sample cases

1. Ong Yong V. Tiu, April 8, 2003

2.  1994: construction of the Masagana Citimall in Pasay City was threatened with
stoppage, when its owner, the First Landlink Asia Development Corporation
(FLADC), owned by the Tius, became heavily indebted to the Philippine National
Bank (PNB) for P190M
 To save the 2 lots where the mall was being built from foreclosure, the Tius
invited Ong Yong, Juanita Tan Ong, Wilson T. Ong, Anna L. Ong, William T. Ong
and Julia Ong Alonzo (the Ongs), to invest in FLADC.
 Pre-Subscription Agreement: Ongs and the Tius agreed to maintain equal
shareholdings in FLADC
 Ongs: subscribe to 1,000,000 shares
 Tius: subscribe to an additional 549,800 shares in addition to their already
existing subscription of 450,200 shares

3.  Tius: nominate the Vice-President and the Treasurer plus 5 directors
 Ongs nominate the President, the Secretary and 6 directors (including the
chairman) to the board of directors of FLADC and right to manage and operate
the mall.
 Tius: contribute to FLADC a 4-storey building P20M (for 200K shares)and 2
parcels of land P30M (for 300K shares) and P49.8M (for 49,800 shares)
 Ongs: paid P190M to settle the mortgage indebtedness of FLADC to PNB (P100M
in cash for their subscription to 1M shares)
 February 23, 1996: Tius rescinded the Pre-Subscription Agreement
 February 27, 1996: Tius filed at the Securities and Exchange Commission
(SEC) seeking confirmation of their rescission of the Pre-Subscription Agreement

4. SEC: confirmed recission of Tius
Ongs filed reconsideration that their P70M was not a premium on
capital stock but an advance loan
 SEC en banc: affirmed it was a premium on capital stock
CA: Ongs and the Tius were in pari delicto (which would not have
legally entitled them to rescission) but, "for practical considerations,"
that is, their inability to work together, it was best to separate the two
groups by rescinding the Pre-Subscription Agreement, returning the
original investment of the Ongs and awarding practically everything
else to the Tius.

5. Whether or not specific
performance and NOT rescission
is the remedy

6.  HELD: YES. Ongs granted.
 did not justify the rescission of the contract
 providing appropriate offices for David S. Tiu and Cely Y. Tiu as Vice-
President and Treasurer, respectively, had no bearing on their obligations
under the Pre-Subscription Agreement since the obligation pertained to
FLADC itself
 failure of the Ongs to credit shares of stock in favor of the Tius for their
property contributions also pertained to the corporation and not to the
Ongs
 the principal objective of both parties in entering into the Pre-Subscription
Agreement in 1994 was to raise the P190 million

7.  law requires that the breach of contract should be so "substantial or fundamental"
as to defeat the primary objective of the parties in making the agreement since
the cash and other contributions now sought to be returned already belong to
FLADC, an innocent third party, said remedy may no longer be availed of under
the law.
 Any contract for the acquisition of unissued stock in an existing corporation or a
corporation still to be formed shall be deemed a subscription within the meaning
of this Title, notwithstanding the fact that the parties refer to it as a purchase or
some other contract
 allows the distribution of corporate capital only in three instances: (1) amendment
of the Articles of Incorporation to reduce the authorized capital stock, (2)
purchase of redeemable shares by the corporation, regardless of the existence of
unrestricted retained earnings,25 and (3) dissolution and eventual liquidation of
the corporation.

8. They want this Court to make a corporate decision for
FLADC.
The Ongs' shortcomings were far from serious and certainly
less than substantial; they were in fact remediable and
correctable under the law. It would be totally against all rules
of justice, fairness and equity to deprive the Ongs of their
interests on petty and tenuous grounds.

9. Nava V. Peers Marketing Corp.
November 25, 1976

10. Teofilo Po as an incorporator subscribed to 80 shares of Peers
Marketing Corporation at P100 PV and paid 25%. No certificate
of stock was issued to him or to any incorporator, subscriber or
stockholder.
April 2, 1966: Po sold to Ricardo A. Nava for P2,000 20 of 80
shares
Nava requested to register the sale in the books of the
corporation.
denied - Po has not paid fully the amount of his subscription
Po was delinquent of the balance due so the corporation
claimed on his entire subscription of which included 20 shares
sold to Nava.

11. December 21, 1966: Nava filed this mandamus to register 20
shares in Nava's name in the corporation's transfer book.
CFI: court dismissed the petition
Nava appealed on the basis that
Section 37: "no certificate of stock shall be issued to a
subscriber as fully paid up until the full par value thereof, or
the full subscription in case of no par stock, has been paid by
him to the corporation"

12. Whether or not officers of Peers Marketing
Corporation can be compelled by
mandamus to enter in its stock and
transfer book the sale made

13. HELD: NO. dismissal affirmed.
no provision of the by-laws of the corporation covers that
situation
A stock subscription is a subsisting liability from the time the
subscription is made. The subscriber is as much bound to
pay his subscription as he would be to pay any other debt.
The right of the corporation to demand payment is no less
incontestable.
no clear legal duty on the part of the officers of the
corporation to register the 20 shares in Nava's name - no
cause of action for mandamus.

14. Baltazar case: partial payment = entitled to vote the said
shares
although he has not paid the balance of his subscription
and a call or demand had been made for the payment of
the par value of the delinquent shares
Without stock certificate, which is the evidence of ownership
of corporate stock, the assignment of corporate shares is
effective only between the parties to the transaction
delivery of the stock certificate, which represents the
shares to be alienated , is essential for the protection of
both the corporation and its stockholders

15. THE RURAL BANK OF LIPA CITY, INC.
(petitioners) VS. HONORABLE COURT OF
APPEALS, HONORABLE COMMISSION EN
BANC, SECURITIES AND EXCHANGE
COMMISSION (respondents)
September 28, 2001

16.  Reynaldo Villanueva, Sr. together with 8 other shareholders execute a Deed
of Assignment with a total of 10, 467 shares in favor of the representative of
stock holders of the Bank.
 Reynaldo Villanueva, Sr. and his wife, Avelina executed an Agreement
acknowledging their indebtness to the Bank (4 Million pesos); will be paid out
of the proceeds of the sale of their real property described in the Agreement.
 Nov. 15, 1993 – Villanueva spouses promised to pay their debt on or before
December. 31
 The Villanueva failed to pay on its due date

17. 1. The surrender of all stocks certificates issued to them
2. The delivery of sufficient collateral to secure the balance of their debt
amount to Php. 3, 346, 898.54
 The share of stock converted into Treasury Stocks and was questioned
by the Villanuevas.
Jan. 15, 1994 – stockholders of the Bank met and elected a new set of
directors and officers for that year.

18.  Joining them as co-petitioners were Catalino Villanueva, Andres
Gonzales, Aurora Lacerna, Celso Laygo, Edgardo Reyes, Alejandro
Tonogan, and Elena Usi.
 Named respondents were the newly-elected officers and directors of the
Rural Bank, namely: Bernardo Bautista, Jaime Custodio, Octavio Katigbak,
Francisco Custodio and Juanita Bautista
April 6, 1994- SEC denied Villanueva’s application for the issuance of a writ
of preliminary injunction
December 16, 1994- motion for reconsideration was granted that the
Villanueava’s did not voluntarily or involuntarily disposed their shares

19. In reply, the Rural Bank held a petition for Certiorari
and Aulment with Damages
To the SEC Hearing Officer with grave abuse of
discretion amounting to lack or excess of jurisdiction
June 7, 1995- the SEC en banc denied the petition for
certiorari

20. a. Whether there was valid transfer of the shares to
the Bank
b. Whether or not the Hon. Hearing Officer
committed any grave of abuse of discretion that
would warrant the filling of petition for certiorari
c. Whether or not private respondents are
presumably stockholders of the bank

21.  (a) There must be delivery of the stock certificate:
(b) The certificate must be endorsed by the owner or his
attorney-in-fact or other persons legally authorized to make
the transfer; and
 (c) To be valid against third parties, the transfer must be
recorded in the books of the corporation.

22. LIM TAY (petitioner) VS. COURT OF APPEALS,
GO FAY AND CO., SY GUIOK, AND THE
ESTATE OF ALFONSO LIM (respondents)
August 5, 1998

23.  Jan. 8, 1980 – Sy Guiok secured a loan from Lim Tay (40,000) payable
within 6 months by executing a Contract of Pledge.
 Alfonso Sy Lim also executing a Contract of Pledge
 Each of them pledge 300 shares of stock on the Go Fay & Company Inc. &
pay interest of their loan at the rate of 10% per annum.
 Both failed to pay their respected loans to Lim Tay
 Oct. 1990 – Lim Tay filed a “Petition” for Mandamus” against Go Fay & Co.
 Sy Lim died; was represented by Conchita Lim (Answered-In-
Intervention SEC)

24. Lim Tay’s appeal denied by SEC and appealed again with
CA.
Lim Tay’s argument:
1. acquired ownership over the shares “through extraordinary
prescription” and ;
2. thru respondents’ subsequent acts, which amount to a
novation of the contracts
3. dacion en pago

25. Whether or not Lim Tay is the owner of the
shares previously subjected to pledge, for
him to cause the registration of said
shares in his own name.

26. 1. Contract of pledge doesn’t make Lim Tay the owner of the shares pledge
2. Lim Tay failed to establish a clear legal right
3. Without foreclosure and purchase an auction, pledgee is not the owner of
pledged shares (Sec. 68 Delinquent Sale)
4. Lim Tay cannot claim to have acquired ownership over the certificates of
stocks through extraordinary prescription (Art. 1132 of the Civil Code)
5. Lim Tay cannot claim acquire the shares by prescription
6. Lim Tay cannot acquire the shares by virtue of a notation
7. No Dacion en pago in favor of the petition
8. Lashes not a bar to Lim Tay

27. Gonzales V. Philippine National
Bank
May 30, 1983

28. The petitioner requested from the respondent that he be
allowed to examine the records of the latter
Petitioner claimed that he wanted to determine the veracity of
reports that the respondent has guaranteedthe obligation of
another corporation in the purchase of a sugar mill and
that the respondent financed theconstruction of a bridge and
a sugar mill.
When the respondent denied his request, the petitioner
soughtmandamus from the Court of First Assistance (CFI) of
Manila, adding that he acquired one (1) share of stock in
PNB and was thusentitled to examine the respondent’s

29. The CFI dismissed the petition on the ground that
thepetitioner had improper motives and his purpose was not
germane to his interest as a stockholder.
The petitioner argued that his right was unconditonal

30. Whether the petitioner could examine the
records of the respondent

31.  Held: No
 The former Corporation Law was already replaced by the Corporation Code which requires that the
person requesting the examination of a corporation’s records must be acting in good faith and for a
legitimate purpose.
 Examination could not be granted on the ground of mere curiosity.
 The petitioner acquired only one share of stock and did so only after making a request to examine acts
done by the respondent when the former was still a stranger to the same.
 The circumstances showed that the petitioner’s purpose was not germane to his interest as a
stockholder. Lastly, the right to examine the records of a corporation under the Corporation Code was
violative of the PNB’s charter.
 The petition was dismissed

32. Babst V. CA
January 26, 2001

33.  Elizalde Steel Consolidated, Inc. (ELISCON) obtained a loan from Commercial Bank and
Trust Company (CBTC) in the amount of P8, 015, 900.84, evidenced by a promissory note.
ELISCON defaulted on its payments, leaving an outstanding balance of P 2, 795, 240.67
 The letters of credit, on the other hand, were opened for ELISCON by CBTC using the
credits facilities of Pacific Multi-Commercial Corporation (MULTI) with the said bank.
Subsequently, Antonio Roxas Chua and Chester Babst executed a Continuing Suretyship,
whereby they bound themselves jointly and severally liable to pay any existing indebtedness
of MULTI to CBTC

34.  The Bank of the Philippine Islands (BPI) and CBTC entered into a merger, wherein BPI, as
the surviving corporation, acquired all the assets and assumed all the liabilities of CBTC.
Meanwhile, ELISCON became heavily indebted to Developmental Bank of the Philippines
(DBP) as it suffered financial difficulties.
 ELISCON called its creditors to a meeting to announce the take-over by DBP of its assets,
including its indebtedness to BPI. Thereafter, DBP proposed formulas for the settlement of
all of ELISCON’s obligations to its creditors but BPI rejected the formula

35.  BPI then filed a complaint for sum of money against ELICSON, MULTI and Babst. ELISCON
argued that the complaint was premature since DBP had made serious efforts to settle its
obligations with BPI. Babst, on the other hand, asserted that his suretyship covers only
obligations which MULTI incurred soley for its benefit and not for any third party liabilty.
MULTI denied knowledge of the BPI-CBTC merger.
 BPI argued that it did not give consent to the DBP take-over of ELISCON. Hence, no valid
novation has been effected.

36. Whether BPI consented to the assumption by
DBP of the obligations of ELISCON

37.  HELD: Yes
 The original obligation having been extinguished, the contracts pf suretyship
executed by Babst and MULTI are also extinguished.
 BPI contends that there must be an express consent of the creditor.
However, the rule that it must be “express” is not absolute for the existence
of the consent may well be inferred from the acts of the creditor, since
volition may as well be expressed by deeds as by words.
 In short, there can be implied consent of the creditor to the subsitution of the
debtors

38.  In the instant case, the failure of BPI to register its objection to the take-over
by DBP of ELISCON’s assets at the creditors’ meeting is deemed to be a
form of implied consent on the part of BPI.
 BPI merely objected to the payment formula, not the substitution of debtors.
 BPI’s conduct evinced a clear and unmistakable consent to the substitution
of DBP for ELISCON as debtor. Hence, there was a valid novation which
resulted in the release of ELISCON from its obligation to BPI, whose cause
of action should be directed against DBP as the new debtor.