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G.R. No.

131394

March 28, 2005

JESUS V. LANUZA, MAGADYA REYES, BAYANI REYES and ARIEL REYES, Petitioner, vs. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION, DOLORES ONRUBIA, ELENITA NOLASCO, JUAN O. NOLASCO III, ESTATE OF FAUSTINA M. ONRUBIA, PHILIPPINE MERCHANT MARINE SCHOOL, INC., Respondents. DECISION TINGA, J.: Presented in the case at bar is the apparently straight-forward but complicated question: What should be the basis of quorum for a stockholders meetingthe outstanding capital stock as indicated in the articles of incorporation or that contained in the companys stock and transfer book? Petitioners seek to nullify the Court of Appeals Decision in CAG.R. SP No. 414731 promulgated on 18 August 1997, affirming the SEC Order dated 20 June 1996, and the Resolution2 of the Court of Appeals dated 31 October 1997 which denied petitioners motion for reconsideration. The antecedents are not disputed. In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with seven hundred (700) founders shares and seventy-six (76) common shares as its initial capital stock subscription reflected in the articles of incorporation. However, private respondents and their predecessors who were in control of PMMSI registered the companys stock and transfer book for the first time in 1978, recording thirty-three (33) common shares as the only issued and outstanding shares of PMMSI. Sometime in 1979, a special stockholders meeting was called and held on the basis of what was considered as a quorum of twenty-seven (27) common shares, representing more than two-thirds (2/3) of the common shares issued and outstanding. In 1982, the heirs of one of the original incorporators, Juan Acayan, filed a petition with the Securities and Exchange Commission (SEC) for the registration of their property rights over one hundred (120) founders shares and twelve (12) common shares owned by their father. The SEC hearing officer held that the heirs of Acayan were entitled to the claimed shares and called for a special stockholders meeting to elect a new set of officers.3 The SEC En Banc affirmed the decision. As a result, the shares of Acayan were recorded in the stock and transfer book. On 06 May 1992, a special stockholders meeting was held to elect a new set of directors. Private respondents thereafter filed a petition with the SEC questioning the validity of the 06 May 1992 stockholders meeting, alleging that the quorum for the said meeting should not be based on the 165 issued and outstanding shares as per the stock and transfer book, but on the initial subscribed capital stock of seven hundred seventy-six (776) shares, as reflected in the 1952 Articles of Incorporation. The petition was dismissed.4 Appeal was made to the SEC En Banc, which granted said appeal, holding that the shares of the deceased incorporators should be duly represented by their respective administrators or heirs concerned. The SEC directed the parties to call for a stockholders meeting on the basis of the stockholdings reflected in the articles of incorporation for the purpose of electing a new set of officers for the corporation.5 Petitioners, who are PMMSI stockholders, filed a petition for review with the Court of Appeals.6 Rebecca Acayan, Jayne O. Abuid, Willie O. Abuid and Renato Cervantes, stockholders and directors of PMMSI, earlier filed another petition for review of the same SEC En Bancs orders. The petitions were thereafter consolidated.7 The consolidated petitions essentially raised the following issues, viz: (a) whether the basis the outstanding capital stock and accordingly also for determining the quorum at stockholders meetings it should be the 1978 stock and transfer book or if it should be the 1952 articles of incorporation; and (b) whether the Court of Appeals "gravely erred in applying the Espejo Decision to the benefit of respondents."8 The "Espejo Decision" is the decision of the SEC en banc in SEC Case No. 2289 which ordered the recording of the shares of Jose Acayan in the stock and transfer book. The Court of Appeals held that for purposes of transacting business, the quorum should be based on the outstanding capital stock as found in the articles of incorporation.9 As to the second issue, the Court of Appeals held that the ruling in the Acayan case would ipso facto benefit the private respondents, since to require a separate judicial declaration to recognize the shares of the original incorporators would entail unnecessary delay and expense. Besides, the Court of Appeals added, the incorporators have already proved their stockholdings through the provisions of the articles of incorporation.10 In the instant petition, petitioners claim that the 1992 stockholders meeting was valid and legal. They submit that reliance on the 1952 articles of incorporation for determining the quorum negates the existence and validity of the stock and transfer book which private respondents themselves prepared. In addition, they posit that private respondents cannot avail of the benefits secured by the heirs of Acayan, as private respondents must show and prove entitlement to the founders and common shares in a separate and independent action/proceeding.

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In private respondents Memorandum11 dated 08 March 2000, they point out that the instant petition raises the same facts and issues as those raised in G.R. No. 13131512, which was denied by the First Division of this Court on 18 January 1999 for failure to show that the Court of Appeals committed any reversible error. They add that as a logical consequence, the instant petition should be dismissed on the ground of res judicata. Furthermore, private respondents claim that in view of the applicability of the rule on res judicata, petitioners counsel should be cited for contempt for violating the rule against forumshopping.13 For their part, petitioners claim that the principle of res judicata does not apply to the instant case. They argue that the instant petition is separate and distinct from G.R. No. 131315, there being no identity of parties, and more importantly, the parties in the two petitions have their own distinct rights and interests in relation to the subject matter in litigation. For the same reasons, they claim that counsel for petitioners cannot be found guilty of forum-shopping.14 In their Manifestation and Motion15 dated 22 September 2004, private respondents moved for the dismissal of the instant petition in view of the dismissal of G.R. No. 131315. Attached to the said manifestation is a copy of theEntry of Judgment16 issued by the First Division dated 01 December 1999. The petition must be denied, not on res judicata, but on the ground that like the petition in G.R. No. 131315 it fails to impute reversible error to the challenged Court of Appeals Decision. Res judicata does not apply in the case at bar. Res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment.17 The doctrine of res judicata provides that a final judgment, on the merits rendered by a court of competent jurisdiction is conclusive as to the rights of the parties and their privies and constitutes an absolute bar to subsequent actions involving the same claim, demand, or cause of action.18 The elements of res judicata are (a) identity of parties or at least such as representing the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity in the two (2) particulars is such that any judgment which may be rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.19 There is no dispute as to the identity of subject matter since the crucial point in both cases is the propriety of including the still unproven shares of respondents for purposes of determining the quorum. Petitioners, however, deny that there is identity of parties and causes of actions between the two petitions. The test often used in determining whether causes of action are identical is to ascertain whether the same facts or evidence would support and establish the former and present causes of action.20 More significantly, there is identity of causes of action when the judgment sought will be inconsistent with the prior judgment.21 In both petitions, petitioners assert that the Court of Appeals Decision effectively negates the existence and validity of the stock and transfer book, as well as automatically grants private respondents shares of stocks which they do not own, or the ownership of which remains to be unproved. Petitioners in the two petitions rely on the entries in the stock and transfer book as the proper basis for computing the quorum, and consequently determine the degree of control one has over the company. Essentially, the affirmance of the SEC Order had the effect of diminishing their control and interests in the company, as it allowed the participation of the individual private respondents in the election of officers of the corporation. Absolute identity of parties is not a condition sine qua non for res judicata to applya shared identity of interest is sufficient to invoke the coverage of the principle.22 However, there is no identity of parties between the two cases. The parties in the two petitions have their own rights and interests in relation to the subject matter in litigation. As stated by petitioners in their Reply to Respondents Memorandum,23 there are no two separate actions filed, but rather, two separate petitions for review on certiorari filed by two distinct parties with the Court and represented by their own counsels, arising from an adverse consolidated decision promulgated by the Court of Appeals in one action or proceeding.24 As such, res judicata is not present in the instant case. Likewise, there is no basis for declaring petitioners or their counsel guilty of violating the rules against forum-shopping. In the Verification/Certification25 portion of the petition, petitioners clearly stated that there was then a pending motion for reconsideration of the 18 August 1997 Decision of the Court of Appeals in the consolidated cases (CA-G.R. SP No. 41473 and CA-G.R. SP No. 41403) filed by the Abuids, as well as a motion for clarification. Moreover, the records indicate that petitioners filed their Manifestation26 dated 20 January 1998, informing the Court of their receipt of the petition in G.R. No. 131315 in compliance with their duty to inform the Court of the pendency of another similar petition. The Court finds that petitioners substantially complied with the rules against forum-shopping. The Decision of the Court of Appeals must be upheld.

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The petition in this case involves the same facts and substantially the same issues and arguments as those in G.R. No. 131315 which the First Division has long denied with finality. The First Division found the petition before it inadequate in failing to raise any reversible error on the part of the Court of Appeals. We reach a similar conclusion as regards the present petition. The crucial issue in this case is whether it is the companys stock and transfer book, or its 1952 Articles of Incorporation, which determines stockholders shareholdings, and provides the basis for computing the quorum. We agree with the Court of Appeals. The articles of incorporation has been described as one that defines the charter of the corporation and the contractual relationships between the State and the corporation, the stockholders and the State, and between the corporation and its stockholders.27 When PMMSI was incorporated, the prevailing law was Act No. 1459, otherwise known as "The Corporation Law." Section 6 thereof states: Sec. 6. Five or more persons, not exceeding fifteen, a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes by filing with the Securities and Exchange Commission articles of incorporation duly executed and acknowledged before a notary public, setting forth: .... (7) If it be a stock corporation, the amount of its capital stock, in lawful money of the Philippines, and the number of shares into which it is divided, and if such stock be in whole or in part without par value then such fact shall be stated; Provided, however, That as to stock without par value the articles of incorporation need only state the number of shares into which said capital stock is divided. (8) If it be a stock corporation, the amount of capital stock or number of shares of no-par stock actually subscribed, the amount or number of shares of no-par stock subscribed by each and the sum paid by each on his subscription. . . .28 A review of PMMSIs articles of incorporation29 shows that the corporation complied with the requirements laid down by Act No. 1459. It provides in part: 7. That the capital stock of the said corporation is NINETY THOUSAND PESOS (P90,000.00) divided into two classes, namely: FOUNDERS STOCK - 1,000 shares at P20 par value- P 20,000.00 COMMON STOCK- 700 shares at P 100 par value P 70,000.00 TOTAL ---------------------1,700 shares----------------------------P 90,000.00 .... 8. That the amount of the entire capital stock which has been actually subscribed is TWENTY ONE THOUSAND SIX HUNDRED PESOS (P21,600.00) and the following persons have subscribed for the number of shares and amount of capital stock set out after their respective names: SUBSCRIBER SUBSCRIBED AMOUNT SUBSCRIBED Par Value P 2,400.00 2, 400.00 2, 000.00 1, 000.00 1, 000.00 2, 800.00 800.00

No. of Shares Crispulo J. Onrubia Juan H. Acayan Martin P. Sagarbarria Mauricio G. Gallaga Luis Renteria Faustina M. de Onrubia Mrs. Ramon Araneta 120 Founders 120 " 100 " 50 " 50 " 140 " 40 "

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Carlos M. Onrubia

80 " 700

1,600.00 P 14,000.00

SUBSCRIBER

SUBSCRIBED No. of Shares

AMOUNT SUBSCRIBED Par Value P 1,200.00 1,200.00 800.00 800.00 800.00 1,200.00 800.00 800.00 P7,600.0030

Crispulo J. Onrubia Juan H. Acayan Martin P. Sagarbarria Mauricio G. Gallaga Luis Renteria Faustina M. de Onrubia Mrs. Ramon Araneta Carlos M. Onrubia

12 Common 12 " 8" 8" 8" 12 " 8" 8" 76

There is no gainsaying that the contents of the articles of incorporation are binding, not only on the corporation, but also on its shareholders. In the instant case, the articles of incorporation indicate that at the time of incorporation, the incorporators were bona fide stockholders of seven hundred (700) founders shares and seventy-six (76) common shares. Hence, at that time, the corporation had 776 issued and outstanding shares. On the other hand, a stock and transfer book is the book which records the names and addresses of all stockholders arranged alphabetically, the installments paid and unpaid on all stock for which subscription has been made, and the date of payment thereof; a statement of every alienation, sale or transfer of stock made, the date thereof and by and to whom made; and such other entries as may be prescribed by law.31 A stock and transfer book is necessary as a measure of precaution, expediency and convenience since it provides the only certain and accurate method of establishing the various corporate acts and transactions and of showing the ownership of stock and like matters.32 However, a stock and transfer book, like other corporate books and records, is not in any sense a public record, and thus is not exclusive evidence of the matters and things which ordinarily are or should be written therein.33 In fact, it is generally held that the records and minutes of a corporation are not conclusive even against the corporation but are prima facie evidence only,34 and may be impeached or even contradicted by other competent evidence.35 Thus, parol evidence may be admitted to supply omissions in the records or explain ambiguities, or to contradict such records.36 In 1980, Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines" supplanted Act No. 1459. BP Blg. 68 provides: Sec. 24. Election of directors or trustees.At all elections of directors or trustees, there must be present, either in person or by representative authorized to act by written proxy, the owners of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote. . . . Sec. 52. Quorum in meetings.- Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or majority of the members in the case of non-stock corporation. Outstanding capital stock, on the other hand, is defined by the Code as:

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Sec. 137. Outstanding capital stock defined. The term "outstanding capital stock" as used in this code, means the total shares of stock issued to subscribers or stockholders whether or not fully or partially paid (as long as there is binding subscription agreement) except treasury shares. Thus, quorum is based on the totality of the shares which have been subscribed and issued, whether it be founders shares or common shares.37 In the instant case, two figures are being pitted against each other those contained in the articles of incorporation, and those listed in the stock and transfer book. To base the computation of quorum solely on the obviously deficient, if not inaccurate stock and transfer book, and completely disregarding the issued and outstanding shares as indicated in the articles of incorporation would work injustice to the owners and/or successors in interest of the said shares. This case is one instance where resort to documents other than the stock and transfer books is necessary. The stock and transfer book of PMMSI cannot be used as the sole basis for determining the quorum as it does not reflect the totality of shares which have been subscribed, more so when the articles of incorporation show a significantly larger amount of shares issued and outstanding as compared to that listed in the stock and transfer book. As aptly stated by the SEC in itsOrder dated 15 July 1996:38 It is to be explained, that if at the onset of incorporation a corporation has 771 shares subscribed, the Stock and Transfer Book should likewise reflect 771 shares. Any sale, disposition or even reacquisition of the company of its own shares, in which it becomes treasury shares, would not affect the total number of shares in the Stock and Transfer Book. All that will change are the entries as to the owners of the shares but not as to the amount of shares already subscribed. This is precisely the reason why the Stock and Transfer Book was not given probative value. Did the shares, which were not recorded in the Stock and Transfer Book, but were recorded in the Articles of Iincorporation just vanish into thin air? . . . .39 As shown above, at the time the corporation was set-up, there were already seven hundred seventy-six (776) issued and outstanding shares as reflected in the articles of incorporation. No proof was adduced as to any transaction effected on these shares from the time PMMSI was incorporated up to the time the instant petition was filed, except for the thirty-three (33) shares which were recorded in the stock and transfer book in 1978, and the additional one hundred thirty-two (132) in 1982. But obviously, the shares so ordered recorded in the stock and transfer book are among the shares reflected in the articles of incorporation as the shares subscribed to by the incorporators named therein. One who is actually a stockholder cannot be denied his right to vote by the corporation merely because the corporate officers failed to keep its records accurately.40 A corporations records are not the only evidence of the ownership of stock in a corporation.41 In an American case,42 persons claiming shareholders status in a professional corporation were listed as stockholders in the amendment to the articles of incorporation. On that basis, they were in all respects treated as shareholders. In fact, the acts and conduct of the parties may even constitute sufficient evidence of ones status as a shareholder or member.43 In the instant case, no less than the articles of incorporation declare the incorporators to have in their name the founders and several common shares. Thus, to disregard the contents of the articles of incorporation would be to pretend that the basic document which legally triggered the creation of the corporation does not exist and accordingly to allow great injustice to be caused to the incorporators and their heirs. Petitioners argue that the Court of Appeals "gravely erred in applying the Espejo decision to the benefit of respondents." The Court believes that the more precise statement of the issue is whether in its assailed Decision, the Court of Appeals can declare private respondents as the heirs of the incorporators, and consequently register the founders shares in their name. However, this issue as recast is not actually determinative of the present controversy as explained below. Petitioners claim that the Decision of the Court of Appeals unilaterally divested them of their shares in PMMSI as recorded in the stock and transfer book and instantly created inexistent shares in favor of private respondents. We do not agree. The assailed Decision merely declared that a separate judicial declaration to recognize the shares of the original incorporators would entail unnecessary delay and expense on the part of the litigants, considering that the incorporators had already proved ownership of such shares as shown in the articles of incorporation.44 There was no declaration of who the individual owners of these shares were on the date of the promulgation of the Decision. As properly stated by the SEC in its Order dated 20 June 1996, to which the appellate courts Decision should be related, "if at all, the ownership of these shares should only be subjected to the proper judicial (probate) or extrajudicial proceedings in order to determine the respective shares of the legal heirs of the deceased incorporators."45 WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioners. SO ORDERED.

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G.R. No. 130876

January 31, 2002

FRANCISCO M. ALONSO, substituted by his heirs, petitioners, vs. CEBU COUNTRY CLUB, INC., respondent. PARDO, J.: The Case The case is an appeal via certiorari from a decision of the Court of Appeals1 affirming in toto that of the Regional Trial Court, Branch 8, Cebu City,2 declaring that the title to the contested Lot No. 727, Banilad Friar Lands Estate, Cebu City, was validly reconstituted in the name of the Cebu Country Club, Inc. and ordering petitioners to pay attorneys fees of P400,000.00, and litigation expenses of P51,000.00, and costs. In an appeal via certiorari, petitioners may raise only questions of law, which shall be distinctly set forth.3 The jurisdiction of the Supreme Court in cases brought before it from the Court of Appeals is limited to the review of errors of law and not to analyze or weigh the evidence all over again, as its findings of facts are deemed final and conclusive.4 In this appeal, petitioners raise five (5) issues, all of which involve questions of fact that have been resolved by the trial court and the Court of Appeals in favor of the Cebu Country Club, Inc. The Facts The facts, as found by the Court of Appeals, are as follows: (1) Petitioner Francisco M. Alonso, who died pendente lite and substituted by his legal heirs, a lawyer by profession, the only son and sole heir of the late Tomas N. Alonso and Asuncion Medalle, who died on June 16, 1962 and August 18, 1963, respectively (Exhibits "P" and "P-1"). Cebu Country Club, Inc. is a non-stock, non-profit corporation duly organized and existing under Philippine Laws the purpose of which is to cater to the recreation and leisure of its members. (2) Sometime in 1992, petitioner discovered documents and records Friar Lands Sale Certificate Register/Installment Record Certificate No. 734, Sales Certificate No. 734 and Assignment of Sales Certificate (Exhs. "A", "J" and "K") showing that his father acquired Lot No. 727 of the Banilad Friar Lands Estate from the Government of the Philippine Islands in or about the year 1911 in accordance with the Friar Lands Act (Act No. 1120). The documents show that one Leoncio Alburo, the original vendee of Lot No. 727, assigned his sales certificate to petitioners father on December 18, 1911, who completed the required installment payments thereon under Act No. 1120 and was consequently issued Patent No. 14353 on March 24, 1926. On March 27, 1926, the Director of Lands, acting for and in behalf of the government, executed a final deed of sale in favor of petitioners father Tomas N. Alonso (Exh. "C"). It appears, however, that the deed was not registered with the Register of Deeds because of lack of technical requirements, among them the approval of the deed of sale by the Secretary of Agriculture and Natural Resources, as required by law. (3) Upon investigation of the status of the land, petitioner found out from the office of the Registrar of Deeds of Cebu City that title to Lot No. 727 of the Banilad Friar Lands Estate had been "administratively reconstituted from the owners duplicate" on July 26, 1948 under Transfer Certificate of Title (TCT) No. RT-1310 (T-11351) in the name of United Service Country Club, Inc., predecessor of Cebu Country Club, Inc. On March 8, 1960, upon order of the Court of First Instance, the name of the registered owner in TCT No. RT-1310 (T-11531) was changed to Cebu Country Club, Inc. Moreover, the TCT provides that the reconstituted title was a transfer from TCT No. 1021 (Exh. "D" and sub-markings). (4) At present, TCT No. RT-1310 (T-11351) has been partially cancelled when Lot No. 727 was subdivided in accordance with the Memorandum of Agreement entered into by Cebu Country Club, Inc. and Susana Ingles Marquiso and Simeon Ingles, Jr. by virtue of the ruling of the Court of Appeals in the case of Heirs of Ramon Cabrera and Graciano Ingles v. Cebu Country Club, Inc.5 and affirmed by the Supreme Court in G. R. No. 60392, per resolution dated August 29, 1983. Lot 727-D-2 covered by TCT No. 94905 remains registered in the name of Cebu Country Club, Inc. (Exh. "D-2"). (5) In the firm belief that petitioners father is still the rightful owner of Lot No. 727 of the Banilad Friar Lands Estate since there are no records showing that he ever sold or conveyed the disputed property to anyone, on July 7, 1992, petitioner made a formal demand upon Cebu Country Club, Inc. to restore to him the ownership and possession of said lot within fifteen (15) days from receipt thereof. He indicated that his claim was analogous to that of the heirs of the late Ramon Cabrera and Graciano Ingles which was upheld by the Court of Appeals (Exh. "H"). Cebu Country Club, Inc., however, denied petitioners claim and refused to deliver possession to him. (6) Left with no other recourse, on September 25, 1992, petitioner filed with the Regional Trial Court, Cebu City,6a complaint for declaration of nullity and non existence of deed/title, cancellation of certificates of title and recovery of property against defendant Cebu Country Club, Inc.7 He alleged that the Cebu Country Club, Inc. fraudulently and illegally managed to secure in its name the administrative reconstitution of TCT No. RT-13 10 (T-11351) despite the absence of any transaction of specific
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land dealing that would show how Lot No. 727 had come to pass to Cebu Country Club, Inc.; that TCT No. 11351 which is the source title of TCT No. RT-1310 (T-11351) does not pertain to Lot No. 727; that the reconstituted title which was issued on July 26, 1948, did not contain the technical description of the registered land which was inserted only on March 8, 1960, twentyeight (28) years after the issuance of TCT No. RT-1310 (T-11351), hence, Cebu Country Club, Inc.s title is null and void. Petitioner thus prayed for the cancellation of TCT No. RT-1310 (T-11351) and the issuance of another title in his name as the sole heir of Tomas Alonso, for Cebu Country Club, Inc. to deliver possession of the property to petitioner, and render an accounting of the fruits and income of the land. Petitioner likewise prayed for the sum of P100,000.00 by way of attorneys fees plus P500.00 per hearing as appearance fee, and P10,000.00 as reasonable litigation expenses. (7) On November 5, 1992, Cebu Country Club, Inc. filed with the trial court its answer with counterclaim. It alleged that petitioner had no cause of action against Cebu Country Club, Inc. since the same had prescribed and was barred by laches, Cebu Country Club, Inc. having been in possession of the land since 1935 until the present in the concept of an owner, openly, publicly, peacefully, exclusively, adversely, continuously, paying regularly the real estate taxes thereon; that Cebu Country Club, Inc. acquired the lot in good faith and for value; that it caused the administrative reconstitution of Lot No. 727 in 1948 from the owners duplicate, the original of TCT No. 11351 having been lost or destroyed during the war, pursuant to Republic Act No. 26, its implementing Circular, GLRO Circular No. 178 and Circular No. 6 of the General Land Registration Office;9 that unlike Cebu Country Club, Inc., petitioners father never had any registered title under the Land Registration Act No. 496 nor did he pay the necessary taxes on Lot No. 727 during his lifetime; that petitioners father knew that the United Service Country Club, Inc., predecessor of Cebu Country Club, Inc. was occupying Lot No. 727 as owner; that petitioners father never reconstituted his alleged title to Lot No. 727 but did so over Lot No. 810 of the Banilad Friar Lands Estate, a lot adjacent to the disputed property, in 1946; that petitioner himself lived in Cebu City, a few kilometers away from the land in litigation; that petitioners father or petitioner himself, both of whom are lawyers and the former a congressman as well, for more than sixty (60) years, never made any demand on Cebu Country Club, Inc. for the recovery of the property knowing fully well that said land was owned and utilized by Cebu Country Club, Inc. as its main golf course. By way of counterclaim, Cebu Country Club, Inc. prayed for the award of attorneys fees in the amount of P900,000.00 and litigation expenses of P100,000.00, moral damages of P500,000.00 and exemplary damages of P2,000,000.00.10 (8) In the course of the trial, Cebu Country Club, Inc. to disprove petitioners allegation that its title, TCT No. RT-1310 (T11351), was obtained illegally and fraudulently, submitted the deposition of an expert witness, Atty. Benjamin Bustos, Chief of the Reconstitution Division, Land Registration Authority, Central Office, Metro Manila (Exh. "8"). He testified that pursuant to GLRO Circular No. 17 dated February 19, 1947 and Circular No. 6 (RD-3) dated August 5, 1946 (Exhs "2" and "3"), titles issued before the inauguration of the Republic of the Philippines were numbered consecutively, and titles issued after the inauguration of the Republic were likewise numbered consecutively, starting with the number one (1). Eventually, therefore, the title numbers issued before the inauguration would be duplicated by the title numbers issued after the inauguration of the Republic.11 (9) On May 7, 1993, the trial court rendered a decision, the dispositive portion of which reads: "THE FOREGOING CONSIDERED, judgment is hereby rendered in favor of the defendant and against the plaintiff: declaring the contested property or Lot 727 as legally belonging to the defendant; directing the plaintiff to pay attorney' fee of P400,000.00; and litigation expenses of P51,000.00; and finally, with costs against the plaintiff. "SO ORDERED. "Cebu City, May 7, 1993. "(s/t) BERNARDO LL. SALAS "Judge"12 (10) In due time, both parties appealed to the Court of Appeals.13 After proceedings on appeal, on March 31, 1997, the Court of Appeals promulgated a decision, the dispositive portion of which reads: "WHEREFORE, IN VIEW OF THE FOREGOING, the appeals interposed by both parties are hereby DENIED, and the lower courts Decision dated May 7, 1993 is AFFIRMED in toto. No pronouncement as to costs." "SO ORDERED."14 On April 30, 1997, petitioner filed a motion for reconsideration; however, on October 2, 1997, the Court of Appeals denied the motion.15 Hence, this appeal.16
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On October 24, 2000, we required the Solicitor General to file comment on the issue of the validity of the re-constituted title in dispute.17 On November 8, 2000, the Solicitor General submitted a comment stating that on the basis of information received from the Land Registration Authority (LRA) and the Land Management Bureau (LMB), the Cebu Country Club, Inc. had been occupying the disputed property even before the Second World War and developed it into a golf course and must have acquired the property in a proper and valid manner.18 Nonetheless, the Solicitor General emphasized that the Cebu Country Clubs certificate of title is a reconstituted title. A reconstituted title does not confirm or adjudicate ownership of land covered by lost or destroyed title.19 And the Governments right to file reversion proceedings cannot be barred by prescription that does not run against the State.20 The Issues Petitioners raise the following issues: 1. Whether the Court of Appeals erred in affirming the validity of TCT No. RT-1310 (T-11351). 2. Whether the Court of Appeals erred in sustaining respondents claim of ownership over Lot No. 727; 3. Whether the Court of Appeals erred in holding that the present action is barred by prescription and/or by laches; 4. Whether the Court of Appeals erred in not applying the doctrine of stare decisis; 5. Whether the Court of Appeals erred in sustaining the trial courts award for damages in the form of attorneys fees and litigation expenses.21 We resolve the issues in seriatim. First Issue: Validity of Cebu Country Club, Inc.s Title The first issue is whether the Court of Appeals lawfully adjudged the validity of the administrative reconstitution of the title of Cebu Country Club, Inc. over the OCT of the Government of the Philippine Islands and Sales Patent No. 14353 on Lot No. 727 in the name of Tomas N. Alonso. The issue is factual, which, as aforesaid, cannot be reviewed in this appeal. Nevertheless, petitioners assail the validity of the administrative reconstitution of Cebu Country Club, Inc.s title No. RT-1310 (T-11351) on three (3) grounds: 1. Its source title bears the same number as another title which refers to another parcel of land; 2. There is no recorded transaction of the land from Tomas Alonso in favor of Cebu Country Club, Inc.; and 3. The technical description was not transcribed in the title within two (2) years from the date of its reconstitution. None of the grounds has any basis or merit. On the question that TCT No. RT-1310 (T-11351) bears the same number as another title to another land, we agree with the Court of Appeals that there is nothing fraudulent with the fact that Cebu Country Club, Inc.s reconstituted title bears the same number as the title of another parcel of land. This came about because under General Land Registration Office (GLRO) Circular No. 17, dated February 19, 1947, and Republic Act No. 26 and Circular No. 6, RD 3, dated August 5, 1946, which were in force at the time the title was reconstituted on July 26, 1948, the titles issued before the inauguration of the Philippine Republic were numbered consecutively and the titles issued after the inauguration were numbered also consecutively starting with No. 1, so that eventually, the titles issued before the inauguration were duplicated by titles issued after the inauguration of the Philippine Republic. This was testified to by Atty. Benjamin Bustos, Chief of the Reconstitution Division, Land Registration Authority, Central Office, Metro Manila, and by Atty. Dindo Nuez, Deputy Register of Deeds of Cebu City, who declared that several titles in the record of the Register of Deeds which were reconstituted after the inauguration of the Philippine Republic had the same numbers as the titles issued before the Second World War, due to the operation of the circulars referred to. Said the Court of Appeals: "As a third argument, plaintiff avers that the lower court erred in declaring defendant as the owner of Lot 727 when it has a void title because it was fraudulently acquired. Specifically, plaintiff points out that on the face of defendants administratively reconstituted title- TCT No. RT-1310 (T-11351), it would appear that its source title is TCT No. 11351. Going over the said title further, it can be gleaned that the parent title of TCT No. 11351 is TCT No. 1021. However, plaintiff claims that defendant failed to present said source titles. It appears likewise that the Register of Deeds of Cebu City does not have a copy thereof. "On the other hand, plaintiff presented TCT No. 11351 issued on June 18, 1954 in the name of Pacita Raffinan covering Lot 925 of the Cadastral Survey of Cebu with an area of 310 square meters, more or less, (Exh. "L") and TCT No. 1021 issued on July 12, 1947 in the name of Rosario Rubio covering Lot No. 51-D of the subdivision plan being a
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portion of Lot No. 576 of the Banilad Friar lands Estate with an area of 230 sq. m., more or less (Exh. "E"). In his motion for new trial, he likewise presented as one of his newly discovered evidence a copy of TCT No. RT-1325 (T1021) (Annex "B", Motion for New Trial, p. 60, Rollo) whose source title was presumably TCT No. 1021, which apparently is the parent title of defendants TCT. Said TCT No. RT-1325 (T-1021) was administratively reconstituted on July 27, 1948 and covers Lot No. 1314 of the Cadastral Survey of Cebu with an area of 110 sq. m., more or less, and registered in the name of Spouses Andres Borres and Emiliana Enriquez. As stated in TCT No. RT-1325 (T-1021), its parent title, TCT No. 1021, was entered in the record book on May 17, 1939. "Plaintiff concludes then that considering that TCT Nos. 11351 and 1021 as well as RT-1325 (T-1021), which were purportedly the parent titles of TCT No. RT-1310 (T-11351), do not cover Lot. 727, defendants TCT was void having been obtained from a spurious or non-existent source (Citing the case of Ramon Cabrera, et. al., vs. Cebu Country Club, Inc. CA-G.R. No. 65559-R, Exh. "F"). "That there seems to be no record on file of the existence of either TCT No. 11351 or 1021 covering Lot 727 of the Banilad Friar Lands Estate containing an area of 377,622 sq. m., does not invalidate defendants title. As defendant counters, which was corroborated by Atty. Dindo Nuez, Deputy Register of Deeds for Cebu City, copies of these titles were lost and could not be found despite diligent search thereof. "Moreover, the absence of said titles and the existence of TCT Nos. 11351 and 1021, which do not cover Lot 727, do not render TCT No. RT-1310 (T-11351) invalid in the light of Circular No. 6 Exh. "3") re: numbering of certificates of title, entries in the day book and registration books, and GLRO Circular No. 17 (Exh. "2") the rules and regulations governing the reconstitution of lost or destroyed certificates of title."22 Petitioners next argue that the reconstituted title of Cebu Country Club, Inc. had no lawful source to speak of; it was reconstituted through extrinsic and intrinsic fraud in the absence of a deed of conveyance in its favor. In truth, however, reconstitution was based on the owners duplicate of the title, hence, there was no need for the covering deed of sale or other modes of conveyance. Cebu Country Club, Inc. was admittedly in possession of the land since long before the Second World War, or since 1931. In fact, the original title (TCT No. 11351) was issued to the United Service Country Club, Inc. on November 19, 1931 as a transfer from Transfer Certificate of Title No. 1021 (Exh. "D-6"). More importantly, Cebu Country Club, Inc. paid the realty taxes on the land even before the war, and tax declarations covering the property showed the number of the TCT of the land. Cebu Country Club, Inc. produced receipts showing real estate tax payments since 1949 (Exhs. 27 to 100-B). On the other hand, petitioner failed to produce a single receipt of real estate tax payment ever made by his father since the sales patent was issued to his father on March 24, 1926. Worse, admittedly petitioner could not show any torrens title ever issued to Tomas N. Alonso, because, as said, the deed of sale executed on March 27, 1926 by the Director of Lands was not approved by the Secretary of Agriculture and Natural Resources and could not be registered. "Under the law, it is the act of registration of the deed of conveyance that serves as the operative act to convey the land registered under the Torrens system. The act of registration creates constructive notice to the whole world of the fact of such conveyance."23 On this point, petitioner alleges that Cebu Country Club, Inc. obtained its title by fraud in connivance with personnel of the Register of Deeds in 1941 or in 1948, when the title was administratively reconstituted. Imputations of fraud must be proved by clear and convincing evidence.24 Petitioner failed to adduce evidence of fraud. In an action for re-conveyance based on fraud, he who charges fraud must prove such fraud in obtaining a title. "In this jurisdiction, fraud is never presumed."25 The strongest suspicion cannot sway judgment or overcome the presumption of regularity. "The sea of suspicion has no shore, and the court that embarks upon it is without rudder or compass."26 Worse, the imputation of fraud was so tardily brought, some forty-four (44) years or sixty-one (61) years after its supposed occurrence, that is, from the administrative reconstitution of title on July 26, 1948, or from the issuance of the original title on November 19, 1931, that verification is rendered extremely difficult, if not impossible, especially due to the supervening event of the second world war during which practically all public records were lost or destroyed, or no longer available. Petitioners next question the lack of technical description inscribed in the reconstituted title in Cebu Country Club, Inc.s name. This is not a bar to reconstitution of the title nor will it affect the validity of the reconstituted title. A registered owner is given two (2) years to file a plan of such land with the Chief of the General Land Registration Office.27 The two-year period is directory, not jurisdictional. In other words, the failure to submit the technical description within two (2) years would not invalidate the title. At most, the failure to file such technical description within the two-year period would bar a transfer of the title to a third party in a voluntary transaction. Second Issue: Whether Francisco Alonso is owner of the land The second issue is whether the Court of Appeals erred in ruling that the Cebu Country Club, Inc. is owner of Lot No. 727. Admittedly, neither petitioners nor their predecessor had any title to the land in question. The most that petitioners could claim was that the Director of Lands issued a sales patent in the name of Tomas N. Alonso. The sales patent, however, and
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even the corresponding deed of sale were not registered with the Register of Deeds and no title was ever issued in the name of the latter. This is because there were basic requirements not complied with, the most important of which was that the deed of sale executed by the Director of Lands was not approved by the Secretary of Agriculture and Natural Resources. Hence, the deed of sale was void.28 "Approval by the Secretary of Agriculture and Commerce is indispensable for the validity of the sale."29 Moreover, Cebu Country Club, Inc. was in possession of the land since 1931, and had been paying the real estate taxes thereon based on tax declarations in its name with the title number indicated thereon. Tax receipts and declarations of ownership for taxation purposes are strong evidence of ownership.30 This Court has ruled that although tax declarations or realty tax payments are not conclusive evidence of ownership, nevertheless, they are good indicia of possession in the concept of owner for no one in his right mind will be paying taxes for a property that is not in his actual or constructive possession.31 Notwithstanding this fatal defect, the Court of Appeals ruled that "there was substantial compliance with the requirement of Act No. 1120 to validly convey title to said lot to Tomas N. Alonso."32 On this point, the Court of Appeals erred. Under Act No. 1120, which governs the administration and disposition of friar lands, the purchase by an actual and bona fide settler or occupant of any portion of friar land shall be "agreed upon between the purchaser and the Director of Lands, subject to the approval of the Secretary of Agriculture and Natural Resources (mutatis mutandis)."33 In his Memorandum filed on May 25, 2001, the Solicitor General submitted to this Court certified copies of Sale Certificate No. 734, in favor of Leoncio Alburo, and Assignment of Sale Certificate No. 734, in favor of Tomas N. Alonso. Conspicuously, both instruments do not bear the signature of the Director of Lands and the Secretary of the Interior. They also do not bear the approval of the Secretary of Agriculture and Natural Resources. Only recently, in Jesus P. Liao v. Court of Appeals,34 the Court has ruled categorically that approval by the Secretary of Agriculture and Commerce of the sale of friar lands is indispensable for its validity, hence, the absence of such approval made the sale null and void ab-initio.35 Necessarily, there can be no valid titles issued on the basis of such sale or assignment.36 Consequently, petitioner Franciscos father did not have any registerable title to the land in question. Having none, he could not transmit anything to his sole heir, petitioner Francisco Alonso or the latters heirs. In a vain attempt at showing that he had succeeded to the estate of his father, on May 4, 1991, petitioner Francisco Alonso executed an affidavit adjudicating the entire estate to himself (Exh. "Q"), duly published in a newspaper of general circulation in the province and city of Cebu (Exh. "Q-1"). Such affidavit of self-adjudication is inoperative, if not void, not only because there was nothing to adjudicate, but equally important because petitioner Francisco did not show proof of payment of the estate tax and submit a certificate of clearance from the Commissioner of Internal Revenue.37 Obviously, petitioner Francisco has not paid the estate taxes. Consequently, we rule that neither Tomas N. Alonso nor his son Francisco M. Alonso or the latters heirs are the lawful owners of Lot No. 727 in dispute. Neither has the respondent Cebu Country Club, Inc. been able to establish a clear title over the contested estate. The reconstitution of a title is simply the re-issuance of a lost duplicate certificate of title in its original form and condition. It does not determine or resolve the ownership of the land covered by the lost or destroyed title. A reconstituted title, like the original certificate of title, by itself does not vest ownership of the land or estate covered thereby.38 Third Issue: Action has prescribed or is barred by laches The third issue is whether petitioners action for re-conveyance has prescribed or is barred by laches. "An action based on implied or constructed trust prescribes in ten (10) years... from the time of its creation or upon the alleged fraudulent registration of the property."39 Petitioner Franciscos action in the court below was basically one of reconveyance. It was filed on September 25, 1992, sixty-one (61) years after the title was issued on November 19, 1931, and forty-four (44) years after its reconstitution on July 26, 1948. Thus, the failure of petitioner Francisco and his father to assert ownership of the land for over sixty (60) years during which the Cebu Country Club, Inc. was in possession is simply contrary to their claim of ownership.40 Petitioner Franciscos and his fathers "long inaction or passivity in asserting their rights over disputed property will preclude them from recovering the same."41 Aside from the fact that, as herein-above stated, neither petitioner Francisco nor his father held a valid title over the land, and that there was no showing that his father owned the land at the time of his demise so as to bequeath the same to petitioner Francisco as his sole heir, by now, the rule is firmly settled that an action for re-conveyance based on fraud must be filed within ten (10) years from discovery of the fraud which as to titled lands referred to the registration of the title with the register of deeds.42 "An action for re-conveyance is a legal remedy granted to a landowner whose property has been wrongfully or erroneously registered in anothers name, but then the action must be filed within ten years from the issuance
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of the title since such issuance operates as a constructive notice."43 In addition, the action is barred by laches because of the long delay before the filing of the case.44 Fourth Issue: No stare decisis The next issue is whether the Court of Appeals erred in not ruling that the decision in Ramon Cabrera-Graciano Ingles vs. Cebu Country Club, Inc., CA-G. R. No. 65559-R, October 31, 1981, was binding on respondent Cebu Country Club, Inc. as to the land in question. Petitioners assert that as the Court of Appeals annulled Cebu Country Club, Inc.s title in the Cabrera-Ingles case, so too must the title in this case be declared void. In the first place, there is no identity of parties; secondly, neither the titles to nor the parcels of land involved are the same. Consequently, the doctrine of res-judicata does not apply.45 Momentarily casting aside the doctrine of res-judicata, there is an important moiety in the Cabrera-Ingles case. There, the Director of Lands, after the administrative reconstitution of the title, issued a directive to the Register of Deeds to register the lot in question in favor of Graciano Ingles.46 This superseded the administrative reconstitution, rendering allegations of fraud irrelevant. Here, the Director of Lands did not issue a directive to register the land in favor of Tomas N. Alonso. And worse, the sales patent and corresponding deed of sale executed in 1926 are now stale.47 Petitioners further contend that the Supreme Courts minute resolution refusing to review that decision is equivalent to a judgment on the merits. The minute resolution may amount to a final action on the case but it is not a precedent.48 It can not bind non-parties to the action. To restate, the rule is that: (1) a judgment in rem is binding upon the whole world, such as a judgment in a land registration case or probate of a will; (2) a judgment in personam is binding upon the parties and their successors in interest but not upon strangers.49 A judgment directing a party to deliver possession of a property to another is in personam; it is binding only against the parties and their successors in interest by title subsequent to the commencement of the action.50 "Suits to quiet title are not technically suits in rem, nor are they, strictly speaking, in personam, but being against the person in respect of the res, these proceedings are characterized as quasi in rem. The judgment in such proceedings is conclusive only between the parties."51 In this case, the action below is basically one for declaration of nullity of title and recovery of ownership of real property, or re-conveyance. "An action to recover a parcel of land is a real action but it is an action in personam, for it binds a particular individual only although it concerns the right to a tangible thing."52 "Any judgment therein is binding only upon the parties properly impleaded."53 What is more, the doctrine of stare decisis notwithstanding, the Court has abandoned or overruled precedents whenever it realized that the Court erred in the prior decisions. "After all, more important than anything else is that this Court should be right."54 Fifth Issue: Award of attorneys fees The final issue raised is whether or not the Court of Appeals erred in awarding in favor of the Cebu Country Club, Inc. attorneys fees of P400,000.00 as damages and P51,000.00 as litigation expenses.55 An award of attorneys fees and expenses of litigation is proper under the circumstances provided for in Article 2208 of the Civil Code, one of which is when the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered56 and when the civil action or proceeding is clearly unfounded and where defendant acted in gross and evident bad faith.57 "The award of attorneys fees as damages is the exception rather than the rule; it is not to be given to the defendant every time the latter prevails. The right to litigate is so precious that a penalty should not be charged on those who may exercise it erroneously, unless, of course such party acted in bad faith."58 In this case, however, we would rather not award attorneys fees and expenses of litigation in the absence of showing of gross and evident bad faith in filing the action.59 The Judgment WHEREFORE, we DENY the petition for review. However, we SET ASIDE the decision of the Court of Appeals60and that of the Regional Trial Court, Cebu City, Branch 08.61 IN LIEU THEREOF, we DISMISS the complaint and counterclaim of the parties in Civil Case No. CEB 12926 of the trial court. We declare that Lot No. 727 D-2 of the Banilad Friar Lands Estate covered by Original Certificate of Title Nos. 251, 232, and 253 legally belongs to the Government of the Philippines. No costs. SO ORDERED.

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G.R. No. 122174

October 3, 2002

INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE PHILIPPINES, respondents. AUSTRIA-MARTINEZ, J.: Filed before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals in CA-G.R. SP No. 35056, denying due course and dismissing the petition filed by Industrial Refractories Corp. of the Philippines (IRCP). Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13, 1976 for the purpose of engaging in the business of manufacturing, producing, selling, exporting and otherwise dealing in any and all refractory bricks, its by-products and derivatives. On June 22, 1977, it registered its corporate and business name with the Bureau of Domestic Trade. Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the name "Synclaire Manufacturing Corporation". It amended its Articles of Incorporation on August 23, 1985 to change its corporate name to "Industrial Refractories Corp. of the Philippines". It is engaged in the business of manufacturing all kinds of ceramics and other products, except paints and zincs. Both companies are the only local suppliers of monolithic gunning mix.1 Discovering that petitioner was using such corporate name, respondent RCP filed on April 14, 1988 with the Securities and Exchange Commission (SEC) a petition to compel petitioner to change its corporate name on the ground that its corporate name is confusingly similar with that of petitioners such that the public may be confused or deceived into believing that they are one and the same corporation.2 The SEC decided in favor of respondent RCP and rendered judgment on July 23, 1993 with the following dispositive portion: "WHEREFORE, judgment is hereby rendered in favor of the petitioner and against the respondent declaring the latters corporate name Industrial Refractories Corporation of the Philippines as deceptively and confusingly similar to that of petitioners corporate name Refractories Corporation of the Philippines. Accordingly, respondent is hereby directed to amend its Articles of Incorporation by deleting the name Refractories Corporation of the Philippines in its corporate name within thirty (30) days from finality of this Decision. Likewise, respondent is hereby ordered to pay the petitioner the sum of P50,000.00 as attorneys fees."3 Petitioner appealed to the SEC En Banc, arguing that it does not have any jurisdiction over the case, and that respondent RCP has no right to the exclusive use of its corporate name as it is composed of generic or common words.4 In its Decision dated July 23, 1993, the SEC En Banc modified the appealed decision in that petitioner was ordered to delete or drop from its corporate name only the word "Refractories".5 Petitioner IRCP elevated the decision of the SEC En Banc through a petition for review on certiorari to the Court of Appeals which then rendered the herein assailed decision. The appellate court upheld the jurisdiction of the SEC over the case and ruled that the corporate names of petitioner IRCP and respondent RCP are confusingly or deceptively similar, and that respondent RCP has established its prior right to use the word "Refractories" as its corporate name.6 The appellate court also found that the petition was filed beyond the reglementary period.7 Hence, herein petition which we must deny. Petitioner contends that the petition before the Court of Appeals was timely filed. It must be noted that at the time the SEC En Banc rendered its decision on May 10, 1994, the governing rule on appeals from quasi-judicial agencies like the SEC was Supreme Court Circular No. 1-91. As provided therein, the remedy should have been a petition for review filed before the Court of Appeals within fifteen (15) days from notice, raising questions of fact, of law, or mixed questions of fact and law.8 A motion for reconsideration suspends the running of the period.9 In the case at bench, there is a discrepancy between the dates provided by petitioner and respondent. Petitioner alleges the following dates of receipt and filing:10 June 10, 1994 Receipt of SECs Decision dated May 10, 1994 June 20, 1994 Filing of Motion for Reconsideration September 1, 1994 Receipt of SECs Order dated August 3, 1994 denying petitioners motion for reconsideration September 2, 1994 Filing of Motion for extension of time
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September 6, 1994 Filing of Petition Respondent RCP, however, asserts that the foregoing dates are incorrect as the certifications issued by the SEC show that petitioner received the SECs Decision dated May 10, 1994 on June 9, 1994, filed the motion for reconsideration via registered mail on June 25, 1994, and received the Order dated August 3, 1994 on August 15, 1994.11 Thus, the petition was filed twentyone (21) days beyond the reglementary period provided in Supreme Court Circular No. 1-91.12 If reckoned from the dates supplied by petitioner, then the petition was timely filed. On the other hand, if reckoned from the dates provided by respondent RCP, then it was filed way beyond the reglementary period. On this score, we agree with the appellate courts finding that petitioner failed to rebut respondent RCPs allegations of material dates of receipt and filing.13 In addition, the certifications were executed by the SEC officials based on their official records14 which enjoy the presumption of regularity.15 As such, these are prima facie evidence of the facts stated therein.16 And based on such dates, there is no question that the petition was filed with the Court of Appeals beyond the fifteen (15) day period. On this ground alone, the instant petition should be denied as the SEC En Bancs decision had already attained finality and the SECs findings of fact, when supported by substantial evidence, is final.17 Nevertheless, to set the matters at rest, we shall delve into the other issues posed by petitioner. Petitioners arguments, substantially, are as follows: (1) jurisdiction is vested with the regular courts as the present case is not one of the instances provided in P.D. 902-A; (2) respondent RCP is not entitled to use the generic name "refractories"; (3) there is no confusing similarity between their corporate names; and (4) there is no basis for the award of attorneys fees.18 Petitioners argument on the SECs jurisdiction over the case is utterly myopic. The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5 of P.D. 902-A, as amended.19 By express mandate, it has absolute jurisdiction, supervision and control over all corporations.20 It also exercises regulatory and administrative powers to implement and enforce the Corporation Code,21 one of which is Section 18, which provides: "SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name." It is the SECs duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public, and it has authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to generate confusion.22 Clearly therefore, the present case falls within the ambit of the SECs regulatory powers.23 Likewise untenable is petitioners argument that there is no confusing or deceptive similarity between petitioner and respondent RCPs corporate names. Section 18 of the Corporation Code expressly prohibits the use of a corporate name which is "identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws". The policy behind the foregoing prohibition is to avoid fraud upon the public that will have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporation.24 Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership Names25 specifically requires that: (1) a corporate name shall not be identical, misleading or confusingly similar to one already registered by another corporation with the Commission;26 and (2) if the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive word different from the name of the company already registered.27 As held in Philips Export B.V. vs. Court of Appeals,28 to fall within the prohibition of the law, two requisites must be proven, to wit: (1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law. As regards the first requisite, it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption.29 In this case, respondent RCP was incorporated on October 13, 1976 and since then has been using the corporate name "Refractories Corp. of the Philippines". Meanwhile, petitioner was incorporated on August 23, 1979 originally under the name "Synclaire Manufacturing Corporation". It only started using the name "Industrial Refractories Corp. of the Philippines" when it amended its Articles of Incorporation on August 23, 1985, or nine (9) years after respondent RCP started using its name. Thus, being the prior registrant, respondent RCP has acquired the right to use the word "Refractories" as part of its corporate name.
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Anent the second requisite, in determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary care and discrimination and the Court must look to the record as well as the names themselves.30 Petitioners corporate name is "Industrial Refractories Corp. of the Phils.", while respondents is "Refractories Corp. of the Phils." Obviously, both names contain the identical words "Refractories", "Corporation" and "Philippines". The only word that distinguishes petitioner from respondent RCP is the word "Industrial" which merely identifies a corporations general field of activities or operations. We need not linger on these two corporate names to conclude that they are patently similar that even with reasonable care and observation, confusion might arise.31 It must be noted that both cater to the same clientele, i.e. the steel industry. In fact, the SEC found that there were instances when different steel companies were actually confused between the two, especially since they also have similar product packaging.32 Such findings are accorded not only great respect but even finality, and are binding upon this Court, unless it is shown that it had arbitrarily disregarded or misapprehended evidence before it to such an extent as to compel a contrary conclusion had such evidence been properly appreciated. 33 And even without such proof of actual confusion between the two corporate names, it suffices that confusion is probable or likely to occur.34 Refractory materials are described as follows: "Refractories are structural materials used at high temperatures to [sic] industrial furnaces. They are supplied mainly in the form of brick of standard sizes and of special shapes. Refractories also include refractory cements, bonding mortars, plastic firebrick, castables, ramming mixtures, and other bulk materials such as dead-burned grain magneside, chrome or ground ganister and special clay."35 While the word "refractories" is a generic term, its usage is not widespread and is limited merely to the industry/trade in which it is used, and its continuous use by respondent RCP for a considerable period has made the term so closely identified with it. 36 Moreover, as held in the case of Ang Kaanib sa Iglesia ng Dios kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay Cristo Jesus, Haligi at Suhay ng Katotohanan, petitioners appropriation of respondent's corporate name cannot find justification under the generic word rule. 37 A contrary ruling would encourage other corporations to adopt verbatim and register an existing and protected corporate name, to the detriment of the public.38 Finally, we find the award of P50,000.00 as attorney's fees to be fair and reasonable. Article 2208 of the Civil Code allows the award of such fees when its claimant is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. In this case, despite its undertaking to change its corporate name in case another firm has acquired a prior right to use such name,39 it refused to do so, thus compelling respondent to undergo litigation and incur expenses to protect its corporate name. WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of merit. Costs against petitioner. SO ORDERED.

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G.R. No. 137592

December 12, 2001

ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS, H.S.K. SA BANSANG PILIPINAS, INC., petitioner, vs. IGLESIA NG DIOS KAY CRISTO JESUS, HALIGI AT SUHAY NG KATOTOHANAN, respondent. YNARES-SANTIAGO, J.: This is a petition for review assailing the Decision dated October 7, 19971 and the Resolution dated February 16, 19992 of the Court of Appeals in CA-G.R. SP No. 40933, which affirmed the Decision of the Securities and Exchange and Commission (SEC) in SEC-AC No. 539.3 Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (Church of God in Christ Jesus, the Pillar and Ground of Truth),4 is a non-stock religious society or corporation registered in 1936. Sometime in 1976, one Eliseo Soriano and several other members of respondent corporation disassociated themselves from the latter and succeeded in registering on March 30, 1977 a new non-stock religious society or corporation, namedIglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan. On July 16, 1979, respondent corporation filed with the SEC a petition to compel the Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name, which petition was docketed as SEC Case No. 1774. On May 4, 1988, the SEC rendered judgment in favor of respondent, ordering the Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name to another name that is not similar or identical to any name already used by a corporation, partnership or association registered with the Commission.5No appeal was taken from said decision. It appears that during the pendency of SEC Case No. 1774, Soriano, et al., caused the registration on April 25, 1980 of petitioner corporation, Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K, sa Bansang Pilipinas. The acronym "H.S.K." stands for Haligi at Saligan ng Katotohanan.6 On March 2, 1994, respondent corporation filed before the SEC a petition, docketed as SEC Case No. 03-94-4704, praying that petitioner be compelled to change its corporate name and be barred from using the same or similar name on the ground that the same causes confusion among their members as well as the public. Petitioner filed a motion to dismiss on the ground of lack of cause of action. The motion to dismiss was denied. Thereafter, for failure to file an answer, petitioner was declared in default and respondent was allowed to present its evidence ex parte. On November 20, 1995, the SEC rendered a decision ordering petitioner to change its corporate name. The dispositive portion thereof reads: PREMISES CONSIDERED, judgment is hereby rendered in favor of the petitioner (respondent herein). Respondent Mga Kaanib sa Iglesia ng Dios Kay Kristo Jesus (sic), H.S.K. sa Bansang Pilipinas (petitioner herein) is hereby MANDATED to change its corporate name to another not deceptively similar or identical to the same already used by the Petitioner, any corporation, association, and/or partnership presently registered with the Commission. Let a copy of this Decision be furnished the Records Division and the Corporate and Legal Department [CLD] of this Commission for their records, reference and/or for whatever requisite action, if any, to be undertaken at their end. SO ORDERED.7 Petitioner appealed to the SEC En Banc, where its appeal was docketed as SEC-AC No. 539. In a decision dated March 4, 1996, the SEC En Banc affirmed the above decision, upon a finding that petitioner's corporate name was identical or confusingly or deceptively similar to that of respondent's corporate name.8 Petitioner filed a petition for review with the Court of Appeals. On October 7, 1997, the Court of Appeals rendered the assailed decision affirming the decision of the SEC En Banc. Petitioner's motion for reconsideration was denied by the Court of Appeals on February 16, 1992. Hence, the instant petition for review, raising the following assignment of errors: I THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER HAS NOT BEEN DEPRIVED OF ITS RIGHT TO PROCEDURAL DUE PROCESS, THE HONORABLE COURT OF APPEALS DISREGARDED THE JURISPRUDENCE APPLICABLE TO THE CASE AT BAR AND INSTEAD RELIED ON TOTALLY INAPPLICABLE JURISPRUDENCE. II THE HONORABLE COURT OF APPEALS ERRED IN ITS INTERPRETATION OF THE CIVIL CODE PROVISIONS ON EXTINCTIVE PRESCRIPTION, THEREBY RESULTING IN ITS FAILURE TO FIND THAT THE RESPONDENT'S RIGHT OF ACTION TO INSTITUTE THE SEC CASE HAS SINCE PRESCRIBED PRIOR TO ITS INSTITUTION.
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III THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER AND PROPERLY APPLY THE EXCEPTIONS ESTABLISHED BY JURISPRUDENCE IN THE APPLICATION OF SECTION 18 OF THE CORPORATION CODE TO THE INSTANT CASE. IV THE HONORABLE COURT OF APPEALS FAILED TO PROPERLY APPRECIATE THE SCOPE OF THE CONSTITUTIONAL GUARANTEE ON RELIGIOUS FREEDOM, THEREBY FAILING TO APPLY THE SAME TO PROTECT PETITIONER'S RIGHTS.9 Invoking the case of Legarda v. Court of Appeals,10 petitioner insists that the decision of the Court of Appeals and the SEC should be set aside because the negligence of its former counsel of record, Atty. Joaquin Garaygay, in failing to file an answer after its motion to dismiss was denied by the SEC, deprived them of their day in court. The contention is without merit. As a general rule, the negligence of counsel binds the client. This is based on the rule that any act performed by a lawyer within the scope of his general or implied authority is regarded as an act of his client.11 An exception to the foregoing is where the reckless or gross negligence of the counsel deprives the client of due process of law. 12 Said exception, however, does not obtain in the present case. In Legarda v. Court of Appeals, the effort of the counsel in defending his client's cause consisted in filing a motion for extension of time to file answer before the trial court. When his client was declared in default, the counsel did nothing and allowed the judgment by default to become final and executory. Upon the insistence of his client, the counsel filed a petition to annul the judgment with the Court of Appeals, which denied the petition, and again the counsel allowed the denial to become final and executory. This Court found the counsel grossly negligent and consequently declared as null and void the decision adverse to his client. The factual antecedents of the case at bar are different. Atty. Garaygay filed before the SEC a motion to dismiss on the ground of lack of cause of action. When his client was declared in default for failure to file an answer, Atty. Garaygay moved for reconsideration and lifting of the order of default.13 After judgment by default was rendered against petitioner corporation, Atty. Garaygay filed a motion for extension of time to appeal/motion for reconsideration, and thereafter a motion to set aside the decision.14 Evidently, Atty. Garaygay was only guilty of simple negligence. Although he failed to file an answer that led to the rendition of a judgment by default against petitioner, his efforts were palpably real, albeit bereft of zeal.15 Likewise, the issue of prescription, which petitioner raised for the first time on appeal to the Court of Appeals, is untenable. Its failure to raise prescription before the SEC can only be construed as a waiver of that defense.16 At any rate, the SEC has the authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to spawn confusion. It is the duty of the SEC to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public.17 Section 18 of the Corporation Code provides: Corporate Name. No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or is contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name. Corollary thereto, the pertinent portion of the SEC Guidelines on Corporate Names states: (d) If the proposed name contains a word similar to a word already used as part of the firm name or style of a registered company, the proposed name must contain two other words different from the name of the company already registered; Parties organizing a corporation must choose a name at their peril; and the use of a name similar to one adopted by another corporation, whether a business or a nonprofit organization, if misleading or likely to injure in the exercise of its corporate functions, regardless of intent, may be prevented by the corporation having a prior right, by a suit for injunction against the new corporation to prevent the use of the name.18 Petitioner claims that it complied with the aforecited SEC guideline by adding not only two but eight words to their registered name, to wit: "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which, petitioner argues, effectively distinguished it from respondent corporation. The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner's name are, as correctly observed by the SEC, merely descriptive of and also referring to the members, or kaanib, of respondent who are likewise residing in the Philippines. These words can hardly serve as an effective differentiating medium necessary to avoid confusion or difficulty in distinguishing petitioner from respondent. This is especially so, since both petitioner and respondent corporations are using
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the same acronym H.S.K.;19 not to mention the fact that both are espousing religious beliefs and operating in the same place. Parenthetically, it is well to mention that the acronym H.S.K. used by petitioner stands for "Haligi at Saligan ng Katotohanan."20 Then, too, the records reveal that in holding out their corporate name to the public, petitioner highlights the dominant words "IGLESIA NG DIOS KAY KRISTO HESUS, HALIGI AT SALIGAN NG KATOTOHANAN," which is strikingly similar to respondent's corporate name, thus making it even more evident that the additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.", are merely descriptive of and pertaining to the members of respondent corporation.21 Significantly, the only difference between the corporate names of petitioner and respondent are the wordsSALIGAN and SUHAY. These words are synonymous both mean ground, foundation or support. Hence, this case is on all fours with Universal Mills Corporation v. Universal Textile Mills, Inc.,22 where the Court ruled that the corporate names Universal Mills Corporation and Universal Textile Mills, Inc., are undisputably so similar that even under the test of "reasonable care and observation" confusion may arise. Furthermore, the wholesale appropriation by petitioner of respondent's corporate name cannot find justification under the generic word rule. We agree with the Court of Appeals' conclusion that a contrary ruling would encourage other corporations to adopt verbatim and register an existing and protected corporate name, to the detriment of the public. The fact that there are other non-stock religious societies or corporations using the names Church of the Living God, Inc., Church of God Jesus Christ the Son of God the Head, Church of God in Christ & By the Holy Spirit, and other similar names, is of no consequence. It does not authorize the use by petitioner of the essential and distinguishing feature of respondent's registered and protected corporate name.23 We need not belabor the fourth issue raised by petitioner. Certainly, ordering petitioner to change its corporate name is not a violation of its constitutionally guaranteed right to religious freedom. In so doing, the SEC merely compelled petitioner to abide by one of the SEC guidelines in the approval of partnership and corporate names, namely its undertaking to manifest its willingness to change its corporate name in the event another person, firm, or entity has acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it. WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED. The appealed decision of the Court of Appeals is AFFIRMED in toto. SO ORDERED.

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G.R. No. L-28351 July 28, 1977 UNIVERSAL MILLS CORPORATION, petitioner, vs. UNIVERSAL TEXTILE MILLS, INC., respondent. Appeal from the order of the Securities and Exchange Commission in S.E.C. Case No. 1079, entitled In the Matter of the Universal Textile Mills, Inc. vs. Universal Mills Corporation, a petition to have appellant change its corporate name on the ground that such name is "confusingly and deceptively similar" to that of appellee, which petition the Commission granted. According to the order, "the Universal Textile Mills, Inc. was organ on December 29, 1953, as a textile manufacturing firm for which it was issued a certificate of registration on January 8, 1954. The Universal Mills Corporation, on the other hand, was registered in this Commission on October 27, 1954, under its original name, Universal Hosiery Mills Corporation, having as its primary purpose the "manufacture and production of hosieries and wearing apparel of all kinds." On May 24, 1963, it filed an amendment to its articles of incorporation changing its name to Universal Mills Corporation, its present name, for which this Commission issued the certificate of approval on June 10, 1963. The immediate cause of this present complaint, however, was the occurrence of a fire which gutted respondent's spinning mills in Pasig, Rizal. Petitioner alleged that as a result of this fire and because of the similarity of respondent's name to that of herein complainant, the news items appearing in the various metropolitan newspapers carrying reports on the fire created uncertainty and confusion among its bankers, friends, stockholders and customers prompting petitioner to make announcements, clarifying the real Identity of the corporation whose property was burned. Petitioner presented documentary and testimonial evidence in support of this allegation. On the other hand, respondent's position is that the names of the two corporations are not similar and even if there be some similarity, it is not confusing or deceptive; that the only reason that respondent changed its name was because it expanded its business to include the manufacture of fabrics of all kinds; and that the word 'textile' in petitioner's name is dominant and prominent enough to distinguish the two. It further argues that petitioner failed to present evidence of confusion or deception in the ordinary course of business; that the only supposed confusion proved by complainant arose out of an extraordinary occurrence a disastrous fire. (pp. 16-&17, Record.) Upon these premises, the Commission held: From the facts proved and the jurisprudence on the matter, it appears necessary under the circumstances to enjoin the respondent Universal Mills Corporation from further using its present corporate name. Judging from what has already happened, confusion is not only apparent, but possible. It does not matter that the instance of confusion between the two corporate names was occasioned only by a fire or an extraordinary occurrence. It is precisely the duty of this Commission to prevent such confusion at all times and under all circumstances not only for the purpose of protecting the corporations involved but more so for the protection of the public. In today's modern business life where people go by tradenames and corporate images, the corporate name becomes the more important. This Commission cannot close its eyes to the fact that usually it is the sound of all the other words composing the names of business corporations that sticks to the mind of those who deal with them. The word "textile" in Universal Textile Mills, Inc.' can not possibly assure the exclusion of all other entities with similar names from the mind of the public especially so, if the business they are engaged in are the same, like in the instant case. This Commission further takes cognizance of the fact that when respondent filed the amendment changing its name to Universal Mills Corporation, it correspondingly filed a written undertaking dated June 5, 1963 and signed by its President, Mr. Mariano Cokiat, promising to change its name in the event that there is another person, firm or entity who has obtained a prior right to the use of such name or one similar to it. That promise is still binding upon the corporation and its responsible officers. (pp. 17-18, Record.) It is obvious that the matter at issue is within the competence of the Securities and Exchange Commission to resolve in the first instance in the exercise of the jurisdiction it used to possess under Commonwealth Act 287 as amended by Republic Act 1055 to administer the application and enforcement of all laws affecting domestic corporations and associations, reserving to the courts only conflicts of judicial nature, and, of course, the Supreme Court's authority to review the Commissions actuations in appropriate instances involving possible denial of due process and grave abuse of discretion. Thus, in the case at bar, there being no claim of denial of any constitutional right, all that We are called upon to determine is whether or not the order of the Commission enjoining petitioner to its corporate name constitutes, in the light of the circumstances found by the Commission, a grave abuse of discretion. We believe it is not. Indeed, it cannot be said that the impugned order is arbitrary and capricious. Clearly, it has rational basis. The corporate names in question are not Identical, but they are indisputably so similar that even under the test of "reasonable care and observation as the public generally are capable of using and may be expected to exercise" invoked by appellant, We are apprehensive confusion will usually arise, considering that under the second amendment of its articles of incorporation on August 14, 1964, appellant included among its primary purposes the "manufacturing, dyeing, finishing and selling of fabrics of all kinds" in which respondent had been engaged for more than a decade ahead of petitioner. Factually, the Commission found existence of such confusion, and there is evidence to support its conclusion. Since respondent is not claiming damages in this proceeding, it is, of course, immaterial whether or not appellant has acted in good faith, but We cannot perceive why of all names, it had to choose a name already being used by another firm engaged in practically the same business for more than a decade enjoying well earned patronage and goodwill, when there are so many other appropriate names it could possibly adopt without arousing any suspicion as to its motive and, more importantly, any degree of confusion in the mind of the public which could mislead even its own customers, existing or prospective. Premises considered, there is no warrant for our interference. As this is purely a case of injunction, and considering the time that has elapsed since the facts complained of took place, this decision should not be deemed as foreclosing any further remedy which appellee may have for the protection of its interests. WHEREFORE, with the reservation already mentioned, the appealed decision is affirmed. Costs against petitioners.
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G.R. No. 101897. March 5, 1993. LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM, INC., respondents. 1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY EXISTING CORPORATION, PROHIBITED; CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM". The Articles of Incorporation of a corporation must, among other things, set out the name of the corporation. Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate names are concerned: "Section 18. Corporate name. No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name." The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations. We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. 2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that word, although originally a generic, has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. The doctrine of secondary meaning originated in the field of trademark law. Its application has, however, been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. In Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of secondary meaning was elaborated in the following terms: " . . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public which has to do with schools). The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive appropriation with reference to an article in the market, because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that, in that trade and to that group of the purchasing public, the word or phrase has come to mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. . . . No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If there was any of this kind, the same tend to prove only that the appellant had been using the disputed word for a long period of time. . . . In other words, while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time, this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. Consequently, the allegations of the appellant in its first two assigned errors must necessarily fail." We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but not registered with the SEC because they have not adopted the corporate form of organization. 3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE WHETHER THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER CORPORATE ENTITY'S NAME. petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other. DECISION FELICIANO, J p:
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Petitioner is an educational institution duly registered with the Securities and Exchange Commission ("SEC"). When it first registered with the SEC on 21 September 1950, it used the corporate name Lyceum of the Philippines, Inc. and has used that name ever since. On 24 February 1984, petitioner instituted proceedings before the SEC to compel the private respondents, which are also educational institutions, to delete the word "Lyceum" from their corporate names and permanently to enjoin them from using "Lyceum" as part of their respective names. Some of the private respondents actively participated in the proceedings before the SEC. These are the following, the dates of their original SEC registration being set out below opposite their respective names: Western Pangasinan Lyceum 27 October 1950 Lyceum of Cabagan 31 October 1962 Lyceum of Lallo, Inc. 26 March 1972 Lyceum of Aparri 28 March 1972 Lyceum of Tuao, Inc. 28 March 1972 Lyceum of Camalaniugan 28 March 1972 The following private respondents were declared in default for failure to file an answer despite service of summons: Buhi Lyceum; Central Lyceum of Catanduanes; Lyceum of Eastern Mindanao, Inc.; and Lyceum of Southern Philippines Petitioner's original complaint before the SEC had included three (3) other entities: 1. The Lyceum of Malacanay; 2. The Lyceum of Marbel; and 3. The Lyceum of Araullo The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the Lyceum of Marbel, for failure to serve summons upon these two (2) entities. The case against the Liceum of Araullo was dismissed when that school motu proprio change its corporate name to "Pamantasan ng Araullo." The background of the case at bar needs some recounting. Petitioner had sometime before commenced in the SEC a proceeding (SEC-Case No. 1241) against the Lyceum of Baguio, Inc. to require it to change its corporate name and to adopt another name not "similar [to] or identical" with that of petitioner. In an Order dated 20 April 1977, Associate Commissioner Julio Sulit held that the corporate name of petitioner and that of the Lyceum of Baguio, Inc. were substantially identical because of the presence of a "dominant" word, i.e., "Lyceum," the name of the geographical location of the campus being the only word which distinguished one from the other corporate name. The SEC also noted that petitioner had registered as a corporation ahead of the Lyceum of Baguio, Inc. in point of time, 1 and ordered the latter to change its name to another name "not similar or identical [with]" the names of previously registered entities. The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme Court in a case docketed as G.R. No. L-46595. In a Minute Resolution dated 14 September 1977, the Court denied the Petition for Review for lack of merit. Entry of judgment in that case was made on 21 October 1977. 2 Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then wrote all the educational institutions it could find using the word "Lyceum" as part of their corporate name, and advised them to discontinue such use of "Lyceum." When, with the passage of time, it became clear that this recourse had failed, petitioner instituted before the SEC SEC-Case No. 2579 to enforce what petitioner claims as its proprietary right to the word "Lyceum." The SEC hearing officer rendered a decision sustaining petitioner's claim to an exclusive right to use the word "Lyceum." The hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and held that the word "Lyceum" was capable of appropriation and that petitioner had acquired an enforceable exclusive right to the use of that word. On appeal, however, by private respondents to the SEC En Banc, the decision of the hearing officer was reversed and set aside. The SEC En Banc did not consider the word "Lyceum" to have become so identified with petitioner as to render use thereof by other institutions as productive of confusion about the identity of the schools concerned in the mind of the general public. Unlike its hearing officer, the SEC En Banc held that the attaching of geographical names to the word "Lyceum" served sufficiently to distinguish the schools from one another, especially in view of the fact that the campuses of petitioner and those of the private respondents were physically quite remote from each other. 3 Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28 June 1991, however, the Court of Appeals affirmed the questioned Orders of the SEC En Banc. 4 Petitioner filed a motion for reconsideration, without success. Before this Court, petitioner asserts that the Court of Appeals committed the following errors: 1. The Court of Appeals erred in holding that the Resolution of the Supreme Court in G.R. No. L-46595 did not constitute stare decisis as to apply to this case and in not holding that said Resolution bound subsequent determinations on the right to exclusive use of the word Lyceum. 2. The Court of Appeals erred in holding that respondent Western Pangasinan Lyceum, Inc. was incorporated earlier than petitioner.
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3. The Court of Appeals erred in holding that the word Lyceum has not acquired a secondary meaning in favor of petitioner. 4. The Court of Appeals erred in holding that Lyceum as a generic word cannot be appropriated by the petitioner to the exclusion of others. 5 We will consider all the foregoing ascribed errors, though not necessarily seriatim. We begin by noting that the Resolution of the Court in G.R. No. L-46595 does not, of course, constitute res adjudicata in respect of the case at bar, since there is no identity of parties. Neither is stare decisis pertinent, if only because the SEC En Banc itself has re-examined Associate Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute Resolution of the Court in G.R. No. L-46595 was not a reasoned adoption of the Sulit ruling. The Articles of Incorporation of a corporation must, among other things, set out the name of the corporation. 6 Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate names are concerned: "SECTION 18. Corporate name. No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name." (Emphasis supplied) The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations. 7 We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus, Pericles and Lycurgus frequented by the youth for exercise and by the philosopher Aristotle and his followers for teaching." 8 In time, the word "Lyceum" became associated with schools and other institutions providing public lectures and concerts and public discussions. Thus today, the word "Lyceum" generally refers to a school or an institution of learning. While the Latin word "lyceum" has been incorporated into the English language, the word is also found in Spanish (liceo) and in French (lycee). As the Court of Appeals noted in its Decision, Roman Catholic schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo de Albay." 9 "Lyceum" is in fact as generic in character as the word "university." In the name of the petitioner, "Lyceum" appears to be a substitute for "university;" in other places, however, "Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college. It may be (though this is a question of fact which we need not resolve) that the use of the word "Lyceum" may not yet be as widespread as the use of "university," but it is clear that a not inconsiderable number of educational institutions have adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo" denotes a school or institution of learning, it is not unnatural to use this word to designate an entity which is organized and operating as an educational institution. It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that that word, although originally a generic, has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. The doctrine of secondary meaning originated in the field of trademark law. Its application has, however, been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. 10 In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11 the doctrine of secondary meaning was elaborated in the following terms: " . . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." 12 The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public which has to do with schools). The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive appropriation with reference to an article in the market, because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that, in that trade and to that group of the purchasing public, the word or phrase has come to mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. Consequently, the same doctrine or principle cannot be made to apply where the evidence did not prove that the business (of the plaintiff) has continued for so long a time that it has become of consequence and acquired a good will of considerable value such that its articles and produce have acquired a well-known reputation, and confusion will result by the use of the disputed name (by the defendant) (Ang Si Heng vs. Wellington Department Store, Inc., 92 Phil. 448).
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With the foregoing as a yardstick, [we] believe the appellant failed to satisfy the aforementioned requisites. No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If there was any of this kind, the same tend to prove only that the appellant had been using the disputed word for a long period of time. Nevertheless, its (appellant) exclusive use of the word (Lyceum) was never established or proven as in fact the evidence tend to convey that the cross-claimant was already using the word 'Lyceum' seventeen (17) years prior to the date the appellant started using the same word in its corporate name. Furthermore, educational institutions of the Roman Catholic Church had been using the same or similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate), 'Liceo de Masbate,' 'Liceo de Albay' long before appellant started using the word 'Lyceum'. The appellant also failed to prove that the word 'Lyceum' has become so identified with its educational institution that confusion will surely arise in the minds of the public if the same word were to be used by other educational institutions. In other words, while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time, this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. Consequently, the allegations of the appellant in its first two assigned errors must necessarily fail." 13 (Underscoring partly in the original and partly supplied) We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. It may be noted also that at least one of the private respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen (17) years before the petitioner registered its own corporate name with the SEC and began using the word "Lyceum." It follows that if any institution had acquired an exclusive right to the word "Lyceum," that institution would have been the Western Pangasinan Lyceum, Inc. rather than the petitioner institution. In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc. failed to reconstruct its records before the SEC in accordance with the provisions of R.A. No. 62, which records had been destroyed during World War II, Western Pangasinan Lyceum should be deemed to have lost all rights it may have acquired by virtue of its past registration. It might be noted that the Western Pangasinan Lyceum, Inc. registered with the SEC soon after petitioner had filed its own registration on 21 September 1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed to have lost its rights under its original 1933 registration, appears to us to be quite secondary in importance; we refer to this earlier registration simply to underscore the fact that petitioner's use of the word "Lyceum" was neither the first use of that term in the Philippines nor an exclusive use thereof. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but not registered with the SEC because they have not adopted the corporate form of organization. We conclude and so hold that petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other. WHEREFORE, the petitioner having failed to show any reversible error on the part of the public respondent Court of Appeals, the Petition for Review is DENIED for lack of merit, and the Decision of the Court of Appeals dated 28 June 1991 is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

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G.R. No. 139371

April 4, 2001

INDIANA AEROSPACE UNIVERSITY, petitioner, vs. COMMISSION ON HIGHER EDUCATION (CHED), respondent. PANGANIBAN, J.: When the delayed filing of an answer causes no prejudice to the plaintiff, default orders should be avoided. Inasmuch as herein respondent was improvidently declared in default, its Petition for Certiorari to annul its default may be given due course. The act of the Commission on Higher Education enjoining petitioner from using the word "university" in its corporate name and ordering it to revert to its authorized name does not violate its proprietary rights or constitute irreparable damage to the school. Indeed, petitioner has no vested right to misrepresent itself to the public. An injunction is a remedy in equity and should not be used to perpetuate a falsehood. The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, challenging the July 21, 1999 Decision1 of the Court of Appeals (CA) in CA-GR SP No. 51346. The appellate court directed the Regional Trial Court (RTC) of Makati City, Branch 136, to cease and desist from proceeding with Civil Case No. 98-811 and to dismiss the Complaint for Damages filed by the "Indiana Aerospace University" against the Commission on Higher Education (CHED). The dispositive portion of the CA Decision reads as follows: "WHEREFORE, in the light of the foregoing consideration, and pursuant to pertinent existing laws and jurisprudence on the matter, [the trial court] is hereby DIRECTED to cease and desist from proceeding with Civil Case No. 98-811 and to order the dismissal of [petitioner's] Petition dated March 31, 1999 in Civil Case No. 98-911 for lack of merit and valid cause of action."2 The Facts The facts of this case are summarized by the CA, as follows: "Sometime in October 1996, Dr. Reynaldo B. Vera, Chairman, Technical Panel for Engineering, Architecture, and Maritime Education (TPRAM) of [CHED], received a letter dated October 18, 1998 (Annex 'C') from Douglas R. Macias, Chairman, Board of Aeronautical Engineering, Professional Regulat[ory] Commission (PRC) and Chairman, Technical Committee for Aeronautical Engineering (TPRAME) inquiring whether [petitioner] had already acquired [u]niversity status in view of the latter's advertisement in [the] Manila Bulletin. "In a letter dated October 24, 1996, Dr. Vera formally referred the aforesaid letter to Chairman Alcala with a request that the concerned Regional Office of [CHED] be directed to conduct appropriate investigation on the alleged misrepresentation by [petitioner]. Thereafter, [CHED] referred the matter to its Regional Director in Cebu City, requesting said office to conduct an investigation and submit its report. The [R]eport submitted in January 1997, stated in substance: 'x x x xxx xxx 'To recall it was in the month of May 1996, [that] Director Ma. Lilia Gaduyon met the school [p]resident in the regional office and verbally talked [with] and advised them not to use University when it first came out in an advertisement column of a local daily newspaper in Cebu City. It was explained that there was a violation [committed by] his institution [when it used] the term university unless the school ha[d] complied [with] the basic requirement of being a university as prescribed in CHED Memorandum Order No. 48, s. 1996.' xxx xxx x x x.' "As a consequence of said Report, [respondent's] Legal Affairs Service was requested to take legal action against [petitioner]. Subsequently, on February 3, 1997, [respondent] directed [petitioner] to desist from using the term University, including the use of the same in any of its alleged branches. In the course of its investigation, [respondent] was able to verify from the Securities and Exchange Commission (SEC) that [petitioner had] filed a proposal to amend its corporate name from Indiana School of Aeronautics to Indiana Aerospace University, which was supposedly favorably recommended by the Department of Education, Culture and Sports (DECS) per its Indorsement dated 17 July 1995, and on [that] basis, SEC issued to [petitioner] Certificate of Registration No. AS-083-002689 dated August 7, 1995. Surprisingly, however, it ought to be noted, that SEC Chairman Perfecto R. Yasay, Jr. wrote the following letter to the [c]hairman of [respondent]: 'Hon. Angel C. Alcala Chairman
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Commission on Higher Education DAP Bldg., San Miguel Avenue Ortigas Center, Pasig City Dear Chairman Alcala: This refers to your letter dated September 18, 1997 requesting this Commission to make appropriate changes in the Articles of Incorporation of Indiana School of Aeronautics, Inc. due to its unauthorized use of the term 'University' in its corporate name. Relative thereto, please be informed that our records show that the above-mentioned corporation has not filed any amended articles of incorporation that changed its corporate name to include the term 'University.' In case the corporation submit[s] an application for change of name, your Cease and Desist Order shall be considered accordingly. Very Truly yours, (SGD.) PERFECTO R. YASAY, JR. Chairman' "In reaction to [respondent's] order for [petitioner] to desist from using the word 'University', Jovenal Toring, [c]hairman and [f]ounder of [petitioner] wrote a letter dated February 24, 1997 (Annex 'G') appealing for reconsideration of [respondent's] Order, with a promise to follow the provisions of CMO No. 48, pertinent portions of which have been quoted in the Petition, to wit: 'On 07 August 1995, in line with the call of the government to go for global competitiveness and our vision to help in the development of aerospace technology, the Board of Directors applied with the SEC for the amendment of Article I of the Articles of Incorporation to read as 'Indiana Aerospace University' instead of 'Indiana School of Aeronautics, Inc.' xxx xxx xxx 'In view thereof, we would like to appeal to you Fr. Delagoza to please reconsider your order of February 3, 1997, otherwise the school will encounter financial difficulties and suffer damages which will eventually result in the mass dislocation of x x x thousand[s] of students. The undersigned, being the [c]hairman and [f]ounder, will try our very best to follow the provisions of CHED MEMO No. 48, series of 1996 that took effect last June 18, 1996. xxx xxx xxx xxx xxx xxx Thank you very much for giving me a copy of said CHED MEMO Order No. 48. More power and God Bless You. "The appeal of [petitioner] was however rejected by [respondent] in its decision dated July 30, 1998 and [the latter] ordered the former to cease and desist from using the word 'University.' However, prior to said date, on April 2, 1998, [petitioner] filed a Complaint for Damages with prayer for Writ of Preliminary and Mandatory Injunction and Temporary Restraining Order against [respondent], docketed as Civil Case No. 98-811 before public respondent judge. "On April 7, 1998, [respondent] filed a Special Appearance with Motion to Dismiss, based on 1) improper venue; 2) lack of authority of the person instituting the action; and 3) lack of cause of action. On April 17, 1998, [petitioner] filed its Opposition to the Motion to Dismiss [on] grounds stated therein, to which [respondent] filed a Reply on April 21, 1998, reiterating the same arguments in its Motion to Dismiss. After due hearing, [petitioner] formally offered its evidence on July 23, 1998 while [respondent] made a formal offer of evidence on July 28, 1998 to which [petitioner] filed its Comments/Objections and finally, [respondent] submitted its Memorandum relative thereto on October 1, 1998. "Public respondent judge, in an Order dated August 14, 1998, denied [respondent's] Motion to Dismiss and at the same time, issued a Writ of Preliminary Injunction in favor of [petitioner]. [Respondent], in the same Order, was directed to file its Answer within fifteen (15) days from receipt of said Order, which was August 15, 1998. xxx xxx xxx 'WHEREFORE, and in consideration of all the foregoing, [respondent's] Motion to Dismiss is hereby denied, and the [respondent] is directed to file its [A]nswer to the [C]omplaint within fifteen (15) days from receipt of this order.

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In the meantime, [respondent], its officials, employees and all parties acting under its authority are hereby enjoined to observe the following during the pendency of this case: 1. Not to publish or circulate any announcement in the newspaper, radio or television regarding its Cease and Desist Order against x x x [petitioner]; 2. Not to enforce the Cease and Desist Order issued against x x x [petitioner]; 3. To maintain the status quo by not withholding the issuance of yearly school permits and special order to all graduates. Let a Writ of Preliminary Injunction to that effect issue upon posting by [petitioner] of an injunction bond in the amount of One Hundred Thousand Pesos (P100,000.00), and subject to the approval of the Court. SO ORDERED.' "On September 22, 1998, [petitioner] filed before public respondent a Motion To Declare [Respondent] in [D]efault pursuant to Section 3, Rule 9 in relation to Section 4, Rule 16 of the Rules of Court, as amended, and at the same time praying [for] the Motion to [S]et for [H]earing on October 30, 1998 at 8:30 a.m. On the same date, [respondent] filed a Motion For Extension of Time to File its Answer, x x x until November 18, 1998. On November 17, 1998, [respondent] filed its [A]nswer. "[Petitioner], on November 11, 1998 filed its Opposition to the Motion for Extension of Time to File [Respondent's] Answer and on November 9, 1998, a Motion to Expunge [Respondent's] Answer and at the same time praying that its [M]otion be heard on November 27, 1998 at 9:00 a.m. On even date, public respondent judge issued an Order directing the Office of the Solicitor General to file within a period of ten (10) days from date its written Opposition to the Motion to Expunge [Respondent's] Answer and within the same period to file a written [N]otice of [A]ppearance in the case. Unable to file their written Opposition to the Motion to Expunge within the period given by public respondent, the OSG filed a Motion to Admit Written Opposition stating the reasons for the same, attaching thereto the Opposition with [F]ormal [E]ntry of [A]ppearance. "In an Order dated December 9, 1998, (Annex 'A'), public respondent judge ruled on [Petitioner's] Motion to Declare [Respondent in Default], to wit: "WHEREFORE, and in view of all the foregoing, the present motion is granted. [Petitioner] is hereby directed to present its evidence ex-parte before the [b]ranch [c]lerk of [c]ourt, who is designated as [c]ommissioner for the purpose, within ten (10) days from receipt of this [O]rder, and for the latter to submit his report within twenty (20) days from the date the case is submitted for decision." SO ORDERED.'"3 On February 23, 1999, respondent filed with the CA a Petition for Certiorari, arguing that the RTC had committed grave abuse of discretion (a) in denying the former's Motion to Dismiss, (b) in issuing a Writ of Preliminary Injunction, and (c) in declaring respondent in default despite its filing an Answer. Ruling of the Court of Appeals The CA ruled that petitioner had no cause of action against respondent. Petitioner failed to show any evidence that it had been granted university status by respondent as required under existing law and CHED rules and regulations. A certificate of incorporation under an unauthorized name does not confer upon petitioner the right to use the word "university" in its name. The evidence submitted by respondent showed that the Securities and Exchange Commission (SEC) had denied that petitioner had ever amended its Articles of Incorporation to include "university" in its corporate name. For its part, the Department of Education, Culture and Sports (DECS) denied having issued the alleged Certification dated May 18, 1998, indorsing the change in petitioner's corporate name. Besides, neither the Corporation Code nor the SEC Charter vests the latter with the authority to confer university status on a corporation that it regulates. For the same reason, the appellate court also ruled that the Writ of Preliminary Injunction had improvidently been issued. The doubtful right claimed by petitioner is subordinate to the public interest to protect unsuspecting students and their parents from the unauthorized operation and misrepresentation of an educational institution. Respondent should not have been declared in default, because its Answer had been filed long before the RTC ruled upon petitioner's Motion to declare respondent in default. Thus, respondent had not obstinately refused to file an Answer; on the contrary, its failure to do so on time was due to excusable negligence. Declaring it in default did not serve the ends of justice, but only prevented it from pursuing the merits of its case.1wphi1.nt Hence, this Petition.4 Issues
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Petitioner alleges that the appellate court committed the following reversible errors: "A. In giving due course to respondent CHED's Petition for Certiorari filed way beyond the 60-day reglementary period prescribed by Section 4, Rule 65 of the Rules of Court; B. In not requiring Respondent CHED to first file a Motion to Set Aside the Order of Default dated December 9, 1998; and C. In ordering the dismissal of Civil Case No. 98-811."5 In its Memorandum, petitioner adds that the CA erred in dissolving the Writ of Preliminary Injunction issued by the RTC. We shall take up these issues in the following order: (1) timeliness of the certiorari petition, (2) validity of the default order, 93) validity of the preliminary injunction, and (4) dismissal of the Complaint. This Court's Ruling The Petition is partly meritorious. First Issue: Timeliness of Certiorari Petitioner claims that the Petition for Certiorari of respondent should have been dismissed by the CA, because it was filed out of time and was not preceded by a motion for reconsideration in the RTC. The copy of the Order of August 14, 1998 had been served at respondent's office on August 15, 1998, but its Answer was filed only after 180 days which, according to petitioner, could not be considered a reasonable period. On the other hand, the Office of the Solicitor General (OSG) argues that the Order is null and void and, hence, may be assailed at any time. We hold that respondent's Petition for Certiorari was seasonably filed. In computing its timeliness, what should have been considered was not the Order of august 14, 1998, but the date when respondent received the December 9, 1998 Order declaring it in default. Since it received this Order only on January 13, 1999, and filed its Petition for Certiorari on February 23, 1999, it obviously complied with the sixty-day reglementary period stated in Section 4, Rule 65 of the 1997 Rules of Court. Moreover, the August 14, 1998 Order was not a proper subject of certiorari or appeal, since it was merely an interlocutory order. Exhaustion of Available Remedies Petitioner also contends that certiorari cannot prosper in this case, because respondent did not file a motion for reconsideration before filing its Petition for Certiorari with the CA. Respondent counters that reconsideration should be dispensed with, because the December 9, 1998 Order is a patent nullity. The general rule is that, in order to give the lower court the opportunity to correct itself, a motion for reconsideration is a prerequisite to certiorari. It is also basic that a petitioner must exhaust all other available remedies before resorting to certiorari. This rule, however, is subject to certain exceptions such as any of the following: (1) the issues raised are purely legal in nature, (2) public interest is involved, (3) extreme urgency is obvious or (4) special circumstances warrant immediate or more direct action.6 It is patently clear that the regulation or administration of educational institutions, especially on the tertiary level, is invested with public interest. Hence, the haste with which the solicitor general raised these issues before the appellate court is understandable. For the reason mentioned, we rule that respondent's Petition for Certiorari did not require prior resort to a motion for reconsideration. Second Issue: Validity of the Default Order Petitioner avers that the RTC was justified in declaring respondent in default, because the August 14, 1998 Order directing the filing of an answer had been served on August 25, 1998. And as late as October 30, 1998, respondent could only file a Motion for Extension of Time, which the trial court denied because of the expiry of the fifteen-day period. Petitioner adds that respondent's proper remedy would have been a Motion to Set Aside the Order of Default, pursuant to Section 3(b), Rule 9 of the Rules of Court. Respondent, in turn, avers that certiorari was the only plain, speedy and adequate remedy in the ordinary course of law, because the default Order had improvidently been issued. We agree with respondent. Lina v. Court of Appeals7 discussed the remedies available to a defendant declared in default, as follows: (1) a motion to set aside the order of default under Section 3(b), Rule 9 of the Rules of Court, if the default was discovered before judgment could be rendered; (2) a motion for new trial under Section 1(a) of Rule 37, if the default was discovered after judgment but while appeal is still available; (3) a petition for relief under Rule 38, if judgment has become final and executory; and (4) an appeal from the judgment under Section 1, Rule 41, even if no petition to set aside the order of default has been resorted to.
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These remedies, however, are available only to a defendant who has been validly declared in default. Such defendant irreparably loses the right to participate in the trial. On the other hand, a defendant improvidently declared in default may retain and exercise such right after the order of default and the subsequent judgment by default are annulled, and the case remander to the court of origin. The former is limited to the remedy set forth in Section 2, paragraph 3 of Rule 41 of the pre 997 Rules of Court, and can therefore contest only the judgment by default on the designated ground that it is contrary to evidence or law. The latter, however, has the following options: to resort to this same remedy; to interpose a petition for certiorari seeking the nullification of the order of default, even before the promulgation of a judgment by default; or in the event that judgment has been rendered, to have such order and judgment declared void. In prohibiting appeals from interlocutory orders, the law does not intend to accord executory force to such writs, particularly when the effect would be to cause irreparable damage. If, in the course of trial, a judge proceeds without or in excess of jurisdiction, this rule prohibiting an appeal does not leave the aggrieved party without any remedy.8 In a case like this, a special civil action of certiorari is the plain, speedy and adequate remedy. Herein respondent controverts the judgment by default, not on the ground that it is unsubstantiated by evidence or that it is contrary to law, but on the ground that it is intrinsically void for having been rendered pursuant to a patently invalid order of default.9 Grave Abuse of Discretion Petitioner claims that in issuing the default Order, the RTC did not act with grave abuse of discretion, because respondent had failed to file its answer within fifteen days after receiving the August 14, 1998 Order. We disagree. Quite the contrary, the trial court gravely abused its discretion when it declared respondent in default despite the latter's filing of an Answer.10 Placing respondent in default thereafter served no practical purpose. Petitioner was lax in calling the attention of the Court to the fifteen-day period for filing an Answer. It moved to declare respondent in default only on September 20, 1998, when the filing period had expired on August 30, 1998. The only conclusion in this case is that petitioner has not been prejudiced by the delay. The same leniency can also be accorded to the RTC, which declared respondent in default only on December 9, 1998, or twenty-two days after the latter had filed its Answer on November 17, 1998. Defendant's Answer should be admitted, because it had been filed before it was declared in default, and no prejudice was caused to plaintiff. The hornbook rule is that default judgments are generally disfavored.11 While there are instances when a party may be properly declared in default, these cases should be deemed exceptions to the rule and should be resorted to only in clear cases of obstinate refusal or inordinate neglect in complying with the orders of the court.12 In the present case, however, no such refusal or neglect can be attributed to respondent. It appears that respondent failed to file its Answer because of excusable negligence. Atty. Joel Voltaire Mayo, director of the Legal Affairs Services of CHED, had to relinquish his position in accordance with the Memorandum dated July 7, 1998, requiring all non-CESO eligibles holding non-career positions to vacate their respective offices. It was only on September 25, 1998, after CHED Special Order No. 63 had been issued, when he resumed his former position. Respondent also presented a meritorious defense in its Answer that it was duty-bound to pursue the state policy of protecting, fostering and promoting the right of all citizens to affordable quality education at all levels. In stark contrast, petitioner neither qualified for nor was ever conferred university status by respondent. Judges, as a rule, should avoid issuing default orders that deny litigants the chance to be heard. Instead, the former should give the latter every opportunity to present their conflicting claims on the merits of the controversy, as much as possible avoiding any resort to procedural technicalities.13 Third Issue: Preliminary Injunction Petitioner contends that the RTC validly issued the Writ of Preliminary Injunction. According to the trial court, respondent's actions adversely affected petitioner's interests, faculty and students. In fact, the very existence of petitioner as a business concern would have been jeopardized had its proprietary rights not been protected. We disagree. We concur with the CA that the trial court acted with grave abuse of discretion in issuing the Writ of Preliminary Injunction against respondent. Petitioner failed to establish a clear right to continue representing itself to the public as a university. Indeed, it has no vested right to misrepresent itself. Before an injunction can be issued, it is essential that (1) there must be a right in esse to be protected, and (2) the act against which the injunction is to be directed must have violated such right.14 The establishment and the operation of schools are subject to prior authorization from the government. No school may claim to be a university unless it has first complied with the prerequisites provided in Section 34 of the Manual of Regulations for Private Schools. Section 3, Rule 58 of the Rules of Court, limits the grant of preliminary injunction to cases in which the plaintiff is clearly entitled to the relief prayed for.
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We also agree with the finding of the CA that the act sought to be enjoined by petitioner is not violative of the latter's rights. Respondent's Cease and Desist Order of July 30, 1997 merely restrained petitioner from using the term "university" in its name. It was not ordered to close, but merely to revert to its authorized name; hence, its proprietary rights were not violated. Fourth Issue: Dismissal of the Complaint Petitioner claims that the CA went beyond its limited jurisdiction under Rule 65 when it reversed the trial court and dismissed the Complaint on the ground that petitioner had failed to state a cause of action. The RTC had yet to conduct trial, but the CA already determined the factual issue regarding petitioner's acquisition of university status, a determination that is not permitted in certiorari proceedings. The CA ruled that the trial court gravely abused its discretion in denying respondent's Motion to Dismiss on the ground of lack of cause of action because of petitioner's lack of legal authority or right to use the word "university." Said the appellate court: "x x x. No matter how we interpret the Corporation Code and the law granting the Securities and Exchange Commission its powers and duties, there is nothing there which grants it the power or authority to confer University Status to an educational institution. Fundamental is the rule that when there is no power granted, none exist[s], not even implied ones for there is none from where to infer. The mere fact of securing an alleged Certificate of Incorporation under an unauthorized name does not confer the right to use such name. "But what makes the conclusion of [the trial court] even anomalous, to say the least, is that no less than the Chairman of the SEC in his letter to the [respondent] (Exh. "J") expressly said that [petitioner] never filed any Amended Articles of Incorporation so as to have a change of corporate name to include the term "University". Worse, the records officer of DECS issued a Certification dated May 18, 1998 (Annex "AA") to the effect that there was no Indorsement made by that office addressed to the SEC or the Proposed Amended Article of Incorporation of Indiana Aeronautics. x x x. "Under such clear pattern of deceitful maneuvering to circumvent the requirement for acquiring University Status, it is [a] patently reversible error for [the trial court] to hold that [petitioner] has a right to use the word "University" which must be protected. Dismissal of [petitioner's] Complaint for lack of a valid cause of action should have been the proper action taken by [the trial court] judge."15 An order denying a motion to dismiss is interlocutory, and so the proper remedy in such a case is to appeal after a decision has been rendered. A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted to only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve persons from arbitrary acts acts which courts or judges have no power or authority in law to perform. It is not designed to correct erroneous findings and conclusions made by the court.16 In the case at bar, we find no grave abuse of discretion in the RTC's denial of the Motion to Dismiss, as contained in the August 14, 1998 Order. The CA erred in ruling otherwise. The trial court stated in its Decision that petitioner was an educational institution, originally registered with the Securities and Exchange Commission as the "Indiana School of Aeronautics, Inc." That name was subsequently changed to "Indiana Aerospace University" after the Department of Education, Culture and Sports had interposed no objection to such change.17 Respondent issued a formal Cease and Desist Order directing petitioner to stop using the word "university" in its corporate name. The former also published an announcement in the March 21, 1998 issue of Freeman, a local newspaper in Cebu City, that there was no institution of learning by that name. The counsel of respondent was quoted as saying in the March 28, 1998 issue of the newspaper Today that petitioner had been ordered closed by the respondent for illegal advertisement, fraud and misrepresentation of itself as a university. Such acts, according to the RTC undermined the public's confidence in petitioner as an educational institution.18 This was a clear statement of a sufficient cause of action. When a motion to dismiss is grounded on the failure to state a cause of action, a ruling thereon should be based only on the facts alleged in the complaint.19 The court must pass upon this issue based solely on such allegations, assuming them to be true. For it to do otherwise would be a procedural error and a denial of plaintiff's right to due process.20 WHEREFORE, the Petition is hereby GRANTED IN PART, and the assailed Decision MODIFIED. The trial court isDIRECTED to SET ASIDE the Order of Default of December 9, 1998; to ADMIT the Answer dated November 5, 1998; to LIFT the preliminary injunction; and to CONTINUE, with all deliberate speed, the proceedings in Civil Case NO. 98811.1wphi1.nt SO ORDERED.

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G.R. No. 96161 February 21, 1992 PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC.,petitioners, vs. COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION and STANDARD PHILIPS CORPORATION,respondents. MELENCIO-HERRERA, J.: Petitioners challenge the Decision of the Court of Appeals, dated 31 July 1990, in CA-GR Sp. No. 20067, upholding the Order of the Securities and Exchange Commission, dated 2 January 1990, in SEC-AC No. 202, dismissing petitioners' prayer for the cancellation or removal of the word "PHILIPS" from private respondent's corporate name. Petitioner Philips Export B.V. (PEBV), a foreign corporation organized under the laws of the Netherlands, although not engaged in business here, is the registered owner of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM under Certificates of Registration Nos. R-1641 and R1674, respectively issued by the Philippine Patents Office (presently known as the Bureau of Patents, Trademarks and Technology Transfer). Petitioners Philips Electrical Lamps, Inc. (Philips Electrical, for brevity) and Philips Industrial Developments, Inc. (Philips Industrial, for short), authorized users of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM, were incorporated on 29 August 1956 and 25 May 1956, respectively. All petitioner corporations belong to the PHILIPS Group of Companies. Respondent Standard Philips Corporation (Standard Philips), on the other hand, was issued a Certificate of Registration by respondent Commission on 19 May 1982. On 24 September 1984, Petitioners filed a letter complaint with the Securities & Exchange Commission (SEC) asking for the cancellation of the word "PHILIPS" from Private Respondent's corporate name in view of the prior registration with the Bureau of Patents of the trademark "PHILIPS" and the logo "PHILIPS SHIELD EMBLEM" in the name of Petitioner, PEBV, and the previous registration of Petitioners Philips Electrical and Philips Industrial with the SEC. As a result of Private Respondent's refusal to amend its Articles of Incorporation, Petitioners filed with the SEC, on 6 February 1985, a Petition (SEC Case No. 2743) praying for the issuance of a Writ of Preliminary Injunction, alleging, among others, that Private Respondent's use of the word PHILIPS amounts to an infringement and clear violation of Petitioners' exclusive right to use the same considering that both parties engage in the same business. In its Answer, dated 7 March 1985, Private Respondent countered that Petitioner PEBV has no legal capacity to sue; that its use of its corporate name is not at all similar to Petitioners' trademark PHILIPS when considered in its entirety; and that its products consisting of chain rollers, belts, bearings and cutting saw are grossly different from Petitioners' electrical products. After conducting hearings with respect to the prayer for Injunction; the SEC Hearing Officer, on 27 September 1985, ruled against the issuance of such Writ. On 30 January 1987, the same Hearing Officer dismissed the Petition for lack of merit. In so ruling, the latter declared that inasmuch as the SEC found no sufficient ground for the granting of injunctive relief on the basis of the testimonial and documentary evidence presented, it cannot order the removal or cancellation of the word "PHILIPS" from Private Respondent's corporate name on the basis of the same evidence adopted in toto during trial on the merits. Besides, Section 18 of the Corporation Code (infra) is applicable only when the corporate names in question are identical. Here, there is no confusing similarity between Petitioners' and Private Respondent's corporate names as those of the Petitioners contain at least two words different from that of the Respondent. Petitioners' Motion for Reconsideration was likewise denied on 17 June 1987. On appeal, the SEC en banc affirmed the dismissal declaring that the corporate names of Petitioners and Private Respondent hardly breed confusion inasmuch as each contains at least two different words and, therefore, rules out any possibility of confusing one for the other. On 30 January 1990, Petitioners sought an extension of time to file a Petition for Review on Certiorari before this Court, which Petition was later referred to the Court of Appeals in a Resolution dated 12 February 1990. In deciding to dismiss the petition on 31 July 1990, the Court of Appeals 1 swept aside Petitioners' claim that following the ruling in Converse Rubber Corporation v. Universal Converse Rubber Products, Inc., et al, (G. R. No. L-27906, January 8, 1987, 147 SCRA 154), the word PHILIPS cannot be used as part of Private Respondent's corporate name as the same constitutes a dominant part of Petitioners' corporate names. In so holding, the Appellate Court observed that the Converse case is not four-square with the present case inasmuch as the contending parties in Converse are engaged in a similar business, that is, the manufacture of rubber shoes. Upholding the SEC, the Appellate Court concluded that "private respondents' products consisting of chain rollers, belts, bearings and cutting saw are unrelated and non-competing with petitioners' products i.e. electrical lamps such that consumers would not in any probability mistake one as the source or origin of the product of the other." The Appellate Court denied Petitioners' Motion for Reconsideration on 20 November 1990, hence, this Petition which was given due course on 22 April 1991, after which the parties were required to submit their memoranda, the latest of which was received on 2 July 1991. In December 1991, the SEC was also required to elevate its records for the perusal of this Court, the same not having been apparently before respondent Court of Appeals. We find basis for petitioners' plea. As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927), the Court declared that a corporation's right to use its corporate and trade name is a property right, a right in rem, which it may assert and protect against the world in the same manner as it may protect its tangible property, real or personal, against trespass or conversion. It is regarded, to a certain extent, as a property right and
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one which cannot be impaired or defeated by subsequent appropriation by another corporation in the same field (Red Line Transportation Co. vs. Rural Transit Co., September 8, 1934, 20 Phil 549). A name is peculiarly important as necessary to the very existence of a corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co. 40 W Va 530, 23 SE 792). Its name is one of its attributes, an element of its existence, and essential to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations is that each corporation must have a name by which it is to sue and be sued and do all legal acts. The name of a corporation in this respect designates the corporation in the same manner as the name of an individual designates the person (Cincinnati Cooperage Co. vs. Bate. 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird. 10 NH 123); and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted (Federal Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165, 26 A 36). A corporation acquires its name by choice and need not select a name identical with or similar to one already appropriated by a senior corporation while an individual's name is thrust upon him (See Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A corporation can no more use a corporate name in violation of the rights of others than an individual can use his name legally acquired so as to mislead the public and injure another (Armington vs. Palmer, 21 RI 109. 42 A 308). Our own Corporation Code, in its Section 18, expressly provides that: No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing law.Where a change in a corporate name is approved, the commission shall issue an amended certificate of incorporation under the amended name. (Emphasis supplied) The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely: (1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2) the proposed name is either: (a) identical; or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law. The right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption (1 Thompson, p. 80 citing Munn v. Americana Co., 82 N. Eq. 63, 88 Atl. 30; San Francisco Oyster House v. Mihich, 75 Wash. 274, 134 Pac. 921). In this regard, there is no doubt with respect to Petitioners' prior adoption of' the name ''PHILIPS" as part of its corporate name. Petitioners Philips Electrical and Philips Industrial were incorporated on 29 August 1956 and 25 May 1956, respectively, while Respondent Standard Philips was issued a Certificate of Registration on 12 April 1982, twenty-six (26) years later (Rollo, p. 16). Petitioner PEBV has also used the trademark "PHILIPS" on electrical lamps of all types and their accessories since 30 September 1922, as evidenced by Certificate of Registration No. 1651. The second requisite no less exists in this case. In determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person, using ordinary care and discrimination. In so doing, the Court must look to the record as well as the names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). While the corporate names of Petitioners and Private Respondent are not identical, a reading of Petitioner's corporate names, to wit: PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC., inevitably leads one to conclude that "PHILIPS" is, indeed, the dominant word in that all the companies affiliated or associated with the principal corporation, PEBV, are known in the Philippines and abroad as the PHILIPS Group of Companies. Respondents maintain, however, that Petitioners did not present an iota of proof of actual confusion or deception of the public much less a single purchaser of their product who has been deceived or confused or showed any likelihood of confusion. It is settled, however, that proof of actual confusion need not be shown. It suffices that confusion is probably or likely to occur (6 Fletcher [Perm Ed], pp. 107-108, enumerating a long line of cases). It may be that Private Respondent's products also consist of chain rollers, belts, bearing and the like, while petitioners deal principally with electrical products. It is significant to note, however, that even the Director of Patents had denied Private Respondent's application for registration of the trademarks "Standard Philips & Device" for chain, rollers, belts, bearings and cutting saw. That office held that PEBV, "had shipped to its subsidiaries in the Philippines equipment, machines and their parts which fall under international class where "chains, rollers, belts, bearings and cutting saw," the goods in connection with which Respondent is seeking to register 'STANDARD PHILIPS' . . . also belong" ( Inter Partes Case No. 2010, June 17, 1988, SEC Rollo). Furthermore, the records show that among Private Respondent's primary purposes in its Articles of Incorporation (Annex D, Petition p. 37, Rollo) are the following: To buy, sell, barter, trade, manufacture, import, export, or otherwise acquire, dispose of, and deal in and deal with any kind of goods, wares, and merchandise such as but not limited to plastics, carbon products, office stationery and supplies, hardware parts, electrical wiring devices, electrical component parts, and/or complement of industrial, agricultural or commercial machineries, constructive supplies, electrical supplies and other merchandise which are or
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may become articles of commerce except food, drugs and cosmetics and to carry on such business as manufacturer, distributor, dealer, indentor, factor, manufacturer's representative capacity for domestic or foreign companies. (emphasis ours) For its part, Philips Electrical also includes, among its primary purposes, the following: To develop manufacture and deal in electrical products, including electronic, mechanical and other similar products . . . (p. 30, Record of SEC Case No. 2743) Given Private Respondent's aforesaid underlined primary purpose, nothing could prevent it from dealing in the same line of business of electrical devices, products or supplies which fall under its primary purposes. Besides, there is showing that Private Respondent not only manufactured and sold ballasts for fluorescent lamps with their corporate name printed thereon but also advertised the same as, among others, Standard Philips (TSN, before the SEC, pp. 14, 17, 25, 26, 37-42, June 14, 1985; pp. 16-19, July 25, 1985). As aptly pointed out by Petitioners, [p]rivate respondent's choice of "PHILIPS" as part of its corporate name [STANDARD PHILIPS CORPORATION] . . . tends to show said respondent's intention to ride on the popularity and established goodwill of said petitioner's business throughout the world" (Rollo, p. 137). The subsequent appropriator of the name or one confusingly similar thereto usually seeks an unfair advantage, a free ride of another's goodwill (American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488). In allowing Private Respondent the continued use of its corporate name, the SEC maintains that the corporate names of Petitioners PHILIPS ELECTRICAL LAMPS. INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC. contain at least two words different from that of the corporate name of respondent STANDARD PHILIPS CORPORATION, which words will readily identify Private Respondent from Petitioners and viceversa. True, under the Guidelines in the Approval of Corporate and Partnership Names formulated by the SEC, the proposed name "should not be similar to one already used by another corporation or partnership. If the proposed name contains a word already used as part of the firm name or style of a registered company; the proposed name must contain two other words different from the company already registered" (Emphasis ours). It is then pointed out that Petitioners Philips Electrical and Philips Industrial have two words different from that of Private Respondent's name. What is lost sight of, however, is that PHILIPS is a trademark or trade name which was registered as far back as 1922. Petitioners, therefore, have the exclusive right to its use which must be free from any infringement by similarity. A corporation has an exclusive right to the use of its name, which may be protected by injunction upon a principle similar to that upon which persons are protected in the use of trademarks and tradenames (18 C.J.S. 574). Such principle proceeds upon the theory that it is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business thereunder, that another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name (6 Fletcher [Perm Ed], pp. 39-40, citingBorden Ice Cream Co. v. Borden's Condensed Milk Co., 210 F 510). Notably, too, Private Respondent's name actually contains only a single word, that is, "STANDARD", different from that of Petitioners inasmuch as the inclusion of the term "Corporation" or "Corp." merely serves the Purpose of distinguishing the corporation from partnerships and other business organizations. The fact that there are other companies engaged in other lines of business using the word "PHILIPS" as part of their corporate names is no defense and does not warrant the use by Private Respondent of such word which constitutes an essential feature of Petitioners' corporate name previously adopted and registered and-having acquired the status of a well-known mark in the Philippines and internationally as well (Bureau of Patents Decision No. 88-35 [TM], June 17, 1988, SEC Records). In support of its application for the registration of its Articles of Incorporation with the SEC, Private Respondent had submitted an undertaking "manifesting its willingness to change its corporate name in the event another person, firm or entity has acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it." Private respondent must now be held to its undertaking. As a general rule, parties organizing a corporation must choose a name at their peril; and the use of a name similar to one adopted by another corporation, whether a business or a nonbusiness or non-profit organization if misleading and likely to injure it in the exercise in its corporate functions, regardless of intent, may be prevented by the corporation having the prior right, by a suit for injunction against the new corporation to prevent the use of the name (American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., 89 App DC 269, 191 F 2d 488, 27 ALR 2d 948). WHEREFORE, the Decision of the Court of Appeals dated 31 July 1990, and its Resolution dated 20 November 1990, are SET ASIDE and a new one entered ENJOINING private respondent from using "PHILIPS" as a feature of its corporate name, and ORDERING the Securities and Exchange Commission to amend private respondent's Articles of Incorporation by deleting the word PHILIPS from the corporate name of private respondent. No costs. SO ORDERED.

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G.R. No. 156819. December 11, 2003 ALICIA E. GALA, GUIA G. DOMINGO and RITA G. BENSON, petitioners, vs. ELLICE AGRO-INDUSTRIAL CORPORATION, MARGO MANAGEMENT AND DEVELOPMENT CORPORATION, RAUL E. GALA, VITALIANO N. AGUIRRE II, ADNAN V. ALONTO, ELIAS N. CRESENCIO, MOISES S. MANIEGO, RODOLFO B. REYNO, RENATO S. GONZALES, VICENTE C. NOLAN, NESTOR N. BATICULON, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review under Rule 45 of the Rules of Court, seeking the reversal of the decision dated November 8, 2002[1] and the resolution dated December 27, 2002[2] of the Court of Appeals in CA-G.R. SP No. 71979. On March 28, 1979, the spouses Manuel and Alicia Gala, their children Guia Domingo, Ofelia Gala, Raul Gala, and Rita Benson, and theirencargados Virgilio Galeon and Julian Jader formed and organized the Ellice Agro-Industrial Corporation.[3] The total subscribed capital stock of the corporation was apportioned as follows: Name Number of Shares 11, 700 23,200 16 40 40 2 1 1 35,000 Amount 1,170,000.00 2,320,000.00 1,600.00 4,000.00 4,000.00 200.00 100.00 100.00 P3,500,000.00[4] Manuel R. Gala Alicia E. Gala Guia G. Domingo Ofelia E. Gala Raul E. Gala Rita G. Benson Virgilio Galeon Julian Jader TOTAL

As payment for their subscriptions, the Gala spouses transferred several parcels of land located in the provinces of Quezon and Laguna toEllice. [5] In 1982, Manuel Gala, Alicia Gala and Ofelia Gala subscribed to an additional 3,299 shares, 10,652.5 shares and 286.5 shares, respectively.[6] On June 28, 1982, Manuel Gala and Alicia Gala acquired an additional 550 shares and 281 shares, respectively. [7] Subsequently, on September 16, 1982, Guia Domingo, Ofelia Gala, Raul Gala, Virgilio Galeon and Julian Jader incorporated the Margo Management and Development Corporation (Margo). [8] The total subscribed capital stock of Margo was apportioned as follows: Name Raul E. Gala Ofelia E. Gala Guia G. Domingo Virgilio Galeon Julian Jader TOTAL Number of Shares 6,640 6,640 6,640 40 40 20,000 Amount 66,400.00 66,400.00 66,400.00 40.00 40.00 P200,000.00[9]

On November 10, 1982, Manuel Gala sold 13,314 of his shares in Ellice to Margo. [10] Alicia Gala transferred 1,000 of her shares in Ellice to a certain Victor de Villa on March 2, 1983. That same day, de Villa transferred said shares to Margo. [11] A few months later, on August 28, 1983, Alicia Gala transferred 854.3 of her shares to Ofelia Gala, 500 to Guia Domingo and 500 to Raul Gala. [12] Years later, on February 8, 1988, Manuel Gala transferred all of his remaining holdings in Ellice, amounting to 2,164 shares, to Raul Gala. [13] On July 20, 1988, Alicia Gala transferred 10,000 of her shares to Margo. [14] Thus, as of the date on which this case was commenced, the stockholdings in Ellice were allocated as follows:
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Name Margo Alicia Gala Raul Gala Ofelia Gala Gina Domingo Rita Benson Virgilio Galeon Julian Jader Adnan Alonto Elias Cresencio TOTAL

Number of Shares 24,312.5 21,480.2 2,704.5 980.8 516 2 1 1 1 1 50,000

Amount 2,431,250.00 2,148,020.00 270,450.00 98,080.00 51,600.00 200.00 100.00 100.00 100.00 100.00 P5,000,000.00

On June 23, 1990, a special stockholders meeting of Margo was held, where a new board of directors was elected. [15] That same day, the newly-elected board elected a new set of officers. Raul Gala was elected as chairman, president and general manager. During the meeting, the board approved several actions, including the commencement of proceedings to annul certain dispositions of Margos property made by Alicia Gala. The board also resolved to change the name of the corporation to MRG Management and Development Corporation. [16] Similarly, a special stockholders meeting of Ellice was held on August 24, 1990 to elect a new board of directors. In the ensuing organizational meeting later that day, a new set of corporate officers was elected. Likewise, Raul Gala was elected as chairman, president and general manager. On March 27, 1990, respondents filed against petitioners with the Securities and Exchange Commission (SEC) a petition for the appointment of a management committee or receiver, accounting and restitution by the directors and officers, and the dissolution of Ellice Agro-Industrial Corporation for alleged mismanagement, diversion of funds, financial losses and the dissipation of assets, docketed as SEC Case No. 3747. [17]The petition was amended to delete the prayer for the appointment of a management committee or receiver and for the dissolution of Ellice. Additionally, respondents prayed that they be allowed to inspect the corporate books and documents of Ellice. [18] In turn, petitioners initiated a complaint against the respondents on June 26, 1991, docketed as SEC Case No. 4027, praying for, among others, the nullification of the elections of directors and officers of both Margo Management and Development Corporation and Ellice Industrial Corporation; the nullification of all board resolutions issued by Margo from June 23, 1990 up to the present and all board resolutions issued byEllice from August 24, 1990 up to the present; and the return of all titles to real property in the name of Margo and Ellice, as well as all corporate papers and records of both Margo and Ellice which are in the possession and control of the respondents. [19] The two cases were consolidated in an Order dated November 23, 1993. [20] Meanwhile, during the pendency of the SEC cases, the shares of stock of Alicia and Ofelia Gala in Ellice were levied and sold at public auction to satisfy a judgment rendered against them by he Regional Trial Court of Makati, Branch 66, in Civil Case No. 42560, entitled ReginesCondominium v. Ofelia (Gala) Panes and Alicia Gala. [21] On November 3, 1998, the SEC rendered a Joint Decision in SEC Cases Nos. 3747 and 4027, the dispositive portion of which states: WHEREFORE, premises considered, judgment is hereby rendered, as follows: 1. 2. Dismissing the petition in SEC Case No. 3747, Issuing the following orders in SEC Case No. 4027; (a) (b) Enjoining herein respondents to perform corporate acts of both Ellice and Margo, as directors and officers thereof. Nullifying the election of the new sets of Board of Directors and Officers of Ellice and Margo from June 23, 1990 to the present, and that of Ellice from August 24, 1990 to the present.
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(c) (d) SO ORDERED. [22]

Ordering the respondent Raul Gala to return all the titles of real properties in the names of Ellice and Margo which were unlawfully taken and held by him. Directing the respondents to return to herein petitioners all corporate papers, records of both Ellice and Margo which are in their possession and control.

Respondents appealed to the SEC En Banc, which, on July 4, 2002, rendered its Decision, the decretal portion of which reads: WHEREFORE, the Decision of the Hearing Officer dated November 3, 1998 is hereby REVERSED and SET ASIDE and a new one hereby rendered granting the appeal, upholding the Amended Petition in SEC Case No. 3747, and dismissing the Petition with Prayer for Issuance of Preliminary Restraining Order and granting the Compulsory Counterclaim in SEC Case No. 4027. Accordingly, appellees Alicia Gala and Guia G. Domingo are ordered as follows: (1) jointly and solidarily pay ELLICE and/or MARGO the amount of P700,000.00 representing the consideration for the unauthorized sale of a parcel of land to Lucky Homes and Development Corporation (Exhs. N and CCC); jointly and severally pay ELLICE and MARGO the proceeds of sales of agricultural products averaging P120,000.00 per month from February 17, 1988; jointly and severally indemnify the appellants P90,000.00 as attorneys fees; jointly and solidarily pay the costs of suit; turn over to the individual appellants the corporate records of ELLICE and MARGO in their possession; and desist and refrain from interfering with the management of ELLICE and MARGO.
[23]

(2) (3) (4) (5) (6) SO ORDERED.

Petitioners filed a petition for review with the Court of Appeals which dismissed the petition for review and affirmed the decision of the SEC En Banc. [24] Hence, this petition, raising the following issues: I WHETHER OR NOT THE LOWER COURT ERRED IN NOT DECLARING AS ILLEGAL AND CONTRARY TO PUBLIC POLICY THE PURPOSES AND MANNER IN WHICH RESPONDENT CORPORATIONS WERE ORGANIZED WHICH WERE, E.G. TO (1) PREVENT THE GALA ESTATE FROM BEING BROUGHT UNDER THE COVERAGE (SIC) OF THE COMPREHENSIVE AGRARIAN REFORM PROGRAM (CARP) AND (2) PURPORTEDLY FOR ESTATE PLANNING. II WHETHER OR NOT THE LOWER COURT ERRED (1) IN SUSPICIOUSLY RESOLVING THE CASE WITHIN TWO (2) DAYS FROM RECEIPT OF RESPONDENTS COMMENT; AND (2) IN NOT MAKING A DETERMINATION OF THE ISSUES OF FACTS AND INSTEAD RITUALLY CITING THE FACTUAL FINDINGS OF THE COMMISSION A QUO WITHOUT DISCUSSION AND ANALYSIS; III WHETHER OR NOT THE LOWER COURT ERRED IN RULING THAT THE ORGANIZATION OF RESPONDENT CORPORATIONS WAS NOT ILLEGAL FOR DEPRIVING PETITIONER RITA G. BENSON OF HER LEGITIME. IV WHETHER OR NOT THE LOWER COURT ERRED IN NOT PIERCING THE VEILS OF CORPORATE FICTION OF RESPONDENTS CORPORATIONS ELLICE AND MARGO. [25] In essence, petitioners want this Court to disregard the separate juridical personalities of Ellice and Margo for the purpose of treating all property purportedly owned by said corporations as property solely owned by the Gala spouses. The petitioners first contention in support of this theory is that the purposes for which Ellice and Margo were organized should be declared as illegal and contrary to public policy. They claim that the respondents never pursued exemption from land reform coverage in good faith and instead merely used the corporations as tools to circumvent land reform laws and to avoid estate taxes. Specifically, they point out that respondents have not shown that the transfers of the land in favor of Ellice were executed in compliance with the requirements of Section 13 of R.A. 3844.[26]Furthermore, they alleged that respondent corporations were run without any of the conventional corporate formalities. [27]

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At the outset, the Court holds that petitioners contentions impugning the legality of the purposes for which Ellice and Margo were organized, amount to collateral attacks which are prohibited in this jurisdiction. [28] The best proof of the purpose of a corporation is its articles of incorporation and by-laws. The articles of incorporation must state the primary and secondary purposes of the corporation, while the by-laws outline the administrative organization of the corporation, which, in turn, is supposed to insure or facilitate the accomplishment of said purpose. [29] In the case at bar, a perusal of the Articles of Incorporation of Ellice and Margo shows no sign of the allegedly illegal purposes that petitioners are complaining of. It is well to note that, if a corporations purpose, as stated in the Articles of Incorporation, is lawful, then the SEC has no authority to inquire whether the corporation has purposes other than those stated, and mandamus will lie to compel it to issue the certificate of incorporation. [30] Assuming there was even a grain of truth to the petitioners claims regarding the legality of what are alleged to be the corporations true purposes, we are still precluded from granting them relief. We cannot address here their concerns regarding circumvention of land reform laws, for the doctrine of primary jurisdiction precludes a court from arrogating unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence.[31] Since primary jurisdiction over any violation of Section 13 of Republic Act No. 3844 that may have been committed is vested in the Department of Agrarian Reform Adjudication Board (DARAB),[32] then it is with said administrative agency that the petitioners must first plead their case. With regard to their claim that Ellice and Margo were meant to be used as mere tools for the avoidance of estate taxes, suffice it say that the legal right of a taxpayer to reduce the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted. [33] The petitioners allegation that Ellice and Margo were run without any of the typical corporate formalities, even if true, would not merit the grant of any of the relief set forth in their prayer. We cannot disregard the corporate entities of Ellice and Margo on this ground. At most, such allegations, if proven to be true, should be addressed in an administrative case before the SEC. [34] Thus, even if Ellice and Margo were organized for the purpose of exempting the properties of the Gala spouses from the coverage of land reform legislation and avoiding estate taxes, we cannot disregard their separate juridical personalities. Next, petitioners make much of the fact that the Court of Appeals promulgated its assailed Decision a mere two days from the time the respondents filed their Comment. They alleged that the appellate court could not have made a deliberate study of the factual questions in the case, considering the sheer volume of evidence available. [35] In support of this allegation, they point out that the Court of Appeals merely adopted the factual findings of the SEC En Banc verbatim, without deliberation and analysis. [36] In People v. Mercado, [37] we ruled that the speed with which a lower court disposes of a case cannot thus be attributed to the injudicious performance of its function. Indeed, magistrates are not supposed to study a case only after all the pertinent pleadings have been filed. It is a mark of diligence and devotion to duty that jurists study a case long before the deadline set for the promulgation of their decision has arrived. The two-day period between the filing of petitioners Comment and the promulgation of the decision was sufficient time to consider their arguments and to incorporate these in the decision. As long as the lower court does not sacrifice the orderly administration of justice in favor of a speedy but reckless disposition of a case, it cannot be taken to task for rendering its decision with due dispatch. The Court of Appeals in this intra-corporate controversy committed no reversible error and, consequently, its decision should be affirmed. [38] Verily, if such swift disposition of a case is considered a non-issue in cases where the life or liberty of a person is at stake, then we see no reason why the same principle cannot apply when only private rights are involved. Furthermore, well-settled is the rule that the factual findings of the Court of Appeals are conclusive on the parties and are not reviewable by the Supreme Court. They carry even more weight when the Court of Appeals affirms the factual findings of a lower fact-finding body.[39] Likewise, the findings of fact of administrative bodies, such as the SEC, will not be interfered with by the courts in the absence of grave abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by substantial evidence. [40] However, in the interest of equity, this Court has reviewed the factual findings of the SEC En Banc, which were affirmed in toto by the Court of Appeals, and has found no cogent reason to disturb the same. Indeed, we are convinced that the arguments raised by the petitioners are nothing but unwarranted conclusions of law. Specifically, they insist that the Gala spouses never meant to part with the ownership of the shares which are in the names of their children and encargados, and that all transfers of property to these individuals are supposedly void for being absolutely simulated for lack of consideration.[41] However, as correctly held by the SEC En Banc, the transfers were only relatively simulated, inasmuch as the evident intention of the Gala spouses was to donate portions of their property to their children and encargados. [42] In an attempt to bolster their theory that the organization of the respondent corporations was illegal, the petitioners aver that the legitimepertaining to petitioners Rita G. Benson and Guia G. Domingo from the estate of their father had been
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subject to unwarranted reductions as a result thereof. In sum, they claim that stockholdings in Ellice which the late Manuel Gala had assigned to them were insufficient to cover their legitimes, since Benson was only given two shares while Domingo received only sixteen shares out of a total number of 35,000 issued shares. [43] Moreover, the reliefs sought by petitioners should have been raised in a proceeding for settlement of estate, rather than in the present intra-corporate controversy. If they are genuinely interested in securing that part of their late fathers property which has been reserved for them in their capacity as compulsory heirs, then they should simply exercise their actio ad supplendam legitimam, or their right of completion of legitime.[44]Such relief must be sought during the distribution and partition stage of a case for the settlement of the estate of Manuel Gala, filed before a court which has taken jurisdiction over the settlement of said estate. [45] Finally, the petitioners pray that the veil of corporate fiction that shroud both Ellice and Margo be pierced, consistent with their earlier allegation that both corporations were formed for purposes contrary to law and public policy. In sum, they submit that the respondent corporations are mere business conduits of the deceased Manuel Gala and thus may be disregarded to prevent injustice, the distortion or hiding of the truth or the letting in of a just defense. [46] However, to warrant resort to the extraordinary remedy of piercing the veil of corporate fiction, there must be proof that the corporation is being used as a cloak or cover for fraud or illegality, or to work injustice, [47] and the petitioners have failed to prove that Ellice and Margo were being used thus. They have not presented any evidence to show how the separate juridical entities of Ellice and Margo were used by the respondents to commit fraudulent, illegal or unjust acts. Hence, this contention, too, must fail. On June 5, 2003, the petitioners filed a Reply, where, aside from reiterating the contentions raised in their Petition, they averred that there is no proof that either capital gains taxes or documentary stamp taxes were paid in the series of transfers of Ellice and Margo shares. Thus, they invoke Sections 176 and 201 of the National Internal Revenue Code, which would bar the presentation or admission into evidence of any document that purports to transfer any benefit derived from certificates of stock if the requisite documentary stamps have not been affixed thereto and cancelled. Curiously, the petitioners never raised this issue before the SEC Hearing Officer, the SEC En Banc or the Court of Appeals. Thus, we are precluded from passing upon the same for, as a rule, no question will be entertained on appeal unless it has been raised in the court below, for points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of due process impel this rule.[48] Furthermore, even if these allegations were proven to be true, such facts would not render the underlying transactions void, for these instruments would not be the sole means, much less the best means, by which the existence of these transactions could be proved. For this purpose, the books and records of a corporation, which include the stock and transfer book, are generally admissible in evidence in favor of or against the corporation and its members. They can be used to prove corporate acts, a corporations financial status and other matters, including ones status as a stockholder. Most importantly, these books and records are, ordinarily, the best evidence of corporate acts and proceedings.[49] Thus, reference to these should have been made before the SEC Hearing Officer, for this Court will not entertain this belated questioning of the evidence now. It is always sad to see families torn apart by money matters and property disputes. The concept of a close corporation organized for the purpose of running a family business or managing family property has formed the backbone of Philippine commerce and industry. Through this device, Filipino families have been able to turn their humble, hard-earned life savings into going concerns capable of providing them and their families with a modicum of material comfort and financial security as a reward for years of hard work. A family corporation should serve as a rallying point for family unity and prosperity, not as a flashpoint for familial strife. It is hoped that people reacquaint themselves with the concepts of mutual aid and security that are the original driving forces behind the formation of family corporations and use these tenets in order to facilitate more civil, if not more amicable, settlements of family corporate disputes. WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision dated November 8, 2002 and the Resolution dated December 27, 2002, both of the Court of Appeals, are AFFIRMED. Costs against petitioners. SO ORDERED.

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G.R. No. 133547

December 7, 2001

HEIRS OF ANTONIO PAEL and ANDREA ALCANTARA and CRISANTO PAEL, petitioners, vs. COURT OF APPEALS, JORGE H. CHIN and RENATO B. MALLARI, respondents. ---------------------------------------G.R. No. 133843 December 7, 2001 MARIA DESTURA, petitioner, vs. COURT OF APPEALS, JORGE H. CHIN and RENATO B. MALLARI, respondents. RESOLUTION For resolution are the Motions for Reconsideration of our Decision dated February 10, 2000, filed by petitioners Heirs of Antonio Pael, Andrea Alcantara and Crisanto Pael in G.R. No. 133547, and petitioner Maria Destura in G.R. No. 133843. Likewise, University of the Philippines filed a motion for intervention. It is at once apparent that no new issues are raised in the motions for reconsideration. The arguments presented are a mere rehash of what have been said and reiterated in the pleadings, all of which have been considered and found without merit in the Decision now assailed. Be that as it may, it bears reiterating that the title of PFINA Properties, Inc., Transfer Certificate of Title No. 186662, was irregularly and illegally issued. As such, the reinstatement of the titles of private respondents was proper and did not constitute a collateral attack on the title of PFINA. It should be recalled that the transfer of title from the Heirs of Pael in favor of PFINA was replete with badges of fraud and irregularities which rendered nugatory and inoperative the existing doctrines on land registration and land titles. More important, the Heirs of Pael had earlier disposed of their rights. There was nothing to transfer to PFINA. The transfer was not only fictitious, it was void. PFINA claims that it acquired the properties from the Heirs of Pael by virtue of a deed of assignment dated January 25, 1983, hence, it filed a motion to intervene before the Court of Appeals. It is worthy to note, however, that before it filed its motion for intervention, or for a long period of fifteen (15) years, PFINA and the Heirs of Pael were totally silent about the alleged deed of assignment. No steps were taken by either of them to register the deed or secure transfer certificate of title evidencing the change of ownership during this long period of time. Furthermore, at the time PFINA acquired the disputed properties in 1983, its corporate name was PFINA Mining and Exploration, Inc., a mining company which had no valid grounds to engage in the highly speculative business of urban real estate development. Both the decisions of the Court of Appeals and this Court show that the alleged transfer in 1983 was not only dubious and fabricated; it could produce no legal effect. As stated above, the Paels were no longer owners of the land they allegedly assigned. In the Decision, we affirmed the factual findings of the Court of Appeals because they are amply supported by the evidence on record. Well established is the rule that if there is no showing of error in the appreciation of facts by the Court of Appeals, this Court treats them as conclusive. The conclusions of law which the Court of Appeals drew from those facts are likewise accurate and convincing. Insofar as the original parties in G.R. Nos. 133547 and 133843 are concerned, the motions for reconsideration are, therefore, denied with finality. No further pleadings from them will be entertained. During the pendency of the motions for reconsideration, the University of the Philippines filed a motion for intervention, alleging that the properties covered by TCT No. 52928 and No. 52929 in the name of respondents Chin and Mallari form part of the vast tract of land that is the U.P. Campus, which is registered in the name of U.P. under TCT No. 9462. Therefore, any pronouncement by this Court affecting the properties would create a cloud over U.P.s title, for which reason it had a right to intervene in these proceedings. While as a rule, the intervention of a new party at this late stage should no longer be allowed, there is in the cases at bar an inescapable issue waiting to be resolved, and which issue can be taken up herein without the necessity of separate proceedings. In Director of Lands vs. Court of Appeals, this Court stated: But Rule 12 of the Rules of Court like all other Rules therein promulgated, is simply a rule of procedure, the whole purpose and object of which is to make the powers of the Court fully and completely available for justice. The purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice. It does not constitute the thing itself which courts are always striving to secure to litigants. It is designed as the means best adopted to obtain that thing. In other words, it is a means to an end. The denial of the motions for intervention arising from the strict application of the rule due to alleged lack of notice to, or the alleged failure of, movants, to their successors-in-interest and to all purchasers for value and in good faith and thereby
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open the door to fraud, falsehood and misrepresentation, should intervenors claims be proven to be true. For it cannot be gainsaid that if the petition for reconstitution is finally granted, the chaos and confusion arising from a situation where the certificates of title of the movants covering large areas of land overlap or encroach on properties the title to which is being sought to be reconstituted by private respondent, who herself indicates in her Opposition that, according to the Director of Lands, the overlapping embraces some 87 hectares only, is certain and inevitable. xxx xxx xxx. Likewise in the case of Mago v. Court of Appeals, it was held: These matters should have been taken into account by the courts a quo for being of utmost importance in ruling on petitioners motion for intervention. The permissive tenor of the provision on intervention show s the intention of the Rules to give to the court the full measure of discretion in permitting or disallowing the same. But needless to say, this discretion should be exercised judiciously and only after consideration of all the circumstances obtaining in the case. But it is apparent that the courts a quo only considered the technicalities of the rules on intervention and of the petition for relief from judgment. The denial of their motion to intervene arising from the strict application of the rule was an injustice to petitioners whose substantial interest in the subject property cannot be disputed. It must be stressed that the trial court granted private respondents petition for prohibition with injunction without petitioners being impleaded, in total dis regard of their right to be heard, when on the face of the resolution of the Community Relations and Information Office (CRIO) sought to be enjoined, petitioners were the ones directly to be affected. We need not belabor the point that petitioners are indeed indispensable parties with such an interest in the controversy or subject matter that a final adjudication cannot be made in their absence without affecting, nay injuring, such interest. Therefore, notwithstanding its belated filing, the motion for intervention of U.P. is granted, albeit the adjudication thereof shall be limited to a determination of the alleged overlapping or encroachment between U.P.s title, on the one hand, and respondents TCT Nos. 52928 and 52929, on the other hand. In its comment, intervenor U.P. cites several cases decided by this Court wherein its title to the property contested in these cases has long been upheld, namely: 1) Tiburcio v. PHHC and U.P., 106 Phil. 477; 2) Galvez and Tiburcio v. Tuason, dela Paz, U.P. and PHHC, 10 SCRA 344; 3) PHHC and U.P. v. Mencias, 20 SCRA 1031; 4) Katigbak v. IAC, Director of Lands and U.P., G.R. No. L-67414, December 7, 1988; 5) Varsity Hills, Inc. v. Mariano, 163 SCRA 132; 6) Roberto A. Pael, et al. v. Court of Appeals, et al., G.R. No. 97277, April 15, 1992; and 7) Krus na Ligas Farmers Multi-Purpose Cooperative v. U.P. and Office of the Presidential Legal Assistant, G.R. No. 107622, March 23, 1993. Intervenor U.P. specifically cites the decision in Roberto A. Pael et al. v. Court of Appeals, et al., supra, wherein the title of the Paels was declared to be of dubious origin and a fabrication. Hence, since respondents derive their titles from a defective title, their titles should also be null and void. By way of historical backgrounder, intervenor U.P. narrates that its titles previously covered by TCT No. 9462 emanated from a sale by the Commonwealth of the Philippines to the University in 1949. Prior to that, the U.P. title can be traced back to OCT No. 730 in the name of Mariano Severo Tuason and others as early as 1914. On the other hand, respondents Chin and Mallari contend that their titles, TCT Nos. 52928 and 52929, cover lands which are outside of the properties validly and legitimately owned by, and titled in the name of, U.P. They claim that there is neither encroachment nor overlapping. Considering the conflicting claims by U.P. and respondents, the ascertainment of boundaries of the lands they respectively claim becomes imperative. The instant cases have altogether taken more than eight (8) years. Despite the exceedingly voluminous records, the boundaries of the properties covered by the disputed titles of respondents and the boundaries of the lands covered by the title of U.P. are not discussed therein. In order to avoid the institution of new cases and thus obviate further litigation, we deem it best to have any conflict and dispute on this matter speedily resolved through an intervention. Concomitantly, there is a need for reception of further evidence which, however, can not be done before this Court. Hence, this case should be remanded to the Court of Appeals for reception of evidence relevant to determining the boundaries of the conflicting claims between U.P. and respondents Chin and Mallari over the property in dispute. WHEREFORE, in view of the foregoing, the motion for intervention of the University of the Philippines is GRANTED. The case is REMANDED to the Court of Appeals for reception of evidence on the conflicting claims over the property covered by TCT Nos. 52928 and 52929 between the intervernor University of the Philippines, on the one hand, and respondents Jorge H. Chin and Renato B. Mallari, on the other hand. The motions for reconsideration filed by petitioners are DENIED for lack of merit. This denial is FINAL and no further pleadings from petitioners will be entertained. SO ORDERED.
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G.R. No. L-15429 December 1, 1919 UY SIULIONG, MARIANO LIMJAP, GACU UNG JIENG, EDILBERTO CALIXTO and UY CHO YEE, petitioners, vs. THE DIRECTOR OF COMMERCE AND INDUSTRY, respondent. JOHNSON, J.: The purpose of this action is to obtain the writ of mandamus to require the respondent to file and register, upon the payment of the lawful fee, articles of incorporation, and to issue to the petitioners as the incorporators of a certain corporation to be known as "Siuliong y Compaia, Inc.," a certificate under the seal of the office of said respondent, certifying that the articles of incorporation have been duly filed and registered in his office in accordance with the law. To the petition the respondent demurred and the cause was finally submitted upon the petition and demurrer. The important facts necessary for the solution of the question presented, which are found in the petition, may be stated as follows: 1. That prior to the presentation of the petition the petitioners had been associated together as partners, which partnership was known as "mercantil regular colectiva, under the style and firm name of "Siuliong y Cia.;" 2. That the petitioners herein, who had theretofore been members of said partnership of "Siuliong y Cia.," desired to dissolve said partnership and to form a corporation composed of the same persons as incorporators, to be known as "Siulong y Compaia, Incorporada;" 3. That the purpose of said corporation, "Siuliong y Cia., Inc.," is (a) to acquire the business of the partnership theretofore known as Siuliong & Co., and (b) to continue said business with some of its objects or purposes; 4. That an examination of the articles of incorporation of the said "Siuliong y Compaia, Incorporada" (Exhibit A) shows that it is to be organized for the following purposes: (a) The purchase and sale, importation and exportation, of the products of the country as well as of foreign countries; (b) To discount promissory notes, bills of exchange, and other negotiable instruments; (c) The purchase and sale of bills of exchange, bonds, stocks, or "participaciones de sociedades mercantiles e industriales [joint account of mercantile and industrial associations]," and of all classes of mercantile documents; "comisiones [commissions];" "consignaciones [consignments];" (d) To act as agents for life, marine and fire insurance companies; lawphi1.net (e) To purchase and sell boats of all classes "y fletamento de los mismos [and charterage of same];" and (f) To purchase and sell industrial and mercantile establishments. While the articles of incorporation of "Siuliong y Cia., Inc." states that its purpose is to acquire and continue the business, with some of its objects or purposes, of Siuliong & Co., it will be found upon an examination of the purposes enumerated in the proposed articles of incorporation of "Siuliong y Cia., Inc.," that some of the purposes of the original partnership of "Siuliong y Cia." have been omitted. For example, the articles of partnership of "Siuliong y Cia." gave said company the authority to purchase and sell all classes "de fincas rusticas y urbanas [of rural and city real estate]" as well as the right to act as agents for the establishment of any other business which it might esteem convenient for the interests of "la compaia [the company]." (Exhibit C). The respondent in his argument in support of the demurrer contends (a) that the proposed articles of incorporation presented for file and registry permitted the petitioners to engage in a business which had for its end more than one purpose; (b) that it permitted the petitioners to engage in the banking business, and (c) to deal in real estate, in violation of the Act of Congress of July 1, 1902. The petitioners, in reply to said argument of the respondent, while insisting that said proposed articles of incorporation do not permit it to enter into the banking business nor to engage in the purchase and sale of real estate in violation of said Act of Congress, expressly renounced in open court their right to engage in such business under their articles of incorporation, even though said articles might be interpreted in a way to authorize them to so to do. That renouncement on the part of the petitioners eliminates from the purposes of said proposed corporation (of "Siuliong y Cia., Inc.") any right to engage in the banking business as such, or in the purchase and sale of real estate. We come now to the consideration of the principal question raised by the respondent, to wit: that the proposed articles of incorporation of "Siuliong y Cia., Inc.," permits it to engage in a business with more than one purpose. If upon an examination of the articles of incorporation we find that its purpose is to engage in a business with butone principal purpose, then that contention of the respondent will have been answered and it will be unnecessary to discuss at length the
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question whether or not a corporation organized for commercial purposes in the Philippine Islands can be organized for more than one purpose. The attorney for the respondent, at the time of the argument, admitted in open court that corporations in the Philippine Islands might be organized for both the "importation and exportation" of merchandise and that there might be no relation between the kind of merchandise imported with the class of merchandise exported. Referring again to be proposed articles of incorporation, a copy of which is united with the original petition and marked Exhibit A, it will be seen that the only purpose of said corporation are those enumerated in subparagraphs (a), (b), (c), (d), (e) and ( f ) of paragraph 4 above. While said articles of incorporation are somewhat loosely drawn, it is clear from a reading of the same that the principal purpose of said corporation is to engage in amercantile business, with the power to do and perform the particular acts enumerated in said subparagraphs above referred to. Without discussing or deciding at this time whether a corporation organized under the laws of the Philippine Islands may be organized for more than one purpose, we are of the opinion and so decide that a corporation may be organized under the laws of the Philippine Islands for mercantile purposes, and to engage in such incidental business as may be necessary and advisable to give effect to, and aid in, the successful operation and conduct of the principal business.1awphi1.net In the present case we are fully persuaded that all of the power and authority included in the articles of incorporation of "Siuliong y Cia., Inc.," enumerated above in paragraph 4 (Exhibit A) are only incidental to the principal purpose of said proposed incorporation, to wit: "mercantile business." The purchase and sale, importation and exportation of the products of the country, as well as of foreign countries, might make it necessary to purchase and discount promissory notes, bills of exchange, bonds, negotiable instruments, stock, and interest in other mercantile and industrial associations. It might also become important and advisable for the successful operation of the corporation to act as agent for insurance companies as well as to buy, sell and equip boats and to buy and sell other establishments, and industrial and mercantile businesses. While we have arrived at the conclusion that the proposed articles of incorporation do not authorize the petitioners to engage in a business with more than one purpose, we do not mean to be understood as having decided that corporations under the laws of the Philippine Islands may not engage in a business with more than one purpose. Such an interpretation might work a great injustice to corporations organized under the Philippine laws. Such an interpretation would give foreign corporations, which are permitted to be registered under the laws here and which may be organized for more than one purpose, a great advantage over domestic corporations. We do not believe that it was the intention of the legislature to give foreign corporations such an advantage over domestic corporations. Considering the particular purposes and objects of the proposed articles of incorporation which are specially enumerated above, we are of the opinion that it contains nothing which violates in the slightest degree any of the provisions of the laws of the Philippine Islands, and the petitioners are, therefore, entitled to have such articles of incorporation filed and registered as prayed for by them and to have issued to them a certificate under the seal of the office of the respondent, setting forth that such articles of incorporation have been duly filed in his office. (Sec. 11, Act No. 1459.) Therefore, the petition prayed for is hereby granted, and without any finding as to costs, it is so ordered.

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GR. No. 9321

September 24, 1914

NORBERTO ASUNCION, ET AL., petitioners-appellants, vs. MANUEL DE YRIARTE, respondent-appellee. MORELAND, J.: This is an action to obtain a writ of mandamus to compel the chief of the division of achieves of the Executive Bureau to file a certain articles of incorporation. The chief of the division of archives, the respondent, refused to file the articles of incorporation, hereinafter referred to, upon the ground that the object of the corporation, as stated in the articles, was not lawful and that, in pursuance of section 6 of Act No. 1459, they were not registerable. The proposed incorporators began an action in the Court of First Instance of the city of Manila to compel the chief of the division of archives to receive and register said articles of incorporation and to do any and all acts necessary for the complete incorporation of the persons named in the articles. The court below found in favor of the defendant and refused to order the registration of the articles mentioned, maintaining ad holding that the defendant, under the Corporation Law, had authority to determine both the sufficiency of the form of the articles and the legality of the object of the proposed corporation. This appeal is taken from that judgment. The first question that arises is whether or not the chief of the division of archives has authority, under the Corporation for registration, to decide not only as to the sufficiency of the form of the articles, but also as to the lawfulness of the purpose of the proposed corporation. It is strongly urged on the part of the appellants that the duties of the defendant are purely ministerial and that he has no authority to pass upon the lawfulness of the object for which the incorporators propose to organize. No authorities are cited to support this proposition and we are of the opinion that it is not sound. Section 6 of the Corporation Law reads in part as follows: Five or more persons, not exceeding fifteen, a majority of whom are residents of the Philippine Islands, may form a private corporation for any lawful purpose by filing with the division of archives, patents, copyrights, and trademarks if the Executive Bureau articles of incorporation duly executed and acknowledged before a notary public, . . . . Simply because the duties of an official happens to be ministerial, it does not necessarily follow that he may not, in the administration of his office, determine questions of law. We are of the opinion that it is the duty of the division of archives, when articles of incorporation are presented for registration, to determine whether the objects of the corporation as expressed in the articles are lawful. We do not believe that, simply because articles of incorporation presented foe registration are perfect in form, the division of archives must accept and register them and issue the corresponding certificate of incorporation no matter what the purpose of the corporation may be as expressed in the articles. We do not believe it was intended that the division of archives should issue a certificate of incorporation to, and thereby put the seal of approval of the Government upon, a corporation which was organized for base of immoral purposes. That such corporation might later, if it sought to carry out such purposes, be dissolved, or its officials imprisoned or itself heavily fined furnished no reason why it should have been created in the first instance. It seems to us to be not only the right but the duty of the divisions of archives to determine the lawfulness of the objects and purposes of the corporation before it issues a certificate of incorporation. It having determined that the division of archives, through its officials, has authority to determine not only the sufficiency as to form of the articles of incorporation offered for registration, but also the lawfulness of the purposes of leads us to the determination of the question whether or not the chief of the division of archives, who is the representative thereof and clothed by it with authority to deal subject to mandamus in the performance of his duties. We are of the opinion that he may be mandamused if he act in violation of law or if he refuses, unduly, to comply with the law. While we have held that defendant has power to pass upon the lawfulness of the purposes of the proposed corporation and that he may, in the fulfillment of his duties, determine the question of law whether or not those purposes are lawful and embraced within that class concerning which the law permits corporations to be formed, that does not necessarily mean, as we have already intimated, that his duties are not ministerial. On the contrary, there is no incompatibility in holding, as we do hold, that his duties are ministerial and that he has no authority to exercise discretion in receiving and registering articles of incorporation. He may exercise judgment that is, the judicial function in the determination of the question of law referred to, but he may not use discretion. The question whether or not the objects of a proposed corporation are lawful is one that can be decided one way only. If he err in the determination of that question and refuse to file articles which should be filed under the law, the decision is subject to review and correction and, upon proper showing, he will be ordered to file the articles. This is the same kind of determination which a court makes when it decides a case upon the merits, the court
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makes when it decides a case upon the merits. When a case is presented to a court upon the merits, the court can decide only one way and be right. As a matter of law, there is only one way and be right. As a matter of law, there is only one course to pursue. In a case where the court or other official has discretion in the resolution of a question, then, within certain limitations, he may decide the question either way and still be right. Discretion, it may be said generally, is a faculty conferred upon a court or other official by which he may decide a question either way and still be right. The power conferred upon the division of archives with respect to the registration of articles of incorporation is not of that character. It is of the same character as the determination of a lawsuit by a court upon the merits. It can be decided only one way correctly. If, therefore, the defendant erred in determining the question presented when the articles were offered for registration, then that error will be corrected by this court in this action and he will be compelled to register the articles as offered. If, however, he did not commit an error, but decided that question correctly, then, of course, his action will be affirmed to the extent that we will deny the relief prayed for. The next question leads us to the determination of whether or not the purposes of the corporation as stated in the articles of incorporation are lawful within the meaning of the Corporation Law. The purpose of the incorporation as stated in the articles is: "That the object of the corporation is (a) to organize and regulate the management, disposition, administration and control which the barrio of Pulo or San Miguel or its inhabitants or residents have over the common property of said residents or inhabitants or property belonging to the whole barrio as such; and (b) to use the natural products of the said property for institutions, foundations, and charitable works of common utility and advantage to the barrio or its inhabitants." The municipality of Pasig as recognized by law contains within its limits several barrios or small settlements, like Pulo or San Miguel, which have no local government of their own but are governed by the municipality of Pasig through its municipal president and council. The president and members of the municipal council are elected by a general vote of the municipality, the qualified electors of all the barrios having the right to participate. The municipality of Pasig is a municipal corporation organized by law. It has the control of all property of the municipality. The various barrios of the municipality have no right to own or hold property, they not being recognized as legal entities by any law. The residents of the barrios participate in the advantages which accrue to the municipality from public property and receive all the benefits incident to residence in a municipality organized by law. If there is any public property situated in the barrio of Pulo or San Miguel not belonging to the general government or the province, it belongs to the municipality of Pasig and the sole authority to manage and administer the same resides in that municipality. Until the present laws upon the subject are charged no other entity can be the owner of such property or control or administer it. The object of the proposed corporation, as appears from the articles offered for registration, is to make of the barrio of Pulo or San Miguel a corporation which will become the owner of and have the right to control and administer any property belonging to the municipality of Pasig found within the limits of that barrio. This clearly cannot be permitted. Otherwise municipalities as now established by law could be deprived of the property which they now own and administer. Each barrio of the municipality would become under the scheme proposed, a separate corporation, would take over the ownership, administration, and control of that portion of the municipal territory within its limits. This would disrupt, in a sense, the municipalities of the Islands by dividing them into a series of smaller municipalities entirely independent of the original municipality. What the law does not permit cannot be obtained by indirection. The object of the proposed corporation is clearly repugnant to the provisions of the Municipal Code and the governments of municipalities as they have been organized thereunder. (Act No. 82, Philippine Commission.) The judgment appealed from is affirmed, with costs against appellants.

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G.R. No. 111685

August 20, 2001

DAVAO LIGHT & POWER CO., INC., petitioner, vs. THE HON. COURT OF APPEALS, HON. RODOLFO M. BELLAFLOR, Presiding Judge of Branch 11, RTC-Cebu and FRANCISCO TESORERO, respondents. DE LEON, JR., J.: Before us is a petition for review on certiorari assailing the Decision dated August 31, 1993 rendered by the Sixteenth Division1 of the Court of Appeals in CA-G.R. SP No. 29996, the dispositive portion of which states: WHEREFORE, the petition for review filed by Davao Light & Power Co., Inc. is hereby DENIED DUE COURSE and the same is DISMISSED. IT IS SO ORDERED. The antecedent facts are: On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a complaint for damages2 against private respondent Francisco Tesorero before the Regional Trial Court of Cebu City, Branch 11. Docketed as CEB-11578, the complaint prayed for damages in the amount of P11,000,000.00. In lieu of an answer, private respondent filed a motion to dismiss3 claiming that: (a) the complaint did not state a cause of action; (b) the plaintiff's claim has been extinguished or otherwise rendered moot and academic; (c) there was nonjoinder of indispensable parties; and (d) venue was improperly laid. Of these four (4) grounds, the last mentioned is most material in this case at bar. On August 3, 1992, the trial court issued a Resolution4 dismissing petitioner's complaint on the ground of improper venue. The trial court stated that: The plaintiff being a private corporation undoubtedly Banilad, Cebu City is the plaintiff's principal place of business as alleged in the complaint and which for purposes of venue is considered as its residence. x x x. However, in defendant's motion to dismiss, it is alleged and submitted that the principal office of plaintiff is at "163-165 P. Reyes Street, Davao City as borne out by the Contract of Lease (Annex 2 of the motion) and another Contract of Lease of Generating Equipment (Annex 3 of the motion) executed by the plaintiff with the NAPOCOR. The representation made by the plaintiff in the 2 aforementioned Lease Contracts stating that its principal office is at "163-165 P. Reyes Street, Davao City" bars the plaintiff from denying the same. The choice of venue should not be left to plaintiff's whim or caprises [sic]. He may be impelled by some ulterior motivation in choosing to file a case in a court even if not allowed by the rules of venue. Another factor considered by the Courts in deciding controversies regarding venue are considerations of judicial economy and administration, as well as the convenience of the parties for which the rules of procedure and venue were formulated x x x. Considering the foregoing, the Court is of the opinion that the principal office of plaintiff is at Davao City which for purposes of venue is the residence of plaintiff. Hence, the case should be filed in Davao City. The motion on the ground of improper venue is granted and the complaint DISMISSED on that ground. SO ORDERED. Petitioner's motion for reconsideration5 was denied in an Order6 dated October 1, 1992. From the aforesaid resolution and order, petitioner originally filed before this Court on November 20, 1992 a petition for review on certiorari docketed as G.R. No. 107381.7 We declined to take immediate cognizance of the case, and in a Resolution dated January 11, 1993,8 referred the same to the Court of Appeals for resolution. The petition was docketed in the appellate court as CA-G.R. SP No. 29996. On August 31, 1993, the Court of Appeals rendered the assailed judgment9 denying due course and dismissing the petition. Counsel for petitioner received a copy of the decision on September 6, 1993.10 Without filing a motion for

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reconsideration, petitioner filed the instant petition, assailing the judgment of the Court of Appeals on the following grounds: 5.01. Respondent Court of Appeals denied petitioner procedural due process by failing to resolve the third of the above-stated issues. 5.02. Petitioner's right to file its action for damages against private respondent in Cebu City where its principal office is located, and for which it paid P55,398.50 in docket fees, may not be negated by a supposed estoppel absent the essential elements of the false statement having been made to private respondent and his reliance on good faith on the truth thereof, and private respondent's action or inaction based thereon of such character as to change his position or status to his injury, detriment or prejudice. The principal issue in the case at bar involves a question of venue. It is to be distinguished from jurisdiction, as follows: Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their alteration.11 It is private respondent's contention that the proper venue is Davao City, and not Cebu City where petitioner filed Civil Case No. CEB-11578. Private respondent argues that petitioner is estopped from claiming that its residence is in Cebu City, in view of contradictory statements made by petitioner prior to the filing of the action for damages. First, private respondent adverts to several contracts12 entered into by petitioner with the National Power Corporation (NAPOCOR) where in the description of personal circumstances, the former states that its principal office is at "163-165 P. Reyes St., Davao City." According to private respondent the petitioner's address in Davao City, as given in the contracts, is an admission which should bind petitioner. In addition, private respondent points out that petitioner made several judicial admissions as to its principal office in Davao City consisting principally of allegations in pleadings filed by petitioner in a number of civil cases pending before the Regional Trial Court of Davao in which it was either a plaintiff or a defendant.13 Practically the same issue was addressed in Young Auto Supply Co. v. Court of Appeals.14 In the aforesaid case, the defendant therein sought the dismissal of an action filed by the plaintiff, a corporation, before the Regional Trial Court of Cebu City, on the ground of improper venue. The trial court denied the motion to dismiss; on certiorari before the Court of Appeals, the denial was reversed and the case was dismissed. According to the appellate tribunal, venue was improperly laid since the address of the plaintiff was supposedly in Pasay City, as evidenced by a contract of sale, letters and several commercial documents sent by the plaintiff to the defendant, even though the plaintiff's articles of incorporation stated that its principal office was in Cebu City. On appeal, we reversed the Court of Appeals. We reasoned out thus: In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff x x x. There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both plaintiffs aver in their complaint that they are residents of Cebu City, thus: xxx xxx xxx The Article of Incorporation of YASCO (SEC Reg. No. 22083) states: "THIRD. That the place where the principal office of the corporation is to be established or located is at Cebu City, Philippines (as amended on December 20, 1980 and further amended on December 20, 1984)" x x x. A corporation has no residence in the same sense in which this term is applied to a natural person. But for practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of incorporation (Cohen v. Benguet Commercial Co., Ltd., 34 Phil. 526 [1916] Clavecilla Radio System v. Antillo, 19 SCRA 379 [1967]). The Corporation Code precisely requires each corporation to specify in its articles of incorporation the "place where the principal office of the corporation is to be located which must be within the Philippines" (Sec. 14[3]). The purpose of this requirement is to fix the residence of a corporation in a definite place, instead of allowing it to be ambulatory.
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In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot be filed against a corporation in any place where the corporation maintains its branch offices. The Court ruled that to allow an action to be instituted in any place where the corporation has branch offices, would create confusion and work untold inconvenience to said entity. By the same token, a corporation cannot be allowed to file personal actions in a place other than its principal place of business unless such a place is also the residence of a co-plaintiff or a defendant. If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel because it misled Roxas to believe that Pasay City was its principal place of business. But this is not the case before us. With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal place of business is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue. [emphasis supplied] The same considerations apply to the instant case. It cannot be disputed that petitioner's principal office is in Cebu City, per its amended articles of incorporation15 and by-laws.16 An action for damages being a personal action,17venue is determined pursuant to Rule 4, section 2 of the Rules of Court, to wit: Venue of personal actions. All other actions may be commenced and tied where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff.18 Private respondent is not a party to any of the contracts presented before us. He is a complete stranger to the covenants executed between petitioner and NAPOCOR, despite his protestations that he is privy thereto, on the rather flimsy ground that he is a member of the public for whose benefit the electric generating equipment subject of the contracts were leased or acquired. We are likewise not persuaded by his argument that the allegation or representation made by petitioner in either the complaints or answers it filed in several civil cases that its residence is in Davao City should estop it from filing the damage suit before the Cebu courts. Besides there is no showing that private respondent is a party in those civil cases or that he relied on such representation by petitioner. WHEREFORE, the instant petition is hereby GRANTED. The appealed decision is hereby REVERSED and SET ASIDE. The Regional Trial Court of Cebu City, Branch 11 is hereby directed to proceed with Civil Case No. CEB-11578 with all deliberate dispatch. No pronouncement as to costs. WE CONCUR: SO ORDERED.

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G.R. No. L-22238

February 18, 1967

CLAVECILLIA RADIO SYSTEM, petitioner-appellant, vs. HON. AGUSTIN ANTILLON, as City Judge of the Municipal Court of Cagayan de Oro City and NEW CAGAYAN GROCERY, respondents-appellees. B. C. Padua for petitioner and appellant. Pablo S. Reyes for respondents and appellees. REGALA, J.: This is an appeal from an order of the Court of First Instance of Misamis Oriental dismissing the petition of the Clavecilla Radio System to prohibit the City Judge of Cagayan de Oro from taking cognizance of Civil Case No. 1048 for damages. It appears that on June 22, 1963, the New Cagayan Grocery filed a complaint against the Clavecilla Radio System alleging, in effect, that on March 12, 1963, the following message, addressed to the former, was filed at the latter's Bacolod Branch Office for transmittal thru its branch office at Cagayan de Oro: NECAGRO CAGAYAN DE ORO (CLAVECILLA) REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE SHALL SHIP LATER REPLY POHANG The Cagayan de Oro branch office having received the said message omitted, in delivering the same to the New Cagayan Grocery, the word "NOT" between the words "WASHED" and "AVAILABLE," thus changing entirely the contents and purport of the same and causing the said addressee to suffer damages. After service of summons, the Clavecilla Radio System filed a motion to dismiss the complaint on the grounds that it states no cause of action and that the venue is improperly laid. The New Cagayan Grocery interposed an opposition to which the Clavecilla Radio System filed its rejoinder. Thereafter, the City Judge, on September 18, 1963, denied the motion to dismiss for lack of merit and set the case for hearing.1wph1.t Hence, the Clavecilla Radio System filed a petition for prohibition with preliminary injunction with the Court of First Instance praying that the City Judge, Honorable Agustin Antillon, be enjoined from further proceeding with the case on the ground of improper venue. The respondents filed a motion to dismiss the petition but this was opposed by the petitioner. Later, the motion was submitted for resolution on the pleadings. In dismissing the case, the lower court held that the Clavecilla Radio System may be sued either in Manila where it has its principal office or in Cagayan de Oro City where it may be served, as in fact it was served, with summons through the Manager of its branch office in said city. In other words, the court upheld the authority of the city court to take cognizance of the case. 1wph1.t In appealing, the Clavecilla Radio System contends that the suit against it should be filed in Manila where it holds its principal office. It is clear that the case for damages filed with the city court is based upon tort and not upon a written contract. Section 1 of Rule 4 of the New Rules of Court, governing venue of actions in inferior courts, provides in its paragraph (b) (3) that when "the action is not upon a written contract, then in the municipality where the defendant or any of the defendants resides or may be served with summons." (Emphasis supplied) Settled is the principle in corporation law that the residence of a corporation is the place where its principal office is established. Since it is not disputed that the Clavecilla Radio System has its principal office in Manila, it follows that the suit against it may properly be filed in the City of Manila. The appellee maintain, however, that with the filing of the action in Cagayan de Oro City, venue was properly laid on the principle that the appellant may also be served with summons in that city where it maintains a branch office. This Court has already held in the case of Cohen vs. Benguet Commercial Co., Ltd., 34 Phil. 526; that the term "may be served with summons" does not apply when the defendant resides in the Philippines for, in such case, he may be sued only in the municipality of his residence, regardless of the place where he may be found and served with summons. As any other corporation, the Clavecilla Radio System maintains a residence which is Manila in this case, and a person can have only one residence at a time (See Alcantara vs. Secretary of the Interior, 61 Phil. 459; Evangelists vs. Santos, 86 Phil. 387). The fact that it maintains branch offices in some parts of the country does not mean that it can be sued in any of these places. To allow an action to be instituted in any place where a corporate entity has its branch offices would create confusion and work untold inconvenience to the corporation. It is important to remember, as was stated by this Court in Evangelista vs. Santos, et al., supra, that the laying of the venue of an action is not left to plaintiff's caprice because the matter is regulated by the Rules of Court. Applying the provision of the Rules of Court, the venue in this case was improperly laid. The order appealed from is therefore reversed, but without prejudice to the filing of the action in Which the venue shall be laid properly. With costs against the respondents-appellees.

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G.R. No. L-56763 December 15, 1982 JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION, petitioners, vs. TYSON ENTERPRISES, INC., JUDGE GREGORIO G. PINEDA of the Court of First Instance of Rizal, Pasig Branch XXI and COURT OF APPEALS, respondents. AQUINO, J: This is a case about the venue of a collection suit. On August 29, 1979, Tyson Enterprises, Inc. filed against John Sy and Universal Parts Supply Corporation in the Court of First Instance of Rizal, Pasig Branch XXI, a complaint for the collection of P288,534.58 plus interest, attorney's fees and litigation expenses (Civil Case No. 34302). It is alleged in the complaint that John Sy, doing business under the trade name, Universal Parts Supply, is a resident of Fuentebella Subdivision, Bacolod City and that his co-defendant, Universal Parts Supply Corporation, allegedly controlled by Sy, is doing business in Bacolod City. Curiously enough, there is no allegation in the complaint as to the office or place of business of plaintiff Tyson Enterprises, Inc., a firm actually doing business at 1024 Magdalena, now G. Masangkay Street, Binondo, Manila (p. 59, Rollo). What is alleged is the postal address or residence of Dominador Ti, the president and general manager of plaintiff firm, which is at 26 Xavier Street, Greenhills Subdivision, San Juan, Rizal. The evident purpose of alleging that address and not mentioning the place of business of plaintiff firm was to justify the filing of the suit in Pasig, Rizal instead of in Manila. Defendant Sy and Universal Parts Supply Corporation first filed a motion for extension of time to file their answer and later a motion for a bill of particulars. The latter motion was denied. Then, they filed a motion to dismiss on the ground of improper venue. They invoked the provision of section 2(b), Rule 4 of the Rules of Court that personal actions "may be commenced and tried where the defendant or any of the defendants resides or may be found, or where the plaintiffs or any of the plaintiffs resides, at the election of the plaintiff." To strengthen that ground, they also cited the stipulation in the sales invoice that "the parties expressly submit to the jurisdiction of the Courts of the City of Manila for any legal action arising out of" the transaction which stipulation is quoted in paragraph 4 of plaintiff's complaint. The plaintiff opposed the motion to dismiss on the ground that the defendants had waived the objection based on improper venue because they had previously filed a motion for a bill of particulars which was not granted. The trial court denied the motion to dismiss on the ground that by filing a motion for a bill of particulars the defendants waived their objection to the venue. That denial order was assailed in a petition for certiorari and prohibition in the Court of Appeals which issued on July 29, 1980 a restraining order, enjoining respondent judge from acting on the case. He disregarded the restraining order (p. 133, Rollo). The Appellate Court in its decision of October 6, 1980 dismissed the petition. It ruled that the parties did not intend Manila as the exclusive venue of the actions arising under their transactions and that since the action was filed in Pasig, which is near Manila, no useful purpose would be served by dismissing the same and ordering that it be filed in Manila (Sy vs. Pineda, CA-G.R. No. SP-10775). That decision was appealed to this Court. There is no question that the venue was improperly laid in this case. The place of business of plaintiff Tyson Enterprises, Inc., which for purposes of venue is considered as its residence (18 C.J.S 583; Clavecilla Radio system vs. Antillon, L-22238, February 18, 1967, 19 SCRA 379), because a corporation has a personality separate and distinct from that of its officers and stockholders. Consequently, the collection suit should have been filed in Manila, the residence of plaintiff corporation and the place designated in its sales invoice, or it could have been filed also in Bacolod City, the residence of defendant Sy. We hold that the trial court and the Court of Appeals erred in ruling that the defendants, now the petitioners, waived their objection to the improper venue. As the trial court proceeded in defiance of the Rules of Court in not dismissing the case, prohibition lies to restrain it from acting in the case (Enriquez vs. Macadaeg, 84 Phil. 674). Section 4, Rule 4 of the Rules of Court provides that, "when improper venue is not objected to in a motion to dismiss it is deemed waived" and it can no longer be pleaded as an affirmative defense in the answer (Sec. 5, Rule 16). In this case, the petitioners, before filing their answer, filed a motion to dismiss based on improper venue. That motion was seasonably filed (Republic vs. Court of First Instance of Manila, L-30839, November 28, 1975, 68 SCRA 231, 239). The fact that they filed a motion for a bill of particulars before they filed their motion to dismiss did not constitute a waiver of their objection to the venue. It should be noted that the provision of Section 377 of the Code of Civil Procedure that "the failure of a defendant to object to the venue of the action at the time of entering his appearance in the action shall be deemed a waiver on his part of all objection to the place or tribunal in which the action is brought" is not found in the Rules of Court. And the provision of section 4, Rule 5 of the 1940 Rules of Court that "when improper venue is not objected to prior to the trial, it is deemed waived" is not reproduced in the present Rules of Court.
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To repeat, what section 4 of Rule 4 of the present Rules of court provides is that the objection to improper venue should be raised in a motion to dismiss seasonably filed and, if not so raised, then the said objection is waived. Section 4 does not provide that the objection based on improper venue should be interposed by means of a special appearance or before any pleading is filed. The rules on venue, like the other procedural rules, are designed to insure a just and orderly administration of justice or the impartial and evenhanded determination of every action and proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted freedom to choose the court where he may file his complaint or petition. The choice of venue should not be left to the plaintiff's whim or caprice. He may be impelled by some ulterior motivation in choosing to file a case in a particular court even if not allowed by the rules on venue. As perspicaciously observed by Justice Moreland, the purpose of procedure is not to restrict the court's jurisdiction over the subject matter but to give it effective facility "in righteous action", "to facilitate and promote the administration of justice" or to insure "just judgments" by means of a fair hearing. If that objective is not achieved, then "the administration of justice becomes incomplete and unsatisfactory and lays itself open to grave criticism." (Manila Railroad Co. vs. Attorney General, 20 Phil. 523, 530.) The case of Marquez Lim Cay vs. Del Rosario, 55 Phil. 962, does not sustain the trial court's order of denial because in that case the defendants, before filing a motion to dismiss on the ground of improper venue, interposed a demurrer on the ground that the complaint does not state a cause of action. Then, they filed a motion for the dissolution of an attachment, posted a bond for its dissolution and later filed a motion for the assessment of the damages caused by the attachment. All those acts constituted a submission to the trial court's jurisdiction and a waiver of the objection based on improper venue under section 377 of the Code of Civil Procedure. The instant case is similar to Evangelista vs. Santos, 86 Phil. 387, where the plaintiffs sued the defendant in the Court of First Instance of Rizal on the assumption that he was a resident of Pasay City because he had a house there. Upon receipt of the summons, the defendant filed a motion to dismiss based on improper venue. He alleged under oath that he was a resident of Iloilo City. This Court sustained the dismissal of the complaint on the ground of improper venue, because the defendant was really a resident of Iloilo City. His Pasay City residence was used by his children who were studying in Manila. Same holding in Casilan vs. Tomassi, 90 Phil. 765; Corre vs. Corre, 100 Phil. 321; Calo vs. Bislig Industries, Inc., L-19703, January 30, 1967, 19 SCRA 173; Adamos vs. J. M. Tuason, Co., Inc.,. L-21957, October 14, 1968, 25 SCRA 529. Where one Cesar Ramirez, a resident of Quezon City, sued in the Court of First Instance of Manila Manuel F. Portillo, a resident of Caloocan City, for the recovery of a sum of money, the trial court erred in not granting Portillo's motion to dismiss the complaint on the ground of improper venue This Court issued the writ of prohibition to restrain the trial court from proceeding in the case (Portillo vs. Judge Reyes and Ramirez, 113 Phil. 288). WHEREFORE, the decision of the Court of Appeals and the order of respondent judge denying the motion to dismiss are reversed and set aside. The writ of prohibition is granted. Civil Case No. 34302 should be considered dismissed without prejudice to refiling - it in the Court of First Instance of Manila or Bacolod City at the election of plaintiff which should be allowed to withdraw the documentary evidence submitted in that case. All the proceedings in said case, including the decision, are also set aside. Costs against Tyson Enterprises, Inc. SO ORDERED.

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G.R. No. 104175 June 25, 1993 YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA, petitioners, vs. THE HONORABLE COURT OF APPEALS (THIRTEENTH DIVISION) AND GEORGE CHIONG ROXAS,respondents. QUIASON, J.: Petitioners seek to set aside the decision of respondent Court of Appeals in CA-G.R. SP No. 25237, which reversed the Order dated February 8, 1991 issued by the Regional Trial Court, Branch 11, Cebu City in Civil Case No. CEB 6967. The order of the trial court denied the motion to dismiss filed by respondent George C. Roxas of the complaint for collection filed by petitioners. It appears that sometime on October 28, 1987, Young Auto Supply Co. Inc. (YASCO) represented by Nemesio Garcia, its president, Nelson Garcia and Vicente Sy, sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to Roxas. The purchase price was P8,000,000.00 payable as follows: a downpayment of P4,000,000.00 and the balance of P4,000,000.00 in four post dated checks of P1,000,000.00 each. Immediately after the execution of the agreement, Roxas took full control of the four markets of CMDC. However, the vendors held on to the stock certificates of CMDC as security pending full payment of the balance of the purchase price. The first check of P4,000,000.00, representing the down-payment, was honored by the drawee bank but the four other checks representing the balance of P4,000,000.00 were dishonored. In the meantime, Roxas sold one of the markets to a third party. Out of the proceeds of the sale, YASCO received P600,000.00, leaving a balance of P3,400,000.00 (Rollo, p. 176). Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of the CMDC shares to Nemesio Garcia. On June 10, 1988, petitioners filed a complaint against Roxas in the Regional Trial Court, Branch 11, Cebu City, praying that Roxas be ordered to pay petitioners the sum of P3,400,00.00 or that full control of the three markets be turned over to YASCO and Garcia. The complaint also prayed for the forfeiture of the partial payment of P4,600,000.00 and the payment of attorney's fees and costs (Rollo, p. 290). Roxas filed two motions for extension of time to submit his answer. But despite said motion, he failed to do so causing petitioners to file a motion to have him declared in default. Roxas then filed, through a new counsel, a third motion for extension of time to submit a responsive pleading. On August 19, 1988, the trial court declared Roxas in default. The order of default was, however, lifted upon motion of Roxas. On August 22, 1988, Roxas filed a motion to dismiss on the grounds that: 1. The complaint did not state a cause of action due to non-joinder of indispensable parties; 2. The claim or demand set forth in the complaint had been waived, abandoned or otherwise extinguished; and 3. The venue was improperly laid (Rollo, p. 299). After a hearing, wherein testimonial and documentary evidence were presented by both parties, the trial court in an Order dated February 8, 1991 denied Roxas' motion to dismiss. After receiving said order, Roxas filed another motion for extension of time to submit his answer. He also filed a motion for reconsideration, which the trial court denied in its Order dated April 10, 1991 for being pro-forma (Rollo, p. 17). Roxas was again declared in default, on the ground that his motion for reconsideration did not toll the running of the period to file his answer. On May 3, 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not accompanied with the required affidavit or merit. But without waiting for the resolution of the motion, he filed a petition for certiorari with the Court of Appeals. The Court of Appeals sustained the findings of the trial court with regard to the first two grounds raised in the motion to dismiss but ordered the dismissal of the complaint on the ground of improper venue ( Rollo, p. 49). A subsequent motion for reconsideration by petitioner was to no avail. Petitioners now come before us, alleging that the Court of Appeals erred in: 1. holding the venue should be in Pasay City, and not in Cebu City (where both petitioners/plaintiffs are residents; 2. not finding that Roxas is estopped from questioning the choice of venue ( Rollo, p. 19). The petition is meritorious. In holding that the venue was improperly laid in Cebu City, the Court of Appeals relied on the address of YASCO, as appearing in the Deed of Sale dated October 28, 1987, which is "No. 1708 Dominga Street, Pasay City." This was the same address written in YASCO's letters and several commercial documents in the possession of Roxas (Decision, p. 12; Rollo, p. 48).

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In the case of Garcia, the Court of Appeals said that he gave Pasay City as his address in three letters which he sent to Roxas' brothers and sisters (Decision, p. 12; Rollo, p. 47). The appellate court held that Roxas was led by petitioners to believe that their residence is in Pasay City and that he had relied upon those representations (Decision, p. 12, Rollo, p. 47). The Court of Appeals erred in holding that the venue was improperly laid in Cebu City. In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff [Sec. 2(b) Rule 4, Revised Rules of Court]. There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both plaintiffs aver in their complaint that they are residents of Cebu City, thus: 1.1. Plaintiff Young Auto Supply Co., Inc., ("YASCO") is a domestic corporation duly organized and existing under Philippine laws with principal place of business at M. J. Cuenco Avenue, Cebu City. It also has a branch office at 1708 Dominga Street, Pasay City, Metro Manila. Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and with business address at Young Auto Supply Co., Inc., M. J. Cuenco Avenue, Cebu City. . . . (Complaint, p. 1; Rollo, p. 81). The Article of Incorporation of YASCO (SEC Reg. No. 22083) states: THIRD That the place where the principal office of the corporation is to be established or located is at Cebu City, Philippines (as amended on December 20, 1980 and further amended on December 20, 1984) ( Rollo, p. 273). A corporation has no residence in the same sense in which this term is applied to a natural person. But for practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of incorporation (Cohen v. Benguet Commercial Co., Ltd., 34 Phil. 256 [1916] Clavecilla Radio System v. Antillon, 19 SCRA 379 [1967]). The Corporation Code precisely requires each corporation to specify in its articles of incorporation the "place where the principal office of the corporation is to be located which must be within the Philippines" (Sec. 14 [3]). The purpose of this requirement is to fix the residence of a corporation in a definite place, instead of allowing it to be ambulatory. In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot be filed against a corporation in any place where the corporation maintains its branch offices. The Court ruled that to allow an action to be instituted in any place where the corporation has branch offices, would create confusion and work untold inconvenience to said entity. By the same token, a corporation cannot be allowed to file personal actions in a place other than its principal place of business unless such a place is also the residence of a co-plaintiff or a defendant. If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that its principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel because it misled Roxas to believe that Pasay City was its principal place of business. But this is not the case before us. With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal place of business is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals appealed from is SET ASIDE and the Order dated February 8, 1991 of the Regional Trial Court is REINSTATED. SO ORDERED.

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G.R. No. L-23606

July 29, 1968

ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC., petitioner, vs. SECURITIES & EXCHANGE COMMISSION, respondent. To the question May a corporation extend its life by amendment of its articles of incorporation effected during the three-year statutory period for liquidation when its original term of existence had already expired? the answer of the Securities and Exchange Commissioner was in the negative. Offshoot is this appeal. That problem emerged out of the following controlling facts: Petitioner Alhambra Cigar and Cigarette Manufacturing Company, Inc. (hereinafter referred to simply as Alhambra) was duly incorporated under Philippine laws on January 15, 1912. By its corporate articles it was to exist for fifty (50) years from incorporation. Its term of existence expired on January 15, 1962. On that date, it ceased transacting business, entered into a state of liquidation. Thereafter, a new corporation. Alhambra Industries, Inc. was formed to carry on the business of Alhambra. On May 1, 1962, Alhambra's stockholders, by resolution named Angel S. Gamboa trustee to take charge of its liquidation. On June 20, 1963 within Alhambra's three-year statutory period for liquidation - Republic Act 3531 was enacted into law. It amended Section 18 of the Corporation Law; it empowered domestic private corporations to extend their corporate life beyond the period fixed by the articles of incorporation for a term not to exceed fifty years in any one instance. Previous to Republic Act 3531, the maximum non-extendible term of such corporations was fifty years. On July 15, 1963, at a special meeting, Alhambra's board of directors resolved to amend paragraph "Fourth" of its articles of incorporation to extend its corporate life for an additional fifty years, or a total of 100 years from its incorporation. On August 26, 1963, Alhambra's stockholders, representing more than two-thirds of its subscribed capital stock, voted to approve the foregoing resolution. The "Fourth" paragraph of Alhambra's articles of incorporation was thus altered to read: FOURTH. That the term for which said corporation is to exist is fifty (50) years from and after the date of incorporation, and for an additional period of fifty (50) years thereafter. On October 28, 1963, Alhambra's articles of incorporation as so amended certified correct by its president and secretary and a majority of its board of directors, were filed with respondent Securities and Exchange Commission (SEC). On November 18, 1963, SEC, however, returned said amended articles of incorporation to Alhambra's counsel with the ruling that Republic Act 3531 "which took effect only on June 20, 1963, cannot be availed of by the said corporation, for the reason that its term of existence had already expired when the said law took effect in short, said law has no retroactive effect." On December 3, 1963, Alhambra's counsel sought reconsideration of SEC's ruling aforesaid, refiled the amended articles of incorporation. On September 8, 1964, SEC, after a conference hearing, issued an order denying the reconsideration sought. Alhambra now invokes the jurisdiction of this Court to overturn the conclusion below.
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1. Alhambra relies on Republic Act 3531, which amended Section 18 of the Corporation Law. Well it is to take note of the old and the new statutes as they are framed. Section 18, prior to and after its modification by Republic Act 3531, covers the subject of amendment of the articles of incorporation of private corporations. A provision thereof which remains unaltered is that a corporation may amend its articles of incorporation "by a majority vote of its board of directors or trustees and ... by the vote or written assent of the stockholders representing at least two-thirds of the subscribed capital stock ... " But prior to amendment by Republic Act 3531, an explicit prohibition existed in Section 18, thus: ... Provided, however, That the life of said corporation shall not be extended by said amendment beyond the time fixed in the original articles: ... This was displaced by Republic Act 3531 which enfranchises all private corporations to extend their corporate existence. Thus incorporated into the structure of Section 18 are the following: ... Provided, however, That should the amendment consist in extending the corporate life, the extension shall not exceed fifty years in any one instance: Provided, further, That the original articles, and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation: ... As we look in retrospect at the facts, we find these: From July 15 to October 28, 1963, when Alhambra made its attempt to extend its corporate existence, its original term of fifty years had already expired (January 15, 1962); it was in the midst of the three-year grace period statutorily fixed in Section 77 of the Corporation Law, thus: . SEC. 77. Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of 2 continuing the business for which it was established. Plain from the language of the provision is its meaning: continuance of a "dissolved" corporation as a body corporate for three years has for its purpose the final closure of its affairs, and no other; the corporation is specifically enjoined from "continuing the business for which it was established". The liquidation of the corporation's affairs set forth in Section 77 became necessary precisely because its life had ended. For this reason alone, the corporate existence and juridical personality of that corporation to do business may no longer be extended.
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Worth bearing in mind, at this juncture, is the basic development of corporation law. The common law rule, at the beginning, was rigid and inflexible in that upon its dissolution, a corporation became legally dead for all purposes. Statutory authorizations had to be provided for its continuance after dissolution "for limited and specified purposes incident to complete 3 liquidation of its affairs". Thus, the moment a corporation's right to exist as an "artificial person" ceases, its corporate powers are terminated "just 4 as the powers of a natural person to take part in mundane affairs cease to exist upon his death". There is nothing left but to conduct, as it were, the settlement of the estate of a deceased juridical person. 2. Republic Act 3531, amending Section 18 of the Corporation Law, is silent, it is true, as to when such act of extension may be made. But even with a superficial knowledge of corporate principles, it does not take much effort to reach a correct conclusion. For, implicit in Section 77 heretofore quoted is that the privilege given to prolongcorporate life under the amendment must be exercised before the expiry of the term fixed in the articles of incorporation. Silence of the law on the matter is not hard to understand. Specificity is not really necessary. The authority to prolong corporate life was inserted by Republic Act 3531 into a section of the law that deals with the power of a corporation to amend its articles of incorporation. (For, the manner of prolongation is through an amendment of the articles.) And it should be clearly evident that under Section 77 no corporation in a state of liquidation can act in any way, much less amend its articles, "for the purpose of continuing the business for which it was established". All these dilute Alhambra's position that it could revivify its corporate life simply because when it attempted to do so, Alhambra was still in the process of liquidation. It is surely impermissible for us to stretch the law that merely empowers a corporation to act in liquidation to inject therein the power to extend its corporate existence. 3. Not that we are alone in this view. Fletcher has written: "Since the privilege of extension is purely statutory, all of the statutory conditions precedent must be complied with in order that the extension may be effectuated. And, generally these conditions must be complied with, and the steps necessary to effect the extension must be taken,during the life of the corporation, and before the expiration of the term of existence as original fixed by its charter or the general law, since, as a rule, the corporation is ipso facto dissolved as soon as that time expires. So where the extension is by amendment of the articles of incorporation, the amendment must be adopted before that time. And, similarly, the filing and recording of a certificate of extension after that time cannot relate back to the date of the passage of a resolution by the stockholders in favor of the extension so as to save the life of the corporation. The contrary is true, however, and the doctrine of relation will apply, where the delay is due to the neglect of the officer with whom the certificate is required to be filed, or to a wrongful refusal on his part to receive it. And statutes in some states specifically provide that a renewal may be had within a specified time before or after the time fixed for the termination of the corporate 5 existence". The logic of this position is well expressed in a foursquare case decided by the Court of Appeals of Kentucky. There, pronouncement was made as follows: ... But section 561 (section 2147) provides that, when any corporation expires by the terms of its articles of incorporation, it may be thereafter continued to act for the purpose of closing up its business, but for no other purpose. The corporate life of the Home Building Association expired on May 3, 1905. After that date, by the mandate of the statute, it could continue to act for the purpose of closing up its business, but for no other purpose. The proposed amendment was not made until January 16, 1908, or nearly three years after the corporation expired by the terms of the articles of incorporation. When the corporate life of the corporation was ended, there was nothing to extend. Here it was proposed nearly three years after the corporate life of the association had expired to revivify the dead body, and to make that relate back some two years and eight months. In other words, the association for two years and eight months had only existed for the purpose of winding up its business, and, after this length of time, it was proposed to revivify it and make it a live corporation for the two years and eight months daring which it had not been such. The law gives a certain length of time for the filing of records in this court, and provides that the time may be extended by the court, but under this provision it has uniformly been held that when the time was expired, there is nothing to extend, and that the appeal must be dismissed... So, when the articles of a corporation have expired, it is too late to adopt an amendment extending the life of a corporation; 7 for, the corporation having expired, this is in effect to create a new corporation ..." True it is, that the Alabama Supreme Court has stated in one case. that a corporation empowered by statute torenew its corporate existence may do so even after the expiration of its corporate life, provided renewal is taken advantage of within the extended statutory period for purposes of liquidation. That ruling, however, is inherently weak as persuasive authority for the situation at bar for at least two reasons: First. That case was a suit for mandamus to compel a former corporate officer to turn over books and records that came into his possession and control by virtue of his office. It was there held that such officer was obliged to surrender his books and records even if the corporation had already expired. The holding on the continued existence of the corporation was a mere dictum. Second. Alabama's law is different. Corporations in that state were authorized not only to extend but also to renew their corporate existence.That very case defined the word "renew" as follows; "To make new again; to restore to freshness; to make new spiritually; to regenerate; to begin again; to recommence; to resume; to restore to existence, to revive; to re-establish; to recreate; to replace; to grant or obtain an extension of Webster's New International Dict.; 34 Cyc. 1330; Carter v. Brooklyn Life Ins. Co., 110 N.Y. 9 15, 21, 22, 17 N.E. 396; 54 C.J. 379. Sec". On this point, we again draw from Fletcher: "There is a broad distinction between the extension of a charter and the grant of a new one. To renew a charter is to revive a charter which has expired, or, in other words, "to give a new existence to one which has been forfeited, or which has lost its vitality by lapse of time". To "extend" a charter is "to increase the time for the existence of one which would otherwise reach its limit at an earlier 10 period". Nowhere in our statute Section 18, Corporation Law, as amended by Republic Act 3531 do we find the word "renew" in reference to the authority given to corporations to protract their lives. Our law limits itself to extension of corporate existence. And, as so understood, extension may be made only before the term provided in the corporate charter expires. Alhambra draws attention to another case which declares that until the end of the extended period for liquidation, a dissolved corporation "does not become an extinguished entity". But this statement was obviously lifted out of context. That case dissected the question whether or not suits
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can be commenced by or against a corporation within its liquidation period. Which was answered in the affirmative. For, the corporation still exists for the settlement of its affairs. People, ex rel. vs. Green, also invoked by Alhambra, is as unavailing. There, although the corporation amended its articles to extend its existence at a time when it had no legal authority yet, it adopted the amended articles later on when it had the power to extend its life and during its original term when it could amend its articles. The foregoing notwithstanding, Alhambra falls back on the contention that its case is arguably within the purview of the law. It says that before cessation of its corporate life, it could not have extended the same, for the simple reason that Republic Act 3531 had not then become law. It must be remembered that Republic Act 3531 took effect on June 20, 1963, while the original term of Alhambra's existence expired before that date on January 15, 1962. The mischief that flows from this theory is at once apparent. It would certainly open the gates for all defunct corporations whose charters have expired even long before Republic Act 3531 came into being to resuscitate their corporate existence. 4. Alhambra brings into argument Republic Act 1932, which amends Section 196 of the Insurance Act, now reading as follows: 1wph1.t SEC. 196. Any provision of law to the contrary notwithstanding, every domestic life insurance corporation, formed for a limited period under the provisions of its articles of incorporation, may extend its corporate existence for a period not exceeding fifty years in any one instance by amendment to its articles of incorporation on or before the expiration of the term so fixed in said articles ... To be observed is that the foregoing statute unlike Republic Act 3531 expressly authorizes domestic insurance corporations to extend their corporate existence "on or before the expiration of the term" fixed in their articles of incorporation. Republic Act 1932 was approved on June 22, 1957, long before the passage of Republic Act 3531 in 1963. Congress, Alhambra points out, must have been aware of Republic Act 1932 when it passed Republic Act 3531. Since the phrase "on or before", etc., was omitted in Republic Act 3531, which contains no similar limitation, it follows, according to Alhambra, that it is not necessary to extend corporate existence on or before the expiration of its original term. That Republic Act 3531 stands mute as to when extention of corporate existence may be made, assumes no relevance. We have already said, in the face of a familiar precept, that a defunct corporation is bereft of any legal faculty not otherwise expressly sanctioned by law. Illuminating here is the explanatory note of H.B. 1774, later Republic Act 3531 now in dispute. Its first paragraph states that "Republic Act No. 1932 allows the automatic extension of the corporate existence of domestic life insurance corporations upon amendment of their articles of incorporation on or before the expiration of the terms fixed by said articles". The succeeding lines are decisive: "This is a good law, a sane and 13 sound one. There appears to be no valid reason why it should not be made to apply to other private corporations. The situation here presented is not one where the law under consideration is ambiguous, where courts have to put in harness extrinsic aids such as a look at another statute to disentangle doubts. It is an elementary rule in legal hermeneutics that where the terms of the law are clear, no statutory construction may be permitted. Upon the basic conceptual scheme under which corporations operate, and with Section 77 of the Corporation Law particularly in mind, we find no vagueness in Section 18, as amended by Republic Act 3531. As we view it, by directing attention to Republic Act 1932, Alhambra would seek to create obscurity in the law; and, with that, ask of us a ruling that such obscurity be explained. This, we dare say, cannot be done. The pari materia rule of statutory construction, in fact, commands that statutes must be harmonized with each other. So harmonizing, the conclusion is clear that Section 18 of the Corporation Law, as amended by Republic Act 3531 in reference to extensions of corporate existence, is to be read in the same light as Republic Act 1932. Which means that domestic corporations in general, as with domestic insurance companies, can extend corporate existence only on or before the expiration of the term fixed in their charters. 5. Alhambra pleads for munificence in interpretation, one which brushes technicalities aside. Bases for this posture are that Republic Act 3531 is a remedial statute, and that extension of corporate life is beneficial to the economy. Alhambra's stance does not induce assent. Expansive construction is possible only when there is something to expand. At the time of the passage of Republic Act 3531, Alhambra's corporate life had already expired. It had overstepped the limits of its limited existence. No life there is to prolong. Besides, a new corporation Alhambra Industries, Inc., with but slight change in stockholdings has already been established. Its purpose is to 16 carry on, and it actually does carry on, the business of the dissolved entity. The beneficial-effects argument is off the mark. The way the whole case shapes up then, the only possible drawbacks of Alhambra might be that, instead of the new corporation (Alhambra Industries, Inc.) being written off, the old one (Alhambra Cigar & Cigarette Manufacturing Company, Inc.) has to be wound up; and that the old 17 corporate name cannot be retained fully in its exact form. What is important though is that the word Alhambra, the name that counts [it has goodwill], remains. FOR THE REASONS GIVEN, the ruling of the Securities and Exchange Commission of November 18, 1963, and its order of September 8, 1964, both here under review, are hereby affirmed. Costs against petitioner Alhambra Cigar & Cigarette Manufacturing Company, Inc. So ordered.
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G.R. No. 125198 March 3, 1997 MSCI-NACUSIP Local Chapter, petitioner, vs. NATIONAL WAGES AND PRODUCTIVITY COMMISSION and MONOMER SUGAR CENTRAL, INC.,respondents. HERMOSISIMA, JR., J.: This is a petition for certiorari questioning the February 1, 1995 Decision of public respondent National Wages and Productivity Commission (Commission, for brevity) in NWPC Case No. E-93-007 which reversed on appeal the August 17, 1993 Decision of the Regional Tripartite Wages and Productivity Board VI (Board, for brevity) denying the application for exemption of private respondent Monomer Sugar Central, Inc. (MSCI, for brevity) from Wage Order No. RO VI-01 issued by the Board. The relevant antecedents are undisputed. On January 11, 1990, Asturias Sugar Central, Inc. (ASCI, for brevity), executed a Memorandum of Agreement with Monomer Trading Industries, Inc. (MTII, for brevity), whereby MTII shall acquire the assets of ASCI by way of a Deed of Assignment provided that an entirely new organization in place of MTII shall be organized, which new corporation shall be the assignee of the assets of ASCI. By virtue of this Agreement, a new corporation was organized and incorporated on February 15, 1990 under the corporate name Monomer Sugar Central, Inc. or MSCI, the private respondent herein. On January 16, 1991, MSCI applied for exemption from the coverage of Wage Order No. RO VI-01 issued by the Board on the ground that it is a distressed employer. In support thereto, MSCI submitted its audited financial statements and income tax returns duly stamped "received" by the Bureau of Internal Revenue (BIR) and the Securities and Exchange Commission (SEC) for the period beginning February 15, 1990 and ending August 31, 1990, including the quarterly financial statements and income tax returns for the two quarters ending November 30, 1990 and February 28, 1991. The petitioner herein MSCI-NACUSIP Local Chapter (Union, for brevity), in opposition, maintained that MSCI is not distressed; that respondent applicant has not complied with the requirements for exemption; and that the financial statements submitted by MSCI do not reflect the true and valid financial status of the company, and that the paid-up capital would have been higher than P5 million and thus impairment would have been lower than 25% had the pre-organization agreement between ASCI and MTII been complied with. The Board conducted hearings on the application, during which the applicant was required to submit additional documents such as its Articles of Incorporation, Memorandum of Agreement between ASCI and MTII, SEC registration, including the schedules of its long-term liabilities, income and expenses, production reports and mill share, among others. On August 17, 1993, the Board denied MSCI's application for exemption based on the finding that the applicant's losses of P3,400,738.00 for the period February 15, 1990 to August 31, 1990 constitute an impairment of only 5.25% of its paid-up capital of P64,688,528.00, can not be said to be sufficient to meet the required 25% in order to qualify for the exemption, as provided in NWPC Guidelines No. 01, Series of 1992 entitled "REVISED GUIDELINES ON EXEMPTION FROM COMPLIANCE WITH THE PRESCRIBED WAGE/COST OF LIVING ALLOWANCE INCREASES GRANTED BY THE REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARDS:" Sec. 3. CRITERIA FOR EXEMPTION The following criteria shall be used to determine whether the applicant establishment is qualified for exemption: xxx xxx xxx 3. For Distressed Establishments: a. In the case of a stock corporation, partnership, single proprietorship, non-stock, non-profit organization or cooperative engaged in a business activity or charging fees for its services a.1 When accumulated losses for the last 2 full accounting periods and interim period, if any, immediately preceding the effectivity of the Order have impaired by at least 25 percent the: Paid-up capital at the end of the last full accounting period preceding the effectivity of the Order, in the case of corporations: Total invested capital at the beginning of the last full accounting period preceding the effectivity of the Order in the case of partnerships and single proprietorships. xxx xxx xxx
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The motion for reconsideration, filed by MSCI on September 20, 1993, was denied by the Board on October 12, 1993. A timely appeal was brought before the public respondent Commission. In its decision dated February 1, 1995, the Commission reversed and set aside the foregoing orders of the Board, and granted MSCI's application for exemption from Wage Order No. RO VI-01, for a period of one (1) year from its effectivity or from November 27, 1990 to November 26, 1991, in the following manner: WHEREFORE, premises considered, the Orders of the Board appealed from are hereby REVERSED and SET ASIDE. Monomer is hereby GRANTED full exemption from Wage Order No. RO VI-01, for a period of one year from effectivity of the Wage Order, which is from 27 November 1990 to 26 November 1991. SO DECIDED. 1 Petitioner has come before us by way of a Petition for Certiorari under Rule 65. The issue posed is whether or not respondent MSCI can qualify as a distressed employer from February 15, 1990 to August 31, 1990 as well as during the interim period from September 1, 1990 to November 30, 1990 and thus be entitled to exemption from compliance with Wage Order No. RO VI-01. To resolve this issue, however, a pivotal determination must first be made: What is the correct paid-up capital of MSCI for the pertinent period covered by the application for exemption P5 million or P64,688,528.00? The Board held that the paid-up capital of MSCI on the aforesaid dates was actually P64,688,528.00 and not P5 million as claimed by MSCI in its application for exemption and, thus, the established losses amounting to P3,400,738.00 constitute an impairment of only 5.25% of the true paid-up capital of P64 million plus, 2 which losses are not enough to meet the required 25% impairment requirement. This conclusion is anchored on the belief of the Board that the value of the assets of ASCI, party to the Memorandum of Agreement, transferred to MSCI on March 28, 1990 should be taken into consideration in computing the paid-up capital of MSCI to reflect its true financial structure. Moreover, the loans or advances extended by MTII, the other party to the Agreement, to MSCI should allegedly be treated as additional investments to MSCI, 3 and must therefore be included in computing respondent's paid-up capital. Public respondent Commission thought otherwise. In reversing the Board and granting the exemption, the Commission held that the Board exceeded its authority in computing and giving new valuation to what should be the paid-up capital of MSCI. It stressed that RA No. 6727, or the Wage Rationalization Act, and its implementing guidelines have not conferred upon the Board the authority to change the paid-up capital of a corporation. 4 The foregoing asseveration of the parties considered, we find no grave abuse of discretion on the part of the Commission in setting aside the findings of the Board and granting full exemption to MSCI from Wage Order No. RO VI-01. NWPC Guidelines No. 01, Series of 1992 as well as the new NWPC Guidelines No. 01, Series of 1996, defineCapital as referring to paid-up capital at the end of the last full accounting period, in the case of corporations or total invested capital at the beginning of the period under review, in the case of partnerships and single proprietorships. To have a clear understanding of what paid-up capital is, however, a referral to Sections 12 and 13 of BP Blg. 68 or the Corporation Code would be very helpful, viz: Sec. 12. Minimum capital stock required of stock corporations. Stock corporations incorporated under this Code shall not be required to have any minimum authorized capital stock except as otherwise specifically provided for by special law, and subject to the provisions of the following section. Sec. 13. Amount of capital stock to be subscribed and paid for purposes of incorporation. At least twentyfive (25%) percent of the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation, and at least twenty-five (25%) percent of the total subscription must be paid upon subscription, the balance to be payable on a date or dates fixed in the contract of subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the board of directors: Provided, however, That in no case shall the paid-up capital be less than five thousand (P5,000.00) pesos. (n) By express provision of Section 13, paid-up capital is that portion of the authorized capital stock which has been both subscribed and paid. To illustrate, where the authorized capital stock of a corporation is worth P 1 million and the total subscription amounts to P250,000.00, at least 25% of this amount, namely, P62,500.00 must be paid up per Section 13. The latter, P62,500.00, is the paid-up capital or what should more accurately be termed as "paid-up capital stock." 5 In the case under consideration, there is no dispute, and the Board even mentioned in its August 17, 1993 Decision, that MSCI was organized and incorporated on February 15, 1990 with an authorized capital stock of P60 million, P20 million of which

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was subscribed. Of the P20 million subscribed capital stock, P5 million was paid-up. 6This fact is only too glaring for the Board to have been misled into believing that MSCI'S paid-up capital stock was P64 million plus and not P5 million. The submission of the Board that the value of the assets of Asturias Sugar Central, Inc. transferred to MSCI on March 28, 1990, as well as the loans or advances made by MTII to MSCI should have been taken into consideration in computing the paid-up capital of MSCI is unmeritorious, at best, and betrays the Board's sheer lack of grasp of a basic concept in Corporation Law, at worst. Not all funds or assets received by the corporation can be considered paid-up capital, for this term has a technical signification in Corporation Law. Such must form part of the authorized capital stock of the corporation, subscribed and then actually paid up. Furthermore, the Commission aptly observed that the loans and advances of MTII to respondent MSCI cannot be treated as investments, unless the corresponding shares of stocks are issued. But as it turned out, such loans and advances were in fact treated as liabilities of MSCI to MTII as shown in its 1990 audited financial statements. 7 The treatment by the Board of these loans as part of MSCI's capital stock without satisfying certain mandatory requirements is proscribed under Section 38 of the Corporation Code which provides: Power to increase or decrease capital stock; incur, create or increase bonded indebtedness. No corporation shall increase or decrease its capital stock or incur, create or increase any bonded indebtedness unless approved by a majority vote of the board of directors and, at a stockholders' meeting duly called for the purpose, two-thirds (2/3) of the outstanding capital stock shall favor the increase or diminution of the capital stock, or the incurring, creating or increasing of any bonded indebtedness. Written notice of the proposed increase or diminution of the capital stock or of the incurring, creating, or increasing of any bonded indebtedness and of the time and place of the stockholders' meeting at which the proposed increase or diminution of the capital stock or the incurring or increasing of any bonded indebtedness is to be considered, must be addressed to each stockholders at his place of residence as shown on the books of the corporation and deposited to de addressee in the post office with postage prepaid, or served personally. The above requirements, which are condition precedents before the capital stock of a corporation may be increased, were unquestionably not observed in this case. Henceforth, the paid-up capital stock of MSCI for the period covered by the application for exemption still stood at P5 million. The losses, therefore, amounting to P3,400,738.00 for the period February 15, 1990 to August 31, 1990 impaired MSCI's paid-up capital of P5 million by as much as 68%. Likewise, the losses incurred by MSCI for the interim period from September 1, 1990 to November 30, 1990, as found by the Commission, per MSCI's quarterly income statements, amounting to P13,554,337.33 impaired the company's paid-up capital of P5 million by a whopping 271.08%, 8 more than enough to qualify MSCI as a distressed employer. Respondent Commission thus acted well within its jurisdiction in granting MSCI full exemption from Wage Order No. RO VI-01 as a distressed employer. WHEREFORE, the petition is DISMISSED. Costs against petitioner. SO ORDERED.

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G.R. Nos. 104637-38. September 14, 2000 SAN MIGUEL CORPORATION, NEPTUNIA CORPORATION LIMITED, ANDRES SORIANO III AND ANSCOR-HAGEDORN SECURITIES, INC., petitioners, vs. SANDIGANBAYAN (FIRST DIVISION), PHILIPPINE COCONUT PRODUCERS FEDERATION, INC. (COCOFED), MARIA CLARA L. LOBREGAT, BIENVENIDO MARQUEZ, JOSE R. ELEAZAR, JR., DOMINGO ESPINA, JOSE GOMEZ, CELESTINO SABATE, MANUEL DEL ROSARIO, JOSE MARTINEZ, JR., JOSE REYNALDO MORENTE AND ELADIO CHATTO, respondents. [G.R. No. 109797. September 14, 2000] SAN MIGUEL CORPORATION, NEPTUNIA CORPORATION LIMITED, ANDRES SORIANO III AND ANSCOR-HAGEDORN SECURITIES, INC., petitioners, vs. SANDIGANBAYAN (FIRST DIVISION), PHILIPPINE COCONUT PRODUCERS FEDERATION, INC. (COCOFED), MARIA CLARA L. LOBREGAT, BIENVENIDO MARQUEZ, JOSE R. ELEAZAR, JR., DOMINGO ESPINA, JOSE GOMEZ, CELESTINO SABATE, MANUEL DEL ROSARIO, JOSE MARTINEZ, JR., JOSE REYNALDO MORENTE AND ELADIO CHATTO, respondents. DECISION PUNO, J.: It appears that on March 26, 1986, the Coconut Industry Investment Fund Holding Companies[1] ("CIIF" for brevity) sold 33,133,266 shares of the outstanding capital stock of San Miguel Corporation to Andres Soriano III of the SMC Group payable in four (4) installments. [2] On April 1, 1986, Andres Soriano III paid the initial P500 million to the UCPB as administrator of the CIIF. The sale was transacted through the stock exchange and the shares were registered in the name of Anscor-Hagedorn Securities, Inc. (AHSI). On April 7, 1986, the Presidential Commission on Good Government (PCGG) then led by the former President of the Senate, the Honorable Jovito R. Salonga, sequestered the shares of stock subject of the sale.[3] Due to the sequestration, the SMC Group (hereinafter referred to as the petitioners) suspended payment of the balance of the purchase price of the subject stocks. In retaliation, the UCPB Group rescinded the sale. On June 2, 1986, UCPB and CIIF Holding Companies went to court. They filed a complaint with the Regional Trial Court of Makati against the petitioners for confirmation of rescission of sale with damages.[4] On June 5, 1986, the petitioners assailed in this Court the jurisdiction of the Makati RTC on the ground that primary jurisdiction was vested with the PCGG since the SMC shares were sequestered shares. [5] On August 10, 1988, we upheld the petitioners. We ordered, among others, the dismissal of the rescission case filed in the Makati RTC without prejudice to the ventilation of the parties' claims before the Sandiganbayan.[6] The record shows that the petitioners and the UCPB Group were able to thresh out their dispute extra-judicially. In March 1990, they signed a Compromise Agreement and Amicable Settlement.[7] Its pertinent provisions state: "3.1. The sale of the shares covered by and corresponding to the first installment of the 1986 Stock Purchase Agreement consisting of Five Million SMC Shares is hereby recognized by the parties as valid and effective as of 1 April 1986. Accordingly, said shares and all stock and cash dividends declared thereon after 1 April 1986 shall pertain, and are hereby assigned, to SMC. x x x 3.2. The First Installment Shares shall revert to the SMC treasury for dispersal pursuant to the SMC Stock Dispersal Plan attached as Annex "A-1" hereof. The parties are aware that these First Installment Shares shall be sold to raise funds at the soonest possible time for the expansion program of SMC. x x x 3.3. The sale of the shares covered by and corresponding to the second, third and fourth installments of the 1986 Stock Purchase Agreement is hereby rescindedeffective 1 April 1986 and deemed null and void, and of no force and effect. Accordingly, all stock and cash dividends declared after 1 April 1986 corresponding to the second, third and fourth installments shall pertain to CIIF Holding Corporations. xxx"[8](emphasis supplied) They likewise agreed to pay an "arbitration fee" of 5,500,000 SMC shares composed of 3,858,831 A shares and 1,641,169 B shares to thePCGG to be held in trust for the Comprehensive Agrarian Reform Program. [9] On March 23, 1990, the petitioners and the UCPB Group filed with the Sandiganbayan a Joint Petition for Approval of the Compromise Agreement and Amicable Settlement. The petition was docketed as Civil Case No. 0102.[10] On March 29, 1990, the Sandiganbayan motu proprio directed that copies of the Joint Petition be furnished to E. Cojuangco, Jr., M. Lobregat and others who are defendants in Civil Case No. 0033. The same SMC shares are the subject of Civil Case No. 0033 and alleged as part of the alleged ill-gotten wealth of former President Marcos and his "cronies."[11] On April 25, 1990, the Republic of the Philippines, through the Office of the Solicitor General (OSG), opposed[12] the Compromise Agreement and Amicable Settlement. It contended that the involved coco-levy funds, whether in the form of earnings or dividends therefrom, or in the form of the value of liquidated corporate assets represented by all sequestered shares (like the value of assets sold/mortgaged to finance the P500M first installment), or in the form of cash, or, as in the case of subject "Settlement," in the form of "proceeds" of sale or of "payments" of certain alleged obligations are public funds. As public funds, the coco-levy funds, in any form or transformation, are beyond or "outside the commerce," and perforce not within the private disposition of private individuals. [13] The reliefs prayed for by the Solicitor General state: "1. That the "Settlement" be stricken off the record or at most referred back to the PCGG for serious study and consideration. While the PCGG under its legal mandate (as sustained in G.R. No. 84895, "Republic v. Campos") in principle encourages settlement agreements on ill-gotten wealth to expedite recovery thereof for the benefit of the Government, the herein privately proposed "Settlement" subject of the petition contains private proposals of "utilization and management of" public funds that are prejudicial to the Government , without "full disclosures" as normally required by PCGG and over which in respect of declarant immunity may even be granted. 2. That this Petition be consolidated with, or treated as a premature motion or incident in Civil Case No. 0033, and brought by improper parties. To repeat, the plaintiff Republic through PCGG is not a party to what in effect will be a judicial compromise in Civil Case No. 0033. Nowhere does the "Settlement" mention that its terms are subject to the judicial outcome of this Civil Case No. 0033. It is to be emphasized that even in the "Pepsi-Cola Settlement" cited by the petitioners, the alleged loan payments therein to liquidate alleged obligations are subject in no uncertain terms to the final outcome of the main Civil Case No. 0033 pending before this Honorable Court,

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'The concern of the Court in matters such as this has always been to see to it that the properties in sequestration would be well (and profitably, if possible) preservedeither for the government, if the plaintiff proves the 'crony' and 'ill-gotten' character of the property, or for the defendants if not,' considering that one of the reliefs prayed for or one of causes of action in the Republic's Complaint in Civil Case No. 0033 is precisely for Accounting and/or Damages.In the instant "Settlement," the "crony" and "ill-gotten character of the property" involved is a matter of public record if not public notoriety. Plaintiff Republic need not prove the public character of the coco-levy funds. This is a matter of settled law and jurisprudence, a "given" fact, to quote the Honorable Supreme Court."[14](emphasis supplied) On April 18, 1990, Mr. Eduardo M. Cojuangco, Jr. moved to intervene alleging legal interest in the approval or disapproval of the Compromise Agreement and Amicable Settlement.[15] On May 24, 1990, the Philippine Coconut Producers' Federation, Inc. (COCOFED), et al.[16] filed an "Omnibus Class Action Motion for Leave to Intervene and to Admit: (1) Opposition-in-Intervention, and (2) Compulsory Counter-Petition and Counterclaim for Damages."[17] They alleged that they are the ultimate beneficial owners of the SMC shares subject of the Compromise Agreement. On June 18, 1990, the PCGG filed its Manifestation [18] attaching a copy of the Resolution[19] of the Commission en banc dated June 15, 1990.PCGG joined the Solicitor General in praying that the Joint Petition for Approval of Compromise Agreement should be treated as an incident of Case No. 0033.[20] PCGG, however, interposed no objection to the implementation of the Compromise Agreement subject to the incorporation of the following provisions: "1. As stated in the COMPROMISE, the 5 million SMC shares (now 26,450,000) paid for by the P500 million first installment shall be delivered to SMC, kept in treasury, and sold as soon as feasible in accordance with a plan to be agreed upon by the Commission and SMC; provided, that SMC shall not unreasonably withhold its consent to a sales plan approved by PCGG. The P500 million paid by SMC as first installment shall be accounted for by UCPB and the CIIF companies to the extent respectively received by them, and any portion thereof in excess of the usual business needs of the possessor shall be delivered by it to the Commission, to be held in escrow for the ultimate owner. 2. On Delivery Date, the stock certificates for the balance of the SHARES in the name of the 14 holding companies shall be delivered to PCGG and deposited with the Central Bank for safekeeping to await their sale in accordance with the plan of dispersal that PCGG and UCPB shall agree to establish for them. As soon as practicable, but with proper account of market conditions, all those shares shall be sold, and the proceeds thereof disposed as provided below. UCPB shall not unreasonably withhold its consent to a sales plan approved by PCGG in accordance with this paragraph. 3. So much of the proceeds of the sale as may be necessary shall be used a) to finance the obligations of the CIIF Companies under the COMPROMISE, and b) to liquidate the obligations of the CIIF Companies to UCPB for the purchase price of the SHARES. The balance shall be kept by the PCGG in escrow to await final judicial determination of the ownership of the various coconut-related companies and of all the other assets involved here. The cash dividends that have been declared on the SHARES may be applied for the above purposes before proceeds from the sale of shares are realized. The balance of such cash dividends shall be held in escrow in the same manner as the sales proceeds. 4. All SHARES shall continue to be sequestered even beyond Delivery Date. Sequestration on them shall be lifted as they are sold consequent to approval of the sale by the Sandiganbayan, and in accordance with the dispersal plan approved by the Commission. All of the SHARES that are unsold will continue to be voted by PCGG while still unsold. 5. The consent of PCGG to the transfer of the sequestered shares of stock in accordance with the COMPROMISE, and to the lifting of the sequestration thereon to permit such transfer, shall be effective only when approved by the Sandiganbayan. The Commission makes no determination of the legal rights of the parties as against each other. The consent it gives here conforms to its duty to care for the sequestered assets, and to its purpose to prevent the repetition of the national plunder. It is not to be construed as indicating any recognition of the legality or sufficiency of any act of any of the parties." [21] The petitioners and the UCPB Group filed their Joint Manifestation[22] accepting the conditions imposed by PCGG. They also opposed the intervention of COCOFED, et al. On October 12, 1990, the petitioners moved for early resolution of the Joint Petition for Approval of the Compromise Agreement and Amicable Settlement together with its pending incidents.[23] On October 16, 1990, the Sandiganbayan issued an Order [24] integrating Case No. 0102 as an incident of Civil Case No. 0033, thus: "Considering the interest expressed by the different parties in Civil Case No. 0033, and considering further that the subject matter of the amicable settlement which is presented before this Court for approval, the Court has deemed it best that Civil Case No. 0102 be integrated with, and be made an incident to, Civil Case No. 0033. xxx"[25] The petitioners did not challenge the Order. In its Manifestation[26] dated November 19, 1990, the Solicitor General maintained his Opposition to the Compromise Agreement and Amicable Settlement. On November 23, 1990, Sandiganbayan deferred consideration of the Compromise Agreement "until the parties thereto take the initiative to restore the same in the Court's calendar."[27] On February 5, 1991, it also deferred resolution of Cojuangco's Motion to Intervene. On February 21, 1991, the UCPB Group filed a Motion to set the Joint Petition for hearing. [28] In its Order dated February 27, 1991, the Sandiganbayan required the parties to comment on the propriety of the said court's continuing to entertain the Compromise Agreement.[29] In compliance with the said Order, the petitioners filed its Manifestation dated March 15, 1991 expressly recognizing the jurisdiction of the Sandiganbayan to rule on the petition for the approval of the compromise agreement.31 On June 3, 1991, the Sandiganbayan issued the following Resolution: 31 "It appearing that the sequestered character of the shares of stock subject of the instant petition for the approval of the compromise agreement, which are shares of stock in the San Miguel Corporation in the name of the CIIF Corporations, is independent of the transaction involving the contracting parties in the Compromise Agreement between what may be labeled as the "SMC Group" and the "UCPB Group," and it appearing further that the said sequestered SMC shares of stock have not been physically seized nor taken over by the PCGG, so much so that the reversions contemplated in
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said Compromise Agreement are without prejudice to the perpetuation of the sequestration thereon, until such time as a judgment might be rendered on said sequestration (which issue is not before this Court as (sic) this time), and it appearing finally that the PCGG has not interposed any objection to the contractual resolution of the problems confronting the "SMC Group" and the "UCPB Group" to the extent that the sequestered character of the shares in question is not affected, this Court will await the pleasure of the Presidential Commission on Good Government before consideration of the Compromise Agreement is reinstated in the Court's calendar. While this is, in effect, a denial of the "UCPB Group's" Motion to set consideration of the Compromise Agreement herein, this denial is without prejudice to a reiteration of the motion or any other action by the parties should developments hereafter justify the same." On July 4, 1991, the petitioners and the UCPB Group filed a Joint Manifestation that they have implemented the Compromise Agreement and Amicable Settlement with the conditions set by the PCGG and accordingly, withdrew their Joint Petition.32 They informed that they have executed the following corporate acts: "a. On instructions of the SMC Group, the certificates of stock registered in the name of Anscor-Hagedorn Securities, Inc. (AHSI) representing 175,274,960 SMC shares were surrendered to the SMC corporate secretary. b. The said SMC shares were reissued and registered in the record books of SMC in the following manner: i) Certificates for 25,450,000 SMC shares were registered in the name of SMC, as treasury; ii) Certificates for 144,324,960 SMC shares were registered in the name of the CIIF Holding Companies; iii) Certificates for 5,500,000 SMC shares were registered in the name of the PCGG. c. The UCPB Group has delivered to the SMC Group the amount of P500,000,000.00 in full payment of the UCPB preferred shares. d. The SMC Group delivered to the UCPB Group the amount of P481,628,055.99 representing accumulated dividends (from April 1, 1986) on the shares reverted to the CIIF Holding Companies."33 The PCGG manifested that it has no objection to the action taken by the petitioners and the UCPB Group.34 COCOFED, et al. and Cojuangco, Jr. filed their respective motions,35 both dated July 4, 1991 to nullify the implementation of the compromise agreement. Acting on the Joint Manifestation of Implementation of Compromise Agreement and of Withdrawal of Petition, the Sandiganbayan on July 5, 1991 noted the same "with the observation that the PCGG, the UCPB Group and the SMC Group shall always act with due regard to the sequestered character of the shares of stock involved herein as well as the fruits thereof, more particularly to prevent the loss or dissipation of their value" and "without prejudice to whatever might be the resolution of this Court on the Motion to Nullify the Compromise Agreement filed by Eduardo Cojuangco, Jr."36 On July 8, 1991, the Sandiganbayan issued two (2) Orders. The first was to hear the defendants in Civil Case No. 0033 on the matter of the Compromise Agreement whether under Civil Case No. 0102 or as an incident to Civil Case No. 0033. 37 The second required the petitioners and the UCPB Group as well as PCGG to formally state in writing the different holders of the SMC shares subject of the compromise agreement. The Sandiganbayan further ordered PCGG to indicate on the face of the subject shares their sequestered character. 38 On July 16, 1991, petitioners filed their Manifestation where they declared that Stock Certificate Nos. A 0004129 and A 0015556 representing 25,450,000 shares were issued in the name of SMC as treasury stocks.39 On July 23, 1991, the Sandiganbayan noted the Manifestations of the PCGG, the petitioners and the UCPB group that the certificates of stock for the subject SMC shares which are intended to form part of the corporation's treasury shares have been marked "sequestered" by SMC and are in the custody of the PCGG.40 On August 5, 1991, the Sandiganbayan issued an order requiring SMC to deliver the certificates of stock representing the subject matter of the Compromise Agreement to the PCGG in view of the oral manifestations of Commissioner Maceren seeking clarification of portions of Sandiganbayan's July 23, 1991 Resolution.41 On August 9, 1991, the UCPB Group filed a Motion to Allow it to Utilize Dividends on SMC shares for the payment of the loans of CIIF Companies to UCPB.42 The motion was granted on September 2, 1991.43 On August 15, 1991, COCOFED, et al. filed their Urgent Motion to Compel Surrender of the Cash Dividends pertaining to (a) the 4.5 million SMC shares allegedly delivered to PCGG in trust for the Comprehensive Agrarian Reform Program and (b) the SMC shares allegedly delivered to SMC as treasury shares.44 On August 22, 1991, petitioners filed a Manifestation and Motion stating that the SMC shares have reverted to the SMC treasury as treasury shares and are not entitled to dividends.45 On October 1, 1991, the Sandiganbayan issued a Resolution allowing COCOFED, et al. to intervene.46 On March 30, 1992, it denied the separate motions for reconsideration filed by the petitioners and the UCPB Group. 47 On October 25, 1991, the Sandiganbayan issued another Resolution requiring SMC to deliver the 25.45 million SMC treasury shares to the PCGG.48 On March 18, 1992, it denied petitioners' Motion for Reconsideration and further ordered SMC to pay dividends on the said treasury shares and to deliver them to the PCGG. 49 On April 13, 1992, petitioners filed a Motion to Dismiss Intervention and/or Motion for Clarification with Ad Cautelam Motion to Suspend Time.50 The motion was denied in the Sandiganbayan's Resolution dated March 17, 1993.51 Before this Court now are two (2) consolidated petitions for certiorari under Rule 65 of the Rules of Court filed by petitioners San Miguel Corporation, Neptunia Corporation Limited, Andres Soriano III and Anscor-Hagedorn Securities, Inc. They seek to annul the following resolutions of the Sandiganbayan: In G.R. No. 104637-38: 1. The Resolution dated October 25, 1991 reiterating52 that all Certificates of Stock representing sequestered shares in the SMC be physically deposited with the PCGG and requiring SMC to pay the cash dividends due or actually earned by the said shares and deliver them to PCGG; 53

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2. The Resolution dated March 18, 199254 requiring SMC to deliver to the PCGG the 25.45 million shares as well as the cash and/or stock dividends which have accrued thereto from March 26, 1986 to date and which might have further accrued thereto had not said shares of stock been declared treasury shares.55 In G.R. No. 109797: 1. The Resolution dated September 30, 1991 allowing COCOFED and other private respondents to intervene in Case No. 0102 and admitting their Counter-Petition;56 2. The Resolution dated March 27, 1992 denying the motions of petitioners and the UCPB Group for reconsideration of the Resolution dated September 30, 1991; and57 3. The Resolution dated March 17, 1993 denying petitioners' motion to dismiss the Counter-Petition filed by COCOFED, et al.58 Petitioners contend: In G.R. No. 104637-38: "GROUNDS FOR CERTIORARI The questioned orders of the Sandiganbayan were issued without or in excess of its jurisdiction, and with grave abuse of discretion amounting to lack of jurisdiction.They should be set aside as null and void. A The questioned orders would deprive SMC of property already paid for. They unduly protect the claimants of sequestered companies, at the expense of SMC. B The Sandiganbayan over-reached its jurisdiction in issuing the questioned orders. 1. The fact of sequestration, by itself, does not mean that the possessor of the sequestered assets must be dispossessed thereof at all costs. In the present case, there are weighty reasons why the treasury shares and any "dividends" thereon should remain with SMC. 2. The purported issue of ownership does not justify the dispossession of SMC of these shares. C The PCGG is the entity primarily charged with the duty and responsibility of preserving sequestered assets. Absent any showing that the PCGG betrayed this duty when it allowed SMC to keep the shares already paid for in treasury, the Sandiganbayan has no jurisdiction to over-rule the PCGG's judgment. D The questioned orders will foment litigation, in violation of the clear policy of the law that compromise is encouraged. E The sequestered (sic) assets threaten and put the sequestered assets at risk. F The Sandiganbayan gravely abused its discretion when it treated the contracting parties to the compromise agreement differently."59 In G. R. No. 109797: "GROUNDS TO GRANT PETITION The Sandiganbayan acted without or in excess of jurisdiction or with grave abuse of discretion in issuing the questioned Resolutions in that: I Civil Case No. 0102 has been withdrawn. COCOFED, et al. cannot intervene in a withdrawn case. II The Sandiganbayan's motu proprio consolidation of Case 102 with Case 33 did not make the SMC Group parties to Case 33. It did not result in a merger of the two cases which preserved their separate identity. III By their own allegations, COCOFED, et al. have no cause of action. 1. COCOFED, et al. are not real parties in interest. They deny the Sandiganbayan's basis for finding that they are real parties in interest, i.e., that the SMC shares were acquired with coco-levy funds. 2. COCOFED, et al. are estopped from claiming to act for the UCPB Group. IV COCOFED, et al. are bound by the business judgment of the UCPB Group that the compromise is to the best interest of the UCPB Group. V In violation of the public policy that frowns on litigation and encourages fair compromise, the questioned resolutions foment litigation on issues settled by the compromise. VI COCOFED, et al. paid no docket fees for the counter-petition. The Sandiganbayan acquired no jurisdiction over the counter-petition."60 Vis--vis these arguments, private respondents COCOFED, et al. contend: In G.R. No. 104637-38:

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I. That the Sandiganbayan has not yet resolved the matter of the compromise agreement. By insisting that it has implemented the compromise agreement and thus need not turn over the SMC shares corresponding to the P500 million first installment and the dividends thereon to the PCGG, the SMC Group is preempting the Sandiganbayan. II. The Order of the Sandiganbayan to turn over the SMC shares corresponding to the P500 million first installment and the dividends thereon is proper because the SMC Group is not entitled thereto, having forfeited the first installment as liquidated damages for its refusal and failure to make subsequent installment payments. III. At any rate, the transformation of the SMC shares into treasury shares is but part and parcel of the compromise agreement which has not yet been approved. Thus, it is premature for the SMC Group to treat these shares as such and to refuse to turn over the same as well as the accrued dividends thereon to the PCGG, as ordered by the Sandiganbayan. Moreover, the transformation is extremely disadvantageous to the CIIF Companies. IV. The PCGG appointed directors of UCPB, the CIIF Companies, and SMC cannot enter into a compromise agreement which is tantamount to a disposition or dissipation of sequestered assets. Moreover, the PCGG is not entitled to any arbitration fee. V. While the law encourages amicable settlements, the law likewise provides that any compromise should not only be legal but must also be fair. In this case, the proposed compromise is contrary to law and grossly disadvantageous to the CIIF Companies, UCPB and the coconut farmers/producers. VI. The perceived danger of risk on the sequestered assets is purely speculative and is not supported by adequate proof. Moreover, the SMC shares are sufficient to cover the losses which may be sustained in pursuing the recovery of the SMC shares. VII. The CIIF Companies, being the disputed owners of the SMC shares, are entitled to have the dividends on the SMC shares applied to its indebtedness to UCPB.On the other hand, until the question of which entity is entitled thereto is settled, the SMC shares corresponding to the P500 million first installment and the dividends thereon should be turned over to the PCGG. 61 and in G.R. No. 109797: I. Civil Case No. 0102 may not be withdrawn sans the approval of the Sandiganbayan. Further, the filing by COCFED, et al. of the Intervention was in accordance with the ruling in Soriano III case which vests on COCOFED, et al. the right to ventilate its claims over the SMC shares. II. The COCOFED case settled with finality that COCOFED, et al. are real parties in interest to the coconut levy funds as well as the corporations organized and investments acquired or funded from out of the coconut levy funds. III. Where the business judgment is unsound and violative of law or public policy, affected persons may question such decision. IV. The admission of the intervention is consistent with the ruling laid down in the Soriano III case. V. The intervention is in the nature of an Answer with Compulsory Counterclaim. As such, the Sandiganbayan acquired jurisdiction despite nonpayment of docket fees.62 We stress at the outset that the instant petitions were brought to us through a special civil action of certiorari under Rule 65 of the Rules of Court to annul and set aside the above mentioned Sandiganbayan resolutions for having been allegedly issued without or in excess of jurisdiction and with grave abuse of discretion. To justify the issuance of the writ of certiorari, the abuse of discretion must be grave, as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all, in contemplation of law, as to be equivalent to having acted without jurisdiction.63 We shall now use this unyielding yardstick.
RE: ISSUE OF DELIVERY OF CERTIFICATES OF STOCK OF SMC SHARES AND THE DIVIDENDS THEREON TO THE PCGG IN G.R. NO. 104637-38

We find no grave abuse of discretion on the part of Sandiganbayan when it ordered the petitioners to deliver the treasury shares to PCGG and pay their corresponding dividends for the following reasons: First. The cases at bar do not merely involve a compromise agreement dealing with private interest. The Compromise Agreement here involves sequestered shares of stock now worth more than nine (9) billions of pesos, per estimate given by COCOFED.64 Their ownership is still under litigation. It is not yet known whether the shares are part of the alleged ill-gotten wealth of former President Marcos and his "cronies." Any Compromise Agreement concerning these sequestered shares falls within the unquestionable jurisdiction of and has to be approved by the Sandiganbayan. The parties themselves recognized this jurisdiction. In the Compromise Agreement itself, the petitioners and the UCPB Group expressly acknowledged the need to obtain the approval by the Sandiganbayan of its terms and conditions, thus: 5. Unless extended by mutual agreement of the parties, the 'Delivery Date' shall be on the 10th Day from and after receipt by any party of the notice of approval of this Compromise Agreement and Amicable Settlement by the Sandiganbayan . Upon receipt of such notice, all other parties shall be immediately informed.65(emphasis supplied) The PCGG Resolution of June 15, 1990 also imposed the approval of the Sandiganbayan as a condition sine qua non for the transfer of these sequestered shares of stock, viz: "4. All SHARES shall continue to be sequestered even beyond Delivery Date. Sequestration on them shall be lifted as they are sold consequent to approval of the sale by the Sandiganbayan, and in accordance with the dispersal plan approved by the Commission. All of the SHARES that are unsold will continue to be voted by PCGG while still unsold. 5. The consent of PCGG to the transfer of the sequestered shares of stock in accordance with the COMPROMISE, and to the lifting of the sequestration thereon to permit such transfer, shall be effective only when approved by the Sandiganbayan. The Commission makes no determination of the legal rights of the parties as against each other. The consent it gives here conforms to its duty to care for the sequestered assets, and to its purpose to prevent the repetition of the national plunder.It is not to be construed as indicating any recognition of the legality or sufficiency of any act of any of the parties."66 (emphasis supplied) Thus, the petitioners voluntarily submitted to the jurisdiction of the Sandiganbayan by asking for the approval of the said Compromise Agreement. They stated in their Manifestation dated March 15, 1991 67 that: "1. The Compromise Agreement subject matter of this petition categorically states that `(a)ll the terms of th(e) Agreement are subject to approval by the Presidential Commission on Good Government (PCGG) as may be required by Executive Orders numbered 1, 2, 14 and 14-A. (T)he Agreement and the PCGG approval thereof shall be submitted to the Sandiganbayan. x x x
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PCGG has consented to the Compromise Agreement. But its consent is 'effective only when approved by the Sandiganbayan' (PCGG Resolution dated 15 June 1990, In Re: Compromise Agreement between San Miguel Corporation, et al. and United Coconut Planters Bank, et al.). Petitioners accepted this condition, and incorporated by reference such condition as an integral part of the Compromise Agreement."68 (emphasis supplied) In fine, the jurisdiction of the Sandiganbayan to pass upon the parties Compromise Agreement is beyond dispute. Second. Given its undisputed jurisdiction, the Sandiganbayan ordered that the treasury shares should be delivered to PCGG and that their dividends should be paid pending determination of their real ownership which is the key to the question whether they are part of the alleged illgotten wealth of former President Marcos and his "cronies." We cannot condemn and annul this order as capricious. In the exercise of its discretion, the Sandiganbayan can require a party-litigant to deliver a sequestered property to the PCGG. We held in Baseco vs. PCGG69 that "the power of the PCGG to sequester property claimed to be 'illgotten' means to place or cause to be placed under its possession or control said property, or any building or office wherein any such property and any records pertaining thereto may be found, including 'business enterprises and entities,' - - - for the purpose of preventing the destruction, concealment or dissipation of, and otherwise conserving and preserving the same - - - until it can be determined, through appropriate judicial proceedings, whether the property was in truth 'ill-gotten,' i.e. acquired through or as a result of improper or illegal use or the conversion of funds belonging to the government or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of official position, authority, relationship, connection or influence, resulting in unjust enrichment of the ostensible owner and grave damage and prejudice to the State."70 The order of the Sandiganbayan regarding the subject treasury shares is merely preservative in nature. When the petitioners and UCPB Group filed their Joint Manifestation of Implementation of the Compromise Agreement and of Withdrawal of Petition, the Sandiganbayancautioned that "the PCGG, the UCPB and the SMC Group shall always act with due regard to the sequestered character of the shares of stock involved as well as the fruits thereof, more particularly to prevent the loss or dissipation of their value."71 The caution was wisely given in view of the many contested provisions of the Compromise Agreement. For one, the Sandiganbayan observed that the conversion of the SMC shares to treasury shares will result in a change in the status of the sequestered shares in that: 1. When the SMC converts these common shares to treasury stock, it is converting those outstanding shares into the corporation's property for which reason treasury shares do not earn dividends. 2. The retained dividends which would have accrued to those shares if converted to treasury would go into the corporation and enhance the corporation as a whole. The enhancement to the specific sequestered shares, however, would be only to the extent aliquot in relation to all the other outstanding SMC shares. 3. By converting the 26.45 million shares of stock into treasury shares, the SMC has altered not only the voting power of those shares of stock since treasury shares do not vote, but the SMC will have actually enhanced the voting strength of the other outstanding shares of stock to the extent that these 26.45 million shares no longer vote.72 These significant changes in the character of the SMC shares cannot be denied. In Commissioner of Internal Revenue vs. Manning,73 we explained the limited nature of treasury shares, thus: "Although authorities may differ on the exact legal and accounting status of the so-called 'treasury shares,' they are more or less in agreement that treasury shares are stocks issued and fully paid for and re-acquired by the corporation either by purchase, donation, forfeiture or other means. Treasury shares are therefore issued shares, but being in the treasury they do not have the status of outstanding shares. Consequently, although a treasury share, not having been retired by the corporation re-acquiring it, may be re-issued or sold again, such share, as long as it is held by the corporation as a treasury share, participates neither in dividends, because dividends cannot be declared by the corporation to itself, nor in the meetings of the corporation as voting stock, for otherwise equal distribution of voting powers among stockholders will be effectively lost and the directors will be able to perpetuate their control of the corporation, though it still represents a paid-for interest in the property of the corporation. The foregoing essential features of a treasury stock are lacking in the questioned shares..." 74 (emphasis supplied) For another, the payment to the PCGG of an arbitration fee in the form of 5,500,000 of SMC shares75 is denounced as illegal, shocking and unconscionable.76 COCOFED, et al. have assailed the legal right of PCGG to act as arbiter as well as the fairness of its acts as arbiter.COCOFED, et al. estimate that the value of the SMC shares given to PCGG as arbitration fee which allegedly is not deserved, can run to P1,966,635,000.00.77 This is a serious allegation and the Sandiganbayan cannot be charged with grave abuse of discretion when it ordered that SMC should be temporarily dispossessed of the subject treasury shares and that SMC should pay their dividends while the Compromise Agreement involving them is still under question. Petitioners cannot rely on the case of First Phil. Holdings Corp. vs. Sandiganbayan78 to justify their insistence that the P500 million payment made by Soriano III should be validated. They contend that the rules encouraging amicable settlement in civil cases should apply to cases involving sequestered properties.79 In First Phil. Holdings, this Court gave due course to the petition and ordered the Sandiganbayan to approve the PCGG Resolution lifting the sequestration of MERALCO shares. We noted that the Republic of the Philippines has agreed to settle the controversy and the agreement will not in any way prejudice the rights of third persons. In the cases at bar, the record is clear that the Republic of the Philippines, through the Office of the Solicitor General, vigorously opposed the Compromise Agreement on legal and moral grounds. COCOFED, et al. also opposed and contend that the conversion of the SMC shares into treasury shares is highly prejudicial to the interests of the coconut farmers. It cannot be gainsaid that if it is later proved that SMC is not the lawful owner of the shares in question, what the adjudged lawful owner will receive are treasury shares with diminished value. The impugned order of theSandiganbayan was issued to avoid this mischief. Petitioners also argue that the Sandiganbayan gravely abused its discretion when it treated the contracting parties to the Compromise Agreement differently.80 They argue that it should not have allowed the dividend income of the sequestered shares in the name of the CIIF Holding Companies to be applied to their indebtedness to the UCPB. Again, we do not agree for the order of the Sandiganbayan is consistent with the need to preserve and enhance the value of the sequestered assets. We quote its explanation: "The application of the dividend income of the CIIF-owned SMC shares (which remain sequestered) to the debts of these CIIF companies in favor of the UCPB was meritorious on its own account.

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The CIIF companies remain sequestered companies; the shares of stock in these companies and in the UCPB remain sequestered. If the UCPB shares and the CIIF companies (and, therefore, their assets and properties) are adjudged to have been 'ill-gotten' and 'crony-owned,' then all the sequestered properties, including the SMC shares and the resulting dividends will go to the government; otherwise, the CIIF companies will go to their registered stockholders, i.e., allegedly the coconut farmers, and the debts of the CIIF companies to the UCPB will have been duly paid or diminished. The period of sequestration will not have been unduly prejudicial to these corporations or to the coconut farmers. Furthermore, if the debts of the CIIF companies to the UCPB had remained unpaid or unserviced at all, the bank itself (which is also heavily sequestered) would also suffer since it would, according to the UCPB, be violating the instructions of the Monetary Board (MB) thereon (p. 546, Record III). Compliance with the MB'sinstructions would save the UCPB from punitive action from the Central Bank. The release of the dividends in this case would, therefore, protect the contingent rights of the coconut farmers as well as of the Republic in the UCPB itself. After all, nobody else is in contention for the benefits resulting from the payment of the debts of the CIIF companies except for the Government by reason of the sequestrations imposed and the registered stockholders thereof. Nobody else would suffer the consequences if the SMC shares owned by the CIIF companies were seized by the UCPB and/or the UCPB became impaired should the heavy debts of the CIIF companies not be serviced or partially paid. 2. On the other hand, the SMC Group has not justified its desire to retain the custody of the 25.45 million sequestered shares of stock, which it had converted to Treasury Shares despite sequestration, and to retain the dividends due thereon, on its own merits. The SMC Group's primary justification for non-compliance with the Resolution of this Court requiring it to turn over the certificates of stock for the 25.45 million sequestered shares as well as the cash dividends already accrued thereon is the fact that the shares of stock have allegedly now become Treasury Shares. The SMC Group, however, forgets two things: '(a) Under the Corporation Code 'Treasury shares are shares of stock which have been issued and fully paid for, but subsequently reacquired by, the issuing corporation by purchase, redemption, donation or through some lawful means . . .' (Sec. 9, B.P. Blg. 68, Corporation Code). These 26.45 million shares of stock or any portion thereof can, therefore, become Treasury Shares, i.e., property of the San Miguel Corporation, only if the sale between the UCPB Group and the SMC Group is allowed; otherwise these shares cannot even begin to be deemed to have been 're-acquired by the issuing corporation,' i.e., the San Miguel Corporation; (b) Even then, under the AGREEMENT between the UCPB Group and the SMC Group on March 26, 1986 for the sale of 33.1 million shares of SMC, the buyers were not only the San Miguel Corporation but also Andres Soriano, III, the Neptunia Corporation Limited of Hongkong and the Anscor-Hagedorn Securities, Inc.Under the letter of the PCGG Commissioner Ramon Diaz dated May 19, 1986 (item No. 6, supra), the Corporate Secretary of the San Miguel Corporation was forbidden from recording the transfer, conveyance, and encumbrance of these shares without the PCGG's approval. This was by virtue of the PCGG's powers under Sec. 2 of E.O. No. 2.' Unless, therefore, the right of Neptunia, Andres Soriano, III and the Anscor-Hagedorn Securities, Inc. to these 26.45 million shares shall have been transferred to the SMC, the SMC cannot be deemed to have 'reacquired' these shares. They would remain co-owned by all four (4) entities. The SMC Group's claim, therefore, that these 26.45 million shares are now Treasury Shares is unfounded. But even if, indeed, these shares are treasury shares, they remain sequestered so that any movement of these shares cannot be of any permanent character that will alter their being sequestered shares and, therefore, in 'custodia legis,' that is to say, under the control and disposition of this Court. It must finally be said that the conversion of the 26.45 (or 25.45) million shares by the SMC Group into Treasury Shares is of the SMC Group's own making and the SMC Group cannot perform acts that will, by its own say-so, take property away from 'custodia legis.' The position taken by the SMC Group here is self-serving and unacceptable. It is also contrary to jurisprudence."81 The claim of petitioners to fairness hardly impresses. It is planted on the assumption that their purchase of the subject shares is above board.The assumption begs the question for the Sandiganbayan has yet to decide the real ownership of the subject shares, i.e., whether or not they are part of the alleged illegal wealth of former President Marcos and his "cronies." Nor have petitioners shown that they will suffer a legal prejudice if they deliver the shares and the dividends thereon to the PCGG. It need not be stressed that in the event the petitioners are found to be the lawful owners of these shares, they will be awarded the cash and stock dividends which have accrued thereon. We agree with the conclusion of the Sandiganbayan in its assailed Resolution of March 18, 1992 that "the SMC Group has not justified its desire to retain the custody of the 25.45 million sequestered shares of stock, which it had converted to treasury shares despite sequestration, and to retain the dividends due thereon, on its own merits."82 More unimpressive is petitioners' submission that the "delivery of the shares to the PCGG may create legal problems and may give an impression that these shares are outstanding and may be sold and transferred, when under the law, all that can be done is for SMC to reissue the shares pursuant to procedures mandated by the applicable laws."83 Such fear is clearly unfounded and needs no elaborate refutation. RE: ISSUE Of INTERVENTION OF COCOFED, ET AL. IN CASE NO. 0102 We also affirm the resolution of the Sandiganbayan allowing the intervention of COCOFED, et al. in Civil Case No. 0102. It is the posture of the petitioners that intervention is improper since Case No. 0102 has already been withdrawn as of July 4, 1991. They hinge the right to withdraw the Joint Petition to approve their Compromise Agreement on section 1, Rule 17 of the Rules of Court. 84 We do not agree. First. The right of COCOFED, et al. to intervene in cases involving these SMC shares has long been recognized by this Court. In Soriano III v. Yuzon,85 we ruled: "x x x The Philippine Coconut Producers Federation (COCOFED) also came into the picture. A Manifestation dated March 15, 1988 was filed in its behalf by its President, Ma. Clara Lobregat. The Manifestation contained a discussion of the laws passed (and the official action taken pursuant thereto) establishing the coconut levy and providing for the management and utilization of the funds thereby generated. It advocated the thesis that the question of whether or not the investments of the coconut levy fund constitute public property, essentially involves issues of fact and law which should be resolved in the first instance by a trial court of competent jurisdiction at a hearing on the merits, and the COCOFED should be conceded the right to demonstrate at such a hearing that the coconut farmers, through the so-called CIIF companies, and not Mr. Cojuangco, Jr. or any of his companies, are the beneficial owners of the disputed block of SMC shares. Alternatively, the COCOFED prayed that it be given the opportunity to
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substantiate the points it thus raises in G.R. No. 74910, or in Civil Case No. 13865 of the Regional Trial Court at Makati, or in Civil Case No. 0033 of the Sandiganbayan entitled 'Republic v. Eduardo Cojuangco, Jr.. et al.,' or in any other case which may hereafter be filed in litigation of the issues."86 In said case, we dismissed all the actions87 brought to us, directed the dismissal of cases pending before the Regional Trial Courts and Securities and Exchange Commission, and ruled that: "This dismissal is without prejudice to the assertion and ventilation before the Sandiganbayan by the parties of their respective claims by such appropriate modes as are prescribed by law. x x x"88 Second. We again emphasize that petitioners and the UCPB Group voluntarily submitted to and invoked the jurisdiction of the Sandiganbayan when they filed their Joint Petition for Approval of the Compromise Agreement and Amicable Settlement. The Sandiganbayan then immediately exercised its jurisdiction as can be gleaned from the numerous hearings conducted and orders it issued resolving various incidents of the case.Among others, it ordered persons and entities with known legal interest on the subject shares to file their comments on the Joint Petition. This order was not seasonably challenged by the petitioners. Pursuant thereto, COCOFED, et al., claiming beneficial interests on the shares, intervened.Mr. Eduardo Cojuangco, Jr. also manifested his intent to intervene. The right of these persons and entities to have their claims heard and resolved cannot be defeated by the petitioners by the simple act of withdrawing their Joint Petition for Approval of Compromise Agreement and immediately implementing its provisions. To allow the unilateral withdrawal is to allow the petitioners to make a plaything of the jurisdiction of the Sandiganbayan, submit to it when it is in their favor and repudiate it when it threatens to turn against their interest.Jurisdiction is vested by law and the all too familiar rule is that once a court has assumed jurisdiction over a case, its jurisdiction shall continue until the case is terminated.89 Third. Petitioners cannot invoke section 1, Rule 17 of the Rules of Court which provides "that a complaint may be dismissed by the plaintiff by filing a notice of dismissal at any time before service of the answer or of a motion for summary judgment." The provision contemplates a complaint where there is a plaintiff and a defendant with real conflicting interests. The cases at bar, however, are different. They started as a Joint Petition for Approval of Compromise Agreement and Amicable Settlement. Known persons and entities claiming adverse interests on the subject shares were not impleaded. In other words, no party that can assail the validity of the Compromise Agreement that involves billions of pesos and substantial state interests was impleaded in any capacity. Yet, petitioners are aware that the subject shares of stock are sequestered and their ownership is still under litigation in Case No. 0033. The attempt to bypass these persons and entities with interests in the subject shares is hardly tenable and the withdrawal of the petition and its immediate implementation when they opposed it makes petitioners' posture doubly untenable. There is another reason why petitioners cannot rely on section 1, Rule 17 of the Rules of Court. This provision allows the plaintiff to withdraw his complaint before defendant has answered it or filed a motion for summary judgment. In fine, before the defendant has pleaded to the complaint. At that point, defendant has hardly been exposed to any kind of damage or prejudice, hence, the plaintiff is unilaterally allowed to withdraw his complaint. In the cases at bar, before the petitioners and the UCPB Group can file their Manifestation of Withdrawal of Joint Petition for Approval of Compromise Agreement and Amicable Settlement, COCOFED, et al. have already filed their Opposition in Intervention and Compulsory Counter-Petition and Counterclaim for Damages. In the same vein, the Republic, thru the OSG, has already filed its Opposition. These pleadings of COCOFED, et al. and the Republic assail the legality of the Compromise Agreement. They can be deemed as answers to the Joint Petition, hence, petitioners can no longer unilaterally withdraw their Joint Petition. Fourth. Petitioners further contend that COCOFED, et al. cannot intervene because Case No. 0102 is not an action or a suit and they did not implead any adverse party and set forth no claims. Petitioners' contention cannot merit the assent of the Court. Regardless of its nature as an action or suit, the fault of the Joint Petition precisely lies in the attempt to bypass parties with legitimate interests on the subject shares. The existence of these parties is known to the petitioners yet they were not impleaded. Their failure to be impleaded is bad enough but worse still is petitioners' submission that since they were not impleaded, ergo, they cannot intervene. It is now a musty principle of justice that a right cannot arise from a wrong. Moreover, the Sandiganbayan did not treat the Joint Petition as an "action or suit" but as a mere incident of Case No. 0033. In any event, section 1, Rule 19 of the Rules of Court provides the rule on who can intervene, viz: "A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof, may, with leave of court, be allowed to intervene in the action." The legal interest of COCOFED, et al. which justifies their intervention is extensively discussed in the impugned resolution of the Sandiganbayan, viz: "In all fairness, the motion to intervene filed by COCOFED, et al. must be granted for the following reasons: 1. The coconut planters and producers represented by COCOFED do have a legal interest in the matter of litigation and are so situated as to be adversely affected by the disposition of the sequestered shares of stock subject matter of the compromise agreement. The rule on intervention (section 2, Rule 12 of the Rules of Court) states: 'Sec. 2. Intervention - A person may, before or during a trial be permitted by the court, in its discretion, to intervene in an action, if he has legal interest in the matter of litigation, or in the success of either of the parties, or an interest against both, or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or an officer thereof.' xxxxxxxxx It should be borne in mind that the real subject matter of this case is the coconut levy fund of which the SMC shares in question are claimed to be but a part. xxx To start with, the coconut levy fund came from levies imposed upon the sale of copra or equivalent coconut product that was deducted from the price of copra which, as claimed by movants-farmers, would have gone to them. Thus, starting 1971, under the Coconut Investment Fund (CIF), a levy of P0.55 was imposed on the first domestic sale of every 100 kilograms of copra or equivalent product. In 1973, under the Coconut Consumers Stabilization Fund (CCSF), a levy of P15.00 on the first sale of every 100 kilograms of copra resecada or equivalent product was imposed. From the CCSF was established yet another fund, the Coconut Industry Development Fund (CIDF) whose initial capital of P100 million and regular allotment equivalent to P.20 per kilogram of copra resecada or its equivalent were contributed by the CCSF. (It is from this Coconut Industry Investment Fund (CIIF) that the so-called CIIF Companies were later established). From 1981, under the Coconut Industry Stabilization Fund which replaced the CCSF and CIDF, a levy of P50.00 for every 100 kilos of copra resecada or equivalent product delivered to exporters and copra users was collected and apportioned among the CIDF, COCOFED, PCA and the UCPB.

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Through the years, part of the coconut levy fund was used and applied to various projects and invested or converted into different assets, properties and businesses. xxx xxx [T]he coconut farmers and producers do have a legal interest in the SMC shares. That legal interest consists of their alleged beneficial ownership of the San Miguel shares, they being the 'registered owners and/or beneficial owners of all, or at least not less than fifty-one percent (51%), of the capital stock of the CIIF Companies' some of which wholly own the so-called CIIF Copra Trading Companies and the CIIF Holding Companies which are the registered stockholders of the SMC shares.(p. 3, COCOFED'S Omnibus Class Action xxx). Their claim is based on the specific provisions of Section 5, Article III, PD 1468, the pertinent portion of which states: 'Said fund (Coconut Consumers Stabilization Fund and the Coconut Industry Development Fund) and the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be owned by them in their private capacities xxx.' This Presidential Decree has been assailed by the PCGG as a 'transgression of the basic limitation of the licit exercise of the state's taxing and police powers', but this is a legal question yet to be resolved. It has been argued that COCOFED, et al. should not be allowed to intervene because they have no actual, material, direct or immediate interest in the subject matter.To be bound entirely by the form and nature of these assets as shares of stock subject to the special laws, rules and by-laws of corporations, is to adopt an overly strict, narrow and myopic approach. It has already been alleged that these shares constitute ill-gotten wealth derived from the coconut levy fund. The form into which part of the coco-levy fund has been converted is not crucial or decisive; otherwise, it would be so easy to defeat the recovery of ill-gotten wealth by simply converting those funds, assets and properties from one form to another and using legal technicalities to thwart all attempts to reach them. The clear intention of the law is to recover all assets and properties illegally acquired by former President Marcos, et al., in whatever form they may be, such as, to quote the exact wording of Executive Order No. 2, 'in the form of bank accounts, deposits, trust accounts, shares of stocks, buildings, shopping centers, condominium, mansions, residences, estates, and other kinds of real and personal properties in the Philippines and in various countries of the world.' (2nd Whereas Clause, Executive Order No. 2) Moreover, at this stage of the proceedings, it has not yet been established who the real owners of the SMC shares are, but if we bar movants from the start, and if it should turn out in the end that they are the beneficial owners and that the Compromise Agreement did in fact prejudice their rights, then we shall have done them an irreparable injustice. Fairness and prudence dictate that -- at the risk of the inconvenience of having one more group to be heard on the matter -- We exercise our discretion in favor of allowing them to intervene."90 Under the rules on intervention, the allowance or disallowance of a motion to intervene is addressed to the sound discretion of the court.91Discretion is a faculty of a court or an official by which he may decide a question either way, and still be right. 92 The permissive tenor of the rules shows an intention to give to the court the full measure of discretion in permitting or disallowing the intervention. The discretion of the court, once exercised, cannot be reviewed by certiorari nor controlled by mandamus save in instances where such discretion has been so exercised in an arbitrary or capricious manner.93 Nor are we impressed by petitioners' submission that COCOFED, et al. should pay a docket fee for their counter-petition and counterclaim for damages. We note that it was the Sandiganbayan itself that ordered COCOFED and the other defendants in Civil Case No. 0033 to give their comment to the Joint Petition for Approval of Compromise Agreement, etc. In response to this order, COCOFED, et al. filed their Opposition-inIntervention and Compulsory Counter-Petition and Counterclaim for Damages. COCOFED, et al. alleged that the Compromise Agreement is illegal and its approval would bring damages to themselves. In effect, COCOFED, et al. alleged a compulsory counterclaim for which they need not pay any docket fee. Fifth. Petitioners cannot insist on their right to have their Compromise Agreement approved on the ground that it bears the imprimatur of the PCGG. To be sure, the consent of the PCGG is a factor that should be considered in the approval or disapproval of the subject Compromise Agreement but it is not the only factor. In Republic vs. Sandiganbayan,94 this Court had the occasion to categorically draw the distinctions between (i) the Sandiganbayan's exclusive jurisdiction to determine the judicial question of ownership over sequestered properties and (ii) the incidents of the exercise by the PCGG of its purely administrative and executive functions as conservator of sequestered properties, as follows: "In other words, neither in Pea nor in any other case did this Court ever say that orders of sequestration, seizure or take-over of the PCGG or other acts done in the exercise of its so-called 'primary administrative jurisdiction' are beyond judicial review, or beyond the power of the courts to reverse or nullify. It is true, of course, that those acts are entitled to much respect, the findings and conclusions motivating and justifying them should be accorded great weight, 'like the factual findings of the trial and appellate courts,' and such findings and conclusions of the PCGG may not be superseded and substituted by the judgment of the courts. But obviously the principle does not and cannot sanction arbitrary, whimsical, capricious or oppressive exercise of power and discretion on the part of the PCGG, or its performance of acts without or in excess of its authority and competence under the law. And in accordance with applicable law, review of those acts, and correction or invalidation thereof, when called for, can only be undertaken by the Sandiganbayan, which has exclusive original jurisdiction over all cases regarding 'the funds, moneys, assets and properties illegally acquired or misappropriated by former President Ferdinand E. Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents or nominees.'"95 (emphasis supplied) This ruling has stronger application in the cases at bar considering that COCOFED, et al. have challenged the legality of the consent given by PCGG to the Compromise Agreement on various grounds but especially in light of the "arbitration fee" it received in the form of SMC shares of substantial value. COCOFED, et al.'s position that the Compromise Agreement is a sell out of its interest is also a repudiation of the so called "business judgment" of UCPB which petitioners insist should bind COCOFED, et al. A final word. The cases at bar involve shares of stock estimated to be worth more than P9 billion now. These shares were sequestered in 1986 and the government filed Civil Case No. 0033 in 1987 to determine whether they are part of the alleged ill-gotten wealth of former President Marcos and his "cronies." We did not set aside the impugned resolutions of the Sandiganbayan in the cases at bar for they constitute cautious moves to preserve the character of the sequestered shares pending determination of their true owners. Be that as it may, we note that Civil Case No. 0033 has remained unresolved by the Sandiganbayan. The delay is no longer tolerable for it locks in billions of pesos which could well rev-up our sputtering economy. Worse, it constitutes another embarassing evidence of snail-paced justice, so long lamented but mostly by our lips alone.The Sandiganbayan must not be the burial ground of cases of far-reaching importance to our people. It is time for it to write finis to Civil Case No. 0033. IN VIEW WHEREOF, the petitions in G.R. Nos. 104637-38 and in G.R. No. 109797 are DISMISSED. No costs. SO ORDERED.

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G.R. No. 93073 December 21, 1992 REPUBLIC PLANTERS BANK, petitioner, vs. COURT OF APPEALS and FERMIN CANLAS, respondents. CAMPOS, JR., J.: This is an appeal by way of a Petition for Review on Certiorari from the decision * of the Court of Appeals in CA G.R. CV No. 07302, entitled "Republic Planters Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and Fermin Canlas, DefendantAppellant", which affirmed the decision ** in Civil Case No. 82-5448 except that it completely absolved Fermin Canlas from liability under the promissory notes and reduced the award for damages and attorney's fees. The RTC decision, rendered on June 20, 1985, is quoted hereunder: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Republic Planters Bank, ordering defendant Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and defendants Shozo Yamaguchi and Fermin Canlas to pay, jointly and severally, the plaintiff bank the following sums with interest thereon at 16% per annum from the dates indicated, to wit: Under the promissory note (Exhibit "A"), the sum of P300,000.00 with interest from January 29, 1981 until fully paid; under promissory note (Exhibit "B"), the sum of P40,000.00 with interest from November 27, 1980; under the promissory note (Exhibit "C"), the sum of P166,466.00 which interest from January 29, 1981; under the promissory note (Exhibit "E"), the sum of P86,130.31 with interest from January 29, 1981; under the promissory note (Exhibit "G"), the sum of P12,703.70 with interest from November 27, 1980; under the promissory note (Exhibit "H"), the sum of P281,875.91 with interest from January 29, 1981; and under the promissory note (Exhibit "I"), the sum of P200,000.00 with interest from January 29, 1981. Under the promissory note (Exhibit "D") defendants Pinch Manufacturing Corporation (formerly named Worldwide Garment Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay jointly and severally, the plaintiff bank the sum of P367,000.00 with interest of 16% per annum from January 29, 1980 until fully paid Under the promissory note (Exhibit "F") defendant corporation Pinch (formerly Worldwide) is ordered to pay the plaintiff bank the sum of P140,000.00 with interest at 16% per annum from November 27, 1980 until fully paid. Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff the sum of P231,120.81 with interest at 12% per annum from July 1, 1981, until fully paid and the sum of P331,870.97 with interest from March 28, 1981, until fully paid. All the defendants are also ordered to pay, jointly and severally, the plaintiff the sum of P100,000.00 as and for reasonable attorney's fee and the further sum equivalent to 3% per annum of the respective principal sums from the dates above stated as penalty charge until fully paid, plus one percent (1%) of the principal sums as service charge. With costs against the defendants. SO ORDERED. 1 From the above decision only defendant Fermin Canlas appealed to the then Intermediate Court (now the Court Appeals). His contention was that inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing, Inc, he should not be held personally liable for such authorized corporate acts that he performed. It is now the contention of the petitioner Republic Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo Yamaguchi, jointly and severally, defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the nine notes. We find merit in this appeal. From the records, these facts are established: Defendant Shozo Yamaguchi and private respondent Fermin Canlas were President/Chief Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized to apply for credit facilities with the petitioner Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I inclusive, each of which were uniformly worded in the following manner: ___________, after date, for value received, I/we, jointly and severaIly promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________ PESOS(....) Philippine Currency... On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi and Fermin Canlas above their printed names with the phrase "and (in) his personal capacity" typewritten below. At the bottom of the promissory notes appeared: "Please credit proceeds of this note to: ________ Savings Account ______XX Current Account No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP. These entries were separated from the text of the notes with a bold line which ran horizontally across the pages.
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In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment Manufacturing, Inc. was apparently rubber stamped above the signatures of defendant and private respondent. On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its corporate name to Pinch Manufacturing Corporation. On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money covered among others, by the nine promissory notes with interest thereon, plus attorney's fees and penalty charges. The complainant was originally brought against Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended to drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing Corporation it its place. Defendants Pinch Manufacturing Corporation and Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only private respondent Fermin Canlas filed an Amended Answer wherein he, denied having issued the promissory notes in question since according to him, he was not an officer of Pinch Manufacturing Corporation, but instead of Worldwide Garment Manufacturing, Inc., and that when he issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same were in blank, the typewritten entries not appearing therein prior to the time he affixed his signature. In the mind of this Court, the only issue material to the resolution of this appeal is whether private respondent Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the nine promissory notes. We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons: The promissory motes are negotiable instruments and must be governed by the Negotiable Instruments Law. 2 Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. 3 By signing the notes, the maker promises to pay to the order of the payee or any holder 4according to the tenor thereof. 5 Based on the above provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape liability arising therefrom. Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon. 6 An instrument which begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons, makes them solidarily liable. 7 The fact that the singular pronoun is used indicates that the promise is individual as to each other; meaning that each of the co-signers is deemed to have made an independent singular promise to pay the notes in full. In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer and certain, without reason for ambiguity, by the presence of the phrase "joint and several" as describing the unconditional promise to pay to the order of Republic Planters Bank. A joint and several note is one in which the makers bind themselves both jointly and individually to the payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit. 8 A joint and several obligation in common law corresponds to a civil law solidary obligation; that is, one of several debtors bound in such wise that each is liable for the entire amount, and not merely for his proportionate share. 9 By making a joint and several promise to pay to the order of Republic Planters Bank, private respondent Fermin Canlas assumed the solidary liability of a debtor and the payee may choose to enforce the notes against him alone or jointly with Yamaguchi and Pinch Manufacturing Corporation as solidary debtors. As to whether the interpolation of the phrase "and (in) his personal capacity" below the signatures of the makers in the notes will affect the liability of the makers, We do not find it necessary to resolve and decide, because it is immaterial and will not affect to the liability of private respondent Fermin Canlas as a joint and several debtor of the notes. With or without the presence of said phrase, private respondent Fermin Canlas is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor. Finally, the respondent Court made a grave error in holding that an amendment in a corporation's Articles of Incorporation effecting a change of corporate name, in this case from Worldwide Garment manufacturing Inc to Pinch Manufacturing Corporation extinguished the personality of the original corporation. The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It is the same corporation with a different name, and its character is in no respect changed. 10 A change in the corporate name does not make a new corporation, and whether effected by special act or under a general law, has no affect on the identity of the corporation, or on its property, rights, or liabilities. 11 The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or incurred. 12 As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change of name meant only the continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of its agents if authorized by the Board. Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for as follows: Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal , or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability. Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative capacity or the name of the third party for whom he might have acted as agent, the agent is personally liable to take holder of the instrument and cannot
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be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's personal liability. 13 On the private respondent's contention that the promissory notes were delivered to him in blank for his signature, we rule otherwise. A careful examination of the notes in question shows that they are the stereotype printed form of promissory notes generally used by commercial banking institutions to be signed by their clients in obtaining loans. Such printed notes are incomplete because there are blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest, date of issue and the maturity date. The terms and conditions of the loan are printed on the note for the borrower-debtor 's perusal. An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instruments Law which provides, in so far as relevant to this case, thus: Sec. 14. Blanks: when may be filled. Where the instrument is wanting in any material particular, the person in possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time... Proof that the notes were signed in blank was only the self-serving testimony of private respondent Fermin Canlas, as determined by the trial court, so that the trial court ''doubts the defendant (Canlas) signed in blank the promissory notes". We chose to believe the bank's testimony that the notes were filled up before they were given to private respondent Fermin Canlas and defendant Shozo Yamaguchi for their signatures as joint and several promissors. For signing the notes above their typewritten names, they bound themselves as unconditional makers. We take judicial notice of the customary procedure of commercial banks of requiring their clientele to sign promissory notes prepared by the banks in printed form with blank spaces already filled up as per agreed terms of the loan, leaving the borrowers-debtors to do nothing but read the terms and conditions therein printed and to sign as makers or co-makers. When the notes were given to private respondent Fermin Canlas for his signature, the notes were complete in the sense that the spaces for the material particular had been filled up by the bank as per agreement. The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable. The ruling in case of Reformina vs. Tomol relied upon by the appellate court in reducing the interest rate on the promissory notes from 16% to 12% per annum does not squarely apply to the instant petition. In the abovecited case, the rate of 12% was applied to forebearances of money, goods or credit and court judgemets thereon, only in the absence of any stipulation between the parties. In the case at bar however , it was found by the trial court that the rate of interest is 9% per annum, which interest rate the plaintiff may at any time without notice, raise within the limits allowed law. And so, as of February 16, 1984 , the plaintiff had fixed the interest at 16% per annum. This Court has held that the rates under the Usury Law, as amended by Presidential Decree No. 116, are applicable only to interests by way of compensation for the use or forebearance of money. Article 2209 of the Civil Code, on the other hand, governs interests by way of damages. 15 This fine distinction was not taken into consideration by the appellate court, which instead made a general statement that the interest rate be at 12% per annum. Inasmuch as this Court had declared that increases in interest rates are not subject to any ceiling prescribed by the Usury Law, the appellate court erred in limiting the interest rates at 12% per annum. Central Bank Circular No. 905, Series of 1982 removed the Usury Law ceiling on interest rates. 16 In the 1ight of the foregoing analysis and under the plain language of the statute and jurisprudence on the matter, the decision of the respondent: Court of Appeals absolving private respondent Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered declaring private respondent Fermin Canlas jointly and severally liable on all the nine promissory notes with the following sums and at 16% interest per annum from the dates indicated, to wit: Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest from January 29, 1981 until fully paid; under promissory note marked as Exhibit B, the sum of P40,000.00 with interest from November 27, 1980: under the promissory note denominated as Exhibit C, the amount of P166,466.00 with interest from January 29, 1981; under the promissory note denominated as Exhibit D, the amount of P367,000.00 with interest from January 29, 1981 until fully paid; under the promissory note marked as Exhibit E, the amount of P86,130.31 with interest from January 29, 1981; under the promissory note marked as Exhibit F, the sum of P140,000.00 with interest from November 27, 1980 until fully paid; under the promissory note marked as Exhibit G, the amount of P12,703.70 with interest from November 27, 1980; the promissory note marked as Exhibit H, the sum of P281,875.91 with interest from January 29, 1981; and the promissory note marked as Exhibit I, the sum of P200,000.00 with interest on January 29, 1981. The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and Shozo Yamaguchi, for not having appealed from the decision of the trial court, shall be adjudged in accordance with the judgment rendered by the Court a quo. With respect to attorney's fees, and penalty and service charges, the private respondent Fermin Canlas is hereby held jointly and solidarity liable with defendants for the amounts found, by the Court a quo. With costs against private respondent. SO ORDERED.

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