1
Rural Bank of Lipa City vs CA Case Digest
The Rural Bank of Lipa City Inc., etc. vs. Court of Appeals
[GR 124535, 28 September 2001]
Facts: Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of Lipa
City, executed a Deed of Assignment, wherein he assigned his shares, as well
as those of 8 other shareholders under his control with a total of 10,467
shares, in favor of the stockholders of the Bank represented by its directors
Bernardo Bautista, Jaime Custodio and Octavio Katigbak. Sometime
thereafter, Reynaldo Villanueva, Sr. and his wife, Avelina, executed an
Agreement wherein they acknowledged their indebtedness to the Bank in the
amount of P4,000,000.00, and stipulated that said debt will be paid out of the
proceeds of the sale of their real property described in the Agreement. At a
meeting of the Board of Directors of the Bank on 15 November 1993, the
Villanueva spouses assured the Board that their debt would be paid on or
before December 31 of that same year; otherwise, the Bank would be entitled
to liquidate their shareholdings, including those under their control. In such
an event, should the proceeds of the sale of said shares fail to satisfy in full
the obligation, the unpaid balance shall be secured by other collateral
sufficient therefor. When the Villanueva spouses failed to settle their
obligation to the Bank on the due date, the Board sent them a letter
demanding: (1) the surrender of all the stock certificates issued to them; and
(2) the delivery of sufficient collateral to secure the balance of their debt
amounting to P3,346,898.54.
The Villanuevas ignored the bank's demands, whereupon their shares of
stock were converted into Treasury Stocks. Later, the Villanuevas, through
their counsel, questioned the legality of the conversion of their shares. On 15
January 1994, the stockholders of the Bank met to elect the new directors and
set of officers for the year 1994. The Villanuevas were not notified of said
meeting. In a letter dated 19 January 1994, Atty. Amado Ignacio, counsel for
the Villanueva spouses, questioned the legality of the said stockholders'
meeting and the validity of all the proceedings therein. In reply, the new set
of officers of the Bank informed Atty. Ignacio that the Villanuevas were no
longer entitled to notice of the said meeting since they had relinquished their
rights as stockholders in favor of the Bank. Consequently, the Villanueva
spouses filed with the Securities and Exchange Commission (SEC), a petition
for annulment of the stockholders' meeting and election of directors and
officers on 15 January 1994, with damages and prayer for preliminary
injunction (SEC Case 02-94-4683_. Joining them as co-petitioners were
Catalino Villanueva, Andres Gonzales, Aurora Lacerna, CelsoLaygo,
Edgardo Reyes, Alejandro Tonogan, and Elena Usi. Named respondents
were the newly-elected officers and directors of the Rural Bank, namely:
Bernardo Bautista, Jaime Custodio, Octavio Katigbak, Francisco Custodio
and Juanita Bautista. On 6 April 1994, the Villanuevas' application for the
issuance of a writ of preliminary injunction was denied by the SEC Hearing
Officer on the ground of lack of sufficient basis for the issuance thereof.
However, a motion for reconsideration was granted on 16 December 1994,
upon finding that since the Villanuevas' have not disposed of their shares,
whether voluntarily or involuntarily, they were still stockholders entitled to
notice of the annual stockholders' meeting was sustained by the SEC.
Accordingly, a writ of preliminary injunction was issued enjoining Bautista,
et. al. from acting as directors and officers of the bank. Thereafter, Bautista,
et al. filed an urgent motion to quash the writ of preliminary injunction,
challenging the propriety of the said writ considering that they had not yet
received a copy of the order granting the application for the writ of
preliminary injunction. With the impending 1995 annual stockholders'
meeting only 9 days away, the Villanuevas filed an Omnibus Motion praying
that the said meeting and election of officers scheduled on 14 January 1995
be suspended or held in abeyance, and that the 1993 Board of Directors be
allowed, in the meantime, to act as such. 1 day before the scheduled
stockholders meeting, the SEC Hearing Officer granted the Omnibus Motion
by issuing a temporary restraining order preventing Bautista, et al. from
holding the stockholders meeting and electing the board of directors and
officers of the Bank. A petition for Certiorari and Annulment with Damages
was filed by the Rural Bank, its directors and officers before the SEC en
 2

banc. On 7 June 1995, the SEC en banc denied the petition for certiorari. A
subsequent motion for reconsideration was likewise denied by the SEC en
banc in a Resolution dated 29 September 1995. A petition for review was
filed before the Court of Appeals (CA-GR SP 38861), assailing the Order
dated 7 June 1995 and the Resolution dated 29 September 1995 of the SEC
en banc in SEC EB 440. The appellate court upheld the ruling of the SEC.
Bautista, et al.'s motion for reconsideration was likewise denied by the Court
of Appeals in an Order dated 29 March 1996. The bank, Bautista, et al. filed
the instant petition for review.

Issue: Whether there was valid transfer of the shares to the Bank.

Held: For a valid transfer of stocks, there must be strict compliance with the
mode of transfer prescribed by law. The requirements are: (a) There must be
delivery of the stock certificate: (b) The certificate must be endorsed by the
owner or his attorney-in-fact or other persons legally authorized to make the
transfer; and (c) To be valid against third parties, the transfer must be
recorded in the books of the corporation. As it is, compliance with any of
these requisites has not been clearly and sufficiently shown. Still, while the
assignment may be valid and binding on the bank, et al. and the Villanuevas,
it does not necessarily make the transfer effective. Consequently, the bank et
al., as mere assignees, cannot enjoy the status of a stockholder, cannot vote
nor be voted for, and will not be entitled to dividends, insofar as the assigned
shares are concerned. Parenthetically, the Villanuevas cannot, as yet, be
deprived of their rights as stockholders, until and unless the issue of
ownership and transfer of the shares in question is resolved with finality.

(1st div) G.R. No. 168380 February 8, 2007
MANUEL V. BAVIERA,
vs.
ESPERANZA PAGLINAWAN & G.R. No. 170602 February 8, 2007
MANUEL V. BAVIERA,
vs.
STANDARD CHARTERED BANK
FACTS: Manuel Baviera, petitioner in these cases, was the former head of the HR Service
Delivery and Industrial Relations of Standard Chartered Bank-Philippines. SCB did not
comply with the conditions set forth by the BSP. Although unregistered with the SEC, SCB
was able to sell securities worth around P6
billion to some 645 investors. Petitioner entered into an Investment Trust Agreement with
SCB wherein he purchased US$8,000.00
worth of securities upon the bank’s promise of 40% return on his investment
and a guarantee that his
money is safe. After six (6) months, however, petitioner learned that the value of his
investment went down to US$7,000.00. He tried to withdraw his investment but was
persuaded by Antonette de los Reyes of SCB to hold on to it for another six (6) months in
view of the possibility that the market would pick up. The trend
in the securities market, however, was bearish and the worth of petitioner’s
investment went down further
to only US$3,000.00. On October 26, 2001, Petitioner then filed with the BSP a letter-
complaint demanding compensation for his lost investment. But SCB denied his demand on
the ground that his investment is "regular." On July 15, 2003, petitioner filed with the
Department of Justice (DOJ), represented herein by its prosecutors, public respondents, a
complaint charging the above-named officers and members of the SCB Board of Directors
and other SCB officials, private respondents, with syndicated
estafa.
For their part, private respondents filed the following as counter-charges against petitioner:
(1) blackmail and extortion and blackmail and perjury. On September 29, 2003, petitioner
also filed a complaint for perjury against private . On February 7, 2004, petitioner also filed
with the DOJ a complaint for violation of Section 8.1
9 very definite sense a servant of the law, the twofold aim of which is that guilt shall not escape
of the Securities Regulation Code against private respondents, On February 23, 2004, the
DOJ rendered its Joint Resolution dismissing all the complaints and counter-charges filed the
herein parties. Petitioner filed with the Court of Appeals a petition for certiorari alleging that
the DOJ acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
dismissing his complaint for
3
syndicated estafa and a separate petition for certiorari assailing the DOJ Resolution
dismissing the case for violation of the Securities Regulation Code. Petitioner claimed that
the DOJ acted with grave abuse of discretion tantamount to lack or excess of jurisdiction
in holding that the complaint should have been filed with the SEC. On January
7, 2005, the Court of Appeals promulgated its Decision dismissing the petition. It sustained
the ruling of the DOJ that the case should have been filed initially with the SEC. Meanwhile,
on February 21, 2005, the C
ourt of Appeals rendered its Decision involving petitioner’s charges and
respondents’ counter chargesdismissing the petitions on the ground that the
purpose of a petition for certiorari is not to evaluate and weigh the parties’
evidence but to determine w
hether the assailed Resolution of the DOJ was issued with grave abuse of discretion
tantamount to lack of jurisdiction. Petitioner moved for a reconsideration but it
was denied . Hence, the instant petitions for review on certiorari. ISSUE: Whether or not
the Court of Appeals erred in concluding that the DOJ did not commit grave abuse
of discretion in dismissing petitioner’s complaint for;
violation of Securities Regulation Code and for syndicated
estafa.
HELD : (For violation of Securities Regulation Code) NO. The Court of Appeals held that
under Section 53.1 of the said Code provides, a criminal complaint for violation of any law
or rule administered by the SEC must first be filed with the latter. If the Commission finds
that there is probable cause, then it should refer the case to the DOJ. Since petitioner failed to
comply with the foregoing procedural requirement, the DOJ did not gravely abuse its
discretion in dismissing his complaint. Under the doctrine of primary jurisdiction, courts will
not determine a controversy involving a question within the jurisdiction of the administrative
tribunal, where the question demands the exercise of sound administrative discretion
requiring the specialized knowledge and expertise of said administrative tribunal to
determine technical and intricate matters of fact
(For Syndicated Estafa)
; NO. Section 5, Rule 110 of the 2000 Rules of Criminal Procedure, as amended, provides
that all criminal actions, commenced by either a complaint or an information, shall be
prosecuted under the direction and control of a public prosecutor. This mandate is founded
on the theory that a crime is a breach of the security and peace of the people at large, an
outrage against the very sovereignty of the State. It follows that a representative of the State
shall direct and control the prosecution of the offense. A public prosecutor is in a peculiar and
or innocence suffers.
Suarez v. Platon
Concomitant with his authority and power to control the prosecution of criminal offenses, the
public prosecutor is vested with the discretionary power to determine whether a
 4

prima facie
case exists or not. A preliminary investigation is essentially an inquiry to determine whether
(a) a crime has been committed; and (b) whether there is probable cause that the accused is
guilty thereof. Thus, the decision whether or not to dismiss the criminal complaint against the
accused depends on the sound discretion of the prosecutor. The rule in this jurisdiction is that
courts will not interfere with the conduct of preliminary investigations or reinvestigations or
in the determination of what
constitutes sufficient
probable cause for the filing of the corresponding information against an offender. Courts are
not empowered to substitute their own judgment for that of the executive branch. T
he prosecutor’s findings on the existence of probable cause are not
subject to review by the courts, unless these are patently shown to have been made with
grave abuse of discretion. In
Suarez
previously cited, this Court made it clear that a public prosecutor’s duty is
two
-fold. On one hand, he is bound by his oath of office to prosecute persons where the
complainant’s evidence is
ample and sufficient to show
prima

facie
guilt of a crime. Yet, on the other hand, he is likewise duty-bound to protect innocent
persons from groundless, false, or malicious prosecution.
WHEREFORE
, we
DENY
the petitions and
AFFIRM
the assailed Decisions of the Court of Appeals in CA-G.R. SP No. 87328 and in
CA-G.R. SP No. 85078.

SEC vs Performance Foreign Exchange Corporation GR No 154131 July 20,
2006
FACTS:Performance Foreign Exchange Corporation, respondent
herein, is a domestic corporation duly registered with SEC and
engaged as its primary purpose to operate as a broker/agent between market
participants in transactionsinvolving, but not limited to, foreign exchange,
deposits, interest rate instruments, and similar or derivative products,other
than acting as a broker for the trading of securities pursuant to the Revised
Securities Act of the Philippines.The respondent secondary purpose is to
engage in money changer or exchanging foreign currencies.T h e
respondent received a letter from SEC requiring it to
a p p e a r b e f o r e t h e C o m p l i a n c e a n d E n f o r c e m e n t Department
(CED) for a clarificatory conference regarding its business operations. The
Director of CED issued aCease and Desist Order for
possible violation
of R.A.No. 8799 (otherwise known as The Securities RegulationCode) and
that the outcome of the inquiry shows that respondent is engaged
in the trading of
foreign currency futures
contracts
in behalf of its clients without the necessary license; that such transaction can
be deemed as adirect violation of Section 11 of R.A. No. 8799. The
respondent filed a motion to SEC to lift the said order.SEC Chairman
Bautista,
in her desire to know with certainty the nature of respondent’s business
, sent a letter to the BSP,
requesting a definitive statement
that respondent’s business transactions are a form of
financial derivatives
and, therefore, can only be undertaken by banks or non-bank financial
intermediaries performing quasi-banking functions. However, SEC
issued an Order denying respondent’s motion for the lifting of the
Cease andDesist Order
without waiting for BSP’s determination of the matter.
Thereafter, SEC issued an order makingthe Cease and Desist Order
permanent.
Respondent filed with the Court of Appeals a Petition for Certiorari. It
alleged that SEC grave abuse of discretionwhen it issued the Cease and
Desist Order and its subsequent Order making the same permanent without
waitingfor the BSP’s determination of the real nature of its business
operations; and that petitioner’s Orders, issued withoutany factual basis,
5
violated its (respondent’s) fundamental right to due process.BSP, in answer
to SEC Chairman letter-request stated that respondent’s business activity "
does not fall under thecategory of futures trading
"and"
can not be
classified as financial derivatives transactions
,"CA ruled that SEC acted with grave abuse of discretion when it
issued its challenged Orders without a positive factual finding that
respondent violated the Securities Regulation Code. Hence, this
petition.ISSUE:Whether or not SEC acted with grave abuse of discretion in
issuing the Cease and Desist Order and its subsequentOrder making it
permanent.HELD:YES. Section 64 of R.A. No. 8799, provides:S e c . 6 4 .
Cease and Desist Order
. – 64.1. The Commission,
after proper investigation or verification
,
motu proprio
, or upon verified complaint by any aggrieved party,
may issue a ceaseand desist order
without the necessity of a prior hearing if in its judgment
the act or practice,unless restrained, will operate as a fraud on investors or
is otherwise likely to cause graveor irreparable injury or prejudice to the investing
public
.x x x. (Underscoring supplied)Under the above provision, there are two
essential requirements that must be complied with by the SEC before itmay
issue a cease and desist order:
First
, it must conduct proper investigation or verification; and
Second
, theremust be a finding that the act or practice, unless restrained,
will operate as a fraud on investors or is otherwise likely to cause
grave or irreparable injury or prejudice to the investing public

SECURITIES AND EXCHANGE COMMISSION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CUALOPING
SECURITIES CORPORATION AND FIDELITY STOCK
TRANSFERS, INC., respondents
FACTS: Cualoping Securities Corporation (CUALOPING for brevity) is a
stockbroker, Fidelity Stock Transfer, Inc. (FIDELITY for brevity), on the
other hand, is the stock transfer agent of Philex Mining Corporation
(PHILEX for brevity).
On or about the first half of 1988, certificates of stock of PHILEX
representing one million four hundred [thousand] (1,400,000) shares were
stolen from the premises of FIDELITY. These stock certificates consisting of
stock dividends of certain PHILEX shareholders had been returned to
FIDELITY for lack of forwarding addresses of the shareholders concerned.
Later, the stolen stock certificates ended in the hands of a certain Agustin
Lopez, a messenger of New World Security Inc., an entirely different stock
brokerage firm. In the first half of 1989, Agustin Lopez brought the stolen
stock certificates to CUALOPING for trading and sale with the stock
exchange. When the said stocks were brought to CUALOPING, all of the
said stock certificates bore the “apparent” indorsement (signature) in
blank of the owners (the stockholders to whom the stocks were issued by
PHILEX) thereof. At the side of these indorsements (signatures), the words
“Signature Verified” apparently of FIDELITY were stamped on each and
every certificate. Further, on the words “Signature Verified” showed the
usual initials of the officers of FIDELITY.
Upon receipt of the said certificates from Agustin Lopez, CUALOPING
stamped each and every certificate with the words “Indorsement
Guaranteed,” and thereafter traded the same with the stock exchange.
After the stock exchange awarded and confirmed the sale of the stocks
represented by said certificates to different buyers, the same were delivered
to FIDELITY for the cancellation of the stocks certificates and for issuance
of new certificates in the name of the new buyers. Agustin Lopez on the
other hand was paid by CUALOPING with several checks for Four Hundred
Thousand (P400,000.00) Pesos for the value of the stocks.
6
After acquiring knowledge of the pilferage, FIDELITY conducted an
investigation with assistance of the National Bureau of Investigation (NBI)
and found that two of its employees were involved and signed the
certificates.
After two (2) months from receipt of said stock certificates, FIDELITY
rejected the issuance of new certificates in favor of the buyers for reasons
that the signatures of the owners of the certificates were allegedly forged and
thus the cancellation and new issuance thereof cannot be effected.
The SEC found both Cualoping and Fidelity equally negligent in the
performance of their duties hereby orders them to (1) jointly replace the
subject shares and for Fidelity to cause the transfer thereof in the names of
the buyers and (2) to pay a fine of P50,000,00 each for hav[ing] violated
Section 29 (a) of the Revised Securities Act.
CA reversed.
ISSUE: WON both parties are negligent.
HELD: YES. The first aspect of the SEC decision appealed to the Court of
Appeals, i.e., that portion which orders the two stock transfer agencies to
“jointly replace the subject shares and for FIDELITY to cause the transfer
thereof in the names of the buyers” clearly calls for an exercise of SEC’s
adjudicative jurisdiction. This case, it might be recalled, has started only on
the basis of a request by FIDELITY for an opinion from the SEC. The
stockholders who have been deprived of their certificates of stock or the
persons to whom the forged certificates have ultimately been transferred by
the supposed indorsee thereof are yet to initiate, if minded, an appropriate
adversarial action. Neither have they been made parties to the proceedings
now at bench. A justiciable controversy such as can occasion an exercise of
SEC’s exclusive jurisdiction would require an assertion of a right by a proper
party against another who, in turn, contests it. 5 It is one instituted by and
against parties having interest in the subject matter appropriate for judicial
determination predicated on a given state of facts. That controversy must be
raised by the party entitled to maintain the action. He is the person to whom
the right to seek judicial redress or relief belongs which can be enforced
against the party correspondingly charged with having been responsible for,
or to have given rise to, the cause of action. A person or entity tasked with
the power to adjudicate stands neutral and impartial and acts on the basis of
the admissible representations of the contending parties.
 7

In the case at bench, the proper parties that can bring the controversy and can
cause an exercise by the SEC of its original and exclusive jurisdiction would
be all or any of those who are adversely affected by the transfer of the
pilfered certificates of stock. Any peremptory judgment by the SEC, without
such proceedings having first been initiated, would be precipitate. We thus
see nothing erroneous in the decision of the Court of Appeals, albeit not for
the reason given by it, to set aside the SEC’s adjudication “without
prejudice” to the right of persons injured to file the necessary proceedings for
appropriate relief.

(on the issue of the legal propriety of the imposition by the SEC of a
P50,000 fine on each of FIDELITY and CUALOPING)There is, to our
mind, no question that both FIDELITY and CUALOPING have been guilty
of negligence in the conduct of their affairs involving the questioned
certificates of stock. To constitute, however, a violation of the Revised
Securities Act that can warrant an imposition of a fine under Section
29(3), in relation to Section 46 of the Act, fraud or deceit, not mere
negligence, on the part of the offender must be established. Fraud here is
akin to bad faith which implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliquity; it is unlike that
of the negative idea of negligence in that fraud or bad faith contemplates
a state of mind affirmatively operating with furtive objectives. Given the
factual circumstances found by the appellate court, neither FIDELITY nor
CUALOPING, albeit indeed remiss in the observance of due diligence, can
be held liable under the above provisions of the Revised Securities Act. We
do not imply, however, that the negligence committed by private respondents
would not at all be actionable; upon the other hand, as we have earlier
intimated, such an action belongs not to the SEC but to those whose rights
have been injured.

#12 THIRD DIVISION
G.R. No. 181416 November 11, 2013
MEDICAL PLAZA MAKATI CONDOMINIUM
CORPORATION, Petitioner,
vs.
ROBERT H. CULLEN, Respondent.
PONENTE: PERALTA, J.
Facts:
Respondent (Cullen) purchased from Meridien Land Holding,
Inc. (MLHI) condominium Unit No. 1201 of the petitioner. Old
title was later cancelled and new title (CCT 64218) was issued
in respondent’s name. On 19 September 2002, petitioner
(MPMCC) demanded from Cullen payment for unpaid
association dues and assessments claiming a carry-over of
MLHI. Cullen refused claiming they are being religiously paid.
Consequently, Cullen was prevented from exercising his right
to vote and be voted during election of MPMCC’s BOD.
When MLHI clarified that his dues had already been settled
and upon MPMCC’s failure to explain why is such, he filed a
Complaint for Damages against MPMCC in RTC Makati, acting
as a regular court. MPMCC and MLHI moved to dismiss mainly
on the ground of lack of jurisdiction. On 9 September 2009,
the RTC dismissed the complaint on the ground that the action
falls within the exclusive jurisdiction of HLURB and that the
issues raised are intra-corporate between the corporation and
member.
On appeal, the CA reversed RTC decision holding that the
controversy is an ordinary civil action for damages within the
jurisdiction of regular courts. When motions for
reconsideration was denied, petitioners filed the present
petition for review on certiorari under Rule 45.
Issues:
1. Whether or not the controversy is an intra-corporate, not
an ordinary action.
2. Whether or not RTC acting as a special commercial court,
not RTC acting as a regular court, and not HLURB, has
jurisdiction over the subject matter.
Ruling:
8
YES. Petition is Granted. CA Decision is Reversed.
It is a settled rule that jurisdiction over the subject matter is
determined by the allegations in the complaint. It is not
affected by the pleas or the theories set up by the defendant in
an answer or a motion to dismiss. Otherwise, jurisdiction
would become dependent almost entirely upon the whims of
the defendant.18 Also illuminating is the Court’s
pronouncement in Go v. Distinction Properties Development
and Construction, Inc.:19
Basic as a hornbook principle is that jurisdiction over the subject matter
of a case is conferred by law and determined by the allegations in the
complaint which comprise a concise statement of the ultimate facts
constituting the plaintiff’s cause of action. The nature of an action, as
well as which court or body has jurisdiction over it, is determined based
on the allegations contained in the complaint of the plaintiff, irrespective
of whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein. The averments in the complaint and the
character of the relief sought are the ones to be consulted. Once vested
by the allegations in the complaint, jurisdiction also remains vested
irrespective of whether or not the plaintiff is entitled to recover upon all
or some of the claims asserted therein. x x x20
Based on the allegations made by respondent in his complaint,
does the controversy involve intra-corporate issues as would
fall within the jurisdiction of the RTC sitting as a special
commercial court or an ordinary action for damages within the
jurisdiction of regular courts?
In determining whether a dispute constitutes an
intra-corporate controversy, the Court uses two tests, namely,
the relationship test and the nature of the controversy test.21
An intra-corporate controversy is one which pertains to any of
the following relationships: (1) between the corporation,
partnership or association and the public; (2) between the
corporation, partnership or association and the State insofar
as its franchise, permit or license to operate is concerned; (3)
between the corporation, partnership or association and its
stockholders, partners, members or officers; and (4) among
the stockholders, partners or associates themselves.22 Thus,
under the relationship test, the existence of any of the above

intra-corporate relations makes the case intra-corporate.23
Under the nature of the controversy test, "the controversy
must not only be rooted in the existence of an intra-corporate
relationship, but must as well pertain to the enforcement of
the parties’ correlative rights and obligations under the
Corporation Code and the internal and intra-corporate
regulatory rules of the corporation."24 In other words,
jurisdiction should be determined by considering both the
relationship of the parties as well as the nature of the question
involved.25
Applying the two tests, we find and so hold that the case
involves intra-corporate controversy. It obviously arose from
the intra-corporate relations between the parties, and the
questions involved pertain to their rights and obligations
under the Corporation Code and matters relating to the
regulation of the corporation.26
Admittedly, petitioner is a condominium corporation duly
organized and existing under Philippine laws, charged with the
management of the Medical Plaza Makati. Respondent, on the
other hand, is the registered owner of Unit No. 1201 and is
thus a stockholder/member of the condominium corporation.
Clearly, there is an intra-corporate relationship between the
corporation and a stockholder/member.
The nature of the action is determined by the body rather than
the title of the complaint. Though denominated as an action
for damages, an examination of the allegations made by
respondent in his complaint shows that the case principally
dwells on the propriety of the assessment made by petitioner
against respondent as well as the validity of petitioner’s act in
preventing respondent from participating in the election of the
corporation’s Board of Directors. Respondent contested the
alleged unpaid dues and assessments demanded by
petitioner.
The issue is not novel. The nature of an action involving any
dispute as to the validity of the assessment of association dues
has been settled by the Court in Chateau de Baie
Condominium Corporation v. Moreno.27 In that case,
9
respondents therein filed a complaint for intra-corporate
dispute against the petitioner therein to question how it
calculated the dues assessed against them, and to ask an
accounting of association dues. Petitioner, however, moved
for the dismissal of the case on the ground of lack of
jurisdiction alleging that since the complaint was against the
owner/developer of a condominium whose condominium
project was registered with and licensed by the HLURB, the
latter has the exclusive jurisdiction. In sustaining the denial of
the motion to dismiss, the Court held that the dispute as to the
validity of the assessments is purely an intra-corporate matter
between petitioner and respondent and is thus within the
exclusive jurisdiction of the RTC sitting as a special
commercial court. More so in this case as respondent
repeatedly questioned his characterization as a delinquent
member and, consequently, petitioner’s decision to bar him
from exercising his rights to vote and be voted for. These
issues are clearly corporate and the demand for damages is
just incidental. Being corporate in nature, the issues should be
threshed out before the RTC sitting as a special commercial
court. The issues on damages can still be resolved in the same
special commercial court just like a regular RTC which is still
competent to tackle civil law issues incidental to
intra-corporate disputes filed before it.28
Moreover, Presidential Decree No. 902-A enumerates the
cases over which the Securities and Exchange Commission
(SEC) exercises exclusive jurisdiction:
xxxx
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; and
c) Controversies in the election or appointment of directors, trustees,
officers, or managers of such corporations, partnerships, or
associations.29
To be sure, this action partakes of the nature of an

intra-corporate controversy, the jurisdiction over which
pertains to the SEC. Pursuant to Section 5.2 of Republic Act No.
8799, otherwise known as the Securities Regulation Code, the
jurisdiction of the SEC over all cases enumerated under
Section 5 of Presidential Decree No. 902-A has been
transferred to RTCs designated by this Court as Special
Commercial Courts.30 While the CA may be correct that the
RTC has jurisdiction, the case should have been filed not with
the regular court but with the branch of the RTC designated as
a special commercial court. Considering that the RTC of Makati
City, Branch 58 was not designated as a special commercial
court, it was not vested with jurisdiction over cases previously
cognizable by the SEC.31The CA, therefore, gravely erred in
remanding the case to the RTC for further proceedings.
Indeed, Republic Act (RA) No. 9904, or the Magna Carta for
Homeowners and Homeowners’ Associations, approved on
January 7, 2010 and became effective on July 10, 2010,
empowers the HLURB to hear and decide inter-association
and/or intra-association controversies or conflicts concerning
homeowners’ associations. However, we cannot apply the
same in the present case as it involves a controversy between
a condominium unit owner and a condominium corporation.
While the term association as defined in the law covers
homeowners’ associations of other residential real property
which is broad enough to cover a condominium corporation, it
does not seem to be the legislative intent. A thorough review
of the deliberations of the bicameral conference committee
would show that the lawmakers did not intend to extend the
coverage of the law to such kind of association. We quote
hereunder the pertinent portion of the Bicameral Conference
Committee’s deliberation, to wit:
THE CHAIRMAN (SEN. ZUBIRI). Let’s go back, Mr. Chair, very quickly
on
homeowners.
THE ACTING CHAIRMAN (REP. ZIALCITA). Ang sa akin lang, I think
our
views are similar, Your Honor, Senator Zubiri, the entry of the
condominium units might just complicate the whole matters. So we’d
like to put it on record that we’re very much concerned about the plight
of the Condominium Unit Homeowners’ Association. But this could very
10
well be addressed on a separate bill that I’m willing to co-sponsor with
the distinguished Senator Zubiri, to address in the Condominium Act of
the Philippines, rather than address it here because it might just create
a red herring into the entire thing and it will just complicate matters,
hindi ba?
THE CHAIRMAN (SEN. ZUBIRI). I also agree with you although I
sympathize with them---although we sympathize with them and we feel
that many times their rights have been also violated by abusive
condominium corporations. However, there are certain things that we
have to reconcile. There are certain issues that we have to reconcile with
this version.
In the Condominium Code, for example, they just raised a very peculiar
situation under the Condominium Code --- Condominium Corporation
Act. It’s five years the proxy, whereas here, it’s three years. So there
would already be violation or there will be already a problem with their
version and our version. Sino ang matutupad doon? Will it be our version
or their version?
So I agree that has to be studied further. And because they have a
law pertaining to the condominium housing units, I personally feel that it
would complicate matters if we include them. Although I agree that they
should be looked after and their problems be looked into.
Probably we can ask our staff, Your Honor, to come up already with
the bill although we have no more time. Hopefully we can tackle this
again on the 15th Congress. But I agree with the sentiments and the
inputs of the Honorable Chair of the House panel.
May we ask our resource persons to also probably give comments?
Atty. Dayrit.
MR. DAYRIT.
Yes I agree with you. There are many, I think, practices in their
provisions in the Condominium Law that may be conflicting with this
version of ours.
For instance, in the case of, let’s say, the condominium, the so-called
common areas and/or maybe so called open spaces that they may have,
especially common areas, they are usually owned by the condominium
corporation. Unlike a subdivision where the open spaces and/or the
common areas are not necessarily owned by the association. Because
sometimes --- generally these are donated to the municipality or to the
city. And it is only when the city or municipality gives the approval or the
conformity that this is donated to the homeowners’ association. But
generally, under PD [Presidential Decree] 957, it’s donated. In the
 11

Condominium Corporation, hindi. Lahat ng mga open spaces and

common areas like corridors, the function rooms and everything, are
owned by the corporation. So that’s one main issue that can be
conflicting.

THE CHAIRMAN (SEN. ZUBIRI). I’ll just ask for a one-minute suspension
so we can talk.

THE ACTING CHAIRMAN (REP. ZIALCITA). Unless you want to put a

catchall phrase like what we did in the Senior Citizen’s Act. Something
like, to the extent --- paano ba iyon? To the extent that it is practicable
and applicable, the rights and benefits of the homeowners, are hereby
extended to the --- mayroon kaming ginamit na phrase eh...to the

extent that it be practicable and applicable to the unit homeoweners, is
hereby extended, something like that. It’s a catchall phrase. But then
again, it might create a...
MR. JALANDONI. It will become complicated. There will be a lot of
conflict
of laws between the two laws.
THE ACTING CHAIRMAN (REP. ZIALCITA). Kaya nga eh. At saka, I
don’t
know. I think the --- mayroon naman silang protection sa ano eh, di ba?
Buyers decree doon sa Condominium Act. I’m sure there are provisions
there eh. Huwag na lang, huwag na lang.
MR. JALANDONI. Mr. Chairman, I think it would be best if your previous
comments that you’d be supporting an amendment. I think that would
be --- Well, that would be the best course of action with all due respect.
THE ACTING CHAIRMAN (REP. ZIALCITA). Yeah. Okay. Thank you.
So
iyon na lang final proposal naming ‘yung catchall phrase, "With respect
to the..."32
xxxx
THE CHAIRMAN (SEN. ZUBIRI). xxx And so, what is their final decision
on the definition of homeowners?
THE ACTING CHAIRMAN (REP. ZIALCITA).
We stick to the original, Mr. Chairman. We’ll just open up a whole can of
worms and a whole new ball game will come into play. Besides, I am not
authorized, neither are you, by our counterparts to include the
condominium owners.
THE CHAIRMAN (SEN. ZUBIRI).
Basically that is correct. We are not authorized by the Senate nor –
because we have discussed this lengthily on the floor, actually, several
months on the floor. And we don’t have the authority as well for other
Bicam members to add a provision to include a separate entity that has
already their legal or their established Republic Act tackling on that
particular issue. But we just like to put on record, we sympathize with
the plight of our friends in the condominium associations and we will just
guarantee them that we will work on an amendment to the Condominium
Corporation Code. So with that – we skipped, that is correct, we have to
12
go back to homeowners’ association definition, Your Honor, because we
had skipped it altogether. So just quickly going back to Page 7 because
there are amendments to the definition of homeowners. If it is alright
with the House Panel, adopt the opening phrase of Subsection 7 of the
Senate version as opening phrase of Subsection 10 of the reconciled
version.
x x x x33
To be sure, RA 4726 or the Condominium Act was enacted to
specifically govern a condominium. Said law sanctions the
creation of the condominium corporation which is especially
formed for the purpose of holding title to the common area, in
which the holders of separate interests shall automatically be
members or shareholders, to the exclusion of others, in
proportion to the appurtenant interest of their respective
units.34 The rights and obligations of the condominium unit
owners and the condominium corporation are set forth in the
above Act.
Clearly, condominium corporations are not covered by the
amendment. Thus, the intra-corporate dispute between
petitioner and respondent is still within the jurisdiction of the
RTC sitting as a special commercial court and not the HLURB.
The doctrine laid down by the Court in Chateau de Baie
Condominium Corporation v. Moreno35 which in turn cited
Wack Wack Condominium Corporation, et al v. CA36 is still a
good law.
WHEREFORE, we hereby GRANT the petition and REVERSE the
Court of Appeals Decision. XXX The Complaint before the
Regional Trial Court of Makati City, Branch 58, which is not a
special commercial court, XXX is ordered DISMISSED for
lack of jurisdiction. Let the case be REMANDED to the
Executive Judge of the RTC Makati City for re-raffle
purposes among the designated special commercial
courts.
- Digested [18 November 2016, 21:36]
***

PHILIPPINE OVERSEAS TELECOMMUNUICATIONS CORPORATION (POTC),
ET AL. vs. VICTOR V. AFRICA, ET AL.
DOCTRINE:
An intra-corporate dispute involving a corporation under sequestration of the
Presidential Commission on Good Government (PCGG) falls under the jurisdiction of
the Regional Trial Court (RTC), not the Sandiganbayan.
FACTS:
POTC, PHILCOMSAT and PHC are all domestic corporations. Atty. Ilusorio’s family
owned shares of stock in POTC. He claimed that he had incurred the ire of Imelda
Marcos during the regime of President Marcos, leading to the Marcos spouses’
grabbing from him the POTC shares of stock through threats and intimidation and
without any valuable consideration, and placing such shares under the names of
their alter egos, namely: Independent Realty Corporation (IRC); Mid-Pasig Land
Development (Mid-Pasig); and one share in the name of Ferdinand Marcos, Jr.
After Marcos was toppled down, Pres. C. Aquino issued Executive Order No. 1 to
create the PCGG. Subsequently, Campos, a self-confessed crony of President
Marcos, voluntarily surrendered to the PCGG the properties, assets, and
corporations he had held in trust for the deposed President. Among the corporations
surrendered were IRC and Mid-Pasig.
The Government, represented by the PCGG, filed in the Sandiganbayan a complaint
for reconveyance, reversion, accounting, restitution and damages. The Republic,
IRC and Mid-Pasig, and the PCGG then entered into a compromise agreement with
Atty. Ilusorio, which was subsequently approved by Pres. Ramos.
PHILCOMSAT stockholders held an informal gathering at the Manila Golf Club for the
apparent purpose of introducing the new PCGG nominees to the stockholders. As a
consequence, other PHILCOMSAT stockholders instituted a Complaint with
application for the issuance of temporary restraining order (TRO) and writ of
preliminary injunction (WPI) in the Securities and Exchange Commission (SEC)
assailing the election of the Directors and Officers on several grounds, such as the
lack of sufficient notice of the meeting, the lack of quorum, and the lack of
qualifying shares of those who were elected.
The SEC issued a TRO, and, later on, a WPI enjoining the Nieto Group-PCGG from
acting as Directors and Officers of PHILCOMSAT and from representing themselves
as such. Following the enactment of Republic Act No. 8799 (Securities Regulation
Code), SEC Case No. 09-98-6086 was transferred to the RTC in Makati City, which
re-docketed it and raffled it to Branch 138. RTC ruled against herein petitioners. On
appeal, CA held that the RTC acted within its jurisdiction in resolving the intra-
corporate dispute; that the conduct of pre-trial was not required in corporate
election cases; that the RTC had the authority to decide.
13
On appeal before the SC, petitioners claim that the Sandiganbayan had original and
exclusive jurisdiction over sequestered corporations, sequestration-related cases,
and any and over all incidents arising from, or incidental or related to such
cases; that it was error on the part of the CA to conclude that the Sandiganbayan
was automatically ousted of jurisdiction over the sequestered assets once the
complaint alleged an intra-corporate dispute due to the sequestered assets being in
custodia legis of the Sandiganbayan; the RTC could not render a valid judgment on
the dispute because it had not been designated as a Commercial Court.
ISSUE:W/N RTC (Branch 138) have jurisdiction over the intra-corporate
controversy
HELD:YES
RATIO:
It is settled that there is an intra-corporate controversy when the dispute involves
any of the following relationships, to wit:
(a) between the corporation, partnership or association and the public;
(b) between the corporation, partnership or association and the State in so
far as its franchise, permit or license to operate is concerned;
(c) between the corporation, partnership or association and its
stockholders, partners, members or officers; and
(d) among the stockholders, partners or associates themselves.
Originally, Section 5 of Presidential Decree (P.D.) No. 902-A vested the original and
exclusive jurisdiction over cases involving the following in the SEC, to wit:
xxxx
(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 as such entity;
(c) Controversies in the election or appointment of directors, trustees,
officers or managers of such corporations, partnership or associations;
xxxx
However, upon the enactment of Republic Act No. 8799 (The Securities Regulation
Code), the jurisdiction of the SEC over intra-corporate controversies and the other
cases enumerated in Section 5 of P.D. No. 902-A was transferred to the Regional
Trial Court pursuant to Section 5.2 of the law.
To implement Republic Act No. 8799, the Court promulgated its resolution of
November 21, 2000 in A.M. No. 00-11-03-SC designating certain branches of the

RTC to try and decide the cases enumerated in Section 5 of P.D. No. 902-A. Among
the RTCs designated as special commercial courts was the RTC (Branch 138) in
Makati City.
The subject matter involved was an intra-corporate controversy, not any incidents
arising from, incidental to, or related to any case involving assets whose nature as
ill-gotten wealth was yet to be determined.
Moreover, the jurisdiction of the Sandiganbayan has been held not to extend even
to a case involving a sequestered company notwithstanding that the majority of the
members of the board of directors were PCGG nominees.
ZUELLIG FREIGHT AND CARGO SYSTEMS vs. NATIONAL LABOR RELATIONS
COMMISSION AND RONALDO V. SAN MIGUEL
DOCTRINE:
The mere change in the corporate name is not considered under the law as the
creation of a new corporation; hence, the renamed corporation remains liable for
the illegal dismissal of its employee separated under that guise.
FACTS:
San Miguel brought a complaint for unfair labor practice, illegal dismissal, non-
payment of salaries and moral damages against petitioner, formerly known as Zeta
Brokerage Corporation (Zeta).
San Miguel was the checker/customs representative of Zeta since December 16,
1985; that in January 1994, he and other employees of Zeta were informed that
Zeta would cease operations, and that all affected employees, including him, would
be separated. Through a letter, Zeta informed him of his termination effective
March 31, 1994.
San Miguel contended that:
 The amendments of the articles of incorporation of Zeta were for the
purpose of changing the corporate name, broadening the primary
functions, and increasing the capital stock
 Such amendments could not mean that Zeta had been thereby dissolved.
Petitioner contends that:
 San Miguel’s termination from Zeta had been for a cause authorized by
the Labor Code;
 That its predecessor-in-interest had complied with the requirements for
termination due to the cessation of business operations;
 It had no obligation to employ San Miguel in the exercise of its valid
management prerogative;
 That all employees had been given sufficient time to make their decision
whether to accept its offer of employment or not, but he had not
responded to its offer within the time set; that because of his failure to
meet the deadline, the offer had expired
Decision of the Labor Arbiter:
14
 There was merely a change of business name and primary purpose and
upgrading of stocks of the corporation
 Termination of complainant’s services allegedly due to cessation of
business operations of Zeta is deemed illegal
Decision of the NLRC and the CA: Affirmed the decision of the Labor Arbiter
ISSUE: W/N petitioner is liable for illegally dismissing San Miguel
HELD:YES
RATIO:
There was no abuse of discretion on the part of the CA and the NLRC.Its
decision was supported by the records and the applicable laws and jurisprudence.It
is not enough to show mere abuse of discretion. It is necessary to demonstrate that
the abuse of discretion was grave.The cessation of business by Zeta was not
a bona fide closure to be regarded as a valid ground for the termination of
employment of San Miguel within the ambit of Article 283 of theLabor
Code.
Article 283. Closure of establishment and reduction of personnel. — The employer
may also terminate the employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof. x x x.
The amendments of the articles of incorporation of Zeta to change the corporate
name to Zuellig Freight and Cargo Systems, Inc. did not produce the dissolution of
the former as a corporation.A change in the corporate name does not make a new
corporation, whether effected by a special act or under a general law. It has no
effect on the identity of the corporation, or on its property, rights, or liabilities. 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.
Zeta and petitioner remained one and the same corporation. The change of name
did not give petitioner the license to terminate employees of Zeta like San Miguel
without just or authorized cause. The situation was not similar to that of an
enterprise buying the business of another company where the purchasing company
had no obligation to rehire terminated employees of the latter.Petitioner, despite its
new name, was the mere continuation of Zeta’s corporate being, and still held the
obligation to honor all of Zeta’s obligations, one of which was to respect San
Miguel’s security of tenure.The dismissal of San Miguel from employment on the
pretext that petitioner, being a different corporation, had no obligation to accept
him as its employee, was illegal and ineffectual.
15