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Renato Tayag vs Benguet Consolidated, Inc.

26 SCRA 242 Business Organization Corporation Law Domicile of a


Corporation By Laws Must Yield To a Court Order Corporation is an Artificial
Being
In March 1960, Idonah Perkins died in New York. She left behind properties here and
abroad. One property she left behind were two stock certificates covering 33,002 shares of
stocks of the Benguet Consolidated, Inc (BCI). Said stock certificates were in the possession
of the Country Trust Company of New York (CTC-NY). CTC-NY was the domiciliary
administrator of the estate of Perkins (obviously in the USA). Meanwhile, in 1963, Renato
Tayag was appointed as the ancillary administrator (of the properties of Perkins she left
behind in the Philippines).
A dispute arose between CTC-NY and Tayag as to who between them is entitled to possess
the stock certificates. A case ensued and eventually, the trial court ordered CTC-NY to turn
over the stock certificates to Tayag. CTC-NY refused. Tayag then filed with the court a
petition to have said stock certificates be declared lost and to compel BCI to issue new
stock certificates in replacement thereof. The trial court granted Tayags petition.
BCI assailed said order as it averred that it cannot possibly issue new stock certificates
because the two stock certificates declared lost are not actually lost; that the trial court as
well Tayag acknowledged that the stock certificates exists and that they are with CTC-NY;
that according to BCIs by laws, it can only issue new stock certificates, in lieu of lost,
stolen, or destroyed certificates of stocks, only after court of law has issued a final and
executory order as to who really owns a certificate of stock.
ISSUE: Whether or not the arguments of Benguet Consolidated, Inc. are correct.
HELD: No. Benguet Consolidated is a corporation who owes its existence to Philippine laws.
It has been given rights and privileges under the law. Corollary, it also has obligations
under the law and one of those is to follow valid legal court orders. It is not immune from
judicial control because it is domiciled here in the Philippines. BCI is a Philippine corporation
owing full allegiance and subject to the unrestricted jurisdiction of local courts. Its shares of
stock cannot therefore be considered in any wise as immune from lawful court orders.
Further, to allow BCIs opposition is to render the court order against CTC-NY a mere scrap
of paper. It will leave Tayag without any remedy simply because CTC-NY, a foreign entity
refuses to comply with a valid court order. The final recourse then is for our local courts to
create a legal fiction such that the stock certificates in issue be declared lost even though
in reality they exist in the hands of CTC-NY. This is valid. As held time and again, fictions
which the law may rely upon in the pursuit of legitimate ends have played an important
part in its development.

Further still, the argument invoked by BCI that it can only issue new stock certificates in
accordance with its bylaws is misplaced. It is worth noting that CTC-NY did not appeal the
order of the court it simply refused to turn over the stock certificates hence ownership
can be said to have been settled in favor of estate of Perkins here. Also, assuming that
there really is a conflict between BCIs bylaws and the court order, what should prevail is
the lawful court order. It would be highly irregular if court orders would yield to the bylaws
of a corporation. Again, a corporation is not immune from judicial orders.

Manuel Torres, Jr. vs Court of Appeals


278 SCRA 793 Business Organization Corporation Law Transfer of Shares of
Stocks Corporate Records
Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty &
Development Corporation (TRDC). TRDC is a small family owned corporation and other
stockholders thereof include Judge Torres nieces and nephews. However, even though
Judge Torres owns the majority of TRDC and was also the president thereof, he is only
entitled to one vote among the 9-seat Board of Directors, hence, his vote can be easily
overridden by minority stockholders. So in 1987, before the regular election of TRDC
officers, Judge Torres assigned one share (qualifying share) each to 5 outsiders for the
purpose of qualifying them to be elected as directors in the board and thereby strengthen
Judge Torres power over other family members.
However, the said assignment of shares were not recorded by the corporate secretary, Ma.
Christina Carlos (niece) in the stock and transfer book of TRDC. When the validity of said
assignments were questioned, Judge Torres ratiocinated that it is impractical for him to
order Carlos to make the entries because Carlos is one of his opposition. So what Judge
Torres did was to make the entries himself because he was keeping the stock and transfer
book. He further ratiocinated that he can do what a mere secretary can do because in the
first place, he is the president.
Since the other family members were against the inclusion of the five outsiders, they
refused to take part in the election. Judge Torres and his five assignees then decided to
conduct the election among themselves considering that the 6 of them constitute a
quorum.
ISSUE: Whether or not the inclusion of the five outsiders are valid. Whether or not the
subsequent election is valid.
HELD: No. The assignment of the shares of stocks did not comply with procedural
requirements. It did not comply with the by laws of TRDC nor did it comply with Section 74
of the Corporation Code. Section 74 provides that the stock and transfer book should be
kept at the principal office of the corporation. Here, it was Judge Torres who was keeping it

and was bringing it with him. Further, his excuse of not ordering the secretary to make the
entries is flimsy. The proper procedure is to order the secretary to make the entry of said
assignment in the book, and if she refuses, Judge Torres can come to court and compel her
to make the entry. There are judicial remedies for this. Needless to say, the subsequent
election is invalid because the assignment of shares is invalid by reason of procedural
infirmity. The Supreme Court also emphasized: all corporations, big or small, must abide by
the provisions of the Corporation Code. Being a simple family corporation is not an
exemption. Such corporations cannot have rules and practices other than those established
by law.

Philippine Stock Exchange vs Court of Appeals


287 SCRA 232 Business Organization Corporation Law Extent of Power of the
Securities and Exchange Commission
Puerto Azul Land, Inc. (PALI) is a corporation engaged in the real estate business. PALI was
granted permission by the Securities and Exchange Commission (SEC) to sell its shares to
the public in order for PALI to develop its properties.
PALI then asked the Philippine Stock Exchange (PSE) to list PALIs stocks/shares to facilitate
exchange. The PSE Board of Governors denied PALIs application on the ground that there
were multiple claims on the assets of PALI. Apparently, the Marcoses, Rebecco Panlilio
(trustee of the Marcoses), and some other corporations were claiming assets if not
ownership over PALI.
PALI then wrote a letter to the SEC asking the latter to review PSEs decision. The SEC
reversed PSEs decisions and ordered the latter to cause the listing of PALI shares in the
Exchange.
ISSUE: Whether or not it is within the power of the SEC to reverse actions done by the PSE.
HELD: Yes. The SEC has both jurisdiction and authority to look into the decision of PSE
pursuant to the Revised Securities Act and for the purpose of ensuring fair administration of
the exchange. PSE, as a corporation itself and as a stock exchange is subject to SECs
jurisdiction, regulation, and control. In order to insure fair dealing of securities and a fair
administration of exchanges in the PSE, the SEC has the authority to look into the rulings
issued by the PSE. The SEC is the entity with the primary say as to whether or not
securities, including shares of stock of a corporation, may be traded or not in the stock
exchange.
HOWEVER, in the case at bar, the Supreme Court emphasized that the SEC may only
reverse decisions issued by the PSE if such are tainted with bad faith. In this case, there
was no showing that PSE acted with bad faith when it denied the application of PALI. Based

on the multiple adverse claims against the assets of PALI, PSE deemed that granting PALIs
application will only be contrary to the best interest of the general public. It was reasonable
for the PSE to exercise its judgment in the manner it deems appropriate for its business
identity, as long as no rights are trampled upon, and public welfare is safeguarded.

Feliciano vs. COA (G.R. No. 147402, January 14, 2004


Facts: COA assessed Leyte Metropolitan Water District (LMWD) auditing fees. Petitioner
Feliciano, as General Manager of LMWD, contended that the water district could not pay the
said fees on the basis of Sections 6 and 20 of P.D. No. 198 as well as Section 18 of R.A. No.
6758. He primarily claimed that LMWD is a private corporation not covered by COA's
jurisdiction. Petitioner also asked for refund of all auditing fees LMWD previously paid to
COA. COA Chairman denied petitioners requests. Petitioner filed a motion for
reconsideration which COA denied. Hence, this petition.
Issue: Whether a Local Water District (LWD) created under PD 198, as amended, is a
government-owned or controlled corporation subject to the audit jurisdiction of COA or a
private corporation which is outside of COAs audit jurisdiction.
Held: Petition lacks merit. The Constitution under Sec. 2(1), Article IX-D and existing laws
mandate COA to audit all government agencies, including government-owned and
controlled corporations with original charters. An LWD is a GOCC with an original charter.
The Constitution recognizes two classes of corporations. The first refers to private
corporations created under a general law. The second refers to government-owned or
controlled corporations created by special charters.Under existing laws, that general law is
the Corporation Code.
Obviously, LWDs are not private corporations because they are not created under the
Corporation Code. LWDs are not registered with the Securities and Exchange Commission.
Section 14 of the Corporation Code states that all corporations organized under this code
shall file with the SEC articles of incorporation x x x. LWDs have no articles of
incorporation, no incorporators and no stockholders or members. There are no stockholders
or members to elect the board directors of LWDs as in the case of all corporations
registered with the SEC. The local mayor or the provincial governor appoints the directors
of LWDs for a fixed term of office. The board directors of LWDs are not co-owners of the
LWDs. The board directors and other personnel of LWDs are government employees subject
to civil service laws and anti-graft laws. Clearly, an LWD is a public and not a private entity,
hence, subject to COAs audit jurisdiction.
Republic
SUPREME
Manila

of

EN BANC
G.R. No. L-22619

December 2, 1924

the

Philippines
COURT

NATIONAL
COAL
COMPANY, plaintiff-appellee,
vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellant.
Attorney-General
Villa-Real
Perfecto J. Salas Rodriguez for appellee.

for

appellant.

JOHNSON, J.:
This action was brought in the Court of First Instance of the City of Manila on the 17th day
of July, 1923, for the purpose of recovering the sum of P12,044.68, alleged to have been
paid under protest by the plaintiff company to the defendant, as specific tax on 24,089.3
tons of coal. Said company is a corporation created by Act No. 2705 of the Philippine
Legislature for the purpose of developing the coal industry in the Philippine Islands and is
actually engaged in coal mining on reserved lands belonging to the Government. It claimed
exemption from taxes under the provision of sections 14 and 15 of Act No. 2719, and
prayed for a judgment ordering the defendant to refund to the plaintiff said sum of
P12,044.68, with legal interest from the date of the presentation of the complaint, and
costs against the defendant.
The defendant answered denying generally and specifically all the material allegations of
the complaint, except the legal existence and personality of the plaintiff. As a special
defense, the defendant alleged (a) that the sum of P12,044.68 was paid by the plaintiff
without protests, and (b) that said sum was due and owing from the plaintiff to the
Government of the Philippine Islands under the provisions of section 1496 of the
Administrative Code and prayed that the complaint be dismissed, with costs against the
plaintiff.
Upon the issue thus presented, the case was brought on for trial. After a consideration of
the evidence adduced by both parties, the Honorable Pedro Conception, judge, held that
the words "lands owned by any person, etc.," in section 15 of Act No. 2719 should be
understood to mean "lands held in lease or usufruct," in harmony with the other provision
of said Act; that the coal lands possessed by the plaintiff, belonging to the Government, fell
within the provisions of section 15 of Act No. 2719; and that a tax of P0.04 per ton of 1,016
kilos on each ton of coal extracted therefrom, as provided in said section, was the only tax
which should be collected from the plaintiff; and sentenced the defendant to refund to the
plaintiff the sum of P11,081.11 which is the difference between the amount collected under
section 1496 of the Administrative Code and the amount which should have been collected
under the provisions of said section 15 of Act No. 2719. From that sentence the defendant
appealed, and now makes the following assignments of error:
I. The court below erred in holding that section 15 of Act No. 2719 does not refer to coal
lands owned by persons and corporations.
II. The court below erred in holding that the plaintiff was not subject to the tax prescribed in
section 1496 of the Administrative Code.

The question confronting us in this appeal is whether the plaintiff is subject to the taxes
under section 15 of Act No. 2719, or to the specific taxes under section 1496 of the
Administrative Code.
The plaintiff corporation was created on the 10th day of March, 1917, by Act No. 2705, for
the purpose of developing the coal industry in the Philippine Island, in harmony with the
general plan of the Government to encourage the development of the natural resources of
the country, and to provided facilities therefor. By said Act, the company was granted the
general powers of a corporation "and such other powers as may be necessary to enable it
to prosecute the business of developing coal deposits in the Philippine Island and of mining,
extracting, transporting and selling the coal contained in said deposits." (Sec. 2, Act No.
2705.) By the same law (Act No. 2705) the Government of the Philippine Islands is made
the majority stockholder, evidently in order to insure proper government supervision and
control, and thus to place the Government in a position to render all possible
encouragement, assistance and help in the prosecution and furtherance of the company's
business.
On May 14, 1917, two months after the passage of Act No. 2705, creating the National Coal
Company, the Philippine Legislature passed Act No. 2719 "to provide for the leasing and
development of coal lands in the Philippine Islands." On October 18, 1917, upon petition of
the National Coal Company, the Governor-General, by Proclamation No. 39, withdrew "from
settlement, entry, sale or other disposition, all coal-bearing public lands within the Province
of Zamboanga, Department of Mindanao and Sulu, and the Island of Polillo, Province of
Tayabas." Almost immediately after the issuance of said proclamation the National Coal
Company took possession of the coal lands within the said reservation, with an area of
about 400 hectares, without any further formality, contract or lease. Of the 30,000 shares
of stock issued by the company, the Government of the Philippine Islands is the owner of
29,809 shares, that is, of 99 1/3 per centum of the whole capital stock.
If we understand the theory of the plaintiff-appellee, it is, that it claims to be the owner of
the land from which it has mined the coal in question and is therefore subject to the
provisions of section 15 of Act No. 2719 and not to the provisions of the section 1496 of the
Administrative Code. That contention of the plaintiff leads us to an examination of the
evidence upon the question of the ownership of the land from which the coal in question
was mined. Was the plaintiff the owner of the land from which the coal in question was
mined? If the evidence shows the affirmative, then the judgment should be affirmed. If the
evidence shows that the land does not belong to the plaintiff, then the judgment should be
reversed, unless the plaintiff's rights fall under section 3 of said Act.
The only witness presented by the plaintiff upon the question of the ownership of the land
in question was Mr. Dalmacio Costas, who stated that he was a member of the board of
directors of the plaintiff corporation; that the plaintiff corporation took possession of the
land in question by virtue of the proclamation of the Governor-General, known as
Proclamation No. 39 of the year 1917; that no document had been issued in favor of the
plaintiff corporation; that said corporation had received no permission from the Secretary of
Agriculture and Natural Resources; that it took possession of said lands covering an area of
about 400 hectares, from which the coal in question was mined, solely, by virtue of said
proclamation (Exhibit B, No. 39).

Said proclamation (Exhibit B) was issued by Francis Burton Harrison, then GovernorGeneral, on the 18th day of October, 1917, and provided: "Pursuant to the provision of
section 71 of Act No. 926, I hereby withdraw from settlement, entry, sale, or other
disposition, all coal-bearing public lands within the Province of Zamboanga, Department of
Mindanao and Sulu, and the Island of Polillo, Province of Tayabas." It will be noted that said
proclamation only provided that all coal-bearing public lands within said province and
island should be withdrawn from settlement, entry, sale, or other disposition. There is
nothing in said proclamation which authorizes the plaintiff or any other person to enter
upon said reversations and to mine coal, and no provision of law has been called to our
attention, by virtue of which the plaintiff was entitled to enter upon any of the lands so
reserved by said proclamation without first obtaining permission therefor.
The plaintiff is a private corporation. The mere fact that the Government happens to the
majority stockholder does not make it a public corporation. Act No. 2705, as amended by
Act No. 2822, makes it subject to all of the provisions of the Corporation Law, in so far as
they are not inconsistent with said Act (No. 2705). No provisions of Act No. 2705 are found
to be inconsistent with the provisions of the Corporation Law. As a private corporation, it
has no greater rights, powers or privileges than any other corporation which might be
organized for the same purpose under the Corporation Law, and certainly it was not the
intention of the Legislature to give it a preference or right or privilege over other legitimate
private corporations in the mining of coal. While it is true that said proclamation No. 39
withdrew "from settlement, entry, sale, or other disposition of coal-bearing public lands
within the Province of Zamboanga . . . and the Island of Polillo," it made no provision for the
occupation and operation by the plaintiff, to the exclusion of other persons or corporations
who might, under proper permission, enter upon the operate coal mines.
On the 14th day of May, 1917, and before the issuance of said proclamation, the
Legislature of the Philippine Island in "an Act for the leasing and development of coal lands
in the Philippine Islands" (Act No. 2719), made liberal provision. Section 1 of said Act
provides: "Coal-bearing lands of the public domain in the Philippine Island shall not be
disposed of in any manner except as provided in this Act," thereby giving a clear indication
that no "coal-bearing lands of the public domain" had been disposed of by virtue of said
proclamation.
Neither is there any provision in Act No. 2705 creating the National Coal Company, nor in
the amendments thereof found in Act No. 2822, which authorizes the National Coal
Company to enter upon any of the reserved coal lands without first having obtained
permission from the Secretary of Agriculture and Natural Resources.lawphi1.net
The following propositions are fully sustained by the facts and the law:
(1) The National Coal Company is an ordinary private corporation organized under Act No.
2705, and has no greater powers nor privileges than the ordinary private corporation,
except those mentioned, perhaps, in section 10 of Act No. 2719, and they do not change
the situation here.
(2) It mined on public lands between the month of July, 1920, and the months of March,
1922, 24,089.3 tons of coal.

(3) Upon demand of the Collector of Internal Revenue it paid a tax of P0.50 a ton, as taxes
under the provisions of article 1946 of the Administrative Code on the 15th day of
December, 1922.
(4) It is admitted that it is neither the owner nor the lessee of the lands upon which said
coal was mined.
(5) The proclamation of Francis Burton Harrison, Governor-General, of the 18th day of
October, 1917, by authority of section 1 of Act No. 926, withdrawing from settlement,
entry, sale, or other dispositon all coal-bearing public lands within the Province of
Zamboanga and the Island of Polillo, was not a reservation for the benefit of the National
Coal Company, but for any person or corporation of the Philippine Islands or of the United
States.
(6) That the National Coal Company entered upon said land and mined said coal, so far as
the record shows, without any lease or other authority from either the Secretary of
Agriculture and Natural Resources or any person having the power to grant a leave or
authority.
From all of the foregoing facts we find that the issue is well defined between the plaintiff
and the defendant. The plaintiff contends that it was liable only to pay the internal revenue
and other fees and taxes provided for under section 15 of Act No. 2719; while the
defendant contends, under the facts of record, the plaintiff is obliged to pay the internal
revenue duty provided for in section 1496 of the Administrative Code. That being the issue,
an examination of the provisions of Act No. 2719 becomes necessary.
An examination of said Act (No. 2719) discloses the following facts important for
consideration here:
First. All "coal-bearing lands of the public domain in the Philippine Islands shall not be
disposed of in any manner except as provided in this Act." Second. Provisions for leasing by
the Secretary of Agriculture and Natural Resources of "unreserved, unappropriated coalbearing public lands," and the obligation to the Government which shall be imposed by said
Secretary upon the lessee.lawphi1.net
Third. The internal revenue duty and tax which must be paid upon coal-bearing lands
owned by any person, firm, association or corporation.
To repeat, it will be noted, first, that Act No. 2719 provides an internal revenue duty and tax
upon unreserved, unappropriated coal-bearing public lands which may be leased by the
Secretary of Agriculture and Natural Resources; and, second, that said Act (No. 2719)
provides an internal revenue duty and tax imposed upon any person, firm, association or
corporation, who may be the owner of "coal-bearing lands." A reading of said Act clearly
shows that the tax imposed thereby is imposed upon two classes of persons only lessees
and owners.
The lower court had some trouble in determining what was the correct interpretation of
section 15 of said Act, by reason of what he believed to be some difference in the
interpretation of the language used in Spanish and English. While there is some ground for

confusion in the use of the language in Spanish and English, we are persuaded, considering
all the provisions of said Act, that said section 15 has reference only to persons, firms,
associations or corporations which had already, prior to the existence of said Act, become
the owners of coal lands. Section 15 cannot certainty refer to "holders or lessees of coal
lands' for the reason that practically all of the other provisions of said Act has reference to
lessees or holders. If section 15 means that the persons, firms, associations, or corporation
mentioned therein are holders or lessees of coal lands only, it is difficult to understand why
the internal revenue duty and tax in said section was made different from the obligations
mentioned in section 3 of said Act, imposed upon lessees or holders.
From all of the foregoing, it seems to be made plain that the plaintiff is neither a lessee nor
an owner of coal-bearing lands, and is, therefore, not subject to any other provisions of Act
No. 2719. But, is the plaintiff subject to the provisions of section 1496 of the Administrative
Code?
Section 1496 of the Administrative Code provides that "on all coal and coke there shall be
collected, per metric ton, fifty centavos." Said section (1496) is a part of article, 6 which
provides for specific taxes. Said article provides for a specific internal revenue tax upon all
things manufactured or produced in the Philippine Islands for domestic sale or
consumption, and upon things imported from the United States or foreign countries. It
having been demonstrated that the plaintiff has produced coal in the Philippine Islands and
is not a lessee or owner of the land from which the coal was produced, we are clearly of the
opinion, and so hold, that it is subject to pay the internal revenue tax under the provisions
of section 1496 of the Administrative Code, and is not subject to the payment of the
internal revenue tax under section 15 of Act No. 2719, nor to any other provisions of said
Act.
Therefore, the judgment appealed from is hereby revoked, and the defendant is hereby
relieved from all responsibility under the complaint. And, without any finding as to costs, it
is so ordered.
Street, Malcolm, Avancea, Villamor, Ostrand and Romualdez, JJ., concur.

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 72807 September 9, 1991
MARILAO
WATER
CONSUMERS
ASSOCIATION,
INC., petitioners,
vs.
INTERMEDIATE APPELLATE COURT, MUNICIPALITY OF MARILAO, BULACAN,
SANGGUNIANG
BAYAN,
MARILAO,
BULACAN,
and
MARILAO
WATER
DISTRICT, respondents.

Magtanggol C. Gunigundo for petitioner.


Prospero A. Crescini for Marilao Water District.

NARVASA, J.:p
Involved in this appeal is the determination of which triburial has jurisdiction over the
dissolution of a water district organized and operating as a quasi-public corporation under
the provisions of Presidential Decree No. 198, as amended; 1 the Regional Trial Court, or the
Securities & Exchange Commission.
PD 198 authorizes the formation, lays down the powers and functions, and governs the
operation of water districts throughout the country; it is "the source of authorization and
power to form and maintain a (water) district." Once formed, it says, a district is subject to
its provisions and is not under the jurisdiction of any political subdivision. 2
Under PD 198, water districts may be created by the different local legislative bodies by the
passage of a resolution to this effect, subject to the terms of the decree. The primary
function of these water districts is to sell water to residents within their territory, under
such schedules of rates and charges as may be determined by their boards. 3 They shall
manage, administer, operate and maintain all watersheds within their territorial
boundaries, safeguard and protect the use of the waters therein, supervise and control
structures within their service areas, and prohibit any person from selling or otherwise
disposing of water for public purposes within their service areas where district facilities are
available to provide such service. 4
The decree specifies the terms under which water districts may be formed and operate. It
prescribes, particularly
a) the name by which a water district shad be known, which shall be contained in the
enabling resolution, and shall include the name of the city, municipality, or province, or
region thereof, served by said system, followed by the words, 'Water District;' 5
b) the number and qualifications of the members of the boards of directors, with the date
of expiration of term of office for each; 6 the manner of their selection and initial
appointment by the head of the local political subdivision; 7 their terms of office (which
shall be in staggered periods of two, four and six years); 8 the manner of filling up
vacancies in the board; 9 the compensation and liabilities of members of the board. 10 The
resolution shall contain a "statement that the district may only be dissolved on the grounds
and under the conditions set forth in Section 44" of the law, but nothing in the resolution of
formation, the decree adds, "shall state or infer that the local legislative body has the
power to dissolve, alter or affect the district beyond that specifically provided for in this
Act." 11
The juridical entities thus created and organized under PD 198 are considered quasi-public
corporations, performing public services and supplying public wants. They are authorized
not only to "exercise all the powers which are expressly granted" by said decree, and those

"which are necessarily implied from or incidental to" said powers, but also "the power of
eminent domain, the exercise .. (of which) shall however be subject to review by the
Administration" (LWUA). In addition to the powers granted in, and subject to such
restrictions imposed under, the Act, they may also exercise the powers, rights and
privileges given to private corporations under existing laws. 12
The decree also established a government corporation attached to the Office of the
President, known as the Local Water Utilities Administration (LWUA) 13 to function primarily
as "a specialized lending institution for the promotion development and financing of local
water utilities." It has the following specific powers and duties; 14
(1) prescribe minimum standards and regulations in order to assure
acceptable standards of construction materials and supplies, maintenance,
operation, personnel training, accounting and fiscal practices for local water
utilities;
(2) furnish technical assistance and personnel training programs for local
water utilities;
(3) monitor and evaluate local water standards; and
(4) effect systems integration, joint investment and operations, district
annexation and deannexation whenever economically warranted.
It was pursuant to the foregoing rules and norms that the Marilao Water District was formed
by Resolution of the Sangguniang Bayan of the Municipality of Marilao dated September 18,
1982, which resolution was thereafter forwarded to the LWUA and "duly filed" by it on
October 4, 1982 after ascertaining that it conformed to the requirements of the law. 15
The claim was thereafter made that the creation of the Marilao Water District in the manner
aforestated was defective and illegal. The claim was made by a non-stock, non-profit
corporation known as the Marilao Water Consumers Association, Inc., in a petition dated
December 12, 1983 filed with the Regional Trial Court at Malolos, Bulacan. Impleaded as
respondents were the Marilao Water District, as well as the Municipality of Marilao, Bulacan;
its Sangguniang Bayan; and Mayor Nicanor V. GUILLERMO. The petition prayed for the
dissolution of the water district on the basis chiefly of the following allegations, to wit:
1) there had been no real, but only a "farcical" public hearing prior to the creation of the
Water District;
2) not only was the waterworks system turned over to the Water District without
compensation. but a subsidy was illegally authorized for it;
3) the Water District was being run with "negligence, apathy, indifference and
mismanagement," and was not providing adequate and efficient service to the community,
but this notwithstanding, the consumers were being billed in full and threatened with
disconnection for failure to pay bills on time; in fact, one of the consumers who complained
had his water service cut off;

4) the consumers were consequently "forced to organize themselves into a corporation last
October 3, 1983 ... for the purpose of demanding adequate and sufficient supply of water
and efficient management of the waterworks in Marilao, Bulacan. 16
Acting on the complaint, particularly on the application for temporary restraining order and
preliminary injunction set out therein, the Trial Court issued an Order on December 22,
1983 setting the application for preliminary hearing, requiring the respondents to answer
the petition and restraining them until further orders from collecting any water bill,
disconnecting any water service, transferring any property of the waterworks, or disbursing
any amount in favor of any person. The order was modified on January 6, 1984 to allow the
respondents to pay the district's outstanding obligations to Meralco, by way of exception to
the restraining order.
On January 13, 1984 the Marilao Water District filed its Answer with Compulsory
Counterclaim, denying the material allegations of the petition and asserting as affirmative
defenses (a) the Court's lack of jurisdiction of the subject matter, and (b) the failure of the
petition to state a cause of action. The answer alleged that the matter of the water
district's dissolution fell under the original and exclusive jurisdiction of the Securities &
Exchange Commission (SEC); and the matter of the propriety of water rates, within the
primary administrative jurisdiction of the LWUA and the quasi-judicial jurisdiction of the
National Water Resources Council. On the same date, Marilao Water District filed a motion
for admission of its third-party complaint against the officers and directors of the petitioner
corporation, it being claimed that they had instigated the filing of the petition simply
because one of them was a political adversary of the respondent Mayor.
The other respondents also filed their answer through the Provincial Fiscal of Bulacan,
setting up the same affirmative defense of lack of jurisdiction on the part of the Trial Court;
and failure of the petition to state a cause of action since it admitted that it was by
resolution of the Marilao Sangguniang Bayan that the Marilao Water District was
constituted.
The petitioner the Marilao Consumers Association filed a reply, and an answer to the
counterclaim, on January 26, 1984. It averred that since the Marilao Water District had not
been organized under the Corporation Code, the SEC had no jurisdiction over a proceeding
for its dissolution; and that under Section 45 of PD 198, the proceeding to determine if the
dissolution of the water district is for the best interest of the people, is within the
competence of a regular court of justice, and neither the LWUA nor the National Water
Resources Council is competent to take cognizance of the matter of dissolution of the water
district and recovery of its waterworks system, or the exorbitant rates imposed by it. The
Consumers Association also opposed admission of the third-party complaint on the ground
that its individual officers are not personally amenable to suit for acts of the
corporation, 17 which has a personality distinct from theirs.
The Trial Court found for the respondents. It dismissed the Consumers Association's suit by
Order handed down on June 8, 1984 which pertinently reads as follows:
After a consideration of the arguments raised by the herein parties, the Court
is more inclined to take the position of the respondents that the Securities and

Exchange Commission has the exclusive and original jurisdiction over this
case.
WHEREFORE, the instant petition, the third-party complaint, and the
compulsory counterclaim filed herein are hereby DISMISSED, for lack of
jurisdiction.
Its motion for reconsideration having been denied, by Order dated September 20, 1984, the
Consumers Association filed with this Court a petition for review on certiorari, which was
docketed as G.R. No. 68742. The case was however referred to the Intermediate Appellate
Court by this Court's Second Division, in a Resolution dated November 19, 1984, where it
was docketed as AC-G.R. S.P. No. 04862.
But there in the Intermediate Appellate Court, the Consumers Association's cause also met
with failure. The Appellate Court, in its Decision promulgated on September 10, 1985, ruled
that its cause could not prosper because
1) it had availed of the wrong remedy, i.e., the special civil action of certiorari; the Order of
June 8, 1984 being a final order in the sense that it "left nothing else to be done in the case
the proper remedy was appeal under Rule 41 of the Rules of Court and not a certiorari suit
under Rule 65; and
2) even if the certiorari action be treated as an appeal, it was 14 unerringly clear that the
controversy ... falls within the competence of the SEC in virtue of P.D. 902-A 18 Which
provides that said agency "shall have original and exclusive jurisdiction to hear and decide
cases involving:
a) xxx xxx xxx
b) Controversies arising out of intra-corporate or partnership relations,
between and among stockholders, members or associates; between any or all
of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity ...
The Appellate Court subsequently denied the petitioner's motion for reconsideration, by
Resolution dated November 4, 1985. Hence, the petition for review on certiorari at bar, in
which reversal of the Appellate Tribunal's decision is sought, the petitioner insisting that the
remedy resorted to by it was correct but misunderstood by the I.A.C. and that the law does
indeed vest exclusive jurisdiction over the subject matter of the case in the Regional Trial
Court, not the Securities and Exchange Commission.
Turning first to the adjective issue, it is quite evident that the Order of the Trial Court of
June 8, 1984, dismissing the action of the Consumers Association, is really a final order; it
finally disposed of the proceeding and left nothing more to be done by the Court on the
merits. Now, the firmly settled principle is that the remedy against such a final order is the
ordinary remedy of an appeal, either solely on questions of law in which case the appeal
may be taken only to the Supreme Court or questions of fact and law in which event

the appeal should be brought to the Court of Appeals. The extraordinary remedy of a
special civil action of certiorari or prohibition is not the appropriate recourse because
precisely, one of the conditions for availing of it is that there should be "no appeal, nor any
plain, speedy and adequate remedy in the ordinary course of law. 19 A resort to the latter
instead of the former would ordinarily be fatal, unless it should appear in a given case that
appeal would otherwise be an inefficacious or inadequate remedy. 20
In holding that Marilao Water District had resorted to the wrong remedy against the Trial
Court's order dismissing its suit, i.e., the special civil action of certiorari, instead of an
appeal, the Intermediate Appellate Court quite overlooked the fact, not seriously disputed
by the Marilao Water District and its co-respondents, that the former had in fact availed of
the remedy of appeal by certiorari under Rule 45 of the Rules of Court, as required by
paragraph 25 of the Interim Rules & Guidelines of this Court, implementing Batas
Pambansa Bilang 129; that before doing so, it had first asked for and been granted an
extension of thirty (30) days within which to file a petition for review on certiorari; but that
subsequently, by Resolution of this Court's Second Division dated November 19, 1984, the
case was referred to the Intermediate Appellate Court, evidently because it was felt that
certain factual issues had yet to be determined. In any case, all things considered, the
Court is not prepared to have the case at bar finally determined on this procedural issue.
The juridical entities known as water districts created by PD 198, although considered as
quasi-public corporations and authorized to exercise the powers, rights and privileges given
to private corporations under existing laws 21 are entirely distinct from corporations
organized under the Corporation Code, PD 902-A, as amended. The Corporation Code has
nothing whatever to do with their formation and organization, all the terms and conditions
for their organization and operation being particularly spelled out in PD 198. The
resolutions creating them, their charters, in other words, are filed not with the Securities
and Exchange Commission but with the LWUA. It is these resolutions qua charters, and not
articles of incorporation drawn up under the Corporation Code, which set forth the name of
the water districts, the number of their directors, the manner of their selection and
replacement, their powers, etc. The SEC which is charged with enforcement of the
Corporation Code as regards corporations, partnerships and associations formed or
operating under its provisions, has no power of supervision or control over the activities of
water districts. More particularly, the SEC has no power of oversight over such activities of
water districts as selling water, fuling the rates and charges therefor 22 or the management,
administration, operation and maintenance of watersheds within their territorial
boundaries, or the safeguarding and protection of the use of the waters therein, or the
supervision and control of structures within the service areas of the district, and the
prohibition of any person from selling or otherwise disposing of water for public purposes
within their service areas where district facilities are available to provide such
service. 23 That function of supervision or control over water districts is entrusted to the
Local Water Utilities Administration. 24 Consequently, as regards the activities of water
districts just mentioned, the SEC obviously can have no claim to any expertise.
The "Provincial Water Utilities Act of 1973" has a specific provision governing dissolution of
water districts created thereunder This is Section 45 of PD 198 25 reading as follows:
SEC. 45. Dissolution. A district may be dissolved by resolution of its board of
directors filed in the manner of filing the resolution forming the district:

Provided, however, That prior to the adoption of any such resolution: (1)
another public entity has acquired the assets of the district and has assumed
all obligations and liabilities attached thereto; (2) all bondholders and other
creditors have been notified and they consent to said transfer and dissolution;
and (3) a court of competent jurisdiction has found that said transfer and
dissolution are in the best interest of the public.
Under this provision, it is the LWUA which is the administrative body involved in the
voluntary dissolution of a water district; it is with it that the resolution of dissolution is filed,
not the Securities and Exchange Commission. And this provision is evidently quite distinct
and different from those on dissolution of corporations "formed or organized under the
provisions of xx (the Corporation) Code" set out in Sections 117 to 121, inclusive, of said
Code, under which dissolution may be voluntary (by vote of the stockholders or members),
generally effected by the filing of the corresponding resolution with the Securities and
Exchange Commission, or involuntary, commenced by the filing of a verified complaint also
with the SEC.
All these argue against conceding jurisdiction in the Securities and Exchange Commission
over proceedings for the dissolution of water districts. For although described as
quasipublic corporations, and granted the same powers as private corporations, water
districts are not really corporations. They have no incorporators, stockholders or members,
who have the right to vote for directors, or amend the articles of incorporation or by-laws,
or pass resolutions, or otherwise perform such other acts as are authorized to stockholders
or members of corporations by the Corporation Code. In a word, there can be no such thing
as a relation of corporation and stockholders or members in a water district for the simple
reason that in the latter there are no stockholders or members. Between the water district
and those who are recipients of its water services there exists not the relationship of
corporation-and-stockholder, but that of a service agency and users or customers. There
can therefore be no such thing in a water district as "intra-corporate or partnership
relations, between and among stockholders, members or associates (or) between any or all
of them and the corporation, partnership or association of which they are stockholders,
members or associates, respectively," within the contemplation of Section 5 of the
Corporation Code so as to bring controversies involving them within the competence and
cognizance of the SEC.
There can be even less debate about the fact that the SEC has no jurisdiction over the corespondents of the Marilao Water District the Municipality of Marilao, its Sangguniang
Bayan and its Mayor who are accused of a "conspiracy" with the water district in respect
of the anomalies described in the Consumer Associations' petition. 26
The controversy, therefore, between the Consumers Association, on the one hand, and
Marilao District and its co-respondents, on the other, is not within the jurisdiction of the
SEC.
In their answer with counterclaim in the proceedings a quo, the respondents advocated the
theory that the case falls within the jurisdiction of the LWUA and/or the National Water
Resources Council.

The LWUA does not appear to have any adjudicatory functions. It is, as already pointed out,
"primarily a specialized lending institution for the promotion, development and financing of
local water utilities, 27 with power to prescribe minimum standards and regulations
regarding maintenance, operation, personnel training, accounting and fiscal practices for
local water utilities, to furnish technical assistance and personnel training programs
therefor; monitor and evaluate local water standards; and effect systems integration, joint
investment and operations, district annexation and deannexation whenever economically
warranted. 28 The LWUA has quasi-judicial power only as regards rates or charges fixed by
water districts, which it may review to establish compliance with the provisions of PD 198,
without prejudice to appeal being taken therefrom by a water concessionaire to the
National Water Resources Council whose decision thereon shall be appealable to the Office
of the President. 29 The rates or charges established by respondent Marilao Water District
do not appear to be at issue in the controversy at bar.
The National Water Resources Council, on the other hand, is conferred "original jurisdiction
over all disputes relating to appropriation, utilization, exploitation, development, control,
conservation and protection of waters within the meaning and context of the provisions
of ..." (the Code by which said Council was created, Presidential Decree No. 1067, otherwise
known as the Water Code of the Philippines); 30 and its decision on water rights
controversies may be appealed to the Court of First Instance of the province where the
subject matter of the controversy is situated. 31 It also has authority to review questions of
annexations and deannexations (addition to or exclusion from the district of territory).
Again it does not appear that the case at bar is a water rights controversy or one involving
annexation or deannexation.
What essentially is sought by the Consumers Association is the dissolution of the Marilao
Water District, on the ground that its formation was illegal and invalid; the waterworks
system had been turned over to it without compensation and a subsidy illegally authorized
for it; and the Water District was being run with "negligence, apathy, indifference and
mismanagement," and was not providing adequate and efficient service to the
community. 32
Now, as already above stated, the dissolution of a water district is governed by Section 45
of PD 198, as amended, stating that it "may be dissolved by resolution of its board of
directors filed in the manner of filing the resolution forming the district," subject to
enumerated pre-requisites. 33 The procedure for dissolution thus consists of the following
steps:
1) the initiation by the board of directors of the water district motu proprio or at the relation
of an interested party, of proceedings for the dissolution of the water district, including:
a) the ascertainment by said board that
1) another public entity has acquired the assets of the district and has assumed all
obligations and liabilities attached thereto; and
2) all bondholders and other creditors have been notified and consent to said transfer and
dissolution;

b) the commencement by the water district in a court of competent jurisdiction of a


proceeding to obtain a declaration that "said transfer and dissolution are in the best
interest of the public;
2) after compliance with the foregoing requisites, the adoption by the board of directors of
the water district of a resolution dissolving the water district and its submission to the
Sangguniang Bayan concerned for approval;
3) submission of the resolution of the Sangguniang Bayan dissolving the water district to
the head of the local government concerned for approval, and ultimately to the LWUA for
final approval and filing.
The Consumer Association's action therefore is, in fine, in the nature of a mandamus suit,
seeking to compel the board of directors of the Marilao Water District, and its alleged coconspirators, the Sangguniang Bayan and the Mayor of Marilao to go through the process
above described for the dissolution of the water district. In this sense, and indeed, taking
account of the nature of the proceedings for dissolution just described, it seems plain that
the case does not fall within the limited jurisdiction of the SEC., but within the general
jurisdiction of Regional Trial Courts.
WHEREFORE, the Decision of the Intermediate Appellate Court of September 10, 1985
affirming that of the Regional Trial Court of June 8, 1984 is REVERSED and SET ASIDE,
and the case is remanded to the Regional Trial Court for further proceedings and
adjudication in accordance with law. No costs.
SO ORDERED.
Cruz and Medialdea, JJ., concur.
Grio-Aquino, J., took no part.

EN BANC
[G.R. No. 141735. June 8, 2005]
SAPPARI K. SAWADJAAN, petitioner, vs. THE HONORABLE COURT OF APPEALS,
THE CIVIL SERVICE COMMISSION and AL-AMANAH INVESTMENT BANK OF
THE PHILIPPINES, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court of the Decision [1] of
the Court of Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No. 95-2754
of the Civil Service Commission (CSC) dated 11 August 1994 and 11 April 1995,
respectively, which in turn affirmed Resolution No. 2309 of the Board of Directors of the AlAmanah Islamic Investment Bank of the Philippines (AIIBP) dated 13 December 1993,

finding petitioner guilty of Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and dismissing him from the service, and its
Resolution[2] of 15 December 1999 dismissing petitioners Motion for Reconsideration.
The records show that petitioner Sappari K. Sawadjaan was among the first employees
of the Philippine Amanah Bank (PAB) when it was created by virtue of Presidential Decree
No. 264 on 02 August 1973. He rose through the ranks, working his way up from his initial
designation as security guard, to settling clerk, bookkeeper, credit investigator, project
analyst, appraiser/ inspector, and eventually, loans analyst. [3]
In February 1988, while still designated as appraiser/investigator, Sawadjaan was
assigned to inspect the properties offered as collaterals by Compressed Air Machineries and
Equipment Corporation (CAMEC) for a credit line of Five Million Pesos (P5,000,000.00). The
properties consisted of two parcels of land covered by Transfer Certificates of Title (TCTs)
No. N-130671 and No. C-52576. On the basis of his Inspection and Appraisal Report, [4] the
PAB granted the loan application. When the loan matured on 17 May 1989, CAMEC
requested an extension of 180 days, but was granted only 120 days to repay the loan. [5]
In the meantime, Sawadjaan was promoted to Loans Analyst I on 01 July 1989. [6]
In January 1990, Congress passed Republic Act 6848 creating the AIIBP and repealing
P.D. No. 264 (which created the PAB). All assets, liabilities and capital accounts of the PAB
were transferred to the AIIBP, [7] and the existing personnel of the PAB were to continue to
discharge their functions unless discharged. [8] In the ensuing reorganization, Sawadjaan
was among the personnel retained by the AIIBP.
When CAMEC failed to pay despite the given extension, the bank, now referred to as
the AIIBP, discovered that TCT No. N-130671 was spurious, the property described therein
non-existent, and that the property covered by TCT No. C-52576 had a prior existing
mortgage in favor of one Divina Pablico.
On 08 June 1993, the Board of Directors of the AIIBP created an Investigating
Committee to look into the CAMEC transaction, which had cost the bank Six Million Pesos
(P6,000,000.00) in losses.[9] The subsequent events, as found and decided upon by the
Court of Appeals,[10] are as follows:
On 18 June 1993, petitioner received a memorandum from Islamic Bank [AIIBP] Chairman
Roberto F. De Ocampo charging him with Dishonesty in the Performance of Official Duties
and/or Conduct Prejudicial to the Best Interest of the Service and preventively suspending
him.
In his memorandum dated 8 September 1993, petitioner informed the Investigating
Committee that he could not submit himself to the jurisdiction of the Committee because of
its alleged partiality. For his failure to appear before the hearing set on 17 September 1993,
after the hearing of 13 September 1993 was postponed due to the Manifestation of even
date filed by petitioner, the Investigating Committee declared petitioner in default and the
prosecution was allowed to present its evidence ex parte.

On 08 December 1993, the Investigating Committee rendered a decision, the pertinent


portions of which reads as follows:
In view of respondent SAWADJAANS abject failure to perform his duties and assigned tasks
as appraiser/inspector, which resulted to the prejudice and substantial damage to the Bank,
respondent should be held liable therefore. At this juncture, however, the Investigating
Committee is of the considered opinion that he could not be held liable for the
administrative offense of dishonesty considering the fact that no evidence was adduced to
show that he profited or benefited from being remiss in the performance of his duties. The
record is bereft of any evidence which would show that he received any amount in
consideration for his non-performance of his official duties.
This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure
to perform his official duties resulted to the prejudice and substantial damage to the
Islamic Bank for which he should be held liable for the administrative offense of CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.
Premises considered, the Investigating Committee recommends that respondent SAPPARI
SAWADJAAN be meted the penalty of SIX (6) MONTHS and ONE (1) DAY SUSPENSION from
office in accordance with the Civil Service Commissions Memorandum Circular No. 30,
Series of 1989.
On 13 December 1993, the Board of Directors of the Islamic Bank [AIIBP] adopted
Resolution No. 2309 finding petitioner guilty of Dishonesty in the Performance of Official
Duties and/or Conduct Prejudicial to the Best Interest of the Service and imposing the
penalty of Dismissal from the Service.
On reconsideration, the Board of Directors of the Islamic Bank [AIIBP] adopted the
Resolution No. 2332 on 20 February 1994 reducing the penalty imposed on petitioner from
dismissal to suspension for a period of six (6) months and one (1) day.
On 29 March 1994, petitioner filed a notice of appeal to the Merit System Protection Board
(MSPB).
On 11 August 1994, the CSC adopted Resolution No. 94-4483 dismissing the appeal for lack
of merit and affirming Resolution No. 2309 dated 13 December 1993 of the Board of
Directors of Islamic Bank.
On 11 April 1995, the CSC adopted Resolution No. 95-2574 denying petitioners Motion for
Reconsideration.
On 16 June 1995, the instant petition was filed with the Honorable Supreme Court on the
following assignment of errors:
I. Public respondent Al-Amanah Islamic Investment Bank of the Philippines has
committed a grave abuse of discretion amounting to excess or lack of jurisdiction when it
initiated and conducted administrative investigation without a validly promulgated rules of
procedure in the adjudication of administrative cases at the Islamic Bank.

II. Public respondent Civil Service Commission has committed a grave abuse of
discretion amounting to lack of jurisdiction when it prematurely and falsely assumed
jurisdiction of the case not appealed to it, but to the Merit System Protection Board.
III. Both the Islamic Bank and the Civil Service Commission erred in finding petitioner
Sawadjaan of having deliberately reporting false information and therefore guilty of
Dishonesty and Conduct Prejudicial to the Best Interest of the Service and penalized with
dismissal from the service.
On 04 July 1995, the Honorable Supreme Court En Banc referred this petition to this
Honorable Court pursuant to Revised Administrative Circular No. 1-95, which took effect on
01 June 1995.
We do not find merit [in] the petition.
Anent the first assignment of error, a reading of the records would reveal that petitioner
raises for the first time the alleged failure of the Islamic Bank [AIIBP] to promulgate rules of
procedure governing the adjudication and disposition of administrative cases involving its
personnel. It is a rule that issues not properly brought and ventilated below may not be
raised for the first time on appeal, save in exceptional circumstances (Casolita, Sr. v. Court
of Appeals, 275 SCRA 257) none of which, however, obtain in this case.
Granting arguendo that the issue is of such exceptional character that the Court may take
cognizance of the same, still, it must fail. Section 26 of Republic Act No. 6848 (1990)
provides:
Section 26. Powers of the Board. The Board of Directors shall have the broadest powers to
manage the Islamic Bank, x x x The Board shall adopt policy guidelines necessary to carry
out effectively the provisions of this Charter as well as internal rules and
regulations necessary for the conduct of its Islamic banking business and all matters
related to personnel organization, office functions and salary administration. (Italics ours)
On the other hand, Item No. 2 of Executive Order No. 26 (1992) entitled Prescribing
Procedure and Sanctions to Ensure Speedy Disposition of Administrative Cases directs, all
administrative agencies to adopt and include in their respective Rules of Procedure
provisions designed to abbreviate administrative proceedings.
The above two (2) provisions relied upon by petitioner does not require the Islamic Bank
[AIIBP] to promulgate rules of procedure before administrative discipline may be imposed
upon its employees. The internal rules of procedures ordained to be adopted by the Board
refers to that necessary for the conduct of its Islamic banking business and all matters
related to personnel organization, office functions and salary administration. On the
contrary, Section 26 of RA 6848 gives the Board of Directors of the Islamic Bank the
broadest powers to manage the Islamic Bank. This grant of broad powers would be an idle
ceremony if it would be powerless to discipline its employees.
The second assignment of error must likewise fail. The issue is raised for the first
time via this petition for certiorari. Petitioner submitted himself to the jurisdiction of the
CSC. Although he could have raised the alleged lack of jurisdiction in his Motion for
Reconsideration of Resolution No. 94-4483 of the CSC, he did not do so. By filing the Motion

for Reconsideration, he is estopped from denying the CSCs jurisdiction over him, as it is
settled rule that a party who asks for an affirmative relief cannot later on impugn the action
of the tribunal as without jurisdiction after an adverse result was meted to him. Although
jurisdiction over the subject matter of a case may be objected to at any stage of the
proceedings even on appeal, this particular rule, however, means that jurisdictional issues
in a case can be raised only during the proceedings in said case and during the appeal of
said case (Aragon v. Court of Appeals, 270 SCRA 603). The case at bar is a petition
[for] certiorari and not an appeal.
But even on the merits the argument must falter. Item No. 1 of CSC Resolution No. 93-2387
dated 29 June 1993, provides:
Decisions in administrative cases involving officials and employees of the civil service
appealable to the Commission pursuant to Section 47 of Book V of the Code (i.e.,
Administrative Code of 1987) including personnel actions such as contested appointments
shall now be appealed directly to the Commission and not to the MSPB.
In Rubenecia v. Civil Service Commission, 244 SCRA 640, 651, it was categorically held:
. . . The functions of the MSPB relating to the determination of administrative disciplinary
cases were, in other words, re-allocated to the Commission itself.
Be that as it may, (i)t is hornbook doctrine that in order `(t)o ascertain whether a court (in
this case, administrative agency) has jurisdiction or not, the provisions of the law should be
inquired into. Furthermore, `the jurisdiction of the court must appear clearly from the
statute law or it will not be held to exist.(Azarcon v. Sandiganbayan, 268 SCRA 747, 757)
From the provision of law abovecited, the Civil Service Commission clearly has jurisdiction
over the Administrative Case against petitioner.
Anent the third assignment of error, we likewise do not find merit in petitioners proposition
that he should not be liable, as in the first place, he was not qualified to perform the
functions of appraiser/investigator because he lacked the necessary training and expertise,
and therefore, should not have been found dishonest by the Board of Directors of Islamic
Bank [AIIBP] and the CSC. Petitioner himself admits that the position of appraiser/inspector
is one of the most serious [and] sensitive job in the banking operations. He should have
been aware that accepting such a designation, he is obliged to perform the task at hand by
the exercise of more than ordinary prudence. As appraiser/investigator, he is expected,
among others, to check the authenticity of the documents presented by the borrower by
comparing them with the originals on file with the proper government office. He should
have made it sure that the technical descriptions in the location plan on file with the
Bureau of Lands of Marikina, jibe with that indicated in the TCT of the collateral offered by
CAMEC, and that the mortgage in favor of the Islamic Bank was duly annotated at the back
of the copy of the TCT kept by the Register of Deeds of Marikina. This, petitioner failed to
do, for which he must be held liable. That he did not profit from his false report is of no
moment. Neither the fact that it was not deliberate or willful, detracts from the nature of
the act as dishonest. What is apparent is he stated something to be a fact, when he really
was not sure that it was so.

WHEREFORE, above premises considered, the instant Petition is DISMISSED, and the
assailed Resolutions of the Civil Service Commission are hereby AFFIRMED.
On 24 March 1999, Sawadjaans counsel notified the court a quo of his change of
address,[11] but apparently neglected to notify his client of this fact. Thus, on 23 July 1999,
Sawadjaan, by himself, filed a Motion for New Trial [12] in the Court of Appeals based on the
following grounds: fraud, accident, mistake or excusable negligence and newly discovered
evidence. He claimed that he had recently discovered that at the time his employment was
terminated, the AIIBP had not yet adopted its corporate by-laws. He attached a
Certification[13] by the Securities and Exchange Commission (SEC) that it was only on 27
May 1992 that the AIIBP submitted its draft by-laws to the SEC, and that its registration was
being held in abeyance pending certain corrections being made thereon. Sawadjaan argued
that since the AIIBP failed to file its by-laws within 60 days from the passage of Rep. Act No.
6848, as required by Sec. 51 of the said law, the bank and its stockholders had already
forfeited its franchise or charter, including its license to exist and operate as a corporation,
[14]
and thus no longer have the legal standing and personality to initiate an administrative
case.
Sawadjaans counsel subsequently adopted his motion, but requested that it be treated
as a motion for reconsideration. [15] This motion was denied by the court a quo in its
Resolution of 15 December 1999.[16]
Still disheartened, Sawadjaan filed the present petition for certiorari under Rule 65 of
the Rules of Court challenging the above Decision and Resolution of the Court of Appeals
on the ground that the court a quo erred: i) in ignoring the facts and evidences that the
alleged Islamic Bank has no valid by-laws; ii) in ignoring the facts and evidences that the
Islamic Bank lost its juridical personality as a corporation on 16 April 1990; iii) in ignoring
the facts and evidences that the alleged Islamic Bank and its alleged Board of Directors
have no jurisdiction to act in the manner they did in the absence of a valid by-laws; iv) in
not correcting the acts of the Civil Service Commission who erroneously rendered the
assailed Resolutions No. 94-4483 and No. 95-2754 as a result of fraud, falsification and/or
misrepresentations committed by Farouk A. Carpizo and his group, including Roberto F. de
Ocampo; v) in affirming an unconscionably harsh and/or excessive penalty; and vi) in failing
to consider newly discovered evidence and reverse its decision accordingly.
Subsequently, petitioner Sawadjaan filed an Ex-parte Urgent Motion for Additional
Extension of Time to File a Reply (to the Comments of Respondent Al-Amanah Investment
Bank of the Philippines),[17] Reply (to Respondents Consolidated Comment,) [18] and Reply (to
the Alleged Comments of Respondent Al-Amanah Islamic Bank of the Philippines). [19] On 13
October 2000, he informed this Court that he had terminated his lawyers services, and, by
himself, prepared and filed the following: 1) Motion for New Trial; [20] 2) Motion to Declare
Respondents in Default and/or Having Waived their Rights to Interpose Objection to
Petitioners Motion for New Trial;[21] 3) Ex-Parte Urgent Motions to Punish Attorneys Amado
D. Valdez, Elpidio J. Vega, Alda G. Reyes, Dominador R. Isidoro, Jr., and Odilon A. Diaz for
Being in Contempt of Court & to Inhibit them from Appearing in this Case Until they Can
Present Valid Evidence of Legal Authority;[22] 4) Opposition/Reply (to Respondent AIIBPs
Alleged Comment);[23] 5) Ex-Parte Urgent Motion to Punish Atty. Reynaldo A. Pineda for
Contempt of Court and the Issuance of a Commitment Order/Warrant for His Arrest; [24] 6)
Reply/Opposition (To the Formal Notice of Withdrawal of Undersigned Counsel as Legal

Counsel for the Respondent Islamic Bank with Opposition to Petitioners Motion to Punish
Undersigned Counsel for Contempt of Court for the Issuance of a Warrant of Arrest); [25] 7)
Memorandum for Petitioner;[26] 8) Opposition to SolGens Motion for Clarification with Motion
for Default and/or Waiver of Respondents to File their Memorandum; [27] 9) Motion for
Contempt of Court and Inhibition/Disqualification with Opposition to OGCCs Motion for
Extension of Time to File Memorandum; [28] 10) Motion for Enforcement (In Defense of the
Rule of Law);[29] 11) Motion and Opposition (Motion to Punish OGCCs Attorneys Amado D.
Valdez, Efren B. Gonzales, Alda G. Reyes, Odilon A. Diaz and Dominador R. Isidoro, Jr., for
Contempt of Court and the Issuance of a Warrant for their Arrest; and Opposition to their
Alleged Manifestation and Motion Dated February 5, 2002);[30] 12) Motion for
Reconsideration of Item (a) of Resolution dated 5 February 2002 with Supplemental Motion
for Contempt of Court; [31] 13) Motion for Reconsideration of Portion of Resolution Dated 12
March 2002;[32] 14) Ex-Parte Urgent Motion for Extension of Time to File Reply Memorandum
(To: CSC and AIIBPs Memorandum);[33]15) Reply Memorandum (To: CSCs Memorandum) With
Ex-Parte Urgent Motion for Additional Extension of time to File Reply Memorandum (To:
AIIBPs Memorandum);[34] and 16) Reply Memorandum (To: OGCCs Memorandum for
Respondent AIIBP).[35]
Petitioners efforts are unavailing, and we deny his petition for its procedural and
substantive flaws.
The general rule is that the remedy to obtain reversal or modification of the judgment
on the merits is appeal. This is true even if the error, or one of the errors, ascribed to the
court rendering the judgment is its lack of jurisdiction over the subject matter, or the
exercise of power in excess thereof, or grave abuse of discretion in the findings of fact or of
law set out in the decision.[36]
The records show that petitioners counsel received the Resolution of the Court of
Appeals denying his motion for reconsideration on 27 December 1999. The fifteen day
reglamentary period to appeal under Rule 45 of the Rules of Court therefore lapsed on 11
January 2000. On 23 February 2000, over a month after receipt of the resolution denying
his motion for reconsideration, the petitioner filed his petition forcertiorari under Rule 65.
It is settled that a special civil action for certiorari will not lie as a substitute for the lost
remedy of appeal,[37] and though there are instances[38] where the extraordinary remedy
of certiorari may be resorted to despite the availability of an appeal, [39] we find no special
reasons for making out an exception in this case.
Even if we were to overlook this fact in the broader interests of justice and treat this as
a special civil action for certiorari under Rule 65,[40] the petition would nevertheless be
dismissed for failure of the petitioner to show grave abuse of discretion. Petitioners
recurrent argument, tenuous at its very best, is premised on the fact that since respondent
AIIBP failed to file its by-laws within the designated 60 days from the effectivity of Rep. Act
No. 6848, all proceedings initiated by AIIBP and all actions resulting therefrom are a patent
nullity. Or, in his words, the AIIBP and its officers and Board of Directors,
. . . [H]ave no legal authority nor jurisdiction to manage much less operate the Islamic
Bank, file administrative charges and investigate petitioner in the manner they did and
allegedly passed Board Resolution No. 2309 on December 13, 1993 which is null and

void for lack of an (sic) authorized and valid by-laws. The CIVIL SERVICE COMMISSION was
therefore affirming, erroneously, a null and void Resolution No. 2309 dated December 13,
1993 of the Board of Directors of Al-Amanah Islamic Investment Bank of the Philippines in
CSC Resolution No. 94-4483 dated August 11, 1994. A motion for reconsideration thereof
was denied by the CSC in its Resolution No. 95-2754 dated April 11, 1995. Both
acts/resolutions of the CSC are erroneous, resulting from fraud, falsifications and
misrepresentations of the alleged Chairman and CEO Roberto F. de Ocampo and the alleged
Director Farouk A. Carpizo and his group at the alleged Islamic Bank. [41]
Nowhere in petitioners voluminous pleadings is there a showing that the court a
quo committed grave abuse of discretion amounting to lack or excess of jurisdiction
reversible by a petition for certiorari. Petitioner already raised the question of AIIBPs
corporate existence and lack of jurisdiction in his Motion for New Trial/Motion for
Reconsideration of 27 May 1997 and was denied by the Court of Appeals. Despite the
volume of pleadings he has submitted thus far, he has added nothing substantial to his
arguments.
The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts
business, has shareholders, corporate officers, a board of directors, assets, and personnel.
It is, in fact, here represented by the Office of the Government Corporate Counsel, the
principal law office of government-owned corporations, one of which is respondent bank.
[42]
At the very least, by its failure to submit its by-laws on time, the AIIBP may be
considered a de facto corporation[43] whose right to exercise corporate powers may not be
inquired into collaterally in any private suit to which such corporations may be a party. [44]
Moreover, a corporation which has failed to file its by-laws within the prescribed period
does not ipso facto lose its powers as such. The SEC Rules on Suspension/Revocation of the
Certificate of Registration of Corporations, [45] details the procedures and remedies that may
be availed of before an order of revocation can be issued. There is no showing that such a
procedure has been initiated in this case.
In any case, petitioners argument is irrelevant because this case is not a corporate
controversy, but a labor dispute; and it is an employers basic right to freely select or
discharge its employees, if only as a measure of self-protection against acts inimical to its
interest.[46] Regardless of whether AIIBP is a corporation, a partnership, a sole
proprietorship, or a sari-sari store, it is an undisputed fact that AIIBP is the petitioners
employer. AIIBP chose to retain his services during its reorganization, controlled the means
and methods by which his work was to be performed, paid his wages, and, eventually,
terminated his services.[47]
And though he has had ample opportunity to do so, the petitioner has not alleged that
he is anything other than an employee of AIIBP. He has neither claimed, nor shown, that he
is a stockholder or an officer of the corporation. Having accepted employment from AIIBP,
and rendered his services to the said bank, received his salary, and accepted the promotion
given him, it is now too late in the day for petitioner to question its existence and its power
to terminate his services. One who assumes an obligation to an ostensible corporation as
such, cannot resist performance thereof on the ground that there was in fact no
corporation.[48]

Even if we were to consider the facts behind petitioner Sawadjaans dismissal from
service, we would be hard pressed to find error in the decision of the AIIBP.
As appraiser/investigator, the petitioner was expected to conduct an ocular inspection
of the properties offered by CAMEC as collaterals and check the copies of the certificates of
title against those on file with the Registry of Deeds. Not only did he fail to conduct these
routine checks, but he also deliberately misrepresented in his appraisal report that after
reviewing the documents and conducting a site inspection, he found the CAMEC loan
application to be in order. Despite the number of pleadings he has filed, he has failed to
offer an alternative explanation for his actions.
When he was informed of the charges against him and directed to appear and present
his side on the matter, the petitioner sent instead a memorandum questioning the fairness
and impartiality of the members of the investigating committee and refusing to recognize
their jurisdiction over him. Nevertheless, the investigating committee rescheduled the
hearing to give the petitioner another chance, but he still refused to appear before it.
Thereafter, witnesses were presented, and a decision was rendered finding him guilty
of dishonesty and dismissing him from service. He sought a reconsideration of this decision
and the same committee whose impartiality he questioned reduced their recommended
penalty to suspension for six months and one day. The board of directors, however, opted
to dismiss him from service.
On appeal to the CSC, the Commission found that Sawadjaans failure to perform his
official duties greatly prejudiced the AIIBP, for which he should be held accountable. It held
that:
. . . (I)t is crystal clear that respondent SAPPARI SAWADJAAN was remiss in the performance
of his duties as appraiser/inspector. Had respondent performed his duties as
appraiser/inspector, he could have easily noticed that the property located at Balintawak,
Caloocan City covered by TCT No. C-52576 and which is one of the properties offered as
collateral by CAMEC is encumbered to Divina Pablico. Had respondent reflected such fact in
his appraisal/inspection report on said property the ISLAMIC BANK would not have approved
CAMECs loan of P500,000.00 in 1987 and CAMECs P5 Million loan in 1988, respondent
knowing fully well the Banks policy of not accepting encumbered properties as collateral.
Respondent SAWADJAANs reprehensible act is further aggravated when he failed to check
and verify from the Registry of Deeds of Marikina the authenticity of the property located at
Mayamot, Antipolo, Rizal covered by TCT No. N-130671 and which is one of the properties
offered as collateral by CAMEC for its P5 Million loan in 1988. If he only visited and verified
with the Register of Deeds of Marikina the authenticity of TCT No. N-130671 he could have
easily discovered that TCT No. N-130671 is fake and the property described therein nonexistent.
...
This notwithstanding, respondent cannot escape liability. As adverted to earlier, his failure
to perform his official duties resulted to the prejudice and substantial damage to the

ISLAMIC BANK for which he should be held liable for the administrative offense of CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE. [49]
From the foregoing, we find that the CSC and the court a quo committed no grave
abuse of discretion when they sustained Sawadjaans dismissal from service. Grave abuse
of discretion implies such capricious and whimsical exercise of judgment as equivalent to
lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and it must be so patent and
gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law. [50] The records show that the respondents
did none of these; they acted in accordance with the law.
WHEREFORE, the petition is DISMISSED. The Decision of the Court of Appeals of 30
March 1999 affirming Resolutions No. 94-4483 and No. 95-2754 of the Civil Service
Commission, and its Resolution of 15 December 1999 are hereby AFFIRMED. Costs against
the petitioner.
SO ORDERED.
Davide, Jr., C.J., Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, and Garcia,
JJ., concur.
Puno, J., on official leave.

What is the effect of non-filing of the articles of incorporation within the required period?

Failure to submit the by-laws within 30 days from incorporation does not automatically
dissolve the corporation. It is merely a ground for suspension or revocation of its charter
after proper notice and hearing. The corporation is, at the very least, a de facto corporation
whose existence may not be collaterally attacked.(Sawadjaan v. CA, G.R. No. 142284,
June 8, 2005)

Plaintiffs filed a collection action against X Corporation. Upon execution of the court's
decision, X Corporation was found to be without assets. Thereafter, plaintiffs filed an action
against its present and past stockholder Y Corporation which owned substantially all of the
stocks of X corporation. The two corporations have the same board of directors and Y
Corporation financed the operations of X corporation. May Y Corporation be held liable for
the
debts
of
X
Corporation?
Why?
A: Yes, Y Corporation may be held liable for the debts of X Corporation. The doctrine of
piercing the veil of corporation fiction applies to this case. The two corporations have the
same board of directors and Y Corporation owned substantially all of the stocks of X
Corporation, which facts justify the conclusion that the latter is merely an extension of the

personality of the former, and that the former controls the policies of the latter. Added to
this is the fact that Y Corporation controls the finances of X Corporation which is merely an
adjunct, business conduit or alter ego of Y Corporation. (CIR v. Norton & Harrison
Company, G.R. No. L-17618, Aug. 31, 1964)
Mcleod vs NLRC
FACTS:
On February 2, 1995, John F. McLeod filed a complaint for retirement benefits, vacation and
sick leave benefits and other benefits against Filipinas Synthetic Corporation (Filsyn), Far
Eastern Textile Mills, Inc., Sta. Rosa Textiles, Inc., Complainant was the former VP and Plant
Manager of Peggy Mills, Inc.; that he was hired in June 1980 and Peggy Mills closed
operations due to irreversible losses but its assets were acquired by Sta. Rosa Textile
Corporation complainant was hired by Sta. Rosa Textile but he resigned and that while
complainant was Vice President and Plant Manager of Peggy Mills, the union staged a strike
up to July 1992 resulting in closure of operations due to irreversible losses as per Notice
.The complainant was relied upon to settle the labor problem but due to his lack of
attention and absence the strike continued resulting in closure of the company. Mcleod
contends that the corporations are solidarily liable. On 3 April 1998, the Labor Arbiter
rendered his decision in favor of Mcleod The NLRC Reversed decision CA- Modified the
NLRCs decision. Lim was solidarily liable

Issue:
whether there is merger/ consolidation
w/n Patricio Lim must be solidarily liable with PMI

Held:
There was also no merger or consolidation of PMI and SRTI. Consolidation is the union of
two or more existing corporations to form a new corporation called the consolidated
corporation. It is a combination by agreement between two or more corporations by which
their rights, franchises, and property are united and become those of a single, new
corporation, composed generally, although not necessarily, of the stockholders of the
original corporations. Merger, on the other hand, is a union whereby one corporation
absorbs one or more existing corporations, and the absorbing corporation survives and
continues the combined business.

The parties to a merger or consolidation are called constituent corporations. In


consolidation, all the constituents are dissolved and absorbed by the new consolidated
enterprise. In merger, all constituents, except the surviving corporation, are dissolved. In
both cases, however, there is no liquidation of the assets of the dissolved corporations, and
the surviving or consolidated corporation acquires all their properties, rights and franchises
and their stockholders usually become its stockholders. The surviving or consolidated
corporation assumes automatically the liabilities of the dissolved corporations, regardless

of whether the creditors have consented or not to such merger or consolidation.27 In the
present case, there is no showing that the subject dation in payment involved any
corporate merger or consolidation. Neither is there any showing of those indicative factors
that SRTI is a mere instrumentality of PMI.

Moreover, SRTI did not expressly or impliedly agree to assume any of PMIs debts. 2. In the
present case, there is nothing substantial on record to show that Patricio acted in bad faith
in terminating McLeods services to warrant Patricios personal liability. PMI had no other
choice but to stop plant operations. The work stoppage therefore was by necessity. The
company could no longer continue with its plant operations because of the serious business
losses that it had suffered. The mere fact that Patricio was president and director of PMI is
not a ground to conclude that he should be held solidarily liable with PMI for McLeods
money claims.

The ruling in A.C. Ransom Labor Union-CCLU v. NLRC,59 which the Court of Appeals cited,
does not apply to this case. We quote pertinent portions of the ruling, thus:
(a) Article 265 of the Labor Code, in part, expressly provides: "Any worker whose
employment has been terminated as a consequence of an unlawful lockout shall be entitled
to reinstatement with full backwages."
Article 273 of the Code provides that: "Any person violating any of the provisions of Article
265 of this Code shall be punished by a fine of not exceeding five hundred pesos and/or
imprisonment for not less than one (1) day nor more than six (6) months."

(b) How can the foregoing provisions be implemented when the employer is a corporation?
The answer is found in Article 212 (c) of the Labor Code which provides: "(c) Employer
includes any person acting in the interest of an employer, directly or indirectly. The term
shall not include any labor organization or any of its officers or agents except when acting
as employer.". The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law.
Since RANSOM is an artificial person, it must have an officer who can be presumed to be
the employer, being the "person acting in the interest of (the) employer" RANSOM. The
corporation, only in the technical sense, is the employer. The responsible officer of an
employer corporation can be held personally, not to say even criminally, liable for nonpayment of back wages. That is the policy of the law.

De Asis vs. CA
GR No. 127578, February 15, 1999
FACTS:
Vircel Andres as legal guardian of Glen Camil Andres de Asis, filed an action in 1988 for
maintenance and support against the alleged father Manuel De Asis who failed to provide

support and maintenance despite repeated demands. Vircel later on withdrew the
complaint in 1989 for the reason that Manuel denied paternity of the said minor and due to
such denial, it seems useless to pursue the said action. They mutually agreed to move for
the dismissal of the complaint with the condition that Manuel will not pursue his counter
claim. However in 1995, Vircel filed a similar complaint against the alleged father, this
time as the minors legal guardian/mother. Manuel interposed maxim of res judicata for the
dismissal of the case. He maintained that since the obligation to give support is based on
existence of paternity between the child and putative parent, lack thereof negates the right
to claim support.
ISSUE: WON the minor is barred from action for support.
HELD:
The right to give support cannot be renounced nor can it be transmitted to a third person.
The original agreement between the parties to dismiss the initial complaint was in the
nature of a compromise regarding future support which is prohibited by law. With respect
to Manuels contention for the lack of filial relationship between him and the child and
agreement of Vircel in not pursuing the original claim, the Court held that existence of lack
thereof of any filial relationship between parties was not a matter which the parties must
decide but should be decided by the Court itself. While it is true that in order to claim
support, filiation or paternity must be first shown between the parties, but the presence or
lack thereof must be judicially established and declaration is vested in the Court. It cannot
be left to the will or agreement of the parties. Hence, the first dismissal cannot bar the
filing of another action asking for the same relief (no force and effect). Furthermore, the
defense of res judicata claimed by Manuel was untenable since future support cannot be
the subject of any compromise or waiver.
De Asis vs. De Asis Case Digest
De Asis vs. De Asis
303 SCRA 176

Facts: Private respondent, in her capacity as the legal guardian of the minor, Glen Camil
Andres de Asis, brought an action for maintenance and support against petitioner before
the RTC of Quezon City, alleging that petitioner is the father of subject minor, and the
former refused and/or failed to provide for the maintenance of the latter, despite repeated
demands. Petitioner denied his paternity of the said minor alleged and that he cannot be
required to provide support for him. The mothers child sent in a manifestation stating that
because of petitioners judicial declarations, it was futile and a useless exercise to claim
support from him. Hence, she was withdrawing her complaint against petitioner subject to
the condition that the latter should not pursue his counterclaim. By virtue of the said

manifestation, the parties mutually agreed to move for the dismissal of the complaint. The
motion was granted by the trial court, which then dismissed the case with prejudice.

Subsequently, another Complaint for maintenance and support was brought against
petitioner, this time in the name of Glen Camil Andres de Asis, represented by her legal
guardian, herein private respondent. Petitioner moved to dismiss the complaint on the
ground of res judicata. The trial court denied the motion, ruling that res judicata is
inapplicable in an action for support for the reason that renunciation or waiver of future
support is prohibited by law. The trial court likewise denied petitioners motion for
reconsideration. Petitioner filed with the CA a petition for certiorari. CA dismissed the
same.

Issue: Whether or not the lower courts acted in grave abuse of discretion after the first
complaint was dismissed and adjudged.

Ruling: The right to receive support can neither be renounced nor transmitted to a third
person. Furthermore, future support cannot be the subject of a compromise. The
manifestation sent by private respondent amounted to renunciation as it severed the
vinculum that gives the subject minor, the right to claim support from his putative parent,
the petitioner. Furthermore, the agreement entered into between the petitioner and private
respondent for the dismissal of the counterclaim was in the nature of a compromise, which
cannot be countenanced. It violated the prohibition against any compromise of the right to
support.
SOLIDBANK CORPORATION V. MINDANAO FERROALLOY CORPORATION
GR 153535, JULY 28, 2005

FACTS:
Mindanao Ferroalloy corporation is the fruit of a joint venture agreement between a
Filipino corporation and Korean Corporation. In its operations, its liabilities ballooned
over its assets that it had to secure loans from petitioner Solidbank. The loans were
later consolidated and restructured, evidenced by a promissory note. The promissory note
was signed by Cu and Hong, both officers of the corporation. The corporation, through the
same officers also executed a deed of assignment. Thereafter, the corporation
stopped its operations and the loan was left unpaid. The bank was prompted to
file a complaint against the corporation, and with it, impleading the officers who
signed the agreement and promissory notes. The trial court held in favor of the bank
but didn't adjudge liability of the officers. Both the trial court and CA held that there was
no solidary liability on the part of the officers impleaded by the bank.

HELD:
Though Hong and Cu signed above the maker/borrower and the printed name of the
corporation, without the word by preceding their signatures, the fact that they signed in
their personal capacities is negated by the facts that name and address of the
corporation
also
appeared
on
the
space
provided for in the maker/borrower and their signatures only appeared once when it
should be twice if indeed it was in their personal capacities. Further, they didn't sign on
the portion allocated for the co-maker, and there was also indicia of it being signed as
authorized representatives.

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