PJOY - DIgest Februarysorry Po Late

Commercial Law: Corporation Law
ADELAIDO ORIONDO, TEODORO M. HERNANDEZ, RENATO L. BASCO,

CARMEN MERINO, AND REYNALDO SALVADOR v. COMMISSION ON AUDIT
G.R. No. 211293 June 04, 2019, EN BANC (Leonen, J.)
FACTS:
1. Petitioner Oriondo, Hernandez, Basco, Merino, and Salvador are former

officers of the Philippine Tourism Authority who had received honoraria and
cash gifts for concurrently rendering services to Corregidor Foundation, Inc.
Corregidor Foundation, Inc., a non-stock corporation which receives funds from
the government through the Philippines Tourism Authority. The Commission on
Audit (COA), through its audit team, was of the opinion that the grant of
honoraria to petitioners Oriondo, Hernandez, Basco, Merino, and Salvador were
contrary to Department of Budget Management Circular No. 2003-5. The Legal
and Adjudication Office-Corporate of the Commission on Audit issued Notice of
Disallowance No. CFI-2006-001, disallowing in audit the honoraria and cash
gift paid to Oriondo, Hernandez, Basco, Merino, and Salvador. Oriondo,
Hernandez, Basco, Merino, and Salvador filed a Motion for Reconsideration of
the Notice of Disallowance, arguing that Corregidor Foundation, Inc. is a private
corporation created under the Corporation Code and, therefore, cannot be
audited by the Commission on Audit.
2. Corregidor Foundation, Inc, is a non-stock corporation which receives

funds from the government through the Philippines Tourism Authority. The
Philippine Tourism Authority Board of Directors adopted Resolution No. B-7-
87,9 approving the creation of a foundation for the development of Corregidor
and the same was incorporated under the Securities and Exchange
Commission. The Philippine Tourism Authority agreed to release to the
Corregidor Foundation, Inc. its operating funds based on a budget for its
approval. For its part, the Corregidor Foundation, Inc. agreed to submit a
quarterly report on the receipts and disbursements of Philippine Tourism
Authority funds. It additionally agreed to deposit all collections of revenues in a
distinct and separate account in the name of the island of Corregidor, with the
disposition of the funds at the sole discretion of the Philippine Tourism
Authority. Another Memorandum of Agreement was subsequently entered into
[Date]
1
by the Philippine Tourism Authority and the Corregidor Foundation, Inc. The
subsequent Agreement reiterated the provisions of the prior Agreement but
added some stipulation which provided that the disbursements of the Philippine
Tourism Authority's funds by Corregidor Foundation, Inc. shall be subject to
the audit of the Internal Auditor of the Philippine Tourism Authority and the
Commission on Audit.
ISSUE:
1. Does the COA has jurisdiction to determine whether a corporation such as

Corregidor Foundation, Inc. is a government-owned or controlled
corporation?
2. Is the Corregidor Foundation, Inc. a government-owned or controlled
corporation?
RULING:
1. Yes. The Court stated that the law provides that the COA generally has audit
jurisdiction over public entities. In the Administrative Code's Introductory
Provisions, the COA is allowed to categorize government-owned or controlled
corporations for purposes of the exercise and discharge of its powers,
functions, and responsibilities with respect to such corporations. Therefore,
the determination of whether or not an entity is the proper subject of
its audit jurisdiction is a necessary part of the Commission's
constitutional mandate to examine and audit the government as well as
non-government entities that receive subsidies from it. To insist on
Oriondo, et. al. argument would be to impede the Commission on Audit's
exercise of its powers and functions.
2. Yes. An entity is considered a government-owned or controlled
corporation if all three (3) attributes are present: (1) the entity is
organized as a stock or non-stock corporation; (2) its functions are
public in character; and (3) it is owned or, at the very least, controlled
by the government. The aforementioned requirements were satisfied by the
Corregidor Foundation, Inc. It is immaterial whether a corporation is private
or public for purposes of exercising the audit jurisdiction of the Commission
[Date]
2
on Audit. So long as the government owns or controls the corporation, as in

this case, the Commission on Audit may audit the corporation's accounts.
[Date]
3
FAR EAST BANK AND TRUST COMPANY v. UNION BANK OF THE

PHILIPPINES [now substituted by BAYAN DELIQUENT LOAN RECOVERY 1
(SPV-AMC), INC.]
G.R. No. 196637 June 3, 2019, FIRST DIVISION (Gesmundo, J.)
FACTS:
EYCO Group of Companies (EYCO) and its controlling stockholders (the

Yutingcos) filed with the Securities and Exchange Commission (SEC) a "Petition
for the Declaration of Suspension of Payment[s], Formation and Appointment of
Rehabilitation Receiveri Committee, Approval of Rehabilitation Plan with
Alternative Prayer for Liquidation and Dissolution of Corporations" (SEC Case
No. 09-97-5764). On the other hand, Union Bank of the Philippines (Union
Bank) is a member of EYCO’s creditor banks (Consortium). Union Bank sued
EYCO and the Yutingcos in the regular courts (Civil Case No. 66477) alleging
that the properties of EYCO were sold fraudulently and done in bad faith, to
prevent them from being levied upon, to Far East Bank and Trust Company
(FEBTC now Bank of the Philippine Islands). SEC issued an order declaring the
suspension of payments for EYCO and directing the creation of the
Management Committee (MANCOM. Union Bank filed a petition for certiorari
before the Court of Appeals. The Spouses Yutingco filed a Motion to Dismiss of
Civil Case No. 66477 on the ground of pendency of the proceedings in the SEC
which had acquired prior jurisdiction over the subject matter of the case.
ISSUE:
Should Civil Case No. 66477 be dismissed on the ground of litis

pendentia?
RULING:
No. All the elements of litis pendentia are absent herein case, namely: (a)
identity of parties, or at least such parties who represent the same interests in
both actions; (b) identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) identity with respect to the two (2) preceding
[Date]
4
particulars in the two (2) cases is such that any judgment that may be rendered
in the pending case, regardless of which party is successful, would amount to
res judicata in the other case. On the first element, there is no identity of
parties since the Yutingcos were ordered dropped from Sec Case No. 09-97-
5764. The Court ruled that the SEC cannot acquire jurisdiction over an
individual filing a petition for suspension of payments together with a corporate
entity. On second element, the Court held that SEC took cognizance of the
petition for suspension of payments, having been vested with exclusive
jurisdiction under P.D. No. 902-A over such recourse by financially
distressed corporations. While a management committee or rehabilitation
receiver may review or seek modification of existing contracts of the
debtor-corporation, this is merely an incident of the specific powers
granted by law and only for the purpose of maintaining the viability of the
debtor-corporation which would ultimately benefit the creditors. The RTC,
on the other hand, unquestionably has jurisdiction to hear and decide actions
incapable of pecuniary estimation, such as the suit for rescission of sale (Civil
Case No. 66477). Finally, on the third element, any judgment or final
disposition by the SEC on the claims against the debtor-corporations will not
fully resolve the issues before the trial court (i.e., validity of the sale of EYCO
properties in favor of petitioner, real ownership of the properties and damages).
The rulings issued by the SEC Hearing Panel in the course of rehabilitation will
not settle the issue of whether the Spouses Yutingco, EYCO and petitioner
connived to ensure that the properties of NIKON will not answer for the latter's
huge loans obtained from Union Bank. Rehabilitation proceedings are summary
in nature; they do not include adjudication of claims that require full trial on
the merits.
[Date]
5

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Commercial Law: Corporation Law

ADELAIDO ORIONDO, TEODORO M. HERNANDEZ, RENATO L. BASCO,

1. Petitioner Oriondo, Hernandez, Basco, Merino, and Salvador are former

2. Corregidor Foundation, Inc, is a non-stock corporation which receives

1. Does the COA has jurisdiction to determine whether a corporation such as

on Audit. So long as the government owns or controls the corporation, as in

FAR EAST BANK AND TRUST COMPANY v. UNION BANK OF THE

G.R. No. 196637 June 3, 2019, FIRST DIVISION (Gesmundo, J.)

EYCO Group of Companies (EYCO) and its controlling stockholders (the

Should Civil Case No. 66477 be dismissed on the ground of litis

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