Islamic Directorate vs.

CA
G.R. No. 117897, 14 May 1997.
Hermosisima, Jr., J.

FACTS: In 1971, petitioner IDP was incorporated with the primary purpose of
establishing a mosque, school, and other religious infrastructures. IDP purchased a
49,652-square meter lot. When President Marcos declared martial law in 1972,
most of the members of the 1971 Board of Trustees ("Tamano Group") flew to the
Middle East to escape political persecution. Thereafter, two contending groups
claiming to be the IDP Board of Trustees sprung: the Carpizo group and Abbas
group. In a suit between the two groups, SEC rendered a decision in 1986 declaring
both groups to be null and void. SEC recommended that a new by-laws be approved
and a new election be conducted upon the approval of the by-laws. However, the
SEC recommendation was not heeded. In 1989, the Carpizo group passed a Board
Resolution authorizing the sale of the land to Iglesia Ni Cristo ("INC"), and a Deed of
Sale was eventually executed. In 1991, the Tamano Group filed a petition before the
SEC questioning the sale. Meanwhile, INC filed a suit for specific performance
against the Carpizo group. INC also moved to compel a certain Leticia Ligon
(mortgagee) to surrender the title. The Tamano group sought to intervene, but the
intervention was denied despite being informed of the pending SEC case. In 1992,
the Court subsequently ruled that the INC as the rightful owner of the land, and
ordered Ligon to surrender the titles for annotation. Ligon appealed to CA and SC,
but her appeals were denied. In 1993, the SEC ruled that the sale was null and void.

ISSUE: Is the sale between the Carpizo group and INC null and void?

RULING: YES. Since the SEC has declared the Carpizo group as a void Board of
Trustees, the sale it entered into with INC is likewise void. Without a valid consent of
a contracting party, there can be no valid contract. In this case, the IDP never gave
its consent, through a legitimate Board of Trustees, to the disputed Deed of
Absolute Sale executed in favor of INC. Therefore, this is a case not only of vitiated
consent, but one where consent on the part of one of the supposed contracting
parties is totally wanting. Ineluctably, the subject sale is void and produces no effect
whatsoever. Further, the Carpizo group failed to comply with Section 40 of the
Corporation Code, which provides that: " ... a corporation may, by a majority vote of
its board of directors or trustees, sell, lease, exchange, mortgage, pledge or
otherwise dispose of all or substantially all of its property and assets... when
authorized by the vote of the stockholders representing at least two-thirds (2/3) of
the outstanding capital stock; or in case of non-stock corporation, by the vote of at
least two-thirds (2/3) of the members, in a stockholders' or members' meeting duly
called for the purpose...." The subject lot constitutes the only property of IDP.
Hence, its sale to a third-party is a sale or disposition of all the corporate property
and assets of IDP. For the sale to be valid, the majority vote of the legitimate Board
of Trustees, concurred in by the vote of at least 2/3 of the bona fide members of the
corporation should have been obtained. These twin requirements were not met in
the case at bar.

Nestor Ching vs. Subic Bay Golf Club

G.R. No. 174353, September 10, 2014
De Castro, J.

FACTS: Nestor Ching and Andrew Wellington filed a Complaint with the
Regional Trial Court on behalf of the members of Subic Bay Golf and Country
Club, Inc (SBGCCI) against it and its Board of Directors and officers. Ching and
Wellington claimed that the Subic Bay Golfers and Shareholders Inc. (SBGSI) did
not disclose to them the amendment which allegedly made the shares non-
proprietary, as it takes away the right of the shareholders to participate in the pro-
rata distribution of the assets of the corporation after its dissolution. According
to Ching and Wellington, this is in fraud of the stockholders who only
discovered the amendment when they filed a case for injunction to restrain
the corporation from suspending their rights to use all the facilities of the club. The
RTC dismissed the complaint saying that the action is a derivative suit. Ching and
Wellington argued that the complaint was not a derivative suit. They claim
that they filed the suit in their own right as stockholders against the officers
and Board of Directors of the SBGCCI. However the SBGCCI claimed by way of
defense that Ching and Wellington failed to show that it was authorized by SBGSI to
file the Complaint on its behalf as well as the requisites for filing a derivative suit.

ISSUE: Is the petition filed by Nestor Ching and Andrew Wellington a derivative suit?

RULING: No. Derivative suit must be differentiated from individual and

representative or class suits and it is based on wrongful or fraudulent acts of
directors or other persons. Where a stockholder or member is denied the
right of inspection, his suit would be individual because the wrong is done to him
personally and not to the other stockholders or the corporation. Where the wrong is
done to a group of stockholders, as where preferred stockholders rights are
violated, a class or representative suit will be proper for the protection of all
stockholders belonging to the same group. But where the acts complained of
constitute a wrong to the corporation itself, the cause of action belongs to the
corporation and not to the individual stockholder or member. Ching and
Welingtons only possible cause of action as minority stockholders against the
actions of the Board of Directors is the common law right to file a derivative suit.
The legal standing of minority stockholders to bring derivative suits is not a
statutory right, there being no provision in the Corporation Code or related
statutes authorizing the same, but is instead a product of jurisprudence based
on equity.
 Dulay Enterprises vs. CA
G.R. No. 91889, August 27, 1993
Nocon, J.

FACTS: Manuel Dulay Enterprises, Inc, a domestic corporation obtained various

loans for the construction of its hotel project, Dulay Continental Hotel. Manuel Dulay
by virtue of Board Resolution No 18 sold the subject property to spouses Veloso.
Veloso (buyer), without the knowledge of Manuel Dulay, mortgaged the subject
property to private respondent Torres. Upon the failure of Veloso to pay Torres, the
property was sold to Torres in an extrajudicial foreclosure sale. Torres filed an action
against the corporation, Virgilio Dulay and against the tenants of the apartment.
RTC ordered the corporation and the tenants to vacate the building. Petitioner
argued that RTC had acted with grave abuse of discretion when it applied the
doctrine of piercing the veil of corporate entity considering that the sale has no
binding effect on corporation as Board Resolution No. 18 which authorized the sale
of the subject property was resolved without the approval of all the members of the
board of directors and said Board Resolution was prepared by a person not
designated by the corporation to be its secretary.

ISSUE: Is the sale to Veloso valid notwithstanding that it was resolved without the
approval of all the members of the board of directors?

RULING: YES. Section 101 of the Corporation Code of the Philippines provides: If a
directors' meeting is held without call or notice, an action taken therein within the
corporate powers is deemed ratified by a director who failed to attend, unless he
promptly files his written objection with the secretary of the corporation after having
knowledge thereof. Dulay Inc. is classified as a close corporation and consequently a
board resolution authorizing the sale or mortgage is not necessary to bind the
corporation for the action of its president. At any rate, corporate action taken at a
board meeting without proper call or notice in a close corporation is deemed ratified
by the absent director unless the latter promptly files his written objection with the
secretary of the corporation after having knowledge of the meeting which, in his
case, Virgilio Dulay failed to do. Although a corporation is an entity which has a
personality distinct and separate from its individual stockholders or members, the
veil of corporate fiction may be pierced when it is used to defeat public convenience
justify wrong, protect fraud or defend crime.