Lapu-lapu Foundation, Inc. vs.

CA, 421 SCRA 329

Facts:
Sometime in 1977, Elias Q. Tan, then President of Lapulapu Foundation, Inc., obtained
four loans from Allied Banking Corporation covered by four promissory notes in the
amounts of P100,000 each. As of 23 January 1979, the entire obligation amounted to
P493,566.61 and despite demands made on them by the Bank, Tan and the foundation
failed to pay the same. The Bank was constrained to file with the Regional Trial Court of
Cebu City, Branch 15, a complaint seeking payment by Tan and the foundation, jointly
and solidarily, of the sum of P493,566.61 representing their loan obligation, exclusive of
interests, penalty charges, attorney’s fees and costs. In its answer to the complaint, the
Foundation denied incurring indebtedness from the Bank alleging that the loans were
obtained by Tan in his personal capacity, for his own use and benefit and on the strength
of the personal information he furnished the Bank. The Foundation maintained that it
never authorized Tan to co-sign in his capacity as its President any promissory note and
that the Bank fully knew that the loans contracted were made in Tan’s personal capacity
and for his own use and that the Foundation never benefited, directly or indirectly,
therefrom.

The Foundation then interposed a cross-claim against Tan alleging that he, having
exceeded his authority, should be solely liable for said loans, and a counterclaim against
the Bank for damages and attorney’s fees. For his part, Tan admitted that he contracted
the loans from the Bank in his personal capacity. The parties, however, agreed that the
loans were to be paid from the proceeds of Tan’s shares of common stocks in the
Lapulapu Industries Corporation, a real estate firm. The loans were covered by
promissory notes which were automatically renewable (“rolled-over”) every year at an
amount including unpaid interests, until such time as Tan was able to pay the same from
the proceeds of his aforesaid shares. According to Tan, the Bank’s employee required
him to affix two signatures on every promissory note, assuring him that the loan
documents would be filled out in accordance with their agreement. However, after he
signed and delivered the loan documents to the Bank, these were filled out in a manner
not in accord with their agreement, such that the Foundation was included as party
thereto. Further, prior to its filing of the complaint, the Bank made no demand on him.

After due trial, the court rendered judgment (1) requiring Tan and the Foundation to pay
jointly and solidarily to the Bank the amount of P493,566.61 as principal obligation for
the four promissory notes, including all other charges included in the same, with interest
at 14% per annum, computed from 24 January 1979, until the same are fully paid, plus
2% service charges and 1% monthly penalty charges; (2) requiring Tan and the
Foundation to pay jointly and solidarily, attorney’s fees in the equivalent amount of 25%
of the total amount due from them on the promissory notes, including all charges; and (3)
requiring Tan and the Foundation to pay jointly and solidarily litigation expenses of
P1,000.00 plus costs of the suit. On appeal, the CA affirmed with modification the
judgment of the court a quo by deleting the award of attorney’s fees in favor of the Bank
for being without basis. Tan and the foundation filed the petition for review on certiorari.
Issue:
1 Whether Tan and the foundation should be held jointly and solidarily liable.
2 Whether the foundation gave Tan an apparent authority to deal with the Bank.

Held:
1. The appellate court did not err in holding Tan and the foundation jointly and solidarily
liable as it applied the doctrine of piercing the veil of corporate entity. Tan and the
foundation cannot hide behind the corporate veil under the following circumstances: "The
evidence shows that Tan has been representing himself as the President of Lapulapu
Foundation, Inc. He opened a savings account and a current account in the names of the
corporation, and signed the application form as well as the necessary specimen signature
cards twice, for himself and for the foundation. He submitted a notarized Secretary’s
Certificate from the corporation, attesting that he has been authorized, inter alia, to sign
for and in behalf of the Lapulapu Foundation any and all checks, drafts or other orders
with respect to the bank; to transact business with the Bank, negotiate loans, agreements,
obligations, promissory notes and other commercial documents; and to initially obtain a
loan for P100,000.00 from any bank. Under these circumstances, the foundation is liable
for the transactions entered into by Tan on its behalf.

2. Per its Secretary’s Certificate, the Foundation had given its President, Tan, ostensible
and apparent authority to inter alia deal with the Bank. Accordingly, the Foundation is
estopped from questioning Tan’s authority to obtain the subject loans from the
respondent Bank. It is a familiar doctrine that if a corporation knowingly permits one of
its officers, or any other agent, to act within the scope of an apparent authority, it holds
him out to the public as possessing the power to do those acts; and thus, the corporation
will, as against anyone who has in good faith dealt with it through such agent, be
estopped from denying the agent’s authority.
 Philippine Stock Exchange, Inc. vs. CA, 281 SCRA 232
Facts:
Puerto Azul Land, Inc. (PALI) is a corporation engaged in the real estate business. PALI
was granted permission by the Securities and Exchange Commission (SEC) to sell its
shares to the public in order for PALI to develop its properties.

PALI then asked the Philippine Stock Exchange (PSE) to list PALI’s stocks/shares to
facilitate exchange. The PSE Board of Governors denied PALI’s application on the
ground that there were multiple claims on the assets of PALI. Apparently, the Marcoses,
Rebecco Panlilio (trustee of the Marcoses), and some other corporations were claiming
assets if not ownership over PALI.

PALI then wrote a letter to the SEC asking the latter to review PSE’s decision. The SEC
reversed PSE’s decisions and ordered the latter to cause the listing of PALI shares in the
Exchange.

ISSUE:
Whether or not it is within the power of the SEC to reverse actions done by the PSE.

HELD:
Yes. The SEC has both jurisdiction and authority to look into the decision of PSE
pursuant to the Revised Securities Act and for the purpose of ensuring fair administration
of the exchange. PSE, as a corporation itself and as a stock exchange is subject to SEC’s
jurisdiction, regulation, and control. In order to insure fair dealing of securities and a fair
administration of exchanges in the PSE, the SEC has the authority to look into the rulings
issued by the PSE. The SEC is the entity with the primary say as to whether or not
securities, including shares of stock of a corporation, may be traded or not in the stock
exchange.

HOWEVER, in the case at bar, the Supreme Court emphasized that the SEC may only
reverse decisions issued by the PSE if such are tainted with bad faith. In this case, there
was no showing that PSE acted with bad faith when it denied the application of PALI.
Based on the multiple adverse claims against the assets of PALI, PSE deemed that
granting PALI’s application will only be contrary to the best interest of the general
public. It was reasonable for the PSE to exercise its judgment in the manner it deems
appropriate for its business identity, as long as no rights are trampled upon, and public
welfare is safeguarded.
 Evangelista vs. Santos, 86 Phil 837
Facts:
Plaintiff’s are minority stockholders of the Vitali Lumber Company, Inc., a Philippine
corporation organized for the exploitation of a lumber concession in Zamboanga,
Philippines; that defendant holds more than 50 per cent of the stocks of said corporation
and also is and always has been the president, manager, and treasurer thereof; and that
defendant, in such triple capacity, through fault, neglect, and abandonment allowed its
lumber concession to lapse and its properties and assets to disappear, thus causing the
complete ruin of the corporation and total depreciation of its stocks. Their complaint
therefore prays for judgment requiring defendant: (1) to render an account of his
administration of the corporate affairs and assets: (2) to pay plaintiffs the value of their
respective participation in said assets on the basis of the value of the stocks held by each
of them; and (3) to pay the costs of suit.

The complaint does not give plaintiffs’ residence, but, for purposes of venue, alleges that
defendant resides at 2112 Dewey Boulevard, corner Libertad Street, Pasay, province of
Rizal. Having been served with summons at that place, defendant filed a motion for the
dismissal of the complaint on the ground of improper venue and also on the ground that
the complaint did not state a cause of action in favor of plaintiffs.

In support of the objection to the venue, defendant states that he is a resident of Iloilo
City and not of Pasay, defendant also presented further affidavit to the effect that while
he has a house in Pasay, where members of his family who are studying in Manila live
and where he himself is sojourning for the purpose of attending to his interests in Manila,
yet he has his permanent residence in the City of Iloilo where he is registered as a voter
for election purposes and has been paying his residence certificate.

Issue:
Whether or not defendant is a resident of Iloilo, therefore, there was no proper venue
when he was served with summons in Pasay.

Held:
The facts in this case show that the objection to the venue is well-founded. Where the
plaintiff is a nonresident and the contract upon which suit is brought was made in the
Philippine Islands it may safely be asserted that the convenience of the defendant would
be best served by a trial in the province where he resides. The fact that defendant was
sojourning in Pasay at the time he was served with summons does not make him a
resident of that place for purposes of venue. Residence is “the permanent home, the place
to which, whenever absent for business or pleasure, one intends to return.