1)

2)
3)
4)
5)
6)
7)
8)

PNB VS CA
Western Institute of Technology vs Salas
Board of Liquidators vs Kalaw
BenguEt Electric Coop vs NLRC
Prime White Cement vs IAC
Gokongwei vs SEC et al
Strong vs Repide
Steinberg vs Velasco

1)
2)
3)
4)

RIGHT OF INSPECTION
Pardo vs Hercules lumber
Gonzales vs PNB
Veraguth vs Isabela Sugar
Gokonwei vs SEC

Philippine National Bank vs. Court of Appeals, 83 SCRA 237, May 18, 1978
G.R. No. L-27155 May 18, 1978
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO GUECO and THE PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY, INC., respondents.
Medina, Locsin, Corua, & Sumbillo for petitioner.
Manuel Lim & Associates for private respondents.
ANTONIO, J.:
Certiorari to review the decision of the Court of Appeals which affirmed the judgment of the Court of First Instance
of Manila in Civil Case No. 34185, ordering petitioner, as third-party defendant, to pay respondent Rita Gueco
Tapnio, as third-party plaintiff, the sum of P2,379.71, plus 12% interest per annum from September 19, 1957 until
the same is fully paid, P200.00 attorney's fees and costs, the same amounts which Rita Gueco Tapnio was ordered
to pay the Philippine American General Insurance Co., Inc., to be paid directly to the Philippine American General
Insurance Co., Inc. in full satisfaction of the judgment rendered against Rita Gueco Tapnio in favor of the former;
plus P500.00 attorney's fees for Rita Gueco Tapnio and costs. The basic action is the complaint filed by Philamgen
(Philippine American General Insurance Co., Inc.) as surety against Rita Gueco Tapnio and Cecilio Gueco, for the
recovery of the sum of P2,379.71 paid by Philamgen to the Philippine National Bank on behalf of respondents
Tapnio and Gueco, pursuant to an indemnity agreement. Petitioner Bank was made third-party defendant by
Tapnio and Gueco on the theory that their failure to pay the debt was due to the fault or negligence of petitioner.
The facts as found by the respondent Court of Appeals, in affirming the decision of the Court of First Instance of
Manila, are quoted hereunder:
Plaintiff executed its Bond, Exh. A, with defendant Rita Gueco Tapnio as principal, in favor of the Philippine
National Bank Branch at San Fernando, Pampanga, to guarantee the payment of defendant Rita Gueco Tapnio's
account with said Bank. In turn, to guarantee the payment of whatever amount the bonding company would pay
to the Philippine National Bank, both defendants executed the indemnity agreement, Exh. B. Under the terms and
conditions of this indemnity agreement, whatever amount the plaintiff would pay would earn interest at the rate
of 12% per annum, plus attorney's fees in the amount of 15 % of the whole amount due in case of court litigation.
The original amount of the bond was for P4,000.00; but the amount was later reduced to P2,000.00.
It is not disputed that defendant Rita Gueco Tapnio was indebted to the bank in the sum of P2,000.00, plus
accumulated interests unpaid, which she failed to pay despite demands. The Bank wrote a letter of demand to
plaintiff, as per Exh. C; whereupon, plaintiff paid the bank on September 18, 1957, the full amount due and owing
in the sum of P2,379.91, for and on account of defendant Rita Gueco's obligation (Exhs. D and D-1).
Plaintiff, in turn, made several demands, both verbal and written, upon defendants (Exhs. E and F), but to no avail.
Defendant Rita Gueco Tapnio admitted all the foregoing facts. She claims, however, when demand was made upon
her by plaintiff for her to pay her debt to the Bank, that she told the Plaintiff that she did not consider herself to be
indebted to the Bank at all because she had an agreement with one Jacobo-Nazon whereby she had leased to the
latter her unused export sugar quota for the 1956-1957 agricultural year, consisting of 1,000 piculs at the rate of
P2.80 per picul, or for a total of P2,800.00, which was already in excess of her obligation guaranteed by plaintiff's
bond, Exh. A. This lease agreement, according to her, was with the knowledge of the bank. But the Bank has placed
obstacles to the consummation of the lease, and the delay caused by said obstacles forced 'Nazon to rescind the
lease contract. Thus, Rita Gueco Tapnio filed her third-party complaint against the Bank to recover from the latter
any and all sums of money which may be adjudged against her and in favor of the plaitiff plus moral damages,
attorney's fees and costs.
Insofar as the contentions of the parties herein are concerned, we quote with approval the following findings of
the lower court based on the evidence presented at the trial of the case:
It has been established during the trial that Mrs. Tapnio had an export sugar quota of 1,000 piculs for the
agricultural year 1956-1957 which she did not need. She agreed to allow Mr. Jacobo C. Tuazon to use said quota

for the consideration of P2,500.00 (Exh. "4"-Gueco). This agreement was called a contract of lease of sugar
allotment.
At the time of the agreement, Mrs. Tapnio was indebted to the Philippine National Bank at San Fernando,
Pampanga. Her indebtedness was known as a crop loan and was secured by a mortgage on her standing crop
including her sugar quota allocation for the agricultural year corresponding to said standing crop. This
arrangement was necessary in order that when Mrs. Tapnio harvests, the P.N.B., having a lien on the crop, may
effectively enforce collection against her. Her sugar cannot be exported without sugar quota allotment Sometimes,
however, a planter harvest less sugar than her quota, so her excess quota is utilized by another who pays her for
its use. This is the arrangement entered into between Mrs. Tapnio and Mr. Tuazon regarding the former's excess
quota for 1956-1957 (Exh. "4"-Gueco).
Since the quota was mortgaged to the P.N.B., the contract of lease had to be approved by said Bank, The same was
submitted to the branch manager at San Fernando, Pampanga. The latter required the parties to raise the
consideration of P2.80 per picul or a total of P2,800.00 (Exh. "2-Gueco") informing them that "the minimum lease
rental acceptable to the Bank, is P2.80 per picul." In a letter addressed to the branch manager on August 10, 1956,
Mr. Tuazon informed the manager that he was agreeable to raising the consideration to P2.80 per picul. He further
informed the manager that he was ready to pay said amount as the funds were in his folder which was kept in the
bank.
Explaining the meaning of Tuazon's statement as to the funds, it was stated by him that he had an approved loan
from the bank but he had not yet utilized it as he was intending to use it to pay for the quota. Hence, when he said
the amount needed to pay Mrs. Tapnio was in his folder which was in the bank, he meant and the manager
understood and knew he had an approved loan available to be used in payment of the quota. In said Exh. "6Gueco", Tuazon also informed the manager that he would want for a notice from the manager as to the time when
the bank needed the money so that Tuazon could sign the corresponding promissory note.
Further Consideration of the evidence discloses that when the branch manager of the Philippine National Bank at
San Fernando recommended the approval of the contract of lease at the price of P2.80 per picul (Exh. 1 1-Bank),
whose recommendation was concurred in by the Vice-president of said Bank, J. V. Buenaventura, the board of
directors required that the amount be raised to 13.00 per picul. This act of the board of directors was
communicated to Tuazon, who in turn asked for a reconsideration thereof. On November 19, 1956, the branch
manager submitted Tuazon's request for reconsideration to the board of directors with another recommendation
for the approval of the lease at P2.80 per picul, but the board returned the recommendation unacted upon,
considering that the current price prevailing at the time was P3.00 per picul (Exh. 9-Bank).
The parties were notified of the refusal on the part of the board of directors of the Bank to grant the motion for
reconsideration. The matter stood as it was until February 22, 1957, when Tuazon wrote a letter (Exh. 10-Bank
informing the Bank that he was no longer interested to continue the deal, referring to the lease of sugar quota
allotment in favor of defendant Rita Gueco Tapnio. The result is that the latter lost the sum of P2,800.00 which she
should have received from Tuazon and which she could have paid the Bank to cancel off her indebtedness,
The court below held, and in this holding we concur that failure of the negotiation for the lease of the sugar quota
allocation of Rita Gueco Tapnio to Tuazon was due to the fault of the directors of the Philippine National Bank, The
refusal on the part of the bank to approve the lease at the rate of P2.80 per picul which, as stated above, would
have enabled Rita Gueco Tapnio to realize the amount of P2,800.00 which was more than sufficient to pay off her
indebtedness to the Bank, and its insistence on the rental price of P3.00 per picul thus unnecessarily increasing the
value by only a difference of P200.00. inevitably brought about the rescission of the lease contract to the damage
and prejudice of Rita Gueco Tapnio in the aforesaid sum of P2,800.00. The unreasonableness of the position
adopted by the board of directors of the Philippine National Bank in refusing to approve the lease at the rate of
P2.80 per picul and insisting on the rate of P3.00 per picul, if only to increase the retail value by only P200.00 is
shown by the fact that all the accounts of Rita Gueco Tapnio with the Bank were secured by chattel mortgage on
standing crops, assignment of leasehold rights and interests on her properties, and surety bonds, aside from the
fact that from Exh. 8-Bank, it appears that she was offering to execute a real estate mortgage in favor of the Bank
to replace the surety bond This statement is further bolstered by the fact that Rita Gueco Tapnio apparently had

the means to pay her obligation fact that she has been granted several value of almost P80,000.00 for the
agricultural years from 1952 to 56. 1
Its motion for the reconsideration of the decision of the Court of Appeals having been denied, petitioner filed the
present petition.
The petitioner contends that the Court of Appeals erred:
(1) In finding that the rescission of the lease contract of the 1,000 piculs of sugar quota allocation of respondent
Rita Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified refusal of petitioner to approve said lease
contract, and its unreasonable insistence on the rental price of P3.00 instead of P2.80 per picul; and
(2) In not holding that based on the statistics of sugar price and prices of sugar quota in the possession of the
petitioner, the latter's Board of Directors correctly fixed the rental of price per picul of 1,000 piculs of sugar quota
leased by respondent Rita Gueco Tapnio to Jacobo C. Tuazon at P3.00 per picul.
Petitioner argued that as an assignee of the sugar quota of Tapnio, it has the right, both under its own Charter and
under the Corporation Law, to safeguard and protect its rights and interests under the deed of assignment, which
include the right to approve or disapprove the said lease of sugar quota and in the exercise of that authority, its
Board of Directors necessarily had authority to determine and fix the rental price per picul of the sugar quota
subject of the lease between private respondents and Jacobo C. Tuazon. It argued further that both under its
Charter and the Corporation Law, petitioner, acting thru its Board of Directors, has the perfect right to adopt a
policy with respect to fixing of rental prices of export sugar quota allocations, and in fixing the rentals at P3.00 per
picul, it did not act arbitrarily since the said Board was guided by statistics of sugar price and prices of sugar quotas
prevailing at the time. Since the fixing of the rental of the sugar quota is a function lodged with petitioner's Board
of Directors and is a matter of policy, the respondent Court of Appeals could not substitute its own judgment for
that of said Board of Directors, which acted in good faith, making as its basis therefore the prevailing market price
as shown by statistics which were then in their possession.
Finally, petitioner emphasized that under the appealed judgment, it shall suffer a great injustice because as a
creditor, it shall be deprived of a just claim against its debtor (respondent Rita Gueco Tapnio) as it would be
required to return to respondent Philamgen the sum of P2,379.71, plus interest, which amount had been
previously paid to petitioner by said insurance company in behalf of the principal debtor, herein respondent Rita
Gueco Tapnio, and without recourse against respondent Rita Gueco Tapnio.
We must advert to the rule that this Court's appellate jurisdiction in proceedings of this nature is limited to
reviewing only errors of law, accepting as conclusive the factual fin dings of the Court of Appeals upon its own
assessment of the evidence. 2
The contract of lease of sugar quota allotment at P2.50 per picul between Rita Gueco Tapnio and Jacobo C. Tuazon
was executed on April 17, 1956. This contract was submitted to the Branch Manager of the Philippine National
Bank at San Fernando, Pampanga. This arrangement was necessary because Tapnio's indebtedness to petitioner
was secured by a mortgage on her standing crop including her sugar quota allocation for the agricultural year
corresponding to said standing crop. The latter required the parties to raise the consideration to P2.80 per picul,
the minimum lease rental acceptable to the Bank, or a total of P2,800.00. Tuazon informed the Branch Manager,
thru a letter dated August 10, 1956, that he was agreeable to raising the consideration to P2.80 per picul. He
further informed the manager that he was ready to pay the said sum of P2,800.00 as the funds were in his folder
which was kept in the said Bank. This referred to the approved loan of Tuazon from the Bank which he intended to
use in paying for the use of the sugar quota. The Branch Manager submitted the contract of lease of sugar quota
allocation to the Head Office on September 7, 1956, with a recommendation for approval, which recommendation
was concurred in by the Vice-President of the Bank, Mr. J. V. Buenaventura. This notwithstanding, the Board of
Directors of petitioner required that the consideration be raised to P3.00 per picul.
Tuazon, after being informed of the action of the Board of Directors, asked for a reconsideration thereof. On
November 19, 1956, the Branch Manager submitted the request for reconsideration and again recommended the

approval of the lease at P2.80 per picul, but the Board returned the recommendation unacted, stating that the
current price prevailing at that time was P3.00 per picul.
On February 22, 1957, Tuazon wrote a letter, informing the Bank that he was no longer interested in continuing
the lease of sugar quota allotment. The crop year 1956-1957 ended and Mrs. Tapnio failed to utilize her sugar
quota, resulting in her loss in the sum of P2,800.00 which she should have received had the lease in favor of
Tuazon been implemented.
It has been clearly shown that when the Branch Manager of petitioner required the parties to raise the
consideration of the lease from P2.50 to P2.80 per picul, or a total of P2,800-00, they readily agreed. Hence, in his
letter to the Branch Manager of the Bank on August 10, 1956, Tuazon informed him that the minimum lease rental
of P2.80 per picul was acceptable to him and that he even offered to use the loan secured by him from petitioner
to pay in full the sum of P2,800.00 which was the total consideration of the lease. This arrangement was not only
satisfactory to the Branch Manager but it was also approves by Vice-President J. V. Buenaventura of the PNB.
Under that arrangement, Rita Gueco Tapnio could have realized the amount of P2,800.00, which was more than
enough to pay the balance of her indebtedness to the Bank which was secured by the bond of Philamgen.
There is no question that Tapnio's failure to utilize her sugar quota for the crop year 1956-1957 was due to the
disapproval of the lease by the Board of Directors of petitioner. The issue, therefore, is whether or not petitioner is
liable for the damage caused.
As observed by the trial court, time is of the essence in the approval of the lease of sugar quota allotments, since
the same must be utilized during the milling season, because any allotment which is not filled during such milling
season may be reallocated by the Sugar Quota Administration to other holders of allotments. 3 There was no proof
that there was any other person at that time willing to lease the sugar quota allotment of private respondents for a
price higher than P2.80 per picul. "The fact that there were isolated transactions wherein the consideration for the
lease was P3.00 a picul", according to the trial court, "does not necessarily mean that there are always ready takers
of said price. " The unreasonableness of the position adopted by the petitioner's Board of Directors is shown by
the fact that the difference between the amount of P2.80 per picul offered by Tuazon and the P3.00 per picul
demanded by the Board amounted only to a total sum of P200.00. Considering that all the accounts of Rita Gueco
Tapnio with the Bank were secured by chattel mortgage on standing crops, assignment of leasehold rights and
interests on her properties, and surety bonds and that she had apparently "the means to pay her obligation to the
Bank, as shown by the fact that she has been granted several sugar crop loans of the total value of almost
P80,000.00 for the agricultural years from 1952 to 1956", there was no reasonable basis for the Board of Directors
of petitioner to have rejected the lease agreement because of a measly sum of P200.00.
While petitioner had the ultimate authority of approving or disapproving the proposed lease since the quota was
mortgaged to the Bank, the latter certainly cannot escape its responsibility of observing, for the protection of the
interest of private respondents, that degree of care, precaution and vigilance which the circumstances justly
demand in approving or disapproving the lease of said sugar quota. The law makes it imperative that every person
"must in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and
4
observe honesty and good faith, This petitioner failed to do. Certainly, it knew that the agricultural year was
about to expire, that by its disapproval of the lease private respondents would be unable to utilize the sugar quota
in question. In failing to observe the reasonable degree of care and vigilance which the surrounding circumstances
reasonably impose, petitioner is consequently liable for the damages caused on private respondents. Under Article
21 of the New Civil Code, "any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage." The afore-cited provisions on
human relations were intended to expand the concept of torts in this jurisdiction by granting adequate legal
remedy for the untold number of moral wrongs which is impossible for human foresight to specifically provide in
the statutes. 5
A corporation is civilly liable in the same manner as natural persons for torts, because "generally speaking, the
rules governing the liability of a principal or master for a tort committed by an agent or servant are the same
whether the principal or master be a natural person or a corporation, and whether the servant or agent be a

natural or artificial person. All of the authorities agree that a principal or master is liable for every tort which he
expressly directs or authorizes, and this is just as true of a corporation as of a natural person, A corporation is
liable, therefore, whenever a tortious act is committed by an officer or agent under express direction or authority
from the stockholders or members acting as a body, or, generally, from the directors as the governing body." 6
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby AFFIRMED.
Fernando, Aquino, Concepcion, Jr., and Santos, JJ., concur.

FIRST DIVISION

[G.R. No. 113032. August 21, 1997]

WESTERN INSTITUTE OF TECHNOLOGY, INC., HOMERO L. VILLASIS,

DIMAS ENRIQUEZ, PRESTON F. VILLASIS & REGINALD F.
VILLASIS, petitioners, vs. RICARDO T. SALAS, SOLEDAD
SALAS-TUBILLEJA, ANTONIO S. SALAS, RICHARD S. SALAS &
HON. JUDGE PORFIRIO PARIAN, respondents.
DECISION
HERMOSISIMA, JR., J.:

Up for review on certiorari are: (1) the Decision September 6, 1993 and (2)
the order dated November 23, 1993 of Branch 33 of the Regional Trial Court
of Iloilo City in Criminal Cases Nos. 37097 and 37098 for estafa and
falsification of a public document, respectively. The judgment acquitted the
private respondents of both charges, but petitioners seek to hold them civilly
liable.
Private respondents Ricardo T. Salas, Salvador T. Salas, Soledad SalasTubilleja, Antonio S. Salas, and Richard S. Salas, belonging to the same
family, are the majority and controlling members of the Board of Trustees of

Western Institute of Technology, Inc. (WIT, for short), a stock corporation

engaged in the operation, among others, of an educational institution.
According to petitioners, the minority stockholders of WIT, sometime on June
1, 1986 in the principal office of WIT at La Paz, Iloilo City, a Special Board
meeting was held. In attendance were other members of the Board including
one of the petitioners Reginald Villasis. Prior to aforesaid Special Board
Meeting, copies of notice thereof, dated May 24, 1986, were distributed to all
Board Members. The notice allegedly indicated that the meeting to be held on
June 1, 1986 included item No. 6 which states:
"Possible implementation of Art. III, Sec. 6 of the Amended By-Laws of Western
Institute of Technology, Inc. on compensation of all officers of the corporation."

[1]

In said meeting, the Board of Trustees passed Resolution No. 48, s. 1986,
granting monthly compensation to the private respondents as corporate
officers retroactive June 1, 1985, viz.:
Resolution No. 48 s. 1986
On the motion of Mr. Richard Salas (accused), duly seconded by Mrs. Soledad
Tubilleja (accused), it was unanimously resolved that:
The Officers of the Corporation be granted monthly compensation for services
rendered as follows: Chairman - P9,000.00/month, Vice-Chairman -P3,500.00/month,
Corporate Treasurer - P3,500.00/month and Corporate Secretary - P3,500.00/month,
retroactive June 1, 1985 and the ten percentum of the net profits shall be distributed
equally among the ten members of the Board of Trustees. This shall amend and
superceed(sic) any previous resolution.
There were no other business.
The Chairman declared the meeting adjourned at 5:11 P.M.
This is to certify that the foregoing minutes of the regular meeting of the Board of
Trustees of Western Institute of Technology, Inc. held on March 30, 1986 is true and
correct to the best of my knowledge and belief.
(Sgd) ANTONIO S. SALAS
Corporate Secretary
[2]

A few years later, that is, on March 13, 1991, petitioners Homero Villasis,
Preston Villasis, Reginald Villasis and Dimas Enriquez filed an affidavit-

complaint against private respondents before the Office of the City Prosecutor
of Iloilo, as a result of which two (2) separate criminal informations, one for
falsification of a public document under Article 171 of the Revised Penal Code
and the other for estafa under Article 315, par. 1(b) of the RPC, were filed
before Branch 33 of the Regional Trial Court of Iloilo City. The charge for
falsification of public document was anchored on the private respondents
submission of WITs income statement for the fiscal year 1985-1986 with the
Securities and Exchange Commission (SEC) reflecting therein the
disbursement of corporate funds for the compensation of private respondents
based on Resolution No. 4, series of 1986, making it appear that the same
was passed by the board on March 30, 1986, when in truth, the same was
actually passed on June 1, 1986, a date not covered by the corporations
fiscal year 1985-1986 (beginning May 1, 1985 and ending April 30,
1986). The information for falsification of a public document states:
The undersigned City Prosecutor accuses RICARDO T. SALAS, SALVADOR T.
SALAS, SOLEDAD SALAS-TUBILLEJA, ANTONIO S. SALAS and RICHARD S.
SALAS (whose dates and places of birth cannot be ascertained) of the crime of
FALSIFICATION OF A PUBLC DOCUMENT, Art. 171 of the Revised Penal Code,
committed as follows:
That on or about the 10th day of June, 1986, in the City of Iloilo, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused, being then
the Chairman, Vice-Chairman, Treasurer, Secretary and Trustee (who later became
the secretary), respectively, of the board of trustees of the Western Institute of
Technology, Inc., a corporation duly organized and existing under the laws of the
Republic of the Philippines, conspiring and confederating together and mutually
helping one another, to better realized (sic) their purpose, did then and there wilfully,
unlawfully and criminally prepare and execute and subsequently cause to be
submitted to the Securities and Exchange Commission an income statement of the
corporation for the fiscal year 1985-1986, the same being required to be submitted
every end of the corporation fiscal year by the aforesaid Commission and therefore, a
public document, including therein the disbursement of the retroactive compensation
of accused corporate officers in the amount of P186,470.70, by then and there making
it appear that the basis thereof Resolution No. 4, Series of 1986 was passed by the
board of trustees on March 30, 1986, a date covered by the corporations fiscal year
1985-1986 (i.e., from May 1, 1985 to April 30, 1986), when in truth and in fact, as
said accused well knew, no such Resolution No. 48, Series of 1986 was passed on
March 30, 1986.
CONTRARY TO LAW.

Iloilo City, Philippines, November 22,1991. [Underscoring ours].

[3]

The Information, on the other hand, for estafa reads:

The undersigned City Prosecutor accuses RICARDO SALAS, SALVADOR T.
SALAS, SOLEDAD SALAS-TUBILLEJA, ANTONIO S. SALAS, RICHARD S.
SALAS (whose dates and places of birth cannot be ascertained) of the crime
of ESTAFA, Art. 315, par 1(b) of the Revised Penal Code, committed as follows:
That on or about the 1st day of June, 1986, in the City of Iloilo, Philippines and within
the jurisdiction of this Honorable Court, the above-named accused, being then the
Chairman, Vice-Chairman, Treasurer, Secretary and Trustee (who later became the
secretary), respectively, of the board of trustees of the Western Institute of
Technology, Inc., a corporation duly organized and existing under the laws of the
Republic of the Philippines, conspiring and confederating together and mutually
helping one another, to better realize their purpose, did then and there wilfully,
unlawfully and feloniously defraud the said corporation (and its stockholders) in the
following manner, to wit: herein accused, knowing fully well that they have no
sufficient, lawful authority to disburse--- let alone violation of applicable laws and
jurisprudence, disbursed the funds of the corporation by effecting payment of their
retroactive salaries in the amount of P186,470.70 and subsequently paying themselves
every 15th and 30th of the month starting June 15, 1986 until the present, in the
amount of P19,500.00 per month, as if the same were their own, and when herein
accused were informed of the illegality of these disbursements by the minority
stockholders by way of objections made in an annual stockholders meeting held on
June 14, 1986 and every year thereafter, they refused, and still refuse, to rectify the
same to the damage and prejudice of the corporation (and its stockholders) in the
total sum of P1,453,970.79 as of November 15, 1991.
CONTRARY TO LAW.
Iloilo City, Philippines, November 22,1991. [Underscoring ours]
[4]

Thereafter, trial for the two criminal cases, docketed as Criminal Cases
Nos. 37097 and 37098, was consolidated. After a full-blown hearing, Judge
Porfirio Parian handed down a verdict of acquittal on both counts dated
September 6, 1993 without imposing any civil liability against the accused
therein.
[5]

Petitioners filed a Motion for Reconsideration of the civil aspect of the

RTC Decision which was, however, denied in an Order dated November 23,
1993.
[6]

[7]

Hence, the instant petition.

Significantly on December 8, 1994, a Motion for Intervention, dated
December 2, 1994, was filed before this Court by Western Institute of
Technology, Inc., supposedly one of the petitioners herein, disowning its
inclusion in the petition and submitting that Atty. Tranquilino R. Gale, counsel
for the other petitioners, had no authority whatsoever to represent the
corporation in filing the petition. Intervenor likewise prayed for the dismissal of
the petition for being utterly without merit. The Motion for Intervention was
granted on January 16, 1995.
[8]

Petitioners would like us to hold private respondents civilly liable despite

their acquittal in Criminal Cases Nos. 37097 and 37098. They base their
claim on the alleged illegal issuance by private respondents of Resolution No.
48, series of 1986 ordering the disbursement of corporate funds in the amount
of P186,470.70 representing the retroactive compensation as of June 1, 1985
in favor of private respondents, board members of WIT, plus P1,453,970.79
for the subsequent collective salaries of private respondent every 15 and
30 of the month until the filing of the criminal complaints against them on
March 1991. Petitioners maintain that this grant of compensation to private
respondents is proscribed under Section 30 of the Corporation Code. Thus,
private respondents are obliged to return these amounts to the corporation
with interest.
th

th

We cannot sustain the petitioners. The pertinent section of the Corporation

Code provides:
Sec. 30. Compensation of directors.--- In the absence of any provision in the by-laws
fixing their compensation, the directors shall not receive any compensation,as such
directors, except for reasonable per diems: Provided, however, That any such
compensation (other than per diems) may be granted to directors by the vote of the
stockholders representing at least a majority of the outstanding capital stock at a
regular or special stockholders meeting. In no case shall the total yearly
compensation of directors, as such directors, exceed ten (10%) percent of the net
income before income tax of the corporation during the preceding year.
[Underscoring ours]
There is no argument that directors or trustees, as the case may be, are
not entitled to salary or other compensation when they perform nothing more
than the usual and ordinary duties of their office. This rule is founded upon a
presumption that directors /trustees render service gratuitously and that the
return upon their shares adequately furnishes the motives for service, without
compensation Under the foregoing section, there are only two (2) ways by
[9]

which members of the board can be granted compensation apart from

reasonable per diems: (1) when there is a provision in the by-laws fixing their
compensation; and (2) when the stockholders representing a majority of the
outstanding capital stock at a regular or special stockholders meeting agree
to give it to them.
This proscription, however, against granting compensation to
directors/trustees of a corporation is not a sweeping rule. Worthy of note is the
clear phraseology of Section 30 which states: xxx [T]he directors shall not
receive any compensation, as such directors, xxx. The phrase as such
directors is not without significance for it delimits the scope of the prohibition
to compensation given to them for services performed purely in their capacity
as directors or trustees. The unambiguous implication is that members of the
board may receive compensation, in addition to reasonable per diems, when
they render services to the corporation in a capacity other than as
directors/trustees. In the case at bench, Resolution No. 48, s. 1986 granted
monthly compensation to private respondents not in their capacity as
members of the board, but rather as officers of the corporation, more
particularly as Chairman, Vice-Chairman, Treasurer and Secretary of Western
Institute of Technology. We quote once more Resolution No. 48, s. 1986 for
easy reference, viz.:
[10]

Resolution No. 48 s. 1986

On the motion of Mr. Richard Salas (accused), duly seconded by Mrs. Soledad
Tubilleja (accused), it was unanimously resolved that:
The Officers of the Corporation be granted monthly compensation for services
rendered as follows: Chairman - P9,000.00/month, Vice-Chairman P3,500.00/month, Corporate Treasurer - P3,500.00/month and Corporate Secretary P3,500.00/month, retroactive June 1, 1985 and the ten percentum of the net profits
shall be distributed equally among the ten members of the Board of Trustees. This
shall amend and superceed(sic) any previous resolution.
There were no other business.
The Chairman declared the meeting adjourned at 5:11 P.M.
This is to certify that the foregoing minutes of the regular meeting of the Board of
Trustees of Western Institute of Technology, Inc. held on March 30, 1986 is true and
correct to the best of my knowledge and belief.

(Sgd) ANTONIO S. SALAS

Corporate
Secretary [Underscoring ours]
[11]

Clearly, therefore , the prohibition with respect to granting compensation to

corporate directors/trustees as such under Section 30 is not violated in this
particular case. Consequently, the last sentence of Section 30 which
provides:
xxx xxx. In no case shall the total yearly compensation of directors, as such
directors, exceed ten (10%) percent of the net income before income tax of the
corporation during the preceding year. [Underscoring ours]
does not likewise find application in this case since the compensation is being
given to private respondents in their capacity as officers of WIT and not as
board members.
Petitioners assert that the instant case is a derivative suit brought by them
as minority shareholders of WIT for and on behalf of the corporation to annul
Resolution No. 48, s. 1986 which is prejudicial to the corporation.
We are unpersuaded. A derivative suit is an action brought by minority
shareholders in the name of the corporation to redress wrongs committed
against it, for which the directors refuse to sue. It is a remedy designed by
equity and has been the principal defense of the minority shareholders against
abuses by the majority. Here, however, the case is not a derivative suit but is
merely an appeal on the civil aspect of Criminal Cases Nos. 37097 and 37098
filed with the RTC of Iloilo for estafa and falsification of public
document. Among the basic requirements for a derivative suit to prosper is
that the minority shareholder who is suing for and on behalf of the corporation
must allege his complaint before the proper forum that he is suing on a
derivative cause of action on behalf of the corporation and all other
shareholders similarly situated who wish to join. This is necessary to vest
jurisdiction upon the tribunal in line with the rule that it is the allegations in the
complaint that vests jurisdiction upon the court or quasi-judicial body
concerned over the subject matter and nature of the action. This was not
complied with by the petitioners either in their complaint before the court a
quo nor in the instant petition which, in part, merely states that this is a
petition for review on certiorari on pure questions of law to set aside a portion
of the RTC decision in Criminal Cases Nos. 37097 and 37098 since the trial
courts judgment of acquittal failed to impose any civil liability against the
private respondents. By no amount of equity considerations, if at all
[12]

[13]

[14]

[15]

[16]

deserved, can a mere appeal on the civil aspect of a criminal case be treated
as a derivative suit.
Granting, for purposes of discussion, that this is a derivative suit as
insisted by petitioners, which it is not, the same is outrightly dismissible for
having been wrongfully filed in the regular court devoid of any jurisdiction to
entertain the complaint. The case should have been filed with the Securities
and Exchange Commission (SEC) which exercises original and exclusive
jurisdiction over derivative suits, they being intra-corporate disputes, per
Section 5(b) of P.D. No. 902-A:
In addition to the regulatory and adjudicative functions of the Securities and
Exchange Commission over corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide cases involving:
xxx xxx

xxx

b) Controversies arising out of intra-corporate or partnership relations, between and

among stockholders, members, or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members or
associates, respectively; and between such corporation, partnership or association and
the State insofar as it concerns their individual franchise or right to exist as such
entity;
xxx. [Underscoring ours]

xxx xxx

Once the case is decided by the SEC, the losing party may file a petition for
review before the Court of Appeals raising questions of fact, of law, or mixed
questions of fact and law. It is only after the case has ran this course, and
not earlier, can it be brought to us via a petition for review on certiorari under
Rule 45 raising only pure questions of law. Petitioners, in pleading that we
treat the instant petition as a derivative suit, are trying to short-circuit the
entire process which we cannot here sanction.
[17]

[18]

As an appeal on the civil aspect of Criminal Cases Nos. 37097 and 37098
for falsification of public document and estafa, which this petition truly is, we
have to deny the petition just the same. It will be well to quote the respondent
courts ratiocinations acquitting the private respondents on both counts:
The prosecution wants this Court to believe and agree that there is falsification of
public document because, as claimed by the prosecution, Resolution No. 48, Series of
1986 (Exh. 1-E-1) was not taken up and passed during the Regular Meeting of the

Board of Trustees of the western Institute of Technology (WIT), Inc. on March 30,
1986, but on June 1, 1986 special meeting of the same board of trustees.
This Court is reluctant to accept this claim of falsification. The prosecution omitted to
submit the complete minutes of the regular meeting of the Board of Trustees on March
30, 1986. It only presented in evidence Exh. C, which is page 5 or the last page of
the said minutes. Had the complete minutes (Exh. 1 consisting of five (5) pages,
been submitted, it can readily be seen and understood that Resolution No. 48, Series
of 1986 (Exh. 1-E-1) giving compensation to corporate officers, was indeed included
in Other Business, No. 6 of the Agenda, and was taken up and passed on March 30,
1986. The mere fact of existence of Exh. C also proves that it was passed on March
30, 1986 for Exh,. C is a part and parcel of the whole minutes of the Board of
Trustees Regular Meeting on March 30, 1986. No better and more credible proof can
be considered other than the Minutes (Exh. 1) itself of the Regular Meeting of the
Board of Trustees on March 30, 1986. The imputation that said Resolution No.48 was
neither taken up nor passed on March 30, 1986 because the matter regarding
compensation was not specifically stated or written in the Agenda and that the words
possible implementation of said Resolution No. 48, was expressly written in the
Agenda for the Special Meeting of the Board on June 1, 1986, is simply an
implication. This evidence by implication to the mind of the court cannot prevail over
the Minutes (Exh. 1) and cannot ripen into proof beyond reasonable doubt which is
demanded in all criminal prosecutions.
This Court finds that under the Eleventh Article (Exh. 3-D-1) of the Articles of
Incorporation (Exh. 3-B) of the Panay Educational Institution, Inc., now the Western
Institute of Technology, Inc., the officers of the corporation shall receive such
compensation as the Board of Directors may provide. These Articles of Incorporation
was adopted on May 17, 1957 (Exh. 3-E). The Officers of the corporation and their
corresponding duties are enumerated and stated in Sections 1, 2, 3 and 4 of Art. III of
the Amended By-Laws of the Corporation (Exh. 4-A) which was adopted on May
31, 1957. According to Sec. 6, Art. III of the same By-Laws, all officers shall receive
such compensation as may be fixed by the Board of Directors.
It is the perception of this Court that the grant of compensation or salary to the
accused in their capacity as officers of the corporation, through Resolution No. 48,
enacted on March 30, 1986 by the Board of Trustees, is authorized by both the
Articles of Incorporation and the By-Laws of the Corporation. To state otherwise is to
depart from the clear terms of the said articles and by-laws. In their defense the
accused have properly and rightly asserted that the grant of salary is not for
directors, but for their being officers of the corporation who oversee the day to day
activities and operations of the school.

xxx xxx

xxx

xxx [O]n the question of whether or not the accused can be held liable for estafa
under Sec. 1 (b) of Art. 315 of the Revised Penal Code, it is perceived by this Court
that the receipt and the holding of the money by the accused as salary on basis of the
authority granted by the Articles and By-Laws of the corporation are not tainted with
abuse of confidence. The money they received belongs to them and cannot be said to
have been converted and/or misappropriated by them.
xxx. [Underscoring ours]

xxx xxx

[19]

From the foregoing factual findings, which we find to be amply

substantiated by the records, it is evident that there is simply no basis to hold
the accused, private respondents herein, civilly liable. Section 2(b) of Rule
111 on the New Rules on Criminal Procedure provides:
SEC. 2. Institution of separate civil action.
xxx xxx

xxx

(b) Extinction of the penal action does not carry with it extinction of the civil, unless
the extinction proceeds from a declaration in a final judgment that the fact from which
the civil might arise did not exist. [Underscoring ours]
Likewise, the last paragraph of Section 2, Rule 120 reads:
SEC. 2. Form and contents of judgment.
xxx xxx

xxx

In case of acquittal, unless there is a clear showing that the act from which the civil
liability might arise did not exist, the judgment shall make a finding on the civil
liability of the accused in favor of the offended party. [Underscoring ours]
The acquittal in Criminal Cases Nos. 37097 and 37098 is not merely
based on reasonable doubt but rather on a finding that the accused-private
respondents did not commit the criminal acts complained of. Thus, pursuant to
the above rule and settled jurisprudence, any civil actionex delicto cannot
prosper. Acquittal in a criminal action bars the civil action arising therefrom
where the judgment of acquittal holds that the accused did not commit the
criminal acts imputed to them.
[20]

WHEREFORE, the instant petition is hereby DENIED with costs against

petitioners.
SO ORDERED.
Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.