G.R. No. 151969 September 4, 2009VALLE VERDE COUNTRY CLUB, INC., ERNESTO VILLALUNA, RAY GAMBOA, AMADO M. SANTIAGO, JR., FORTUNATO DEE, AUGUSTO SUNICO, VICTOR SALTA, FRANCISCO ORTIGAS III, ERIC ROXAS, in their capacities as members of the Board of Directors of Valle Verde Country Club, Inc., and JOSE RAMIREZ,Petitioners,vs.VICTOR AFRICA,Respondent.D E C I S I O NBRION,J.:In this petition for review on certiorari,1the parties raise a legal question on corporate governance: Can the members of a corporations board of directors elect another director to fill in a vacancy caused by the resignation of a hold-over director?THE FACTUAL ANTECEDENTSOn February 27, 1996, during the Annual Stockholders Meeting of petitioner Valle Verde Country Club, Inc. (VVCC), the following were elected as members of the VVCC Board of Directors: Ernesto Villaluna, Jaime C. Dinglasan (Dinglasan), Eduardo Makalintal (Makalintal), Francisco Ortigas III, Victor Salta, Amado M. Santiago, Jr., Fortunato Dee, Augusto Sunico, and Ray Gamboa.2In the years 1997, 1998, 1999, 2000, and 2001, however, the requisite quorum for the holding of the stockholders meeting could not be obtained. Consequently, the above-named directors continued to serve in the VVCC Board in a hold-over capacity.On September 1, 1998, Dinglasan resigned from his position as member of the VVCC Board. In a meeting held on October 6, 1998, the remaining directors, still constituting a quorum of VVCCs nine-member board, elected Eric Roxas (Roxas) to fill in the vacancy created by the resignation of Dinglasan.A year later, or on November 10, 1998, Makalintal also resigned as member of the VVCC Board. He was replaced by Jose Ramirez (Ramirez), who was elected by the remaining members of the VVCC Board on March 6, 2001.Respondent Africa (Africa), a member of VVCC, questioned the election of Roxas and Ramirez as members of the VVCC Board with the Securities and Exchange Commission (SEC) and the Regional Trial Court (RTC), respectively. The SEC case questioning the validity of Roxas appointment was docketed as SEC Case No. 01-99-6177. The RTC case questioning the validity of Ramirez appointment was docketed as Civil Case No. 68726.In his nullification complaint3before the RTC, Africa alleged that the election of Roxas was contrary to Section 29, in relation to Section 23, of the Corporation Code of the Philippines (Corporation Code). These provisions read:Sec. 23.The board of directors or trustees.- Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified.x x x xSec. 29.Vacancies in the office of director or trustee.- Any vacancy occurring in the board of directors or trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be elected only for the unexpired term of his predecessor in office. xxx. [Emphasis supplied.]Africa claimed that a year after Makalintals election as member of the VVCC Board in 1996, his [Makalintals] term as well as those of the other members of the VVCC Board should be considered to have already expired. Thus, according to Africa, the resulting vacancy should have been filled by the stockholders in a regular or special meeting called for that purpose, and not by the remaining members of the VVCC Board, as was done in this case.Africa additionally contends that for the members to exercise the authority to fill in vacancies in the board of directors, Section 29 requires, among others, that there should be an unexpired term during which the successor-member shall serve. Since Makalintals term had already expired with the lapse of the one-year term provided in Section 23, there is no more "unexpired term" during which Ramirez could serve.Through a partial decision4promulgated on January 23, 2002, the RTC ruled in favor of Africa and declared the election of Ramirez, as Makalintals replacement, to the VVCC Board as null and void.Incidentally, the SEC issued a similar ruling on June 3, 2003, nullifying the election of Roxas as member of the VVCC Board, vice hold-over director Dinglasan. While VVCC manifested its intent to appeal from the SECs ruling, no petition was actually filed with the Court of Appeals; thus, the appellate court considered the case closed and terminated and the SECs ruling final and executory.5THE PETITIONVVCC now appeals to the Court to assail the RTCs January 23, 2002 partial decision for being contrary to law and jurisprudence. VVCC made a direct resort to the Courtviaa petition for review oncertiorari,claiming that the sole issue in the present case involves a purely legal question.As framed by VVCC, the issue for resolution is whether the remaining directors of the corporations Board, still constituting a quorum, can elect another director to fill in a vacancy caused by the resignation of a hold-over director.Citing law and jurisprudence, VVCC posits that the power to fill in a vacancy created by the resignation of a hold-over director is expressly granted to the remaining members of the corporations board of directors.Under the above-quoted Section 29 of the Corporation Code, a vacancy occurring in the board of directors caused by the expiration of a members term shall be filled by the corporations stockholders. Correlating Section 29 with Section 23 of the same law, VVCC alleges thata members term shall be for one yearanduntil his successor is elected and qualified;otherwise stated,a members term expires only when his successor to the Board is elected and qualified. Thus, "until such time as [a successor is] elected or qualified in an annual election where a quorum is present," VVCC contends that "the term of [a member] of the board of directors has yet not expired."As the vacancy in this case was caused by Makalintals resignation, not by the expiration of his term, VVCC insists that the board rightfully appointed Ramirez to fill in the vacancy.In support of its arguments, VVCC cites the Courts ruling in the 1927El Hogar6case which states:Owing to the failure of a quorum at most of the general meetings since the respondent has been in existence, it has been the practice of the directors to fill in vacancies in the directorate by choosing suitable persons from among the stockholders. This custom finds its sanction in Article 71 of the By-Laws, which reads as follows:Art. 71. The directors shall elect from among the shareholders members to fill the vacancies that may occur in the board of directors until the election at the general meeting.x x x xUpon failure of a quorum at any annual meeting the directorate naturally holds over and continues to function until another directorate is chosen and qualified. Unless the law or the charter of a corporation expressly provides that an office shall become vacant at the expiration of the term of office for which the officer was elected, the general rule is to allow the officer to hold over until his successor is duly qualified. Mere failure of a corporation to elect officers does not terminate the terms of existing officers nor dissolve the corporation. The doctrine above stated finds expression in article 66 of the by-laws of the respondent which declares in so many words that directors shall hold office "for the term of one year or until their successors shall have been elected and taken possession of their offices." xxx.It results thatthe practice of the directorate of filling vacancies by the action of the directors themselves is valid.Nor can any exception be taken to the personality of the individuals chosen by the directors to fill vacancies in the body. [Emphasis supplied.]Africa, in opposing VVCCs contentions, raises the same arguments that he did before the trial court.THE COURTS RULINGWe are not persuaded by VVCCs arguments and, thus, find its petition unmeritorious.To repeat, the issue for the Court to resolve is whether the remaining directors of a corporations Board, still constituting a quorum, can elect another director to fill in a vacancy caused by the resignation of a hold-over director. The resolution of this legal issue is significantly hinged on the determination of what constitutes a directors term of office.The holdover period is not part of the term of office of a member of the board of directorsThe word "term" has acquired a definite meaning in jurisprudence. In several cases, we have defined "term" as the time during which the officer may claim to hold the office as of right, and fixes the interval after which the several incumbents shall succeed one another.7The term of office is not affected by the holdover.8The term is fixed by statute and it does not change simply because the office may have become vacant, nor because the incumbent holds over in office beyond the end of the term due to the fact that a successor has not been elected and has failed to qualify.Term is distinguished from tenure in that an officers "tenure" represents the term during which the incumbent actually holds office. The tenure may be shorter (or, in case of holdover, longer) than the term for reasons within or beyond the power of the incumbent.Based on the above discussion, when Section 239of the Corporation Code declares that "the board of directorsshall hold office for one (1) year until their successors are elected and qualified," we construe the provision to mean that the term of the members of the board of directors shall be only for one year; their term expires one year after election to the office. The holdover period that time from the lapse of one year from a members election to the Board and until his successors election and qualification is not part of the directors original term of office, nor is it a new term; the holdover period, however, constitutes part of his tenure. Corollary, when an incumbent member of the board of directors continues to serve in a holdover capacity, it implies that the office has a fixed term, which has expired, and the incumbent is holding the succeeding term.10After the lapse of one year from his election as member of the VVCC Board in 1996, Makalintals term of office is deemed to have already expired. That he continued to serve in the VVCC Board in a holdover capacity cannot be considered as extending his term. To be precise, Makalintals term of office began in 1996 and expired in 1997, but, by virtue of the holdover doctrine in Section 23 of the Corporation Code, he continued to hold office until his resignation on November 10, 1998. This holdover period, however, is not to be considered as part of his term, which, as declared, had already expired.With the expiration of Makalintals term of office, a vacancy resulted which, by the terms of Section 2911of the Corporation Code, must be filled by the stockholders of VVCC in a regular or special meeting called for the purpose. To assume as VVCC does that the vacancy is caused by Makalintals resignation in 1998, not by the expiration of his term in 1997, is both illogical and unreasonable. His resignation as a holdover director did not change the nature of the vacancy; the vacancy due to the expiration of Makalintals term had been created long before his resignation.The powers of the corporations board of directors emanate from its stockholdersVVCCs construction of Section 29 of the Corporation Code on the authority to fill up vacancies in the board of directors, in relation to Section 23 thereof, effectively weakens the stockholders power to participate in the corporate governance by electing their representatives to the board of directors. The board of directors is the directing and controlling body of the corporation. It is a creation of the stockholders and derives its power to control and direct the affairs of the corporation from them. The board of directors, in drawing to themselves the powers of the corporation, occupies a position of trusteeship in relation to the stockholders, in the sense that the board should exercise not only care and diligence, but utmost good faith in the management of corporate affairs.12The underlying policy of the Corporation Code is that the business and affairs of a corporation must be governed by a board of directors whose members have stood for election, and who have actually been elected by the stockholders, on an annual basis. Only in that way can the directors' continued accountability to shareholders, and the legitimacy of their decisions that bind the corporation's stockholders, be assured. The shareholder vote is critical to the theory that legitimizes the exercise of power by the directors or officers over properties that they do not own.13This theory of delegated power of the board of directors similarly explains why, under Section 29 of the Corporation Code, in cases where the vacancy in the corporations board of directors is caused not by the expiration of a members term, the successor "so elected to fill in a vacancy shall be elected only for the unexpired term of the his predecessor in office." The law has authorized the remaining members of the board to fill in a vacancy only in specified instances, so as not to retard or impair the corporations operations; yet, in recognition of the stockholders right to elect the members of the board, it limited the period during which the successor shall serve only to the "unexpired termof his predecessor in office."While the Court in El Hogar approved of the practice of the directors to fill vacancies in the directorate, we point out that this ruling was made before the present Corporation Code was enacted14and before its Section 29 limited the instances when the remaining directors can fill in vacancies in the board, i.e., when the remaining directors still constitute a quorum and when the vacancy is caused for reasons other than by removal by the stockholders or by expiration of the term.1avvphi1It also bears noting that the vacancy referred to in Section 29 contemplates a vacancy occurring within the directors term of office. When a vacancy is created by the expiration of a term, logically, there is no more unexpired term to speak of. Hence, Section 29 declares that it shall be the corporations stockholders who shall possess the authority to fill in a vacancy caused by the expiration of a members term.As correctly pointed out by the RTC, when remaining members of the VVCC Board elected Ramirez to replace Makalintal, there was no more unexpired term to speak of, as Makalintals one-year term had already expired. Pursuant to law, the authority to fill in the vacancy caused by Makalintals leaving lies with the VVCCs stockholders, not the remaining members of its board of directors.WHEREFORE, we DENY the petitioners petition for review on certiorari, and AFFIRM the partial decision of the Regional Trial Court, Branch 152, Manila, promulgated on January 23, 2002, in Civil Case No. 68726. Costs against the petitioners.SO ORDERED.

G.R. No. 166862 December 20, 2006MANILA METAL CONTAINER CORPORATION,petitioner,REYNALDO C. TOLENTINO,intervenor,vs.PHILIPPINE NATIONAL BANK,respondent,DMCI-PROJECT DEVELOPERS, INC.,intervenor.D E C I S I O NCALLEJO, SR.,J.:Before us is a petition for review oncertiorariof the Decision1of the Court of Appeals (CA) in CA-G.R. No. 46153 which affirmed the decision2of the Regional Trial Court (RTC), Branch 71, Pasig City, in Civil Case No. 58551, and its Resolution3denying the motion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC).The AntecedentsPetitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City), Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure aP900,000.00 loan it had obtained from respondent Philippine National Bank (PNB), petitioner executed a real estate mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation ofP1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment4of Real Estate Mortgage over its property. On March 31, 1981, petitioner secured another loan ofP653,000.00 from respondent PNB, payable in quarterly installments ofP32,650.00, plus interests and other charges.5On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction forP911,532.21, petitioner's outstanding obligation to respondent PNB as of June 30, 1982,6plus interests and attorney's fees.After due notice and publication, the property was sold at public auction on September 28, 1982 where respondent PNB was declared the winning bidder forP1,000,000.00. The Certificate of Sale7issued in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated at the dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984.Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an extension of time to redeem/repurchase the property.8In its reply dated August 30, 1983, respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action and recommendation.9In a letter10dated February 10, 1984, petitioner reiterated its request for a one year extension from February 17, 1984 within which to redeem/repurchase the property on installment basis. It reiterated its request to repurchase the property on installment.11Meanwhile, some PNB Pasay City Branch personnel informed petitioner that as a matter of policy, the bank does not accept "partial redemption."12Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a new title in favor of respondent PNB.13Petitioner's offers had not yet been acted upon by respondent PNB.Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 petitioner's obligation amounted toP1,574,560.47. This included the bid price ofP1,056,924.50, interest, advances of insurance premiums, advances on realty taxes, registration expenses, miscellaneous expenses and publication cost.14When apprised of the statement of account, petitioner remittedP725,000.00 to respondent PNB as "deposit to repurchase," and Official Receipt No. 978191 was issued to it.15In the meantime, the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property forP1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. It was suggested that petitioner purchase the property forP2,660,000.00, its minimum market value. Respondent PNB gave petitioner until December 15, 1984 to act on the proposal; otherwise, itsP725,000.00 deposit would be returned and the property would be sold to other interested buyers.16Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another letter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in a letter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property forP2,660,000.00. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the property.17On February 25, 1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984. Petitioner declared that it had already agreed to the SAMD's offer to purchase the property forP1,574,560.47, and that was why it had paidP725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse should PNB insist on the position.18On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner's offer to purchase the property, but forP1,931,389.53 in cash less theP725,000.00 already deposited with it.19On page two of the letter was a space above the typewritten name of petitioner's President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated therein that he had received it.20Petitioner did not respond, so PNB requested petitioner in a letter dated June 30, 1988 to submit an amended offer to repurchase.Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB had agreed to sell the property forP1,574,560.47, and that since itsP725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price of the property.21Petitioner averred that it had a net balance payable in the amount ofP643,452.34. Respondent PNB, however, rejected petitioner's offer to pay the balance ofP643,452.34 in a letter dated August 1, 1989.22On August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages." To support its cause of action for specific performance, it alleged the following:34. As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the substantial amount ofP725,000.00 for the redemption/repurchase price ofP1,574,560.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed, the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD. The Bank cannot take advantage of a condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal.35. PNB approved the repurchase price ofP1,574,560.47 for which it acceptedP725,000.00 from Manila Metal. PNB cannot take advantage of its own delay and long inaction in demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal.Petitioner later filed an amended complaint and supported its claim for damages with the following arguments:36. That in order to protect itself against the wrongful and malicious acts of the defendant Bank, plaintiff is constrained to engage the services of counsel at an agreed fee ofP50,000.00 and to incur litigation expenses of at leastP30,000.00, which the defendant PNB should be condemned to pay the plaintiff Manila Metal.37. That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal suffered besmirched reputation for which defendant PNB is liable for moral damages of at leastP50,000.00.38. That for the wrongful and malicious act of defendant PNB which are highly reprehensible, exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the public good of at leastP30,000.00.23Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus:a) Declaring the Amended Real Estate Mortgage (Annex "A") null and void and without any legal force and effect.b) Declaring defendant's acts of extra-judicially foreclosing the mortgage over plaintiff's property and setting it for auction sale null and void.c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. 43792) covering the property described in paragraph 4 of the Complaint, to reinstate TCT No.37025in the name of Manila Metal and to cancel the annotation of the mortgage in question at the back of the TCT No.37025described in paragraph 4 of this Complaint.d) Ordering the defendant PNB to return and/or deliver physical possession of the TCT No.37025described in paragraph 4 of this Complaint to the plaintiff Manila Metal.e) Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages, moral and exemplary damages in the aggregate amount of not less thanP80,000.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion, and attorney's fees ofP50,000.00 and litigation expenses of at leastP30,000.00 as may be proved during the trial, and costs of suit.Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises.24In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired.During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts.25The parties agreed to limit the issues to the following:1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiff's offer to purchase the property is still valid and legally enforceable.2. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the defendant in its letter dated June 4, 1985.3. Whether or not there is a perfected contract of sale between the parties.26While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner vacate the property within 15 days from notice,27but petitioners refused to do so.On March 18, 1993, petitioner offered to repurchase the property forP3,500,000.00.28The offer was however rejected by respondent PNB, in a letter dated April 13, 1993. According to it, the prevailing market value of the property was approximatelyP30,000,000.00, and as a matter of policy, it could not sell the property for less than its market value.29On June 21, 1993, petitioner offered to purchase the property forP4,250,000.00 in cash.30The offer was again rejected by respondent PNB on September 13, 1993.31On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and respondent PNB's counterclaim. It ordered respondent PNB to refund theP725,000.00 deposit petitioner had made.32The trial court ruled that there was no perfected contract of sale between the parties; hence, petitioner had no cause of action for specific performance against respondent. The trial court declared that respondent had rejected petitioner's offer to repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner had offered to repurchase the property per its letter of July 14, 1988, the amount ofP643,422.34 was way below theP1,206,389.53 which respondent PNB had demanded. It further declared that theP725,000.00 remitted by petitioner to respondent PNB on June 4, 1985 was a "deposit," and not a downpayment or earnest money.On appeal to the CA, petitioner made the following allegations:ITHE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE.IITHE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE.IIITHE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4 JUNE 1985.IVTHE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE.VTHE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE.VITHE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER.VIITHE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFF-APPELLANT.VIIITHE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND LITIGATION EXPENSES.33Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over the property covered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors.34Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting the motion,35and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiff-appellant, and his motion to withdraw as intervenor.36The CA rendered judgment on May 11, 2000 affirming the decision of the RTC.37It declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered toP1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale.The CA ratiocinated that petitioner's original offer to purchase the subject property had not been accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985 letter specifically on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not prosper. Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4, 1985 letter of respondent PNB. Consequently, there was no perfected contract of sale, and as such, there was no contract to rescind.According to the appellate court, the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented to support it. Respondent PNB's letter dated June 30, 1988 cannot revive the failed negotiations between the parties. Respondent PNB merely asked petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower selling price and that the balance of the repurchase be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989.Petitioner filed a motion for reconsideration, which the CA likewise denied.Thus, petitioner filed the instant petition for review oncertiorari, alleging that:I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT.II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY.III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES.V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONER-APPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE.38The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from respondent.Petitioner maintains that it had accepted respondent's offer made through the SAMD, to sell the property forP1,574,560.00. When the acceptance was made in its letter dated June 25, 1984; it then depositedP725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which respondent had issued. Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. Moreover, as gleaned from the letter of SAMD dated June 4, 1985, the PNB Board of Directors had approved petitioner's offer to purchase the property. It claims that this was the suspensive condition, the fulfillment of which gave rise to the contract. Respondent could no longer unilaterally withdraw its offer to sell the property forP1,574,560.47, since the acceptance of the offer resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of the original purchase price ofP1,574,560.47, while respondent was obliged to transfer ownership and deliver the property to petitioner, conformably with Article 1159 of the New Civil Code.Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondent's offer to sell the property forP1,574,560.00. Consequently, respondent could no longer validly make a counter-offer ofP1,931,789.88 for the purchase of the property. It likewise maintains that, although theP725,000.00 was considered as "deposit for the repurchase of the property" in the receipt issued by the SAMD, the amount constitutes earnest money as contemplated in Article 1482 of the New Civil Code. Petitioner cites the rulings of this Court inVillonco v. Bormaheco39andTopacio v. Court of Appeals.40Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent and its failure to pay the balance of the price as fixed by respondent within the 60-day period from notice was to protest respondent's breach of its obligation to petitioner. It did not amount to a rejection of respondent's offer to sell the property since respondent was merely seeking to enforce its right to pay the balance ofP1,570,564.47. In any event, respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract.Petitioner's letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency of the case in the RTC were merely to compromise the pending lawsuit, they did not constitute separate offers to repurchase the property. Such offer to compromise should not be taken against it, in accordance with Section 27, Rule 130 of the Revised Rules of Court.For its part, respondent contends that the parties never graduated from the "negotiation stage" as they could not agree on the amount of the repurchase price of the property. All that transpired was an exchange of proposals and counter-proposals, nothing more. It insists that a definite agreement on the amount and manner of payment of the price are essential elements in the formation of a binding and enforceable contract of sale. There was no such agreement in this case. Primarily, the concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. It clearly presupposes the existence of a valid and binding agreement, the effectivity of which is subordinated to its fulfillment. Since there is no perfected contract in the first place, there is no basis for the application of the principles governing "suspensive conditions."According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984 cannot be classified as a counter-offer; it is simply a recital of its total monetary claims against petitioner. Moreover, the amount stated therein could not likewise be considered as the counter-offer since as admitted by petitioner, it was only recommendation which was subject to approval of the PNB Board of Directors.Neither can the receipt by the SAMD ofP725,000.00 be regarded as evidence of a perfected sale contract. As gleaned from the parties'Stipulation of Factsduring the proceedings in the courta quo, the amount is merely an acknowledgment of the receipt ofP725,000.00 as deposit to repurchase the property. The deposit ofP725,000.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of Directors. Respondent maintains that its acceptance of the amount was qualified by that condition, thus not absolute. Pending such approval, it cannot be legally claimed that respondent is already bound by any contract of sale with petitioner.According to respondent, petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering, managing and preserving the properties and other special assets of PNB. The SAMD does not have the power to sell, encumber, dispose of, or otherwise alienate the assets, since the power to do so must emanate from its Board of Directors. The SAMD was not authorized by respondent's Board to enter into contracts of sale with third persons involving corporate assets. There is absolutely nothing on record that respondent authorized the SAMD, or made it appear to petitioner that it represented itself as having such authority.Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition, among others, "that the selling price shall be the total bank's claim as of documentation date x x x payable in cash (P725,000.00 already deposited)within 60 days from notice of approval." A new Statement of Account was attached therein indicating the total bank's claim to beP1,931,389.53 less deposit ofP725,000.00, orP1,206,389.00. Furthermore, while respondent's Board of Directors accepted petitioner's offer to repurchase the property, the acceptance was qualified, in that it required a higher sale price and subject to specified terms and conditions enumerated therein. This qualified acceptance was in effect a counter-offer, necessitating petitioner's acceptance in return.The Ruling of the CourtThe ruling of the appellate court that there was no perfected contract of sale between the parties on June 4, 1985 is correct.A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.41Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur:(1) Consent of the contracting parties;(2) Object certain which is the subject matter of the contract;(3) Cause of the obligation which is established.Contracts are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.42Once perfected, they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law.43By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.44The absence of any of the essential elements will negate the existence of a perfected contract of sale. As the Court ruled inBoston Bank of the Philippines v. Manalo:45A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.46A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract.47When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties.48InSan Miguel Properties Philippines, Inc. v. Huang,49the Court ruled that the stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2)perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3)consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.A negotiation is formally initiated by an offer, which, however, must be certain.50At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. InAdelfa Properties, Inc. v. Court of Appeals,51the Court ruled that:x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale.52A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis.53Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer.54The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since it lacked the resources, it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties.55The request, which was made through a letter dated August 25, 1983, was referred to the respondent's main branch for appropriate action.56Before respondent could act on the request, petitioner again wrote respondent as follows:1. Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150,000.00);2. Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00); and3. The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one year grave period requested for.57When the petitioner was told that respondent did not allow "partial redemption,"58it sent a letter to respondent's President reiterating its offer to purchase the property.59There was no response to petitioner's letters dated February 10 and 15, 1984.The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984 wasP1,574,560.47 cannot be considered an unqualified acceptance to petitioner's offer to purchase the property. The statement is but a computation of the amount which petitioner was obliged to pay in case respondent would later agree to sell the property, including interests, advances on insurance premium, advances on realty taxes, publication cost, registration expenses and miscellaneous expenses.There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept petitioner's offer and sell the property forP1,574,560.47. Any acceptance by the SAMD of petitioner's offer would not bind respondent. As this Court ruled inAF Realty Development, Inc. vs. Diesehuan Freight Services, Inc.:60Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of authorized duties of such director, are held not binding on the corporation.Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when authorized by a board resolution or its by-laws.61It appears that the SAMD had prepared a recommendation for respondent to accept petitioner's offer to repurchase the property even beyond the one-year period; it recommended that petitioner be allowed to redeem the property and payP1,574,560.00 as the purchase price. Respondent later approved the recommendation that the property be sold to petitioner. But instead of theP1,574,560.47 recommended by the SAMD and to which petitioner had previously conformed, respondent set the purchase price atP2,660,000.00. In fine, respondent's acceptance of petitioner's offer was qualified, hence can be at most considered as a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of sale would have arisen; as it turns out, however, petitioner merely sought to have the counter-offer reconsidered. This request for reconsideration would later be rejected by respondent.We do not agree with petitioner's contention that theP725,000.00 it had remitted to respondent was "earnest money" which could be considered as proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. The provision reads:ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court:8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCC's total liability to PNB as of June 25, 1984 to be P1,574,560.47 and recommended this amount as the repurchase price of the subject property.9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property.The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board.62Thus, theP725,000.00 was merely a deposit to be applied as part of the purchase price of the property, in the event that respondent would approve the recommendation of SAMD for respondent to accept petitioner's offer to purchase the property forP1,574,560.47. Unless and until the respondent accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.63It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to accept the offer to purchase the property forP1,931,389.53. However, this amounted to an amendment of respondent's qualified acceptance, or an amended counter-offer, because while the respondent lowered the purchase price, it still declared that its acceptance was subject to the following terms and conditions:1. That the selling price shall be the total Bank's claim as of documentation date (pls. see attached statement of account as of 5-31-85), payable in cash (P725,000.00 already deposited) within sixty (60) days from notice of approval;2. The Bank sells only whatever rights, interests and participation it may have in the property and you are charged with full knowledge of the nature and extent of said rights, interests and participation and waive your right to warranty against eviction.3. All taxes and other government imposts due or to become due on the property, as well as expenses including costs of documents and science stamps, transfer fees, etc., to be incurred in connection with the execution and registration of all covering documents shall be borne by you;4. That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale, if there are any;5. That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer, your deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties.6. That the sale shall be subject to such other terms and conditions that the Legal Department may impose to protect the interest of the Bank.64It appears that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested respondent to reconsider its amended counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund itsP725,000.00 deposit.In sum, then, there was no perfected contract of sale between petitioner and respondent over the subject property.IN LIGHT OF ALL THE FOREGOING, the petition isDENIED.The assailed decision isAFFIRMED. Costs against petitioner Manila Metal Container Corporation.SO ORDERED.G.R. No. L-48237 June 30, 1987MADRIGAL & COMPANY, INC.,petitioner,vs.HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, THE HON. SECRETARY OF LABOR, and MADRIGAL CENTRAL OFFICE EMPLOYEES UNION,respondents.No. L-49023 June 30, 1987MADRIGAL & COMPANY, INC.,petitioner,vs.HON. MINISTER OF LABOR and MADRIGAL CENTRAL OFFICE EMPLOYEES UNION,respondents.SARMIENTO,J.:These are two petitions for certiorari and prohibition filed by the petitioner, the Madrigal & Co., Inc. The facts are undisputed.The petitioner was engaged, among several other corporate objectives, in the management of Rizal Cement Co., Inc.1Admittedly, the petitioner and Rizal Cement Co., Inc. are sister companies.2Both are owned by the same or practically the same stockholders.3On December 28, 1973, the respondent, the Madrigal Central Office Employees Union, sought for the renewal of its collective bargaining agreement with the petitioner, which was due to expire on February 28, 1974.4Specifically, it proposed a wage increase of P200.00 a month, an allowance of P100.00 a month, and other economic benefits.5The petitioner, however, requested for a deferment in the negotiations.On July 29, 1974, by an alleged resolution of its stockholders, the petitioner reduced its capital stock from 765,000 shares to 267,366 shares.6This was effected through the distribution of the marketable securities owned by the petitioner to its stockholders in exchange for their shares in an equivalent amount in the corporation.7On August 22, 1975, by yet another alleged stockholders' action, the petitioner reduced its authorized capitalization from 267,366 shares to 110,085 shares, again, through the same scheme.8After the petitioner's failure to sit down with the respondent union, the latter, on August 28, 1974, commenced Case No. LR-5415 with the National Labor Relations Commission on a complaint for unfair labor practice.9In due time, the petitioner filed its position paper,10alleging operational losses. Pending the resolution of Case No. LR-5415, the petitioner, in a letter dated November 17, 1975,11informed the Secretary of Labor that Rizal Cement Co., Inc., "from which it derives income"12"as the General Manager or Agent"13had "ceased operating temporarily."14"In addition, "because of the desire of the stockholders to phase out the operations of the Madrigal & Co., Inc. due to lack of business incentives and prospects, and in order to prevent further losses,"15it had to reduce its capital stock on two occasions "As the situation, therefore, now stands, the Madrigal & Co., Inc. is without substantial income to speak of, necessitating a reorganization, by way of retrenchment, of its employees and operations."16The petitioner then requested that it "be allowed to effect said reorganization gradually considering all the circumstances, by phasing out in at least three (3) stages, or in a manner the Company deems just, equitable and convenient to all concerned, about which your good office will be apprised accordingly."17The letter, however, was not verified and neither was it accompanied by the proper supporting papers. For this reason, the Department of Labor took no action on the petitioner's request.On January 19, 1976, the labor arbiter rendered a decision18granting, among other things, a general wage increase of P200.00 a month beginning March 1, 1974 plus a monthly living allowance of P100.00 monthly in favor of the petitioner's employees. The arbiter specifically found that the petitioner "had been making substantial profits in its operation"19since 1972 through 1975. The petitioner appealed.On January 29, 1976, the petitioner applied for clearance to terminate the services of a number of employees pursuant supposedly to its retrenchment program. On February 3, 1976, the petitioner applied for clearance to terminate 18 employees more.20On the same date, the respondent union went to the Regional Office (No. IV) of the Department of Labor (NLRC Case No. R04-2-1432-76) to complain of illegal lockout against the petitioner.21Acting on this complaint, the Secretary of22Labor, in a decision dated December 14, 1976, 22 found the dismissals "to be contrary to law"23and ordered the petitioner to reinstate some 40 employees, 37 of them with backwages.24The petitioner then moved for reconsideration, which the Acting Labor Secretary, Amado Inciong, denied.25Thereafter, the petitioner filed an appeal to the Office of the President. The respondent, the Presidential Assistant on Legal Affairs, affirmed with modification the Labor Department's decision, thus:xxx xxx xxx1. Eliseo Dizon, Eugenio Evangelista and Benjamin Victorio are excluded from the order of reinstatement.2. Rogelio Meneses and Roberto Taladro who appear to have voluntarily retired and paid their retirement pay, their cases are left to the judgment of the Secretary of Labor who is in a better position to assess appellant's allegation as to their retirement.3. The rest are hereby reinstated with six (6) months backwages, except Aleli Contreras, Teresita Eusebio and Norma Parlade who are to be reinstated without backwages.SO ORDERED.26xxx xxx xxxOn May 15, 1978, the petitioner came to this court. (G.R. No. 48237.)Meanwhile, on May 25, 1977, the National Labor Relations Commission rendered a decision affirming the labor arbiter's judgment in Case No. LR-5415.27The petitioner appealed to the Secretary of Labor. On June 9, 1978, the Secretary of Labor dismissed the appeal.28Following these successive reversals, the petitioner came anew to this court. (G.R. No. 49023.)By our resolution dated October 9, 1978, we consolidated G.R. No. 48237 with G.R. No. 49023.29We likewise issued temporary restraining orders.30In G.R. No. 48237, the petitioner argues, that.xxx xxx xxxI. SAID RESPONDENTS ERRED IN HOLDING THAT THERE WAS NO VALID COMPLIANCE WITH THE CLEARANCE REQUIREMENT.II. SAID RESPONDENTS ERRED IN NOT HOLDING THAT THERE IS NO LOCKOUT HERE IN LEGAL CONTEMPLATION, MUCH LESS FOR UNION-BUSTING PURPOSES.III. RESPONDENT PRESIDENTIAL ASSISTANT ERRED IN ORDERING THE REINSTATEMENT OF THE REST OF AFFECTED MEMBERS OF RESPONDENT UNION WITH SIX (6) MONTHS BACKWAGES, EXCEPT ALELI CONTRERAS, TERESITA EUSEBIO AND NORMA PARLADE WHO ARE TO BE REINSTATED WITHOUT BACKWAGES.IV. RESPONDENT PRESIDENTIAL ASSISTANT ERRED IN LEAVING TO THE JUDGMENT OF RESPONDENT SECRETARY THE CASES OF ROGELIO MENESES AND ROBERTO TALADRO WHO HAD VOLUNTARILY RETIRED AND PAID THEIR RETIREMENT PAY.31xxx xxx xxxwhile in G.R. No. 49023, it submits that:xxx xxx xxx1. RESPONDENT MINISTER ERRED IN AFFIRMING THE DECISION EN BANC OF THE NATIONAL LABOR RELATIONS COMMISSION DESPITE CLEAR INDICATIONS IN THE RECORD THAT THE AWARD WAS PREMATURE IN THE ABSENCE OF A DEADLOCK IN NEGOTIATION AND THE FAILURE ON THE PART OF THE LABOR ARBITER TO RESOLVE THE MAIN IF NOT ONLY ISSUE OF REFUSAL TO BARGAIN, THEREBY DEPRIVING PETITIONER OF ITS RIGHT TO DUE PROCESS.2. ASSUMING ARGUENDO THAT THERE WAS A DEADLOCK IN NEGOTIATION, RESPONDENT MINISTER ERRED NEVERTHELESS IN NOT FINDING THAT THE ECONOMIC BENEFITS GRANTED IN THE FORM OF SALARY INCREASES ARE UNFAIR AND VIOLATIVE OF THE MANDATORY GUIDELINES PRESCRIBED UNDER PRESIDENTIAL DECREE NO. 525 AND IGNORING THE UNDISPUTED FACT THAT PETITIONER HAD VIRTUALLY CEASED OPERATIONS AFTER HAVING TWICE DECREASED ITS CAPITAL STOCKS AND, THEREFORE, NOT FINANCIALLY CAPABLE TO ABSORB SUCH AWARD OF BENEFITS.32xxx xxx xxxThere is no merit in these two (2) petitions.As a general rule, the findings of administrative agencies are accorded not only respect but even finality.33This is especially true with respect to the Department of Labor, which performs not only a statutory function but carries out a Constitutional mandate as well.34Our jurisdiction, as a rule, is confined to cases of grave abuse of discretion.35But for certiorari to lie, there must be such arbitrary and whimsical exercise of power, or that discretion was exercised despotically.36In no way can the questioned decisions be seen as arbitrary. The decisions themselves show why.Anent Case No. R04-2-1432-76 (G.R. No. 48237), we are satisfied with the correctness of the respondent Presidential Assistant for Legal Affairs' findings. We quote:xxx xxx xxxIn urging reversal of the appealed decision, appellant contends that (1) its letter dated November 17, 1975, constitute "substantial compliance with the clearance requirement to terminate;" and (2) individual appellees' dismissal had no relation to any union activities, but was the result of an honest-to-goodness retrenchment policy occasioned by loss of income due to cessation of operation.We find the first contention to be without merit. Aside from the fact that the controversial letter was unverified, with not even a single document submitted in support thereof, the same failed to specify the individual employees to be affected by the intended retrenchment. Not only this, but the letter is so vague and indefinite regarding the manner of effecting appellant's retrenchment plan as to provide the Secretary of (sic) a reasonable basis on which to determine whether the request for retrenchment was valid or otherwise, and whether the mechanics in giving effect thereto was just or unjust to the employees concerned. In fact, to be clearly implied from the letter is that the implementary measures needed to give effect to the intended retrenchment are yet to be thought of or concretized in the indefinite future, measures about which the office of the Secretary "will be apprised accordingly." All these, and more, as correctly found by the Acting Secretary, cannot but show that the letter is insufficient in form and substance to constitute a valid compliance with the clearance requirement. That being so, it matters little whether or not complainant union or any of its members failed to interpose any opposition thereto.It cannot be over-emphasized that the purpose in requiring a prior clearance by the Secretary of Labor, in cases of shutdown or dismissal of employees, is to afford said official ample opportunity to examine and determine the reasonableness of the request. This is made imperative in order to give meaning and substance to the constitutional mandate that the State must "afford protection to labor," and guarantee their "security of tenure." Indeed, the rules require that the application for clearance be filed ten (10) days before the intended shutdown or dismissal, serving a copy thereof to the employees affected in order that the latter may register their own individual objections against the grant of the clearance. But how could this requirement of notice to the employees have been complied with, when, as observed by the Acting Secretary in his modificatory decision dated June 30, 1977 "the latter of November 17, 1975 does not even state definitely the employees involved" upon whom service could be made.With respect to appellant's second contention, we agree with the Acting Secretary's findings that individual appellee's dismissal was an offshoot of the union's demand for a renegotiation of the then validly existing collective bargaining Agreement.xxx xxx xxxThe pattern of appellant's acts after the decision of the Labor Arbiter in Case No. LR-5415 has convinced us that its sole objective was to render moot and academic the desire of the union to exercise its right to bargain collectively with management, especially so when it is considered in the light of the fact that under the said decision the demand by the union for wage increase and allowances was granted. What renders appellant's motive suspect was its haste in terminating the services of individual appellees, without waiting the outcome of its appeal in Case No. LR-5415. The amount involved by its offer to pay double separation could very well have been used to pay the salaries of those employees whose services were sought to be terminated, until the resolution of its appeal with the NLRC, since anyway, if its planned retrenchment is found to be justifiable and done in good faith, its only liability is to answer for the separation pay provided by law. By and large, therefore, we agree with the Acting Secretary that, under the circumstances obtaining in this case, "respondent's action [was] a systematic and deliberate attempt to get rid of complainants because of their union activities.We now come to the individual cases of Aleli Contreras, Teresita Eusebio and Norma Parlade. It is appellant's claim that these three (3) should not be reinstated inasmuch as they have abandoned their work by their continued absences, and moreover in the case of Contreras, she failed to oppose the application for clearance filed against her on October 24, 1975. However, appellant's payrolls for December 16-31, 1975, January 1-15, 1976 and January 16-31, 1976, show that the three (3) were "on leave without pay." As correctly appreciated by the Acting Secretary, these "payrolls prove, first, that "leave" has been granted to these employees, and, second, that it is a practice in the company to grant "leaves without pay" without loss of employment status, to those who have exhausted their authorized leaves." As regards, Norma Parlade, the records show that she "truly incurred illness and actually underwent surgery in Oct., 1975." As to Aleli Contreras, there is no showing that the Secretary of Labor or appellant ever acted on the clearance. If we were to follow the logic of appellant, Contreras should not have been included in the application for clearance filed on Feb. 3, 1976. The fact that she was included shows that up to that time, she was still considered as a regular employee. It was for these reasons, coupled with the length of service that these employees have rendered appellant, that the Acting Secretary ordered their reinstatement but without backwages.37xxx xxx xxxWith respect Lo Case No. LR-5415 (G.R. No. 49023), we are likewise content with the findings of the National Labor Relations Commission. Thus:xxx xxx xxxAppellant now points that the only issue certified to compulsory arbitration is "refusal to bargain" and it is, therefore, premature to dictate the terms of the CBA on the assumption that there was already a deadlock in negotiation. Appellant further contends that, assuming there was deadlock in negotiation, the economic benefits granted are unreasonable and violative of the guideline prescribed by P.D. 525.On the other hand, it is the union's stance that its economic demands are justified by, the persistent increase in the cost of living and the substantial earnings of the company from 1971 to 1975.It bears to stress that although the union's petition was precipitated by the company's refusal to bargain, there are glaring circumstances pointing out that the parties also submitted "deadlock" to arbitration. The petition itself is couched in general terms, praying for arbitration of the union's "dispute" with the respondent concerning proposed changes in the collective bargaining agreement." It is supported with a copy of the proposed changes which just goes to show that the union, aside from the issue concerning respondent's refusal to bargain, sought determination of the merit of its proposals. On the part of the appellant company, it pleaded financial incapacity to absorb the proposed economic benefits during the initial stage of the proceedings below. Even the evidence and arguments proferred below by both parties are relevant to deadlock issue. In the face of these factual environment, it is our view that the Labor Arbiter below did not commit a reversible error in rendering judgment on the proposed CBA changes. At any rate, the minimum requirements of due process was satisfied because as heretofore stated, the appellant was given Opportunity, and had in fact, presented evidence and argument in avoidance of the proposed CBA changes.We do not also subscribe to appellant's argument that by reducing its capital, it is made evident that it is phasing out its operations. On the contrary, whatever may be the reason behind such reductions, it is indicative of an intention to keep the company a going concern. So much so that until now almost four (4) years later, it is still very much in existence and operational as before.We now come to the question concerning the equitableness of the economic benefits granted below. It requires no evidence to show that the employees concerned deserve some degree of upliftment due to the unabated increase in the cost of living especially in Metro Manila. Of course the company would like us to believe that it is losing and is therefore not financially capable of improving the present CBA to favor its employees. In support of such assertion, the company points that the profits reflected in its yearly Statement of Income and Expenses are dividends from security holdings. We, however, reject as puerile its suggestion to dissociate the dividends it received from security holdings on the pretext that they belong exclusively to its stockholders. The dividends received by the company are corporate earnings arising from corporate investment which no doubt are attended to by the employees involved in this proceedings. Otherwise. it would not have been reflected as part of profits in the company's yearly financial statements. In determining the reasonableness of the economic grants below, we have, therefore, scrutinized the company's Statement of Income and Expenses from 1972 to 1975 and after equating the welfare of the employees with the substantial earnings of the company, we find the award to be predicated on valid justifications.The salary increase we herein sanction is also in keeping with the rational that made imperative the enactment of the Termination Pay Law since in case the respondent company really closes down, the employees will receive higher separation pay or retirement benefits to tide them over while seeking another employment.38What clearly emerges from the recorded facts is that the petitioner, awash with profits from its business operations but confronted with the demand of the union for wage increases, decided to evade its responsibility towards the employees by a devised capital reduction. While the reduction in capital stock created an apparent need for retrenchment, it was, by all indications, just a mask for the purge of union members, who, by then, had agitated for wage increases. In the face of the petitioner company's piling profits, the unionists had the right to demand for such salary adjustments.That the petitioner made quite handsome profits is clear from the records. The labor arbiter stated in his decision in the collective agreement case (Case No. LR-5415):xxx xxx xxxA clear scrutiny of the financial reports of the respondent [herein petitioner] reveals that it had been making substantial profits in the operation.In 1972, when it still had 765,000 common shares, of which 305,000 were unissued and 459,000 outstanding capitalized at P16,830,000.00, the respondent made a net profit of P2,403,211.58. Its total assets were P70,821,317.81.In 1973, based on the same capitalization, its profit increased to P2,724,465.33. Its total assets increased to P83,240,473.73.In 1974, although its capitalization was reduced from P16,830,000.00 to P11,230,459.36, its profits were further increased to P2,922,349.70. Its assets were P78,842,175.75.The reduction in its assets by P4,398,297.98 was due to the fact that its capital stock was reduced by the amount of P5,599,540.54.In 1975, for the period of only six months, the respondent reported a net profit of P547,414.72, which when added to the surplus of P5,591.214.19, makes a total surplus of P6,138,628.91 as of June 30, 1975.39xxx xxx xxxThe petitioner would, however, have us believe that it in fact sustained losses. Whatever profits it earned, so it claims were in the nature of dividends "declared on its shareholdings in other companies in the earning of which the employees had no participation whatsoever."40"Cash dividends," according to it, "are the absolute property of the stockholders and cannot be made available for disposition if only to meet the employees' economic demands."41There is no merit in this contention. We agree with the National Labor Relations Commission that "[t]he dividends received by the company are corporate earnings arising from corporate investment."42Indeed, as found by the Commission, the petitioner had entered such earnings in its financial statements as profits, which it would not have done if they were not in fact profits.43Moreover, it is incorrect to say that such profits in the form of dividends are beyond the reach of the petitioner's creditors since the petitioner had received them as compensation for its management services in favor of the companies it managed as a shareholder thereof. As such shareholder, the dividends paid to it were its own money, which may then be available for wage increments. It is not a case of a corporation distributing dividends in favor of its stockholders, in which case, such dividends would be the absolute property of the stockholders and hence, out of reach by creditors of the corporation. Here, the petitioner was acting as stockholder itself, and in that case, the right to a share in such dividends, by way of salary increases, may not be denied its employees.Accordingly, this court is convinced that the petitioner's capital reduction efforts were, to begin with, a subterfuge, a deception as it were, to camouflage the fact that it had been making profits, and consequently, to justify the mass layoff in its employee ranks, especially of union members. They were nothing but a premature and plain distribution of corporate assets to obviate a just sharing to labor of the vast profits obtained by its joint efforts with capital through the years. Surely, we can neither countenance nor condone this. It is an unfair labor practice.As we observed inPeople's Bank and Trust Company v. People's Bank and Trust Co. Employees Union:44xxx xxx xxxAs has been held by this Court in Insular Lumber Company vs. CA, et al., L-23875, August 29, 1969, 29 SCRA 371, retrenchment can only be availed of if the company is losing or meeting financial reverses in its operation, which certainly is not the case at bar. Undisputed is the fact, that the Bank "at no time incurred losses. " As a matter of fact, "the net earnings of the Bank would be in the average of P2,000,000.00 a year from 1960 to 1969 and, during this period of nine (9) years, the Bank continuously declared dividends to its stockholders." Thus the mass lay-off or dismissal of the 65 employees under the guise of retrenchment policy of the Bank is a lame excuse and a veritable smoke-screen of its scheme to bust the Union and thus unduly disturb the employment tenure of the employees concerned, which act is certainly an unfair labor practice.45Yet, at the same tune, the petitioner would claim that "the phasing out of its operations which brought about the retrenchment of the affected employees was mainly dictated be the necessity of its stockholders in their capacity as heirs of the late Don Vicente Madrigal to partition the estate left by him."46It must be noted, however, that the labor cases were tried on the theory of losses the petitioner was supposed to have incurred to justify retrenchment. The petitioner cannot change its theory in the Supreme Court. Moreover, there is nothing in the records that will substantiate this claim. But what is more important is the fact that it is not impossible to partition the Madrigal estate assuming that the estate is up for partition without the petitioner's business closing shop and inevitably, without the petitioner laying off its employees.As regards the question whether or not the petitioner's letter dated November 17, 197547was in substantial compliance with legal clearance requirements, suffice it to state that apart from the Secretary of Labor's valid observation that the same "did not constitute a sufficient clearance as contemplated by law, "48the factual circumstances show that the letter in question was itself a part of the "systematic and deliberate attempt to get rid of [the union members] because of their union activities."49Hence, whether or not the said letter complied with the legal formalities is beside the point since under the circumstances, retrenchment was, in all events, unjustified. Parenthetically, the clearance required under Presidential Decree No. 850 has been done away with by Batas Blg. 130, approved on August 21, 1981.During the pendency of these petitions, the petitioner submitted manifestations to the effect that certain employees have accepted retirement benefits pursuant to its retrenchment scheme.50This is a matter of defense that should be raised before the National Labor Relations Commission.To do away with the protracted process of determining the earnings acquired by the employees as a result of ad interim employment, and to erase any doubt as to the amount of backwages due them, this court, in line with the precedent set inMercury Drug Co., Inc. v. Court of Industrial Relations,51affirmed in a long line of decisions that came later, 52 hereby fixes the amount of backwages at three (3) years pay reckoned at the increased rates decreed by the labor arbiter in Case No. LR-5415 without deduction or qualification.WHEREFORE, the petitions are hereby DISMISSED. Subject to the modification as to the amount of backwages hereby awarded, the challenged decisions are AFFIRMED. The temporary restraining orders are LIFTED. With costs against the petitioner.This decision is IMMEDIATELY EXECUTORY.SO ORDERED.G.R. No. L-19761 January 29, 1923PHILIPPINE TRUST COMPANY, as assignee in insolvency of "La Cooperativa Naval Filipina,"plaintiff-appellee,vs.MARCIANO RIVERA,defendant-appellant.Araneta and Zaragoza for appellant.Ross and Lawrence for appellee.STREET,J.:This action was instituted on November 21, 1921, in the Court of First Instance of Manila, by the Philippine Trust Company, as assignee in insolvency ofLa Cooperativa Naval Filipina, against Marciano Rivera, for the purpose of recovering a balance of P22,500, alleged to be due upon defendant's subscription to the capital stock of said insolvent corporation. The trial judge having given judgment in favor of the plaintiff for the amount sued for, the defendant appealed.It appears in evidence that in 1918 theCooperativa Naval Filipinawas duly incorporated under the laws of the Philippine Islands, with a capital of P100,000, divided into one thousand shares of a par value of P100 each. Among the incorporators of this company was numbered the defendant Mariano Rivera, who subscribed for 450 shares representing a value of P45,000, the remainder of the stock being taken by other persons. The articles of incorporation were duly registered in the Bureau of Commerce and Industry on October 30 of the same year.In the course of time the company became insolvent and went into the hands of the Philippine Trust Company, as assignee in bankruptcy; and by it this action was instituted to recover one-half of the stock subscription of the defendant, which admittedly has never been paid.The reason given for the failure of the defendant to pay the entire subscription is, that not long after theCooperativa Naval Filipinahad been incorporated, a meeting of its stockholders occurred, at which a resolution was adopted to the effect that the capital should be reduced by 50 per centum and the subscribers released from the obligation to pay any unpaid balance of their subscription in excess of 50 per centum of the same. As a result of this resolution it seems to have been supposed that the subscription of the various shareholders had been cancelled to the extent stated; and fully paid certificate were issued to each shareholders for one-half of his subscription. It does not appear that the formalities prescribed in section 17 of the Corporation Law (Act No. 1459), as amended, relative to the reduction of capital stock in corporations were observed, and in particular it does not appear that any certificate was at any time filed in the Bureau of Commerce and Industry, showing such reduction.His Honor, the trial judge, therefore held that the resolution relied upon the defendant was without effect and that the defendant was still liable for the unpaid balance of his subscription. In this we think his Honor was clearly right.It is established doctrine that subscription to the capital of a corporation constitute a find to which creditors have a right to look for satisfaction of their claims and that the assignee in insolvency can maintain an action upon any unpaid stock subscription in order to realize assets for the payment of its debts. (Velascovs.Poizat, 37 Phil., 802.) A corporation has no power to release an original subscriber to its capital stock from the obligation of paying for his shares, without a valuable consideration for such release; and as against creditors a reduction of the capital stock can take place only in the manner an under the conditions prescribed by the statute or the charter or the articles of incorporation. Moreover, strict compliance with the statutory regulations is necessary (14 C. J., 498, 620).In the case before us the resolution releasing the shareholders from their obligation to pay 50 per centum of their respective subscriptions was an attempted withdrawal of so much capital from the fund upon which the company's creditors were entitled ultimately to rely and, having been effected without compliance with the statutory requirements, was wholly ineffectual.The judgment will be affirmed with cost, and it is so ordered.G.R. No. 118043 July 23, 1998LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMG LIFE INSURANCE CO. INC.),petitioner,vs.COURT OF APPEALS and COMMISSIONER OF INTERNAL REVENUE,respondents.MENDOZA,J.:This is a petition for review oncertiorariof the decision rendered on November 18, 1994 by the Court of Appeals1reversing, in part, the decision of the Court of Tax Appeals in C.T.A. Case No. 4583.The facts are not in dispute.2Petitioner, now the Jardine-CMG Life Insurance Company, Inc., is a domestic corporation engaged in the life insurance business. In 1984, it issued 50,000 shares of stock as stock dividends, with a par value of P100 or a total of P5 million. Petitioner paid documentary stamp taxes on each certificate on the basis of its par value. The question in this case is whether in determining the amount to be paid as documentary stamp tax, it is the par value of the certificates of stock or the book value of the shares which should be considered. The pertinent provision of law, as it stood at the time of the questioned transaction, reads as follows:Sec. 224. Stamp tax on original issues of certificates of stock. On every original issue, whether on organization, reorganization or for any lawful purpose, ofcertificates of stockby any association, company or corporation, there shall be collected a documentary stamp tax of one peso and ten centavos on each two hundred pesos, or fractional part thereof, of the par value of such certificates:Provided, That in the case of the original issue of stock without par value the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration received by the association, company, or corporation for the issuance of such stock, and in the case of stock dividends on the actual value represented by each share.3The Commissioner of Internal Revenue took the view that the book value of the shares, amounting to P19,307,500.00, should be used as basis for determining the amount of the documentary stamp tax. Accordingly, respondent Internal Revenue Commissioner issued a deficiency documentary stamp tax assessment in the amount of P78,991.25 in excess of the par value of the stock dividends.Together with another documentary stamp tax assessment which it also questioned, petitioner appealed the Commissioner's ruling to the Court of Tax Appeals. On March 30, 1993, the CTA rendered its decision holding that the amount of the documentary stamp tax should be based on the par value stated on each certificate of stock. The dispositive portion of its decision reads:WHEREFORE, the deficiency documentary stamp tax assessments in the amount of P464,898.76 and P78,991.25 or a total of P543,890.01 are hereby cancelled for lack of merit. Respondent Commissioner of Internal Revenue is ordered to desist from collecting said deficiency documentary stamp taxes for the same are considered withdrawn.SO ORDERED.In turn, respondent Commissioner of Internal Revenue appealed to the Court of Appeals which, on November 18, 1994, reversed the CTA's decision and held that, in assessing the tax in question, the basis should be the actual value represented by the subject shares on the assumption that stock dividends, being a distinct class of shares, are not subject to the qualification in the law as to the type of certificate of stock used (with or without par value). The appellate court, therefore, ordered:IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby REVERSED with respect to the deficiency tax assessment on the stock dividends, but AFFIRMED with regards to the assessment on the Insurance Policies. Consequently, private respondent is ordered to pay the petitioner herein the sum of P78,991.25, representing documentary stamp tax on the stock dividends it issued. No costs pronouncement.SO ORDERED.Hence, this petition with the following assignment of error:RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT STOCK DIVIDENDS INVOLVING SHARES WITH PAR VALUE ARE SUBJECT TO DOCUMENTARY STAMP TAX BASED ON THE BOOK VALUE OF SAID SHARES WHICH RULING IS CONTRARY TO WHAT IS CLEARLY PROVIDED FOR BY SECTION 224 (NOW SECTION 175) OF THE TAX CODE.The petition has merit.First. In ruling that the book value of the shares should be considered in assessing the documentary stamp tax, the Court of Appeals stated:There are three (3) classes of stocks referred to in Section 224 (now 175) of the Internal Revenue Code: (a)Certificate of Stocks with par value, (b)Certificate of Stock with no par valueand (c)stock dividends. The first two (2) mentioned are original issuances of the corporation, association or company while the third ones are taken by the corporation, association or company out of or from their unissued shares of stock, hence are also originals. Undoubtedly, all the three classifications are subject to the documentary stamp tax.Conformably, in the case of stock certificates with par value, the documentary stamp tax is based on the par value of the stock; for stock certificates without par value, the same tax is computed from the actual consideration received by the corporation, association or company; but forstock dividends, documentary stamp tax is to be paid "on the actual value represented by each share."Since in dividends, no consideration is technically received by the corporation, petitioner is correct in basing the assessment on the book value thereof rejecting the principles enunciated inCommissioner of Internal Revenue vs. Heald Lumber Co. (10 SCRA 372) as the said case refers to purchases of no-par certificates of stocks and not to stock dividends.4Apparently, the Court of Appeals treats stock dividends as distinct from ordinary shares of stock for purposes of the then 224 of the National Internal Revenue Code. There is, however, no basis for considering stock dividends as a distinct class from ordinary shares of stock since under this provision only certificates of stock are required to be distinguished (into either one with par value or one without) rather than the classes of shares themselves.Indeed, a reading of the then 224 of the NIRC as quoted earlier, starting from its heading, will show that the documentary stamp tax is not levied upon the shares of stock per se but rather on the privilege of issuing certificates of stock.A stock certificate is merely evidence of a share of stock and not the share itself. This distinction is clear in the Corporation Code, to wit: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.5Stock dividends are in the nature of shares of stock, the consideration for which is the amount of unrestricted retained earnings converted into equity in the corporation's books.6Thus,A "stock dividend'' is any dividend payable in shares of stock of the corporation declaring or authorizing such dividend. It is, what the term itself implies, a distribution of the shares of stock of the corporation among the stockholders as dividends. A stock dividend of a corporation is a dividend paid in shares of stock instead of cash, and is properly payable only out of surplus profits. So, a stock dividend is actually two things: (1) a dividend and (2)the enforced use of the dividend money to purchase additional shares of stock at par. . .7From the foregoing, it is clear that stock dividends are shares of stock and not certificates or stock which merely represent them. There is, therefore, no reason for determining the actual value of such dividends for purposes of the documentary stamp tax if the certificates representing them indicate a par value.The Solicitor General himself says that, based on the then 224, there are only two bases for determining the amount of the documentary stamp tax:An examination of the structure of the main provision of Sec. [224] of the NIRC will show that it intends to classify the tax bases into two, either the par value, or the actual consideration or actual value. It specifies in the first part that the basis for the imposition of the documentary stamp tax on shares of stocks belonging to the first category, discussed in the early part of this comment, shall be the face value. In contradistinction, the provision specifies in the proviso that for the second and third categories, the basis for the tax shall not be the face value. Rather, the basis is either the actual consideration received by the corporation f