Intestate Estate of Alexander T. Ty v.

Court of Appeals, 356 SCRA 61

(2001)

Facts: Petitioner Sylvia S. Ty was married to Alexander T. Ty, son of

private respondent Alejandro B. Ty, on January 11, 1981. Alexander died of
leukemia on May 19, 1988 and was survived by his wife, petitioner Sylvia,
and only child, Krizia Katrina. In the settlement of his estate, petitioner was
appointed administratrix of her late husband’s intestate estate.

On November 4, 1992, petitioner filed a motion for leave to sell or mortgage

properties(a parcel of land and shares of stock in different companies) of
Alexander Ty in order to generate funds for the payment of deficiency
estate taxes in the sum of P4,714,560.00.

Private respondent Alejandro Ty then filed two complaints for the recovery
of the properties mentioned. Private respondent claims that the subject
properties are bought through his money even if said properties are placed
in the name of Alexander Ty.

Motions to dismiss were filed by petitioner. Claiming that An express trust

between private respondent Alejandro and his deceased son Alexander.

The motions to dismiss were denied. Petitioner then filed petitions for
certiorari in the , which were also dismissed for lack of merit. Thus, the
present petitions now before the Court.

Petitioner contends that private respondent is attempting to enforce an

unenforceable express trust over the disputed real property. Petitioner is in
error when she contends that an express trust was created by private
respondent when he transferred the property to his son.

Issue/s: Was an express trust created?

Held: No.

Express trusts are those that are created by the direct and positive acts of
the parties, by some writing or deed or will or by words evidencing an
intention to create a trust. On the other hand, implied trusts are those
which, without being expressed, are deducible from the nature of the
transaction by operation of law as matters of equity, independently of the
particular intention of the parties.

In the cases at hand, private respondent contends that the pieces of

property were transferred in the name of the deceased Alexander for the
purpose of taking care of the property for him and his siblings. Such
transfer having been effected without cause of consideration, a resulting
trust was created.

A resulting trust arises in favor of one who pays the purchase money of an
estate and places the title in the name of another, because of the
presumption that he who pays for a thing intends a beneficial interest
therein for himself. The trust is said to result in law from the acts of the
parties. Such a trust is implied in fact (Tolentino, Civil Code of the
Philippines, Vol. 4, p. 678).

If a trust was then created, it was an implied, not an express trust, which
may be proven by oral evidence (Article 1457, Civil Code), and it matters
not whether property is real or personal (Paras, Civil Code of the
Philippines, Annotated, Vol. 4, p. 814).

WHEREFORE, the petition for certiorari in G.R. No. 112872 is

DISMISSED, having failed to show that grave abuse of discretion was
committed in declaring that the regional trial court had jurisdiction over the
case. The petition for review on certiorari in G.R. 114672 is DENIED,
having found no reversible error was committed.
Traders Royal Bank v. Court of Appeals, 177 SCRA 789 (1989)

Facts:

On March 30,1982, the Philippine Blooming Mills, Inc. (PBM) and Alfredo
Ching jointly submitted to the Securities and Exchange Commission a
petition for suspension of payments where Alfredo Ching was joined as co-
petitioner because under the law, he was allegedly entitled, as surety, to
avail of the defenses of PBM and he was expected to raise most of the
stockholders' equity of Pl00 million being required under the plan for the
rehabilitation of PBM. Traders Royal Bank was included among PBM's
creditors named in Schedule A accompanying PBM's petition for
suspension of payments.

On May 13, 1983, the petitioner bank filed a Civil Case in the Regional Trial
Court in Pasay City, against PBM and Alfredo Ching, to collect
P22,227,794.05 exclusive of interests, penalties and other bank charges
representing PBM's outstanding obligation to the bank. Alfredo Ching, a
stockholder of PBM, was impleaded as co-defendant for having signed as a
surety for PBM's obligations to the extent of ten million pesos (Pl0,000,000)
under a Deed of Suretyship dated July 21, 1977.

In its en banc decision, the SEC declared that it had assumed jurisdiction
over petitioner Alfredo Ching pursuant to Section 6, Rule 3 of the new
Rules of Procedure of the SEC providing that "parties in interest without
whom no final determination can be had of an action shall be joined either
as complainant, petitioner or respondent" to prevent multiplicity of suits.

On July 9, 1982, the SEC issued an Order placing PBM's business,

including its assets and liabilities, under rehabilitation receivership, and
ordered that "all actions for claims listed in Schedule A of the petition
pending before any court or tribunal are hereby suspended in whatever
stage the same may be, until further orders from the Commission".

PBM and Ching jointly filed a motion to dismiss the Civil Case in the RTC,
Pasay City, invoking the pendency in the SEC of PBM's application for
suspension of payments (which Ching co-signed) and over which the SEC
had already assumed jurisdiction.

Before the motion to dismiss could be resolved, the court dropped PBM
from the complaint, on motion of the plaintiff bank, for the reason that the
SEC had already placed PBM under rehabilitation receivership.

On August 15, 1983, the trial court denied Ching's motion to dismiss the
complaint against himself. The court pointed out that "P.D. 1758 is only
concerned with the activities of corporations, partnerships and
associations. Never was it intended to regulate and/or control activities of
individuals"

Ching filed a petition for certiorari and prohibition in the Court of Appeals
where the Court of Appeals granted the writs prayed for. It nullified the
questioned orders of respondent Judge and prohibited him from further
proceeding in the Civil Case, except to enter an order dismissing the case.

Isue:

WON the CA erred in holding that jurisdiction over respondent Alfredo

Ching because he was a co-signer or surety of PBM and that the lower
court may not assume jurisdiction over him so as to avoid multiplicity of
suits.

Held:

Although Ching was impleaded in the SEC Case, as a co-petitioner of

PBM, the SEC could not assume jurisdiction over his person and
properties. The Securities and Exchange Commission was empowered, as
rehabilitation receiver, to take custody and control of the assets and
properties of PBM only, for the SEC has jurisdiction over corporations only
not over private individuals, except stockholders in an intra-corporate
dispute. Being a nominal party in the case, Ching's properties were not
included in the rehabilitation receivership that the SEC constituted to take
custody of PBM's assets. Therefore, the petitioner bank was not barred
from filing a suit against Ching, as a surety for PBM. An anomalous
situation would arise if individual sureties for debtor corporations may
escape liability by simply co- filing with the corporation a petition for
suspension of payments in the SEC whose jurisdiction is limited only to
corporations and their corporate assets.

The term "parties-in-interest" in Section 6, Rule 3 of the SEC's New Rules

of Procedure contemplates only private individuals sued or suing as
stockholders, directors, or officers of a corporation.

Ching can be sued separately to enforce his liability as surety for PBM, as
expressly provided by Article 1216 of the New Civil Code:

ART. 1216. The creditor may proceed against any of the solidary debtors or
all of them simultaneously. The demand made against one of them shall
not be an obstacle to those which may subsequently be directed against
the others, as long as the debt has not been fully collected.

It is elementary that a corporation has a personality distinct and separate

from its individual stockholders or members. Being an officer or stockholder
of a corporation does not make one's property the property also of the
corporation, for they are separate entities.

Ching's act of joining as a co-petitioner with PBM in the SEC case did not
vest in the SEC jurisdiction over his person or property, for jurisdiction does
not depend on the consent or acts of the parties but upon express provision
of law.

WHEREFORE, the petition for review is granted.

Sulo ng Bayan v. Araneta, Inc., 72 SCRA 347 (1976)

Facts:

On 26 April 1966, Sulo ng Bayan, Inc. filed an accion de revindicacion with

the Court of First Instance of Bulacan, Fifth Judicial District, Valenzuela,
Bulacan, against Gregorio Araneta Inc. (GAI), Paradise Farms Inc.,
National Waterworks & Sewerage Authority (NAWASA), Hacienda Caretas
Inc., and the Register of Deeds of Bulacan to recover the ownership and
possession of a large tract of land in San Jose del Monte, Bulacan,
containing an area of 27,982,250 sq. ms., more or less, registered under
the Torrens System in the name of GAI, et. al.'s predecessors-in-interest
(who are members of the corporation). On 2 September 1966, GAI filed a
motion to dismiss the amended complaint on the grounds that (1) the
complaint states no cause of action; and (2) the cause of action, if any, is
barred by prescription and laches. Paradise Farms, Inc. and Hacienda
Caretas, Inc. filed motions to dismiss based on the same grounds.
NAWASA did not file any motion to dismiss. However, it pleaded in its
answer as special and affirmative defenses lack of cause of action by Sulo
ng Bayan Inc. and the barring of such action by prescription and laches. On
24 January 1967, the trial court issued an Order dismissing the (amended)
complaint. On 14 February 1967, Sulo ng Bayan filed a motion to
reconsider the Order of dismissal, arguing among others that the complaint
states a sufficient cause of action because the subject matter of the
controversy in one of common interest to the members of the corporation
who are so numerous that the present complaint should be treated as a
class suit. The motion was denied by the trial court in its Order dated 22
February 1967.

Sulo ng Bayan appealed to the Court of Appeals. On 3 September 1969,

the Court of Appeals, upon finding that no question of fact was involved in
the appeal but only questions of law and jurisdiction, certified the case to
the Supreme Court for resolution of the legal issues involved in the
controversy.

Issue:
Whether the corporation (non-stock) may institute an action in behalf of its
individual members for the recovery of certain parcels of land allegedly
owned by said members, among others.

Held:

It is a doctrine well-established and obtains both at law and in equity that a

corporation is a distinct legal entity to be considered as separate and apart
from the individual stockholders or members who compose it, and is not
affected by the personal rights, obligations and transactions of its
stockholders or members. The property of the corporation is its property
and not that of the stockholders, as owners, although they have equities in
it. Properties registered in the name of the corporation are owned by it as
an entity separate and distinct from its members. Conversely, a corporation
ordinarily has no interest in the individual property of its stockholders
unless transferred to the corporation, "even in the case of a one-man
corporation." The mere fact that one is president of a corporation does not
render the property which he owns or possesses the property of the
corporation, since the president, as individual, and the corporation are
separate similarities. Similarly, stockholders in a corporation engaged in
buying and dealing in real estate whose certificates of stock entitled the
holder thereof to an allotment in the distribution of the land of the
corporation upon surrender of their stock certificates were considered not
to have such legal or equitable title or interest in the land, as would support
a suit for title, especially against parties other than the corporation. It must
be noted, however, that the juridical personality of the corporation, as
separate and distinct from the persons composing it, is but a legal fiction
introduced for the purpose of convenience and to subserve the ends of
justice. This separate personality of the corporation may be disregarded, or
the veil of corporate fiction pierced, in cases where it is used as a cloak or
cover for fraud or illegality, or to work -an injustice, or where necessary to
achieve equity. It has not been claimed that the members have assigned or
transferred whatever rights they may have on the land in question to the
corporation. Absent any showing of interest, therefore, a corporation, has
no personality to bring an action for and in behalf of its stockholders or
members for the purpose of recovering property which belongs to said
stockholders or members in their personal capacities.
Saw v. CA, 195 SCRA 740 (1991)

Facts:

A collection suit with preliminary attachment was filed by Equitable Banking

Corporation against Freeman, Inc. and Saw Chiao Lian, its President and
General Manager. The petitioners moved to intervene, alleging that (1) the
loan transactions between Saw Chiao Lian and Equitable Banking Corp.
were not approved by the stockholders representing at least 2/3 of
corporate capital; (2) Saw Chiao Lian had no authority to contract such
loans; and (3) there was collusion between the officials of Freeman, Inc.
and Equitable Banking Corp. in securing the loans. The motion to intervene
was denied, and the petitioners appealed to the Court of Appeals.

Meanwhile, Equitable and Saw Chiao Lian entered into a compromise

agreement which they submitted to and was approved by the lower court.
But because it was not complied with, Equitable secured a writ of
execution, and two lots owned by Freeman, Inc. were levied upon and sold
at public auction to Freeman Management and Development Corp.

The Court of Appeals sustained the denial of the petitioners' motion for
intervention, holding that "the compromise agreement between Freeman,
Inc., through its President, and Equitable Banking Corp. will not necessarily
prejudice petitioners whose rights to corporate assets are at most inchoate,
prior to the dissolution of Freeman, Inc. . . . And intervention under Sec. 2,
Rule 12 of the Revised Rules of Court is proper only when one's right is
actual, material, direct and immediate and not simply contingent or
expectant."

Issue:

WON the Honorable Court of Appeals erred in holding that the petitioners
cannot intervene in Civil Case No. 88-44404 because their rights as
stockholders of Freeman are merely inchoate and not actual, material,
direct and immediate prior to the dissolution of the corporation;

Held:
The petitioners base their right to intervene for the protection of their
interests as stockholders on Everett v. Asia Banking Corp. where it was
held:

The well-known rule that shareholders cannot ordinarily sue in equity to

redress wrongs done to the corporation, but that the action must be brought
by the Board of Directors, . . . has its exceptions. (If the corporation [were]
under the complete control of the principal defendants, . . . it is obvious that
a demand upon the Board of Directors to institute action and prosecute the
same effectively would have been useless, and the law does not require
litigants to perform useless acts.

Equitable demurs, contending that the collection suit against Freeman, Inc,
and Saw Chiao Lian is essentially in personam and, as an action against
defendants in their personal capacities, will not prejudice the petitioners as
stockholders of the corporation. The Everett case is not applicable because
it involved an action filed by the minority stockholders where the board of
directors refused to bring an action in behalf of the corporation. In the case
at bar, it was Freeman, Inc. that was being sued by the creditor bank.

Equitable also argues that the subject matter of the intervention falls
properly within the original and exclusive jurisdiction of the Securities and
Exchange Commission under P.D. No. 902-A. In fact, at the time the
motion for intervention was filed, there was pending between Freeman, Inc.
and the petitioners SEC Case No. 03577 entitled "Dissolution, Accounting,
Cancellation of Certificate of Registration with Restraining Order or
Preliminary Injunction and Appointment of Receiver." It also avers in its
Comment that the intervention of the petitioners could have only caused
delay and prejudice to the principal parties.

After examining the issues and arguments of the parties, the Court finds
that the respondent court committed no reversible error in sustaining the
denial by the trial court of the petitioners' motion for intervention.

In the case of Magsaysay-Labrador v. Court of Appeals, we ruled as

follows:
Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, this
Court affirms the respondent court's holding that petitioners herein have no
legal interest in the subject matter in litigation so as to entitle them to
intervene in the proceedings below. In the case of Batama Farmers'
Cooperative Marketing Association, Inc. v. Rosal, we held: "As clearly
stated in Section 2 of Rule 12 of the Rules of Court, to be permitted to
intervene in a pending action, the party must have a legal interest in the
matter in litigation, or in the success of either of the parties or an interest
against both, or he must be so situated as to be adversely affected by a
distribution or other disposition of the property in the custody of the court or
an officer thereof."

To allow intervention, [a] it must be shown that the movant has legal
interest in the matter in litigation, or otherwise qualified; and [b]
consideration must be given as to whether the adjudication of the rights of
the original parties may be delayed or prejudiced, or whether the
intervenor's rights may be protected in a separate proceeding or not. Both
requirements must concur as the first is not more important than the
second.

The interest which entitles a person to intervene in a suit between other

parties must be in the matter in litigation and of such direct and immediate
character that the intervenor will either gain or lose by the direct legal
operation and effect of the judgment. Otherwise, if persons not parties of
the action could be allowed to intervene, proceedings will become
unnecessarily complicated, expensive and interminable. And this is not the
policy of the law.

The words "an interest in the subject" mean a direct interest in the cause of
action as pleaded, and which would put the intervenor in a legal position to
litigate a fact alleged in the complaint, without the establishment of which
plaintiff could not recover.

Here, the interest, if it exists at all, of petitioners-movants is indirect,

contingent, remote, conjectural, consequential and collateral. At the very
least, their interest is purely inchoate, or in sheer expectancy of a right in
the management of the corporation and to share in the profits thereof and
in the properties and assets thereof on dissolution, after payment of the
corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the

property of the corporation, it does not vest the owner thereof with any legal
right or title to any of the property, his interest in the corporate property
being equitable or beneficial in nature. Shareholders are in no legal sense
the owners of corporate property, which is owned by the corporation as a
distinct legal person.

The Court observes that even with the denial of the petitioners' motion to
intervene, nothing is really lost to them.1âwphi1The denial did not
necessarily prejudice them as their rights are being litigated in the case
now before the Securities and Exchange Commission and may be fully
asserted and protected in that separate proceeding.

WHEREFORE, the petition is DENIED.

Industrial and Dev. Corp. v. Court of Appeals, 272 SCRA 333 (1997)

Facts:

CKH, a corporation established by the late Cheng Kim Heng, owns to

parcels of land in Valenzuela. After his death, Rubi Saw, his second wife,
took over CKH.

Before second marriage, CKH was married to Hung Yuk Wah who lived in
Hong Kong with their children Chong Tak Kei, Chong Tak Choi and Chong
Tak Yam.

After immigrating and marrying Rubi Saw, Cheng Kim Heng brings the first
family into Manila

On May 1988, Rubi and Lourdes Chong (wife of Chong Tak Kei, son of
Cheng Kim Heng) met and executed a Deed of Absolute Sale regarding the
sale of the 2 subject properties to Century Well, owned by Lourdes, Kei and
Choi with the consideration of Php 800,000.00 in the form of a cash to be
delivered upon execution of deed of sale.

When the parties met, a manager’s check could not be produced since it
was a Sunday. Rubi however signed the deed, thinking that since Kim was
an elderly Chinese man whom she had no basis to mistrust, she acceded
to the request.

However, he only had Php20,000.00 in hand but gave the assurance that
the next day the entire amount would be ready. Rubi again agreed.

In the next and succeeding days though, none of them could be reached
for the payment.

CHK and Rubi Saw filed a complaint against respondents claiming that
consideration was not paid despite several demands with a prayer for
annulment/rescission of the Deed of Absolute Sale.

Contention of Century Well: Consideration was paid by means of

offsetting/legal compensation in the amount of Php 700, 000.00 through
alleged promissory notes executed by Heng in favor of his sons Choi and
Kei plus Payment of Php 100,000.00 cash.
Issue:

whether or not there was payment of the consideration for the sale of real
property subject of this case.

Held:

The contrasting submissions of the circumstances surrounding the

execution of the subject document have led to this stalemate of sorts. Still,
the best test to establish the true intent of the parties remains to be the
Deed of Absolute Sale, whose genuineness and due execution, are
unchallenged.

Section 9 of Rule 130 of the Rules of Court states that when the terms of
an agreement have been reduced to writing, it is considered as containing
all the terms agreed upon and there can be, between the parties and their
successors-in-interest, no evidence of such terms other than the contents
of the written agreement.

The so-called parol evidence rule forbids any addition to or contradiction of

the terms of a written instrument by testimony or other evidence purporting
to show that, at or before the execution of the parties written agreement,
other or different terms were agreed upon by the parties, varying the
purport of the written contract. When an agreement has been reduced to
writing, the parties cannot be permitted to adduce evidence to prove
alleged practices which to all purposes would alter the terms of the written
agreement. Whatever is not found in the writing is understood to have been
waived and abandoned.

The rule is not without exceptions, however, as it is likewise provided that a

party to an action may present evidence to modify, explain, or add to the
terms of the written agreement if he puts in issue in his pleadings: (a) An
intrinsic ambiguity, mistake or imperfection in the written agreement; (b)
The failure of the written agreement to express the true intent and
agreement of the parties thereto; (c) The validity of the written agreement;
or (d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.

We reiterate the pertinent provisions of the deed:

That for and in consideration of the sum of EIGHT HUNDRED

THOUSAND (P800,000.00) PESOS, Philippine Currency, paid by
VENDEE to VENDOR, receipt of which is hereby acknowledged by
the latter to its entire satisfaction, said VENDOR, by these presents,
has SOLD, CEDED, TRANSFERRED, and CONVEYED by way of
absolute sale unto said VENDEE, its successors and assigns, the
two parcels of land above described and any and all improvements
therein;

The stipulation in the case is clear enough in manifesting the vendors

admission of receipt of the purchase price, thereby lending sufficient,
though reluctant, credence to the private respondents submission that
payment had been made by off-setting P700,000.00 of the purchase price
with the obligation of Cheng Kim Heng to his sons Choi and Kei. By signing
the Deed of Absolute Sale, petitioner Rubi Saw has given her imprimatur to
the provisions of the deed, and she cannot now challenge its veracity.

However, the suitability of the said stipulations as benchmarks for the

intention of the contracting parties, does not come clothed with the cloak of
validity. It must be remembered that agreements affecting the civil
relationship of the contracting parties must come under the scrutiny of the
provisions of law existing and effective at the time of the execution of the
contract.

We refer particularly to the provisions of the law on compensation as a

mode of extinguishment of obligations. Under Article 1231 of the Civil
Code, an obligation may be extinguished: (1) by payment or performance;
(2) by the loss of the thing due, (3) by the condonation or remission of the
debt; (4) by the confusion or merger of the rights of creditor and debtor, (5)
by compensation; or (6) by novation. Other causes of extinguishment of
obligations include annulment, rescission, fulfillment of a resolutory
condition and prescription.
Compensation may take place by operation of law (legal compensation),
when two persons, in their own right, are creditors and debtors of each
other. Article 1279 of the Civil Code provides for the requisites of legal
compensation:

Article 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and

that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things

due are consumable, they be of the same kind, and also of
the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or

controversy, commenced by third persons and communicated
in due time to the debtor.

Compensation may also be voluntary or conventional, that is, when the

parties, who are mutually creditors and debtors agree to compensate their
respective obligations, even though not all the requisites for legal
compensation are present. Without the confluence of the characters of
mutual debtors and creditors, contracting parties cannot stipulate to the
compensation of their obligations, for then the legal tie that binds
contracting parties to their obligations would be absent. At least one party
would be binding himself under an authority he does not possess. As
observed by a noted author, the requirements of conventional
compensation are (1) that each of the parties can dispose of the credit he
seeks to compensate, and (2) that they agree to the mutual extinguishment
of their credits.

In the instant case, there can be no valid compensation of the purchase

price with the obligations of Cheng Kim Heng reflected in the promissory
notes, for the reason that CKH and Century-Well the principal contracting
parties, are not mutually bound as creditors and debtors in their own name.
A close scrutiny of the promissory notes does not indicate the late Cheng,
as then president of CKH, acknowledging any indebtedness to Century-
Well. As worded, the promissory notes reveal CKHs indebtedness to
Chong Tak Choi and Chong Tak Kei.

In fact, there is no indication at all, that such indebtedness was contracted

by Cheng from Choi and Kei as stockholders of Century-Well. Choi and
Kei, in turn, are not parties to the Deed of Absolute Sale. They are merely
stockholders of Century-Well, and as such, are not bound principally, not
even in a representative capacity, in the contract of sale.Thus, their interest
in the promissory notes cannot be off-set against the obligations between
CKH and Century-Well arising out of the deed of absolute sale, absent any
allegation, much less, even a scintilla of substantiation, that Choi and Keis
interest in Century-Well are so considerable as to merit a declaration of
unity of their civil personalities. Under present law, corporations, such as
Century-Well, have personalities separate and distinct from their
stockholders, except only when the law sees it fit to pierce the veil of
corporate identity, particularly when the corporate fiction is shown to be
used to defeat public convenience, justify wrong, protect fraud or defend
crime, or where a corporation the mere alter ego or business conduit of a
person. The Court cannot, in this instance make such a ruling absent a
demonstration of the merit of such a disposition.