HEIRS OF PAEL vs.

CA The denial of the motion for intervention arising from

the strict application of the rule due lack of notice to, or
FACTS
the alleged failure of, movants to act seasonably will
lead the court to act of injustice to the movants, to their
successors-in-interest and to all purchasers for value
A Motion for Reconsideration of the Decision of the and in good faith and thereby open the door to fraud,
Supreme Court affirming the findings of the Court of falsehood and misrepresentation.
Appeals. The Motion for Reconsideration was filed by
the Heirs of Antonio Pael, Andrea Alcantara, and
Crisante Pael. They alleged that the transfer of
If the petition for reconstitution is finally granted, the
ownership in 1983 was not only dubious and fabricated,
chaos and confusion arising from a situation where the
that it also produced no legal effect.
certificate of title of the movant covering large areas of
land overlap or overreach on properties the title to
The transfer of title from the Heir of Pael in favor of which is being sought to be reconstituted by private
PFINA PROPERTIES, INC was replete with badges of respondent.
fraud and irregularities which rendered nugatory and
Petitioners are indispensable parties with substantial
imperative the existing doctrines on land registration interest in the controversy that final adjudication cannot
and land titles. be made in their absence without affecting, nay injuring
such interest.

The Heirs of Pael earlier disposed of their rights. There

was nothing to transfer to PFINA PROPERTIES, INC. UP’s motion for intervention was granted. The
PFINA PROPERTIES, INC. claims that it acquired the adjudication was limited to a determination of the
properties from the Heirs of Pael by virtue of a deed of alleged overlapping or encroachment between UP’s
assignment. It filed for a motion to intervene. title and respondent’s titles under the names of Chin
and Mallari.

It took them 15 years to act on the alleged deed of

assignment and no steps were taken by either of them The respondents derive their titles from a defective title,
to register the deed or secure the transfer certificate of and their titles should also be null and void.
title evidencing the change of ownership.

UP’s title emanated from TCT 9462 from a sale by the

At the time when PFINA PROPERTIES, INC acquired Commonwealth of the Philippines to the University in
the disputed properties in 1983, its corporate name was 1949. It came from OCT # 730 was under the name of
PFINA Mining and Exploration , Inc. – a mining Mariano Tuason as early as 1914.
company which had no valid grounds to engage in the
highly speculative business of urban real estate
development. ISSUE
Whether the petition for intervention of UP should be
granted given it has intervened late in the case.
The Paels are no longer the owners of the land that
they allegedly assigned. During the pendency of the
motion for reconsideration, the University of the
Philippines (UP) filed a motion for intervention alleging RULING
the properties covered by TCT No. 52828 and TCT No. The motion for intervention of UP is granted. The case
52929 in the name of respondents Chin and Mallari is remanded to the lower Court for reception of
from part of the vast tract of land that is the UP Campus. evidence on conflicting claims over the property TCT
It is registered in the name of UP under TCT No 9462. No 52928 and 52929 between UP and Jorge H Chin
Therefore any pronouncement by this Court affecting and Renato B. Mallari.
the properties could create a cloud over UP’s Title for
which reason it had a right to intervene in the
proceedings.
Motion of reconsideration is denied for lack of merit.
 P1,244,225.00. The guaranteed net worth shortfall
thus amounted to P13,244,225.00 after adding the net
DOCTRINE worth deficiency of P1,244,225.00 to the Minimum
Corporation Law; A mining company has no valid Guaranteed Net Worth of P12,000,000.00. The
grounds to engage in the highly speculative business of adjusted contract price, therefore, amounted to
urban real estate development.—At the time PFINA P6,225,775.00 which is the difference between the
acquired the disputed properties in 1983, its corporate contract price of P19,500,000.00 and the shortfall in
name was PFINA Mining and Exploration, Inc., a the guaranteed net worth of P13,224,225.00. Asia
mining company which had no valid grounds to engage Industries having already paid Inter-Asia
in the highly speculative business of urban real estate P12,000,000.00, it was entitled to a refund of
development. P5,744,225.00. Inter-Asia thereafter proposed, by
letter of 24 January 1980, signed by its president, that
Asia Industries's claim for refund be reduced to
P4,093,993.00, it promising to pay the cost of the
Northern Cotabato Industries, Inc. (NOCOSII)
Inter-Asia Investments Industries vs. CA superstructures in the amount of P759,570.00. To the
proposal respondent agreed. Inter-Asia, however,
welched on its promise.
Facts: On 1 September 1978, Inter-Asia Industries, Inc.
(Inter-Asia), by a Stock Purchase Agreement (the
Agreement), sold to Asia Industries, Inc. (Asia Inter-Asia's total liability thus stood at P4,853,503.00
Industries) for and in consideration of the sum of (P4,093,993.00 plus P759,570.00) exclusive of interest.
P19,500,000.00 all its right, title and interest in and to On 5 April 1983, Asia Industries filed a complaint
all the outstanding shares of stock of FARMACOR, against Inter-Asia with the Regional Trial Court of
INC. (FARMACOR). The Agreement was signed by Makati, one of two causes of action of which was for
Leonides P. Gonzales and Jesus J. Vergara, the recovery of above-said amount of P4,853,503.00
presidents of Inter-Asia and Asia Industries, 17 plus interest. Denying Asia Industries's claim,
respectively. Under paragraph 7 of the Agreement, Inter-Asia countered that Asia Industries failed to pay
Inter-Asia as seller made warranties and the balance of the purchase price and accordingly set
representations. The Agreement was later amended up a counterclaim. Finding for Asia Industries, the trial
with respect to the "Closing Date," originally set up at court rendered on 27 November 1991 a Decision,
10:00 a.m. of 30 September 1978, which was moved to ordering Inter-Asia to pay Asia Industries the sum of
31 October 1978, and to the mode of payment of the P4,853,503.00 plus interest thereon at the legal rate
purchase price. The Agreement, as amended, from the filing of the complaint until fully paid, the sum
provided that pending submission by SGV of of P30,000.00 as attorney's fees and the costs of suit;
FARMACOR's audited financial statements as of 31 and (b) dismissing the counterclaim. On appeal to the
October 1978, Asia Industries may retain the sum of Court of Appeals, and by Decision of 25 January 1996,
P7,500,000.00 out of the stipulated purchase price of the Court of Appeals affirmed the trial court's decision.
P19,500,000.00; that from this retained amount of Inter-Asia's motion for reconsideration of the decision
P7,500,000.00, Asia Industries may deduct any having been denied by the Court of Appeals by
shortfall on the Minimum Guaranteed Net Worth of Resolution of 11 July 1996, Inter-Asia filed the petition
P12,000,000.00; and that if the amount retained is not for review on certiorari.
sufficient to make up for the deficiency in the Minimum
Issue: Whether the 24 January 1980 letter signed by
Guaranteed Net Worth, Inter-Asia shall pay the
Inter-Asia’s president is valid and binding.
difference within 5 days from date of receipt of the
audited financial statements.

Held: The 24 January 1980 letter signed by

Inter-Asia's president is valid and binding. As held in
Asia Industries paid Inter-Asia a total amount of
the case of People's Aircargo and Warehousing Co.,
P12,000,000.00: P5,000,000.00 upon the signing of
Inc. v. Court of Appeals, the general rule is that, in the
the Agreement, and P7,000,000.00 on 2 November
absence of authority from the board of directors, no
1978. From the STATEMENT OF INCOME AND
person, not even its officers, can validly bind a
DEFICIT attached to the financial report dated 28
corporation. A corporation is a juridical person,
November 1978 submitted by SGV, it appears that
separate and distinct from its stockholders and
FARMACOR had, for the 10 months ended 31 October
members, "having . . . powers, attributes and
1978, a deficit of P11,244,225.00. Since the
properties expressly authorized by law or incident to its
stockholder's equity amounted to P10,000,000.00,
existence." Being a juridical entity, a corporation may
FARMACOR had a net worth deficiency of
act through its board of directors, which exercises Banking Corporation (CBC). On 16 September 1974,
almost all corporate powers, lays down all corporate CBC wrote VGCCI requesting that the pledge
business policies and is responsible for the efficiency agreement be recorded in its books. In a letter dated
of management, as provided in Section 23 of the 27 September 1974, VGCCI replied that the deed of
Corporation Code of the Philippines. Under this pledge executed by Calapatia in CBC's favor was duly
provision, the power and responsibility to decide noted in its corporate books. On 3 August 1983,
whether the corporation should enter into a contract Calapatia obtained a loan of P20,000.00 from CBC,
that will bind the corporation is lodged in the board, payment of which was secured by the pledge
subject to the articles of incorporation, bylaws, or agreement still existing between Calapatia and CBC.
relevant provisions of law. However, just as a natural Due to Calapatia's failure to pay his obligation, CBC,
person may authorize another to do certain acts for on 12 April 1985, filed a petition for extrajudicial
and on his behalf, the board of directors may validly foreclosure before Notary Public Antonio T. de Vera of
delegate some of its functions and powers to officers, Manila, requesting the latter to conduct a public auction
committees or agents. The authority of such individuals sale of the pledged stock. On 14 May 1985, CBC
to bind the corporation is generally derived from law, informed VGCCI of the foreclosure proceedings and
corporate bylaws or authorization from the board, requested that the pledged stock be transferred to its
either expressly or impliedly by habit, custom or name and the same be recorded in the corporate
acquiescence in the general course of business, viz: "A books. However, on 15 July 1985, VGCCI wrote CBC
corporate officer or agent may represent and bind the expressing its inability to accede to CBC's request in
corporation in transactions with third persons to the view of Calapatia's unsettled accounts with the club.
extent that [the] authority to do so has been conferred Despite the foregoing, Notary Public de Vera held a
upon him, and this includes powers as, in the usual public auction on 17 September 1985 and CBC
course of the particular business, are incidental to, or emerged as the highest bidder at P20,000.00 for the
may be implied from, the powers intentionally pledged stock. Consequently, CBC was issued the
conferred, powers added by custom and usage, as corresponding certificate of sale.
usually pertaining to the particular officer or agent, and
such apparent powers as the corporation has caused
person dealing with the officer or agent to believe that it On 21 November 1985, VGCCI sent Calapatia a notice
has conferred.... [A]pparent authority is derived not demanding full payment of his overdue account in the
merely from practice. Its existence may be ascertained amount of P18,783.24. Said notice was followed by a
through (1) the general manner in which the demand letter dated 12 December 1985 for the same
corporation holds out an officer or agent as having the amount and another notice dated 22 November 1986
power to act or, in other words the apparent authority for P23,483.24. On 4 December 1986, VGCCI caused
to act in general, with which it clothes him; or (2) the to be published in the newspaper Daily Express a
acquiescence in his acts of a particular nature, with notice of auction sale of a number of its stock
actual or constructive knowledge thereof, within or certificates, to be held on 10 December 1986 at 10:00
beyond the scope of his ordinary powers. It requires a.m. Included therein was Calapatia's own share of
presentation of evidence of similar acts executed either stock (Stock Certificate 1219). Through a letter dated
in its favor or in favor of other parties. It is not the 15 December 1986, VGCCI informed Calapatia of the
quantity of similar acts which establishes apparent termination of his membership due to the sale of his
authority, but the vesting of a corporate officer with the share of stock in the 10 December 1986 auction. On 5
power to bind the corporation." Hence, an officer of a May 1989, CBC advised VGCCI that it is the new
corporation who is authorized to purchase the stock of owner of Calapatia's Stock Certificate 1219 by virtue of
another corporation has the implied power to perform being the highest bidder in the 17 September 1985
all other obligations arising therefrom, such as auction and requested that a new certificate of stock be
payment of the shares of stock. By allowing its issued in its name. On 2 March 1990, VGCCI replied
president to sign the Agreement on its behalf, that "for reason of delinquency" Calapatia's stock was
Inter-Asia clothed him with apparent capacity to sold at the public auction held on 10 December 1986
perform all acts which are expressly, impliedly and for P25,000.00. On 9 March 1990, CBC protested the
inherently stated therein. sale by VGCCI of the subject share of stock and
thereafter filed a case with the Regional Trial Court of
CHINA BANKING CORPORATION VS CA
Makati for the nullification of the 10 December 1986
auction and for the issuance of a new stock certificate
in its name. On 18 June 1990, the Regional Trial Court
Facts of Makati dismissed the complaint for lack of
On 21 August 1974, Galicano Calapatia, Jr., a jurisdiction over the subject matter on the theory that it
stockholder of Valley Golf & Country Club, Inc. involves an intra-corporate dispute and on 27 August
(VGCCI), pledged his Stock Certificate 1219 to China 1990 denied CBC's motion for reconsideration. On 20
September 1990, CBC filed a complaint with the to regulate, govern and control its own actions, affairs
Securities and Exchange Commission (SEC) for the and concerns and its stockholders or members and
nullification of the sale of Calapatia's stock by VGCCI; directors and officers with relation thereto and among
the cancellation of any new stock certificate issued themselves in their relation to it. In other words,
pursuant thereto; for the issuance of a new certificate by-laws are the relatively permanent and continuing
in petitioner's name; and for damages, attorney's fees rules of action adopted by the corporation for its own
and costs of litigation. government and that of the individuals composing it
and having the direction, management and control of
its affairs, in whole or in part, in the management and
On 3 January 1992, SEC Hearing Officer Manuel P. control of its affairs and activities. The purpose of a
Perea rendered a decision in favor of VGCCI, stating in by-law is to regulate the conduct and define the duties
the main that considering that the said share is of the members towards the corporation and among
delinquent, VGCCI had valid reason not to transfer the themselves. They are self-imposed and, although
share in the name of CBC in the books of VGCCI until adopted pursuant to statutory authority, have no status
liquidation of delinquency. Consequently, the case was as public law. Therefore, it is the generally accepted
dismissed. On 14 April 1992, Hearing Officer Perea rule that third persons are not bound by by-laws,
denied CBC's motion for reconsideration. CBC except when they have knowledge of the provisions
appealed to the SEC en banc and on 4 June 1993, the either actually or constructively. For the exception to
Commission issued an order reversing the decision of the general accepted rule that third persons are not
its hearing officer; holding that CBC has a prior right bound by by-laws to be applicable and binding upon
over the pledged share and because of pledgor's the pledgee, knowledge of the provisions of the VGCCI
failure to pay the principal debt upon maturity, CBC By-laws must be acquired at the time the pledge
can proceed with the foreclosure of the pledged share; agreement was contracted. Knowledge of said
declaring that the auction sale conducted by VGCCI on provisions, either actual or constructive, at the time of
10 December 1986 is declared NULL and VOID; and foreclosure will not affect pledgee's right over the
ordering VGCCI to issue another membership pledged share. Article 2087 of the Civil Code provides
certificate in the name of CBC. VGCCI sought that it is also of the essence of these contracts that
reconsideration of the order. However, the SEC denied when the principal obligation becomes due, the things
the same in its resolution dated 7 December 1993. The in which the pledge or mortgage consists maybe
sudden turn of events sent VGCCI to seek redress alienated for the payment to the creditor. Further,
from the Court of Appeals. On 15 August 1994, the VGCCI's contention that CBC is duty-bound to know its
Court of Appeals rendered its decision nullifying and by-laws because of Article 2099 of the Civil Code
setting aside the orders of the SEC and its hearing which stipulates that the creditor must take care of the
officer on ground of lack of jurisdiction over the subject thing pledged with the diligence of a good father of a
matter and, consequently, dismissed CBC's original family, fails to convince. CBC was never informed of
complaint. The Court of Appeals declared that the Calapatia's unpaid accounts and the restrictive
controversy between CBC and VGCCI is not provisions in VGCCI's by-laws. Furthermore, Section
intra-corporate; nullifying the SEC orders and 63 of the Corporation Code which provides that "no
dismissing CBC’s complaint. CBC moved for shares of stock against which the corporation holds
reconsideration but the same was denied by the Court any unpaid claim shall be transferable in the books of
of Appeals in its resolution dated 5 October 1994. CBC the corporation" cannot be utilized by VGCCI. The term
filed the petition for review on certiorari. "unpaid claim" refers to "any unpaid claim arising from
unpaid subscription, and not to any indebtedness
which a subscriber or stockholder may owe the
corporation arising from any other transaction." Herein,
Issue: Whether CBC is bound by VGCCI's by-laws.
the subscription for the share in question has been fully
paid as evidenced by the issuance of Membership
Certificate 1219. What Calapatia owed the corporation
Held: In order to be bound, the third party must have were merely the monthly dues. Hence, Section 63
acquired knowledge of the pertinent by-laws at the time does not apply.
the transaction or agreement between said third party
and the shareholder was entered into. Herein, at the TAM WING TAK vs. MAKASIAR
time the pledge agreement was executed. VGCCI
could have easily informed CBC of its by-laws when it
sent notice formally recognizing CBC as pledgee of FACTS: On November 11, 1992, petitioner, in his
one of its shares registered in Calapatia's name. CBC's capacity as director of ConcordWorld Properties, Inc.,
belated notice of said by-laws at the time of foreclosure (Concord for brevity), a domestic corporation, filed a
will not suffice. By-laws signifies the rules and complaint charging Vic Ang Siong with violation of B.P.
regulations or private laws enacted by the corporation Blg. 22. The complaint alleged that a check for the
amount of P83, 550,000.00, issued by Vic Ang Siong in ATRIUM MANAGEMENT CORP VS. CA
favor of Concord, was dishonored when presented for
encashment.
FACTS: On January 3, 1983, Atrium Management
Corporation filed with the Regional Trial Court, Manila
Vic Ang Siong sought the dismissal of the case on two an action for collection of the proceeds of four
grounds: First, that petitioner had no authority to file postdated checks in the total amount of P2 million.
the case on behalf of Concord, the payee of the Hi-Cement Corporation through its corporate
dishonored check, since the firm’s board of directors signatories, petitioner Lourdes M. de Leon, treasurer,
had not empowered him to act on its behalf. and the late Antonio de las Alas, Chairman, issued
checks in favor of E.T. Henry and Co. Inc., as payee.
E.T. Henry and Co., Inc., in turn, endorsed the four
The City Prosecutor dismissed the complaint. checks to petitioner Atrium Management Corporation
for valuable consideration.

ISSUE: Whether or not petitioner had no standing to

file the criminal complaint since he was neither the Upon presentment for payment, the drawee bank
payee nor holder of the bad check. dishonored all four checks for the common reason
“payment stopped”. Atrium, thus, instituted this action
after its demand for payment of the value of the checks
was denied.
RULING: Yes. It is not disputed in the instant case that
Concord, a domestic corporation, was the payee of the
bum check, not petitioner. Therefore, it is Concord, as
payee of the bounced check, which is the injured party. After due proceedings, on July 20, 1989, the trial court
Since petitioner was neither a payee nor a holder of the rendered a decision ordering Lourdes M. de Leon, her
bad check, he had neither the personality to sue nor a husband Rafael de Leon, E.T. Henry and Co., Inc. and
cause of action against Vic Ang Siong. Under Section Hi-Cement Corporation to pay petitioner Atrium, jointly
and severally, the amount of P2 million corresponding
36 of the Corporation Code, read in relation to Section to the value of the four checks, plus interest and
23, it is clear that where a corporation is an injured attorney’s fees.
party, its power to sue is lodged with its board of
directors or trustees. Note that petitioner failed to show
any proof that he was authorized or deputized or On appeal to the Court of Appeals, on March 17, 1993,
granted specific powers by Concord’s board of director the Court of Appeals promulgated its decision
to sue Victor Ang Siong for and on behalf of the firm. modifying the decision of the trial court, absolving
Clearly, petitioner as a minority stockholder and Hi-Cement Corporation from liability and dismissing the
member of the board of directors had no such power or complaint as against it. The appellate court ruled that:
authority to sue on Concord’s behalf. Nor can we Lourdes M. de Leon was not authorized to issue the
uphold his act as a derivative suit. For a derivative suit subject checks in favor of E.T. Henry, Inc.
to prosper, it is required that the minority stockholder
suing for and on behalf of the corporation must allege
in his complaint that he is suing on a derivative cause
of action on behalf of the corporation and all other ISSUE: Whether Lourdes de Leon and Antonio delas
stockholders similarly situated who may wish to join Alas should be held personally liable for the checks
him in the suit. There is no showing that petitioner has issued as corporate officers and authorized signatories
complied with the foregoing requisites. It is obvious of the check.
that petitioner has not shown any clear legal right
which would warrant the overturning of the decision of
public respondents to dismiss the complaint against RULING: "Personal liability of a corporate director,
Vic Ang Siong. A public prosecutor, by the nature of his trustee or officer along (although not necessarily) with
the corporation may so validly attach, as a rule, only
office, is under no compulsion to file criminal when:
information where no clear legal justification has been
shown, and no sufficient evidence of guilt nor prima
facie case has been presented by the petitioner. No
“1. He assents (a) to a patently unlawful act of the
reversible error may be attributed to the court a quo
corporation, or (b) for bad faith or gross negligence in
when it dismissed petitioner’s special civil action for
directing its affairs, or (c) for conflict of interest,
mandamus.
resulting in damages to the corporation, its of IVO. The lower court rendered judgment dismissing
stockholders or other persons; the complaint of Safic without prejudice to any action it
might subsequently institute against Dominador
Monteverde. The CA affirmed the decision of the lower
“2. He consents to the issuance of watered down court. Thus this petition for review.
stocks or who, having knowledge thereof, does not
forthwith file with the corporate secretary his written
objection thereto; ISSUE
Whether Monteverde’s act in entering into the 1986
contracts is ultra vires.
“3. He agrees to hold himself personally and solidarily
liable with the corporation; or
RULING
“4. He is made, by a specific provision of law, to Article III, Section 3 [g] of the By-Laws of IVO provides,
personally answer for his corporate action.” among others, that
Section 3. Powers and Duties of the President. – The
President shall be elected by the Board of Directors
from their own number.
In the case at bar, Lourdes M. de Leon and Antonio de He shall have the following duties:
las Alas as treasurer and Chairman of Hi-Cement were
authorized to issue the checks. However, Ms. de Leon xxxxxxxxx
was negligent when she signed the confirmation letter
requested by Mr. Yap of Atrium and Mr. Henry of E.T. [g] Have direct and active management of the business
Henry for the rediscounting of the crossed checks and operation of the corporation, conducting the same
issued in favor of E.T. Henry. She was aware that the according to the orders, resolutions and instruction of
checks were strictly endorsed for deposit only to the the Board of Directors and according to his own
payee’s account and not to be further negotiated. What discretion whenever and wherever the same is not
is more, the confirmation letter contained a clause that expressly limited by such orders, resolutions and
was not true, that is, “that the checks issued to E.T. instructions.
Henry were in payment of Hydro oil bought by
Hi-Cement from E.T. Henry”. Her negligence resulted
in damage to the corporation. Hence, Ms. de Leon may It can be clearly seen from the foregoing provision of
be held personally liable therefor. IVO’s By-laws that Monteverde had no blanket
authority to bind IVO to any contract. He must act
SAFIC ALCAN & CIE vs. IMPERIAL VEGETABLE OIL according to the instructions of the Board of Directors.
Even in instances when he was authorized to act
according to his discretion that discretion must not be
FACTS: Petitioner Safic Alcan & Cie (hereinafter, in conflict with prior Board orders, resolutions and
“Safic”) is a French corporation engaged in the instructions. The evidence shows that the IVO Board
international purchase, sale and trading of coconut oil. knew nothing of the 1986 contracts and that it did not
It filed with the RTC of Manila a complaint against authorize Monteverde to enter into speculative
respondent Imperial Vegetable Oil Co., Inc. contracts. In fact, Monteverde had earlier proposed
(hereinafter, “IVO”) In 1985, Safic entered into an that the company engage in such transactions but the
agreement with IVO whereby the latter shall deliver IVO Board rejected his proposal. Since the 1986
tones of coconut oil to Safic. Both parties complied. contracts marked a sharp departure from past IVO
IVO was represented by its president, Dominador transactions, Safic should have obtained from
Monteverde. In 1986, Safic again entered into several Monteverde the prior authorization of the IVO Board. It
agreements with IVO but this time it was agreed that must be pointed out that the Board of Directors, not
IVO shall deliver the coconut oil 8 months from the Monteverde, exercises corporate power. Clearly,
agreement or sometime in 1987. This time, IVO failed Monteverde’s act of entering into speculative contracts
to deliver and Safic sued IVO. IVO in its defense aver with Safic is ultra vires and Safic cannot therefore
that Monteverde was acting beyond his power as enforce those contracts against IVO.
president when he made the 1986 agreement with
Safic; that Monteverde is acting beyond his power
because the 1986 contracts were speculative in nature
and speculative contracts are prohibited by the by-laws