QUEENSLAND-TOKYO COMMODITIES INC., vs.

THOMAS
GEORGE
G.R. No. 172727, September 08, 2010, NACHURA, J.
FACTS:
Queensland-Tokyo Commodities, Inc. (QTCI) is a duly licensed broker
engaged in the trading of commodity futures. In 1995, Guillermo Mendoza, Jr.
(Mendoza) and Oniler Lontoc (Lontoc) of QTCI met with respondent Thomas
George (respondent), encouraging the latter to invest with QTCI. On July 7,
1995, upon Mendoza's prodding, respondent finally invested with QTCI. On the
same day, Collado, in behalf of QTCI, and respondent signed the Customer's
Agreement. Forming part of the agreement was the Special Power of Attorney
executed by respondent, appointing Mendoza as his attorney-in-fact with full
authority to trade and manage his account.
On June 20, 1996, the Securities and Exchange Commission (SEC)
issued a Cease-and-Desist Order against QTCI. Alarmed by the issuance of the
CDO, respondent demanded from QTCI the return of his investment, but it was
not heeded.
QTCI claimed that they were not aware of, nor were they privy to, any
arrangement which resulted in the account of respondent being handled by
unlicensed brokers. They pointed out that respondent transacted business
with QTCI for almost a year, without questioning the license or the authority of
the traders handling his account, rendering him estopped. It was only after it
became apparent that QTCI could no longer resume its business transactions
by reason of the CDO that respondent raised the alleged lack of authority of
the brokers or traders handling his account.
ISSUE:
Whether or not QTCI should be held liable for the loss incurred by
George in the investment he made with the corporation.
HELD:
QCTI recognized Mendoza and Collado as its brokers and did not object
to, and in fact recognized, Mendoza's appointment as respondent's attorney-infact. Collado, in behalf of QTCI, concluded the Customer's Agreement despite

the fact that the appointed attorney-in-fact was not a licensed dealer and
petitioners even permitted Mendoza to handle respondent's account.
Doctrine dictates that a corporation is invested by law with a personality
separate and distinct from those of the persons composing it, such that, save
for certain exceptions, corporate officers who entered into contracts in behalf of
the corporation cannot be held personally liable for the liabilities of the latter.
Personal liability of a corporate director, trustee, or officer, along (although not
necessarily) with the corporation, may validly attach, as a rule, only when - (1)
he assents to a patently unlawful act of the corporation, or when he is guilty of
bad faith or gross negligence in directing its affairs, or when there is a conflict
of interest resulting in damages to the corporation, its stockholders, or other
persons; (2) he consents to the issuance of watered down stocks or who,
having knowledge thereof, does not forthwith file with the corporate secretary
his written objection thereto; (3) he agrees to hold himself personally and
solidarily liable with the corporation; or (4) he is made by a specific provision of
law personally answerable for his corporate action.
Romeo Lau, as president of QTCI, cannot pretend to be innocent on the
existence of these unlawful activities within the company, especially so that
Collado, himself a ranking officer of QTCI, is involved in the unlawful execution
of customers orders. Lau, being the chief operating officer, cannot escape the
fact that had he exercised a modicum of care and discretion in supervising the
operations of QTCI, he could have detected and prevented the unlawful acts of
Collado and Mendoza.

EVER ELECTRICAL MANUFACTURING, INC., (EEMI) and

VICENTE GO
vs.
SAMAHANG MANGGAGAWA NG EVER ELECTRICAL/NAMAWU
LOCAL
G.R. No. 194795, June 13, 2012, MENDOZA, J.
FACTS:
Ever Electrical Manufacturing Inc., (EEMI) is a corporation engaged in
the business of manufacturing electrical parts and supplies. EEMI was one of
those who suffered huge losses during the Asian financial crisis. In 1996,
EEMI obtained a loan from UCPB. As security, EEMIs land and improvements,
including the factory, were mortgaged to UCPB. EEMIs business suffered
further losses due to the continued entry of cheaper goods from China and
other Asian countries. Later, Orient Bank, where EEMI invested 500MIO, went
out of business. As a result, EEMI defaulted on its loan with UCPB. In an
attempt to save the company, EEMI entered into a dacion en pago arrangement
with UCPB which, in effect, transferred ownership of the companys property to
UCPB. Since UCPBs policy prohibited EEMI from leasing the premises directly
with UCPB, UCPB agreed to lease it to an affiliate corporation, EGO Electrical
Supply Co, Inc. (EGO), for and in behalf of EEMI. However, UCPB later
instituted an unlawful detainer suit against EGO, wherein UCPB won. The

Sheriff implemented the writ of execution by closing the premises and, as a

result, EEMIs employees were prevented from entering the factory. Aggrieved,
UNION filed a complaint for illegal dismissal with prayer for payment of 13th
month pay, separation pay, damages, and attorneys fees.
ISSUE:
Whether or not Vicente Go should be held solidarily liable with EEMI.
HELD:
Generally, corporate officers should not be held solidarily liable with the
corporation for separation pay for it is settled that a corporationis invested by
law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be
related. Mere ownership by a single stockholder or by another corporation of all
or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality.
A corporation is invested by law with a personality separate and distinct
from those of the persons composing it as well as from that of any other legal
entity to which it may be related. Corporate directors and officers become
solidarily liable with the corporation for the termination of employees done with
malice or bad faith.
It stressed that bad faith does not connote bad
judgment or negligence; it imports a dishonest purpose or some moral obliquity
and conscious doing of wrong; it means breach of a known duty through some
motive or interest or ill will; it partakes of the nature of fraud.

REPUBLIC OF THE PHILIPPINES vs. EDUARDO CONJUANGCO

G.R. No. 166859, April 12, 2011, BERSAMIN, J.
FACTS:
A complaint was filed against the defendants Eduardo Cojuangco Jr., the
ACCRA lawyers, Danilo Ursua and 71 corporations by the Presidential
Commission on Good Government (PCGG) referred here as Republic of the

Philippines with regard to a block of San Miguel Corporation (SMC) stock

which were allegedly bought through the CIIF Holding Companies and funded
by the coconut levy fund passing through the Unicom Oil Mills and directly
from UCPB. The coconut levy funds were considered as government funds
since this came from contributions from the coconut farmers with the purpose
of improving and stabilizing the coconut farming industry, however these were
said to be privatized under presidential directives of then Pres. Marcos.
Defendant Cojuangco Jr., being close with the Marcoses is said to have
taken undue advantage of his association, influence and connection, embarked
upon different devices and schemes including the use of the ACCRA Lawyers as
nominee shareholders and the defendant corporations as fronts to unjustly
enrich themselves at the expense of the Filipino people when he misused the
coconut levy fund, amounting to $150 million, to purchase 33 million shares of
the SMC through the holding companies. Hence with the allegations mentioned
and with different cases and issues which remain unresolved, the block of
shares representing 20% of the outstanding capital stock of SMC remained
sequestered by the government.
During the pre-trial brief, the Sandiganbayan sought clarification from
the parties, particularly the Republic, on their respective positions, but at the
end it found the clarifications "inadequately" enlightening. To resolve various
pending motions and pleadings, Sandiganbayan lifted and declared the Writs of
Sequestration null and void.
Despite the lifting of the writs of sequestration, since the Republic
continues to hold a claim on the shares which is yet to be resolved, it is hereby
ordered that the following shall be annotated in the relevant corporate books of
San Miguel Corporation:
(1) any sale, pledge, mortgage or other disposition of any of the shares of the
Defendants Eduardo Cojuangco, et al. shall be subject to the outcome of this
case;
(2) the Republic through the PCGG shall be given twenty (20) days written
notice by Defendants Eduardo Cojuangco, et al. prior to any sale, pledge,
mortgage
or
other
disposition
of
the
shares;
(3) in the event of sale, mortgage or other disposition of the shares, by the
Defendants Cojuangco, et al., the consideration therefore, whether in cash or in
kind, shall be placed in escrow with Land Bank of the Philippines, subject to
disposition
only
upon
further
orders
of
this
Court;
and
(4) any cash dividends that are declared on the shares shall be placed in
escrow with the Land Bank of the Philippines, subject to disposition only upon
further orders of this Court. If in case stock dividends are declared, the

conditions on the sale, pledge, mortgage and other disposition of any of the
shares as above-mentioned in conditions 1, 2 and 3, shall likewise apply.
Sandiganbayan denied both Motion for Reconsideration and Motion for
Modification but eventually reduced its resolution deleting the last 2 provisions.
Cojuangco, et al. filed a Motion for Authority to Sell San Miguel Corporation
(SMC) shares, praying for leave to allow the sale of SMC shares and
Sandiganbayan granted the motion. Cojuangco, et al. later rendered a complete
accounting of the proceeds from the sale of the Cojuangco block of shares of
SMC stock, informing that a total amount of P 4,786,107,428.34 had been paid
to the UCPB as loan repayment.
ISSUE:
Whether or not Conjuangco illegally used ill-gotten wealth to buy shares
of San Miguel Corporation
HELD:
The funds are in fact loaned from UCPB, which was organized as a
depositary of the coconut levy funds of the corporation. Also, the Government
failed to adduce substantial evidence linking Cojuangco to the use of Marcos
ill-gotten wealth.
All these judicial pronouncements demand two concurring elements to
be present before assets or properties were considered as ill-gotten wealth,
namely: (a) they must have originated from the government itself, and (b) they
must have been taken by former President Marcos, his immediate family,
relatives, and close associates by illegal means.
But settling the sources and the kinds of assets and property covered by
E.O. No. 1 and related issuances did not complete the definition of ill-gotten
wealth. The further requirement was that the assets and property should have
been amassed by former President Marcos, his immediate family, relatives, and
close associates both here and abroad. In this regard, identifying former
President Marcos, his immediate family, and relatives was not difficult, but
identifying other persons who might be the close associates of former President
Marcos presented an inherent difficulty, because it was not fair and just to
include within the term close associates everyone who had had any association
with President Marcos, his immediate family, and relatives.
It does not suffice, as in this case, that the respondent is or was a
government official or employee during the administration of former Pres.
Marcos. There must be a prima facie showing that the respondent unlawfully

accumulated wealth by virtue of his close association or relation with former

Pres. Marcos and/or his wife. This is so because otherwise the respondents
case will fall under existing general laws and procedures on the matter.

LISAM ENTERPRISES, INC. represented by LOLITA A. SORIANO,

and LOLITA A. SORIANO
vs.
BANCO DE ORO UNIBANK, INC. (formerly PHILIPPINE
COMMERCIAL INTERNATIONAL BANK),* LILIAN S. SORIANO,
ESTATE OF LEANDRO A. SORIANO, JR., REGISTER OF DEEDS
OF LEGASPI CITY, and JESUS L. SARTE
G.R. No. 143264, April 23, 2012, PERALTA, J.
FACTS:
On August 13, 1999, petitioners filed a Complaint against respondents
for Annulment of Mortgage with Prayer for Temporary Restraining Order &
Preliminary Injunction with Damages with the RTC of Legaspi City. Petitioner
Lolita A. Soriano alleged that she is a stockholder of petitioner Lisam
Enterprises, Inc. (LEI) and a member of its Board of Directors, designated as its
Corporate Secretary.
On or about 28 March 1996, defendant Lilian S. Soriano and the late
Leandro A. Soriano, Jr., as husband and wife Spouses Soriano, in their
personal capacity and for their own use and benefit, obtained a loan from
defendant PCIB (Legaspi Branch) (Banco de Oro Unibank, Inc.) in the total
amount of P20 Million.
On November 11, 1999, the RTC issued the first assailed Resolution
dismissing petitioners' Complaint. Petitioners then filed a Motion for
Reconsideration of said Resolution.While awaiting resolution of the motion for

reconsideration, petitioners also filed, on January 4, 2000, a Motion to Admit

Amended Complaint, amending paragraph 13 of the original complaint.
On May 15, 2000, the trial court issued the questioned Order denying
both the Motion for Reconsideration and the Motion to Admit Amended
Complaint. The trial court held that no new argument had been raised by
petitioners in their motion for reconsideration to address the fact of plaintiffs'
failure to allege in the complaint that petitioner Lolita A. Soriano made
demands upon the Board of Directors of Lisam Enterprises, Inc. to take steps
to protect the interest of the corporation against the fraudulent acts of the
Spouses Soriano and PCIB. The trial court further ruled that the Amended
Complaint can no longer be admitted, because the same absolutely changed
petitioners' cause of action.
ISSUE:
Whether or not the case will prosper
HELD:
The courts should be liberal in allowing amendments to pleadings to
avoid a multiplicity of suits and in order that the real controversies between the
parties and their rights be determined in order that the case be decided on the
merits without unnecessary delay.
The Court enumerated the requisites for filing a derivative suit, as
follows:
a) the party bringing the suit should be a shareholder as of the time of
the act or transaction complained of, the number of his shares not being
material;
b) he has tried to exhaust intra-corporate remedies, i.e., has made a
demand on the board of directors for the appropriate relief but the latter has
failed or refused to heed his plea; and
c) the cause of action actually devolves on the corporation, the
wrongdoing or harm having been, or being caused to the corporation and not to
the particular stockholder bringing the suit.
A reading of the amended complaint will reveal that all the foregoing
requisites had been alleged therein. Hence, the amended complaint remedied
the defect in the original complaint and now sufficiently states a cause of
action.

LEGASPI TOWERS 300, INC v. AMELIA P. MUER

G.R. No. 170783, June 18, 2012, PERALTA, J.
FACTS:
Pursuant to the by-laws of Legaspi Towers 300, Inc., petitioners Lilia
Marquinez Palanca, Rosanna D. Imai, Gloria Domingo and Ray Vincent, the
incumbent Board of Directors, set the annual meeting of the members of the
condominium corporation and the election of the new Board of Directors for the
years 2004-2005 on April 2, 2004 at 5:00 p.m. at the lobby of Legaspi Towers
300, Inc.
Out of a total number of 5,723 members who were entitled to vote, 1,358
were supposed to vote through their respective proxies and their votes were

critical in determining the existence of a quorum, which was at least 2,863

(50% plus 1). The Committee on Elections of Legaspi Towers 300, Inc., however,
found most of the proxy votes, at its face value, irregular, thus, questionable;
and for lack of time to authenticate the same, petitioners adjourned the
meeting for lack of quorum.
However, the group of respondents challenged the adjournment of the
meeting. Despite petitioners' insistence that no quorum was obtained during
the annual meeting held on April 2, 2004, respondents pushed through with
the scheduled election and were elected as the new Board of Directors and
officers of Legaspi Towers 300, Inc.
On April 13, 2004, petitioners filed a Complaint for the Declaration of
Nullity of Elections with Prayers for the lssuance of Temporary Restraining
Orders and Writ of Preliminary Injunction and Damages against respondents
with the RTC of Manila.
On the same date, April 21, 2004, respondents filed their Answer to
the Amended Complaint, alleging that the election on April 2, 2004 was
lawfully conducted. Respondents cited the Report of SEC Counsel Nicanor P.
Patricio, who was ordered by the SEC to attend the annual meeting of Legaspi
Towers 300, Inc. on April 2, 2004.
Respondents contended that from the proceedings of the election
reported by SEC representative, Atty. Patricio, it was clear that the election
held on April 2, 2004 was legitimate and lawful and that they prayed for the
dismissal of the complaint for lack cause of action against them.
The Court of Appeals stated that petitioners complaint sought to nullify
the election of the Board of Directors held on April 2, 2004, and to protect and
enforce their individual right to vote. The appellate court held that as the right
to vote is a personal right of a stockholder of a corporation, such right can only
be enforced through a direct action; hence, Legaspi Towers 300, Inc. cannot be
impleaded as plaintiff in this case.

ISSUE:
Whether or not derivative suit or a direct action will proper in this case?
HELD:
In the case of Cua, Jr. v. Tan, it differentiates a derivative suit and an
individual/class suit as follows:

A derivative suit must be differentiated from individual and

representative or class suits, thus:
Suits by stockholders or members of a corporation based on wrongful or
fraudulent acts of directors or other persons may be classified into individual
suits, class suits, and derivative suits. 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.
However, in cases of mismanagement where the wrongful acts are
committed by the directors or trustees themselves, a stockholder or member
may find that he has no redress because the former are vested by law with the
right to decide whether or not the corporation should sue, and they will never
be willing to sue themselves. The corporation would thus be helpless to seek
remedy. Because of the frequent occurrence of such a situation, the common
law gradually recognized the right of a stockholder to sue on behalf of a
corporation in what eventually became known as a "derivative suit." It has been
proven to be an effective remedy of the minority against the abuses of
management. Thus, an individual stockholder is permitted to institute a
derivative suit on behalf of the corporation wherein he holds stock in order to
protect or vindicate corporate rights, whenever officials of the corporation
refuse to sue or are the ones to be sued or hold the control of the corporation.
In such actions, the suing stockholder is regarded as the nominal party, with
the corporation as the party-in- interest.
Since it is the corporation that is the real party-in-interest in a derivative
suit, then the reliefs prayed for must be for the benefit or interest of the
corporation. When the reliefs prayed for do not pertain to the corporation, then
it is an improper derivative suit.
The requisites for a derivative suit are as follows:
a) the party bringing suit should be a shareholder as of the time of
the act or transaction complained of, the number of his shares
not being material;
b) he has tried to exhaust intra-corporate remedies, i.e., has made
a demand on the board of directors for the appropriate relief but
the latter has failed or refused to heed his plea; and

c) the cause of action actually devolves on the corporation, the

wrongdoing or harm having been, or being caused to the corporation and
not to the particular stockholder bringing the suit.
As stated by the Court of Appeals, petitioners complaint seek to nullify
the said election, and to protect and enforce their individual right to vote.
Petitioners seek the nullification of the election of the Board of Directors for the
years 2004-2005, composed of herein respondents, who pushed through with
the election even if petitioners had adjourned the meeting allegedly due to lack
of quorum. Petitioners are the injured party, whose rights to vote and to be
voted upon were directly affected by the election of the new set of board of
directors. The party-in-interest are the petitioners as stockholders, who wield
such right to vote. The cause of action devolves on petitioners, not the
condominium corporation, which did not have the right to vote. Hence, the
complaint for nullification of the election is a direct action by petitioners, who
were the members of the Board of Directors of the corporation before the
election, against respondents, who are the newly-elected Board of Directors.
Under the circumstances, the derivative suit filed by petitioners in behalf of the
condominium corporation in the Second Amended Complaint is improper.
.

JUANITO ANG, for and in behalf of SUNRISE MARKETING

(BACOLOD), INC.
vs.
SPOUSES ROBERTO and RACHEL ANG
G.R. No. 201675, June 19, 2013, CARPIO, J.
FACTS:
Sunrise Marketing (Bacolod), Inc. (SMBI) is a duly registered corporation
owned by the Ang family. Spouses Roberto and Rachel Ang took over the active
management of SMBI. Through the employment of sugar coated words, they
were able to successfully manipulate the stocks sharings between themselves
at 50-50 under the condition that the procedures mandated by the Corporation
Code on increase of capital stock be strictly observed (valid Board Meeting). No
such meeting of the Board to increase capital stock materialized. It was more of
an accommodation to buy peace.
Juanito claimed that payments to Nancy and Theodore ceased sometime
after 2006. On 24 November 2008, Nancy and Theodore, through their counsel
here in the Philippines, sent a demand letter to "Spouses Juanito L.
Ang/Anecita L. Ang and Spouses Roberto L. Ang/Rachel L. Ang" for payment of
the principal amounting to $1,000,000.00 plus interest at ten percent (10%)
per annum, for a total of $2,585,577.37 within ten days from receipt of the
letter. 12 Roberto and Rachel then sent a letter to Nancy and Theodores
counsel on 5 January 2009, saying that they are not complying with the
demand letter because they have not personally contracted a loan from Nancy
and Theodore.
ISSUE:
Whether or not the Honorable Court of Appeals erred in ordering the
dismissal of the Complaint on the ground that the case is not a derivative suit.
HELD:

The Complaint is not a derivative suit. A derivative suit is an action

brought by a stockholder on behalf of the corporation to enforce corporate
rights against the corporations directors, officers or other insiders. Under
Sections 23 and 36 of the Corporation Code, the directors or officers, as
provided under the by-laws, have the right to decide whether or not a
corporation should sue. Since these directors or officers will never be willing to
sue themselves, or impugn their wrongful or fraudulent decisions, stockholders
are permitted by law to bring an action in the name of the corporation to hold
these directors and officers accountable. In derivative suits, the real party in
interest is the corporation, while the stockholder is a mere nominal party.

BOY SCOUTS OF THE PHILIPPINES

vs.
COMMISSION ON AUDIT
G.R. No. 177131, June 7, 2011, LEONARDO-DE CASTRO, J.
FACTS:
The Commission on Audit (COA) maintains that the functions of the Boy
Scout of the Philippines (BSP) that include, among others, the teaching to the
youth of patriotism, courage, self-reliance, and kindred virtues, are undeniably
sovereign functions enshrined under the Constitution and discussed by the
Court in Boy Scouts of the Philippines v. National Labor Relations Commission.
The COA contends that any attempt to classify the BSP as a private
corporation would be incomprehensible since no less than the law which
created it had designated it as a public corporation and its statutory mandate
embraces performance of sovereign functions. It also claims that the only
reason why the BSP employees fell within the scope of the Civil Service
Commission even before the 1987 Constitution was the fact that it was a
government-owned or controlled corporation; that as an attached agency of the
Department of Education, Culture and Sports (DECS), the BSP is an agency of
the government; and that the BSP is a chartered institution under Section
1(12) of the Revised Administrative Code of 1987, embraced under the term
government instrumentality.
The COA concludes that being a government agency, the funds and
property owned or held by the BSP are subject to the audit authority of the
COA pursuant to Section 2(1), Article IX (D) of the 1987 Constitution. It also

claims that it has a unique characteristic which "neither classifies it as a

purely public nor a purely private corporation"; that it is not a quasi-public
corporation; and that it may belong to a different class altogether.

ISSUE:
Whether or not the BSP is public corporation
RULING:
Boy Scout of the Philippines is a public corporation and its funds are
subject to the COAs audit jurisdiction. It is a public corporation or a
government agency or instrumentality with juridical personality, which does
not fall within the constitutional prohibition in Article XII, Section 16,
notwithstanding the amendments to its charter. Not all corporations, which are
not government owned or controlled, are ipso facto to be considered private
corporations as there exist another distinct class of corporations or chartered
institutions which are otherwise known as "public corporations." These
corporations are treated by law as agencies or instrumentalities of the
government which are not subject to the tests of ownership or control and
economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their
administrative relationship to the government or any of its Departments or
Offices.
The Administrative Code of 1987 designates the BSP as one of the
attached agencies of the Department of Education, Culture and Sports
("DECS"). An "agency of the Government" is defined as referring to any of the
various units of the Government including a department, bureau, office, and
instrumentality, government-owned or -controlled corporation, or local
government or distinct unit therein. BSP still remains an instrumentality of the
national government.
BSP is a public corporation created by law for a public purpose, attached
to the DECS pursuant to its Charter and the Administrative Code of 1987. It is
not a private corporation which is required to be owned or controlled by the
government and be economically viable to justify its existence under a special
law.

SPOUSES RODOLFO and MARCELINA GUEVARRA

vs.
THE COMMONER LENDING CORPORATION, INC.

G.R. No. 204672, February 18, 2015, PERLAS-BERNABE, J.

FACTS:
On December 16, 1996, Spouses Guevarra obtained a P320,000.00 loan
from TCLC, which was secured by a real estate mortgage over a 5,532- square
meter parcel of land situated in Guimbal, Iloilo, covered by Original Certificate
of Title (OCT) No. F-31900 (subject property), emanating from a free patent
granted to Spouses Guevarra on February 25, 1986.
Spouses Guevarra, however, defaulted in the payment of their loan,
prompting TCLC to extra-judicially foreclose the mortgage on the subject
property in accordance with Act No. 3135, as amended. In the process, TCLC
emerged as the highest bidder at the public auction sale held on June 15, 2000
for the bid amount of P150,000.00, and on August 25, 2000, the certificate of
sale was registered with the Registry of Deeds of Iloilo.cralawred
Eventually, Spouses Guevarra failed to redeem the subject property
within the one-year reglementary period, which led to the cancellation of OCT
No. F-31900 and the issuance of Transfer Certificate of Title No.T-16187 in the
name of TCLC. Thereafter, TCLC demanded that Sps. Guevarra vacate the
property, but to no avail.ralawred
ISSUE:
Whether or not the CA committed a reversible error in ruling that the
repurchase price for the subject property should be fixed by TCLC.

HELD:

In an extra-judicial foreclosure of registered land acquired under a free

patent, the mortgagor may redeem the property within two (2) years from the
date of foreclosure if the land is mortgaged to a rural bank under Republic Act
No. (RA) 720, as amended, otherwise known as the Rural Banks Act, or within
one (1) year from the registration of the certificate of sale if the land is
mortgaged to parties other than rural banks pursuant to Act No. 3135. If the
mortgagor fails to exercise such right, he or his heirs may still repurchase the
property within five (5) years from the expiration of the aforementioned
redemption period pursuant to Section 119 of the Public Land Act, which
states:
SEC. 119. Every conveyance of land acquired under the free patent or
homestead provisions, when proper, shall be subject to repurchase by the
applicant, his widow, or legal heirs, within a period of five years from the date
of the conveyance.
In this case, the subject property was mortgaged to and foreclosed by
TCLC, which is a lending or credit institution, and not a rural bank; hence, the
redemption period is one (1) year from the registration of the certificate of sale
on August 25, 2000, or until August 25, 2001. Given that Sps. Guevarra failed
to redeem the subject property within the aforestated redemption period, TCLC
was entitled, as a matter of right, to consolidate its ownership and to possess
the same. Nonetheless, such right should not negate Sps. Guevarra's right to
repurchase said property within five (5) years from the expiration of the
redemption period on August 25, 2001, or until August 25, 2006, in view of
Section 119 of the Public Land Act as above-cited.
In this relation, it is apt to clarify that contrary to TCLC's claim, the
tender of the repurchase price is not necessary for the preservation of the right
of repurchase, because the filing of a judicial action for such purpose within
the five-year period under Section 119 of the Public Land Act is already

equivalent to a formal offer to redeem. On this premise, consignation of the

redemption price is equally unnecessary.

DOA ADELA EXPORT INTERNATIONAL, INC., v.

TRADE AND INVESTMENT DEVELOPMENT CORPORATION
(TIDCORP), AND THE BANK OF THE PHILIPPINE ISLANDS (BPI)
G.R. No. 201931, February 11, 2015, VILLARAMA, JR., J.

FACTS:
Petitioner Doa Adela Export International, Inc., (petitioner, for brevity)
filed a Petition for Voluntary Insolvency. The RTC, after finding the petition
sufficient in form and substance, issued an order declaring petitioner as
insolvent and staying all civil proceedings against petitioner. In the same order,
the RTC set the initial hearing on October 19, 2006. Thereafter, Atty. Arlene
Gonzales was appointed as receiver. After taking her oath, Atty. Gonzales
proceeded to make the necessary report, engaged appraisers and required the
creditors to submit proof of their respective claims.
Atty. Gonzales filed a Motion for Parties to Enter Into Compromise
Agreement incorporating therein her proposed terms of compromise. Petitioner,
through its President Epifanio C. Ramos, Jr., and Technology Resource Center
(TRC) entered into a Dacion En Pago by Compromise Agreement wherein
petitioner agreed to transfer a 351-square meter parcel of land covered by TCT
No. 10027 with existing improvements situated in the Barrio of Jolo,
Mandaluyong City, in favor of TRC in full payment of petitioners obligation. The
agreement bears the conformity of Atty. Gonzales as receiver. TRC filed on May
26, 2011 a Compliance, Manifestation and Motion to Approve Dacion En Pago
by Compromise Agreement.
Creditors TIDCORP and BPI also filed a Joint Motion to Approve
Agreement. On November 15, 2011, the RTC rendered the assailed Decision
approving the Dacion En Pago by Compromise Agreement and the Joint Motion
to Approve Agreement. Petitioner filed a motion for partial reconsideration and
claimed that TIDCORP and BPIs agreement imposes on it several obligations
such as payment of expenses and taxes and waiver of confidentiality of its bank
deposits but it is not a party and signatory to the said agreement.
In its Order dated May 14, 2012, the RTC denied the motion and held
that petitioners silence and acquiescence to the joint motion to approve
compromise agreement while it was set for hearing by creditors BPI and
TIDCORP is tantamount to admission and acquiescence thereto. There was no
objection filed by petitioner to the joint motion to approve compromise

agreement prior to its approval, said the RTC. The RTC also noted that
petitioners President attended every hearing of the case but did not interpose
any objection to the said motion when its conditions were being discussed and
formulated by the parties and Atty. Gonzales.

ISSUE:
Whether or not the petitioner is bound by the provision in the BPITIDCORP Joint Motion to Approve Agreement that petitioner shall waive its
rights to confidentiality of its bank deposits under R.A. No. 1405, as amended,
otherwise known as the Law on Secrecy of Bank Deposits and R.A. No. 8791,
otherwise known as The General Banking Law of 2000
HELD:

It is basic in law that a compromise agreement, as a contract, is binding

only upon the parties to the compromise, and not upon non-parties. This is the
doctrine of relativity of contracts. The rule is based on Article 1311 (1) of the
Civil Code which provides that "contracts take effect only between the parties,
their assigns and heirs x x x." The sound reason for the exclusion of nonparties to an agreement is the absence of a vinculum or juridical tie which is
the efficient cause for the establishment of an obligation. Consistent with this
principle, a judgment based entirely on a compromise agreement is binding
only on the parties to the compromise the court approved, and not upon the
parties who did not take part in the compromise agreement and in the
proceedings leading to its submission and approval by the court. Otherwise
stated, a court judgment made solely on the basis of a compromise agreement
binds only the parties to the compromise, and cannot bind a party litigant who
did not take part in the compromise agreement.

WHEREFORE, premises considered, the petition is hereby GRANTED.

The second paragraph of the November 15, 2011 Decision of the Regional Trial
Court of Mandaluyong City, Branch 211, in SEC Case No. MC06-103 is hereby
MODIFIED to read as follows:
2. As regards the Joint Motion to Approve Agreement dated July 29,
2011, filed by creditors Trade and Investment Development Corporation of the
Philippines and the Bank of the Philippine Islands, with the exception of
paragraph 4 and paragraph 5 thereof pertaining to Expenses and Taxes and
Waiver of Confidentiality, the same is likewise APPROVED, for the same is not
contrary to law, morals, good customs, public order or public policy, and the
fact that the Court-Appointed Receiver in her Reply filed on October 24, 2011
intimated her conformity to said Joint Motion to Approve Agreement.