RIVERA, Vs.HE HON. ALFREDO C.

FLORENDO

Facts:
Petitioner, a Phil corporation with a capital stock of P1,000,000.00 divided into 10,000 shares of P100.00 par value
each by the herein petitioner Rivera and four (4) other incorporators. After, Rivera increased his subscription from the
original 1,250 to a total of 4899 shares (Rollo, p. 4).

Subsequently, Isamu Akasako, a Japanese national and co-petitioner who is allegedly the real owner of the shares of
stock in the name of petitioner Rivera, sold 2550 shares of the same to respondent Milagros Tsuchiya for a
consideration of P440, 000.00 with the assurance that Tsuchiya will be made the President and Lourdes Jureidini a
director after the purchase. Rivera who was in Japan also assured respondents by overseas call that he will sign the
stock certificates because I.Akasako is the real owner. But after the sale was consummated and the consideration
was paid with a receipt of payment, Rivera refused to make the endorsement unless he is also paid.

Also, other incorporators sold their shares to both respondent Jureidini and Tsuchiya such that both respondents
became the owners of a total of 3300 shares or the majority out of 5,649 outstanding subscribed shares of the
corporation, and that there was no dispute as to the legality of the transfer of the stock certificate to Jureidini, all of
which bear the signatures of the president and the secretary with the proper indorsements of the respective owners.
Though, respondents attempted several times to register their stock certificates with the corporation but the latter
refused to register the same. Thus, respondents filed a special civil action for mandamus and damages with
preliminary mandatory injunction and/or receivership naming herein petitioners as respondents, Granted, issued an
order for a writ of preliminary mandatory injunction authorizing respondent Jureidini and Tsuchiya to manage the
corporation's hotel and restaurant, upon the filing of a bond - P30,000.00. Then opposed. Hence, this petition.

Issues:
1. WON it is the ordinary court and not SEC that has jurisdiction to entertain the case; and WQN respondents
are deemed stockholders.
2. Won mandamus and preliminary injunction would lie in the present controversy

Held:
1. No.
It has already been settled that an intracorporate controversy would call for the jurisdiction of the Securities and
Exchange Commission On the other hand, an intra-corporate controversy has been defined as "one which arises
between a stockholder and the corporate. There is no distinction, qualification, nor any exemption whatsoever). This
Court has also ruled that cases of respondents who are not shareholders of the corporation, cannot be a "controversy
arising out of intracorporate or partnership relations between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or association, of which they are stockholders, members
or associates, respectively."

Confirmed by this Court, "shares of stock may be transferred by delivery to the transferee of the certificate properly
indorsed.’Title may be vested in the transferee by delivery of the certificate with a written assignment or indorsement
thereof ' (SEC. 63. Certificate of stock and transfer of shares.)

As the bone of contention in this case, is the refusal of petitioner Rivera to indorse the shares of stock in question and
the refusal of the Corporation to register private respondents' shares in its books, there is merit in the findings of the
lower court that the present controversy is not an intracorporate controversy; respondents are not yet stockholders;
they are only seeking to be registered as stockholders because of an alleged sale of shares of stock to them.
Therefore, as the petition is filed by outsiders not yet members of the corporation, jurisdiction properly belongs to the
regular courts.

2. No.
Respondents' principal action of mandamus is an improper course of action.
Mandamus wig not lie in the instant case where the shares of stock in question are not even indorsed by the
registered owner Rivera who is specifically resisting the registration thereof in the books of the corporation. Even the
shares of stock which were purchased respondents from the other incorporators cannot also be the subject of
mandamus on the strength of mere indorsement of the supposed owners of said shares in the absence of express
instructions from them. The rights of the parties will have to be threshed out in an ordinary action.

A mandatory injunction is granted only on a showing (a) that the invasion of the right is material and substantial; (b)
the right of complainant is clear and unmistakable; and (c) there is an urgent and permanent necessity for the writ to
prevent serious damage. Issuance would be justified only in clear cases; that it is generally improper to issue it before
final hearing because it tends to do more than maintain the status quo; that it should be issued only where there is a
willful and unlawful invasion of plaintiff's right and that the latter's case is one free from doubt and dispute.

Court in the instant case violated the fundamental rule of injunctions that a mandatory injunction will not issue in favor
of a party whose rights are not clear and free of doubt or as yet undetermined). It will be recalled that the disputed
shares of stock were purchased not from the registered owner but from a Japanese national who allegedly was the
real owner thereof. It was also alleged that the registered owner was only a dummy of Akasako. . Nonetheless, these
are contentious issues that should properly be ventilated at the trial on the merits.

Another fundamental rule which appears to have been violated in the case at bar is that no advantage may be given
to one to the prejudice of the other, a court should not by means of a preliminary injunction transfer the property in
litigation from the possession of one party to another where the legal title is in dispute and the party having
possession asserts ownership thereto. Here, Rivera is the registered majority and controlling stockholder of the
corporation before the ensuing events transpired. By the issuance of the Writ in question he appears to have been
deprived of his rights as stockholder thereof apart from his status as Chairman of the Board and President of the
corporation, with Akasako as the Manager of the two restaurants.

WHEREFORE orders Judge are SET ASIDE; the complaint (special civil action for mandamus with damages, etc.)
should ordinarily be dismissed.

MERRILL LYNCH FUTURES, INC., vs.HON. COURT OF APPEALS

Facts:
November 23, 1987, Merrill Lynch Futures, Inc. (ML FUTURES) filed a complaint against the Spouses Pedro M. Lara
and Elisa G. Lara for the recovery of a debt and interest, damages, and attorney's fees. In its complaint ML
FUTURES described itself as —

a) A non-resident foreign corporation, not doing business in the Philippines, duly organized by virtue of the
laws of the state of USA.
b) A "futures commission merchant" duly licensed in the United States, essentially functioning as a broker
It also defined a "futures contract" as a "contractual commitment to buy and sell a standardized quantity of a
particular item at a specified future settlement date and at a price agreed upon, with the purchase or sale being
executed on a regulated futures exchange."

In its complaint ML FUTURES alleged:

1) September 28, 1983 it entered into a Futures Customer Agreement with the defendant spouses in which it agreed
to act as the latter's broker for the purchase and sale of futures contracts in the U.S.;
2) that pursuant to the contract, orders to buy and sell futures contracts were transmitted to ML FUTURES by
the Lara Spouses "through the facilities of Merrill Lynch Philippines, Inc., Phil corp, a company servicing plaintiffs
customers; 2
3) Lara Spouses "knew and were duly advised that Merrill Lynch Philippines, Inc. was not a broker in futures
contracts," and that it "did not have a license from the SEC to operate as a commodity trading advisor
4) through said Merrill Lynch ., the Lara Spouses actively traded in futures contracts, including "stock index futures"
for 4 years or so, i.e., from 1983 to October, 1987, there being more or less regular accounting and corresponding
remittances of money made between the spouses and ML FUTURES;
5)Because of a loss amounting to US$160,749.69 incurred in respect of three (3) transactions involving "index
futures," and after setting this off against an amount of US$75,913.42 then owing by ML FUTURES to the Lara
Spouses, said spouses became indebted to ML FUTURES for the ensuing balance of US$84,836.27, which the latter
asked them to pay;
6) Lara Spouses refused to pay this balance, "alleging transactions were null and void because Merrill, servicing
accounts of plaintiff, had no license to operate as a 'commodity and/or financial futures broker.'"

ML FUTURES prayed (1) for a preliminary attachment against defendant spouses' properties and (2) for judgment,
after trial, sentencing the spouses to pay ML FUTURES damages. Preliminary attachment issued ex parte and the
defendant spouses and then filed a motion to dismiss on the grounds that
(1) ML FUTURES had "no legal capacity to sue" and
(2) Its "complaint states no cause of action since . . . (it) is not the real party in interest."

January 12, 1988, TC promulgated an Order sustaining the motion to dismiss, directing the dismissal of the case and
discharging the writ of preliminary attachment. Denied ML FUTURES's motion for reconsideration, CA affirmed the
TC judgment. It declared that the TC had seen "through the charade in the representation of MLPI and the plaintiff
that MLPI is only a trading advisor and in fact it is a conduit in the plaintiff's business transactions in the Philippines as
a basis for invoking the provisions of Section 133 of the Corporation Code," ** the evidence established that plaintiff
had in fact been "doing business" in this country in legal contemplation, Sec. 1. Definition and scope of this ACT.

Issues:
1. WON it is established that ML FUTURES was doing business in the Philippines without a license; and it
were so, WON it is the real party in interest.
2. WON Lara Spouses are now estopped to impugn ML FUTURES' capacity to sue them in the courts.

Held:
1. Yes.
On the ground that the plaintiff has no legal capacity to sue — may be understood in two senses: one, that the
plaintiff is prohibited or otherwise incapacitated by law to institute suit in Philippine Courts or two, although not
otherwise incapacitated in the sense just stated, that it is not a real party in interest.

Here, Lara Spouses contend that ML Futures has no capacity to sue them because the transactions subject of the
complaint were had by them, not with the plaintiff ML FUTURES, but with Merrill Lynch Pierce Fenner & Smith, Inc.
Evidence is quite obviously needed in this situation, for it is not to be expected that said ground, or any facts from
which its existence may be inferred, will be found in the averments of the complaint. When such a ground is asserted
in a motion to dismiss, the general rule governing evidence on motions applies.

No affidavit or deposition attached to the Lara Spouses' motion to dismiss or proffered in proof of the averments of
their motion. The motion was not verified. What the spouses did do was to refer in their motion to documents which
purported to establish that it was not with ML FUTURES that they had theretofore been dealing, but another, distinct
entity, Merrill, Inc. No objections respecting the genuineness of the documents, nor of their relevance to at least one
of the grounds for dismissal — i.e., the prohibition on suits in Philippine Courts by foreign corporations doing business
in the country without license — it would have been a superfluity for the Court to require prior proof of their
authenticity, and no error may be ascribed to the TC in taking account of them in the determination of the motion on
the ground, not that the complaint fails to state a cause of action — as regards which evidence is improper and
impermissible — but that the plaintiff has no legal capacity to sue — respecting which proof may and should be
presented.

The Court is satisfied that the facts on record adequately establish that ML FUTURES, operating in the United States,
had indeed done business with the Lara Spouses in the Philippines over several years, had done so at all times
through Merrill Lynch Philippines, Inc. (MLPI), a corporation organized in this country, and had executed all these
transactions without ML FUTURES being licensed to so transact business here, and without MLPI being authorized
to operate as a commodity futures trading advisor (SEC,TC and CA findings).

The Court is satisfied, too, that the Laras did transact business with ML FUTURES through its agent corporation
organized in the Philippines, it being unnecessary to determine whether this domestic firm was MLPI (Merrill Lynch
Philippines, Inc.) or Merrill Lynch Pierce Fenner & Smith (MLPI's alleged predecessor). The fact is that ML FUTURES
did deal with futures contracts in exchanges in the United States in behalf and for the account of the Lara Spouses,
and that on several occasions the latter received account documents and money in connection with those
transactions.

2. Yes.
The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same
by entering into a contract with it. And the "doctrine of estoppel to deny corporate existence applies to foreign as well
as to domestic corporations;" "one who has dealt with a corporation of foreign origin as a corporate entity is estopped
to deny its corporate existence and capacity." The principle "will be applied to prevent a person contracting with a
foreign corporation from later taking advantage of its noncompliance with the statutes.
The general rule that in the absence of fraud of person who has contracted or otherwise dealt with an association in
such a way as to recognize and in effect admit its legal existence as a corporate body is thereby estopped to deny its
corporate existence in any action leading out of or involving such contract or dealing, unless its existence is attacked
for causes which have arisen since making the contract or other dealing relied on as an estoppel and this applies to
foreign as well as domestic corporations

There would seem to be no question that the Laras received benefits generated by their business relations with ML
FUTURES. Those business relations, according to the Laras themselves, spanned a period of seven (7) years; and
they evidently found those relations to be of such profitability as warranted their maintaining them for that not
insignificant period of time; otherwise, it is reasonably certain that they would have terminated their dealings with ML
FUTURES much, much earlier. In fact, even as regards their last transaction, in which the Laras allegedly suffered a
loss in the sum of US$160,749.69, the Laras nonetheless still received some monetary advantage, for ML FUTURES
credited them with the amount of US$75,913.42 then due to them, thus reducing their debt to US$84,836.27. Given
these facts, and assuming that the Lara Spouses were aware from the outset that ML FUTURES had no license to do
business in this country and MLPI, no authority to act as broker for it, it would appear quite inequitable for the Laras
to evade payment of an otherwise legitimate indebtedness due and owing to ML FUTURES upon the plea that it
should not have done business in this country in the first place, or that its agent in this country, MLPI, had no license
either to operate as a "commodity and/or financial futures broker." Wherefore, Ca reversed and set aside.