G.R. No. L-14441 Case Digest

G.R. No. L-14441, December 17, 1966

Pedro R. Palting

vs Sanjose Petroleum Inc.

Ponente: Barrera

Facts:

San Jose Petroleum a corporation organized and existing in the Republic of Panama, PETROLEUM filed with the Philippine Securities and Exchange Commission a sworn registration statement, for the registration and licensing for sale in the Philippines Voting Trust Certificates.

It was alleged that the entire proceeds of the sale of said securities will be devoted or used exclusively to finance the operations of San Jose Oil Company, Inc. which is a domestic mining corporation. Pedro R. Palting and others, allegedly prospective investors in the shares of SAN JOSE PETROLEUM, filed with the Securities and Exchange Commission an opposition to registration and licensing of the securities on the grounds that the tie-up between SAN JOSE PETROLEUM, and SAN JOSE OIL, violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act of 1949.

Issue:

Whether or not the "tie-up" between the respondent SAN JOSE PETROLEUM, and SAN JOSE OIL COMPANY, INC., is violative of the

Constitution, the Laurel-Langley Agreement, the Petroleum Act of 1949

Held:

Yes. In the 1946 Ordinance Appended to the Constitution, this right was extended to citizens of the United States; states that to all forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines, would have the privilege of disposition, exploitation, development, and utilization of all Philippine natural resources. However, respondent is owned, controlled, directly and indirectly by Panamanian Corporation.

The Laurel-Langley Agreement also states that with respect to natural resources in the public domain in the Philippines, only through the medium of a corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned or controlled by citizens of the United States.

Although it was claimed that the corporation has stockholders residing in United States, there was no indication if they are all citizens of America, how much percentage do they occupy as stockholders, and if they have the same rules that apply to the conditions mentioned. In the circumstances, the court ruled that the respondent SAN JOSE PETROLEUM, as presently constituted, is not a business enterprise that is authorized to exercise the parity privileges under the Parity Ordinance, the Laurel-Langley Agreement and the Petroleum Law. Its tie-up with SAN JOSE OIL is, consequently, illegal.

The parity rights agreement is not applicable to SJP. The parity rights are only granted to American business enterprises or enterprises directly or indirectly controlled by US citizens. SJP is a Panamanian corporate citizen. The other owners of SJO are Venezuelan corporations, not Americans. SJP was not able to show contrary evidence. Further, the Supreme Court emphasized that the stocks of these corporations are being traded in stocks exchanges abroad which renders their foreign ownership subject to change from time to time. This fact renders a practical impossibility to meet the requirements under the parity rights. Hence, the tie up between SJP and SJO is illegal, SJP not being a domestic corporation or an American business enterprise contemplated under the Laurel-Langley Agreement.

G.R. No. 75885 Case Digest

G.R. No. 75885, May 27, 1987

Bataan Shipyard & Engineering Co

vs. PCGG

Ponente: Narvasa

Facts:

Bataan Shipyard and Engineering Co., Inc (BASECO) – private corporation

Presidential Commission on Good Government (PCGG) – issued the sequestration order

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

As evidence found in Malacanang shortly after the sudden flight of President Marcos were certificates corresponding to more than ninety-five percent (95%) of all the outstanding shares of stock of BASECO, endorsed in blank, together with deeds of assignment of practically all the outstanding shares of stock of the three (3) corporations above mentioned (which hold 95.82% of all BASECO stock), signed by the owners thereof although not notarized. While the petitioner's counsel was quick to dispute this asserted fact, assuring the Court that the BASECO stockholders were still in possession of their respective stock certificates and had never endorsed them in blank or to anyone else, that denial is exposed by his own prior and subsequent recorded statements as a mere gesture of defiance rather than a verifiable factual declaration.

In accordance with Executive Orders Numbered 1 and 2 promulgated by President Corazon Aquino, PCGG through its commissioners and agent ordered sequestration, takeover and other provisional orders affecting BASECO.

Commissioner Diaz invoked the provisions of Section 3 (c) of Executive Order No. 1, empowering the Commission —To provisionally takeover in the public interest or to prevent its disposal or dissipation, business enterprises and properties taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos, until the transactions leading to such acquisition by the latter can be disposed of by the appropriate authorities.

Issues:

1.      Are the provisional remedies involved in this case unconstitutional?

2.      Are the acts of PCGG and its Commissioners done without or in excess of its powers or with grave abuse of discretion?

3.      Was there a violation of the right against self-Incrimination and unreasonable searches and seizures?

Ruling:

1. No.

The Provisional or "Freedom" Constitution recognizes the power and duty of the President to enact "measures to achieve the mandate of the people to recover ill- gotten properties amassed by the leaders and supporters of the Marcos regime and protect the interest of the people through orders of sequestration or freezing of assets or accounts. And as also already adverted to, Section 26, Article XVIII of the 1987 Constitution treats of, and ratifies the authority to issue sequestration or freeze orders under Proclamation No. 3. The institution of these provisional remedies is also premised upon the State's inherent police power, regarded, as t lie power of promoting the public welfare by restraining and regulating the use of liberty and property, and as the most essential, insistent and illimitable of powers in the promotion of general welfare and the public interest, and said to be co-extensive with self-protection and not inaptly termed also the law of overruling necessity.

2. No, PCGG’s general function is to conduct investigations in order to collect evidence establishing instances of ill-gotten wealth, issue sequestration, and such orders as may be warranted by the evidence thus collected and as may be necessary to preserve and conserve the assets of which it takes custody and control and prevent their disappearance, loss or dissipation; and eventually file and prosecute in the proper court of competent jurisdiction all cases investigated by it as may be warranted by its findings. It does not try and decide, or hear and determine, or adjudicate with any character of finality or compulsion, cases involving the essential issue of whether or not property should be forfeited and transferred to the State because ill-gotten within the meaning of the Constitution and the executive orders.

3. No. The right against self-incrimination has no application to juridical persons. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation, vested with special privileges and franchises, may refuse to show its hand when charged with an abuse of such privileges.

G.R. No. L-3869 Case Digest

G.R. No. L-3869, January 31, 1952

S. David Winship

vs Philippine Trust Company

Ponente: Paras

Facts:

Prior to December 1941, the Eastern Isles Import Corporation, which is mainly owned by American citizens, had a current account deposit with the Phil Trust Company. Then later, the Japanese administration issued an order requiring all deposit accounts of the hostile people to be transferred to the bank of Taiwan. In compliance, Phil. Trust transferred and paid the credit balances of the current account deposits of the corporation to the bank of Taiwan.

The pre-war current deposit accounts of the Eastern Isles Import Corporation and of the Eastern Isles, Inc. were subsequently transferred to S. Davis Winship who, on August 12, 1947, presented to the Philippine Trust Company checks Nos. A-79212 and H-579401 covering the aforesaid deposits. The Philippine Trust Company, however, refused to pay said checks, whereupon, on September 6, 1947, S. Davis Winship instituted the present action against the Philippine Trust Company in the Court of First Instance of Manila, to recover upon the first cause of action the sum of P51,410.91 and under the second cause of action the sum of P34,827.74.

In its answer, the defendant Philippine trust Company invoked the order of the Japanese Military Administration by virtue of which it transferred the current deposit accounts in question to the Bank of Taiwan as the depository of the Bureau of Enemy Property Custody of the Japanese Military Administration.

After trial, the Court of First Instance of Manila rendered a decision upholding the contention of the defendant and accordingly dismissing the complaint.

Ruling:

In view of this pronouncement, we have to affirm the appealed judgment. As it has been stipulated by the parties that the defendant transferred the deposits in question to the Bank of Taiwan in compliance with the order of the Japanese Military Administration, the defendant was released from any obligation to the depositors or their transferee. Appellant's contention that there is no positive showing that the transfer was made by the Philippine Trust Company in compliance with the order of the Japanese Military Administration, and its logical effect is to make such act binding on said company. At any rate, the defendant corporation has not impugned its validity.

In the case of Filipinas Compañia de Seguros vs. Christern Henefeld and Co., Inc., Phil., 54, we held that the nationality of a private corporation is determined by the character or citizenship of its controlling stockholders; and this pronouncement is of course decisive as to the hostile character of the Eastern Isles, Inc., as far as the Japanese Military Administration was concerned, it being conceded that the controlling stockholders of said corporations were American citizens.

Wherefore, the appealed judgment is affirmed, with costs against the appellant.

G.R. No. L-2294 Case Digest

G.R. No. L-2294, May 25, 1951

Filipinas Compania de Seguros

vs Christen, Huenefeld and Co., Inc.

Ponente: Paras

Facts:

October 1941, Respondent Corporation obtained from the petitioner Filipinas fire policy covering the merchandise contained in a building located in Binondo, Manila. Then during the Japanese military occupation, the building and insured merchandise were burned. In due time, the corporation submitted its claim under the policy. The petitioner refused to pay the claim on the ground that the policy had ceased to be in force on the date US declared war against Germany, the respondents corporation.

The theory of the petitioner is that the insured merchandise were burned up after the policy issued in 1941 in favor of the respondent corporation has ceased to be effective because of the outbreak of the war between the United States and Germany on December 10, 1941, and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure. After trial, the Court of First Instance of Manila dismissed the action without pronouncement as to costs. Upon appeal to the Court of Appeals, the judgment of the Court of First Instance of Manila was affirmed, with costs. The case is now before us on appeal by certiorari from the decision of the Court of Appeals.

The Court of Appeals overruled the contention of the petitioner that the respondent corporation became an enemy when the United States declared war against Germany, relying on English and American cases which held that a corporation is a citizen of the country or state by and under the laws of which it was created or organized. It rejected the theory that nationality of Private Corporation is determined by the character or citizenship of its controlling stockholders.

There is no question that majority of the stockholders of the respondent corporation were German subjects. This being so, we have to rule that said respondent became an enemy corporation upon the outbreak of the war between the United States and Germany. The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy.

The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid and enforceable, and since the insured goods were burned after December 10, 1941, and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. However, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from December 11, 1941, should be returned by the petitioner.

Issue: Whether the policy in question became null and void upon the declaration of war between US and Germany.

Ruling:

It results that the petitioner is entitled to recover what paid to the respondent under the circumstances on this case. However, the petitioner will be entitled to recover only the equivalent, in actual Philippines currency of P92,650 paid on April 19, 1943, in accordance with the rate fixed in the Ballantyne scale.

Wherefore, the appealed decision is hereby reversed and the respondent corporation is ordered to pay to the petitioner the sum of P77,208.33, Philippine currency, less the amount of the premium, in Philippine currency, that should be returned by the petitioner for the unexpired term of the policy in question, beginning December 11, 1941. Without costs. So ordered.

G.R. No. L-68555 Case Digest

G.R. No. L-68555, March 19, 1993

Prime White Cement Corporation

vs Hon. Intermediate Appellate Court and Alejandro Te

Ponente: Campos, Jr.

Facts:

July 1969, plaintiff and Defendant Corporation thru its President, entered into a dealership agreement whereby plaintiff was obligated to act as the exclusive distributor of the cement products in Mindanao for 5 years.

As a result, some business associates propose to be a sub-dealer in Mindanao. Relying on the dealership agreement, plaintiff entered into a written agreement with several hardware stores dealing in buying and selling white cement in Davao and Cagayan de Oro.

Later on, the defendant corporation decide to impose conditions which were answered by several demands from the plaintiff to comply with the dealership agreement. However, defendant refused to comply. After the trial court adjudged the corporation liable to Alejandro Te, the CA affirmed the said decision based on:

There is no dispute that when Zosimo R. Falcon and Justo B. Trazo signed the dealership agreement Exhibit “A”, they was the President and Chairman of the Board, respectively, of defendant-appellant Corporation. Neither is the genuineness of the said agreement contested. As a matter of fact, it appears on the face of the contract itself that both officers were duly authorized to enter into the said agreement and signed the same for and in behalf of the corporation. When they, therefore, entered into the said transaction they created the impression that they were duly clothed with the authority to do so. It cannot now be said that the disputed agreement which possesses all the essential requisites of a valid contract was never intended to bind the corporation as this avoidance is barred by the principle of estoppel.

Issue: Whether or not the dealership agreement referred by the President and Chairman of he Board of petitioner corporation is  valid and enforceable contract.

Ruling: No, it is not valid.

Under the Corporation Law, which was then in force at the time this case arose, as well as under the present Corporation Code, all corporate powers shall be exercised by the Board of Directors, except as otherwise provided by law. Although it cannot completely abdicate its power and responsibility to act for the juridical entity, the Board may expressly delegate specific powers to its President or any of its officers. In the absence of such express delegation, a contract entered into by its President, on behalf of the corporation, may still bind the corporation if the board should ratify the same expressly or impliedly.

Furthermore, even in the absence of express or implied authority by ratification, the President as such may, as a general rule, bind the corporation by a contract in the ordinary course of business, provided the same is reasonable under the circumstances. These rules are basic, but are all general and thus quite flexible. They apply where the President or other officer, purportedly acting for the corporation, is dealing with a third person, i. e., a person outside the corporation.

The situation is quite different where a director or officer is dealing with his own corporation. In the instant case respondent Te was not an ordinary stockholder; he was a member of the Board of Directors and Auditor of the corporation as well. He was what is often referred to as a "self-dealing" director. A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his own advantage and benefit.

G.R. No. 141855 Case Digest

G.R. No. 141855, February 6, 2001

Zacarias Cometa and Herco Realty & Agricultural Corp.

vs Court of Appeals and Jose Franco

Ponente: Ynares-Santiago

Facts:

CFI awarded to Cometa the sum of P57, 396.85 of which the sheriff levied on 3 commercial lots of Cometa located in Makati. 2 of the lots were sold to Franco at public auction.

Later, Herco Realty filed a civil case to annul the levy on execution and sale of the real properties alleging that the ownership of the lots had been transferred by Cometa to Herco before the execution of the sale. It also assailed the legality of the levy contending that the personal properties of Cometa must be exhausted first.

Meanwhile, the RTC Branch 60 issued an order directing the Register of Deeds to cancel the certificates of title of Cometa and to issue new ones in favor of Franco.

Issue: Whether the levy and sale is valid and proper. For if the respondent acquired no interest in the property by virtue of the levy and sale, then, he is not entitled to its possession.

Ruling:

There is no question that petitioners were remiss in attending with dispatch to the protection of their interests as regards the subject lots, and for that reason the case in the lower court was dismissed on a technicality and no definitive pronouncement on the inadequacy of the price paid for the levied properties was ever made. In this regard, it bears stressing that procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a party’s substantive rights as in this case. Like all rules, they are required to be followed except only when for the most persuasive of reasons they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.

While there is no dispute that mere inadequacy of the price per se will not set aside a judicial sale of real property, nevertheless, where the inadequacy of the price is purely shocking to the conscience, such that the mind revolts at it and such that a reasonable man would neither directly or indirectly be likely to consent to it, the same will be set aside.

The subject lots were sold en masse, not separately as above provided. The unusually low price for which they were sold to the vendee, not to mention his vehement unwillingness to allow redemption therein, only serves to heighten the dubiousness of the transfer.

With regard to the applicability of prescription and laches, there can be no question that they operate as a bar in equity. However, it must be pointed out that the question of prescription or laches cannot work to defeat justice or to perpetrate fraud and injustice.

The rule on redemption is liberally construed in favor of the original owner of the property and the policy of the law is to aid rather than defeat him in the exercise of his right of redemption. Thus, we allowed parties in several cases to perfect their right of redemption even beyond the period prescribed therefore.

WHEREFORE, in view of all the foregoing, the challenged Decision of the Court of Appeals dated January 25, 1999, which affirmed the trial court’s denial of petitioners right of redemption, as well as the subsequent Resolution dated January 27, 2000, in CA-G.R. SP No. 48227 entitled Zacarias Cometa, et al. v. Hon. Pedro Laggui, et al., are REVERSED and SET ASIDE; and another one hereby rendered ordering respondent Jose Franco to accept the tender of redemption made by petitioners and to deliver the proper certificate of redemption to the latter.

G.R. No. L-30896 Case Digest

G.R. No. L-30896, April 28, 1983

Jose Sia

vs The people of the Philippines

Ponente: De Castro

Facts:

This is a petition for review of the decision of the CA affirming the decision of the CFI of Manila convicting the appellant of estafa.

Based on the information filed, the accused allegedly defraud the Continental Bank, under the obligation on the part of said accused of holding the said steel sheets in trust receipt agreement, which cold rolled steel sheets were consigned to the continental bank.

In reviewing the evidence, the CA came up with the following findings of facts which the solicitor general alleges should be conclusive upon this court:

Sia was general manager of the Metal Manufacturing Company of the Philippines, Inc. engaged in the manufacture of steel office equipment. He applied for a letter of credit to import steel sheets from Mitsui Bussan Kaisha, Ltd. of Japan, the application being directed to the Continental Bank.

Issue: (1) whether Sia, having only acted for and in behalf of the Metal Manufacturing Company of the Philippines as president thereof in dealing with the complainant, the continental bank he may be liable for the crime charged.

Ruling:

(1st issue) In disputing the theory of petitioner, the Solicitor General relies on the general principle that when a corporation commits an act which would constitute a punishable offense under the law, it is the responsible officers thereof, acting for the corporation, who would be punished for the crime, The Court of Appeals has subscribed to this view when it quoted approvingly from the decision of the trial court the following:

A corporation is an artificial person, an abstract being. If the defense theory is followed unscrupulously legions would form corporations to commit swindle right and left where nobody could be convicted, for it would be futile and ridiculous to convict an abstract being that cannot be pinched and confined in jail like a natural, living person, hence the result of the defense theory would be hopeless chose in business and finance. It is completely untenable. (Rollo [CA], p. 108.)

The act is imposed by agreement of parties, as a practice observed in the usual pursuit of a business or a commercial transaction. The offense may arise, if at all, from the peculiar terms and condition agreed upon by the parties to the transaction, not by direct provision of the law. The intention of the parties, therefore, is a factor determinant of whether a crime was committed or whether a civil obligation alone intended by the parties.

In the absence of an express provision of law making the petitioner liable for the criminal offense committed by the corporation of which he is a president as in fact there is no such provisions in the Revised Penal Code under which petitioner is being prosecuted, the existence of a criminal liability on his part may not be said to be beyond any doubt. In all criminal prosecutions, the existence of criminal liability for which the accused is made answerable must be clear and certain. The maxim that all doubts must be resolved in favor of the accused is always of compelling force in the prosecution of offenses. This Court has thus far not ruled on the criminal liability of an officer of a corporation signing in behalf of said corporation a trust receipt of the same nature as that involved herein.

(2nd issue) We consider the view that the trust receipt arrangement gives rise only to civil liability as the more feasible, before the promulgation of P.D. 115. The transaction being contractual, the intent of the parties should govern. The parties, therefore, are deemed to have consciously entered into a purely commercial transaction that could give rise only to civil liability, never to subject the "entrustee" to criminal prosecution.