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Showing posts with label 1983. Show all posts
Showing posts with label 1983. Show all posts

Jurisprudence: G.R. No. L-56655 July 25, 1983

FIRST DIVISION

G.R. No. L-56655 July 25, 1983

DATU TAGORANAO BENITO, petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION and JAMIATUL PHILIPPINE-AL ISLAMIA, INC., respondents.

The Solicitor General for respondent.

Tacod D. Macaraya for private respondent.



RELOVA, J.:

On February 6, 1959, the Articles of Incorporation of respondent Jamiatul Philippine-Al Islamia, Inc. (originally Kamilol Islam Institute, Inc.) were filed with the Securities and Exchange Commission (SEC) and were approved on December 14, 1962. The corporation had an authorized capital stock of P200,000.00 divided into 20,000 shares at a par value of P10.00 each. Of the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for. Herein petitioner Datu Tagoranao Benito subscribed to 460 shares worth P4,600.00.

On October 28, 1975, the respondent corporation filed a certificate of increase of its capital stock from P200,000.00 to P1,000,000.00. It was shown in said certificate that P191,560.00 worth of shares were represented in the stockholders' meeting held on November 25, 1975 at which time the increase was approved. Thus, P110,980.00 worth of shares were subsequently issued by the corporation from the unissued portion of the authorized capital stock of P200,000.00. Of the increased capital stock of P1,000,000.00, P160,000.00 worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto.

On November 18, 1976, petitioner Datu Tagoranao filed with respondent Securities and Exchange Commission a petition alleging that the additional issue (worth P110,980.00) of previously subscribed shares of the corporation was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital stock of the corporation from P200,000.00 to P1,000,000.00 was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda. Petitioner prayed that the additional issue of shares of previously authorized capital stock as well as the shares issued from the increase in capital stock of respondent corporation be cancelled; that the secretary of respondent corporation be ordered to register the 2,540 shares acquired by him (petitioner) from Domocao Alonto and Moki-in Alonto; and that the corporation be ordered to render an accounting of funds to the stockholders.

In their answer, respondents denied the material allegations of the petition and, by way of special defense, claimed that petitioner has no cause of action and that the stock certificates covering the shares alleged to have been sold to petitioner were only given to him as collateral for the loan of Domocao Alonto and Moki-in Alonto.

On July 11, 1980, Hearing Officer Ledor E. Macalalag of the Securities and Exchange Commission, after due proceedings, rendered a decision which was affirmed by the Commission En Banc during its executive session held on March 9, 1981, as follows:

RESOLVED, That the decision of the hearing Officer in SEC Case No. 1392, dated July 11, 1980, the dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing considerations, this Commission hereby rules: (a) That the issuance by the corporation of its unissued shares was validly made and was not subject to the pre-emptive rights of stockholders, including the petitioner, herein; (b) That there is no sufficient legal basis to set aside the certificate issued by this Commission authorizing the increase in capital stock of respondent corporation from P200,000.00 to Pl,000,000.00. Considering, however, that petitioner has not waived his pre-emptive right to subscribe to the increased capitalization, respondent corporation is hereby directed to allow petitioner to subscribe thereto, at par value, proportionate to his present shareholdings, adding thereto the 2,540 shares transferred to him by Mr. Domocao Alonto and Mrs. Moki-in Alonto; (c) To direct as it hereby directs, the respondent corporation to immediately cancel Certificates of Stock Nos. 216, 223, 302, all in the name of Domocao Alonto, and Certificate of Stock No. 217, in the name of Moki-in Alonto, upon their presentation by the petitioner and to issue new certificates corresponding thereto in the name of petitioner herein; (d) To direct, as it hereby directs, respondent corporation to religiously comply with the requirement of filing annual financial statements under pain of a more drastic action; (e) To declare, as it hereby declares, as irregular, the election of the nine (9) members of the Board of Trustees of respondent corporation on October 30, 1976, for which reason, respondent corporation is hereby ordered to call a stockholders' meeting to elect a new set of five (5) members of the Board of Trustees, unless in the meantime the said number is accordingly increased and the requirement of law to make such increase effective have been complied with. It is understood that the said stockholders' meeting be called within thirty (30) days from the time petitioner shall have subscribed to the increased capitalization.'

be, as the same is hereby AFFIRMED, the same being in accordance with law and the facts of the case. (pp. 28-29, Reno)

Hence, this petition for review by way of appeal from the aforementioned decision of the Securities and Exchange Commission, petitioner contending that (1) the issuance of the 11,098 shares without the consent of the stockholders or of the Board of Directors, and in the absence of consideration, is null and void; (2) the increase in the authorized capital stock from P200,000.00 to P1,000,000.00 without the consent or express waiver of the stockholders, is null and void; (3) he is entitled to attorneys' fees, damages and expenses of litigation in filing this suit against the directors of respondent corporation.

We are not persuaded. As aptly stated by the Securities and Exchange Commission in its decision:

xxx xxx xxx

... the questioned issuance of the unsubscribed portion of the capital stock worth P110,980.00 is ' not invalid even if assuming that it was made without notice to the stockholders as claimed by petitioner. The power to issue shares of stocks in a corporation is lodged in the board of directors and no stockholders' meeting is necessary to consider it because additional issuance of shares of stocks does not need approval of the stockholders. The by-laws of the corporation itself states that 'the Board of Trustees shall, in accordance with law, provide for the issue and transfer of shares of stock of the Institute and shall prescribe the form of the certificate of stock of the Institute. (Art. V, Sec. 1).

Petitioner bewails the fact that in view of the lack of notice to him of such subsequent issuance, he was not able to exercise his right of pre-emption over the unissued shares. However, the general rule is that pre-emptive right is recognized only with respect to new issue of shares, and not with respect to additional issues of originally authorized shares. This is on the theory that when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue. An original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares. When the shares left unsubscribed are later re-offered, he cannot therefore claim a dilution of interest. (Campos and Lopez-Campos Selected Notes and Cases on Corporation Law, p. 855, citing Yasik V. Wachtel 25 Del. Ch. 247,17A. 2d 308 (1941). (pp. 33-34, Rollo)

With respect to the claim that the increase in the authorized capital stock was without the consent, expressed or implied, of the stockholders, it was the finding of the Securities and Exchange Commission that a stockholders' meeting was held on November 25,1975, presided over by Mr. Ahmad Domocao Alonto, Chairman of the Board of Trustees and, among the many items taken up then were the change of name of the corporation from Kamilol Islam Institute Inc. to Jamiatul Philippine-Al Islamia, Inc., the increase of its capital stock from P200,000.00 to P1,000,000.00, and the increase of the number of its Board of Trustees from five to nine. "Despite the insistence of petitioner, this Commission is inclined to believe that there was a stockholders' meeting on November 25, 1975 which approved the increase. The petitioner had not sufficiently overcome the evidence of respondents that such meeting was in fact held. What petitioner successfully proved, however, was the fact that he was not notified of said meeting and that he never attended the same as he was out of the country at the time. The documentary evidence of petitioner conclusively proved that he was attending the Mecca pilgrimage when the meeting was held on November 25, 1975. (Exhs. 'Q', 'Q-14', 'R', 'S' and 'S-l'). While petitioner doubts the authenticity of the alleged minutes of the proceedings (Exh. '4'), the Commission notes with significance that said minutes contain numerous details of various items taken up therein that would negate any claim that it was not authentic. Another thing that petitioner was able to disprove was the allegation in the certificate of increase (Exh. 'E-l') that all stockholders who did not subscribe to the increase of capital stock have waived their pre-emptive right to do so. As far as the petitioner is concerned, he had not waived his pre-emptive right to subscribe as he could not have done so for the reason that he was not present at the meeting and had not executed a waiver, thereof. Not having waived such right and for reasons of equity, he may still be allowed to subscribe to the increased capital stock proportionate to his present shareholdings." (pp. 36-37, Rollo)

Well-settled is the rule that the findings of facts of administrative bodies will not be interfered with by the courts in the absence of grave abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by substantial evidence. (Gokongwei, Jr. vs. SEC, 97 SCRA 78). In a long string of cases, the Supreme Court has consistently adhered to the rule that decisions of administrative officers are not to be disturbed by the courts except when the former have acted without or in excess of their jurisdiction or with grave abuse of discretion (Sichangco vs. Board of Commissioners of Immigration, 94 SCRA 61). Thus, in the case of Deluao vs. Casteel ( L-21906, Dec. 24, 1968, 26 SCRA 475, 496, citing Pajo vs. Ago, et al., L-15414, June 30, 1960) and Genitano vs. Secretary of Agriculture and Natural Resources, et al. (L-2ll67, March 31, 1966), the Supreme Court held that:

... Findings of fact by an administrative board or official, following a hearing, are binding upon the courts and win not be disturbed except where the board or official has gone beyond his statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion. ...

ACCORDINGLY, this petition is hereby dismissed for lack of merit.

SO ORDERED.

Plana, Escolin and Gutierrez, Jr., JJ., concur.

Teehankee, J., concurs in the result.

Melencio-Herrera and Vasquez, JJ., are on leave.

Jurisprudence: G.R. No. L-30896 April 28, 1983

EN BANC

G.R. No. L-30896 April 28, 1983

JOSE O. SIA, petitioner,
vs.
THE PEOPLE OF THE PHILIPPINES, respondent.



DE CASTRO, J.:

Petition for review of the decision of the Court of Appeals affirming the decision of the Court of First Instance of Manila convicting the appellant of estafa, under an information which reads:

That in, about or during the period comprised' between July 24, 1963 and December 31, 1963, both dates inclusive, in the City of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously defraud the Continental Bank, a banking institution duly organized and doing business in the City of Manila, in the following manner, to wit: the said accused, in his capacity as president and general manager of the Metal Manufacturing of the Philippines, Inc. (MEMAP) and on behalf of said company, obtained delivery of 150 M/T Cold Rolled Steel Sheets valued at P 71,023.60 under a trust receipt agreement under L/C No. 63/109, which cold rolled steel sheets were consigned to the Continental Bank, under the express obligation on the part of said accused of holding the said steel sheets in trust and selling them and turning over the proceeds of the sale to the Continental Bank; but the said accused, once in possession of the said goods, far from complying with his aforesaid obligation and despite demands made upon him to do so, with intent to defraud, failed and refused to return the said cold rolled sheets or account for the proceeds thereof, if sold, which the said accused willfully, unlawfully and feloniously misappropriated, misapplied and converted to his own personal use and benefit, to the damage and prejudice of the said Continental Bank in the total amount of P146,818.68, that is the balance including the interest after deducting the sum of P28,736.47 deposited by the said accused with the bank as marginal deposit and forfeited by the said from the value of the said goods, in the said sum of P71,023.60. (Original Records, p. 1).

In reviewing the evidence, the Court of Appeals came up with the following findings of facts which the Solicitor General alleges should be conclusive upon this Court:

There is no debate on certain antecedents: Accused Jose 0. Sia sometime prior to 24 May, 1963, was General Manager of the Metal Manufacturing Company of the Philippines, Inc. engaged in the manufacture of steel office equipment; on 31 May, 1963, because his company was in need of raw materials to be imported from abroad, he applied for a letter of credit to import steel sheets from Mitsui Bussan Kaisha, Ltd. of Tokyo, Japan, the application being directed to the Continental Bank, herein complainant, Exhibit B and his application having been approved, the letter of credit was opened on 5 June, 1963 in the amount of $18,300, Exhibit D; and the goods arrived sometime in July, 1963 according to accused himself, tsn. II:7; now from here on there is some debate on the evidence; according to Complainant Bank, there was permitted delivery of the steel sheets only upon execution of a trust receipt, Exhibit A; while according to the accused, the goods were delivered to him sometime before he executed that trust receipt in fact they had already been converted into steel office equipment by the time he signed said trust receipt, tsn. II:8; but there is no question - and this is not debated - that the bill of exchange issued for the purpose of collecting the unpaid account thereon having fallen due (see Exh. B) neither accused nor his company having made payment thereon notwithstanding demands, Exh. C and C-1, dated 17 and 27 December, 1963, and the accounts having reached the sum in pesos of P46,818.68 after deducting his deposit valued at P28,736.47; that was the reason why upon complaint by Continental Bank, the Fiscal filed the information after preliminary investigation as has been said on 22 October, 1964. (Rollo [CA], pp. 103- 104).

The first issue raised, which in effect combines the first three errors assigned, is whether petitioner Jose O. Sia, having only acted for and in behalf of the Metal Manufacturing Company of the Philippines (Metal Company, for short) as President thereof in dealing with the complainant, the Continental Bank, (Bank for short) he may be liable for the crime charged.

In discussing this question, petitioner proceeds, in the meantime, on the assumption that the acts imputed to him would constitute the crime of estafa, which he also disputes, but seeks to avoid liability on his theory that the Bank knew all along that petitioner was dealing with him only as an officer of the Metal Company which was the true and actual applicant for the letter of credit (Exhibit B) and which, accordingly, assumed sole obligation under the trust receipt (Exhibit A). In disputing the theory of petitioner, the Solicitor General relies on the general principle that when a corporation commits an act which would constitute a punishable offense under the law, it is the responsible officers thereof, acting for the corporation, who would be punished for the crime, The Court of Appeals has subscribed to this view when it quoted approvingly from the decision of the trial court the following:

A corporation is an artificial person, an abstract being. If the defense theory is followed unscrupulously legions would form corporations to commit swindle right and left where nobody could be convicted, for it would be futile and ridiculous to convict an abstract being that can not be pinched and confined in jail like a natural, living person, hence the result of the defense theory would be hopeless chose in business and finance. It is completely untenable. (Rollo [CA], p. 108.)

The above-quoted observation of the trial court would seem to be merely restating a general principle that for crimes committed by a corporation, the responsible officers thereof would personally bear the criminal liability. (People vs. Tan Boon Kong, 54 Phil. 607. See also Tolentino, Commercial Laws of the Philippines, p. 625, citing cases.)

The case cited by the Court of Appeals in support of its stand-Tan Boon Kong case, supra-may however not be squarely applicable to the instant case in that the corporation was directly required by law to do an act in a given manner, and the same law makes the person who fails to perform the act in the prescribed manner expressly liable criminally. The performance of the act is an obligation directly imposed by the law on the corporation. Since it is a responsible officer or officers of the corporation who actually perform the act for the corporation, they must of necessity be the ones to assume the criminal liability; otherwise this liability as created by the law would be illusory, and the deterrent effect of the law, negated.

In the present case, a distinction is to be found with the Tan Boon Kong case in that the act alleged to be a crime is not in the performance of an act directly ordained by law to be performed by the corporation. The act is imposed by agreement of parties, as a practice observed in the usual pursuit of a business or a commercial transaction. The offense may arise, if at all, from the peculiar terms and condition agreed upon by the parties to the transaction, not by direct provision of the law. The intention of the parties, therefore, is a factor determinant of whether a crime was committed or whether a civil obligation alone intended by the parties. With this explanation, the distinction adverted to between the Tan Boon Kong case and the case at bar should come out clear and meaningful. In the absence of an express provision of law making the petitioner liable for the criminal offense committed by the corporation of which he is a president as in fact there is no such provisions in the Revised Penal Code under which petitioner is being prosecuted, the existence of a criminal liability on his part may not be said to be beyond any doubt. In all criminal prosecutions, the existence of criminal liability for which the accused is made answerable must be clear and certain. The maxim that all doubts must be resolved in favor of the accused is always of compelling force in the prosecution of offenses. This Court has thus far not ruled on the criminal liability of an officer of a corporation signing in behalf of said corporation a trust receipt of the same nature as that involved herein. In the case of Samo vs. People, L-17603-04, May 31, 1962, the accused was not clearly shown to be acting other than in his own behalf, not in behalf of a corporation.

The next question is whether the violation of a trust receipt constitutes estafa under Art. 315 (1-[2]) of the Revised Penal Code, as also raised by the petitioner. We now entertain grave doubts, in the light of the promulgation of P.D. 115 providing for the regulation of trust receipts transaction, which is a very comprehensive piece of legislation, and includes an express provision that if the violation or offense is committed by a corporation, partnership, association or other juridical entities the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to civil liabilities arising from the criminal offense. The question that suggests itself is, therefore, whether the provisions of the Revised Penal Code, Article 315, par. 1 (b) are not adequate to justify the punishment of the act made punishable by P.D. 115, that the necessity was felt for the promulgation of the decree. To answer this question, it is imperative to make an indepth analysis of the conditions usually embodied in a trust receipt to best their legal sufficiency to constitute the basis for holding the violation of said conditions as estafa under Article 315 of the Revised Penal Code which P.D. 115 now seeks to punish expressly.

As executed, the trust receipt in question reads:

I/WE HEREBY AGREE TO HOLD SAID GOODS IN TRUST FOR THE SAID BANK as its property with liberty to sell the same for its account but without authority to make any other disposition whatsoever of the said goods or any part thereof (or the proceeds thereof) either way of conditional sale, pledge or otherwise;

In case of sale I/we further agree to hand the proceeds as soon as received to the BANK to apply against the relative acceptance (as described above) and for the payment of any other indebtedness of mine/ours to CONTINENTAL BANK. (Original Records, p. 108)

One view is to consider the transaction as merely that of a security of a loan, and that the trust element is but and inherent feature of the security aspect of the arrangement where the goods are placed in the possession of the "entrustee," to use the term used in P.D. 115, violation of the element of trust not being intended to be in the same concept as how it is understood in the criminal sense. The other view is that the bank as the owner and "entrustor" delivers the goods to the "entrustee, " with the authority to sell the goods, but with the obligation to give the proceeds to the "entrustor" or return the goods themselves if not sold, a trust being thus created in the full sense as contemplated by Art. 315, par. 1 (b).

We consider the view that the trust receipt arrangement gives rise only to civil liability as the more feasible, before the promulgation of P.D. 115. The transaction being contractual, the intent of the parties should govern. Since the trust receipt has, by its nature, to be executed upon the arrival of the goods imported, and acquires legal standing as such receipt only upon acceptance by the "entrustee," the trust receipt transaction itself, the antecedent acts consisting of the application of the L/C, the approval of the L/C and the making of the marginal deposit and the effective importation of the goods, all through the efforts of the importer who has to find his supplier, arrange for the payment and shipment of the imported goods-all these circumstances would negate any intent of subjecting the importer to criminal prosecution, which could possibly give rise to a case of imprisonment for non-payment of a debt. The parties, therefore, are deemed to have consciously entered into a purely commercial transaction that could give rise only to civil liability, never to subject the "entrustee" to criminal prosecution. Unlike, for instance, when several pieces of jewelry are received by a person from the owner for sale on commission, and the former misappropriates for his personal use and benefit, either the jewelries or the proceeds of the sale, instead of returning them to the owner as is his obligation, the bank is not in the same concept as the jewelry owner with full power of disposition of the goods, which the bank does not have, for the bank has previously extended a loan which the L/C represents to the importer, and by that loan, the importer should be the real owner of the goods. If under the trust receipt the bank is made to appear as the owner, it was but an artificial expedient, more of a legal fiction than fact, for if it were really so, it could dispose of the goods in any manner it wants, which it cannot do, just to give consistency with the purpose of the trust receipt of giving a stronger security for the loan obtained by the importer. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof, a feature totally absent in the case of the transaction between the jewel-owner and his agent.

Consequently, if only from the fact that the trust receipt transaction is susceptible to two reasonable interpretation, one as giving rise only to civil liability for the violation of the condition thereof, and the other, as generating also criminal liability, the former should be adopted as more favorable to the supposed offender. (Duran vs. CA, L-39758, May 7, 1976, 71 SCRA 68; People vs. Parayno, L-24804, July 5, 1968, 24 SCRA 3; People vs. Abendan, L-1481, January 28,1949,82 Phil. 711; People vs. Bautista, L-1502, May 24, 1948, 81 Phil. 78; People vs. Abana, L-39, February 1, 1946, 76 Phil. 1.)

There is, moreover, one circumstance appearing on record, the significance of which should be properly evaluated. As stated in petitioner's brief (page 2), not denied by the People, "before the Continental Bank approved the application for a letter of credit (Exhibit 'D'), subsequently covered by the trust receipt, the Continental Bank examined the financial capabilities of the applicant, Metal Manufacturing Company of the Philippines because that was the bank's standard procedure (Testimony of Mr. Ernesto Garlit, Asst. Manager of the Foreign Department, Continental Bank, t.s.n., August 30, 1965). The Continental Bank did not examine the financial capabilities of herein petitioner, Jose O. Sia, in connection with the same letter of credit. (Ibid). " From this fact, it would appear as positively established that the intention of the parties in entering into the "trust receipt" agreement is merely to afford a stronger security for the loan evidenced by the letter of credit, may be not as an ordinary pledge as observed in P.N.B. vs. Viuda e Hijos de Angel Jose, et al., 63 Phil. 814, citing In re Dunlap C (206 Fed. 726) but neither as a transaction falling under Article 315-1 (b) of the Revised Penal Code giving rise to criminal liability, as previously explained and demonstrated.

It is worthy of note that the civil liability imposed by the trust receipt is exclusively on the Metal Company. Speaking of such liability alone, as one arising from the contract, as distinguished from the civil liability arising out of a crime, the petitioner was never intended to be equally liable as the corporation. Without being made so liable personally as the corporation is, there would then be no basis for holding him criminally liable, for any violation of the trust receipt. This is made clearly so upon consideration of the fact that in the violation of the trust agreement and in the absence of positive evidence to the contrary, only the corporation benefited, not the petitioner personally, yet, the allegation of the information is to effect that the misappropriation or conversion was for the personal use and benefit of the petitioner, with respect to which there is variance between the allegation and the evidence.

It is also worthy of note that while the trust receipt speaks of authority to sell, the fact is undisputed that the imported goods were to be manufactured into finished products first before they could be sold, as the Bank had full knowledge of. This fact is, however, not embodied in the trust agreement, thus impressing on the trust receipt vagueness and ambiguity which should not be the basis for criminal prosecution, in the event of a violation of the terms of the trust receipt. Again, P.D. 115 has express provision relative to the "manufacture or process of the good with the purpose of ultimate sale," as a distinct condition from that of "to sell the goods or procure their sale" (Section 4, (1). Note that what is embodied in the receipt in question is the sale of imported goods, the manufacture thereof not having been mentioned. The requirement in criminal prosecution, that there must be strict harmony, not variance, between the allegation and the evidence, may therefore, not be said to have been satisfied in the instance case.

FOR ALL THE FOREGOING, We reverse the decision of the Court of Appeals and hereby acquit the petitioner, with costs de oficio.

SO ORDERED.

Concepcion, Jr., Guerrero, Vasquez, Relova and Gutierrez, JJ., concur.

Fernando, CJ., Escolin, Plana, Abad Santos, JJ., concur in the result.





Separate Opinions



TEEHANKEE, J., concurring:

In concur. Petitioner personally cannot be charged and convicted for the crime of estafa for failure of the corporation (MEMAP) represented by him as president and general manager to pay "the balance of P46,818.68 .... including the interest after deducting the sum of P28,736.47" which sum, according to the very information, it was "deposited by the said accused with the [Continental] bank as marginal deposit and forfeited by the said bank from the value of said goods, in the said sum of P 71,023.60" representing the value of the cold rolled steel sheets imported by the corporation with the bank's financing under its letter of credit and released to the importer corporation under trust receipt in favor of the bank.

All these acts were corporate acts with the accused duly representing the corporation as its president and general manager: the application for bank financing, the deposit (which was from corporate funds, and not a deposit made by the petitioner, as wrongly alleged in the information), the receipt of the steel sheets, then manufactured into finished products (which could not technically be done under the terms of the trust receipt required by the bank, under which the very sheets were supposed to be sold by the corporation) and the non-payment of the credit extended by the bank. There is not the slightest evidence nor intimation that these corporate acts were unauthorized or that petitioner personally had committed any fraud or deceit in connection therewith or that he had personally been responsible for or benefited from the corporation's failure to pay the bank the balance due under the trust receipt.

In the recent case of People vs. Cuevo, G. R. No. L-27607, decided by the Court on May 7, 1981, the Court, for lack of necessary votes, affirmed the dismissal of the same charge of estafa, for non-payment of the debt evidenced by the trust receipt, by the trial court presided by Judge Ruperto Kapunan, Jr. who ruled that "the holder of a trust receipt who disposed of the goods covered thereby and in violation of its terms, failed to deliver to the bank the proceeds of the sale as payment of the debt secured by the trust receipt" incurs only civil and not criminal liability for non-payment of the debt thus incurred. I reiterate my separate opinion therein supporting the more liberal interpretation that the trust receipt transaction "gives rise only to civil liability on the part of the offender" and holding that the very definition of a trust receipt, to wit," ' (A) trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased' (53 Am. Jr. 961, cited in Samo vs. People, 115 Phil. 346, 349), sustains the lower court's rationale in dismissing the information that the contract covered by a trust receipt is merely a secured loan. The goods imported by the small importer and retail dealer through the bank's financing remain of their own property and risk and the old capitalist orientation of putting them in jail for estafa for non-payment of the secured loan (granted after they had been fully investigated by the bank as good credit risks) through the fiction of the trust receipt device should no longer be permitted in this day and age." **

The charge in the case at bar against petitioner-accused must accordingly be dismissed.

MELENCIO-HERRERA, J., concurring and dissenting:

I dissent in so far as the Decision states that violation of the terms of a trust receipt does not constitute Estafa under Art. 315, par. 1 (b) of the Revised Penal Code, for being contrary to the rulings in People vs. Yu Chai Ho, 53 Phil. 874 (1928); PNB vs. Arrozal, 103 Phil. 213 (1958), and Samo vs. People, 5 SCRA 355 (1962).

I concur in so far as the Decision holds that petitioner should not be held liable for the crime of Estafa considering that in the cases above enumerated, the persons who executed the trust receipts acted in their own individual capacities unlike in this case where petitioner acted for and on behalf of the Metal Manufacturing Company, as its General Manager, and was presumably authorized to do so. This Court has not as yet laid down a ruling on the criminal liability of a corporation officer signing a trust receipt on behalf of the corporation, a trust receipt being essentially a financing transaction. It was only upon the promulgation of PD 115 on January 29, 1973 that responsible directors, officers, employees or other officials of a corporation, partnership, associations or other juridical entities are made expressly responsible for violation of the terms of a trust receipt agreement committed by said corporation, partnership, association or other juridical entities.

Makasiar, J., dissent. The C.A. decision should be affirmed.

Aquino, J., dissent. I vote for the affirmance of the judgement of the C.A.







Separate Opinions



TEEHANKEE, J., concurring:

In concur. Petitioner personally cannot be charged and convicted for the crime of estafa for failure of the corporation (MEMAP) represented by him as president and general manager to pay "the balance of P 46,818.68 .... including the interest after deducting the sum of P 28,736.47" which sum, according to the very information, it was "deposited by the said accused with the [Continental] bank as marginal deposit and forfeited by the said bank from the value of said goods, in the said sum of P 71,023.60" representing the value of the cold rolled steel sheets imported by the corporation with the bank's financing under its letter of credit and released to the importer corporation under trust receipt in favor of the bank.

All these acts were corporate acts with the accused duly representing the corporation as its president and general manager: the application for bank financing, the deposit (which was from corporate funds, and not a deposit made by the petitioner, as wrongly alleged in the information), the receipt of the steel sheets, then manufactured into finished products (which could not technically be done under the terms of the trust receipt required by the bank, under which the very sheets were supposed to be sold by the corporation) and the non-payment of the credit extended by the bank. There is not the slightest evidence nor intimation that these corporate acts were unauthorized or that petitioner personally had committed any fraud or deceit in connection therewith or that he had personally been responsible for or benefited from the corporation's failure to pay the bank the balance due under the trust receipt.

In the recent case of People vs. Cuevo, G. R. No. L-27607, decided by the Court on May 7, 1981, the Court, for lack of necessary votes, affirmed the dismissal of the same charge of estafa, for non-payment of the debt evidenced by the trust receipt, by the trial court presided by Judge Ruperto Kapunan, Jr. who ruled that "the holder of a trust receipt who disposed of the goods covered thereby and in violation of its terms, failed to deliver to the bank the proceeds of the sale as payment of the debt secured by the trust receipt" incurs only civil and not criminal liability for non-payment of the debt thus incurred. I reiterate my separate opinion therein supporting the more liberal interpretation that the trust receipt transaction "gives rise only to civil liability on the part of the offender" and holding that the very definition of a trust receipt, to wit," ' (A) trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased' (53 Am. Jr. 961, cited in Samo vs. People, 115 Phil. 346, 349), sustains the lower court's rationale in dismissing the information that the contract covered by a trust receipt is merely a secured loan. The goods imported by the small importer and retail dealer through the bank's financing remain of their own property and risk and the old capitalist orientation of putting them in jail for estafa for non-payment of the secured loan (granted after they had been fully investigated by the bank as good credit risks) through the fiction of the trust receipt device should no longer be permitted in this day and age."*

The charge in the case at bar against petitioner-accused must accordingly be dismissed.

MELENCIO-HERRERA, J., concurring and dissenting:

I dissent in so far as the Decision states that violation of the terms of a trust receipt does not constitute Estafa under Art. 315, par. 1 (b) of the Revised Penal Code, for being contrary to the rulings in People vs. Yu Chai Ho, 53 Phil. 874 (1928); PNB vs. Arrozal, 103 Phil. 213 (1958), and Samo vs. People, 5 SCRA 355 (1962).

I concur in so far as the Decision holds that petitioner should not be held liable for the crime of Estafa considering that in the cases above enumerated, the persons who executed the trust receipts acted in their own individual capacities unlike in this case where petitioner acted for and on behalf of the Metal Manufacturing Company, as its General Manager, and was presumably authorized to do so. This Court has not as yet laid down a ruling on the criminal liability of a corporation officer signing a trust receipt on behalf of the corporation, a trust receipt being essentially a financing transaction. It was only upon the promulgation of PD 115 on January 29, 1973 that responsible directors, officers, employees or other officials of a corporation, partnership, associations or other juridical entities are made expressly responsible for violation of the terms of a trust receipt agreement committed by said corporation, partnership, association or other juridical entities.

Makasiar, J., dissent.

Aquino, J., dissent.







Separate Opinions

TEEHANKEE, J., concurring:

In concur. Petitioner personally cannot be charged and convicted for the crime of estafa for failure of the corporation (MEMAP) represented by him as president and general manager to pay "the balance of P 46,818.68 .... including the interest after deducting the sum of P 28,736.47" which sum, according to the very information, it was "deposited by the said accused with the [Continental] bank as marginal deposit and forfeited by the said bank from the value of said goods, in the said sum of P 71,023.60" representing the value of the cold rolled steel sheets imported by the corporation with the bank's financing under its letter of credit and released to the importer corporation under trust receipt in favor of the bank.

All these acts were corporate acts with the accused duly representing the corporation as its president and general manager: the application for bank financing, the deposit (which was from corporate funds, and not a deposit made by the petitioner, as wrongly alleged in the information), the receipt of the steel sheets, then manufactured into finished products (which could not technically be done under the terms of the trust receipt required by the bank, under which the very sheets were supposed to be sold by the corporation) and the non-payment of the credit extended by the bank. There is not the slightest evidence nor intimation that these corporate acts were unauthorized or that petitioner personally had committed any fraud or deceit in connection therewith or that he had personally been responsible for or benefited from the corporation's failure to pay the bank the balance due under the trust receipt.

In the recent case of People vs. Cuevo, G. R. No. L-27607, decided by the Court on May 7, 1981, the Court, for lack of necessary votes, affirmed the dismissal of the same charge of estafa, for non-payment of the debt evidenced by the trust receipt, by the trial court presided by Judge Ruperto Kapunan, Jr. who ruled that "the holder of a trust receipt who disposed of the goods covered thereby and in violation of its terms, failed to deliver to the bank the proceeds of the sale as payment of the debt secured by the trust receipt" incurs only civil and not criminal liability for non-payment of the debt thus incurred. I reiterate my separate opinion therein supporting the more liberal interpretation that the trust receipt transaction "gives rise only to civil liability on the part of the offender" and holding that the very definition of a trust receipt, to wit," ' (A) trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased' (53 Am. Jr. 961, cited in Samo vs. People, 115 Phil. 346, 349), sustains the lower court's rationale in dismissing the information that the contract covered by a trust receipt is merely a secured loan. The goods imported by the small importer and retail dealer through the bank's financing remain of their own property and risk and the old capitalist orientation of putting them in jail for estafa for non-payment of the secured loan (granted after they had been fully investigated by the bank as good credit risks) through the fiction of the trust receipt device should no longer be permitted in this day and age."*

The charge in the case at bar against petitioner-accused must accordingly be dismissed.

MELENCIO-HERRERA, J., concurring and dissenting:

I dissent in so far as the Decision states that violation of the terms of a trust receipt does not constitute Estafa under Art. 315, par. 1 (b) of the Revised Penal Code, for being contrary to the rulings in People vs. Yu Chai Ho, 53 Phil. 874 (1928); PNB vs. Arrozal, 103 Phil. 213 (1958), and Samo vs. People, 5 SCRA 355 (1962).

I concur in so far as the Decision holds that petitioner should not be held liable for the crime of Estafa considering that in the cases above enumerated, the persons who executed the trust receipts acted in their own individual capacities unlike in this case where petitioner acted for and on behalf of the Metal Manufacturing Company, as its General Manager, and was presumably authorized to do so. This Court has not as yet laid down a ruling on the criminal liability of a corporation officer signing a trust receipt on behalf of the corporation, a trust receipt being essentially a financing transaction. It was only upon the promulgation of PD 115 on January 29, 1973 that responsible directors, officers, employees or other officials of a corporation, partnership, associations or other juridical entities are made expressly responsible for violation of the terms of a trust receipt agreement committed by said corporation, partnership, association or other juridical entities.

Makasiar, J., dissent.

Aquino, J., dissent.

Credit Transactions Case Digest: Bonnevie v. CA (1983)

G.R. No. L-49101 October 24, 1983

Lessons Applicable: Simple Loan

Laws Applicable:

Facts:

  • December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan of P75K from Philippine Bank of Commerce (PBC) by mortgaging their property
  • December 8, 1966: Executed Deed of Sale with Mortgage to Honesto Bonnevie where P75K is payable to PBC and P25K is payable to Spouses Lanzano.
  • April 28, 1967 to July 12, 1968:   Honesto Bonnevie paid a total of P18,944.22 to PBC
  • May 4, 1968:  Honesto Bonnevie assigned all his rights under the Deed of Sale with Assumption of Mortgage to his brother, intervenor Raoul Bonnevie
  • June 10, 1968:  PBC applied for the foreclosure of the mortgage, and notice of sale was published 
  • January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank of Commerce for the annulment of the Deed of Mortgage dated December 6, 1966 as well as the extrajudicial foreclosure made on September 4, 1968.
  • CFI: Dismissed the complaint with costs against the Bonnevies
  • CA: Affirmed
ISSUE: W/N the forclosure on the mortgage is validly executed.

HELD: YES. CA affirmed
  • A contract of loan being a consensual contract is perfected at the same time the contract of mortgage was executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution.
  • Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. 
  • Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption period expired on September 3, 1969. It was not until September 29, 1969 that Honesto Bonnevie first wrote respondent and offered to redeem the property. 
  • loan matured on December 26, 1967 so when respondent Bank applied for foreclosure, the loan was already six months overdue. Payment of interest on July 12, 1968 does not make the earlier act of PBC inequitous nor does it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only the payment of the accrued interest is necessary but also the payment of interest for the proposed period of renewal as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but more so on the discretion of the bank. 

Jurisprudence: G.R. No. L-49101


SECOND DIVISION

G.R. No. L-49101 October 24, 1983

RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and THE PHILIPPINE BANK OF COMMERCE, respondents.

Edgardo I. De Leon for petitioners.

Siguion Reyna, Montecillo & Associates for private respondent.


GUERRERO, J:

Petition for review on certiorari seeking the reversal of the decision of the defunct Court of Appeals, now Intermediate Appellate Court, in CA-G.R. No. 61193-R, entitled "Honesto Bonnevie vs. Philippine Bank of Commerce, et al.," promulgated August 11, 1978 1 as well as the Resolution denying the motion for reconsideration.

The complaint filed on January 26, 1971 by petitioner Honesto Bonnevie with the Court of First Instance of Rizal against respondent Philippine Bank of Commerce sought the annulment of the Deed of Mortgage dated December 6, 1966 executed in favor of the Philippine Bank of Commerce by the spouses Jose M. Lozano and Josefa P. Lozano as well as the extrajudicial foreclosure made on September 4, 1968. It alleged among others that (a) the Deed of Mortgage lacks consideration and (b) the mortgage was executed by one who was not the owner of the mortgaged property. It further alleged that the property in question was foreclosed pursuant to Act No. 3135 as amended, without, however, complying with the condition imposed for a valid foreclosure. Granting the validity of the mortgage and the extrajudicial foreclosure, it finally alleged that respondent Bank should have accepted petitioner's offer to redeem the property under the principle of equity said justice.

On the other hand, the answer of defendant Bank, now private respondent herein, specifically denied most of the allegations in the complaint and raised the following affirmative defenses: (a) that the defendant has not given its consent, much less the requisite written consent, to the sale of the mortgaged property to plaintiff and the assumption by the latter of the loan secured thereby; (b) that the demand letters and notice of foreclosure were sent to Jose Lozano at his address; (c) that it was notified for the first time about the alleged sale after it had foreclosed the Lozano mortgage; (d) that the law on contracts requires defendant's consent before Jose Lozano can be released from his bilateral agreement with the former and doubly so, before plaintiff may be substituted for Jose Lozano and Alfonso Lim; (e) that the loan of P75,000.00 which was secured by mortgage, after two renewals remain unpaid despite countless reminders and demands; of that the property in question remained registered in the name of Jose M. Lozano in the land records of Rizal and there was no entry, notation or indication of the alleged sale to plaintiff; (g) that it is an established banking practice that payments against accounts need not be personally made by the debtor himself; and (h) that it is not true that the mortgage, at the time of its execution and registration, was without consideration as alleged because the execution and registration of the securing mortgage, the signing and delivery of the promissory note and the disbursement of the proceeds of the loan are mere implementation of the basic consensual contract of loan.

After petitioner Honesto V. Bonnevie had rested his case, petitioner Raoul SV Bonnevie filed a motion for intervention. The intervention was premised on the Deed of Assignment executed by petitioner Honesto Bonnevie in favor of petitioner Raoul SV Bonnevie covering the rights and interests of petitioner Honesto Bonnevie over the subject property. The intervention was ultimately granted in order that all issues be resolved in one proceeding to avoid multiplicity of suits.

On March 29, 1976, the lower court rendered its decision, the dispositive portion of which reads as follows:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered dismissing the complaint with costs against the plaintiff and the intervenor.

After the motion for reconsideration of the lower court's decision was denied, petitioners appealed to respondent Court of Appeals assigning the following errors:

1. The lower court erred in not finding that the real estate mortgage executed by Jose Lozano was null and void;

2. The lower court erred in not finding that the auction sale decide on August 19, 1968 was null and void;

3. The lower court erred in not allowing the plaintiff and the intervenor to redeem the property;

4. The lower court erred in not finding that the defendant acted in bad faith; and

5. The lower court erred in dismissing the complaint.

On August 11, 1978, the respondent court promulgated its decision affirming the decision of the lower court, and on October 3. 1978 denied the motion for reconsideration. Hence, the present petition for review.

The factual findings of respondent Court of Appeals being conclusive upon this Court, We hereby adopt the facts found the trial court and found by the Court of Appeals to be consistent with the evidence adduced during trial, to wit:

It is not disputed that spouses Jose M. Lozano and Josefa P. Lozano were the owners of the property which they mortgaged on December 6, 1966, to secure the payment of the loan in the principal amount of P75,000.00 they were about to obtain from defendant-appellee Philippine Bank of Commerce; that on December 8, 1966, executed in favor of plaintiff-appellant the Deed of Sale with Mortgage ,, for and in consideration of the sum of P100,000.00, P25,000.00 of which amount being payable to the Lozano spouses upon the execution of the document, and the balance of P75,000.00 being payable to defendant- appellee; that on December 6, 1966, when the mortgage was executed by the Lozano spouses in favor of defendant-appellee, the loan of P75,000.00 was not yet received them, as it was on December 12, 1966 when they and their co-maker Alfonso Lim signed the promissory note for that amount; that from April 28, 1967 to July 12, 1968, plaintiff-appellant made payments to defendant-appellee on the mortgage in the total amount of P18,944.22; that on May 4, 1968, plaintiff-appellant assigned all his rights under the Deed of Sale with Assumption of Mortgage to his brother, intervenor Raoul Bonnevie; that on June 10, 1968, defendant-appellee applied for the foreclosure of the mortgage, and notice of sale was published in the Luzon Weekly Courier on June 30, July 7, and July 14, 1968; that auction sale was conducted on August 19, 1968, and the property was sold to defendant-appellee for P84,387.00; and that offers from plaintiff-appellant to repurchase the property failed, and on October 9, 1969, he caused an adverse claim to be annotated on the title of the property. (Decision of the Court of Appeals, p. 5).

Presented for resolution in this review are the following issues:

I

Whether the real estate mortgage executed by the spouses Lozano in favor of respondent bank was validly and legally executed.

II

Whether the extrajudicial foreclosure of the said mortgage was validly and legally effected.

III

Whether petitioners had a right to redeem the foreclosed property.

IV

Granting that petitioners had such a right, whether respondent was justified in refusing their offers to repurchase the property.

As clearly seen from the foregoing issues raised, petitioners' course of action is three-fold. They primarily attack the validity of the mortgage executed by the Lozano spouses in favor of respondent Bank. Next, they attack the validity of the extrajudicial foreclosure and finally, appeal to justice and equity. In attacking the validity of the deed of mortgage, they contended that when it was executed on December 6, 1966, there was yet no principal obligation to secure as the loan of P75,000.00 was not received by the Lozano spouses "So much so that in the absence of a principal obligation, there is want of consideration in the accessory contract, which consequently impairs its validity and fatally affects its very existence." (Petitioners' Brief, par. 1, p. 7).

This contention is patently devoid of merit. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed was executed for and on condition of the loan granted to the Lozano spouses. The fact that the latter did not collect from the respondent Bank the consideration of the mortgage on the date it was executed is immaterial. A contract of loan being a consensual contract, the herein contract of loan was perfected at the same time the contract of mortgage was executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution.

Petitioners also argued that granting the validity of the mortgage, the subsequent renewals of the original loan, using as security the same property which the Lozano spouses had already sold to petitioners, rendered the mortgage null and void,

This argument failed to consider the provision 2 of the contract of mortgage which prohibits the sale, disposition of, mortgage and encumbrance of the mortgaged properties, without the written consent of the mortgagee, as well as the additional proviso that if in spite of said stipulation, the mortgaged property is sold, the vendee shall assume the mortgage in the terms and conditions under which it is constituted. These provisions are expressly made part and parcel of the Deed of Sale with Assumption of Mortgage.

Petitioners admit that they did not secure the consent of respondent Bank to the sale with assumption of mortgage. Coupled with the fact that the sale/assignment was not registered so that the title remained in the name of the Lozano spouses, insofar as respondent Bank was concerned, the Lozano spouses could rightfully and validly mortgage the property. Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. (Roxas vs. Dinglasan, 28 SCRA 430; Mallorca vs. De Ocampo, 32 SCRA 48). Another argument for the respondent Bank is that a mortgage follows the property whoever the possessor may be and subjects the fulfillment of the obligation for whose security it was constituted. Finally, it can also be said that petitioners voluntarily assumed the mortgage when they entered into the Deed of Sale with Assumption of Mortgage. They are, therefore, estopped from impugning its validity whether on the original loan or renewals thereof.

Petitioners next assail the validity and legality of the extrajudicial foreclosure on the following grounds:

a) petitioners were never notified of the foreclosure sale.

b) The notice of auction sale was not posted for the period required by law.

c) publication of the notice of auction sale in the Luzon Weekly Courier was not in accordance with law.

The lack of notice of the foreclosure sale on petitioners is a flimsy ground. Respondent Bank not being a party to the Deed of Sale with Assumption of Mortgage, it can validly claim that it was not aware of the same and hence, it may not be obliged to notify petitioners. Secondly, petitioner Honesto Bonnevie was not entitled to any notice because as of May 14, 1968, he had transferred and assigned all his rights and interests over the property in favor of intervenor Raoul Bonnevie and respondent Bank not likewise informed of the same. For the same reason, Raoul Bonnevie is not entitled to notice. Most importantly, Act No. 3135 does not require personal notice on the mortgagor. The requirement on notice is that:

Section 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city

In the case at bar, the notice of sale was published in the Luzon Courier on June 30, July 7 and July 14, 1968 and notices of the sale were posted for not less than twenty days in at least three (3) public places in the Municipality where the property is located. Petitioners were thus placed on constructive notice.

The case of Santiago vs. Dionisio, 92 Phil. 495, cited by petitioners is inapplicable because said case involved a judicial foreclosure and the sale to the vendee of the mortgaged property was duly registered making the mortgaged privy to the sale.

As regards the claim that the period of publication of the notice of auction sale was not in accordance with law, namely: once a week for at least three consecutive weeks, the Court of Appeals ruled that the publication of notice on June 30, July 7 and July 14, 1968 satisfies the publication requirement under Act No. 3135 notwithstanding the fact that June 30 to July 14 is only 14 days. We agree. Act No. 3135 merely requires that such notice shall be published once a week for at least three consecutive weeks." Such phrase, as interpreted by this Court in Basa vs. Mercado, 61 Phil. 632, does not mean that notice should be published for three full weeks.

The argument that the publication of the notice in the "Luzon Weekly Courier" was not in accordance with law as said newspaper is not of general circulation must likewise be disregarded. The affidavit of publication, executed by the Publisher, business/advertising manager of the Luzon Weekly Courier, stares that it is "a newspaper of general circulation in ... Rizal, and that the Notice of Sheriff's sale was published in said paper on June 30, July 7 and July 14, 1968. This constitutes prima facie evidence of compliance with the requisite publication. Sadang vs. GSIS, 18 SCRA 491).

To be a newspaper of general circulation, it is enough that "it is published for the dissemination of local news and general information; that it has a bona fide subscription list of paying subscribers; that it is published at regular intervals." (Basa vs. Mercado, 61 Phil. 632). The newspaper need not have the largest circulation so long as it is of general circulation. Banta vs. Pacheco, 74 Phil. 67). The testimony of three witnesses that they do read the Luzon Weekly Courier is no proof that said newspaper is not a newspaper of general circulation in the province of Rizal.

Whether or not the notice of auction sale was posted for the period required by law is a question of fact. It can no longer be entertained by this Court. (see Reyes, et al. vs. CA, et al., 107 SCRA 126). Nevertheless, the records show that copies of said notice were posted in three conspicuous places in the municipality of Pasig, Rizal namely: the Hall of Justice, the Pasig Municipal Market and Pasig Municipal Hall. In the same manner, copies of said notice were also posted in the place where the property was located, namely: the Municipal Building of San Juan, Rizal; the Municipal Market and on Benitez Street. The following statement of Atty. Santiago Pastor, head of the legal department of respondent bank, namely:

Q How many days were the notices posted in these two places, if you know?

A We posted them only once in one day. (TSN, p. 45, July 25, 1973)

is not a sufficient countervailing evidence to prove that there was no compliance with the posting requirement in the absence of proof or even of allegation that the notices were removed before the expiration of the twenty- day period. A single act of posting (which may even extend beyond the period required by law) satisfies the requirement of law. The burden of proving that the posting requirement was not complied with is now shifted to the one who alleges non-compliance.

On the question of whether or not the petitioners had a right to redeem the property, We hold that the Court of Appeals did not err in ruling that they had no right to redeem. No consent having been secured from respondent Bank to the sale with assumption of mortgage by petitioners, the latter were not validly substituted as debtors. In fact, their rights were never recorded and hence, respondent Bank is charged with the obligation to recognize the right of redemption only of the Lozano spouses. But even granting that as purchaser or assignee of the property, as the case may be, the petitioners had acquired a right to redeem the property, petitioners failed to exercise said right within the period granted by law. Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption period expired on September 3, 1969. It was not until September 29, 1969 that petitioner Honesto Bonnevie first wrote respondent and offered to redeem the property. Moreover, on September 29, 1969, Honesto had at that time already transferred his rights to intervenor Raoul Bonnevie.

On the question of whether or not respondent Court of Appeals erred in holding that respondent Bank did not act in bad faith, petitioners rely on Exhibit "B" which is the letter of lose Lozano to respondent Bank dated December 8, 1966 advising the latter that Honesto Bonnevie was authorized to make payments for the amount secured by the mortgage on the subject property, to receive acknowledgment of payments, obtain the Release of the Mortgage after full payment of the obligation and to take delivery of the title of said property. On the assumption that the letter was received by respondent Bank, a careful reading of the same shows that the plaintiff was merely authorized to do acts mentioned therein and does not mention that petitioner is the new owner of the property nor request that all correspondence and notice should be sent to him.

The claim of appellants that the collection of interests on the loan up to July 12, 1968 extends the maturity of said loan up to said date and accordingly on June 10, 1968 when defendant applied for the foreclosure of the mortgage, the loan was not yet due and demandable, is totally incorrect and misleading. The undeniable fact is that the loan matured on December 26, 1967. On June 10, 1968, when respondent Bank applied for foreclosure, the loan was already six months overdue. Petitioners' payment of interest on July 12, 1968 does not thereby make the earlier act of respondent Bank inequitous nor does it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only the payment of the accrued interest is necessary but also the payment of interest for the proposed period of renewal as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but more so on the discretion of the bank. Respondent Bank may not be, therefore, charged of bad faith.

WHEREFORE, the appeal being devoid of merit, the decision of the Court of Appeals is hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Aquino, J., concur.

Makasiar (Chairman), Abad Santos and Escolin, JJ., concurs in the result.

Concepcion J J., took no part.

De Castro, J., is on leave.

Footnotes

1 Third Division, Reyes, L.B., J., ponente; Busran and Nocon, JJ., concurring.

2 4. The MORTGAGOR shall not sell, dispose of, mortgage, nor in any manner encumber the mortgaged properties without the written consent of MORTGAGEE. If in spite of this stipulation, a mortgaged property is sold, the Vendee shall assume the mortgaged in the terms and conditions under which it is constituted, it being understood that the assumption of the Vendee (does) not release the Vendor of his obligation to the MORTGAGEE; on the contrary, both the Vendor and the Vendee shall be jointly and severally liable for said mortgage obligation. ...

Torts and Damages Case Digest: Singapore Airlines v. Hon. Ernani Cruz Pano, et al. (1983)

G.R. No. L-47739 June 22, 1983
Lessons Applicable: Unjust dismissal (Torts and Damages)
Laws Applicable: 

FACTS:

  • August 21, 1974: Carlos E. Cruz was offered employment Engineer Officer with the opportunity to undergo a B-707 I conversion training course requiring him to enter into a bond with Singapore Airlines Limited for 5 years 
  • Claiming that Cruz had applied for "leave without pay" and had gone on leave without approval of the application during the second year, SIA filed suit for damages against Cruz and his surety, Villanueva, for violation of the terms and conditions 
  • RTC: dismissed the complaint, counterclaim and cross-claim for lack of jurisdiction
ISSUE: W/N properly cognizable by Courts of justice and not by the Labor Arbiters of the National Labor Relations Commission

HELD: YES. records are hereby ordered remanded to the proper Branch of the Regional Trial Court
  • jurisdiction over the present controversy must be held to belong to the civil Courts
  • Article 217 of the Labor Code under PD No. 1691 and BP Blg. 130 provides that all other claims arising from employer-employee relationship are cognizable by Labor Arbiters
  • petitioner's claim for damages is grounded on the "wanton failure and refusal" without just cause of private respondent Cruz to report for duty despite repeated notices served upon him of the disapproval of his application for leave of absence without pay. This, coupled with the further averment that Cruz "maliciously and with bad faith" violated the terms and conditions of the conversion training course agreement to the damage of petitioner removes the present controversy from the coverage of the Labor Code and brings it within the purview of Civil Law
  • complaint was anchored not on the abandonment per se but on the manner and consequent effects of such abandonment of work translated in terms of the damages which petitioner had to suffer
  • The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute.
  • Additionally, there is a secondary issue involved that is outside the pale of competence of Labor Arbiters. Is the liability of Villanueva one of suretyship or one of guaranty? Unquestionably, this question is beyond the field of specialization of Labor Arbiters.

Jurisprudence: G.R. No. L-47739


FIRST DIVISION

G.R. No. L-47739 June 22, 1983

SINGAPORE AIRLINES LIMITED, petitioner,
vs.
HON. ERNANI CRUZ PAÑO as Presiding Judge of Branch XVIII, Court of First Instance of Rizal, CARLOS E. CRUZ and B. E. VILLANUEVA, respondents.

Bengzon, Zarraga, Narciso, Cudala Pecson, Azucena & Bengzon Law Offices for petitioner.

Celso P. Mariano Law Office for private respondent Carlos Cruz.

Romeo Comia for private respondent B. E. Villanueva.



MELENCIO-HERRERA, J.:

On the basic issue of lack of jurisdiction, petitioner company has elevated to us for review the two Orders of respondent Judge dated October 28, 1977 and January 24, 1978 dismissing petitioner's complaint for damages in the first Order, and denying its Motion for Reconsideration in the second.

On August 21, 1974, private respondent Carlos E. Cruz was offered employment by petitioner as Engineer Officer with the opportunity to undergo a B-707 I conversion training course," which he accepted on August 30, 1974. An express stipulation in the letter-offer read:

3.     BONDING. As you win be provided with conversion training you are required to enter into a bond with SIA for a period of 5 years. For this purpose, please inform me of the names and addresses of your sureties as soon as possible.

Twenty six days thereafter, or on October 26, 1974, Cruz entered into an "Agreement for a Course of Conversion Training at the Expense of Singapore Airlines Limited" wherein it was stipulated among others:

4.     The Engineer Officer shall agree to remain in the service of the Company for a period of five years from the date of commencement of such aforesaid conversion training if so required by the Company.

5.     In the event of the Engineer Officer:

1.     Leaving the service of the company during the period of five years referred to in Clause 4 above, or

2.     Being dismissed or having his services terminated by the company for misconduct,

the Engineer Officer and the Sureties hereby bind themselves jointly and severally to pay to the Company as liquidated damages such sums of money as are set out hereunder:

(a)    during the first year of the period of five years referred to in Clause 4 above ...................................................................................... $ 67,460/

(b)    during the second year of the period of five years referred to in Clause 4 above ................................................................................. $ 53,968/

(c)    during the third year of the period of five years referred to in Clause 4 above ...................................................................................... $ 40,476/

(d)    during the fourth year of the period of five years referred to in Clause 4 above .................................................................................. $ 26,984/

(e)    during the fifth year of the period of five years referred to in Clause 4 above ....................................................................................... $ 13,492/

6.     The provisions of Clause 5 above shall not apply in a case where an Engineer Officer has his training terminated by the Company for reasons other than misconduct or where, subsequent to the completion of training, he -

1.     loses his license to operate as a Flight Engineer due to medical reasons which can in no way be attributable to any act or omission on his part;

2.     is unable to continue in employment with the Company because his employment pass or work permit, as the case may be, has been withdrawn or has not been renewed due to no act or omission on his part;

3.     has his services terminated by the Company as a result of being replaced by a national Flight Engineer;

4.     has to leave the service of the Company on valid compassionate grounds stated to and accepted by the Company in writing. 1

Cruz signed the Agreement with his co-respondent, B. E. Villanueva, as surety.

Claiming that Cruz had applied for "leave without pay" and had gone on leave without approval of the application during the second year of the Period of five years, petitioner filed suit for damages against Cruz and his surety, Villanueva, for violation of the terms and conditions of the aforesaid Agreement. Petitioner sought the payment of the following sums: liquidated damages of $53,968.00 or its equivalent of P161,904.00 (lst cause of action); $883.91 or about P2,651.73 as overpayment in salary (2nd clause of action); $61.00 or about P183.00 for cost of uniforms and accessories supplied by the company plus $230.00, or roughly P690.00, for the cost of a flight manual (3rd cause of action); and $1,533.71, or approximately P4,601.13 corresponding to the vacation leave he had availed of but to which he was no longer entitled (4th cause Of action); exemplary damages attorney's fees; and costs.

In his Answer, Cruz denied any breach of contract contending that at no time had he been required by petitioner to agree to a straight service of five years under Clause 4 of the Agreement (supra) and that he left the service on "valid compassionate grounds stated to and accepted by the company so that no damages may be awarded against him. And because of petitioner-plaintiff's alleged ungrounded causes of action, Cruz counterclaimed for attorney's fees of P7,000.00.

The surety, Villanueva, in his own Answer, contended that his undertaking was merely that of one of two guarantors not that of surety and claimed the benefit of excussion, if at an found liable. He then filed a cross-claim against Cruz for damages and for whatever amount he may be held liable to petitioner-plaintiff, and a counterclaim for actual, exemplary, moral and other damages plus attorney's fees and litigation expenses against petitioner-plaintiff.

The issue of jurisdiction having been raised at the pre-trial conference, the parties were directed to submit their respective memoranda on that question, which they complied with in due time. On October 28, 1977, respondent Judge issued the assailed Order dismissing the complaint, counterclaim and cross-claim for lack of jurisdiction stating.

2.     The present case therefore involves a money claim arising from an employer-employee relation or at the very least a case arising from employer-employee relations, which under Art. 216 of the Labor Code is vested exclusively with the Labor Arbiters of the National Labor Relations Commission. 2

Reconsideration thereof having been denied in the Order of January 24, 1978, petitioner availed of the present recourse. We gave due course.

We are here confronted with the issue of whether or not this case is properly cognizable by Courts of justice or by the Labor Arbiters of the National Labor Relations Commission.

Upon the facts and issues involved, jurisdiction over the present controversy must be held to belong to the civil Courts. While seemingly petitioner's claim for damages arises from employer-employee relations, and the latest amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg. 130 provides that all other claims arising from employer-employee relationship are cognizable by Labor Arbiters, 3 in essence, petitioner's claim for damages is grounded on the "wanton failure and refusal" without just cause of private respondent Cruz to report for duty despite repeated notices served upon him of the disapproval of his application for leave of absence without pay. This, coupled with the further averment that Cruz "maliciously and with bad faith" violated the terms and conditions of the conversion training course agreement to the damage of petitioner removes the present controversy from the coverage of the Labor Code and brings it within the purview of Civil Law.

Clearly, the complaint was anchored not on the abandonment per se by private respondent Cruz of his job as the latter was not required in the Complaint to report back to work but on the manner and consequent effects of such abandonment of work translated in terms of the damages which petitioner had to suffer.

Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale Veneer & Plywood, Inc.4 the pertinent portion of which reads:

Although the acts complied of seemingly appear to constitute "matter involving employee employer" relations as Quisaba's dismiss was the severance of a pre-existing employee-employer relations, his complaint is grounded not on his dismissal per se, as in fact he does not ask for reinstatement or backwages, but on the manner of his dismiss and the consequent effects of such

Civil law consists of that 'mass of precepts that determine or regulate the relations ... that exist between members of a society for the protection of private interest (1 Sanchez Roman 3).

The "right" of the respondents to dismiss Quisaba should not be confused with the manner in which the right was exercised and the effects flowing therefrom. If the dismiss was done anti-socially or oppressively, as the complaint alleges, then the respondents violated article 1701 of the Civil Code which prohibits acts of oppression by either capital or labor against the other, and article 21, which makers a person liable for damages if he wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy, the sanction for which, by way of moral damages, is provided in article 2219, No. 10 (Cf, Philippine Refining Co. vs. Garcia, L-21962, Sept. 27, 1966, 18 SCRA 107).

Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the labor Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an obligation, intrinsically a civil dispute.

Additionally, there is a secondary issue involved that is outside the pale of competence of Labor Arbiters. Is the liability of Villanueva one of suretyship or one of guaranty? Unquestionably, this question is beyond the field of specialization of Labor Arbiters.

WHEREFORE, the assailed Orders of respondent Judge are hereby set aside. The records are hereby ordered remanded to the proper Branch of the Regional Trial Court of Quezon City, to which this case belongs, for further proceedings. No costs.

SO ORDERED.

Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.



Footnotes

1 Annex "B ", p. 12, CFI Records.

2      p. 112, Ibid.

3 Article 217. Jurisdiction of Labor Arbiters and the Commission.

(a) The labor Arbiters shall have the original and exclusive jurisdiction to hear and decide the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that involve wages, hours of work and other terms and conditions of employment;

3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees compensation, social security, medicare and maternity benefits;

4.     Cases involving household services and

5. All other claims arising from employer-employee relations, unless expressly excluded by this Code.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

4 68 SCRA 771 (1974).

Corporate Law Case Digest: Datu Tagoranao Benito v. SEC (1983)

G.R. No. L-56655 July 25, 1983
Lessons Applicable: Preemptive Rights (Sec. 39) (Corporate Law)

FACTS:
  • February 6, 1959: Articles of Incorporation (AIC) of Jamiatul Philippine-Al Islamia, Inc. (Jamiatul) (originally Kamilol Islam Institute, Inc.) were filed with the SEC
  • December 14, 1962: approved AIC
  • The corporation had an authorized capital stock of P200K divided into 20K shares at a par value of P10 each. Of the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for
  • Datu Tagoranao Benito subscribed to 460 shares worth P4,600
  • October 28, 1975: filed a certificate of increase of its capital stock from P200K to P1M
  • November 25, 1975: stockholders meeting was held were P191,560.00 worth of shares were represented
    • P110,980 worth of shares were subsequently issued by the corporation from the unissued portion of the authorized capital stock of P200,000
  • Of the increased capital stock of P1M0, P160K worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto.
  • November 18, 1976: Datu Tagoranao filed with SEC a petition alleging that the additional issue (worth P110,980) was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital stock was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda
  • SEC: 
    • issuance by the corporation of its unissued shares was validly made and was not subject to the pre-emptive rights of stockholders
    • directed Jamiatul to allow petitioner to subscribe thereto, at par value, proportionate to his present shareholdings, adding thereto the 2,540 shares transferred to him by Mr. Domocao Alonto and Mrs. Moki-in Alonto
ISSUES: 
  1. W/N the issuance of the P110,980 of authorized capital stock of P200,000 is in violation of pre-emptive right - NO
  2. W/N the issuance of the increase in the authorized capital stock is in violation of pre-emptive right
HELD: Dismissed for lack of merit
  1. NO
  • GR: pre-emptive right is recognized only with respect to new issue of shares, and not with respect to additional issues of originally authorized shares
    • Theory: when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue
      • original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares
      • When the shares left unsubscribed are later re-offered, he cannot therefore claim a dilution of interest.
     2.  NO
  • stockholders' meeting was held which included the increase of its capital stock from P200,000.00 to P1,000,000.00 
    • he was not notified of said meeting and that he never attended the same as he was out of the country at the time
  • administrative bodies will not be interfered with by the courts in the absence of grave abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by substantial evidence