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YOUNG AUTO SUPPLY CO. (YASCO) v.

COURT OF APPEALS
G.R. No. 104175, June 25, 1993
QUAISON
DOCTRINE
A corporation is in a metaphysical sense a resident of the place where its principal
office is located as stated in the articles of incorporation.
FACTS
YASCO sold all of their shares of stock in Consolidated Marketing &
Development Corp. (CMDC) to George Roxas, who thereafter took full control of
the four markets of CMDC. The first check representing the down-payment was
honored by the drawee bank but the four other checks representing the balance
were dishonored. YASCO filed a complaint against Roxas in the RTC of Cebu
City, praying that Roxas be ordered to pay YASCO P3.4M or that full control of
the markets be turned over to YASCO. Roxas filed a motion to dismiss, alleging,
among others that the venue was improperly laid. The motion was dismissed. The
CA, upon appeal, ordered the dismissal of the complaint on the ground of
improper venue, holding that the venue should be in Pasay City and not in Cebu
City. The CA relied on the address of YASCO appearing on the Deed of Sale (No.
1708 Dominga St., Pasay City), which was the same address written in YASCOs
letters and several commercial documents.
ISSUE
Whether or not the venue was properly laid
RULING
Yes. The CA erred in holding that the venue was improperly laid in Cebu City. In
RTCs, all personal actions are commenced and tried in the province or city where
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. There are two
plaintiffs in the case at bench: a natural person and a domestic corporation. Both
plaintiffs aver in their complaint that they are residents of Cebu City.
The Article of Incorporation of YASCO states that the place where the principal
office of the corporation is to be established or located is at Cebu City,
Philippines. A corporation has no residence in the same sense in which this term is
applied to a natural person. But for practical purposes, a corporation is in a
metaphysical sense a resident of the place where its principal office is located as
stated in the articles of incorporation. The Corporation Code precisely requires
each corporation to specify in its articles of incorporation the "place where the
principal office of the corporation is to be located which must be within the
Philippines. The purpose of this requirement is to fix the residence of a
corporation in a definite place, instead of allowing it to be ambulatory.
To allow an action to be instituted in any place where the corporation has branch
offices, would create confusion and work untold inconvenience to said entity. A
corporation cannot be allowed to file personal actions in a place other than its
principal place of business unless such a place is also the residence of a coplaintiff or a defendant.

DEE v. SECURITIES AND EXCHANGE COMMISSION


G.R. No. L-60502, July 16, 1991
PARAS
DOCTRINE
Pre-emptive right is recognized only with respect to new issues of shares, and not
with respect to additional issues of originally authorized shares.
FACTS
Naga Telephone Company, Inc. (Natelco) had an authorized capital of P100K
which it later increased to P3M. The capital stock of Natelco was divided into
213,000 common shares and 87,000 preferred shares, both at a par value of
P10.00 per shares.
Natelco entered into a contract with Communication Services, Inc. (CSI) for the
manufacture, supply, delivery and installation of telephone equipment. In
accordance with this contract, Natelco issued 24,000 shares of common stocks to
CSI as down-payment. Another 12,000 were issued to CSI later. In both instances,
no prior authorization from the Board of Communications (now the National
Telecommunications Commission) was secured pursuant to the conditions
imposed in the BOC case authorizing the increase in capital.
The Natelco stockholders held their annual stockholders meeting to elect seven
directors to their Board. Pedro Lopez Dee was unseated as Chairman and
President, but was elected as one of the directors. CSI was able to gain control of
Natelco when its legal counsel, Atty. Luciano Maggay won a seat and became
president. Dee having been unseated, he filed a petition in the SEC questioning
the validity of the elections on the ground that there was no valid list of
stockholders through which the right to vote could be determined. A restraining
order was issued by the SEC placing Dee and the other officers of the 1978-1979
Natelco Board in hold-over capacity. The SEC restraining order was elevated to
the Supreme Court which restrained the enforcement of the SEC restraining order.
The Maggay Board, therefore, replaced the hold-over officers.
During the tenure of the Maggay Board, it did not reform the contract with CSI,
and entered into another contract with CSI for the supply and installation of
additional equipment. While the group of Luciano Maggay was in control of
Natelco by virtue of the restraining order issued by the SC in G.R. No. 50855, the
Maggay Board issued 113,800 shares of stock to CSI stockholders. Dee said the
Maggay board, in issuing the said shares without notifying Natelco stockholders,
violated their right of pre-emption to the unissued shares. Subsequently, the
Maggay group was unseated from the board of directors.
ISSUE
Whether or not Natelco stockholders have a right to preemption to the 113,800
shares in question
RULING
The general rule is that pre-emptive right is recognized only with respect to new
issues of shares, and not with respect to additional issues of originally authorized

shares. This is on the theory that when a corporation at its inception offers its first
shares, it is presumed to have offered all of those which it is authorized to issue.
An original subscriber is deemed to have taken his shares knowing that they form
a definite proportionate part of the whole number of authorized shares. When the
shares left unsubscribed are later re-offered, he cannot therefore claim a dilution
of interest.
The questioned issuance of the 113,800 stocks is not invalid even assuming that it
was made without notice to the stockholders as claimed by the petitioner. The
power to issue shares of stocks in a corporation is lodged in the board of directors
and no stockholders meeting is required to consider it because additional issuance
of shares of stocks does not need approval of the stockholders. Consequently, no
pre-emptive right of Natelco stockholders was violated by the issuance of the
113,800 shares to CSI.

NAVA v. PEERS MARKETING CORPORATION


G.R. No. L-28120, November 25, 1976
AQUINO
DOCTRINE
The shares which may be alienated are those which are covered by certificates of
stock.
FACTS
Teofilo Po, as incorporator, subscribed to 80 shares of Peers Marketing
Corporation at P100 per share or a total par value of P8,000. Po paid P2,000 or
25% of the amount of his subscription. No certificate of stock was issued to him
or for that matter, to any incorporator, subscriber or stockholder. Po sold to
Ricardo Nava for P2,000 20 of his 80 shares. In the deed of sale, Po represented
that he was "the absolute and registered owner of twenty shares" of Peers
Marketing Corporation. Nava requested the officers of the corporation to register
the sale in the books of the corporation. The request was denied because Po has
not paid fully the amount of his subscription. Nava was informed that Po was
delinquent in the payment of the balance due on his subscription and that the
corporation had a claim on his entire subscription of eighty shares which included
the twenty shares that had been sold to Nava. Nava filed an an action to compel
the corporation to register said 20 shares in Navas name in the corporations
transfer book.
ISSUE
Whether the officers of Peers Marketing Corporation can be compelled by
mandamus to enter in its stock and transfer book the sale made by Po to Nava of
the twenty shares forming part of Po's subscription of eighty shares, with a total
par value of P8,000 and for which Po had paid only P2,000, it being admitted that
the corporation has an unpaid claim of P6,000 as the balance due on Po's
subscription and that the twenty shares are not covered by any stock certificate
RULING
Apparently, no provision of the by-laws of the corporation covers that situation.
The corporation can include in its by-laws rules, not inconsistent with law,
governing the transfer of its shares of stock.
As a rule, the shares which may be alienated are those which are covered by
certificates of stock. As prescribed in Section 35 of the Corporation Law, shares of
stock may be transferred by delivery to the transferee of the certificate properly
indorsed. The usual practice is for the stockholder to sign the form on the back of
the stock certificate. The certificate may thereafter be transferred from one person
to another. If the holder of the certificate desires to assume the legal rights of a
shareholder to enable him to vote at corporate elections and to receive dividends,
he fills up the blanks in the form by inserting his own name as transferee. Then he
delivers the certificate to the secretary of the corporation so that the transfer may
be entered in the corporation's books. The certificate is then surrendered and a
new one issued to the transferee.

That procedure cannot be followed in the instant case because, as already noted,
the twenty shares in question are not covered by any certificate of stock in Po's
name. Moreover, the corporation has a claim on the said shares for the unpaid
balance of Po's subscription. A stock subscription is a subsisting liability from the
time the subscription is made. The subscriber is as much bound to pay his
subscription as he would be to pay any other debt. The right of the corporation to
demand payment is no less incontestable.
A corporation cannot release an original subscriber from paying for his shares
without a valuable consideration or without the unanimous consent of the
stockholders. Under the facts of this case, there is no clear legal duty on the part of
the officers of the corporation to register the twenty shares in Nava's name, Hence,
there is no cause of action for mandamus.

RIZAL COMMERCIAL BANKING CORPORATION v. INTERMEDIATE


APPELLATE COURT
G.R. No. 74851, September 14, 1992
MEDIALDEA
DOCTRINE
Whenever a distressed corporation asks the SEC for rehabilitation and suspension
of payments, preferred creditors may no longer assert such preference, but as
earlier stated, stand on equal footing with other creditors.
FACTS
BF Homes filed a Petition for Rehabilitation and for Declaration or Suspension of
Payment with the SEC. One of the creditors listed in its inventory of creditors and
liabilities was RCBC. RCBC requested the Provincial Sheriff to extra-judicially
foreclose its real estate mortgage on some properties of B.F. Homes. On motion of
BF Homes, the SEC issued a TRO enjoining RCBC and the sheriff from
proceeding with the public auction sale. The sale was rescheduled. The SEC
ordered the issuance of a writ of preliminary injunction upon RCBCs filing of a
bond. However, RCBC did not file a bond on the very day of the auction sale, so
no writ of preliminary injunction was issued by the SEC. Presumably, unaware of
the filing of the bond, the sheriffs proceeded with the public auction sale in which
RCBC was the highest bidder for the properties auctioned. BF Homes filed in the
SEC a motion to annul the auction sale. Because of the proceedings in the SEC,
the sheriff withheld the delivery to RCBC of a certificate of sale covering the
auctioned properties. The SEC then belatedly issued a writ of preliminary
injunction stopping the auction sale which had been conducted by the sheriff two
weeks earlier.
RCBC filed with the Regional Trial Court an action for mandamus against the
provincial sheriff of Rizal and his deputy to compel them to execute in its favor a
certificate of sale of the auctioned properties. The sheriffs in their answer alleged
that they proceeded with the auction sale because no writ of preliminary
injunction had been issued by SEC as of that date, but they informed the SEC they
would suspend the issuance of a certificate of sale to RCBC. The RTC issued a
judgment on the pleadings, ordering BF Homes to execute and deliver the
Certificate of Auction Sale.
BF Homes filed an original complaint with the IAC praying for annulment of the
judgment. The IAC set aside the decision of the RTC, suspending the issuance to
RCBC of new land titles until resolution of the SEC case.
RCBC filed the present petition. Later, it filed a manifestation informing the SC
that the SEC had issued an order denying the motion to annul the auction sale, as a
consequence of which the Register of Deeds of Pasay effected the transfer of title
over the subject properties to RCBC. Hence, RCBC seeks to declare as moot and
academic the issues in the case at bar.
Based on its manifestation, it would seem that the Pasay City Register of Deeds
had taken the SEC Resolution dated October 16, 1986 as its cue for proceeding
with the transfers of title, despite an explicit directive in the Court of Appeals

decision "to suspend issuance . . . until the matter shall have been resolved by the
Securities and Exchange Commission in SEC Case No. 002693, which is the case
concerning BF Homes Rehabilitation. On the other hand, SEC Resolution dated
October 16, 1986 is a denial of BF Homes Consolidated Motion to Annul the
auction sale and to cite RCBC and sheriff for contempt.
ISSUE
Whether or not the transfer of title over the properties to RCBC was valid
RULING
When a corporation threatened by bankruptcy is taken over by a receiver, all the
creditors should stand on an equal footing, not anyone should be given preference
by paying one or some of them ahead of the others. RCBC and the Pasay City
Register of Deeds must have premised their action on SECs refusal in the
resolution dated October 16, 1986 to exercise jurisdiction on the contempt case, as
their go-signal to disregard the CAs directive and proceed with the registration of
titles. Their action of course, is clearly contumacious and both are equally guilty
of contempt. Since the properties, subject of the motion for contempt (in the SEC)
involved assets of a distressed firm, SEC would have been fully justified in
issuing the corresponding restraining order against the consolidation of title in
RCBC, pursuant to Sec. 6(a), PD 902-A, as amended.
The fact remains that by ordering the suspension of registration of titles, the
appellate court clearly intended to have BF Homes assets/properties remain
untouched during the period of rehabilitation so as not to render the SEC
Management Committee irrelevant and inutile and to give it unhampered "rescue
efforts" over the distressed firm. Since RCBC had gone ahead with the registration
of title in complete defiance of the Court of Appeals directive, we have no
recourse except to set aside such transfer and nullify the TCTs issued in RCBCs
name. While it is recognized that RCBC is a preferred creditor and likewise the
highest bidder at the auction sale, We have however stated that whenever a
distressed corporation asks the SEC for rehabilitation and suspension of payments,
preferred creditors may no longer assert such preference, but as earlier stated,
stand on equal footing with other creditors. Foreclosure shall be disallowed so as
not to prejudice other creditors, or cause discrimination among them. If
foreclosure is undertaken despite the fact that a petition for rehabilitation has been
filed, the certificate of sale shall not be delivered pending rehabilitation. Likewise,
if this has also been done, no transfer of title shall be effected also, within the
period of rehabilitation. The rationale behind PD 902-A, as amended, is to effect a
feasible and viable rehabilitation. This cannot be achieved if one creditor is
preferred over the others.
In this connection, the prohibition against foreclosure attaches as soon as a
petition for rehabilitation is filed. Were it otherwise, what is to prevent the
petitioner from delaying the creation of the Management Committee and in the
meantime dissipate all its assets. The sooner the SEC takes over and imposes a
freeze on all the assets, the better for all concerned.

SECURITIES AND EXCHANGE COMMISSION v. KOSCOT


INTERPLANETARY INC.
United States Court of Appeals, Fifth Circuit, 1974, 497 F. 2d 587
FACTS
The modus operandi of Koscot and its investor is as follows Investors solicit
prospects to attend Opportunity Meetings at which the latter are introduced to the
Koscot scheme. Significantly, the investor is admonished not to mention the
details of the business before bringing the prospect to the meeting, a technique
euphemistically denominated the curiosity approach. Thus, in the initial stage,
an investors sole task is to attract individuals to the meeting. Once a prospects
attendance at a meeting is secured, Koscot employees, frequently in conjunction
with investors, undertake to appraise prospects of the virtues of enlisting in the
Koscot plan. The meeting is conducted in conformity with scripts prepared by
Koscot. The final stage in the promotional scheme is the consummation of the
sale. If a prospect capitulates at either an Opportunity Meeting or a Go-Tour, an
investor will not be required to expend any additional effort. Less fortuitous
investors whose prospects are not as quickly enticed to invest do have to devote
additional effort to consummate a sale, the amount of which is contingent upon
the degree of reluctance of the prospect.
ISSUE
Does the Koscot scheme constitute an investment contract?
RULING
The proper standard in determining whether a scheme constitutes an investment
contract is that explicated y the Ninth Circuit in SEC v. Glen W. Turner
Enterprises, Inc. In that case, the court announced that the critical inquiry is
whether the efforts made by those other than the investor are the undeniably
significant ones, those essential managerial efforts which affect the failure or
success of the enterprise. The promotional scheme confronting the Ninth Circuit
in SEC v. Glen W. Turner Enterprises, Inc. is largely paralleled by that exposed
here. As in the Koscot scheme, the initial task of a purchaser of a Dare to be Great
(Dare) plan was to lure prospects to the meetings, denominated Adventure
Meetings. These were characterized by the same overzealous and emotionally
charged atmosphere at which the illusion of affluence fostered in Opportunity
Meetings was created and relied upon in securing sales. The Adventure Meetings
were run according to script, but as the Ninth Circuit noted, The Dare People, not
the purchaser-salesmen, run the meetings and do the selling. Considerable effort
was exerted to consummate the sale at the Adventure Meeting, with the sale
sometimes being closed by the investor but frequently by Dare salesmen. The
Ninth Circuits assessment of the significance of these facts was as follows: In this
case, Dares source of income is from selling the Adventures and the Plan. The
purchaser is sold the idea that he will get a fixed part of the proceeds of the sales.
In essence, to get that share, he invests three things: his money, his efforts to fins
prospects and bring them to the meetings, and whatever it costs him to create an
illusion of his own affluence. He invests them in Dares get-rich quick scheme.
What he buys is a share in the proceeds of the selling efforts of Dare. Those
efforts are the sine qua non of the scheme; those efforts are what produce the
money which is to make him rich. In essence, it is the right to share in the

proceeds of those efforts that he buys. In our view, the scheme is no less an
investment contract merely because he contributes some effort as well as money
to get into it.

NACPIL v. INTERNATIONAL BROADCASTING CORPORATION


G.R. No. 144767, March 21, 2002
KAPUNAN
DOCTRINE
As petitioners appointment as comptroller required the approval and formal
action of the IBCs Board of Directors to become valid, it is clear therefore holds
that petitioner is a corporate officer whose dismissal may be the subject of a
controversy cognizable by the SEC.
FACTS
Dily Dany Nacpil was Assistant General Manager for Finance/Administration and
Comptroller of Intercontinental Broadcasting Corporation (IBC) from 1996 until
April 1997. When Emiliano Templo was appointed to replace IBC President
Tomas Gomez III sometime in March 1997, Templo told the Board of Directors
that as soon as he assumes the IBC presidency, he would terminate the services
of Nacpil. Apparently, Templo blamed Nacpil for the prior mismanagement of
IBC. Upon his assumption of the IBC presidency, Templo allegedly harassed,
insulted, humiliated and pressured Nacpil into resigning until the latter was forced
to retire. However, Templo refused to pay him his retirement benefits, allegedly
because he had not yet secured the clearances from the Presidential Commission
on Good Government and the Commission on Audit. Furthermore, Templo
allegedly refused to recognize Nacpils employment, claiming that petitioner was
not the Assistant General Manager/Comptroller of IBC but merely usurped the
powers of the Comptroller. Hence, Nacpil filed with the Labor Arbiter a complaint
for illegal dismissal and non-payment of benefits.
IBC filed a motion to dismiss alleging that the Labor Arbiter had no jurisdiction
over the case. IBC contended that Nacpil was a corporate officer who was duly
elected by the Board of Directors of IBC; hence, the case qualifies as an intracorporate dispute falling within the jurisdiction of the SEC. The motion was
denied. The Labor Arbiter rendered a decision stating that petitioner had been
illegally dismissed. IBC appealed to the NLRC but the same was dismissed. The
CA, upon the filing of a petition, ruled in favor of IBC. Hence, this petition.
ISSUE
Whether the Labor Arbiter had jurisdiction over the case for illegal dismissal and
non-payment of benefits filed by petitioner
RULING
The Court finds that the Labor Arbiter had no jurisdiction over the same.
Under Presidential Decree No. 902-A (the Revised Securities Act), the law in
force when the complaint for illegal dismissal was instituted by petitioner in 1997,
one of the cases that fall under the exclusive of the SEC was: controversies in the
election or appointment of directors, trustees, officers, or managers of such
corporations, partnerships or associations. The Court has consistently held that
there are two elements to be considered in determining whether the SEC has
jurisdiction over the controversy, to wit: (1) the status or relationship of the
parties; and (2) the nature of the question that is the subject of their controversy.

Nacpil argues that he is not a corporate officer of the IBC but an employee thereof
since he had not been elected nor appointed as Comptroller and Assistant Manager
by the IBCs Board of Directors. He points out that he had actually been
appointed as suchby the IBCs General Manager, Ceferino Basilio. In support of
his argument, Nacpil underscores the fact that the IBCs By-Laws does not even
include the position of comptroller in its roster of corporate officers. He therefore
contends that his dismissal is a controversy falling within the jurisdiction of the
labor courts.
Nacpils argument is untenable. Even assuming that he was in fact appointed by
the General Manager, such appointment was subsequently approved by the Board
of Directors of the IBC. That the position of Comptroller is not expressly
mentioned among the officers of the IBC in the By-Laws is of no moment,
because the IBCs Board of Directors is empowered under Section 25 of the
Corporation Code and under the corporations By-Laws to appoint such other
officers as it may deem necessary.
As petitioners appointment as comptroller required the approval and formal
action of the IBCs Board of Directors to become valid, it is clear therefore holds
that petitioner is a corporate officer whose dismissal may be the subject of a
controversy cognizable by the SEC under Section 5(c) of P.D. 902-A which
includes controversies involving both election and appointment of corporate
directors, trustees, officers, and managers. Had petitioner been an ordinary
employee, such board action would not have been required.