BALANUECO, Richelle Queen Z.

164124

Philippine National Bank v. Merelo B. Aznar

G.R. No. 171805

Facts:

In 1958, Rural Insurance and Surety Company, Inc. (RISCO) ceased operations due to
business reverses. Aznar, et. al contributed a total amount of P212, 720.00, which was
used to purchase three (3) parcels of land, all issued in the name of RISCO. The amount
contributed constituted as liens and encumbrances as annotated in the titles of said lots.
Such annotation was made pursuant to the Minutes of the Special Meeting of the Board
of Directors of RISCO (Minutes) wherein the President explained that seven of its
stockholders contributed for the rehabilitation of the company and that the respective
contributions shall constitute as lien or interest on the property. Various subsequent
annotations were made on the title including Notice of Attachment and Writ of Execution
in favor of Philippine National Bank (PNB). As a result, being the lone and highest bidder,
a Certificate of Sale was issued in favor of the bank. Thereafter, a Final Deed of Sale was
also issued and a new Certificate of Title was issued in the name of PNB.

Aznar, et. al, filed a complaint seeking the quieting of their supposed title to the subject
properties, declaratory relief, cancellation of TCT and reconveyance with temporary
restraining order and preliminary injunction. PNB on the other hand countered that
plaintiffs have no right of action for quieting of title since the order of the court directing
the issuance of titles to PNB had already become final and executory and their validity
cannot be attacked except in a direct proceeding for their annulment. Defendant further
asserted that plaintiffs, as mere stockholders of RISCO do not have any legal or equitable
right over the properties of the corporation.

Issue:

Whether Aznar et. al has legal and/or equitable rights over the properties to ask for the
quieting of title of the properties.

Held

No. Aznar, et. al., have no right to ask for the quieting of title of the properties at issue
because they have no legal and/or equitable rights over the properties that are derived
from the previous registered owner which is RISCO, the pertinent provision of the law is
Section 2 of the Corporation Code (Batas Pambansa Blg. 68), which states that [a]
corporation is an artificial being created by operation of law, having the right of succession
and the powers, attributes and properties expressly authorized by law or incident to its
existence. A corporation has a personality separate and distinct from those of its
stockholders and other corporations to which it may be connected. As ruled
in Magsaysay-Labrador v. Court of Appeals that the interest of the stockholders over the
properties of the corporation is merely inchoate and therefore does not entitle them to
intervene in litigation involving corporate property.

Aznar, et al., who are stockholders of RISCO, cannot claim ownership over the properties
at issue in this case on the strength of the Minutes which, at most, is merely evidence of
a loan agreement between them and the company. There is no indication or even a
suggestion that the ownership of said properties were transferred to them which would
require no less that the said properties be registered under their names. For this reason,
the complaint should be dismissed since Aznar, et al., have no cause to seek a quieting
of title over the subject properties.