Corpo Cases Third List

7/24/2019 Corpo Cases Third List

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G.R. No. 170585 October 6, 2008

DAVID C. LAO and JOS C. LAO, !et"t"oner#, $#. DIONISIO C. LAO, re#!ondent#.

IS the mere inclusion as shareholder in the General Information Sheet of a corporation sucient proof that one is a

shareholder in such corporation?

This is the main question for resolution in this petition for review on certiorari of the Amended Decision1 of the

Court of Appeals (CA armin! the Decision" of the #e!ional Trial Court (#TC$ %ranch 11$ Ce&u Cit' in C%)"*+1,)S#C-

The .acts

/n /cto&er 1*$ 1++0$ petitioners David and ose 2ao 3led a petition with the Securities and 4chan!e Commission

(SC a!ainst respondent Dionisio 2ao$ president of 5aci3c .oundr' Shop Corporation (5.SC- 5etitioners pra'ed for

a declaration as stoc6holders and directors of 5.SC$ issuance of certi3cates of shares in their name and to &e

allowed to e4amine the corporate &oo6s of 5.SC-7

5etitioners claimed that the' are stoc6holders of 5.SC &ased on the General Information Sheet 3led with the SC$ in

which the' are named as stoc6holders and directors of the corporation- 5etitioner David 2ao alle!ed that he

acquired 88, shares in 5.SC from his father$ 2ao 5on! %ao$ which shares were previousl' purchased from a certain

9ipolito 2ao- 5etitioner ose 2ao$ on the other hand$ alle!ed that he acquired 777 shares from respondent Dionisio

2ao himself-8

#espondent denied petitioners: claim- 9e alle!ed that the inclusion of their names in the corporation:s GeneralInformation Sheet was inadvertentl' made- 9e also claimed that petitioners did not acquire an' shares in 5.SC &'

an' of the modes reco!ni;ed &' law$ namel' su&scription$ purchase$ or transfer- Since the' were neither

stoc6holders nor directors of 5.SC$ petitioners had no ri!ht to &e issued certi3cates or stoc6s or to inspect its

corporate &oo6s-*

/n une 1+$ "


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Sulu Development Corp- vs- artin$ *0 5hil- =ud!ment is here&' rendered modif'in! the oint Decision dated Decem&er 1+$

"


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The Amended Decision was penned &' ustice nrico 2an;anas and concurred in &' ustices Sesinando Fillon and

Ficente ap- The CA stated

5etitioners)appellants maintain that the' acquired their shares of stoc6s throu!h transfer ) the third mode

mentioned &' the trial court- David C- 2ao claims that he acquired his 88, shares throu!h his father$ 2ao 5on! %ao$

when the latter purchased said shares from 9ipolito 2ao- /n the other hand$ ose C- 2ao asserts that he acquired his

777 shares throu!h Dionisio C- 2ao himself from the ori!inal 1$777 shares of stoc6s of the latter-

5etitioner)appellants asseverations are unavailin!- To su&stantiate their statements$ the' merel' relied on the

General Information Sheets su&mitted to the Securities and 4chan!e Commission for the 'ear 1+0= to 1++0$ as

well as on the inutes of the Stoc6holders eetin! and %oard of Directors eetin! held on anuar' "0$ 1+00- The'

did not adduce evidence that would indu&ita&l' show that there was indeed a valid transfer of stoc6s$ i-e-

endorsement and deliver'$ from the transferors$ 9ipolito 2ao and Dionisio 2ao$ to them as transferees-

4 4 4 4

To our mind$ David C- 2ao utterl' failed to confute the ar!ument posited &' respondent)appellee or demonstrate

compliance with an' of the statutor' requirements as to warrant a favora&le rulin! on his part- o proof was ever

shown that there was endorsement and deliver' to him of the stoc6 certi3cates representin! the 88, shares of

9ipolito 2ao- either was the transfer re!istered in 5.SC:s Stoc6 and Transfer %oo6- Conversel'$ Dionisio C- 2ao was

a&le to show conformit' with the aforementioned requirements- Accordin!l'$ it is &ut lo!ical to conclude that the

certi3cate of stoc6 coverin! 88, shares of 9ipolito 2ao was in fact endorsed and delivered to Dionisio C- 2ao and as

such is reHected in 5.SC:s Stoc6 and Transfer %oo6 4 4 4-

In fact$ it is a rule that private transactions are presumed to have &een faire and re!ular and that the re!ular course

of &usiness is presumed to have &een followed- Thus$ the transfer made &' 9ipolito 2ao of the 88, shares of stoc6s

to Dionisio C- 2ao is deemed to have &een valid and well)founded unless proven otherwise- David C- 2ao:s mere

alle!ation that Dionisio 2ao ille!all' appropriated upon himself the 88, shares failed to hurdle such presumption- In

this >urisdiction$ neither fraud nor evil is presumed and the record does not show either as to esta&lish &' clear and

sucient evidence that ma' lead @s to &elieve such alle!ation- The part' alle!in! the same has the &urden of proof

to present evidence necessar' to esta&lish his claim$ unfortunatel' however petitioners failed to do so- The General

Information Sheets and the inutes of the eetin!s adduced &' petitioners)appellants do not prove such alle!ation

of fraud or deceit- In the a&sence thereof$ the presumption remains that private transactions have &een fair and

re!ular-

As for the alle!ed shares of ose C- 2ao$ Be 3nd his position identicall' situated with David C- 2ao- There is also no

evidence on record that would clearl' esta&lish how he acquired said shares of 5.SC- ose C- 2ao failed to show that

there was endorsement and deliver' to him of the stoc6 certi3cates or an' documents showin! such transfer orassi!nment- In fact$ the 777 shares &ein! claimed &' him is still under the name of Dionisio C- 2ao was reHected &'

the Certi3cate of Stoc6 as well as in 5.SC:s Stoc6 and Transfer %oo6- Corollar'$ ose C- 2ao could not &e considered a

stoc6holder of 5.SC in the a&sence of support reHectin! his ri!ht to the 777 shares other than the inclusion of his

name in the General Information Sheets from 1+0= to 1++0 and the inutes of the Stoc6holder:s eetin! and %oard

of Director:s eetin!-"ud!e who had previousl' ruled a!ainst him in the hope that a new >ud!e mi!ht &e more

favora&le to him- %ut Be cannot ta6e that &asic proposition too far- That ustice a!pale opted to voluntaril' recuse

himself from the appealed case is alread' fait accompli- It is$ in popular idiom$ water under the &rid!e-

5etitioners cannot &an6 on his voluntar' inhi&ition to nullif' the Amended Decision later issued &' the appellate

court- It is hi!hl' specious to assume that ustice a!pale would have ruled in favor of petitioners on the pendin!

motion for reconsideration if he too6 a diLerent course and opted to sta' on with the case- It is also illo!ical to

presume that the Amended Decision would not have &een issued with or without the participation of ustice

a!pale- The Amended Decision is too far removed from the issue of voluntar' inhi&ition- It does not follow that

petitioners would &e &etter oL were it not for the voluntar' inhi&ition-

5etitioners failed to prove that the' are shareholders of 5S.C-

5etitioners insist that the' are shareholders of 5.SC- The' claim purchasin! shares in 5.SC- 5etitioner David 2ao

alle!es that he acquired 88, shares in the corporation from his father$ 2ao 5on! %ao$ which shares were previousl'

purchased from a certain 9ipolito 2ao- 5etitioner ose 2ao$ on the other hand$ alle!es that he acquired 777 shares

from respondent Dionisio 2ao-

#ecords$ however$ disclose that petitioners have no certi3cates of shares in their name- A certi3cate of stoc6 is the

evidence of a holder:s interest and status in a corporation- It is a written instrument si!ned &' the proper ocer of a


5/59

corporation statin! or ac6nowled!in! that the person named in the document is the owner of a desi!nated num&er

of shares of its stoc6-"8 It is prima facie evidence that the holder is a shareholder of a corporation-

or is there an' written document that there was a sale of shares$ as claimed &' petitioners- 5etitioners did not

present an' deed of assi!nment$ or an' similar instrument$ &etween 2ao 5on! %ao and 9ipolito 2aoE or &etween 2ao

5on! %ao and petitioner David 2ao- There is li6ewise no deed of assi!nment &etween petitioner ose 2ao and private

respondent Dionisio 2ao-

A&sent a written document$ petitioners must prove$ at the ver' least$ possession of the certi3cates of shares in thename of the alle!ed seller- A!ain$ the' failed to prove possession- The' failed to prove the due deliver' of the

certi3cates of shares of the sellers to them- Section ,7 of the Corporation Code provides

Sec- ,7- Certi3cate of stoc6 and transfer of shares- ) The capital stoc6 of stoc6 corporations shall &e divided into

shares for which certi3cates si!ned &' the president or vice)president$ countersi!ned &' the secretar' or assistant

secretar'$ and sealed with the seal of the corporation shall &e issued in accordance with the &')laws- Shares of

stoc6 so issued are personal propert' and ma' &e transferred &' deliver' of the certi3cate or certi3cates indorsed

&' the owner or his attorne')in)fact or other person le!all' authori;ed to ma6e the transfer- o transfer$ however$

shall &e valid$ e4cept as &etween the parties$ until the transfer is recorded in the &oo6s of the corporation so as to

show the names of the parties to the transaction$ the date of the transfer$ the num&er of the certi3cate or

certi3cates and the num&er of shares transferred-

In contrast$ respondent was a&le to prove that he is the owner of the disputed shares- 9e had in his possession the

certi3cates of stoc6s of 9ipolito 2ao- The certi3cates of stoc6s were also properl' endorsed to him- oreimportantl'$ the transfer was dul' re!istered in the stoc6 and transfer &oo6 of the corporation- Thus$ as &etween

the parties$ respondent has proven his ri!ht over the disputed shares- As correctl' ruled &' the CA

Au contraire$ Dionisio C- 2ao was a&le to show throu!h competent evidence that he is undenia&l' the owner of the

disputed shares of stoc6s &ein! claimed &' David C- 2ao- 9e was a&le to validate that he has the ph'sical

possession of the certi3cates coverin! the shares of 9ipolito 2ao- ota&l'$ it was 9ipolito 2ao who properl'

endorsed said certi3cates to herein Dionisio 2ao and that such transfer was re!istered in 5.SC:s Stoc6 and Transfer

%oo6- These circumstances are more in accord with the valid transfer contemplated &' Section ,7 of the

Corporation Code-"*

The mere inclusion as shareholder of petitioners in the General Information Sheet of 5.SC is insucient proof that

the' are shareholders of the compan'-

5etitioners &an6 heavil' on the General Information Sheet su&mitted &' 5.SC to the SC in which the' were named

as shareholders of 5.SC- The' claim that respondent is now estopped from contestin! the General Information

Sheet-

Bhile it ma' &e true that petitioners were named as shareholders in the General Information Sheet su&mitted to the

SC$ that document alone does not conclusivel' prove that the' are shareholders of 5.SC- The information in the

document will still have to &e correlated with the corporate &oo6s of 5.SC- As &etween the General Information

Sheet and the corporate &oo6s$ it is the latter that is controllin!- As correctl' ruled &' the CA

Be a!ree with the trial court that mere inclusion in the General Information Sheets as stoc6holders and ocers

does not ma6e one a stoc6holder of a corporation$ for this ma' have come to pass &' mista6e$ e4pedienc' or

ne!li!ence- As professed &' respondent)appellee$ this was done merel' to compl' with the reportorial requirements

with the SC- This ma'&e a!ainst the law &ut practice$ no matter how lon! continued$ cannot !ive rise to an'

vested ri!ht-

If a transferee of shares of stoc6 who failed to re!ister such transfer in the Stoc6 and Transfer %oo6 of the

Corporation could not e4ercise the ri!hts !ranted unto him &' law as stoc6holder$ with more reason that such ri!hts

&e denied to a person who is not a stoc6holder of a corporation- 5etitioners)appellants never secured such astandin! as stoc6holders of 5.SC and consequentl'$ their petition should &e denied-",

It should &e stressed that the &urden of proof is on petitioners to show that the' are shareholders of 5.SC- This is so

&ecause the' do not have an' certi3cates of shares in their name- oreover$ the' do not appear in the corporate

&oo6s as re!istered shareholders- If the' had certi3cates of shares$ the &urden would have &een with 5.SC to prove

that the' are not shareholders of the corporation-

As discussed$ petitioners failed to hurdle their &urden- There is no written document evidencin! their claimed

purchase of shares- Be note that petitioners a!reed to su&mit their case for decision &ased merel' on the

documents on record- 9ence$ no testimonial evidence was presented to prove the alle!ed purchase of shares-


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A&sent an' documentar' or testimonial evidence$ the &are assertion of petitioners that the' are shareholders

cannot prevail-

All told$ Be a!ree with the #TC and CA decision that petitioners are not shareholders of 5.SC-

B9#./#$ the petition is DID and the appealed Amended Decision A..I#D I .@22-

S/ /#D#D-

G-#- o- +,,=8 une ",$ 1++"

R%RAL &AN' O( SALINAS, INC., )AN%L SAL%D, L%*VI)INDA +RIAS and (RANCISCO +RIAS,

!et"t"oner#,$#.n CO%R+ O( AALS-, SC%RI+IS AND C/ANG CO))ISSION, )LANIA A.

G%RRRO, L%* ANDICO, IL/)INA G. ROSALS, (RANCISCO ). G%RRRO, JR., and (RANCISCO

G%RRRO , SR., re#!ondent#.

The &asic controvers' in this case is whether or not the respondent court erred in sustainin! the Securities and

4chan!e Commission when it compelled &' andamus the #ural %an6 of Salinas to re!ister in its stoc6 and

transfer &oo6 the transfer of 8=7 shares of stoc6 to private respondents- 5etitioners maintain that the 5etition for

andamus should have &een denied upon the followin! !rounds-

(1 andamus cannot &e a remed' co!ni;a&le &' the Securities and 4chan!e Commission when the purpose is to

re!ister certi3cates of stoc6 in the names of claimants who are not 'et stoc6holders of a corporation

(" There e4ist valid reasons for refusin! to re!ister the transfer of the su&>ect of stoc6$ namel'

(a a pendin! controvers' over the ownership of the certi3cates of stoc6 with the #e!ional Trial CourtE

(& claims that the Deeds of Assi!nment coverin! the su&>ect certi3cates of stoc6 were 3ctitious and antedatedE and

(c claims on a resultant possi&le deprivation of inheritance share in relation with a conHictin! claim over the

su&>ect certi3cates of stoc6-

The facts are not disputed-

/n une 1


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Almost four months later$ or two (" da's &efore the death of Clemente Guerrero on une "8$ 1+0ud!ment is here&' rendered in favor of the petitioners and a!ainst the respondents$ directin! the

latter$ particularl' the corporate secretar' of respondent #ural %an6 of Salinas$ Inc-$ to re!ister in the latter:s Stoc6

and Transfer %oo6 the transfer of 8=7 shares of stoc6 of respondent %an6 and to cancel Stoc6 Certi3cates os- ",$

8* and ,* and issue new Stoc6 Certi3cates coverin! the transferred shares in favor of petitioners$ as follows

1- 2u; Andico 8*= shares

"- Bilhelmina #osales 1< shares

7- .rancisco Guerrero$ r- * shares

8- .rancisco Guerrero$ Sr- 1 share

and to pa' to the a&ove)named petitioners$ the dividends for said shares correspondin! to the 'ears 1+01$ 1+0"$

1+07 and 1+08 without interest-

o pronouncement as to costs-

S/ /#D#D- (p- 00$ #ollo

/n appeal$ the SC n %anc armed the decision of the 9earin! /cer- 5etitioner 3led a petition for review with

the Court of Appeals &ut said Court li6ewise armed the decision of the SC-


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Be rule in favor of the respondents-

Section * (& of 5-D- o- +


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case Di!est on %SON V. DIOSO)I+O

,1 59I2 *7* (1+7*

.acts @son 3led a civil action for de&t a!ainst Diosomito upon institution of which an attachment was dul' issued

and levied upon the propert' of the latter on anuar' 10$ 1+7"$ includin! sevent')3ve shares of the orth lectric

Co- Inc- A >ud!ment was rendered infavor of @son on une "7$ 1+7"- As a consequence of it $ the sheriL sold the

said shares at a pu&lic auction on arch "


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/n 7 Au!ust 1+07$ Calapatia o&tained a loan of 5"ect share of stoc6 and thereafter 3led a case

with the #e!ional Trial Court of a6ati for the nulli3cation of the 1< Decem&er 1+0, auction and for the issuance of

a new stoc6 certi3cate in its name-J18K

/n 10 une 1++urisdiction over the su&>ect

matter on the theor' that it involves an intra)corporate dispute and on "= Au!ust 1++< denied petitioner:s motion

for reconsideration-

/n "< Septem&er 1++


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S/ /#D#D-J10K

FGCCI sou!ht reconsideration of the a&ovecited order- 9owever$ the SC denied the same in its resolution dated =

Decem&er 1++7-J1+K

The sudden turn of events sent FGCCI to see6 redress from the Court of Appeals- /n 1* Au!ust 1++8$ the Court of

Appeals rendered its decision nullif'in! and settin! aside the orders of the SC and its hearin! ocer on !round of

lac6 of >urisdiction over the su&>ect matter and$ consequentl'$ dismissed petitioner:s ori!inal complaint- The Court

of Appeals declared that the controvers' &etween C%C and FGCCI is not intra)corporate- It ruled as follows

In order that the respondent Commission can ta6e co!ni;ance of a case$ the controvers' must pertain to an' of the

followin! relationships (a &etween the corporation$ partnership or association and the pu&licE (& &etween the

corporation$ partnership or association and its stoc6holders$ partners$ mem&ers$ or ocersE (c &etween the

corporation$ partnership or association and the state in so far as its franchise$ permit or license to operate is

concerned$ and (d amon! the stoc6holders$ partners or associates themselves (@nion Glass and Container

Corporation vs- SC$ ovem&er "0$ 1+07$ 1", SC#A 71- The esta&lishment of an' of the relationship mentioned

will not necessaril' alwa's confer >urisdiction over the dispute on the Securities and 4chan!e Commission to the

e4clusion of the re!ular courts- The statement made in 5hile4 inin! Corp- vs- #e'es$ 110 SC#A ,


12/59

444

SCTI/ *- In addition to the re!ulator' and ad>udicative functions of the Securities and 4chan!e Commission over

corporations$ partnerships and other forms of associations re!istered with it as e4pressl' !ranted under e4istin!

laws and decrees$ it shall have ori!inal and e4clusive >urisdiction to hear and decide cases involvin!

a Devices or schemes emplo'ed &' or an' acts of the &oard of directors$ &usiness associates$ its ocers or

partners$ amountin! to fraud and misrepresentation which ma' &e detrimental to the interest of the pu&lic andMor of

the stoc6holders$ partners$ mem&ers of associations or or!ani;ations re!istered with the Commission-

& Controversies arisin! out of intra)corporate or partnership relations$ &etween and amon! stoc6holders$ mem&ers$

or associatesE &etween an' or all of them and the corporation$ partnership or association of which the' are

stoc6holders$ mem&ers or associates$ respectivel'E and &etween such corporation$ partnership or association and

the State insofar as it concerns their individual franchise or ri!ht to e4ist as such entit'E

c Controversies in the election or appointment of directors$ trustees$ ocers$ or mana!ers of such corporations$

partnerships or associations-

d 5etitions of corporations$ partnerships or associations to &e declared in the state of suspension of pa'ments in

cases where the corporation$ partnership or association possesses propert' to cover all of its de&ts &ut foresees the

impossi&ilit' of meetin! them when the' respectivel' fall due or in cases where the corporation$ partnership or

association has no sucient assets to cover its lia&ilities$ &ut is under the ana!ement Committee created

pursuant to this Decree-

The aforecited law was e4pounded upon in Fira' v- CAJ""K and in the recent cases of ainland Construction Co-$ Inc-v- ovillaJ"7K and %ernardo v- CA$J"8K thus

- - - The &etter polic' in determinin! which &od' has >urisdiction over a case would &e to consider not onl' the

status or relationship of the parties &ut also the nature of the question that is the su&>ect of their controvers'-

Appl'in! the fore!oin! principles in the case at &ar$ to ascertain which tri&unal has >urisdiction we have to

determine therefore whether or not petitioner is a stoc6holder of FGCCI and whether or not the nature of the

controvers' &etween petitioner and private respondent corporation is intra)corporate-

As to the 3rst quer'$ there is no question that the purchase of the su&>ect share or mem&ership certi3cate at pu&lic

auction &' petitioner (and the issuance to it of the correspondin! Certi3cate of Sale transferred ownership of the

same to the latter and thus entitled petitioner to have the said share re!istered in its name as a mem&er of FGCCI-

It is readil' o&served that FGCCI did not assail the transfer directl' and has in fact$ in its letter of "= Septem&er

1+=8$ e4pressl' reco!ni;ed the pled!e a!reement e4ecuted &' the ori!inal owner$ Calapatia$ in favor of petitioner

and has even noted said a!reement in its corporate &oo6s-J"*K In addition$ Calapatia$ the ori!inal owner of the

su&>ect share$ has not contested the said transfer-

%' virtue of the afore)mentioned sale$ petitioner &ecame a &ona 3de stoc6holder of FGCCI and$ therefore$ the

conHict that arose &etween petitioner and FGCCI aptl' e4emplies an intra)corporate controvers' &etween a

corporation and its stoc6holder under Sec- *(& of 5-D- +ect share

at pu&lic auction$ of which it was the hi!hest &idder- FGCCI caps its ar!ument &' assertin! that its corporate &')

laws should prevail- The &one of contention$ thus$ is the proper interpretation and application of FGCCI:s

aforequoted &')laws$ a su&>ect which irrefuta&l' calls for the special competence of the SC-

Be reiterate herein the sound polic' enunciated &' the Court in A&e>o v- De la Cru;J"=K

,- In the 3fties$ the Court ta6in! co!ni;ance of the move to vest >urisdiction in administrative commissions and&oards the power to resolve speciali;ed disputes in the 3eld of la&or (as in corporations$ pu&lic transportation and

pu&lic utilities ruled that Con!ress in requirin! the Industrial Court:s intervention in the resolution of la&or)

mana!ement controversies li6el' to cause stri6es or loc6outs meant such >urisdiction to &e e4clusive$ althou!h it did

not so e4pressl' state in the law- The Court held that under the sense)ma6in! and e4peditious doctrine of primar'

>urisdiction - - - the courts cannot or will not determine a controvers' involvin! a question which is within the

>urisdiction of an administrative tri&unal$ where the question demands the e4ercise of sound administrative

discretion requirin! the special 6nowled!e$ e4perience$ and services of the administrative tri&unal to determine

technical and intricate matters of fact$ and a uniformit' of rulin! is essential to compl' with the purposes of the

re!ulator' statute administered-


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In this era of clo!!ed court doc6ets$ the need for speciali;ed administrative &oards or commissions with the special

6nowled!e$ e4perience and capa&ilit' to hear and determine promptl' disputes on technical matters or essentiall'

factual matters$ su&>ect to >udicial review in case of !rave a&use of discretion$ has &ecome well ni!h indispensa&le-

Thus$ in 1+08$ the Court noted that &etween the power lod!ed in an administrative &od' and a court$ the

unmista6a&le trend has &een to refer it to the former- :Increasin!l'$ this Court has &een committed to the view that

unless the law spea6s clearl' and unequivoca&l'$ the choice should fall on Jan administrative a!enc'-K: The Court

in the earlier case of &on v- De Gu;man$ noted that the lawma6in! authorit'$ in restorin! to the la&or ar&iters andthe 2#C their >urisdiction to award all 6inds of dama!es in la&or cases$ as a!ainst the previous 5-D- amendment

splittin! their >urisdiction with the re!ular courts$ evidentl'$- - - had second thou!hts a&out deprivin! the 2a&or

Ar&iters and the 2#C of the >urisdiction to award dama!es in la&or cases &ecause that setup would mean duplicit'

of suits$ splittin! the cause of action and possi&le conHictin! 3ndin!s and conclusions &' two tri&unals on one and

the same claim-

In this case$ the need for the SC:s technical e4pertise cannot &e over)emphasi;ed involvin! as it does the

meticulous anal'sis and correct interpretation of a corporation:s &')laws as well as the applica&le provisions of the

Corporation Code in order to determine the validit' of FGCCI:s claims- The SC$ therefore$ too6 proper co!ni;ance

of the instant case-

FGCCI further contends that petitioner is estopped from den'in! its earlier position$ in the 3rst complaint it 3led

with the #TC of a6ati (Civil Case o- +urisdiction over it does not prevent the

plaintiL from 3lin! the same complaint later with the competent court- The plaintiL is not estopped from doin! so

simpl' &ecause it made a mista6e &efore in the choice of the proper forum - - -

Be remind FGCCI that in the same proceedin!s &efore the #TC of a6ati$ it cate!oricall' stated (in its motion to

dismiss that the case &etween itself and petitioner is intra)corporate and insisted that it is the SC and not the

re!ular courts which has >urisdiction- This is precisel' the reason wh' the said court dismissed petitioner:s

complaint and led to petitioner:s recourse to the SC-

9avin! resolved the issue on >urisdiction$ instead of remandin! the whole case to the Court of Appeals$ this Court

li6ewise deems it procedurall' sound to proceed and rule on its merits in the same proceedin!s-

It must &e underscored that petitioner did not con3ne the instant petition for review on certiorari on the issue of

>urisdiction- In its assi!nment of errors$ petitioner speci3call' raised questions on the merits of the case- In turn$ inits responsive pleadin!s$ private respondent dul' answered and countered all the issues raised &' petitioner-

Applica&le to this case is the principle succinctl' enunciated in the case of 9eirs of Crisanta Ga&riel)Almoradie v-

Court of Appeals$J"+K citin! scudero v- Dula'J7ustice the issue on infrin!ement shall &e

resolved &' the court considerin! that this case has dra!!ed on for 'ears and has !one from one forum to another-

It is a rule of procedure for the Supreme Court to strive to settle the entire controvers' in a sin!le proceedin!

leavin! no root or &ranch to &ear the seeds of future liti!ation- o useful purpose will &e served if a case or the

determination of an issue in a case is remanded to the trial court onl' to have its decision raised a!ain to the Court

of Appeals and from there to the Supreme Court-

Be have laid down the rule that the remand of the case or of an issue to the lower court for further reception of

evidence is not necessar' where the Court is in position to resolve the dispute &ased on the records &efore it andparticularl' where the ends of >ustice would not &e su&served &' the remand thereof- oreover$ the Supreme Court

is clothed with ample authorit' to review matters$ even those not raised on appeal if it 3nds that their consideration

is necessar' in arrivin! at a >ust disposition of the case-

In the recent case of China %an6in! Corp-$ et al- v- Court of Appeals$ et al-$J7"K this Court$ throu!h r- ustice

#icardo - .rancisco$ ruled in this wise

At the outset$ the Court:s attention is drawn to the fact that that since the 3lin! of this suit &efore the trial court$

none of the su&stantial issues have &een resolved- To avoid and !loss over the issues raised &' the parties$ as what

the trial court and respondent Court of Appeals did$ would undul' prolon! this liti!ation involvin! a rather simple


14/59

case of foreclosure of mort!a!e- @ndou&tedl'$ this will run counter to the avowed purpose of the rules$ i-e-$ to assist

the parties in o&tainin! >ust$ speed' and ine4pensive determination of ever' action or proceedin!- The Court$

therefore$ feels that the central issues of the case$ al&eit unresolved &' the courts &elow$ should now &e settled

speciall' as the' involved pure questions of law- .urthermore$ the pleadin!s of the respective parties on 3le have

ampl' ventilated their various positions and ar!uments on the matter necessitatin! prompt ad>udication-

In the case at &ar$ since we alread' have the records of the case (from the proceedin!s &efore the SC sucient toena&le us to render a sound >ud!ment and since onl' questions of law were raised (the proper >urisdiction for

Supreme Court review$ we can$ therefore$ unerrin!l' ta6e co!ni;ance of and rule on the merits of the case-

The procedural niceties settled$ we proceed to the merits-

FGCCI assails the validit' of the pled!e a!reement e4ecuted &' Calapatia in petitioner:s favor- It contends that the

same was null and void for lac6 of consideration &ecause the pled!e a!reement was entered into on "1 Au!ust

1+=8J77K &ut the loan or promissor' note which it secured was o&tained &' Calapatia much later or onl' on 7

Au!ust 1+07-J78K

FGCCI:s contention is unmeritorious-

A careful perusal of the pled!e a!reement will readil' reveal that the contractin! parties e4plicitl' stipulated therein

that the said pled!e will also stand as securit' for an' future advancements (or renewals thereof that Calapatia

(the pled!or ma' procure from petitioner

444

This pled!e is !iven as securit' for the prompt pa'ment when due of all loans$ overdrafts$ promissor' notes$ drafts$

&ills or e4chan!e$ discounts$ and all other o&li!ations of ever' 6ind which have heretofore &een contracted$ or

which ma' hereafter &e contracted$ &' the 52DG/#(S andMor D%T/#(S or an' one of them$ in favor of the

52DG$ includin! discounts of Chinese drafts$ &ills of e4chan!e$ promissor' notes$ etc-$ without an' further

endorsement &' the 52DG/#(S andMor De&tor(s up to the sum of TBT T9/@SAD (5"


15/59

And moreover$ the &')law now in question cannot have an' eLect on the appellee- 9e had no 6nowled!e of such

&')law when the shares were assi!ned to him- 9e o&tained them in !ood faith and for a valua&le consideration- 9e

was not a priv' to the contract created &' said &')law &etween the shareholder anuel Gon;ales and the %otica

olasco$ Inc- Said &')law cannot operate to defeat his ri!hts as a purchaser-

An unauthori;ed &')law for&iddin! a shareholder to sell his shares without 3rst oLerin! them to the corporation for

a period of thirt' da's is not &indin! upon an assi!nee of the stoc6 as a personal contract$ althou!h his assi!nor

6new of the &')law and too6 part in its adoption- (1< C'c-$ *=+E Ireland vs- Glo&e illin! Co-$ "1 #-I-$ +-

Bhen no restriction is placed &' pu&lic law on the transfer of corporate stoc6$ a purchaser is not aLected &' an'

contractual restriction of which he had no notice- (%rin6erhoL).arris Trust Savin!s Co- vs- 9ome 2um&er Co-$ 110

o-$ 88=-

The assi!nment of shares of stoc6 in a corporation &' one who has assented to an unauthori;ed &')law has onl'

the eLect of a contract &'$ and enforcea&le a!ainst$ the assi!norE the assi!nee is not &ound &' such &')law &'

virtue of the assi!nment alone- (Ireland vs- Glo&e illin! Co-$ "1 #-I-$ +-

A &')law of a corporation which provides that transfers of stoc6 shall not &e valid unless approved &' the &oard of

directors$ while it ma' &e enforced as a reasona&le re!ulation for the protection of the corporation a!ainst

worthless stoc6holders$ cannot &e made availa&le to defeat the ri!hts of third persons- (.armers: and erchants:

%an6 of 2ineville vs- Basson$ 80 Iowa$ 77,- (@nderscorin! ours-

In order to &e &ound$ the third part' must have acquired 6nowled!e of the pertinent &')laws at the time thetransaction or a!reement &etween said third part' and the shareholder was entered into$ in this case$ at the time

the pled!e a!reement was e4ecuted- FGCCI could have easil' informed petitioner of its &')laws when it sent notice

formall' reco!ni;in! petitioner as pled!ee of one of its shares re!istered in Calapatia:s name- 5etitioner:s &elated

notice of said &')laws at the time of foreclosure will not suce- The rulin! of the SC en &anc is particularl'

instructive

%')laws si!ni3es the rules and re!ulations or private laws enacted &' the corporation to re!ulate$ !overn and

control its own actions$ aLairs and concerns and its stoc6holders or mem&ers and directors and ocers with

relation thereto and amon! themselves in their relation to it- In other words$ &')laws are the relativel' permanent

and continuin! rules of action adopted &' the corporation for its own !overnment and that of the individuals

composin! it and havin! the direction$ mana!ement and control of its aLairs$ in whole or in part$ in the

mana!ement and control of its aLairs and activities- (+ .letcher 81,,- 1+0" d-

The purpose of a &')law is to re!ulate the conduct and de3ne the duties of the mem&ers towards the corporation

and amon! themselves- The' are self)imposed and$ althou!h adopted pursuant to statutor' authorit'$ have no

status as pu&lic law- (I&id-

Therefore$ it is the !enerall' accepted rule that third persons are not &ound &' &')laws$ e4cept when the' have

6nowled!e of the provisions either actuall' or constructivel'- In the case of .leisher v- %otica olasco$ 8= 5hil- *08$

the Supreme Court held that the &')law restrictin! the transfer of shares cannot have an' eLect on the the

transferee of the shares in question as he had no 6nowled!e of such &')law when the shares were assi!ned to him-

9e o&tained them in !ood faith and for a valua&le consideration- 9e was not a priv' to the contract created &' the

&')law &etween the shareholder 4 4 4 and the %otica olasco$ Inc- Said &')law cannot operate to defeat his ri!ht as

a purchaser- (@nderscorin! supplied-

%' analo!' of the a&ove)cited case$ the Commission en &anc is of the opinion that said case is applica&le to the

present controvers'- Appellant)petitioner &an6 as a third part' can not &e &ound &' appellee)respondent:s &')laws-

It must &e recalled that when appellee)respondent communicated to appellant)petitioner &an6 that the pled!e

a!reement was dul' noted in the clu&:s &oo6s there was no mention of the shareholder)pled!or:s unpaid accounts-

The transcript of steno!raphic notes of the une "*$ 1++1 9earin! reveals that the pled!or &ecame delinquent onl'

in 1+=*- Thus$ appellant)petitioner was in !ood faith when the pled!e a!reement was contracted-

The Commission en &anc also &elieves that for the e4ception to the !eneral accepted rule that third persons are not

&ound &' &')laws to &e applica&le and &indin! upon the pled!ee$ 6nowled!e of the provisions of the FGCCI %')laws

must &e acquired at the time the pled!e a!reement was contracted- Rnowled!e of said provisions$ either actual or

constructive$ at the time of foreclosure will not aLect pled!ee:s ri!ht over the pled!ed share- Art- "


16/59

Accordin! to the wei!ht of authorit'$ the pled!ee:s ri!ht is entitled to full protection without surrender of the

certi3cate$ their cancellation$ and the issuance to him of new ones$ and when done$ the pled!ee will &e full'

protected a!ainst a su&sequent purchaser who would &e char!ed with constructive notice that the certi3cate is

covered &' the pled!e- (1")A .letcher *


17/59

Cor!orate La Ca#e D"3e#t4 )aat" S!ort# Cb Inc $. Cec"e Cen3 92010:

G-#- o- 1=0*"7 une 1,$ "


18/59

/- petition is DID- no evidence on record that the em&ership Committee acted on 9odreal:s letter

SC- "+- (a The em&ership Committee shall process applications for mem&ershipE ascertain that the

requirements for stoc6 ownership$ includin! citi;enship$ are complied withE su&mit to the %oard its recommended

on applicants for inclusion in the Baitin! 2istE ta6e char!e of auction sales of shares of stoc6E and e4ercise such

other powers and perform such other functions as ma' &e authori;ed &' the %oard-

em&ership Committee failed to question the alle!ed irre!ularities attendin! c .oodsU purchase

purchase price of 51$0ect to the limitations imposed &' the principles !overnin! estoppel-

7- ID-E ID-E ST/CR9/2D#SE #IG9TS /. #GIST#D ST/CR9/2D#S S@5#I/# T/ T9AT /. 5@#C9AS# /

/TIC /. .ACTS IDICATIG D /. IO@I#IG IT/ #G@2A#2 /. SA2S- V Bhere the plaintiLs were$ at the

time of the alle!ed sales in their favor of the shares stoc6 in question$ aware of sucient facts to put them on

notice of the need of inquirin! into the re!ularit' of the transactions and the title of the opposed vendors$ the' can

not validl' claim$ a!ainst the re!istered stoc6holder$ the statue of purchasers in !ood faith-

8- ID-E ID-E ID-E 5#ICI5A2 /. #GIST#D /B# /S SA #IG9TS /. #GIST#D ST/CR9/2D#- V Theprincipal or &ene3ciar' of the re!istered owner of shares of stoc6 is entitled to invo6e such ri!hts as the re!istered

stoc6holders ma' have under the law-

This action involves the title to 1$,


19/59

certi3cates o- ""=+ V mar6ed 4hi&it " V coverin! **$ud!ment &e rendered declarin! them lawful owners of said shares of stoc6$ with such

dividends$ pro3ts and ri!hts as ma' have accrued theretoE requirin! the defendant to render accounts and to

transfer said shares of stoc6 to plaintiLsU namesE and sentencin! the former to pa' the costs-

The defendant herein is the Attorne' General of the @- S-$ successor to the Administrator- 9e contends$

su&stantiall'$ that$ prior to the out&rea6 of war in the 5aci3c$ said shares of stoc6 were &ou!ht &' Ficente adri!al$

in trust for$ and for the &ene3t of$ the itsui %ussan Raisha (hereinafter referred to as the itsuis$ a corporation

or!ani;ed in accordance with the laws of apan$ the true owner thereof$ with &ranch oce in the 5hilippinesE that onor &efore arch$ 1+8"$ adri!al delivered the correspondin! stoc6 certi3cates$ with his &lan6 indorsement thereon$

to the itsuis$ which 6ept said certi3cates$ in the 3les of its oce in anila$ until the li&eration of the latter &' the

American forces earl' in 1+8*E that the itsuis had never sold$ or otherwise disposed of$ said shares of stoc6E and

that the stoc6 certi3cates aforementioned must have &een stolen or looted$ therefore$ durin! the emer!enc'

resultin! from said li&eration-

Inasmuch as$ pursuant to the 5hilippine 5ropert' Act$ all propert' vested in the @nited States$ or an' of its ocials$

under the Tradin! with the nem' Act$ as amended$ located in the 5hilippines at the time of such vestin!$ or the

proceeds thereof$ shall &e transferred to the #epu&lic of the 5hilippines$ the latter sou!ht permission$ and was

allowed$ to intervene in this case and 3led an answer adoptin! in su&stance the theor' of the defendant-

After due hearin!$ the Court of .irst Instance of anila$ presided over &' 9onora&le 9i!inio %- acadae!$ ud!e$

rendered a decision the dispositive part of which reads$ as follows>!cchanro&les-com-ph

In view of the fore!oin! consideration$ >ud!ment is here&' rendered in favor of the plaintiLs and a!ainst the

defendant$ declarin! the former the a&solute owners of the shares of stoc6 of the 2epanto Consolidated inin!

Compan' covered &' the certi3cates of stoc6$ respectivel'$ in their (plaintiLsU possession- The transfer of said

shares of stoc6 in favor of the Alien 5ropert' Custodian of the @- S- of America$ now 5hilippine Alien 5ropert'

Administration$ is here&' declared null and void and of no eLect- Consequentl'$ the 2epanto Consolidated inin!

Compan' is ordered to cancel the certi3cates of stoc6 issued in the name of the 5hilippine Alien 5ropert' Custodian

or 5hilippine Alien 5ropert' Administrator$ as the case ma' &e- Defendant shall pa' the costs of the proceedin!- (p-

,=$ #-A-

The defendant and the intervenor have appealed from this decision- The main question for determination in this

appeal is whether or not plaintiLs had purchased the shares of stoc6 in question- In support of the ne!ative answer$

appellants have introduced the testimon' of Ficente adri!al$ atsune Rita>ima$ Rin!' iwa$ i!uel Simon$ - A-

5er6ins and Fictor - 2ednic6'$ as well as several pieces of documentar' evidence-

r- adri!al$ whose testimon' &efore the claims Committee of the 5hilippine Alien 5ropert' Administration was

admitted with plaintiLsU consent$ stated that he purchased the shares of stoc6 in question$ amon! others$ for theitsuis and at their requestE that he paid with his own funds the correspondin! price$ which was later reim&ursed to

him &' the itsuisE that he held the correspondin! stoc6 certi3cates$ which were issued in his name$ with the

understandin! that he would eLect the necessar' transfer$ to the itsuis$ upon demandE and that$ shortl' &efore

the out&rea6 of war$ he delivered said stoc6 certi3cates$ with his &lan6 endorsement thereon$ to the itsuis$ to

whom said stoc6s &elon!ed-

atsune Rita>ima declared that in une 1+81 he relieved one Ro&a'ashi$ as mana!er of the &ranch oce of the

itsuis in anilaE that he then received from Ro&a'ashi the stoc6 certi3cates for a&out 1$+


20/59

the itsuisE that$ in ul' 1+81$ he returned the stoc6 certi3cates to adri!al$ with the request that he &u' for the

itsuis$ from time to time$ some more shares of stoc6$ in small lotsE that adri!al &ou!ht "ud!ment was

rendered as a&ove stated- It is well settled$ in this >urisdiction$ that the 3ndin!s of fact V particularl' those relatin!

to the credi&ilit' of the opposin! witnesses V made &' the ud!e a quo$ should not &e distur&ed on appeal$ in the

a&sence of stron! and co!ent reasons therefor- This polic' is predicated upon the circumstance that the trial court

has had an opportunit'$ denied to the appellate court$ to o&serve the &ehaviour of the witnesses durin! the

hearin!$ a potent factor in !au!in! their &ias and veracit'- In the case at &ar$ however$ we notice that$ re>ectin! the

theor' of the defense$ the court of ori!in was !uided$ not &' the conduct of the witnesses in the course of their

testimon'$ &ut &' what 9is 9onor$ the trial ud!e$ re!arded as the inherent wea6ness thereof$ in the evaluation of

which said court does not en>o' the advanta!e alread' adverted to-

oreover$ the decision appealed from appears to have assumed that plaintiLsU pretense must necessaril' &e relied

upon$ owin! to the in3rmities said to have &een found in the theor' of the defense- This view suLers from a fatal

defect- It overloo6s the fact that the &urden of proof is upon the plaintiLs$ and that$ accordin!l'$ a decision in their

favor is not in order unless a preponderance of the evidence supports their claim- To put it diLerentl'$ the alle!ed

impro&a&ilities in the testimon' of the witnesses for the defense will not >ustif' a >ud!ment a!ainst the latter$ if the

evidence for the plaintiLs is more impro&a&le than$ or$ at least$ as impro&a&le as$ that of the defense- Such is the

situation o&tainin! in the case at &ar- Indeed$ upon careful e4amination of the record &efore us$ we 3nd it

impossi&le to share the conclusions$ made in the decision appealed from$ relative to the alle!ed Haws in the version

of the defense-


21/59

2et us$ 3rst$ e4amine the evidence for the plaintiLs$ consistin!$ mainl'$ of their own testimon' and that of 5rimitivo

avier and 2eonardo #ecio-

Accordin! to De los Santos$ on or a&out Decem&er 0$ 1+8"$ he purchased from uan Campos$ in anila$ *


22/59

&e denied that the demise of Campos and 9ess &efore the 3lin! of plaintiLs claim seriousl' impairs the wei!ht

thereof- That the Grim #eaper had chosen to stri6e at one of the alle!ed predecessors of the plaintiLs is a matter

that ma' &e attri&uted to sheer fortuitiousness- Bhen$ as in the case at &ar$ not one$ &ut &oth have thus &een

eliminated$ it is clear$ however$ that this circumstances is most unusual$ and must place the Court on !uard-

The need for caution &ecomes more imperative when we &ear in mind that an important piece of documentar'

evidence$ which alle!edl' e4isted after li&eration$ and could have eLectivel' corro&orated one phase of the

plaintiLsU contention$ had$ accordin! to their evidence$ disappeared throu!h still another unfortunate turn of the

wheel of fate- It will &e recalled that late in 1+8*$ 2eonardo #ecio$ alle!edl' actin! on &ehalf of Astraquillo$ oLeredto sell to Att'- DeBitt the **$orit' of the shares of stoc6 of the 2epanto$ the same had$

from the view point of the apanese$ an enem' character$ and the purchase of said stoc6s was$ therefore$ a hostile

act- As a matter of fact$ in the proceedin!s &efore the Fested 5ropert' Claims Committee$ the parties ) includin!

plaintiLs herein ) had stipulated that such transfers and dealin!s in said stoc6 were prohi&ited &' the apanese

durin! the occupation and hence were dan!erous- (#ecord on Appeal$ p- 11eopardi;e

the life of the parties thereto and De los Santos was aware of the hi!hl' dan!erous or ver' ris6' nature even of

the mere possession of the stoc6 certi3cates in question- (pp- 181$ 187$ t- s- n-

(7 Astraquillo is merel' a former emplo'ee of De los Santos$ who had$ therefore$ no reason to ris6 his nec6$ not

onl' &' alle!edl' &u'in! 0


23/59

mi!ht &e needed$ at an' time$ to meet unforeseen emer!encies of the !ravest and most vital nature V for shares of

stoc6 of du&ious value then and in the foreseea&le future-

(* Be are not satis3ed that either De los Santos or Astraquillo possessed enou!h resources to have 580$ima$ mana!er of the itsuis in anila$ whose testimon' was corro&orated &' his successor in oce$

Rin!' iwa$ to whom Rita>ima turned over the stoc6 certi3cates in April 1+87- The sincerit' of atsume Rita>ima

and Rin!' iwa can not &e dou&ted$ for neither appears to have an' possi&le reason to triHe with the facts- Indeed$

their testimon'$ if accepted as true$ would ultimatel' result in the con3scation$ &' the #epu&lic of the 5hilippines$ of

the shares of stoc6 in question and$ thus$ place the same &e'ond the reach of the itsuis-

It has &een intimated that Rita>ima and Rin!' ma' have testi3ed as the' did$ either to protect themselves$ &ecause

the' mi!ht have disposed of the shares of stoc6 in question for their personal &ene3t$ or &ecause there had &een

undue inHuence or pressure from the authorities V presuma&l' ocers of the !overnment of the @nited States- %ut

these are mere speculations$ without sucient actual &asis- %esides$ >udicial notice ma' &e ta6en of the

circumstance that$ durin! the occupation$ even minor apanese ocials could easil' ma6e mone'$ in the5hilippines$ if the' wanted to$ without misappropriatin! apanese properties- A!ain$ in Decem&er$ 1+8"$ the

apanese in the 5hilippines appeared to have no dou&ts that$ in eLect$ apan had alread' won the war- In short$

Rita>ima and Rin!' must have thou!ht that$ sooner or later$ apan would own the 2epanto and that$ therefore$ the'

would have to account for the shares of stoc6 under consideration- Consequentl'$ it is most unli6el' that either

would have misappropriated said shares of stoc6 as su!!ested &' the plaintiLs-

The &ene3ts which the itsuis and apan ma' derive from a decision a!ainst the plaintiLs V inasmuch as the value

of the shares of stoc6 in question would then &e credited in pa'ment of the reparations which ma' &e demanded &'

the 5hilippines andMor the @nited States V has &een pointed out$ in the dissentin! opinion$ as a possi&le motive for

the commission of per>ur' &' Rita>ima and Rin!'- %esides &ein! purel' con>ectural in nature$ this line of thou!ht V

which not even the plaintiLs have ta6en would have no le! to stand on$ unless we assume that the itsuis had sold

or otherwise disposed of said stoc6s durin! the 'ear 1+8"$ &ut &efore the alle!ed transactions &etween Campos

and 9ess$ on the one hand$ and the plaintiLs on the other$ in Decem&er of that 'ear- It is inconceiva&le$ however$

that the itsuis would part with the stoc6s in question$ precisel' when apan was at the crest of its militar' and

political victories- Indeed$ even if its ocers had alread' foreseen$ at that time$ the eventual defeat of the a4is

powers V and ever'thin! then appeared to indicate the contrar' V the itsuis could not have disposed of said

stoc6s without there&' revealin! their own lac6 of faith in the a&ilit' of apan to achieve 3nal victor'- Thus$ the

itsuis would have caused a !rave in>ur' upon the apanese propa!anda and there&' earned severe punishment

from the Imperial Government- othin!$ a&solutel' nothin!$ in the record$ or in contemporar' histor'$ warrants the

&elief that the itsuis$ who were closel' associated with the apanese Government$ could &e !uilt' of such foll'-

2et us now turn our attention to the evidence for the defense$ &e!innin! with the testimon' of Fictor - 2ednic6'- It

will &e recalled that this witness claimed to have !one to the premises of the itsuis$ sometime in .e&ruar' 1+8*$

and to have seen man' documents scattered a&out the place$ includin! two (" 2epanto certi3cates of stoc6$ one of

which was in the name of Ficente adri!al$ whose &lan6 indorsement appeared thereon- Thus$ the defense sou!ht

to prove that the certi3cates of the shares of stoc6 involved in this case have pro&a&l' &een looted- The lower court


24/59

found 2ednic6'Us stor' inherentl' impro&a&le and then concluded that the theor' of the lootin! must$ consequentl'$

&e ruled out- To our mind$ however$ the testimon' of 2ednic6' is not inherentl' impro&a&le- %esides$ it is a matter

of common 6nowled!e$ of which >udicial notice ma' &e ta6en$ that man' oces and dwellin!s were looted durin!

the li&eration of anila- The possi&ilit' that possession of the stoc6 certi3cates in question ma' have &een secured

&' lootin! should not &e ruled out$ therefore$ irrespective of the credence and wei!ht !iven to the testimon' of

2ednic6'- Actuall'$ said certi3cates are included in the list of stoc6s certi3cates of the 2epanto which$ soon after

li&eration$ were reported and considered looted from the itsuis$ and$ accordin!l'$ &loc6ed or fro;en &' the

authorities- Irrespective of the fore!oin!$ De los Santos could not have o&tained those certi3cates from Campos and

9ess in Decem&er 1+8"$ inasmuch as$ from Decem&er 1+81 to April 1+87$ Rita>ima had &een continuousl' in

possession of said documents$ none of which had &een held &' 9ess durin! the occupation-

The lower court considered a!ainst the defense the circumstance that 2ednic6'$ Simon and 5er6ins had not testi3ed

&efore the Fested 5ropert' Claims Committee- There is no evidence$ however$ that an' of them 6new of the

proceedin!s &efore said committee- .urthermore$ none of them has an' personal interest in the outcome of this

action- Consequentl'$ the' have no possi&le motive to distort the truth$ unli6e De los Santos$ who$ as the present

claimant of all the shares of stoc6 in dispute$ will &e directl' aLected &' the outcome of the case at &ar- 9is

testimon'$ therefore$ cannot &e more wei!ht' than that of the aforementioned witnesses for the defense-

The decision appealed from critici;es the testimon' of 5er6ins upon the followin! !roundschanro&1es virtual 1aw

li&rar'

(1 9avin! ta6en no part in the alle!ed lootin! of 4hi&it "$ #ecio had nothin! to fear in connection therewith and$

so$ he could not have left the oce of r- DeBitt$ while the latter was tal6in! over the telephone with a

representative of the Alien 5ropert' CustodianE

(" Inasmuch as DeBitt had stated that 4hi&it " was included in the list of looted stoc6 certi3cates$ 5er6ins should

have 6nown that$ as holder of the certi3cate$ #ecio is presumed to &e the one who stole the same- Bh' then V

plaintiLs inquire V did 5er6ins fail to prevent #ecio from leavin! said oce?

As re!ards the 3rst o&servation$ suce it to sa' that$ as &earer of the 4hi&it "$ #ecio V who$ accordin! to the

lower court$ is an intelli!ent man V must have reali;ed the dan!er$ pro&a&l' unforeseen &' him$ of &ein!

considered a priv' to the lootin! of said stoc6 certi3cate$ of which he mi!ht have &een unaware &efore the

conference with r- DeBitt- 9ence$ #ecioUs fri!ht and virtual Hi!ht- Feril'$ the testimon' of 5er6ins on this point is

&orne out &' the undisputed fact that 4hi&it " was left &' #ecio in the hands of DeBitt$ and that neither

Astraquillo$ nor his alle!ed successor in interest$ De los Santos$ has ever demanded from DeBitt the return of said

certi3cate$ or even recriminated #ecio for havin! voluntaril' parted with its possession$ as he would have us

&elieve$ without authorit' therefor$ as a &ro6er or a!ent who was supposed merel' to 3nd a &u'er-

As to the second o&servation$ 5er6ins 6new that #ecio was actin! solel' as a &ro6er or a!ent- As such$ he was not

the real holder of 4hi&it "$ and$ consequentl'$ the presumption adverted to did not appl' to him- ven if it did$

however$ what could 5er6ins have done? @se force or violence upon the person of #ecio$ or as6 a policeman to

detain him? either step$ however$ could have &een ta6en without some ris6s- To &e!in with$ 5er6ins could not have

properl' ta6en the law in his own hands- 9ad he done so$ #ecio could have le!all' used force a!ainst force-

oreover$ said presumption is re&utta&le and would have easil' &een oLset &' the undenia&le fact that #ecio had

acted merel' in a representative capacit'- A!ain$ wh' should 5er6ins ta6e the initiative in the matter? Bas it not

&ein! handled &' his associate in the law 3rm$ r- DeBitt$ one of the most a&le mem&ers of the 5hilippine %ar? It

ma' not &e amiss to add that the record &efore us discloses a&solutel' nothin! that ma' cast even a shadow of

dou&t upon the honest' of r- 5er6ins-

The lan!ua!e of the lower court in commentin! on the testimon' of iwa waschanro&1es virtual 1aw li&rar'

- - - In !eneral$ the testimon' of iwa is unrelia&le- 9is &ehaviour in Court in den'in! 3rst and then in acceptin!

later his own si!nature throws him to a position where the Court must loo6 upon him with suspicion and distrust- 9is

prevarication &efore the Court as to the !enuineness of his own si!nature was pro&a&l' due to the conscience of aman who came to Court with a mental reservation$ &ut who ma' have &een compelled under the circumstances to

pla' the role of a willin! tool- (p- *8$ #- A-

The followin! portion of iwaUs testimon' illustrates the point referred to in the decision appealed

from>!cchanro&les-com-ph

ATT- O@I#I/chanro&1es virtual 1aw li&rar'


25/59

O- Bill 'ou please !o over this paper which for purposes of identi3cation we request that it &e mar6ed as 4hi&it

for the plaintiLs and which was mar6ed as 4hi&it ,)& &efore the Fested 5ropert' Claims Committee$ and tell us if

'ou 6now that document? V A- o- I do not remem&er this paper-

O- r- iwa$ at the &ottom of this certi3cate or 4hi&it $ which was 4hi&it ,)& in the Committee and su&mitted &'

the Alien 5ropert' Administration$ there is a t'pewritten name$ Rin!' iwa$ and a&ove it is a si!nature- Bill 'ou

6indl' tell the Court if that is 'our si!nature or not? 5lease loo6 over it a!ain- V A- o- It is not mine-

O- 5lease e4amine it carefull' and tell the Court afterwards if 'ou reco!ni;e that si!nature- 4amine it carefull'- VA- It loo6s ver' similar to m' si!nature-

O- %ut would 'ou want or are 'ou willin! to !o on record and sa' that it is not 'our si!nature? V A- I can not sa'- I

donUt e4actl' remem&er that I si!ned this$ &ut it loo6s ver' similar to m' si!nature-

O- ou will not testif' under oath that this is 'our si!nature? V A- es$ sir-

O- Bhat do 'ou mean to sa' &' U'es$ sir? Do 'ou swear that this is 'our si!nature or not 'our si!nature? V A- I thin6

this is m' si!nature-

O- So 'ou are willin! to !o on record now that that si!nature appearin! in 4hi&it UU is 'our si!nature? V A- es$ I

thin6 so- (pp- 1"*)1",$ t- s- n-

Be do not a!ree with its appraisal &' the lower court- It is clear that$ as he did not remem&er the e4ecution of4hi&it several 'ears &efore the hearin! of this case$ iwa had dou&ts a&out the !enuineness of the si!nature

thereon$ &ut the appearance thereof$ similar or identical to that of his own si!nature$ prevented him from den'in!

its authenticit'- This does not indicate lac6 of veracit' on his part- At an' rate$ plaintiLs claim to have &ou!ht the

shares of stoc6 in question in Decem&er$ 1+8"$ or durin! the mana!ement of Rita>ima$ who held the correspondin!

stoc6 certi3cates continuousl' from Decem&er$ 1+81$ to April$ 1+87$ when iwa su&stituted him$ so that neither

Campos nor 9ess could have delivered those certi3cates to De los Santos in Decem&er 1+8"- Apart from this$ if

there are Haws in the proof for the defense$ those of the evidence for the plaintiLs are much &i!!er and more

su&stantial and vital- Consequentl'$ we hold that plaintiLs have not esta&lished their pretense &' a preponderance

of the evidence-

ven$ however$ if uan Campos and Carl 9ess had sold the shares of stoc6 in question$ as testi3ed to &' De los

Santos$ the result$ insofar as plaintiLs are concerned$ would &e the same- It is not disputed that said shares of stoc6

were re!istered$ in the records of the 2epanto$ in the name of Ficente adri!al- either is it denied that the latter

was$ as re!ards said shares of stoc6$ a mere trustee for the &ene3t of the itsuis- The record shows ) and there is

no evidence to the contrar' V that adri!al had never disposed of said shares of stoc6 in an' manner whatsoever$

e4cept &' turnin! over the correspondin! stoc6 certi3cates$ late in 1+81$ to the itsuis$ the &ene3cial and trueowners thereof- It has$ moreover$ &een esta&lished$ &' the uncontradicted testimon' of Rita>ima and iwa$ the

mana!ers of the itsuis in the 5hilippines$ from 1+81 to 1+8*$ that the itsuis had neither sold$ conve'ed$ or

alienated said shares of stoc6$ nor delivered the aforementioned stoc6 certi3cates$ to an'&od' durin! said period-

Section 7* of the Corporation 2aw reads>!cchanro&les-com-ph

The capital stoc6 of stoc6 corporations shall &e divided into shares for which certi3cates si!ned &' the president or

the vice) president$ countersi!ned &' the secretar' or cler6 and sealed with the seal of the corporation$ shall &e

issued in accordance with the &') laws- Shares of stoc6 so issued are personal propert' and ma' &e transferred &'

deliver' of the certi3cate indorsed &' the owner or his attorne' in fact or other person le!all' authori;ed to ma6e

the transfer- o transfer$ however$ shall &e valid$ e4cept as &etween the parties$ until the transfer is entered and

noted upon the &oo6s of the corporation so as to show the names of the parties to the transaction$ the date of the

transfer$ the num&er of the certi3cate$ and the num&er of shares transferred-

o shares of stoc6 a!ainst which the corporation holds an' unpaid claim shall &e transfera&le on the &oo6s of the

corporation- (Italics supplied-

5ursuant to this provision$ a share of stoc6 ma' &e transferred &' endorsement of the correspondin! stoc6

certi3cate$ coupled with its deliver'- 9owever$ the transfer shall not &e valid$ e4cept as &etween the parties$ until

it is entered and noted upon the &oo6s of the corporation- o such entr' in the name of the plaintiLs herein

havin! &een made$ it follows that the transfer alle!edl' eLected &' uan Campos and Carl 9ess in their favor is not

valid$ e4cept as &etween themselves- It does not &ind either adri!al or the itsuis$ who are not parties to said

alle!ed transaction- Bhat is more$ the same is not valid$ or$ in the words of the Supreme Court of Bisconsin (#e

urph'$ *1 Bisc- *1+$ 0 - B- 81+ V which were quoted approval in @son v- Diosomito (,1 5hil-$ *7* V

a&solutel' void and$ hence$ as !ood as non)e4istent$ insofar as adri!al and the itsuis are concerned- .or this

reason$ althou!h a stoc6 certi3cate is sometimes re!arded as quasi)ne!otia&le$ in the sense that it ma' &e


26/59

transferred &' endorsement$ coupled with deliver'$ it is well settled that the instrument is non)ne!otia&le$ &ecause

the holder thereof ta6es it without pre>udice to such ri!hts or defenses as the re!istered owner or creditor ma' have

under the law$ e4cept insofar as such ri!hts or defenses are su&>ect to the limitations imposed &' the principles

!overnin! estoppel-

Certi3cates of stoc6 are not ne!otia&le instruments (post$ 5ar- 1!cchanro&les-com-ph

The doctrine that a &ona 3de purchaser of shares under a for!ed or unauthori;ed transfer acquires no title as

a!ainst the true owner does not appl' where the circumstances are such as to estop the latter from assertin! his

title- - - -

4 4 4

A reason often !iven for the rule is that it is a case for the application of the ma4im that where one of two innocent

parties must suLer &' reason of a wron!ful or unauthori;ed act$ the loss must fell on the one who 3rst trusted the

wron!doer and put in his hands the means of inHictin! such loss- %ut Une!li!ence which will wor6 an estoppel of this

6ind must &e a pro4imate cause of the purchase or advancement of mone' &' the holder of the propert'$ and must

enter into the transaction itselfUE the ne!li!ence must &e in or immediatel' connected with the transfer itself-

.urthermore$ Uto esta&lish this estoppel it must appear that the true owner had conferred upon the person who has

diverted the securit' the indicia of ownership$ or an apparent title or authorit' to transfer the title-U So the owner is

not !uilt' of ne!li!ence in merel' intrustin! another with the possession of his certi3cate of stoc6$ if he does not$ &'

assi!nment or otherwise$ clothe him with the apparent title- or is he deprived of his title or his remed' a!ainst the

corporation &ecause he intrusts a third person with the 6e' of a &o4 in which the certi3cate are 6ept$ where the

latter ta6es them from the &o4 and &' for!in! the ownerUs name to a power of attorne' procures their transfer on

the corporate &oo6s- or is the mere indorsement of an assi!nment and power of attorne' in &lan6 on a certi3cate

of stoc6$ which is afterwards lost or stolen$ such ne!li!ence as will estop the owner from assertin! his title asa!ainst a &ona 3de purchaser from the 3nder or thief$ or from holdin! the corporation lia&le for allowin! a transfer

on its &oo6s$ where the loss or theft of the certi3cate was not due to an' ne!li!ence on the part of the owner$

althou!h there is some dan!erous and wholl' un>usti3a&le dictum to the contrar'- So it has &een held that the fact

that stoc6 pled!ed to a &an6 is indorsed in &lan6 &' the owner does not estop him from assertin! title thereto as

a!ainst a &ona 3de purchaser for value who derives his title from one who stole the certi3cate from the pled!es-

And this has also &een held to &e true thou!h the thief was on ocer of the pled!es$ since his act in wron!full'

appropriatin! the certi3cate cannot &e re!arded as a misappropriation &' the &an6 to whose custod' the certi3cate

was intrusted &' the owner$ even thou!h the &an6 ma' &e lia&le to the pled!or- - - - A person is not !uilt' of

ne!li!ence in leavin! a certi3cate of stoc6 indorsed in &lan6 in a safe deposit &o4 used &' himself and another

>ointl'$ so as to &e estopped from assertin! his title after the certi3cate has &een stolen &' the other$ and sold or

pled!ed to a &ona 3de purchaser or pled!ee- or is he ne!li!ent in puttin! a certi3cate so indorsed in a place to

which an emplo'ee had access$ where he has no reason to dou&t the latterUs honest'$ - - - (Italics ours-

In the leadin! case of Rno4 v- den uscee American Co- (8" - - +00$ ++")++7$ the rule has &een forcefull'

stated as follows>!cchanro&les-com-ph

The courts have &een frequentl' importuned to e4tend the qualities of ne!otia&ilit' of stoc6 certi3cates &e'ond

the limits mentioned$ and clothe them with the same character of complete ne!otia&ilit' as attaches to commercial

paper$ so as to ma6e a transfer to a purchaser in !ood faith for value equivalent to actual title$ althou!h there was

no a!enc' in the transferror$ and the certi3cate had &een lost without the fault of the true owner$ or had &een

o&tained &' theft or ro&&er'- %ut the courts have refused to accede to this view$ and we have found no case entitled

to &e re!arded as authorit' which denies to the owner of a stoc6 certi3cate which has &een lost without his

ne!li!ence$ or stolen$ the ri!ht to reclaim it from the hands of an' person in whose possession it su&sequentl'

comes$ althou!h the holder ma' have ta6en it in !ood faith and for value- The precise question has not often &een

presented to the courts$ for the reason$ pro&a&l'$ that the' have with !reet uniformit' held that stoc6 certi3cates

were not ne!otia&le instruments in the &road meanin! of that phraseE &ut whenever the question has arisen it has


27/59

&een held that the title of the the owner of a lost or stolen certi3cate ma' &e asserted a!ainst an' one

su&sequentl' o&tainin! its possession althou!h the holder ma' &e a &ona 3de purchaser- Anderson v- icholas$ "0

- - ,ima

mi!ht have$ or must have$ assi!ned the certi3cates on or &efore Decem&er 1+8"$ althou!h$ as a&ove stated$ this is$

not onl'$ impro&a&le$ under the conditions$ then o&tainin!$ &ut$ also$ impossi&le$ considerin! that$ in April 1+87$

Rita>ima delivered the instruments to iwa$ who 6ept them in its possession until 1+8*- At an' rate$ such

assi!nment &' iwa V !rantin! for the sa6e of ar!ument the accurac' of the surmise of plaintiLs herein V was

unauthori;ed &' the itsuis$ who$ in the li!ht of the precedents cited a&ove$ are not char!ea&le with ne!li!ence- Inother words$ assumin! that Rita>ima had &een !uilt' of em&e;;lement$ &' ne!otiatin! the stoc6 certi3cates in

question for his personal &ene3t$ as claimed &' the plaintiLs$ the title of his assi!nees and successors in interest

would still &e su&>ect to the ri!hts of the re!istered owner$ namel'$ adri!al$ and$ consequentl'$ of the part' for

whose &ene3t and account the latter held the correspondin! shares of stoc6$ that is to sa'$ the itsuis-

At an' rate$ at the time of the alle!ed sales in their favor$ plaintiLs were aware of sucient facts to put them on

notice of the need of inquirin! into the re!ularit' of the transactions and the title of the supposed vendors- Indeed$

the certi3cates of stoc6 in question were in the name of adri!al- /&viousl'$ therefore$ the alle!ed sellers (Campos

and 9ess were not re!istered owners of the correspondin! shares of stoc6- %ein! presumed to 6now the law V

particularl' the provisions of section 7* of Act o- 18*+ V and$ also$ as e4perienced traders in shares of stoc6$

plaintiLs must have$ accordin!l'$ &een conscious of the consequent in3rmities in the title of the supposed vendors$

or of the handicaps thereof- oreover$ the aforementioned sales were admittedl' hostile to the apanese$ who had

prohi&ited it and plaintiLs had actual 6nowled!e of these facts and of the ris6s attendant to the alle!ed transaction-

In other words$ plaintiLs advisel' assumed those ris6s and$ hence$ the' can not validl' claim$ a!ainst the re!istered

stoc6holder$ the status of purchasers in !ood faith-

The lower court held$ and plaintiLs maintain that$ not &ein! the re!istered owners of the shares of stoc6 in question$

the itsuis can not assert a &etter ri!ht than said plaintiLs- This pretense is untena&le- Inasmuch as adri!al$ the

re!istered owner of said shares of stoc6$ has alwa's ac6nowled!ed that he held the same merel' as an a!ent of$ or

trustee for$ the itsuis V and this is not denied V it follows that the latter are entitled to invo6e such ri!hts as

adri!al had as re!istered stoc6holder- @pon the other hand$ even the alle!ed sale &' uan Campos and Carl 9ess

to plaintiLs herein is contested &' the defense and$ to our mind$ has not &een esta&lished &' a preponderance of

the evidence- 9ence$ as the undisputed principal or &ene3ciar' of the re!istered owner (adri!al$ the itsuis ma'

claim his ri!hts$ which cannot &e e4ercised &' the plaintiLs$ not onl' &ecause their alle!ed title is not derived either

from adri!al or from the itsuis$ &ut$ also$ &ecause it is in dero!ation$ of said ri!hts- adri!al and the itsuis are

not privies to the alle!ed sales &' Campos and 9ess to the plaintiLs$ contrar' to the latterUs pretense-


28/59

In conclusion$ when the 5ropert' Custodian issued the Festin! /rder complained of$ the shares of stoc6 in question

&elon!ed to the itsuis$ admittedl' an enem' corporation$ so that said Festin! /rder is in conformit' with law and

should &e upheld- Bherefore$ the decision appealed from is here&' reversed$ and the complaint$ accordin!l'$

dismissed$ with costs a!ainst the plaintiLs)appellees- It is so ordered-

5aras$ C--$ 5a&lo$ 5adilla$ ontema'or$ #e'es$ A-$ u!o and 2a&rador$ -$ concur-

G.R. No. 152578 No$e?ber 2@, 2005

R%&LIC O( +/ /ILIINS, Re!re#ented b te re#"dent"a Co??"##"on on Good Go$ern?ent,

et"t"oner $#. S+A+ O( /ANS )N*I 9+ro3 "t# Bector, )AN%L G. )ON+CILLO:, )ILIO +. A,

D%ARDO ). COJ%ANGCO, JR., S+A+ O( (RDINAND )ARCOS, SR., and I)LDA R. )ARCOS,

Re#!ondent#.

In the hope)3lled &ut pro&lem)laden aftermath of the DSA #evolution$ 5resident Cora;on C- Aquino issued

4ecutive /rder (/ o- 1$ creatin! the 5residential Commission on Good Government (5CGG tas6ed with$ amon!

others$ the recover' of all ill)!otten wealth accumulated &' former 5resident .erdinand arcos$ his immediate

famil'$ relatives$ su&ordinates and close associates- This was followed &' / os- " and 18$ respectivel' free;in! all

assets and properties in the 5hilippines in which the former 5resident$ his wife$ their close relatives$ su&ordinates$&usiness associates$ dummies$ a!ents or nominees have an' interest or participation$ and de3nin! the >urisdiction

over cases involvin! the ill)!otten wealth- 5ursuant to the e4ecutive orders$ several writs of sequestration were

issued &' the 5CGG in pursuit of the reputedl' vast arcos fortune-

.ollowin! a lead that arcos had su&stantial holdin!s in %ulletin 5u&lishin! Corporation (%ulletin$ the 5CGG issued

a Brit of Sequestration dated April ""$ 1+0,$ sequesterin! the shares of arcos$ milio T- ap (ap$ duardo -

Co>uan!co$ r- (Co>uan!co$ and their nominees and a!ents in %ulletin-

This was followed &' another Brit of Sequestration issued on .e&ruar' 1"$ 1+0=$ this time sequesterin! the shares

of stoc6$ assets$ properties$ records and documents of 9ans en;i 9oldin!s and ana!ement$ Inc- (99I-


29/59

The #epu&lic then instituted &efore the Sandi!an&a'an on ul' "+$ 1+0=$ a complaint for reconve'ance$ reversion$

accountin!$ restitution and dama!es entitled #epu&lic of the 5hilippines v- milio T- ap$ anuel G- ontecillo$

duardo - Co>uan!co$ r-$ Cesar C- alamea$ .erdinand - arcos and Imelda #- arcos and doc6eted as Civil Case

o- uan!co as alameaUs co)actor instead of mere

colla&orator- The complaint was amended for the second time on /cto&er 1=$ 1++ect of

a case1 that reached this Court-

The Second Amended Complaint also included the state of 9ans - en;i (state of en;i$ throu!h its e4ecutor$

Att'- anuel G- ontecillo (Att'- ontecillo$ as one of the defendants-

The issues presented for resolution as stated in the Sandi!an&a'anUs 5re)Trial /rder dated ovem&er 11$ 1++1

were

1 Bhether or not the sale of 1*8$8=< shares of stoc6 of %ulletin 5u&lishin! Co-$ Inc-$ su&>ect of this case &' the late

9ans - en;i to the @-S- Automotive Co- Inc- is valid and le!alE and

" Bhether or not the shares of stoc6 of %ulletin 5u&lishin! Co- Inc- re!istered andMor issued in the name of

defendants milio T- ap$ duardo Co>uan!co$ r-$ Cesar alamea and the late 9ans - en;i (andMor his estate

andMor his holdin! compan'$ 9 9oldin! Investment Corp- are ill)!otten wealth of the defendants arcos

spouses-

a6e of record the oral manifestation of Att'- stelito endo;a$ counsel for defendant duardo Co>uan!co- That (a

whether or not the said 1*8$8=< shares of stoc6 of %ulletin 5u&lishin! Co- Inc- le!all' &elon!ed to the late 9ans

en;i &efore he sold the same to @-S- Automotive Co- Inc- and (& whether or not plaintiL #epu&lic is entitled to the

same$ should also &e threshed out durin! the trial on the merits-"

After protracted proceedin!s which spawned a num&er of cases7 that went up to this Court$ the Sandi!an&a'an

rendered a Decision8 dated arch 18$ "uan!co$ r-$ su&>ect of the #esolution of the

Supreme Court dated April 1*$ 1+00 in G-#- o- =+1",-

5ursuant to alternative A mentioned therein$ plaintiL #epu&lic of the 5hilippines throu!h the 5CGG is here&'

declared the le!al owner of these shares$ and is further directed to e4ecute$ in accordance with the A!reement

which is entered into with %ulletin 5u&lishin! Corporation on une +$ 1+00$ the necessar' documents in order to

eLect transfer of ownership over these shares to the %ulletin 5u&lishin! Corporation-

%- The 1+0$


30/59

"- /rderin! the defendant state of 9ans - en;i throu!h its 4ecutor$ anuel G- ontecillo$ to surrender for

cancellation the ori!inal ei!ht %ulletin certi3cates of stoc6 in its possession$ which were presented in court as

4hi&its X-$ which are part of the "1"$8"8-* %ulletin shares su&>ect of the #esolution of the Supreme Court dated

April 1*$ 1+00 in G-#- o- =+1",-

7- Declarin! that the followin! %ulletin shares are not the ill)!otten wealth of the defendant arcos spouses

a- The 1*8$8=" %ulletin shares sold &' the late 9ans - en;i to @-S- Automotive Co-$ Inc-$ the sale thereof &ein!

valid and le!alE

&- The "$,1= %ulletin shares in the name of defendant milio T- ap which he owns in his own ri!htE and

c- The 1 %ulletin share in the name of the state of 9ans - en;i which it owns in its own ri!ht-

8- Dismissin!$ for lac6 of sucient evidence$ plaintiLUs claim for dama!es$ and defendantsU respective

counterclaims-

S/ /#D#D-,

In the present consolidated petitions$ the fore!oin! Sandi!an&a'an Decision is assailed on diLerent !rounds-

The #epu&lic$ in G-#- o- 1*"=*0$ assails the afore)quoted Decision insofar as it declared as not ill)!otten wealth of

the arcos spouses the 1*8$8=" shares (1*8 &loc6 sold &' en;i to @-S- Automotive Co-$ Inc- (@S Automotive and

dismissed the #epu&licUs claim for dama!es-

In G-#- o- 1*880=$ Co>uan!co questions para!raphs 1 and " of the Sandi!an&a'an Decision-

In G-#- o- 1*8*10$ on the other hand$ the state of en;i imputes !rave error and misinterpretation of facts and

evidence a!ainst the Sandi!an&a'an in declarin! that the 8,$,", %ulletin shares in the name of Co>uan!co$ and the

1+0$ect of the #epu&licUs petition in G-#- o- 1*"*=0$ is

treated separatel' from the 1+0 and "18 &loc6s$ which are the su&>ects of the petitions in G-#- o- 1*880= and G-#-

o- 1*8*10-

1*8 %loc6

In 1+*=$ en;i purchased the entire interest in %ulletin from its founder and owner$ r- Carson Ta'lor- In 1+,1$ ap$

owner of @S Automotive$ purchased %ulletin shares from en;i and &ecame one of the corporationUs ma>or

stoc6holders-

/n April "$ 1+,0$ a stoc6 option was e4ecuted &' and &etween en;i and en;i and Co- on the one hand$ and ap

and @S Automotive on the other$ where&' the parties !ave the each other preferential ri!ht to &u' the otherUs%ulletin shares-

/n April ""$ 1+,0$ the stoc6holders of %ulletin approved certain amendments to %ulletinUs Articles of Incorporation$

consistin! of some restrictions on the transfer of %ulletin shares to non)stoc6holders-0 The amendments were

approved &' the %oard of Directors of %ulletin and &' the Securities and 4chan!e Commission (SC-

Several 'ears later$ on une *$ 1+08$ Att'- Amorsolo F- endo;a (Att'- endo;a$ Fice 5resident of @S Automotive$

e4ecuted a promissor' note with his personal !uarantee in favor of en;i$ promisin! to pa' the latter the sum of


31/59

5"1$7udiciall' con3rmed the sale-

The Sandi!an&a'an dismissed the #epu&licUs claim$ &ased on the adavit of ariano %- Ouimson$ r- (Ouimsondated /cto&er +$ 1+0,$ that the sale should &e nulli3ed &ecause @S Automotive onl' acted as a dumm' of arcos

who was the real &u'er of the shares- Accordin! to the court$ the #epu&lic failed to overcome its &urden of proof

since OuimsonUs adavit was not corro&orated &' other evidence and was$ in fact$ refuted &' Att'- ontecillo-

In its emorandum+ dated ul' =$ "ected to cross)e4amination &' the law'ers of %ulletin which is controlled &' ap- .urther$ the

evidence it presented &efore the 5CGG purportedl' showin! that the transfer of %ulletin shares from en;i to @S

Automotive was underta6en due to pressure e4erted &' arcos on en;i should have &een ta6en into account-

The #epu&lic insists that the sale &etween en;i and @-S- Automotive was a sham &ecause the parties failed to

compl' with the &asic requirement of a deed of sale in the transfer of the su&>ect shares- .urther$ a num&er of

questions were alle!edl' not resolved$ such as (a Bho was the seller of the su&>ect sharesVthe late en;i as the

alle!ed owner or Att'- ontecillo as then special administrator and later e4ecutor of en;iUs estateE (& If en;i sold

the shares$ was there a need to con3rm the sale? If Att'- ontecillo was the one who sold them$ what was his

authorit' to sell the said shares?

The #epu&lic also contends that en;i and ap were &oth dummies of the late 5resident arcos$ used &' the latterin order to conceal his interest in %ulletin- 9ence$ the 1*8 &loc6 should also have &een declared ill)!otten wealth

and forfeited in favor the Government-

The fore!oin! alle!edl' warrants the award of dama!es in favor of the #epu&lic which the Sandi!an&a'an

erroneousl' failed to do-

The #epu&lic$ therefore$ pra's that the Sandi!an&a'an Decision$ insofar as it declares the sale of the 1*8 &loc6 to

&e valid and le!al$ &e reconsidered and >ud!ment accordin!l' rendered declarin! the 1*8 &loc6 as ill)!otten wealth$

forfeitin! the same or the proceeds thereof in favor of the #epu&lic$ and awardin! actual$ temperate and nominal

dama!es in the CourtUs discretion$ moral dama!es in the amount of *< %illion 5esos$ e4emplar' dama!es of 1

%illion 5esos$ attorne'Us fees$ liti!ation e4penses and tre&le >udicial costs-


32/59

The state of en;i and 99I 3led a emorandum11 dated arch 1


33/59

The o&>ection raised &' the #epu&lic actuall' concerns the authorit' of Att'- ontecillo$ the e4ecutor of en;iUs

estate$ to indorse the said certi3cates- 9owever$ Att'- ontecilloUs authorit' to ne!otiate the transfer and e4ecute

the necessar' documents for the sale of the 1*8 &loc6 is found in the General 5ower of Attorne' e4ecuted &' en;i

on a' "7$ 1+08$ which speci3call' authori;es Att'- ontecillo JTKo sell$ assi!n$ transfer$ conve' and set over upon

such consideration and under such terms and conditions as he ma' deem proper$ an' and all stoc6s or shares of

stoc6$ now standin! or which ma' thereafter stand in m' name on the &oo6s of an' and all compan' or corporation$

and for that purpose to ma6e$ si!n and e4ecute all necessar' instruments$ contracts$ documents or acts of

assi!nment or transfer-1*

Att'- ontecilloUs authorit' to accept pa'ment of the purchase price for the 1*8 &loc6 sold to @S Automotive after

en;iUs death sprin!s from the latterUs 2ast Bill and Testament and the /rder of the pro&ate court con3rmin! the

sale and authori;in! Att'- ontecillo to accept pa'ment therefor- 9ence$ &efore and after en;iUs death$ Att'-

ontecillo was vested with ample authorit' to eLect the sale of the 1*8 &loc6 to @S Automotive-

That the 1*8 &loc6 was not included in the inventor' is plausi&l' e4plained &' the fact that at the time the

inventor' of the assets of en;iUs estate was ta6en$ the sale of the 1*8 &loc6 had alread' &een consummated-

%esides$ the non)inclusion of the proceeds of the sale in the inventor' does not aLect the validit' and le!alit' of the

sale itself-

At an' rate$ the Sandi!an&a'anUs factual 3ndin!s that the 1*8 &loc6 was sold to @S Automotive while en;i was

still alive$ and that Att'- ontecillo merel' accepted pa'ment &' virtue of the authorit' conferred upon him &'

en;i himself are conclusive upon this Court$ supported$ as the' are$ &' the evidence on record-1, As held &' the

Sandi!an&a'an

X The sale was made pursuant to the Stoc6 /ption e4ecuted in 1+,0 &etween the parties to the sale$ considerin!

the restrictions contained in %ulletinUs Articles of Incorporation as amended in 1+,0 limitin! the transfera&ilit' of its

shares- e!otiations for the sale too6 place and were concluded &efore the death of en;i- After his death$ full

pa'ment of the entire consideration of the sale$ principal and interest$ was made onl' after >udicial con3rmation

thereof in the 5ro&ate Case- The transaction was dul' supported &' the correspondin! receipt$ voucher$ cancelled

chec6s$ cancelled promissor' note$ and %I# certi3cation of pa'ment of the correspondin! ta4es due thereon-1=

The Supreme Court is not a trier of facts- It is not our function to e4amine and wei!

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