ENRIQUE SALAFRANCA, petitioner, vs. PHILAMLIFE (PAMPLONA) VILLAGE, HOMEOWNERS ASSOCIATION, INC.

, BONIFACIO DAZO and THE SECOND DIVISION, NATIONAL LABOR RELATIONS COMMISSION (NLRC), respondents. DECISION
ROMERO, J.:

Petitioner Enrique Salafranca started working with the private respondent Philamlife Village Homeowners Association on May 1, 1981 as administrative officer for a period of six months. From this date until December 31, 1983, petitioner was reappointed to his position three more times.[1] As administrative officer, petitioner was generally responsible for the management of the villages day to day activities.[2] After petitioners term of employment expired on December 31, 1983, he still continued to work in the same capacity, albeit, without the benefit of a renewed contract. Sometime in 1987, private respondent decided to amend its by-laws. Included therein was a provision regarding officers, specifically, the position of administrative officer under which said officer shall hold office at the pleasure of the Board of Directors. In view of this development, private respondent, on July 3, 1987, informed the petitioner that his term of office shall be coterminus with the Board of Directors which appointed him to his position. Furthermore, until he submits a medical certificate showing his state of health, his employment shall be on a monthto-month basis.[3] Oddly, notwithstanding the failure of herein petitioner to submit his medical certificate, he continued working until his termination in December 1992.[4] Claiming that his services had been unlawfully and unceremoniously dispensed with, petitioner filed a complaint for illegal dismissal with money claims and for damages.[5] After the submission by the parties of their respective position papers and other pleadings, the Labor Arbiter rendered a decision[6] ordering private respondent to pay the petitioner the amount of P257,833.33 representing his backwages, separation pay and 13th month pay. In justifying the award, the Labor Arbiter elucidated:

Respondents contention that complainants term of employment was co-terminus with the term of Office of the Board of Directors, is wanting in merit. Records show that complainant had been hired in 1981 while the Amendment of the respondents By-Laws making the position of an Administrative Officer co-terminus with the term of the Board of Directors was made in 1987. Evidently, the said Amendment would not be applicable to the case of complainant who had become a regular employee long time before the Amendment took place. Moreover, the Amendment should be applied prospectively and not retroactively.
On appeal by the private respondent, the NLRC reversed the decision of the Labor Arbiter and rendered a new one[7] reducing petitioners monetary award to only one-half (1/2) month pay for every year of service representing his retirement pay. In other words, the NLRC viewed the dismissal of the petitioner as a valid act by the private respondent.

The fact that he continued to perform the function of the office of administrative officer without extension or re-appointment thereafter, to our mind, did not in any way make his employment permanent as in fact, he was even reminded of the nature of his position by then president of the association Jaime Y. Ladao in a letter of 3 July 1987. His reply to the aforesaid letter, claiming his employment regular, and viz a viz, referring to submit his medical certificate, notwithstanding, to our mind, merely underscored the need to define his position as, in fact, the Associations Rules and Regulations were amended if but to put to rest the tenural (sic) limit of the office of the Administrative Officer in accordance with its earlier intention, that it is coterminus with that of the members of the Board of Directors. WHEREFORE, the decision appealed from is hereby set aside. Respondents are hereby ordered to pay herein appellee one half (1/2) month pay for every year of service representing his retirement pay.
In view of the sudden turn of events, petitioner has elevated the case to this Court assigning the following errors:[8]
1. The NLRC gravely abused its discretion when it ruled that the employment of the Petitioner is not purely based on considerations of Employer-Employee relationship. 2. Petitioner was illegally dismissed by private respondents.

As to the first assigned error by the petitioner, we need not dwell on this at length. We agree with the Solicitor Generals observation that an employer-employee relationship exists between the petitioner and the private respondent.[9] x x x xxx xxx

The first element is present in this case. Petitioner was hired as Administrative Officer by respondents. In fact, he was extended successive appointments by respondents. The second element is also present since it is not denied that respondent PVHA paid petitioner a fixed salary for his services. As to the third element, it can be seen from the Records that respondents had the power of dismissal over petitioner. In their letter dated December 7, 1992, respondents informed petitioner that they had decided to discontinue his services. In their Position Paper submitted to the Labor Arbiter, respondents stated that petitioner was dismissed for cause. (p. 17, Record). With respect to the fourth and most important element, respondents controlled the work of petitioner not only with respect to the ends to be achieved but also the means used in reaching such ends.

Relative to the second assigned error of the petitioner, both the Solicitor General and the private respondent take the stance that petitioner was not illegally dismissed.[10] On this aspect, we disagree with their contentions. On the outset, there is no dispute that petitioner had already attained the status of a regular employee, as evidenced by his eleven years of service with the private respondent. Accordingly, petitioner enjoys the right to security of tenure[11] and his services may be terminated only for causes provided by law.[12] Viewed in this light, while private respondent has the right to terminate the services of petitioner, this is subject to both substantive and procedural grounds.[13] The substantive causes for dismissal are those provided in Articles 282 and 283 of the Labor Code,[14] while the procedural grounds refer to the observance of the requirement of due process.[15] In all these instances, it is the private respondent, being the employer, who must prove the validity of the dismissal.[16] Having reviewed the records of this case carefully, we conclude that private respondent utterly failed to substantiate petitioners dismissal, rendering the latters termination illegal. At the risk of being redundant, it must be stressed that these requirements are mandatory and noncompliance therewith renders any judgment reached by the management void and inexistent.[17] While private respondent imputes gross negligence, and serious misconduct as the causes of petitioners dismissal,[18] not a shred of evidence was offered in support thereof, other than bare and uncorroborated allegations. The facts and circumstances regarding such alleged infractions were never explained. While it is true that private respondent, through its president Bonifacio Dazo, executed an affidavit narrating the alleged violations of the petitioner,[19] these were never corroborated by concrete or competent evidence. It is settled that no undue importance should be given to a sworn statement or affidavit as a piece of evidence because, being taken ex-parte, an affidavit is almost always incomplete and inaccurate.[20] Furthermore, it must be noted that when petitioner was terminated in 1992, these alleged infractions were never raised nor communicated to him. In fact, these were only revealed after the complaint was filed by the petitioner in 1993. Why there was a delay was never adequately explained by private respondent. Likewise, we note that Dazo himself was not presented as a witness to give the petitioner an opportunity to cross-examine him and propound clarificatory questions regarding matters averred in his affidavit. All told, the foregoing lapses and the belated submission of the affidavit, cast doubt as to the credibility of the allegations. In sum, the dismissal of the petitioner had no factual basis whatsoever. The rule is that unsubstantiated accusations without more, are not tantamount to guilt.[21] As regards the issue of procedural due process, private respondent justifies its noncompliance therewith in this wise:

The Association Officers, being his peers and friends had a problem however in terminating his services. He had been found to have committed infractions as previously enumerated. PVHA could have proceeded with a full-blown investigation to hear these charges, but the ordeal might break the old mans heart as this will surely affect his standing in the community. So they decided to make their move as

discreetly (but legally) as possible to save the petitioners reputation. Terminating him in accordance with the provision of the by-laws of the Association without pointing out his numerous faults and malfeasance in office and with one-half month pay for every year of service in accordance with the Retirement Law was the best and only alternative.
We are not impressed. The reasoning advanced by the private respondent is as puerile as it is preposterous. The essence of due process is to afford the party an opportunity to be heard and defend himself, to cleanse his name and reputation from any taint. It includes the twin requirements of notice and hearing.[22] This concept evolved from the basic tenet that ones employment or profession is a property right protected by the constitutional guaranty of due process of law.[23] Hence, an individuals separation from work must be founded on clearly-established facts, not on mere conjectures and suspicions.[24] In light of the foregoing, private respondents arguments are clearly baseless and without merit. In truth, instead of protecting petitioners reputation, private respondent succeeded in doing exactly the opposite - it condemned the petitioner without even hearing his side. It is stating the obvious that dismissal, being the ultimate penalty that can be meted out to an employee, should be based on a clear or convincing ground.[25] As such, a decision to terminate an employee without fully apprising him of the facts, on the pretext that the twin requirements of notice and hearing are unnecessary or useless, is an invalid and obnoxious exercise of management prerogative. Furthermore, private respondent, in an effort to validate the dismissal of the petitioner, posits the theory that the latters position is coterminus with that of the Villages Board of Directors, as provided for in its amended by-laws.[26] Admittedly, the right to amend the by-laws lies solely in the discretion of the employer, this being in the exercise of management prerogative or business judgment. However this right, extensive as it may be, cannot impair the obligation of existing contracts or rights. Prescinding from these premises, private respondents insistence that it can legally dismiss petitioner on the ground that his tenure has expired is untenable. To reiterate, petitioner, being a regular employee, is entitled to security of tenure; hence, his services may only be terminated for causes provided by law.[27] A contrary interpretation would not find justification in the laws or the Constitution. If we were to rule otherwise, it would enable an employer to remove any employee from his employment by the simple expediency of amending its by-laws and providing that his/her position shall cease to exist upon the occurrence of a specified event. If private respondent wanted to make the petitioners position co-terminus with that of the Board of Directors, then the amendment must be effective after petitioners stay with the private respondent, not during his term. Obviously, the measure taken by the private respondent in amending its by-laws is nothing but a devious, but crude, attempt to circumvent petitioners right to security of tenure as a regular employee guaranteed under the Labor Code.[28]

Interestingly, the Solicitor General is of the view that what actually transpired was that petitioner was retired from his employment, considering the fact that in 1992 he was already 70 years old and not terminated.[29] While there seems to be a semblance of plausibility in this contention for the matter of extension of service of such employee or official is addressed to the sound discretion of the employer, still we have no doubt that this was just a mere after-thought - a dismissal disguised as retirement. In the proceedings before the Labor Arbiter, it is noteworthy that private respondent never raised the issue of compulsory retirement,[30] as a cause for terminating petitioners service. In its appeal before the NLRC, this ground was never discussed. In fact, private respondent, in justifying the termination of the petitioner, still anchored its claim on the applicability of the amended by-laws. This omission is fatal to private respondents cause, for the rule is wellsettled that matters, theories or arguments not brought out in the proceedings below will ordinarily not be considered by a reviewing court, as they cannot be raised for the first time on appeal.[31] Undaunted, private respondent now asserts that the instant petition was filed out of time,[32] considering that the assailed NLRC decision was received on June 28, 1995 while this petition was filed on September 20, 1995. At this juncture, we take this opportunity to state that under the 1997 Rules of Civil Procedure, a petition for certiorari must now be instituted within sixty days of receipt of the assailed judgment, order or resolution.[33] However, since this case arose in 1995 and the aforementioned rule only took effect on July 1, 1997 then the old rule is applicable. Since prior to the effectivity of the new rule, a special civil action ofcertiorari should be instituted within a period of three months,[34] the instant petition which was filed on September 20, 1995 or two months and twenty-two days thereafter, was still within the reglementary period. With respect to the issue of the monetary award to be given to the petitioner, private respondent argues that he deserves only retirement pay and nothing more. This position would have been tenable had petitioner not been illegally dismissed. However, since we have already ruled petitioners dismissal as without just cause and lacking due process, the award of backwages and reinstatement is proper.[35] In this particular case, reinstatement is no longer feasible since petitioner was already 70 years old at the time he was removed from his employment. As a substitute thereof, separation pay is generally awarded,[36] the amount of which must be equivalent to one-month salary for every year of service.[37] With respect to the amount of backwages which, incidentally is different from separation pay, it is now settled that an illegally dismissed employee is entitled to its full payment as long as the cause of action accrued after March 21, 1989.[39] Considering that petitioner was terminated from the service on December 9, 1992, which is after March 21, 1989, he is entitled to full backwages from the time of the illegal dismissal without any qualification or deduction.[40]
[38]

As regards the issue of retirement pay, private respondent asserts that the correct amount should be one-half (1/2) month salary for every year of service. This time we agree with private respondents contention. The pertinent law is Article 287 of the Labor Code, as amended by Republic Act No. 7641, which reads:

Art. 287. Retirement. - Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employees retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.
xxx xxx x x x.

With respect to the issue that petitioner, being a managerial employee, is not entitled to thirteenth month pay, Memorandum Order No. 28, as implemented by the Revised Guidelines on the Implementation of the 13th Month Pay Law dated November 16, 1987, provides:

Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby required to pay all their rank and file employees a 13th month pay not later than December 24 of every year.
Clearly, therefore, the foregoing exempts managerial employees from this benefit. Of course, this does not preclude an employer from granting other bonuses, in lieu of the 13th month pay, to managerial employees in its discretion. Finally, we cannot simply ignore private respondents malicious scheme to remove petitioner from his position which is contrary to good customs and effected in an oppressive manner, thus warranting an award of moral and exemplary damages to the petitioner.[41] Moreover, since petitioner was forced to litigate and incur expenses to protect his right and interests, he is entitled to attorneys fees.[42] WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The NLRC decision dated June 15, 1995 is hereby REVERSED and SET ASIDE. Private respondent Philamlife Village Homeowners Association is ORDERED: (1) to pay petitioner Enrique Salafranca separation pay equivalent to one month salary for every year of service; (2) to pay his full backwages in accordance with our ruling in Bustamante v. NLRC;[43] (3) to pay his retirement pay in accordance with Article 287 of the Labor Code, as amended by Republic Act No. 7641, (4) to pay moral and exemplary damages in the amount of twenty thousand (P20,000.00) pesos and ten thousand (P10,000.00) pesos,

respectively;[44] and (5) to pay ten (10%) percent of the total amount due to petitioner, as attorneys fees. Consequently, the respondent NLRC is ORDEREDto COMPUTE the total monetary benefits awarded in accordance with this decision and to submit its compliance thereon within thirty (30) days from notice of this decision. SO ORDERED. Kapunan, Purisima, and Pardo, JJ., concur.

G.R. No. L-32473 July 31, 1973 IGNACIO VICENTE and MOISES ANGELES, petitioners, vs. HON. AMBROSIO M. GERALDEZ, as Judge of the Court of First Instance of Bulacan, Branch V (Sta. Maria), and HI CEMENT CORPORATION, respondents G.R. No. L-32483 July 31, 1973 JUAN BERNABE, petitioner, vs. HI CEMENT CORPORATION and THE HON. AMBROSIO M. GERALDEZ, Presiding Judge, Branch V, Court of First Instance of Bulacan, respondents. Librado S. Correa for petitioners Ignacio Vicente and Moises Angeles. Francisco R. Capistrano and Andreciano F. Caballero for petitioner Juan Bernabe. Renato L. Cayetano and Jesus G. Diaz for respondent HI Cement Corporation.

ANTONIO, J.: There are two original actions of certiorari with prayer for preliminary injunction wherein petitioners seek to annul the orders dated April 24, May 18, and July 18, 1970 of respondent Judge of the Court of First Instance of Bulacan in Civil Case No. SM-201 (Hi Cement Corporation vs. Juan Bernabe, Ignacio Vicente and Moises Angeles). The two cases are herein decided jointly because they proceed from the same case and involve in substance the same question of law. On September 9, 1967 herein private respondent Hi Cement Corporation filed with the Court of First Instance of Bulacan a complaint for injunction and damages against herein petitioners Juan Bernabe, Ignacio Vicente and Moises Angeles. In said complaint the plaintiff alleged that it had acquired on October 27, 1965, Placer Lease Contract No. V-90, from the Banahaw Shale Mining Association, under a deed of sale and transfer which was duly registered with the Office of the Mining Recorder of Bulacan on November 4, 1965 and duly approved by the Secretary of Agriculture and Natural Resources on December 15, 1965; that the said Placer Lease Contract No. V-90 was for a period of twenty-five years commencing from August 1, 1960 and covered two mining claims (Red Star VIII & IX) with a combined area of about fifty-one hectares; that within the limits of Placer Mining Claim Red Star VIII are three parcels of land claimed by the defendants Juan Bernabe (about

two hectares), Ignacio Vicente (about two hectares) and Moises Angeles (about one-fourth hectare); that the plaintiff had, on several occasions, informed the defendants, thru its representatives, of the plaintiff's acquisition of the aforesaid placer mining claims which included the areas occupied by them; that the plaintiff had requested the defendants to allow its workers to enter the area in question for exploration and development purposes as well as for the extraction of minerals therefrom, promising to pay the defendants reasonable amounts as damages, but the defendants refused to allow entry of the plaintiff's representatives; that the defendants were threatening the plaintiff's workers with bodily harm if they entered the premises, for which reason the plaintiff had suffered irreparable damages due to its failure to work on and develop its claims and to extract minerals therefrom, resulting in its inability to comply with its contractual commitments, for all of which reasons the plaintiff prayed the court to issue preliminary writs of mandatory injunction perpetually restraining the defendants and those cooperating with them from the commission or continuance of the acts complained of, ordering defendants to allow plaintiff, or its agents and workers, to enter, develop and extract minerals from the areas claimed by defendants, to declare the injunction permanent after hearing, and to order the defendants to pay damages to the plaintiff in the amount of P200,000.00, attorney's fees, expenses of litigation and costs. On September 12, 1967 the trial court issued a restraining order and required the defendants to file their answers. The defendants filed their respective answers, which contained the usual admissions and denials and interposed special and affirmative defenses, namely, among others, that they are rightful owners of certain portions of the land covered by the supposed mining claims of the plaintiff; that it was the plaintiff and its workers who had committed acts of force and violence when they entered into and intruded upon the defendants' lands; and that the complaint failed to state a cause of action. The defendants set up counter-claims against the plaintiff for actual and moral damages, as well as for attorney's fees. In another pleading filed on the same date, defendant Juan Bernabe opposed the issuance of a writ of preliminary mandatory or prohibitory injunction. In its Order dated September 30, 1967, the trial court, however, directed the issuance of a writ of preliminary mandatory injunction upon the plaintiff's posting of a bond in the amount of P100,000.00. In its order, the court suggested the relocation of the boundaries of the plaintiff's claims in relation to the properties of the defendants, and to this end named as Commissioner, a Surveyor from the Office of the District Engineer of Bulacan to relocate the boundaries of the plaintiff's mining claims, to show in a survey plan the location of the areas thereof in conflict with the portions whose ownership is claimed by the defendants and to submit his report thereof to the court on or before October 31, 1967. The court also directed the parties to send their representatives to the place of the survey on the date thereof and to furnish the surveyor with copies of their titles. The Commissioner submitted his report to the Court on November 24, 1967 containing the following findings: 1. In the attached survey plan, the area covered and embraced full and heavy lines is the Placer Mining Claims of the Plaintiff containing an area of 107 hectares while the area bounded by fine-broken lines are the properties of the Defendants. 2. The property of the Defendant MOISES ANGELES, consisting of two (2) parcels known as Lot 1-B and Lot 2 of Psu-103374, both described in O.C.T. No. O-1769 with a total area of 34,984 square meters were totally covered by the Claims of the Plaintiff. 3. The property of the Defendant IGNACIO VICENTE, containing an area of 32,619 square meters, is also inside the Claims of the Plaintiff.

4. The property of the defendant JUAN BERNABE known as Psu-178969, described in O.C.T. No. 0-2050 is partially covered by the Claims of the Plaintiff and the area affected is 57,539 square meters. In an Order issued on December 14, 1967, the court approved the report "with the conformity of all the parties in this case." Thereafter, on April 2, 1968 plaintiff HI Cement Corporation filed a motion to amend the complaint "so as to conform to the facts brought out and/or impliedly admitted in the pre-trial. This motion was granted by the court on April 6, 1968. Accordingly, on October 21, 1968, the plaintiff filed its amended complaint. The amendments consisted in the statement of the correct areas of the land belonging to defendants Bernabe (57,539 square meters), Vicente (32,619 square meters) and Angles (34,984 square meters), as well as the addition of allegations to the effect, among others, that at the pre-trial the defendants Angeles and Vicente declared their willingness to sell to the plaintiff their properties covered by the plaintiff's mining claims for P10.00 per square meter, and that when the plaintiff offered to pay only P0.90 per square meter, the said defendants stated that they were willing to go to trial on the issue of what would be the reasonable price for the properties of defendants sought to be taken by plaintiff. With particular reference to defendant Bernabe, the amended complaint alleged that the said defendant neither protested against nor prohibited the predecessor-in-interest of the plaintiff from prospecting, discovering, locating and contracting minerals from the aforementioned claims, or from conducting the survey thereon, or filed any opposition against the application for lease by the Red Star Mining Association, and that as a result of the failure of said defendant to object to the acts of possession or occupation over the said property by plaintiff, defendant is now estopped from claiming that plaintiff committed acts of usurpation on said property. The plaintiff prayed the court, among other things, to fix the reasonable value of the defendants' properties as reasonable compensation for any resulting damage. Defendant Bernabe filed an amended answer substantially reproducing his original answer and denying the averments concerning him in the amended complaint. The respective counsels of the parties then conferred among themselves on the possibility of terminating the case by compromise, the defendants having previously signified their willingness to sell to the plaintiff their respective properties at reasonable prices. On January 30, 1969 the counsels of the parties executed and submitted to the court for its approval the following Compromise Agreement: COMPROMISE AGREEMENT COME NOW the plaintiff and the defendants, represented by their respective counsel, and respectfully submit the following agreement: 1. That the plaintiff is willing to buy the properties subject of litigation, and the defendants are willing to sell their respective properties; 2. That this Honorable Court authorizes the plaintiff and the defendants to appoint their respective commissioners, that is, one for the plaintiff and one for each defendant; 3. That the parties hereby agree to abide by the decision of the Court based on the findings of the Commissioners;

4. That the fees of the Commissioners shall be paid as follows: For those appointed by the parties shall be paid by them respectively; and for the one appointed by the Court, his fees shall be paid pro-rata by the parties; 5. That the names of the Commissioners to be appointed by the parties shall be submitted to the Court on or before February 8, 1969. WHEREFORE, the undersigned respectfully pray that the foregoing agreement be approved.

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents. DECISION
PANGANIBAN, J.:

In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of apparent authority apply in this case? If so, may the Central Bankappointed conservator of Producers Bank (now First Philippine International Bank) repudiate such apparent authority after said contract has been deemed perfected? During the pendency of a suit for specific performance, does the filing of a derivative suit by the majority shareholders and directors of the distressed bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping? Simply stated, these are the major questions brought before this Court in the instant Petition for review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgatedJanuary 14, 1994 of the respondent Court of Appeals[1] in CA-G.R. CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED. All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito. Costs against appellant bank.

The dispositive portion of the trial courts[2] decision dated July 10, 1991, on the other hand, is as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of Title Nos. T106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos; 2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owners copies of T.C.T. Nos. T106932 to T-106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the names of the plaintiffs; 3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of P 200,000.00 each in moral damages; 4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as exemplary damages; 5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of attorneys fees; 6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of P20,000.00; With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to surrejoinder, the petition was given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned ponente for the writing of this Decision.

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head Manager of the Property Management Department of the petitioner Bank. Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside through this petition.

The Facts The facts of this case are summarized in the respondent Courts Decision, [3] as follows:

(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by Transfer Certificates of Title Nos. T106932 to T-106937. The property used to be owned by BYME Investment and Development Corporation which had them mortgaged with the bank as collateral fora loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose. (2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant bank. The meeting was held pursuant to plaintiffs plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank through a letter dated August 30, 1987 (Exh. B), as follows: August 30, 1987 The Producers Bank of the Philippines Makati, Metro Manila Attn. Gentlemen: Mr. Mercurio Q. Rivera Manager, Property Management Dept.

I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less. TCT NO. AREA 113,580 70,899 52,246 96,768 187,114 481,481 sq.m. sq.m. sq.m. sq.m. sq.m. sq.m.

T-106932 T-106933 T-106934 T-106935 T-106936 T-106937

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash. Kindly contact me at Telephone Number 921-1344. (3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder quoted (Exh. C): September 1, 1987 J-P M-P GUTIERREZ ENTERPRISES 142 Charisma St., Doa Andres II Rosario, Pasig, Metro Manila Attention: JOSE O. JANOLO Dear Sir:

Dear Sir: Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by Byme industrial Corp.). Please be informed however that the banks counter-offer is at P5.5 million for more than 101 hectares on lot basis. We shall be very glad to hear your position on the matter. Best regards. (4)On September 17, 1987, plaintiff Janolo, responding to Riveras aforequoted reply, wrote (Exh. September 17, 1987

Producers Bank Paseo de Roxas Makati, Metro Manila Attention: Mr. Mercurio Rivera Gentlemen: In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa Laguna, I would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH. Hoping that this proposal meets your satisfaction. (5) There was no reply to Janolos foregoing letter of September 17, 1987. What took place was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. E): The Producers Bank of the Philippines Paseo de Roxas, Makati Metro Manila Attention: Mr. Mercurio Rivera Re: Gentlemen: Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme In-vestment, for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00). Thank you. (6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. F): Attention: Atty. Demetrio Demetria 101 Hectares of Land in Sta. Rosa, Laguna

Dear Sir: Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly created committee for submission to the newly designated Acting Conservator of the bank. For your information. (7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera (Exhibit G) tendered payment of the amount of P5.5 million pursuant to (our) perfected sale agreement. Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction were advertised by the bank for sale to any interested buyer (Exhs. H and H-1). Plaintiffs demanded the execution by the bank of the documents on what was considered as a perfected agreement. Thus: Mr. Mercurio Rivera Manager, Producers Bank Paseo de Roxas, Makati Metro Manila Dear Mr. Rivera: This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T106932 to 106937. From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you on October 5, 1987. In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you have advertised for sale the same lot to others. In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the necessary actions/documentation within three (3) days from your receipt hereof We are ready to remit the agreed amount of P5.5 million at

your advice. Otherwise, we shall be constrained to file the necessary court action to protect the interest of our client. We trust that you will be guided accordingly. (8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its communication of December 2, 1987 (Exh. I), that said letter has been referred x x x to the office of our Conservator for proper disposition. However, no response came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second tender of payment (Exhs. L and L-1), this time through the Acting Conservator, defendant Encarnacion. Plaintiffs letter reads: PRODUCERS BANK OF THE PHILIPPINES Paseo de Roxas, Makati, Metro Manila Attn.: Atty. NIDA ENCARNACION Central Bank Conservator Gentlemen: We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank. This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price of the said lots. Please inform us of the date of documentation of the sale immediately. Kindly acknowledge receipt of our payment. (9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through counsel, made a final demand for compliance by the bank with its obligations under the considered perfected contract of sale (Exhibit N). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex 4 of defendants answer to amended complaint), the defendants through Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs considered to be a perfected contract of sale.

(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted in a perfected contract of sale. The defendants took the position that there was no such perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price. On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Banks outstanding shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the motion to intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for reconsideration filed thereafter. From the trial courts decision, the Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said private respondent. On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter, the Second Case) purportedly a derivative suit - with the Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo to declare any perfected sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale.[4] In his answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without Prejudice. Private respondent opposed this motion on the ground, among others, that plaintiffs act of forum shopping justifies the dismissal of both cases, with prejudice.[5] Private respondent, in his memorandum, averred that this motion is still pending in the Makati RTC. In their Petition[6] and Memorandum,[7] petitioners summarized their position as follows:
I.

The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of Demetria and Janolo) and the bank.
II.

The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.

The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of previous management.
IV.

The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, private respondents prayed for dismissal of the instant suit on the ground[8] that:
I.

Petitioners have engaged in forum shopping.

II.

The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no longer be questioned in this case.
III.

The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by respondent Ejercito) and the bank.
IV.

The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency and the contract, has no authority to revoke the contract of sale.
The Issues From the foregoing positions of the parties, the issues in this case may be summed up as follows: 1) Was there forum-shopping on the part of petitioner Bank? 2) Was there a perfected contract of sale between the parties?

3) Assuming there was, was the said contract enforceable under the statute of frauds? 4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to revoke the said contract? 5) Did the respondent Court commit any reversible error in its findings of facts?

The First Issue: Was There Forum-Shopping? In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised Circular No. 28-91 requiring that a party must certify under oath x x x [that] (a) he has not (t)heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending in said courts or agencies. A violation of the said circular entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating for the record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice.[9] Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual forum shopping because the instant petition pending before this Court involves identical parties or interests represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so intertwined that a judgment or resolution in either case will constitute res judicata in the other.[10] On the other hand, petitioners explain[11] that there is no forum-shopping because:

1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a defendant, whereas in the Second Case (assuming the Bank is the real party in interest in a derivative suit), it was the plaintiff; 2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances; 3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the Petition identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a legal question for the courts to decide; 4) Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION.

We rule for private respondent. To begin with, forum-shopping originated as a concept in private international law,[12] where non-resident litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle of forum non conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most convenient or available forum and the parties are not precluded from seeking remedies elsewhere. In this light, Blacks Law Dictionary[13] says that forum-shopping occurs when a party attempts to have his action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict. Hence, according to Words and Phrases,[14] a litigant is open to the charge of forum shopping whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to attempt to settle their differences without imposing undue expense and vexatious situations on the courts. In the Philippines, forum-shopping has acquired a connotation encompassing not only a choice of venues, as it was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal actions where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from the same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal - each remedy being available independently of the others - although he cannot recover more than once.

In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his action. This was the original concept of the term forum shopping. Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience to some of the parties to the action. Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice. And this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the practice.
[15]

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for solving problems has been abused and misused to assure scheming litigants of dubious reliefs. To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned, promulgated Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several cases[16] the inveterate use of this insidious malpractice. Forum-shopping as the filing of repetitious suits in different courts has been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al. vs. Heirs of Orval Hughes, et al., as a reprehensible manipulation of court processes and proceedings x x x.[17] When does forum-shopping take place?

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought, has no jurisdiction
[18]

The test for determining whether a party violated the rule against forum-shopping has been laid down in the 1986 case of Buan vs. Lopez, [19] also by Chief Justice Narvasa, and that is, forum-shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other, as follows:

There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least such parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed for, the relief being founded on the same facts, and the identity on the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant.
xxx xxx xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into operation the sanction of twin dismissals just mentioned. The application of this

sanction will prevent any further delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is a bar to the others; and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to ask for summary dismissal of the two[20] (or more) complaints or petitions, and for the imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action against the erring lawyer. Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought. Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessorsin-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint[21] in the Second Case seeks to declare such purported sale involving the same real property as unenforceable as against the Bank, which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit,[22] this Court ruled that the filing by a party of two apparently different actions, but with the same objective, constituted forum shopping:

In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein - PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn the letter-directive of the COA of October 10, 1988 disapproving the sale. (italics supplied)

In an earlier case,[23] but with the same logic and vigor, we held:

In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both actions unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not involve certain acts which transpired after its commencement, is specious. In the RTC action, as in the action before this Court, the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of implementing the same (by paying the pledgee banks the amount of their loans, obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same: the prevention of such implementation and/or the restoration of the status quo ante. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit did not become functus oflcio. It remained an effective vehicle for obtention of relief; and petitioners remedy in the premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. The remedy was certainly not the institution of another action in another forum based on essentially the same facts. The adoption of this latter recourse renders the petitioners amenable to disciplinary action and both their actions, in this Court as well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and entity, namely, petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed contract of sale; and Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a derivative suit. In the caption itself, petitioners claim to have brought suit for and in behalf of the Producers Bank of the Philippines. Indeed, this is the very essence of a derivative suit:
[24]

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued or

hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; italics supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they really represent the Bank. So, whether they sued derivatively or directly, there is undeniably an identity of interests/entity represented. Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and distinct from its shareholders. But the rulings of this Court are consistent: When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals.[25] In addition to the many cases[26] where the corporate fiction has been disregarded, we now add the instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping. Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is identity of parties, causes of action and reliefs sought, because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second Case), citing as authority Victronics Computers, Inc. vs. Regional Trial Court, Branch 63, Makati, etc. et al.,[27]where the Court held:

The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against the plaintiff - instead of filing a responsive pleading in the other case - setting forth therein, as causes of action, specific denials, special and affirmative defenses or even counterclaims. Thus, Velhagens and Kings motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first place. (italics supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the forum in said case.

Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the present suit. In the former, as underscored in the abovequoted Court ruling, the defendants did not file any responsive pleading in the first case. In other words, they did not make any denial or raise any defense or counter-claim therein. In the case before us however, petitioners filed a responsive pleading to the complaint - as a result of which, the issues were joined. Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings, the petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated in the Second Case. Ultimately, what is truly important to consider in determining whether forumshopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will directly conflict with a possible decision in the Second Case barring the parties from enforcing or implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other.[28] The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners present counsel entered their appearance only during the proceedings in this Court, and the Petitions VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show good faith in observing Circular 28-91. The lawyers who filed the Second Case are not before us; thus the rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes. They are warned that a repetition of the same will be dealt with more severely. Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-shopping but also because of the substantive issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected? The respondent Court correctly treated the question of whether or not there was, on the basis of the facts established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established, respondent Court stated:

There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the Banks Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the Property Management Department of the defendant bank, in early August 1987. The procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20): A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon having been offered, I present it to the Committee. I provide the Committee with necessary information about the property such as original loan of the borrower, bid price during the foreclosure, total claim of the bank, the appraised value at the time the property is being offered for sale and then the information which are relative to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval and once approved, we have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir. The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing with the bank official authorized to entertain offers, to accept offers and to present the offer to the Committee before which the said official is authorized to discuss information relative to price determination. Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official information regarding the price, as determined by the Committee and approved by the Conservator, can be had. And Rivera confirmed his authority when he talked with the plaintiff in August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31, 1990, pp. 27-28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-blank his authority to sell any property? A: No, sir. Not point blank although it came from him. (W)hen I asked him how long it would take because he was saying that the matter of pricing will be passed upon by the committee. And when I asked him how long it will take for the committee to

decide and he said the committee meets every week. If I am not mistaken Wednesday and in about two weeks (sic) time, in effect what he was saying he was not the one who was to decide. But he would refer it to the committee and he would relay the decision of the committee to me. Q: Please answer the question. A: He did not say that he had the authority(.) But he said he would refer the matter to the committee and he would relay the decision to me and he did just like that.

Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose Entereso as one of the members. What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and the banks internal procedure in the matter of the sale of banks assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee, the Conservator and ultimately the bank itself with the set price on the other, and considering further the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash, there can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer for discussion by the Committee of such matters as original loan of borrower, bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at which the bank was selling the property. There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not discussed by the Committee and that it was merely quoted to start negotiations regarding the price. As correctly characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving character of these declarations, the banks submission on this point does not inspire belief. Both Co and Entereso, as members of the Past Due Committee of the bank, claim that the offer of the plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note that negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase price, having been made to

understand by Rivera, the official in charge of the negotiation, that the price will be submitted for approval by the bank and that the banks decision will be relayed to plaintiffs. From the facts, the amount of P5.5 Million has a definite significance. It is the official bank price. At any rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy and negotiate the sale by having the offer officially acted upon by the bank. The bank cannot turn around and later say, as it now does, that what Rivera states as the banks action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, he estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993).
[29]

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer Certificates of Title Nos. T106932 to T-106937. There is, however, a dispute on the first and third requisites. Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept.[30] They disputed the factual basis of the respondent Courts findings that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5 million. We have perused the evidence but cannot find fault with the said Courts findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact -if there be any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than that presented by petitioners is not by itself a reversible error. in fact, such findings merit serious consideration by this Court, particularly where, as in this case, said courts carefully and meticulously discussed their findings. This is basic. Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the question of Riveras authority to act and petitioners allegations that the P5.5 million counter-offer was extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be drawn from the factual findings of the respondent Court. They also delve into the contractual elements of consent and cause. The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of apparent authority, with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals,[31] where it was held that:

Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agents apparent representation yields to the principals true representation and the contract is considered as entered into between the principal and the third person (citing National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166). A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority (9 C.J.S., p. 417). A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021). Application of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following:

(a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager of the Property Management Department of the Bank. By his own admission, Rivera was already the person in charge of the Banks acquired assets (TSN, August 6, 1990, pp. 8-9); (b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting between the buyers and Rivera, the latter suggested that the buyers offer should be no less than P3.3 million (TSN, April 26, 1990, pp. 1617); (c) Rivera received the buyers letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p. 11);

(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p. 11); (e) Rivera received the letter dated September 17, 1987 containing the buyers proposal to buy the property for P4.25 million (TSN, July 30, 1990, p. 12); (f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN, January 16, 1990, p. 18); (g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1987, during which the Banks offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and officer of the Bank, confirmed Riveras statement as to the finality of the Banks counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35); (h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in the Banks advertisements offering for sale the property in question (cf. Exhs. S and SI).
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al.,[32] the Court, through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding his dealings with buyers. To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and testimony which seek to establish Riveras actual authority. These pieces of evidence, however, are inherently weak as they consist of Riveras selfserving testimony and various inter-office memoranda that purport to show his limited actual authority, of which private respondent cannot be charged with knowledge. In any event, since the issue is apparent authority, the existence of which is borne out by the respondent Courts findings, the evidence of actual authority is immaterial insofar as the liability of a corporation is concerned.[33] Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had once acted for the Bank in three criminal cases, they should be charged with actual knowledge of Riveras limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no notice of Riveras actual authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in respect to any acquired assets; on the other hand, respondent has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases.

Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter dated September 17, 1987 extinguished the Banks offer of P5.5 million.[34] They disputed the respondent Courts finding that there was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex L (letter dated September 30, 1987) accepted Riveras counter offer of P5.5 million under Annex J (letter dated September 17, 1987), citing the late Justice Paras, [35] Art. 1319 of the Civil Code[36] and related Supreme Court rulings starting with Beaumont vs. Prieto.[37] However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in his letter dated September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30, 1987 begins with (p)ursuant to our discussion last 28 September 1987 x x x. Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the September 28, 1987 meeting was meant to have the offerors improve on their position of P5.5 million.[38] However, both the trial court and the Court of Appeals found petitioners testimonial evidence not credible, and we find no basis for changing this finding of fact. Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that private respondents evidence is more in keeping with truth and logic - that during the meeting on September 28, 1987, Luis Co and Rivera confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35).[39] Hence, assuming arguendo that the counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis Cos reiteration of the said P5.5 million price during the September 28, 1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there was a meeting of the minds, as the acceptance in said letter was absolute and unqualified. We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action, particularly the latters counter-offer of P5.5 million, as being unauthorized and illegal came only on May 12, 1988 or more than seven (7) months after Janolos acceptance. Such delay, and the absence of any circumstance which might have justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more than a last-minute attempt on the Banks part to get out of a binding contractual obligation. Taken together, the factual findings of the respondent Court point to an implied admission on the part of the petitioners that the written offer made on September 1, 1987 was carried through during the meeting of September 28, 1987. This is the conclusion consistent with human experience, truth and good faith. It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for the first time on appeal and should thus be disregarded.

This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592).
[40]

xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).
[41]

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the inevitable conclusion is simply that there was a perfected contract of sale.

The Third Issue: The petition alleged:[42]

Is the Contract Enforceable?

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28 September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September 1987, the contract produced thereby would be unenforceable by action - there being no note, memorandum or writing subscribed by the Bank to evidence such contract. (Please see Article 1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p. 14) stated:

x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of the price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the fact that a contract of sale was perfected between the parties, such contract being binding in whatever form it may have been entered into (case citations omitted). Stated simply, the banks letter ofSeptember 1, 1987, taken together with plaintiffs letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected contract of sale.

The respondent Court could have added that the written communications commenced not only from September 1, 1987 but from Janolos August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient memoranda - since they include the names of the parties, the terms and conditions of the contract, the price and a description of the property as the object of the contract. But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a new offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5 million. Hence, petitioners - by such utter failure to object - are deemed to have waived any defects of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer of P5.5 million is aplenty -and the silence of petitioners all throughout the presentation makes the evidence binding on them thus:
A - Yes, sir. I think it was September 28, 1987 and I was again present because Atty. Demetria told me to accompany him and we were able to meet Luis Co at the Bank.

xxx

xxx

xxx

Q - Now, what transpired during this meeting with Luis Co of the Producers Bank? A - Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir. Q - What price? A - The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final price and that is the price they intends (sic) to have, sir. Q - What do you mean? A - That is the amount they want, sir. Q - What is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant Riveras counter-offer of 5.5 million was the defendants bank (sic) final offer? A - He said in a day or two, he will make final acceptance, sir. Q - What is the response of Mr. Luis Co? A - He said he will wait for the position of Atty. Demetria, sir.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]

----0---Q - What transpired during that meeting between you and Mr. Luis Co of the defendant Bank? A - We went straight to the point because he being a busy person, I told him if the amount of P5.5 million could still be reduced and he said that was already passed upon by the committee. What the bank expects which was contrary to what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5 million and we should indicate our position as soon as possible. Q - What was your response to the answer of Mr. Luis Co? A - I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office. Q - For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in Producers Bank Building during this meeting? A - Mr. Co himself, Mr. Rivera, Atty. Fajardo and I. Q - By Mr. Co you are referring to? A - Mr. Luis Co. Q - After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the bank? A - Yes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we accepted, the offer of the bank which is P5.5 million.

[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]

---- 0 ---Q - According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it is not within his power to reduce this amount. What can you say to that statement that the amount of P5.5 million was reached by the Committee? A - It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.

[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]

The Fourth Issue: May the Conservator Revoke the Perfected and Enforceable Contract? It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines during the time that the negotiation and perfection of the contract of sale took place. Petitioners energetically contended that the conservator has the power to revoke or overrule actions of the management or the board of directors of

a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:

Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi - banking functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and the management of that institution, collect all monies and debts due said institution and exercise all powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or non-bank financial intermediary performing quasi-banking functions, any provision of law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time in this Petition - as this was not litigated in the trial court or Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process.[43] In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected, actually repudiated or overruled said contract of sale. The Banks acting conservator at the time, Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987 (Annex V, petition) which unilaterally repudiated - not the contract - but the authority of Rivera to make a binding offer - and which unarguably came months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced hereunder:

May 12, 1988 Atty. Noe C. Zarate Zarate Carandang Perlas & Ass. Suite 323 Rufino Building Ayala Avenue, Makati, Metro Manila Dear Atty. Zarate:

This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna. We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a contract to sell and buy with any of them for the following reasons. In the Inter-Office Memorandum dated April 25, 1986 addressed to and approved by former Acting Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of Property Management Department (PMD) staff and officers (Annex A), you will immediately read that Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged counter-offer. In short, your lawyer-clients did not deal with the authorized officers of the bank. Moreover, under Secs. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator may authorize the sale of any property of the corporation/bank. Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators (starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were just preliminary discussions/ consultations between him and your clients, which everyone knows cannot bind the Banks Board or Conservator. We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative of corporate and banking laws. We believe that this is more than sufficient legal justification for refusing said alleged tender. Rest assured that we have nothing personal against your clients. All our acts are official, legal and in accordance with law. We also have no personal interest in any of the properties of the Bank. Please be advised accordingly. Very truly yours, (Sgd.) Leonida T. Encarnacion LEONIDA T. ENCARNACION Acting Conservator

In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator of a bank, it must be pointed out that such powers must be related to the (preservation of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its viability. Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment clause of the Constitution.[44] If the legislature itself cannot revoke an existing valid contract, how can it delegate such non-existent powers to the conservator under Section 28-A of said law? Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence, the conservator merely takes the place of a banks board of directors. What the said board cannot do - such as repudiating a contract validly entered into under the doctrine of implied authority - the conservator cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts - as he has already done so in the instant case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way or another come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the Bank.

The Fifth Issue:

Were There Reversible Errors of Fact?

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation,[45] we held:

x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus: The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of the fact being conclusive [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has emphatically declared that it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court (Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-62482, April 28,

1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G.R. No. L-47531, February 20, 1984, 127 SCRA 596). Barring, therefore, a showing that the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties [Santa Ana, Jr. vs. Hernandez, G.R. No. L16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals,[46] we held:

The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of evidence and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme Court to analyze or weigh such evidence all over again. The Supreme Courts jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. The Supreme Court is not a trier of facts. x x x
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development Corp.:[47]

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals, et al.[48] is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties, particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide. (italics supplied)

Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions which were not only contrary to the evidence on record but have no bases at all, specifically the findings that (1) the Banks counter-offer price of P5.5 million had been determined by the past due committee and approved by conservator Romey, after Rivera presented the same for discussion and (2) the meeting with Co was not to scale down the price and start negotiations anew, but a meeting on the already determined price of P5.5 million. Hence, citing Philippine National Bank vs. Court of Appeals,[49] petitioners are asking us to review and reverse such factual findings. The first point was clearly passed upon by the Court of Appeals,[50] thus:

There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer for discussion by the Committee x x x. Tersely put, under the established fact, the price of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at which the bank was selling the property. (p. 11, CA Decision) xxx xxx xxx

xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was the possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as not credible and at best equivocal, and considering the gratuitous and self-serving character of these declarations, the banks submissions on this point do not inspire belief. To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules on evidence,[51] such suppression gives rise to the presumption that his testimony would have been adverse, if produced. The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed insufficient by both the trial court and the respondent Court, and instead, it was respondents submissions that were believed and became bases of the conclusions arrived at.

In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are espousing. This we cannot do. To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of Appeals.[52] We have studied both the records and the CA Decision and we find no such exceptions in this case. On the contrary, the findings of the said Court are supported by a preponderance of competent and credible evidence. The inferences and conclusions are reasonably based on evidence duly identified in the Decision. Indeed, the appellate court patiently traversed and dissected the issues presented before it, lending credibility and dependability to its findings. The best that can be said in favor of petitioners on this point is that the factual findings of respondent Court did not correspond to petitioners claims, but were closer to the evidence as presented in the trial court by private respondent. But this alone is no reason to reverse or ignore such factual findings, particularly where, as in this case, the trial court and the appellate court were in common agreement thereon. Indeed, conclusions of fact of a trial judge - as affirmed by the Court of Appeals - are conclusive upon this Court, absent any serious abuse or evident lack of basis or capriciousness of any kind, because the trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented.

Epilogue In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the first time on appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators powers to repudiate contracts entered into by the Banks officers] - which per se could justify the dismissal of the present case. We did not limit ourselves thereto, but delved as well into the substantive issues - the perfection of the contract of sale and its enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of facts and as a rule we are not required to look into the factual bases of respondent Courts decisions and resolutions, we did so just the same, if only to find out whether there is reason to disturb any of its factual findings, for we are only too aware of the depth, magnitude and vigor by which the parties, through their respective eloquent counsel, argued their positions before this Court. We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a government-appointed conservator and there is need to rehabilitate the Bank in order to get it back on its feet x x x as many people depend on (it) for investments, deposits and well as employment. As of June 1987, the Banks overdraft with the Central Bank had already reached P1.023 billion x x x and there were (other) offers to buy the subject properties for a substantial amount of money.[53] While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally close its eyes to overriding considerations of substantive and

procedural law, like respect for perfected contracts, non-impairment of obligations and sanctions against forum-shopping, which must be upheld under the rule of law and blind justice. This Court cannot just gloss over private respondents submission that, while the subject properties may currently command a much higher price, it is equally true that at the time of the transaction in 1987, the price agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure sale for no more than P 3.5 million.[54] That the Bank procrastinated and refused to honor its commitment to sell cannot now be used by it to promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of the increase in land values. To rule in favor of the Bank simply because the property in question has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous proposition. WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more severely. Costs against petitioners. SO ORDERED. Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.
Sta. Maria, Bulacan, January 30, 1969. G.R. No. 126751 March 28, 2001

SAFIC ALCAN & CIE, petitioner, vs. IMPERIAL VEGETABLE OIL CO., INC., respondent. YNARES-SANTIAGO, J.: Petitioner Safic Alcan & Cie (hereinafter, "Safic") is a French corporation engaged in the international purchase, sale and trading of coconut oil. It filed with the Regional Trial Court of Manila, Branch XXV, a complaint dated February 26, 1987 against private respondent Imperial Vegetable Oil Co., Inc. (hereinafter, "IVO"), docketed as Civil Case No. 87- 39597. Petitioner Safic alleged that on July 1, 1986 and September 25, 1986, it placed purchase orders with IVO for 2,000 long tons of crude coconut oil, valued at US$222.50 per ton, covered by Purchase Contract Nos. A601446 and A601655, respectively, to be delivered within the month of January 1987. Private respondent, however, failed to deliver the said coconut oil and, instead, offered a "wash out" settlement, whereby the coconut oil subject of the purchase contracts were to be "sold back" to IVO at the prevailing price in the international market at the time of wash out. Thus, IVO bound itself to pay to Safic the difference between the said prevailing price and the contract price of the 2,000 long tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay this amount despite repeated oral and written demands.

Under its second cause of action, Safic alleged that on eight occasions between April 24, 1986 and October 31, 1986, it placed purchase orders with IVO for a total of 4,750 tons of crude coconut oil, covered by Purchase Contract Nos. A601297A/B, A601384, A601385, A601391, A601415, A601681, A601683 and A601770A/B/C/. When IVO failed to honor its obligation under the wash out settlement narrated above, Safic demanded that IVO make marginal deposits within forty-eight hours on the eight purchase contracts in amounts equivalent to the difference between the contract price and the market price of the coconut oil, to compensate it for the damages it suffered when it was forced to acquire coconut oil at a higher price. IVO failed to make the prescribed marginal deposits on the eight contracts, in the aggregate amount of US$391,593.62, despite written demand therefor. The demand for marginal deposits was based on the customs of the trade, as governed by the provisions of the standard N.I.O.P. Contract arid the FOSFA Contract, to wit: N.I.O.P. Contract, Rule 54 - If the financial condition of either party to a contract subject to these rules becomes so impaired as to create a reasonable doubt as to the ability of such party to perform its obligations under the contract, the other party may from time to time demand marginal deposits to be made within forty-eight (48) hours after receipt of such demand, such deposits not to exceed the difference between the contract price and the market price of the goods covered by the contract on the day upon which such demand is made, such deposit to bear interest at the prime rate plus one percent (1%) per annum. Failure to make such deposit within the time specified shall constitute a breach of contract by the party upon whom demand for deposit is made, and all losses and expenses resulting from such breach shall be for the account of the party upon whom such demand is made. (Underscoring ours.)1 FOSFA Contract, Rule 54 - BANKRUPTCY/INSOLVENCY: If before the fulfillment of this contract either party shall suspend payment, commit an act of bankruptcy, notify any of his creditors that he is unable to meet his debts or that he has suspended payment or that he is about to suspend payment of his debts, convene, call or hold a meeting either of his creditors or to pass a resolution to go into liquidation (except for a voluntary winding up of a solvent company for the purpose of reconstruction or amalgamation) or shall apply for an official moratorium, have a petition presented for winding up or shal1i have a Receiver appointed, the contract shall forthwith be closed either at the market price then current for similar goods or, at the option of the other party at a price to be ascertained by repurchase or resale and the difference between the contract price and such closing-out price shall be the amount which the other party shall be entitled to claim shall be liable to account for under this contract (sic). Should either party be dissatisfied with the price, the matter shall be referred to arbitration. Where no such resale or repurchase takes place, the closing-out price shall be fixed by a Price Settlement Committee appointed by the Federation. (Underscoring ours.)2 Hence, Safic prayed that IVO be ordered to pay the sums of US$293,500.00 and US$391,593.62, plus attorney's fees and litigation expenses. The complaint also included an application for a writ of preliminary attachment against the properties of IVO. Upon Safic's posting of the requisite bond, the trial court issued a writ of preliminary attachment. Subsequently, the trial court ordered that the assets of IVO be placed under receivership, in order to ensure the preservation of the same. In its answer, IVO raised the following special affirmative defenses: Safic had no legal capacity to sue because it was doing business in the Philippines without the requisite license or authority; the subject contracts were speculative contracts entered into by IVO's then President, Dominador

Monteverde, in contravention of the prohibition by the Board of Directors against engaging in speculative paper trading, and despite IVO's lack of the necessary license from Central Bank to engage in such kind of trading activity; and that under Article 2018 of the Civil Code, if a contract which purports to be for the delivery of goods, securities or shares of stock is entered into with the intention that the difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser to the winner, the transaction is null and void.
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IVO set up counterclaims anchored on harassment, paralyzation of business, financial losses, rumor-mongering and oppressive action. Later, IVO filed a supplemental counterclaim alleging that it was unable to operate its business normally because of the arrest of most of its physical assets; that its suppliers were driven away; and that its major creditors have inundated it with claims for immediate payment of its debts, and China Banking Corporation had foreclosed its chattel and real estate mortgages. During the trial, the lower court found that in 1985, prior to the date of the contracts sued upon, the parties had entered into and consummated a number of contracts for the sale of crude coconut oil. In those transactions, Safic placed several orders and IVO faithfully filled up those orders by shipping out the required crude coconut oil to Safic, totaling 3,500 metric tons. Anent the 1986 contracts being sued upon, the trial court refused to declare the same as gambling transactions, as defined in Article 2018 of the Civil Code, although they involved some degree of speculation. After all, the court noted, every business enterprise carries with it a certain measure of speculation or risk. However, the contracts performed in 1985, on one hand, and the 1986 contracts subject of this case, on the other hand, differed in that under the 1985 contracts, deliveries were to be made within two months. This, as alleged by Safic, was the time needed for milling and building up oil inventory. Meanwhile, the 1986 contracts stipulated that the coconut oil were to be delivered within period ranging from eight months to eleven to twelve months after the placing of orders. The coconuts that were supposed to be milled were in all likelihood not yet growing when Dominador Monteverde sold the crude coconut oil. As such, the 1986 contracts constituted trading in futures or in mere expectations. The lower court further held that the subject contracts were ultra vires and were entered into by Dominador Monteverde without authority from the Board of Directors. It distinguished between the 1985 contracts, where Safic likewise dealt with Dominador Monteverde, who was presumably authorized to bind IVO, and the 1986 contracts, which were highly speculative in character. Moreover, the 1985 contracts were covered by letters of credit, while the 1986 contracts were payable by telegraphic transfers, which were nothing more than mere promises to pay once the shipments became ready. For these reasons, the lower court held that Safic cannot invoke the 1985 contracts as an implied corporate sanction for the high-risk 1986 contracts, which were evidently entered into by Monteverde for his personal benefit. The trial court ruled that Safic failed to substantiate its claim for actual damages. Likewise, it rejected IVO's counterclaim and supplemental counterclaim. Thus, on August 28, 1992, the trial court rendered judgment as follows: WHEREFORE, judgment is hereby rendered dismissing the complaint of plaintiff Safic Alcan & Cie, without prejudice to any action it might subsequently institute against Dominador Monteverde, the former President of Imperial Vegetable Oil Co., Inc., arising from the subject matter of this case. The counterclaim and supplemental counterclaim of the latter defendant are likewise hereby dismissed for lack of merit. No pronouncement as to costs.

The writ of preliminary attachment issued in this case as well as the order placing Imperial Vegetable Oil Co., Inc. under receivership are hereby dissolved and set aside.3 Both IVO and Safic appealed to the Court of Appeals, jointly docketed as CA-G.R. CV No.40820. IVO raised only one assignment of error, viz: THE TRIAL COURT ERRED IN HOLDING 'I'HAT THE ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT WAS NOT THE MAIN CAUSE OF THE DAMAGES SUFFERED BY DEFENDANT AND IN NOT AWARDING DEFENDANT-APPELLANT SUCH DAMAGES. For its part, Safic argued that: THE TRIAL COURT ERRED IN HOLDING THAT IVO'S PRESIDENT, DOMINADOR MONTEVERDE, ENTERED INTO CONTRACTS WHICH WERE ULTRA VIRES AND WHICH DID NOT BIND OR MAKE IVO LIABLE. THE TRIAL COURT ERRED IN HOLDING THA SAFIC WAS UNABLE TO PROVE THE DAMAGES SUFFERED BY IT AND IN NOT AWARDING SUCH DAMAGES. THE TRIAL COURT ERRED IN NOT HOLDING THAT IVO IS LIABLE UNDER THE WASH OUT CONTRACTS. On September 12, 1996, the Court of Appeals rendered the assailed Decision dismissing the, appeals and affirming the judgment appealed from in toto.4 Hence, Safic filed the instant petition for review with this Court, substantially reiterating the errors it raised before the Court of Appeals and maintaining that the Court of Appeals grievously erred when: a. it declared that the 1986 forward contracts (i.e., Contracts Nos. A601446 and A60155 (sic) involving 2,000 long tons of crude coconut oil, and Contracts Nos. A60l297A/B, A601385, A60l39l, A60l4l5, A601681. A601683 and A60l770A/B/C involving 4,500 tons of crude coconut oil) were unauthorized acts of Dominador Monteverde which do not bind IVO in whose name they were entered into. In this connection, the Court of Appeals erred when (i) it ignored its own finding that (a) Dominador Monteverde, as IVO's President, had "an implied authority to make any contract necessary or appropriate to the contract of the ordinary business of the company"; and (b) Dominador Monteverde had validly entered into similar forward contracts for and on behalf of IVO in 1985; (ii) it distinguished between the 1986 forward contracts despite the fact that the Manila RTC has struck down IVO's objection to the 1986 forward contracts (i.e. that they were highly speculative paper trading which the IVO Board of Directors had prohibited Dominador Monteverde from engaging in because it is a form of gambling where the parties do not intend actual delivery of the coconut oil sold) and instead found that the 1986 forward contracts were not gambling; (iii) it relied on the testimony of Mr. Rodrigo Monteverde in concluding that the IVO Board of Directors did not authorize its President, Dominador Monteverde, to enter into the 1986 forward contracts; and (iv) it did not find IVO, in any case, estopped from denying responsibility for, and liability under, the 1986 forward contracts because IVO had recognized itself bound to similar forward contracts which Dominador Monteverde entered into (for and on behalf of IVO) with Safic in 1985 notwithstanding that Dominador Monteverde was (like in the 1986 forward contracts) not expressly authorized by the IVO Board of Directors to enter into such forward contracts;

b. it declared that Safic was not able, to prove damages suffered by it, despite the fact that Safic had presented not only testimonial, but also documentary, evidence which proved the higher amount it had to pay for crude coconut oil (vis--vis the contract price it was to pay to IVO) when IVO refused to deliver the crude coconut oil bought by Safic under the 1986 forward contracts; and c. it failed to resolve the issue of whether or not IVO is liable to Safic under the wash out contracts involving Contracts Nos. A601446 and A60155 (sic), despite the fact that Safic had properly raised the issue on its appeal, and the evidence and the law support Safic's position that IVO is so liable to Safic. In fine, Safic insists that the appellate court grievously erred when it did not declare that IVO's President, Dominador Monteverde, validly entered into the 1986 contracts for and on behalf of IVO. We disagree. Article III, Section 3 [g] of the By-Laws5 of IVO provides, among others, that Section 3. Powers and Duties of the President. - The President shall be elected by the Board of Directors from their own number . He shall have the following duties: xxxxxxxxx [g] Have direct and active management of the business and operation of the corporation, conducting the same according to, the orders, resolutions and instruction of the Board of Directors and according to his own discretion whenever and wherever the same is not expressly limited by such orders, resolutions and instructions. It can be clearly seen from the foregoing provision of IVO's By-laws that Monteverde had no blanket authority to bind IVO to any contract. He must act according to the instructions of the Board of Directors. Even in instances when he was authorized to act according to his discretion, that discretion must not conflict with prior Board orders, resolutions and instructions. The evidence shows that the IVO Board knew nothing of the 1986 contracts6 and that it did not authorize Monteverde to enter into speculative contracts.7 In fact, Monteverde had earlier proposed that the company engage in such transactions but the IVO Board rejected his proposal.8 Since the 1986 contracts marked a sharp departure from past IVO transactions, Safic should have obtained from Monteverde the prior authorization of the IVO Board. Safic can not rely on the doctrine of implied agency because before the controversial 1986 contracts, IVO did not enter into identical contracts with Safic. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.9 In the case of Bacaltos Coal Mines v. Court of Appeals,10 we elucidated the rule on dealing with an agent thus: Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.11

The most prudent thing petitioner should have done was to ascertain the extent of the authority of Dominador Monteverde. Being remiss in this regard, petitioner can not seek relief on the basis of a supposed agency. Under Article 189812 of the Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same expressly or impliedly. It also bears emphasizing that when the third person knows that the agent was acting beyond his power or authority, the principal can not be held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal's ratification.13 There was no such ratification in this case. When Monteverde entered into the speculative contracts with Safic, he did not secure the Board's approval.14 He also did not submit the contracts to the Board after their consummation so there was, in fact, no occasion at all for ratification. The contracts were not reported in IVO's export sales book and turn-out book.15 Neither were they reflected in other books and records of the corporation.16 It must be pointed out that the Board of Directors, not Monteverde, exercises corporate power.17 Clearly, Monteverde's speculative contracts with Safic never bound IVO and Safic can not therefore enforce those contracts against IVO. To bolster its cause, Safic raises the novel point that the IVO Board of Directors did not set limitations on the extent of Monteverde's authority to sell coconut oil. It must be borne in mind in this regard that a question that was never raised in the courts below can not be allowed to be raised for the first time on appeal without offending basic rules of fair play, justice and due process.18 Such an issue was not brought to the fore either in the trial court or the appellate court, and would have been disregarded by the latter tribunal for the reasons previously stated. With more reason, the same does not deserve consideration by this Court. Be that as it may, Safic's belated contention that the IVO Board of Directors did not set limitations on Monteverde's authority to sell coconut oil is belied by what appears on the record. Rodrigo Monteverde, who succeeded Dominador Monteverde as IVO President, testified that the IVO Board had set down the policy of engaging in purely physical trading thus: Q. Now you said that IVO is engaged in trading. With whom does, it usually trade its oil? A. I am not too familiar with trading because as of March 1987, I was not yet an officer of the corporation, although I was at the time already a stockholder, I think IVO is engaged in trading oil. Q. As far as you know, what kind of trading was IVO engaged with? A. It was purely on physical trading. Q. How did you know this? A. As a stockholder, rather as member of [the] Board of Directors, I frequently visited the plant and from my observation, as I have to supervise and monitor purchases of copras and also the sale of the same, I observed that the policy of the corporation is for the company to engaged (sic) or to purely engaged (sic) in physical trading. Q. What do you mean by physical trading?

A. Physical Trading means - we buy and sell copras that are only available to us. We only have to sell the available stocks in our inventory. Q. And what is the other form of trading? Atty. Fernando No basis, your Honor. Atty. Abad Well, the witness said they are engaged in physical trading and what I am saying [is] if there are any other kind or form of trading. Court Witness may answer if he knows. Witness A. Trading future[s] contracts wherein the trader commits a price and to deliver coconut oil in the future in which he is yet to acquire the stocks in the future. Atty. Abad Q. Who established the so-called physical trading in IVO? A. The Board of Directors, sir. Atty. Abad. Q. How did you know that? A. There was a meeting held in the office at the factory and it was brought out and suggested by our former president, Dominador Monteverde, that the company should engaged (sic) in future[s] contract[s] but it was rejected by the Board of Directors. It was only Ador Monteverde who then wanted to engaged (sic) in this future[s] contract[s]. Q. Do you know where this meeting took place? A. As far as I know it was sometime in 1985. Q. Do you know why the Board of Directors rejected the proposal of Dominador Monteverde that the company should engaged (sic) in future[s] contracts? Atty. Fernando Objection, your Honor, no basis. Court

Why don't you lay the basis? Atty. Abad Q. Were you a member of the board at the time? A. In 1975, I am already a stockholder and a member. Q. Then would [you] now answer my question? Atty. Fernando No basis, your Honor. What we are talking is about 1985. Atty. Abad Q. When you mentioned about the meeting in 1985 wherein the Board of Directors rejected the future[s] contract[s], were you already a member of the Board of Directors at that time? A. Yes, sir. Q. Do you know the reason why the said proposal of Mr. Dominador Monteverde to engage in future[s] contract[s] was rejected by the Board of Directors? A. Because this future[s] contract is too risky and it partakes of gambling. Q. Do you keep records of the Board meetings of the company? A. Yes, sir. Q. Do you have a copy of the minutes of your meeting in 1985? A. Incidentally our Secretary of the Board of Directors, Mr. Elfren Sarte, died in 1987 or 1988, and despite [the] request of our office for us to be furnished a copy he was not able to furnish us a copy.19 xxxxxxxxx Atty. Abad Q. You said the Board of Directors were against the company engaging in future[s] contracts. As far as you know, has this policy of the Board of Directors been observed or followed? Witness A. Yes, sir. Q. How far has this Dominador Monteverde been using the name of I.V.0. in selling future contracts without the proper authority and consent of the company's Board of Directors?

A. Dominador Monteverde never records those transactions he entered into in connection with these future[s] contracts in the company's books of accounts. Atty. Abad Q. What do you mean by that the future[s] contracts were not entered into the books of accounts of the company? Witness A. Those were not recorded at all in the books of accounts of the company, sir.20 xxxxxxxxx Q. What did you do when you discovered these transactions? A. There was again a meeting by the Board of Directors of the corporation and that we agreed to remove the president and then I was made to replace him as president. Q. What else? A. And a resolution was passed disowning the illegal activities of the former president.21 Petitioner next argues that there was actually no difference between the 1985 physical contracts and the 1986 futures contracts. The contention is unpersuasive for, as aptly pointed out by the trial court and sustained by the appellate court Rejecting IVO's position, SAFIC claims that there is no distinction between the 1985 and 1986 contracts, both of which groups of contracts were signed or authorized by IVO's President, Dominador Monteverde. The 1986 contracts, SAFIC would bewail, were similarly with their 1985 predecessors, forward sales contracts in which IVO had undertaken to deliver the crude coconut oil months after such contracts were entered into. The lead time between the closing of the deal and the delivery of the oil supposedly allowed the seller to accumulate enough copra to mill and to build up its inventory and so meet its delivery commitment to its foreign buyers. SAFIC concludes that the 1986 contracts were equally binding, as the 1985 contracts were, on IVO. Subjecting the evidence on both sides to close scrutiny, the Court has found some remarkable distinctions between the 1985 and 1986 contracts. x x x 1. The 1985 contracts were performed within an average of two months from the date of the sale. On the other hand, the 1986 contracts were to be performed within an average of eight and a half months from the dates of the sale. All the supposed performances fell in 1987. Indeed, the contract covered by Exhibit J was to be performed 11 to 12 months from the execution of the contract. These pattern (sic) belies plaintiffs contention that the lead time merely allowed for milling and building up of oil inventory. It is evident that the 1986 contracts constituted trading in futures or in mere expectations. In all likelihood, the coconuts that were supposed to be milled for oil were not yet on their trees when Dominador Monteverde sold the crude oil to SAFIC.

2. The mode of payment agreed on by the parties in their 1985 contracts was uniformly thru the opening of a letter of credit LC by SAFIC in favor of IVO. Since the buyer's letter of credit guarantees payment to the seller as soon as the latter is able to present the shipping documents covering the cargo, its opening usually mark[s] the fact that the transaction would be consummated. On the other hand, seven out of the ten 1986 contracts were to be paid by telegraphic transfer upon presentation of the shipping documents. Unlike the letter of credit, a mere promise to pay by telegraphic transfer gives no assurance of [the] buyer's compliance with its contracts. This fact lends an uncertain element in the 1986 contracts.
1w phi 1.nt

3. Apart from the above, it is not disputed that with respect to the 1985 contracts, IVO faithfully complied with Central Bank Circular No. 151 dated April 1, 1963, requiring a coconut oil exporter to submit a Report of Foreign Sales within twenty-four (24) hours "after the closing of the relative sales contract" with a foreign buyer of coconut oil. But with respect to the disputed 1986 contracts, the parties stipulated during the hearing that none of these contracts were ever reported to the Central Bank, in violation of its above requirement. (See Stipulation of Facts dated June 13, 1990). The 1986 sales were, therefore suspect. 4. It is not disputed that, unlike the 1985 contacts, the 1986 contracts were never recorded either in the 1986 accounting books of IVO or in its annual financial statement for 1986, a document that was prepared prior to the controversy. (Exhibits 6 to 6-0 and 7 to 7-1). Emelita Ortega, formerly an assistant of Dominador Monteverde, testified that they were strange goings-on about the 1986 contract. They were neither recorded in the books nor reported to the Central Bank. What is more, in those unreported cases where profits were made, such profits were ordered remitted to unknown accounts in California, U.S.A., by Dominador Monteverde. xxxxxxxxx Evidently, Dominador Monteverde made business or himself, using the name of IVO but concealing from it his speculative transactions. Petitioner further contends that both the trial and appellate courts erred in concluding that Safic was not able to prove its claim for damages. Petitioner first points out that its wash out agreements with Monteverde where IVO allegedly agreed to pay US$293,500.00 for some of the failed contracts was proof enough and, second, that it presented purchases of coconut oil it made from others during the period of IVO's default. We remain unconvinced. The so-called "wash out" agreements are clearly ultra vires and not binding on IVO. Furthermore, such agreements did not prove Safic's actual losses in the transactions in question. The fact is that Safic did not pay for the coconut oil that it supposedly ordered from IVO through Monteverede. Safic only claims that, since it was ready to pay when IVO was not ready to deliver, Safic suffered damages to the extent that they had to buy the same commodity from others at higher prices. The foregoing claim of petitioner is not, however, substantiated by the evidence and only raises several questions, to wit: 1.] Did Safic commit to deliver the quantity of oil covered by the 1986 contracts to its own buyers? Who were these buyers? What were the terms of those contracts with respect to quantity, price and date of delivery? 2.] Did Safic pay damages to its buyers? Where were the receipts? Did Safic have to procure the equivalent oil from other sources? If so, who were these sources? Where were their contracts and what were the terms of these contracts as to quantity, price and date of delivery?

The records disclose that during the course of the proceedings in the trial court, IVO filed an amended motion22for production and inspection of the following documents: a.] contracts of resale of coconut oil that Safic bought from IVO; b.] the records of the pooling and sales contracts covering the oil from such pooling, if the coconut oil has been pooled and sold as general oil; c.] the contracts of the purchase of oil that, according to Safic, it had to resort to in order to fill up alleged undelivered commitments of IVO; d.] all other contracts, confirmations, invoices, wash out agreements and other documents of sale related to (a), (b) and (c). This amended motion was opposed by Safic.23 The trial court, however, in its September 16, 1988 Order ,24 ruled that: From the analysis of the parties' respective positions, conclusion can easily be drawn therefrom that there is materiality in the defendant's move: firstly, plaintiff seeks to recover damages from the defendant and these are intimately related to plaintiffs alleged losses which it attributes to the default of the defendant in its contractual commitments; secondly, the documents are specified in the amended motion. As such, plaintiff would entertain no confusion as to what, which documents to locate and produce considering plaintiff to be (without doubt) a reputable going concern in the management of the affairs which is serviced by competent, industrious, hardworking and diligent personnel; thirdly, the desired production and inspection of the documents was precipitated by the testimony of plaintiffs witness (Donald O'Meara) who admitted, in open court, that they are available. If the said witness represented that the documents, as generally described, are available, reason there would be none for the same witness to say later that they could not be produced, even after they have been clearly described. Besides, if the Court may additionally dwell on the issue of damages, the production and inspection of the desired documents would be of tremendous help in the ultimate resolution thereof. Plaintiff claims for the award of liquidated or actual damages to the tune of US$391,593.62 which, certainly, is a huge amount in terms of pesos, and which defendant disputes. As the defendant cannot be precluded in taking exceptions to the correctness and validity of such claim which plaintiffs witness (Donald O'Meara) testified to, and as, by this nature of the plaintiffs claim for damages, proof thereof is a must which can be better served, if not amply ascertained by examining the records of the related sales admitted to be in plaintiffs possession, the amended motion for production and inspection of the defendant is in order. The interest of justice will be served best, if there would be a full disclosure by the parties on both sides of all documents related to the transactions in litigation. Notwithstanding the foregoing ruling of the trial court, Safic did not produce the required documents, prompting the court a quo to assume that if produced, the documents would have been adverse to Safic's cause. In its efforts to bolster its claim for damages it purportedly sustained, Safic suggests a substitute mode of computing its damages by getting the average price it paid for certain quantities of coconut oil that it allegedly bought in 1987 and deducting this from the average price of the 1986 contracts. But this mode of computation if flawed .because: 1.] it is conjectural since it rests on average prices not on actual prices multiplied by the actual volume of coconut oil per contract; and 2.] it is based on the unproven assumption that the 1987 contracts of purchase provided the coconut oil needed to make up for the failed 1986 contracts. There is also no evidence that Safic had contracted to supply third parties with coconut oil from the 1986 contracts and that Safic had to buy such oil from others to meet the requirement. Along the same vein, it is worthy to note that the quantities of oil covered by its 1987 contracts with third parties do not match the quantities of oil provided under the 1986 contracts. Had Safic produced the documents that the trial court required, a substantially correct determination of its

actual damages would have been possible. This, unfortunately, was not the case. Suffice it to state in this regard that "[T]he power of the courts to grant damages and attorney's fees demands factual, legal and equitable justification; its basis cannot be left to speculation and conjecture."25 WHEREFORE, in view of all the foregoing, the petition is DENIED for lack of merit. SO ORDERED. G.R. Nos. L-48195 and 48196 May 1, 1942

SOFRONIO T. BAYLA, ET AL., petitioners, vs. SILANG TRAFFIC CO., INC., respondent. SILANG TRAFFIC CO., petitioner, vs. SOFRONIO BAYLA, ET AL., respondents. E. A. Beltran for petitioners. Conrado V. Sanchez, Melchor C. Benitez, and Enrique M. Fernando for respondent. OZAETA, J.: Petitioners in G.R. No. 48195 instituted this action in the Court of First Instance of Cavite against the respondent Silang Traffic Co., Inc. (cross-petitioner in G.R. No. 48196), to recover certain sums of money which they had paid severally to the corporation on account of shares of stock they individually agreed to take and pay for under certain specified terms and conditions, of which the following referring to the petitioner Josefa Naval, is typical: AGREEMENT FOR INSTALLMENT SALE OF SHARES IN THE "SILANG TRAFFIC COMPANY, INC.," Silang, Cavite, P. I. THIS AGREEMENT, made and entered into between Mrs. Josefa Naval, of legal age, married and resident of the Municipality of Silang, Province of Cavite, Philippine Islands, party of the First Part, hereinafter called the subscriber, and the "Silang Traffic Company, Inc.," a corporation duly organized and existing by virtue of and under the laws of the Philippine Islands, with its principal office in the Municipality of Silang, Province of Cavite, Philippine Islands, party of the Second Part, hereinafter called the seller, WITNESSETH: That the subscriber promises to pay personally or by his duly authorized agent to the seller at the Municipality of Silang, Province of Cavite, Philippine Islands, the sum of one thousand five hundred pesos (P1,500), Philippine currency, as purchase price of FIFTEEN (15) shares of capital stock, said purchase price to be paid as follows, to wit: five (5%) per cent upon the execution of the contract, the receipt whereof is hereby acknowledged and confessed, and the remainder in installments of five per cent, payable within the first month of each and every quarter thereafter, commencing on the 1st day of July, 1935, with interest on deferred payments at the rate of SIX (6%) per cent per annum until paid.

That the said subscriber further agrees that if he fails to pay any of said installment when due, or to perform any of the aforesaid conditions, or if said shares shall be attached or levied upon by creditors of the said subscriber, then the said shares are to revert to the seller and the payments already made are to be forfeited in favor of said seller, and the latter may then take possession, without resorting to court proceedings. The said seller upon receiving full payment, at the time and manner hereinbefore specified, agrees to execute and deliver to said subscriber, or to his heirs and assigns, the certificate of title of said shares, free and clear of all encumbrances. In testimony whereof, the parties have hereunto set their hands in the Municipality of Silang, Province of Cavite, Philippine Islands, this 30th day of March, 1935. (Sgd.) JOSEFA NAVAL SILANG TRAFFIC COMPANY, INC. Subscriber By (Sgd.) LINO GOMEZ President. (Exhibit 1. Notarial acknowledgment omitted.) The agreements signed by the other petitioners were of the same date (March 30, 1935) and in identical terms as the foregoing except as to the number of shares and the corresponding purchase price. The petitioners agreed to purchase the following number of shares and, up to April 30, 1937, had paid the following sums on account thereof: Sofronio T. Bayla....... Venancio Toledo........ Josefa Naval.............. Paz Toledo................ 8 shares 8 shares 15 shares 15 shares P360 375 675 675

Petitioners' action for the recovery of the sums above mentioned is based on a resolution by the board of directors of the respondent corporation on August 1, 1937, of the following tenor: A mocion sel Sr. Marcos Caparas y secundado por el Sr. Alejandro Bayla, que para el bien de la corporacion y la pronta terminacion del asunto civil No. 3125 titulado "Vicente F. Villanueva et al. vs. Lino Gomez et al.," en el Juzgado de Primera Instancia de Cavite, donde se gasto y se gastara no poca cantidad de la Corporacion, se resolvio y se aprobo por la Junta Directiva los siguientes: (a) Que se dejara sin efecto lo aprobado por la Junta Directiva el 3 de marzo, 1935, art. 11, sec. 162, sobre las cobranzas que se haran por el Secretario Tesorero de la Corporacion a

los accionistas que habian tomado o suscrito nuevas acciones y que se permitia a estos pagar 20% del valor de las acciones suscritas en un ao, con interes de 6% y el pago o jornal que se hara por trimestre. (b) Se dejara sin efecto, en vista de que aun no esta pagado todo el valor de las 123 acciones, tomadas de las acciones no expedidas (unissued stock) de la Corporacion y que fueron suscritas por los siguienes: Lino Gomez..................... Venancio Toledo............. Melchor P. Benitez........ Isaias Videa................. Esteban Velasco............ Numeriano S. Aldaba.... Inocencio Cruz................. Josefa Naval .................. Sofronio Bayla................. Dionisio Dungca............. 10 Acciones 8 Acciones 17 Acciones 14 Acciones 10 Acciones 15 Acciones 8 Acciones 15 Acciones 8 Acciones 3 Acciones

y devolver a las personas arriba descritas toda la cantidad que estas habian pagado por las 123 acciones. (c) Que se dejara sin efecto lo aprobado por la Junta Directiva el 3 marzo, 1935, art. V. sec. 165, sobre el cambio o trueque de las 31 acciones del Treasury Stock, contra las 32 acciones del Sr. Numeriano Aldaba, en la corporacion Northern Luzon Transportation Co. y que se devuelva al Sr. Numeriano Aldaba las 32 acciones mencionadas despues que el haya devuelto el certificado de las 31 acciones de la Silang Traffic Co., Inc. (d) Permitir al Tesorero de la Corporacion para que devuelva a las personas arriba indicadas, las cantidades pagadas por las 123 acciones. (Exhibit A-1.) The respondent corporation set up the following defenses: (1) That the above-quoted resolution is not applicable to the petitioners Sofronio T. Bayla, Josefa Naval, and Paz Toledo because on the date thereof "their subscribed shares of stock had already automatically reverted to the defendant,

and the installments paid by them had already been forfeited"; and (2) that said resolution of August 1, 1937, was revoked and cancelled by a subsequent resolution of the board of directors of the defendant corporation dated August 22, 1937. The trial court absolved the defendant from the complaint and declared canceled (forfeited) in favor of the defendant the shares of stock in question. It held that the resolution of August 1, 1937, was null and void, citingVelasco vs. Poizat (37 Phil., 802), wherein this Court held that "a corporation has no legal capacity to release an original subscriber to its capital stock from the obligation to pay for shares; and any agreement to this effect is invalid" Plaintiffs below appealed to the Court of Appeals, which modified of the trial court as follows: That part of the judgment dismissing plaintiff's complaint is affirmed, but that part thereof declaring their subscription canceled is reversed. Defendant is directed to grant plaintiffs 30 days after final judgment within which to pay the arrears on their subscription. Without pronouncement as to costs. Both parties appealed to this Court by petition and cross-petition for certiorari. Petitioners insist that they have the right to recover the amounts involved under the resolution of August 1, 1937, while the respondent and cross-petitioner on its part contends that said amounts have been automatically forfeited and the shares of stock have reverted to the corporation under the agreement hereinabove quoted. The parties litigant, the trial court, and the Court of Appeals have interpreted or considered the said agreement as a contract of subscription to the capital stock of the respondent corporation. It should be noted, however, that said agreement is entitled "Agreement for Installment Sale of Shares in the Silang Traffic Company, Inc.,"; that while the purchaser is designated as "subscriber," the corporation is described as "seller"; that the agreement was entered into on March 30, 1935, long after the incorporation and organization of the corporation, which took place in 1927; and that the price of the stock was payable in quarterly installments spread over a period of five years. It also appears that in civil case No. 3125 of the Court of First Instance of Cavite mentioned in the resolution of August 1, 1937, the right of the corporation to sell the shares of stock to the person named in said resolution (including herein petitioners) was impugned by the plaintiffs in said case, who claimed a preferred right to buy said shares. Whether a particular contract is a subscription or a sale of stock is a matter of construction and depends upon its terms and the intention of the parties (4 Fletcher, Cyclopedia of Corporation [permanent edition], 29, cited in Salmon, Dexter & Co. vs. Unson (47 Phil. 649, 652). In the Unson case just cited, this Court held that a subscription to stock in an existing corporation is, as between the subscriber and the corporation, simply a contract of purchase and sale. It seems clear from the terms of the contracts in question that they are contracts of sale and not of subscription. The lower courts erred in overlooking the distinction between subscription and purchase "A subscription, properly speaking, is the mutual agreement of the subscribers to take and pay for the stock of a corporation, while a purchase is an independent agreement between the individual and the corporation to buy shares of stock from it at stipulated price." (18 C. J. S., 760.) In some particulars the rules governing subscriptions and sales of shares are different. For instance, the provisions of our Corporation Law regarding calls for unpaid subscription and assessment of stock (sections 37-50) do not apply to a purchase of stock. Likewise the rule that corporation has no legal capacity to release an original subscriber to its capital stock from the obligation to pay for his shares, is inapplicable to a contract of purchase of shares.

The next question to determine is whether under the contract between the parties the failure of the purchaser to pay any of the quarterly installments on the purchase price automatically gave rise to the forfeiture of the amounts already paid and the reversion of the shares to the corporation. The contract provides for interest of the rate of six per centum per annum on deferred payments. It is also provides that if the purchaser fails to pay any of said installments when due, the said shares are to revert to the seller and the payments already made are to be forfeited in favor of said seller. The respondent corporation contends that when the petitioners failed to pay the installment which fell due on or before July 31, 1937, forfeiture automatically took place, that is to say, without the necessity of any demand from the corporation, and that therefore the resolution of August 1, 1937, authorizing the refund of the installments already paid was inapplicable to the petitioners, who had already lost any and all rights under said contract. The contention is, we think, untenable. The provision regarding interest on deferred payments would not have been inserted if it had been the intention of the parties to provide for automatic forfeiture and cancelation of the contract. Moreover, the contract did not expressly provide that the failure of the purchaser to pay any installment would give rise to forfeiture and cancelation without the necessity of any demand from the seller; and under article 1100 of the Civil Code persons obliged to deliver or do something are not in default until the moment the creditor demands of them judicially or extrajudicially the fulfillment of their obligation, unless (1) the obligation or the law expressly provides that demand shall not be necessary in order that default may arise, (2) by reason of the nature and circumstances of the obligation it shall appear that the designation of the time at which that thing was to be delivered or the service rendered was the principal inducement to the creation of the obligation. Is the resolution of August 1, 1937, valid? The contract in question being one of purchase and not subscription as we have heretofore pointed out, we see no legal impediment to its rescission by agreement of the parties. According to the resolution of August 1, 1937, the recission was made for the good of the corporation and in order to terminate the then pending civil case involving the validity of the sale of the shares in question among others. To that rescission the herein petitioners apparently agreed, as shown by their demand for the refund of the amounts they had paid as provided in said resolution. It appears from the record that said civil case was subsequently dismissed, and that the purchasers of shares of stock, other than the herein petitioners, who were mentioned in said resolution were able to benefit by said resolution. It would be an unjust discrimination to deny the same benefit to the herein petitioners. We may add that there is no intimation in this case that the corporation was insolvent, or that the right of any creditor of the same was in any way prejudiced by the rescission. The attempted revocation of said rescission by the resolution of August 22, 1937, was invalid, it not having been agreed to by the petitioners. Wherefore, the judgment of the court of appeals is hereby reversed and another judgment will be entered against the defendant Silang Traffic Co., Inc., ordering it to pay to the plaintiffs Sofronio T. Bayla, Venancio Toledo, Josefa Naval, and Paz Toledo, the sums of P360, P375, P675, and P675, respectively, with legal interest on each of said sums from May 28, 1938, the date of the filing of the complaint, until the date of payment, and with costs in the three instances. So ordered. Yulo, C.J., Moran, Paras and Bocobo, JJ., concur. G.R. No. 59114 March 18, 1991 JOSE G. RICAFORT, CONRADO T. CALALANG, NATIONWIDE DEVELOPMENT CORPORATION and AGUINALDO DEVELOPMENT CORPORATION, petitioners, vs.

HON. FELIX L. MOYA, Judge, CFI, Davao, Br. II, BLACK MOUNTAIN, INC., TETRA MANAGEMENT CORPORATION and the ENERGY CORPORATION, respondents. Sycip, Salazar, Hernandez & Gatmaitan for petitioners. Reymundo P.G. Villarica and Siguion Reyna, Montecillo & Ongsiako for private respondents.

NARVASA, J.:p With this judgment, the Court writes finis to a controversy principally involving two (2) groups of individuals, which has given rise to no less than eleven (11) actions and proceedings: three (3) in the Court of First Instance, two (2) in the Securities and Exchange Commission, and six (6) in this Court. The roots of the controversy go as far back as 1978, to a deed of sale executed on April 18 of that year by Daniel R. Aguinaldo and D.R. Aguinaldo Corporation (DRACOR), as vendors, and Jose Ricafort and Conrado Calalang, as vendees. By that deed: 1) Aguinaldo and DRACOR sold to Jose Ricafort and Conrado Calalang all their shares of stock and subscriptions in three (3) corporations, namely: a) ADECOR (Aguinaldo Development Corporation ), b) MARBLECORP (Philippine Marble Corporation), and c) NADECOR (Nationwide Development Corporation); 2) Aguinaldo bound himself to convey nine (9) parcels of rice land in Saug, Davao del Norte, held in trust by him, to the real or beneficial owner, ADECOR; 3) As security for payment of the balance of the price (a down payment having been made on execution of the deed of sale) Ricafort and Calalang bound themselves: 1) To pledge to Aguinaldo all the shares of stock in the three (3) corporations, subject of the sale; and 2) To mortgage to Aguinaldo the nine (9) "Saug lots." The pledge of the stock certificates was effected on the same day, April 18, 1978. On August 18, 1980, at the stockholders' meeting of NADECOR, Daniel R. Aguinaldo, Dominador Aytona, Conrado Calalang, Jose G. Ricafort, and five (5) others were elected directors. These directors later elected Aytona, Aguinaldo, and Romeo H. Borsoto as, respectively, Chairman, President and Secretary. A month later, or on September 26, 1980, Aguinaldo executed the Deed of Reconveyance of the nine "Saug lots" in favor of ADECOR, as called for by the Deed of Sale of April 18, 1978, supra. But the related stipulationthat Ricafort and Calalang cause the mortgage of those lots in Aguinaldo's favor as security for the payment of the balance of the price fixed in the sale of April 18, 1978was

not complied with. Ricafort and Calalang refused to fulfill that prestation because, according to them, the deed of reconveyance of the "Saug lots" executed by Aguinaldo in favor of ADECOR dated September 26, 1980, was fatally defective as it did not bear the signature of Aguinaldo's wife, Helen Leontovich. For some undisclosed reason, the latter never saw fit to remedy the omission until very, very much later, after the controversy between the parties had worsened and spawned bitter litigation in various courts, as will now be briefly narrated. CIVIL CASE No. 38117, CFI, Rizal The first case was commenced on October 6, 1980. On that day Civil Case No. 38117 was instituted by Ricafort and Calalang in the then Court of First Instance of Rizal. The stated cause: breach of the contract of sale of April 18, 1978 by Aguinaldo's failure to make a valid transfer of the nine "Saug lots;" the prayer: that Aguinaldo's obligation to make the conveyance be deemed waived and correspondingly, that Ricafort and Calalang, as vendees, be deemed discharged from their own obligation to pay the balance of the price, and the pledge of the stock purchased by them be considered discharged and released. Aguinaldo reacted by instructing a Notary Public, Wilfred Neis, to conduct the auction sale of the pledged stock (of DRACOR; ADECOR and NADECOR, supra). Atty. Neis scheduled the sale on October 10, 1980. This gave rise to the second litigation between the parties. CIVIL CASE NO. 135262, Manila On October 8, 1980, Ricafort and Calalang brought suit against Aguinaldo and Notary Public Neis in the Court of First Instance of Manila, which was docketed as Civil Case No. 135262. They asked that the latter be stopped from proceeding with the auction sale of the stock in question on October 10, 1980, or at any other time thereafter. They also applied for a preliminary injunction pending determination of the merits of the action. Ricafort and Calalang later amended the complaint to incorporate their cause of action in Civil Case No. 38117 of the Court of First Instance at Pasig, supra. Case No. 38117 thus became functus officio. Consequently, Ricafort and Calalang caused its dismissal by filing with the Pasig Court a notice to that effect dated November 6, 1980, in accordance with Section 1, Rule 17 of the Rules of Court. 1 Temporary Restraining Order On October 8, 1980, a temporary restraining order was issued by Judge Tomas Maddela, to whose sala Civil Case No. 135262 had been raffled, enjoining the auction sale of the pledged stock subject of the contract of sale of April 18, 1978. Three more amendments of the complaint were thereafter sought by Ricafort and Calalang through separate motions. The first amendment sought to add a plea: a) for reformation of the contract of sale of April 18, 1978 to include all of the shares of stock in NADECOR of Aguinaldo, DRACOR and all their nominees (totaling 67% of the outstanding stock in NADECOR); and

b) for a preliminary injunction against Aguinaldo to prohibit him from representing himself as the controlling stockholder of NADECOR and attempting to sell that corporation's so-called "Kingking Mining Claims" in Pantukan, Davao del Norte. The amendment was allowed by Order dated April 20, 1981. The second amendment impleaded NADECOR as additional defendant, and prayed that it also be enjoined from offering the Kingking Mining Claims for sale. The amendment was admitted by Order issued on June 25, 1981. These mining claims, by the way, are embraced in nine (9) Lode Lease Contracts docketed as LLCV-908 to V-910; V-935, V-948, V-949, V-966, V-1074 and V-1075; 2 and there is evidence on record that said claims constitute practically all the assets of NADECOR. The third amendment added averments of fraud relative to the transfer by Aguinaldo to himself of ADECOR shares in a foreign company, Sawyer-Adecor International, Inc. (SAICOR). This amendment was approved by Order dated February 5, 1982. Preliminary Injunctions by Manila CFI (CC 135262) Re Kingking Mining Claims, etc. Several injunctive orders were thereafter issued against Aguinaldo and his group by the Trial Court mainly as regards the Kingking Mining Claims in Davao del Norte. These resulted mainly from an Operating Agreement involving said Kingking Claims executed on March 25, 1981 between Aguinaldo, in representation of NADECOR, on the one hand, and a consortium made up of Black Mountain, Inc., Tetra Management Corporation, and Energy Corporation, on the other. On March 30, 1981 the Court enjoined the NADECOR Board from ratifying that Operating Agreement of March 25, 1981. On April 20, 1981, the Court stopped (a) the auction sale of the pledged shares of stock which had been re-scheduled by Notary Public Wilfred Neis at Aguinaldo's instance, and (b) Aguinaldo from representing himself as the controlling stockholder of NADECOR and offering its Kingking Claims for sale. On June 29, 1981, the Court issued another Order (a) declaring Aguinaldo and the NADECOR directors guilty of contempt of court for having, despite the injunction of March 30, 1981, approved and confirmed the Operating Agreement involving the Kingking Claims entered into by NADECOR with Black Mountain, etc., administering an admonition on them, and (b) NULLIFYING said Operating Agreement. And on September 15, 1981 yet another Order was rendered by the Trial Court, prohibiting Aguinaldo from voting or selling the ADECOR shares in Sawyer-Adecor International Corporation (SAICOR), which he had caused to be transferred to his name. At about this time, Ricafort and Calalang perceived what they believed to be a plot by the AguinaldoAytona group to exclude them and SAICOR from the management of NADECOR. It appears that Aguinaldo and his group had refused to convoke the stockholders of NADECOR for the annual meeting for the year 1981 which, under the by-laws 3 should have been called on the third Monday of August. So on August 17, 1981, the Ricafort Group, and the President of SAICOR, Carol Garvice, who was in the country at the time, went to the main offices of NADECOR, and proceeded to hold a meeting for the declared purpose of electing the directors for the incoming year, and otherwise transacting corporate business. Dominador Aytona, Daniel Aguinaldo's colleague and counsel, moved to postpone the meeting, drawing attention to a temporary restraining order supposedly

issued by the Superior Court of California dated August 14, 1981. The majority of the stockholders then present however voted against the postponement, opining inter alia that the restraining order of the California Court was not enforceable in the Philippines. Aytona then questioned Garvice's qualification to take part in the stockholders' meeting. He was reminded that as early as May, 1981, he already knew Garvice to be the President of SAICOR. When the majority of the stockholders expressed their firm wish to continue with the meeting, Aguinaldo and Aytona walked out. The stockholders then elected as directors, Conrado Calalang, Jose Ricafort and five (5) others. The stockholders also rejected the aforesaid operating agreement of March 25, 1981 between NADECOR, represented by the Aguinaldo-Aytona Group, and the consortium of Black Mountain, Inc., Energy Corporation, and Tetra Management Corporation. The stockholders instead approved the proposed operating agreement with Benguet Corporation. The directors-elect then organized the NADECOR Board: they elected the corporate officers headed by Calalang as chairman and president. The Secretary's Certificate attesting to these events was in due course filed with the Securities and Exchange Commission. On that day, too, NADECOR, represented by the new officers, entered into an Operating Agreement with Benguet Corporation for the operation by the latter of the company's KINGKING MINES. This was the second such agreement involving the Kingking Mines . 4 Litigation in Securities & Exchange Commission The area of conflict now widened, to include litigation in the Securities and Exchange Commission. Two (2) cases were instituted in that quasi-judicial agency: SEC Case No. 2143, in 1981 and SEC Case No. 2878, in 1984. SEC Case No. 2143 SEC Case No. 2143 was commenced by complaint dated September 24, 1981 of NADECOR, represented by its newly elected directors and officers (the Ricafort-Calalang Group), against Aguinaldo, Aytona and a certain Romeo H. Borsoto. The complaint alleged that despite the election of the new officers at the stockholders' meeting of August 17, 1981, the defendants continued to fraudulently represent themselves as the legitimate officers of NADECOR and to exclude said officers-elect from the exercise of their rights. The complaint also adverted to the defendants' allegedly malicious refusal to perform their ministerial duty to issue notices of the annual stockholders' meeting, supra. Acting on the application for preliminary injunction contained in the complaint, an order was issued on September 28, 1981 by SEC Director and Hearing Officer Sixto Villanueva (a) prohibiting the defendants "from acting and representing themselves as officers of NADECOR until further orders," and (b) setting the hearing on the preliminary injunction on October 7, 1981. On October 7, 1981 and various dates thereafter, the complainants presented evidence in substantiation of their plea for a preliminary injunction. Defendants refused to adduce proof of their own. They contented themselves with presenting their Answer to the Complaint, and an opposition to the application for preliminary injunction. And instead of submitting countervailing evidence, they filed various motions to lift the temporary restraining order of September 28, 1981. They also attempted to present Calalang and Ricafort as hostile witnesses at the injunction hearing and caused issuance of subpoena towards this end. Those processes were however quashed by the Hearing Officer who ordered said defendants instead to submit a proposal for a stipulation or a request for admission of the facts as to which examination of Calalang and Ricafort was being

sought. The defendants ignored the order and renewed their attempts to have Calalang and Ricafort testify as their hostile witnesses. Then, without awaiting resolution of the application for preliminary injunction by the Hearing Officer (who was still waiting for the defendants to submit their evidence), said defendants brought the matter up to the Securities and Exchange Commission en banc (by filing with that body a petition for certiorari and mandamus, with application for preliminary injunction). The Hearing Officer, Director Villanueva, thereafter denied the defendants' motions to lift the restraining order of September 28, 1981. The defendants thereupon filed a supplemental petition with the Commission en banc, asking that the Healing Officer's own restraining order of September 28, 1981 be itself restrained. They later moved to be allowed to continue exercising functions as officers of NADECOR. CIVIL CASE NO. 143, CFI, DAVAO Still another action was begun at about this time. On November 6, 1981, the consortium of Black Mountain, Inc., Energy Corporation and Tetra Management Corporation filed a complaint in the Court of First Instance of Davao, which was docketed as Civil Case No. 143. Named defendants were Benguet Corporation, NADECOR, and the directors of NADECOR, including Ricafort and Calalang. The complaint sought to enjoin them from interfering with Black Mountain's possession of NADECOR's Kingking mines and recover damages. The Trial Court issued a temporary restraining Order to this effect on November 11, 1981. Ricafort and his co-defendants moved to dismiss the complaint for failure to state a cause of action. They argued that the complaint contained no avermentin any case, it was an uncontroverted factthat NADECOR's agreement with Black Mountain, Inc., et al. for the operation of the Kingking Mining Claims had never been approved by the NADECOR stockholders owning the majority of the capital stock, although such approval was required by Section 44 of the Corporation Code for any contract, such as the one in question, "whereby a corporation undertakes to manage or operate all or substantially all of the business of another corporation, whether such contracts are called service contracts, operating agreements or otherwise . . .," and it appearing that the agreement with Black Mountain embraced 93.5% of the total number and area of NADECOR's mining claims and NADECOR had no other mining properties or business. The Trial Court denied the motion to dismiss in an Order dated December 15,1981. All the foregoing actions in turn generated proceedings in the Supreme Court. PROCEEDINGS INSTITUTED IN SUPREME COURT G.R. No. 60376 (Aguinaldo, et al. v. Hon. T.P. Maddela, et al. [RTC No. 135262]) On November 20, 1981, Aguinaldo, Neis and NADECOR filed with this Court a petition for certiorari and prohibition with application for preliminary injunction, assailing Manila CFI Judge Maddela's alleged failure to act on Civil Case No. 135262. This was docketed as G.R. No. 60376. Petitioners Aguinaldo, et al., later filed on June 15, 1982, a supplemental petition: (1) to annul and enjoin enforcement of Judge Maddela's temporary restraining order dated March 30, 1981stopping the NADECOR Board (then controlled by the Aguinaldo-Aytona Group) from approving the Operating Agreement with Black Mountain, Inc. involving the Kingking Mines; and

(2) to nullify and set aside other adverse orders, dated April 20, 1981, June 25, 1981, June 26, 1981, and Sept. 15, 1981. G.R. No. 59114 (Ricafort, et al. v. Hon. Felix Moya, et al. [Davao RTC CC 143]) For their part, Ricafort and Calalang, together with NADECOR and ADECOR, filed with this Court on December 17, 1981 a petition for certiorari, against Judge Felix L. Moya of the Davao CFI (Branch II), Black Mountain, Inc., Tetra Management Corporation and Energy Corporation. The petition was later amended on January 26, 1982. The petitioners sought annulment of three orders of Judge Moya, to wit: (1) the temporary restraining order issued on November 11, 1981; (2) the order of December l5, 1981, denying the petitioners' motion to dismiss the action (on the ground that the Operating Agreement of Black Mountain, Inc., et al. with NADECOR had not been approved by stockholders holding the majority of the capital stock as required by the Corporation Code, supra); and (3) the order of January 20, 1982, denying their motion to quash the contempt charges against them. Due Course to G.R. Nos. 60376 & 59114 Both petitions in G.R. Nos. 60376 and 59114 were given due course in virtue of a Resolution of this Court dated August 23, 1982. After Black Mountain, Inc., filed on September 9, 1982, a motion alleging chiefly that G.R. No. 59114 had been rendered moot by Letter of Instructions No. 1349 issued by former President Marcos on August 1, 1983, both "Kingking Claims Cases," G.R. No. 59114 and G.R. No. 60376, lay fallow for some three years. A word about said Letter of Instructions No. 1349. It advised the consortium of Black Mountain, Inc., Energy Corporation, and Tetra Management Corporation to implement the operating agreement involving the NADECOR's Kingking mining property in Pantukan, Davao. It superseded Letter of Instructions Nos. 1210, dated March 9, 1982, directing that said property be immediately put into production and that a company called "North Davao Mining Corporation" undertake the development of said Kingking mining property. 5 G.R. No. 61377 (Aguinaldo, Aytona, Borsoto v. SEC, Ricafort, et al. [RE SEC Case. No. 2143]) A third certiorari action involving substantially the same parties was commenced in this Court on August 13, 1982. That action, docketed as G.R. No. 61377, concerned SEC Case No. 2143 in which, it will be recalled, the Aguinaldo-Aytona Group had presented to the Commission en banc a petition and supplemental petition impugning certain actuations of the Hearing Officer including the latter's temporary restraining Order. In this Court the Aguinaldo-Aytona Group complained of the alleged inaction of the Securities and Exchange Commission en banc on their petition to nullify the same which had resulted to their disadvantage, and prayed for invalidation of said Hearing Officer's restraining order. G.R. Nos. 88895 and 88095

Still another proceeding in connection with SEC Case No. 2143 was instituted in this Court by the Aytona Group, although much, much later, in 1988. That stemmed from a motion submitted by the Aytona Group in said SEC Case No. 2143 for a preliminary injunction to stop the Ricafort-Calalang Group from calling and holding the annual stockholders' meeting of NADECOR on August 15, 1988 pursuant to the By-Laws. When that motion was denied, Aytona went to the Court of Appeals which, however, sustained the SEC's denial of the preliminary injunction. Aytona then appealed to this Court, his petitions being docketed here as G.R. Nos. 88895 and 88095. Later, Aytona moved to withdraw and dismiss that appeal, but the appeal was instead denied by this Court for failure to comply with the requisites of the Rules of Court. G.R. Nos. 77274-75 (Dominador R. Aytona, as Executor of the Estate of Deceased Daniel R. Aguinaldo vs. Conrado T. Calalang, et al. [RE CC Q-45704]) One more proceeding on appeal involving the same parties was added to this Court's docket sometime in 1987. This was G.R. Nos. 77274-75. It had its origin in yet another action filed by Aytona, this time with the Regional Trial Court at Quezon City, on August 15, 1985. He filed the case as a stockholder of NADECOR and as executor of the estate of Daniel R. Aguinaldo, who had died in the meantime. Named as defendants were Conrado T. Calalang, Jose G. Ricafort, Salvador O. Rivera, Benjamin V. Aritao, Edgar de Castro, (as officers of NADECOR), and Sawyer-Adecor International, Inc. (SAICOR) and Benguet Corporation. The suit was chiefly grounded on an order of preliminary injunction of the Superior Court of California enjoining several specified stockholders of NADECOR from voting a large bloc of NADECOR shares owned by SAICOR, pending judicial determination of ownership of 1.2 million SAICOR shares of stock, registered in the name of the late D.R. Aguinaldo. The Quezon City Court issued a temporary restraining order on August 16, 1985 enjoining defendants from voting the SAICOR shares at the annual stockholders' meeting set on August 19, 1985, and all other meetings. The defendants, the Ricafort-Calalang Group, promptly moved to dismiss the action on the ground of (1) lack of jurisdiction of the Court over of the subject-matter; (2) non-enforceability of the foreign order of injunction, hence, failure of the complaint founded thereon to state a cause of action; and (3) failure of plaintiffs counsel to indicate his IBP number. The motion was denied by Order dated October 25, 1985; and a writ of preliminary injunction subsequently issued against the defendants on November 5, 1975. Ricafort and his co-defendants challenged that order of denial before the Court of Appeals by way of a petition for certiorari and prohibition. SAICO filed a separate petition for certiorari and prohibition against the same order also before the Court of Appeals. The cases were consolidated; and judgment was rendered thereon in due course on November 28, 1986, annulling and setting aside the Order of the Court a quo of October 25, 1985 and the order for a preliminary injunction of November 5, 1985. Aytona's motion for reconsideration was later denied by the Court of Appeals, in a Resolution dated January 23, 1987. Aytona appealed to this Court. His appeal was docketed as G.R. Nos. 77274-75 (Dominador R. Aytona, as Executor of the Estate of Deceased Daniel R. Aguinaldo vs. Conrado T. Calalang, Jose G. Ricafort, Salvador O. Rivera, Benjamin V. Aritao, Edgar de Castro, and Sawyer- Adecor International, Inc.) G.R. No. 75098 (Ricafort, et al. v. Hon. T. Maddela, et al. [Case No. 135262]) One more proceeding in this Court has to be mentioned: G.R. No. 75098, which was an appeal by certiorari by Ricafort and Calalang against the Order of Judge Maddela of June 10, 1986 in Civil Case No. 135262. Said order was issued by Judge Maddela in connection with hearings that this Court instructed him to conduct, on a motion of the Aytona Group that the auction sale of the

pledged stock should proceed in view of certain recent developments. The instruction was contained in a Resolution dated July 8, 1985 in G.R. No. 60376. G.R. No. 75098 was later consolidated with G.R. No. 60376 by this Court's Resolution of November 5, 1986. Intervention by the Office of the President It appears that the Office of the President of the Philippines took some interest in the Kingking mining property of' NADECOR and issued two letters of instructions concerning it. The first, LOI No. 1210, dated March 9, 1982, directed that the mining property be immediately put into production and that a firm known as "North Davao Mining Corporation" undertake its development. The second, LOI No. 1349, dated August 1, 1983, advised Black Mountain, Inc., the Energy Corporation, and the Tetra Management Corporation to implement their operating agreement involving said Kingking mining property in Pantukan, Davao. 6 FINAL DISPOSITION OF SUPREME COURT AND SEC CASES G.R. NOS. 60376 AND 75058 (Judgment on Compromise) A compromise was arrived at by the parties in G.R. Nos. 60376 and 75098. It was embodied and approved in a Resolution dated March 16, 1988, dictated at a hearing presided over by the Chairman of the First Division, in the presence of the parties and their counsel. Basically the compromise provided for the consummation of the deed of sale of April 18, 1978 through the compliance by the parties with their yet unfulfilled prestations as well as the obligations thereto related. The Resolution approving said compromise declared that those contractual and related commitments should be fulfilled on March 21, 1988, and that thereupon, "G.R. Nos. 60376 and 75098, as well as the case thereto related, Civil Case No. 135262 of the Regional Trial Court of Manila, shall be ordered dismissed, closed, and terminated." On March 23, 1988, this Court promulgated another Resolution declaring the compromise approved by the Resolution of March 16, 1988 to have been fully executed to all the parties' satisfaction. It also ordered the Register of Deeds of Davao to cancel the transfer certificates of title covering the nine (9) "Saug lots" still in the name of Daniel R. Aguinaldo and to issue new ones in the name of ADECOR. Finally, the Resolution declared "G.R. No. 75098 DISMISSED, CLOSED AND TERMINATED, and G.R. No. 60376 and Civil Case No. 135262 DISMISSED only insofar as they involve the subject matter of this compromise agreement." Later, however, the parties having reached a complete settlement, the case was ordered dismissed by this Court, by Resolution of August 14, 1989. (Rollo, G.R. Nos. 60376 and 75098, p. 2298) G.R. Nos. 77274-75 Decision was rendered in G.R. Nos. 77274-75 (Dominador R. Aytona, as Executor of the Estate of Deceased Daniel R. Aguinaldo vs. Conrado T. Calalang, Jose G. Ricafort, Salvador O. Rivera, Benjamin V. Aritao, Edgar de Castro, and Sawyer-Adecor International, Inc.) on June 20, 1988. 7 This Court ruled that QC RTC Case Q-45704 involved a controversy arising out of intracorporate relations between and among stockholders and thus fell within the original and exclusive jurisdiction of the Securities and Exchange Commission; moreover, there was as yet no foreign judgment to be enforced by Philippine Courts, the petitioners' action in the Regional Trial Court being founded on a mere interlocutory order. G.R. No. 61377

Decision was also promulgated by the Court in G.R. No. 61377 on June 30, 1988, dismissing the petition. 8 It held that the challenged temporary restraining order of the Hearing Officer in SEC Case No. 2143, like those issued by Regional Trial Courts, lapsed after twenty (20) days; that the Securities and Exchange Commission still had jurisdiction and indeed the obligation to proceed with the hearing on the merits of Case No. 2143 and issue appropriate orders pursuant thereto, subject to review by the Court of Appeals and the Supreme Court; and that since petitioners (defendants) had not yet finished presenting evidence on such matters affecting the corporate affairs of NADECOR as the validity of proxy votes, alleged usurpation of corporate powers, claims of majority status, issuance of noticesevidentiary issues the resolution of which is primarily lodged with the Securities and Exchange Commission, the latter ought to continue to hear and then decide the respective lights of parties in NADECOR. SEC Case No. 2143 On July 31, 1989, a Joint Manifestation was presented by the Ricafort Group and the Aytona Group in SEC Case No. 2143, briefly to the following effect: 1) the Aytona Group will no longer question the 1989 NADECOR annual stockholders' meeting and the election of directors on that occasion, as well as the organizational meeting of the board of directors; 2) both groups waive any and all claims for damages they may have against each other in the case; 3) the Aytona Group will not move for reconsideration, appeal, or in any way question the decision which may be rendered in the case pursuant to the joint manifestation. Acting thereon, Hearing Officer Alberto P. Atas rendered an Order on August 9, 1989, ruling that 1. (The Commission had decided to) . . . recognize and affirm the validity of the annual stockholders' meeting of Nationwide Development Corporation held on August 17, 1981, the election of petitioners as directors of the Corporation in that meeting, and the validity of the organizational meeting of such board electing the officers of the corporation; . . . 2. . . . all claims for damages of the parties against each other related to this action are hereby considered waived," and 3. Case No. 2143 was "considered CLOSED." SEC Case No. 2878 To complete the picture, mention must be made of one other action in the Securities and Exchange Commission between the same parties, SEC. Case No. 2878. That case was filed by the RicafortCalalang Group to enjoin the Aytona Group from continuing to act and represent themselves as Directors and/or officers of NADECOR. The Ricafort Group alleged that they were duly elected as directors of NADECOR at the annual stockholders' meeting on August 20, 1984, and later, elected as officers of the firm by the directors; that the meeting was adjourned by Calalang, as Chairman, in view of the objections by Aytona (presenting TRO by RTC, QC) to the voting of SAICO's 7,000 shares at the election of directors; that after adjournment, however, Aytona and his group elected themselves officers of NADECOR. A temporary restraining order was issued by Hearing Officer Emmanuel Sison, followed, after presentation of evidence, by a preliminary injunction, against the

Aytona Group. Aytona moved for reconsideration of the Order of injunction, dated October 14, 1985, but his motion was denied by order dated January 17, 1986. On May 25, 1989, the decision in said SEC Case No. 2878 was handed down by Hearing Officer Felipe S. Tongco. Tongco ruled that the only issue concerned the validity of the adjournment of the meeting of August 20, 1984 by Calalang; that as to the question regarding the election of Aytona, et al. as directors after said adjournment, the same had been mooted by the subsequent and indisputably valid election of Calalang and his group in 1986 and 1987; that the validity of the acts of the Aytona Group as pseudo directors and officers had to be determined; that the evidence sufficiently established that the annual stockholders' meeting of August 20, 1984 had been validly adjourned by Calalang; that the election of the Aytona Group as directors following the adjournment was therefore void ab initio; and that group's acts as directors and officers of NADECOR were also null and void. Remaining Proceedings and Resolution Thereof Thus, the only proceedings left undecided are Civil Case No. 143 of the Regional Trial Court of Davao, and G.R. No. 59114, related to Case No. 143. The main issue in these two (2) cases is the validity of the Operating Agreement relative to the Kingking Minesentered into on March 25, 1981 between NADECOR, then represented by the Aguinaldo-Aytona Group, and the consortium composed of Black Mountain, Inc., Tetra Management Corporation, and Energy Corporation. The facts and considerations hereunder summarized, developed beyond dispute in the various legal proceedings above surveyed, dictate a declaration of the invalidity of said Agreement of March 25, 1981. 1. On March 30, 1981, in Civil Case No. 135262, the Manila Trial Court enjoined the NADECOR Board (controlled by the Aguinaldo-Aytona Group) from ratifying this Operating Agreement. 2. On April 20, 1981, the same Court inter alia stopped Aguinaldo from representing himself as the controlling stockholder of NADECOR and offering its Kingking Claims for sale. 3. On June 29, 1981, the Court issued another Order (a) declaring Aguinaldo and the NADECOR directors guilty of contempt of court for having, despite the injunction of March 30, 1981, approved and confirmed the Operating Agreement involving the Kingking Claims entered into by NADECOR with Black Mountain, etc., administering an admonition on them, and (b) NULLIFYING said Operating Agreement. 4. The Ricafort-Calalang Group validly elected directors at the annual stockholders meeting of NADECOR on August 17, 1981; and said directors thereafter validly elected the officers of the corporation at the organizational meeting of the board. 5. The same group (Ricafort-Calalang) had been validly re-elected since then, in 1985, 1986, 1987. An attempt of the Aguinaldo-Aytona group to have its members elected as directors at the stockholders' meeting of August 19, 1985 was declared null and void. 6. At the annual meeting of August 17, 1981, too, the NADECOR stockholders rejected the operating agreement executed on March 25, 1981 by NADECOR, then acting through the Aguinaldo-Aytona Group, and the Black Mountain Consortium, supra. The stockholders also approved the proposed

Agreement with Benguet Corporation for the operation by the latter of the company's KINGKING MINES. The agreement with Benguet Corporation was subsequently signed and executed. 7. On January 22, 1987, President Corazon C. Aquino issued Memorandum Order No. 69, entitled "RESCINDING LETTER OF INSTRUCTION NOS. 1210 AND 1349, DATED MARCH 9, 1982 AND AUGUST 1, 1983," treating directly of the "approved operating agreement involving the Kingking mining property in Pantukan, Davao" of the consortium composed of Black Mountain, Inc., Energy Corporation, and Tetra Management Corporation . 9 The memorandum reads as follows: Letter of Instructions Nos. 1210, dated March 9, 1982, directing that the Kingking mining property in Pantukan, Davao, covered by mining lease contracts issued in the name of the Nationwide Development Corporation be immediately put into production and that the North Davao Mining Corporation undertake the development of the Kingking mining property; and Letter of Instructions No. 1349, dated August 1, 1983, advising the Black Mountain, Inc., the Energy Corporation, and the Tetra Management Corporation to implement the approved operating agreement involving the Kingking mining property in Pantukan, Davao, are hereby rescinded and revoked. This Memorandum Order takes effect immediately. This memorandum Order was sent on February 18, 1987, by Presidential Staff Director Melquiades T. de la Cruz to Director Benjamin Gonzales of the Bureau of Mines and Geo-Sciences, and Carlos G. Dominguez, Secretary of Natural Resources, evidently for implementation. These acts, according to Ricafort and Calalang , 10 "rectified the "great prejudice" caused to . . . (them) by the 'unjust awards by then President Marcos of the operation of the Kingking mines to "crony" North Davao Mining Corporation which had no operating agreement from the claim owners and then to "cronies" Black Mountain, Inc., et al. which had a spurious operating agreement from Aguinaldo with a courtcancelled board of directors' ratification and no stockholders' approval . . ." It was evidently on account of Memorandum Order No. 69 of President Aquino that NADECOR (the Ricafort-Calalang Group) finally succeeded in getting possession of the mines; this, sometime in December, 1989, NADECOR was granted authority by the Secretary of Natural Resources "to enter the area" and "proceed with exploration and development activities" subject to certain specified conditions, one of which was that NADECOR itself shall conduct said exploration and development activities and not contract said activities to an operator . . ." 8. As admitted by the respondents, Black Mountain, Inc. "ceased operations and became bankrupt years before Marcos was booted out of office." 9. The Operating Agreement with the Black Mountain Consortium of March 25, 1981 was never ratified by the NADECOR stockholders; indeed, it was explicitly rejected by said stockholders. Considering that the Kingking Mines comprise all or substantially all the assets of NADECOR, the operating agreement of March 25, 1981 had to be ratified by the stockholders in order to be valid and effective. This, in accordance with Section 44 of the Corporation Code. 11 That no such ratification was ever given constitutes yet another reason to invalidate the same. Under these circumstancesthe agreement executed on March 25, 1981 was entered into in defiance of valid orders of a court of competent jurisdiction and was in fact subsequently nullified by it; it was entered into against the wishes of the majority of the stockholders and directors and in truth, was not only not ratified by the majority of said stockholders as required by the Corporation Code, but explicitly rejected and disowned by them at a meeting duly convoked, said stockholders thereafter approving an operating agreement with Benguet Corporation; the agreement was sought

to be vindicated and enforced by individuals who no longer represented the majority of the stockholders of NADECOR, over the objection and against the wishes of the legitimate majority; the authority granted to the consortium (Black Mountain, Inc., Energy Corporation, and Tetra Management Corporation) to implement the agreement of March 25, 1981 was rescinded and revoked by the Office of the President of the Philippines; and one of the companies in said consortium is now, admittedly, no longer capable on account of bankruptcy of complying with its contractual commitmentsit is impossible to accord the agreement any validity or effect whatsoever. It thus clearly appears, not only that upon purely legal considerations, the operating agreement of March 25, 1981 is, if not outrightly void, unenforceable for want of requisite valid ratification and conferred upon private respondents no actionable, vindicable rights, but also that, from a practical standpoint, any issue about said respondents' rights under the agreement has been mooted by supervening events effectively precluding their exercise in any case. WHEREFORE, the petition is GRANTED. Civil Case No. 143 of the Regional Trial Court of Davao is DISMISSED, and the restraining order of November 11, 1981 issued therein, if still extant, is DISSOLVED. Costs against private respondents. SO ORDERED. Gancayco, Grio-Aquino and Medialdea, JJ., concur. Cruz, J., took no part. G.R. No. 76801 August 11, 1995 LOPEZ REALTY, INC., AND ASUNCION LOPEZ GONZALES, petitioners, vs. FLORENTINA FONTECHA, ET AL., AND THE NATIONAL LABOR RELATIONS COMMISSION, respondents.

PUNO, J.: The controversy at bench arose from a complaint filed by private respondents, 1 namely, Florentina Fontecha, Mila Refuerzo, Marcial Mamaril, Perfecto Bautista, Edward Mamaril, Marissa Pascual and Allan Pimentel, against their employer Lopez Realty Incorporated (petitioner) and its majority stockholder, Asuncion Lopez Gonzales, for alleged non-payment of their gratuity pay and other benefits. 2 The case was docketed as NLRC-NCR Case No. 2-2176-82. Lopez Realty, Inc., is a corporation engaged in real estate business, while petitioner Asuncion Lopez Gonzales is one of its majority shareholders. Her interest in the company vis-a-vis the other shareholders is as follows:
1 Asuncion Lopez Gonzales 7831 7830 7830 4 1 1 shares shares shares shares share share

2 Teresita Lopez Marquez 3 Arturo F. Lopez 4 Rosendo de Leon 5 Benjamin Bernardino 6 Leo Rivera

Except for Arturo F. Lopez, the rest of the shareholders also sit as members of the Board of Directors. As found by the Labor arbiter. 3 sometime in 1978, Arturo Lopez submitted a proposal relative to the distribution of certain assets of petitioner corporation among its three (3) main shareholders. The proposal had three (3) aspects, viz: (1) the sale of assets of the company to pay for its obligations; (2) the transfer of certain assets of the company to its three (3) main shareholders, while some other assets shall remain with the company; and (3) the reduction of employees with provision for their gratuity pay. The proposal was deliberated upon and approved in a special meeting of the board of directors held on April 17, 1978. It appears that petitioner corporation approved two (2) resolutions providing for the gratuity pay of its employees, viz: (a) Resolution No. 6, Series of 1980, passed by the stockholders in a special meeting held on September 8, 1980, resolving to set aside, twice a year, a certain sum of money for the gratuity pay of itsretiring employees and to create a Gratuity Fund for the said contingency; and (b) Resolution No. 10,Series of 1980, setting aside the amount of P157,750.00 as Gratuity Fund covering the period from 1950 up to 1980. Meanwhile, on July 28, 1981, board member and majority stockholder Teresita Lopez Marquez died. On August 17, 1981, except for Asuncion Lopez Gonzales who was then abroad, the remaining members of the Board of Directors, namely: Rosendo de Leon, Benjamin Bernardino, and Leo Rivera, convened a special meeting and passed a resolution which reads: Resolved, as it is hereby resolved that the gratuity (pay) of the employees be given as follows: (a) Those who will be laid off be given the full amount of gratuity; (b) Those who will be retained will receive 25% of their gratuity (pay) due on September 1, 1981, and another 25% on January 1, 1982, and 50% to be retained by the office in the meantime. (emphasis supplied) Private respondents were the retained employees of petitioner corporation. In a letter, dated August 31, 1981, private respondents requested for the full payment of their gratuity pay. Their request was granted in a special meeting held on September 1, 1981. The relevant, portion of the minutes of the said board meeting reads: In view of the request of the employees contained in the letter dated August 31, 1981, it was also decided that, all those remaining employees will receive another 25% (of their gratuity) on or before October 15, 1981 and another 25% on or before the end of November, 1981 of their respective gratuity. At that, time, however, petitioner Asuncion Lopez Gonzales was still abroad. Allegedly, while she was still out of the country, she sent a cablegram to the corporation, objecting to certain matters taken up by the board in her absence, such as the sale of some of the assets of the corporation. Upon her return, she flied a derivative suit with the Securities and Exchange Commission (SEC) against majority shareholder Arturo F. Lopez.

Notwithstanding the "corporate squabble" between petitioner Asuncion Lopez Gonzales and Arturo Lopez, the first two (2) installments of the gratuity pay of private respondents Florentina Fontecha, Mila Refuerzo, Marcial Mamaril and Perfecto Bautista were paid by petitioner corporation. Also, petitioner corporation had prepared the cash vouchers and checks for the third installments of gratuity pay of said private respondents (Florentina Fontecha, Mila Refuerzo, Marcial Mamaril and Perfecto Bautista). For some reason, said vouchers were cancelled by petitioner Asuncion Lopez Gonzales. Likewise, the first, second and third installments of gratuity pay of the rest of private respondents, particularly, Edward Mamaril, Marissa Pascual and Allan Pimentel, were prepared but cancelled by petitioner Asuncion Lopez Gonzales. Despite private respondents' repeated demands for their gratuity pay, corporation refused to pay the same. 4 On July 23, 1984, Labor Arbiter Raymundo R. Valenzuela rendered judgment in favor of private respondents. 5 Petitioners appealed the adverse ruling of the Labor arbiter to public respondent National Labor Relations Commission. The appeal focused on the alleged non-ratification and nonapproval of the assailed August 17, 1981 and September 1, 1981 Board Resolutions during the Annual Stockholders' Meeting held on March 1, 1982. Petitioners further insisted that the payment of the gratuity to some of the private respondents was a mere "mistake" on the part of petitioner corporation since, pursuant to Resolution No. 6, dated September 8, 1980, and Resolution No. 10, dated October 6, 1980, said gratuity pay should be given only upon the employees' retirement. On November 20, 1985, public respondent, through its Second Division, dismissed the appeal for lack of merit, the pertinent portion of which states: 6 We cannot agree with the contention of respondents (petitioners') that the Labor Arbiter a quocommitted abuse of discretion in his decision. Respondents' (petitioners') contention that, the two (2) resolutions dated 17 August 1981 and 1 September 1981 . . . which were not approved in the annual stockholders meeting had no force and effect, deserves scant consideration. The records show that the stockholders did not revoke nor nullify these resolutions granting gratuities to complainants. On record, it appears that the said resolutions arose from the legitimate creation of the Board of Directors who steered the corporate affairs of the corporation. . . . Respondents' (petitioners') allegation that the three (3) complainants, Mila E. Refuerzo, Marissa S. Pascual and Edward Mamaril, who had resigned after filing the complaint on February 8, 1982, were precluded to (sic) receive gratuity because the said resolutions referred to only retiring employee could not be given credence. A reading of Resolutions dated 17 August 1981 and 1 September 1981 disclosed that there were periods mentioned for the payment of complainants' gratuities. This disproves respondents' argument allowing gratuities upon retirement of employees. Additionally, the proposed distribution of assets (Exh. C-1) filed by Mr. Arturo F. Lopez also made mention of gratuity pay, " . . . (wherein) an employee who desires to resign from the LRI will be given the gratuity pay he or she earned." (Emphasis

supplied) Let us be reminded, too, that the complainants' resignation was not voluntary but it was pressurized (sic) due to "power struggle" which was evident between Arturo Lopez and Asuncion Gonzales. The respondents' (petitioners') contention of a mistake to have been committed in granting the first two (2) installments of gratuities to complainants Perfecto Bautista, Florentina Fontecha, Marcial Mamaril and Mila Refuerzo, (has) no legal leg to stand on. The record is bereft of any evidence that the Board of Directors had passed a resolution nor is there any minutes of whatever nature proving mistakes in the award of damages (sic). With regard to the award of service incentive leave and others, the Commission finds no cogent reason to disturb the appealed decision. We affirm. WHEREFORE, let the appealed decision be, as it is hereby, AFFIRMED and let the instant appeal (be) dismissed for lack of merit. SO ORDERED. Petitioners reconsidered. 7 In their motion for reconsideration, petitioners assailed the validity of the board resolutions passed on August 17, 1981 and September 1, 1981, respectively, and claimed, for the first time, that petitioner Asuncion Lopez Gonzales was not notified of the special board meetings held on said dates. The motion for reconsideration was denied by the Second Division on July 24, 1986. On September 4, 1986, petitioners filed another motion for reconsideration. Again, the motion was denied by public respondent in a Minute Resolution dated November 19, 1986. 8 Hence, the petition. As prayed for, we issued a Temporary Restraining Order, 9 enjoining public respondent from enforcing or executing the Resolution, dated November 20, 1986 (sic), in NLRC-NCR-2-2176-82. 10 The sole issue is whether or not public respondent acted with grave abuse of discretion in holding that private respondents are entitled to receive their gratuity pay under the assailed board resolutions dated August 17, 1951 and September 1, 1981. Petitioners contend that the board resolutions passed on August 17, 1981 and September 1, 1981, granting gratuity pay to their retained employees, are ultra vires on the ground that petitioner Asuncion Lopez Gonzales was not duly notified of the said special meetings. They aver, further, that said board resolutions were not ratified by the stockholders of the corporation pursuant to Section 28 1/2 of the Corporation Law (Section 40 of the Corporation Code). They also insist that the gratuity pay must be given only to the retiring employees, to the exclusion of the retained employees or those who voluntarily resigned from their posts. At the outset, we note that petitioners allegation on lack of notice to petitioner Asuncion Lopez Gonzales was raised for the first time in the in their motion for reconsideration filed before public respondent National Labor Relations Commission, or after said public respondent had affirmed the decision of the labor arbiter. To stress, in their appeal before the NLRC, petitioners never raised the issue of lack of notice to Asuncion Lopez Gonzales. The

appeal dealt with (a) the failure of the stockholders to ratify the assailed resolutions and (b) the alleged "mistake" committed by petitioner corporation in giving the gratuity pay to some of its employees who are yet to retire from employment. In their comment, 11 private respondents maintain that the new ground of lack of notice was not raised before the labor arbiter, hence, petitioners are barred from raising the same on appeal. Private respondents claim, further, that such failure on the part of petitioners, had deprived them the opportunity to present evidence that, in a subsequent special board meeting held on September 29, 1981, the subject resolution dated September 1, 1981, was unanimously approved by the board of directors of petitioner corporation, including petitioner Asuncion Lopez Gonzales. 12 Indeed, it would be offensive to the basic rules of fair play and justice to allow petitioners to raise questions which have not been passed upon by the labor arbiter and the public respondent NLRC. It is well settled that questions not raised in the lower courts cannot, be raised for the first time on appeal. 13 Hence, petitioners may not invoke any other ground, other than those it specified at the labor arbiter level, to impugn the validity of the subject resolutions. We now come to petitioners' argument that the resolutions passed by the board of directors during the special meetings on August 1, 1981, and September 1, 1981, were ultra vires for lack of notice. The general rule is that a corporation, through its board of directors, should act in the manner and within the formalities, if any, prescribed by its charter or by the general law. 14 Thus, directors must act as a body in a meeting called pursuant to the law or the corporation's bylaws, otherwise, any action taken therein may be questioned by any objecting director or shareholder. 15 Be that as it may, jurisprudence 16 tells us that an action of the board of directors during a meeting, which was illegal for lack of notice, may be ratified either expressly, by the action of the directors in subsequent legal meeting, or impliedly, by the corporation's subsequent course of conduct. Thus, in one case, 17 it was held: . . . In 2 Fletcher, Cyclopedia of the Law of Private Corporations (Perm. Ed.) sec. 429, at page 290, it is stated: Thus, acts of directors at a meeting which was illegal because of want of notice may be ratified by the directors at a subsequent legal meeting, or by the corporations course of conduct ... Fletcher, supra, further states in sec. 762, at page 1073-1074: Ratification by directors may be by an express resolution or vote to that effect, or it may be implied from adoption of the act, acceptance or acquiescence. Ratification may be effected by a resolution or vote of the board of directors expressly ratifying previous acts either of corporate officers or agents; but it is not necessary, ordinarily, to show a meeting and formal action by the board of directors in order to establish a ratification.

In American Casualty Co., v. Dakota Tractor and Equipment Co., 234 F. Supp. 606, 611 (D.N.D. 1964), the court stated: Moreover, the unauthorized acts of an officer of a corporation may be ratified by the corporation by conduct implying approval and adoption of the act in question. Such ratification may be express or may be inferred from silence and inaction. In the case at bench, it was established that petitioner corporation did not issue any resolution revoking nor nullifying the board resolutions granting gratuity pay to private respondents. Instead, they paid the gratuity pay, particularly, the first two (2) installments thereof, of private respondents Florentina Fontecha, Mila Refuerzo, Marcial Mamaril and Perfecto Bautista. Despite the alleged lack of notice to petitioner Asuncion Lopez Gonzales at that time the assailed resolutions were passed, we can glean from the records that she was aware of the corporation's obligation under the said resolutions. More importantly, she acquiesced thereto. As pointed out by private respondents, petitioner Asuncion Lopez Gonzales affixed her signature on Cash Voucher Nos. 81-10-510 and 81-10-506, both dated October 15, 1981, evidencing the 2nd installment of the gratuity pay of private respondents Mila Refuerzo and Florentina Fontecha. 18 We hold, therefore, that the conduct of petitioners after the passage of resolutions dated August, 17, 1951 and September 1, 1981, had estopped them from assailing the validity of said board resolutions. Assuming, arguendo, that there was no notice given to Asuncion Lopez Gonzalez during the special meetings held on August 17, 1981 and September 1, 1981, it is erroneous to state that the resolutions passed by the board during the said meetings were ultra vires. In legal parlance, "ultra vires" act refers to one which is not within the corporate powers conferred by the Corporation Code or articles of incorporation or not necessary or incidental in the exercise of the powers so conferred. 19 The assailed resolutions before us cover a subject which concerns the benefit and welfare of the company's employees. To stress, providing gratuity pay for its employees is one of the express powers of the corporation under the Corporation Code, hence, petitioners cannot invoke the doctrine of ultra vires to avoid any liability arising from the issuance the subject resolutions. 20 We reject petitioners' allegation that private respondents, namely, Mila Refuerzo, Marissa Pascual and Edward Mamaril who resigned from petitioner corporation after the filing of the case, are precluded from receiving their gratuity pay. Pursuant to board resolutions dated August 17, 1981 and September 1, 1981, respectively, petitioner corporation obliged itself to give the gratuity pay of its retained employees in four (4) installments: on September 1, 1981; October 15, 1981; November, 1981; and January 1, 1982. Hence, at the time the aforenamed private respondents tendered their resignation, the aforementioned private respondents were already entitled to receive their gratuity pay. Petitioners try to convince us that the subject resolutions had no force and effect in view of the non-approval thereof during the Annual Stockholders' Meeting held on March 1, 1982. To strengthen their position, petitioners cite section 28 1/2 of the Corporation Law (Section 40 of the Corporation Code). We are not persuaded.

The cited provision is not applicable to the case at bench as it refers to the sale, lease, exchange or disposition of all or substantially all of the corporation's assets, including its goodwill. In such a case, the action taken by the board of directors requires the authorization of the stockholders on record. It will be observed that, except far Arturo Lopez, the stockholders of petitioner corporation also sit as members of the board of directors. Under the circumstances in field, it will be illogical and superfluous to require the stockholders' approval of the subject resolutions. Thus, even without the stockholders' approval of the subject resolutions, petitioners are still liable to pay private respondents' gratuity pay. IN VIEW WHEREOF, the instant petition is DISMISSED for lack of merit and the temporary restraining order we issued on February 9, 1987 is LIFTED. Accordingly, the assailed resolution of the National Labor Relations Commission in NLRC-NCR-2176-82 is AFFIRMED. This decision is immediately executory. Costs against petitioners. SO ORDERED. Narvasa, C.J., Regalado, Mendoza and Francisco, JJ., concur.

Footnotes 1. Private respondents' basic monthly salary and date of employment with said company are as follows:
Employee Florentina U. Fontecha Mila C. Refuerzo Marcial C. Mamaril Perfecto Bautista Edward S. Mamaril Marissa S. Pascual Allan M. Pimentel Date Employed 10/03/68 08/02/68 09/01/51 12/01/54 10/01/80 02/01/81 03/01/81 Latest Salary P1,090.00 930.00 560.00 540.00 540.00 540.00 540.00

2 The case was docketed as NLRC-NCR Case No. 2-2176-82. 3 See Decision, dated July 23, 1984, Rollo, pp. 20-35. 4 Decision, dated July 23, 1984, Rollo, pp. 20-35. 5 Rollo, pp. 20-35. 6 Rollo, p. 51. 7 See Annex "E" of Petition, Rollo, pp. 56-61.

8 Annex "A" of Petition, Rollo, p. 19. 9 Resolution, dated February 9, 1987, Rollo, p. 72. 10 On November 20, 1985, the National Labor Relations Commission promulgated its Resolution, dismissing the appeal of petitioners, in NLRC-NCR-2-2176-82, for lack if merit. The November 20, 1986 Resolution alluded to refers to the NLRC notice re: November 19, 1986 Resolution, dismissing the second motion for reconsideration of petitioners, dated September 4, 1986; Rollo, p. 19. 11 Rollo, pp. 98-113. 12 Ibid, p. 180. 13 Anchuelo v. IAC, G.R. No. 71391, January 29, 1987, 147 SCRA 434. 14 19 C.J.S. 432-444. 15 cf. Section 53 of the Corporation Code. 16 Johnson v. Community Development Corp., 222 N.W. 2d 847. 17 Ibid. 18 Rollo, p. 109. 19 Section 45 of the Corporation Code provides: Sec. 45. Ultra vires acts of corporation. No corporation under this Code shall possess or exercise any corporate powers except those conferred by this Code or by its articles of incorporation and except such as are necessary or incidental to the exercise of the powers so conferred. 20 Section 36 (10) of the Corporation Code provides, inter alia, that a corporation has the power and capacity "to establish pension, retirement and other plans for the benefit of its directors, trustees, officers and employees.