of the corporation.M *7"t the Mimpropriet* ofprpose sch as wi%% defeat enforcement mst be set p thecorporation defensive%* if the 'ort is to tae co$niance of itas a 0a%ication. n other words, the specic provisions taefrom the stocho%der the brden of showin$ propriet* of

prpose and p%ace pon the corporation the brden ofshowin$ impropriet* of prpose or motive. *t appears to bethe $enera% r%e that stocho%ders are entit%ed to f%%information as to the mana$ement of the corporation and themanner of eCpenditre of its fnds, and to inspection to obtainsch information, especia%%* where it appears that thecompan* is bein$ mismana$ed or that it is bein$ mana$ed forthe persona% benet of o7cers or directors or certain of thestocho%ders to the eCc%sion of others.M *9

5hi%e the ri$ht of a stocho%der to eCamine the boos andrecords of a corporation for a %awf% prpose is a matter of%aw, the ri$ht of sch stocho%der to eCamine the boos andrecords of a who%%*owned sbsidiar* of the corporation inwhich he is a stocho%der is a diJerent thin$.

Some state corts reco$nie the ri$ht nder certain

conditions, whi%e others do not. &hs, it has been he%d thatwhere a corporation owns approCimate%* no propert* eCceptthe shares of stoc of sbsidiar* corporations which aremere%* a$ents or instrmenta%ities of the ho%din$ compan*,the %e$a% ction of distinct corporate entities ma* bedisre$arded and the boos, papers and docments of a%% thecorporations ma* be re0ired to be prodced foreCamination, +0and that a writ of mandams, ma* be $ranted,as the records of the sbsidiar* were, to a%% incontents andprposes, the records of the parent even tho$h sbsidiar*was not named as a part*. +1mandams was %iewise he%dproper to inspect both the sbsidiar*Bs and the parentcorporationBs boos pon proof of s7cient contro% ordominion b* the parent showin$ the re%ation of principa% ora$ent or somethin$ simi%ar thereto. +2

n the other hand, mandams at the sit of a stocho%der wasrefsed where the sbsidiar* corporation is a separate anddistinct corporation domici%ed and with its boos and recordsin another /risdiction, and is not %e$a%%* sb/ect to the contro%of the parent compan*, a%tho$h it owned a vast ma/orit* ofthe stoc of the sbsidiar*. +38iewise, inspection of the boosof an a%%ied corporation b* stocho%der of the parent compan*which owns a%% the stoc of the sbsidiar* has been refsed onthe $rond that the stocho%der was not within the c%ass ofMpersons havin$ an interest.M +)

n the Nashcase, +*&he Spreme 'ort of !ew For he%d thatthe contracta% ri$ht of former stocho%ders to inspect boosand records of the corporation inc%ded the ri$ht to inspectcorporationBs sbsidiariesB boos and records which were incorporationBs possession and contro% in its o7ce in !ew For.M

n the -aile case, ++stocho%ders of a corporation were he%dentit%ed to inspect the records of a contro%%ed sbsidiar*corporation which sed the same o7ces and had dentica%o7cers and directors.

n his MUr$ent otion for rodction and nspection ofDocmentsM before respondent SA', petitioner contended thatrespondent corporation Mhad been attemptin$ to sppressinformation for the stocho%dersM and that petitioner, Masstocho%der of respondent corporation, is entit%ed to copies ofsome docments which for some reason or another,respondent corporation is ver* re%ctant in revea%in$ to thepetitioner notwithstandin$ the fact that no harm wo%d becased thereb* to the corporation.M +7&here is no 0estionthat stocho%ders are entit%ed to inspect the boos and

records of a corporation in order to investi$ate the condct ofthe mana$ement, determine the nancia% condition of thecorporation, and $enera%%* tae an accont of the stewardshipof the o7cers and directors. +

n the case at bar, considerin$ that the forei$n sbsidiar* iswho%%* owned b* respondent San i$e% 'orporation and,therefore, nder its contro%, it wo%d be more in accord withe0it*, $ood faith and fair dea%in$ to constre the stattor*ri$ht of petitioner as stocho%der to inspect the boos andrecords of the corporation as eCtendin$ to boos and recordsof sch who%%* sbsidiar* which are in respondent

corporationBs possession and contro%.;

=hether or not respondent +C &ravel a#used its discretionin allowin& the stocholders of respondent corporation toratif the investment of corporate funds in a forei&ncorporation

etitioner reiterates his contention in SA' 'ase !o. 1 4 private corporation, in orderto accomp%ish is prpose as stated in its


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artic%es of incorporation, and sb/ect to the%imitations imposed b* the 'orporation 8aw,has the power to ac0ire, ho%d, mort$a$e,p%ed$e or dispose of shares, bonds,secrities, and other evidence ofindebtedness of an* domestic or forei$ncorporation. +uch an act, if done in

pursuance of the corporate purpose, doesnot need the approval of stocholdersQ #utwhen the purchase of shares of anothercorporation is done solel for investment

and not to accomplish the purpose of itsincorporation, the vote of approval of thestocholders is necessar. n an* case, theprchase of sch shares or secrities mstbe sb/ect to the %imitations estab%ished b*the 'orporations %awI name%*, (a) that noa$ric%tra% or minin$ corporation sha%% berestricted to own not more than 1=L of thevotin$ stoc of na* a$ric%tra% or minin$corporationI and (c) that sch ho%din$s sha%%be so%e%* for investment and not for theprpose of brin$in$ abot a monopo%* inan* %ine of commerce of combination inrestraint of trade.M &he hi%ippine'orporation 8aw b* S%picio S. Kevara,196+ Ad., p. -9) (Amphasis spp%ied.)

4private corporation has the power to investits corporate fnds Min an* other corporationor bsiness, or for an* prpose other thanthe main prpose for which it wasor$anied, provide that Bits board ofdirectors has been so athoried in areso%tion b* the a7rmative vote ofstocho%ders ho%din$ shares in thecorporation entit%in$ them to eCercise at%east twothirds of the votin$ power on scha propose at a stocho%dersB meetin$ ca%%edfor that prpose,B and provided frther, thatno a$ric%tra% or minin$ corporation sha%% inan*wise be interested in an* othera$ric%tra% or minin$ corporation. =hen theinvestment is necessar to accomplish its

purpose or purposes as stated in its articlesof incorporation the approval of thestocholders is not necessar.MM (7d., p. 1-)(Amphasis ors.) (pp. 2=-2=9).

4ssmin$ ar&uendothat the "oard of Directors of S' had noathorit* to mae the assai%ed investment, there is no0estion that a corporation, %ie an individa%, ma* ratif* andthereb* render bindin$ pon it the ori$ina%%* nathoriedacts of its o7cers or other a$ents. 70&his is tre becase the0estioned investment is neither contrar* to %aw, mora%s,pb%ic order or pb%ic po%ic*. t is a corporate transaction orcontract which is within the corporate powers, bt which isdefective from a spported fai%re to observe in its eCectionthe. re0irement of the %aw that the investment mst beathoried b* the a7rmative vote of the stocho%ders ho%din$twothirds of the votin$ power. &his re0irement is for thebenet of the stocho%ders. &he stocho%ders for whosebenet the re0irement was enacted ma*, therefore, ratif*the investment and its ratication b* said stocho%dersob%iterates an* defect which it ma* have had at the otset.Mere ultra vires actsM, said this 'ort in irovano, 71Mor thosewhich are not i%%e$a% and void a# initio, bt are not mere%*within the scope of the artic%es of incorporation, are mere%*voidab%e and ma* become bindin$ and enforceab%e whenratied b* the stocho%ders.

"esides, the investment was for the prchase of beermanfactrin$ and maretin$ faci%ities which is apparent%*

re%evant to the corporate prpose. &he mere fact thatrespondent corporation sbmitted the assai%ed investment tothe stocho%ders for ratication at the anna% meetin$ of a*1, 19++ cannot be constred as an admission thatrespondent corporation had committed an ultra viresact,considerin$ the common practice of corporations ofperiodica%%* sbmittin$ for the $ratication of theirstocho%ders the acts of their directors, o7cers andmana$ers.

5@A#AE#A, /d$ment is hereb* rendered as fo%%ows:

&he 'ort voted nanimos%* to $rant the petition insofar as it

pra*s that petitioner be a%%owed to eCamine the boos andrecords of San i$e% nternationa%, nc., as specied b* him.

n the matter of the va%idit* of the amended b*%aws ofrespondent San i$e% 'orporation, siC (6) stices, name%*,

stices "arredo, aasiar, 4ntonio, Santos, 4bad Santos andDe 'astro, voted to sstain the va%idit* per se of the amendedb*%aws in 0estion and to dismiss the petition withotpre/dice to the 0estion of the acta% dis0a%ication ofpetitioner ohn Koon$wei, r. to rn and if e%ected to sit asdirector of respondent San i$e% 'orporation bein$ decided,after a new and proper hearin$ b* the "oard of Directors ofsaid corporation, whose decision sha%% be appea%ab%e to therespondent Secrities and ACchan$e 'ommission de%iberatin$and actin$ en #anc and %timate%* to this 'ort. Un%essdis0a%ied in the manner herein provided, the prohibition in

the aforementioned amended b*%aws sha%% not app%* topetitioner.

&he aforementioned siC (6) stices, to$ether with sticeEernando, voted to dec%are the isse on the va%idit* of theforei$n investment of respondent corporation as moot.

'hief stice Ered #i 'astro reserved his vote on the va%idit*of the amended b*%aws, pendin$ hearin$ b* this 'ort on theapp%icabi%it* of section 13(=) of the 'orporation 8aw topetitioner.

stice Eernando reserved his vote on the va%idit* of sb/ectamendment to the b*%aws bt otherwise concrs in theres%t.

Eor (


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