Vicente vs Geraldez and Hi Cement CorporationG.R. No. L-32473 July 31, 1973Bernabe vs Hi Cement Corporation and GeraldezG.R. No. L-32483 July 31, 1973

Facts:The two cases are herein decided jointly because they proceed from the same case and involve in substance the same question of law. Respondent Hi Cement Corporation filed with CFI of Bulacan complaint for injunction and damages against herein petitioners Juan Bernabe et al regarding the rightful possession of a land covered by the alleged Deed of Sale and Transfer obtained by the corporation. The court 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. In an Order issued, the court approved the report "with the conformity of all the parties in this case." 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. Counsels of the parties executed and submitted to the court for its approval the Compromise Agreement. Pursuant to the terms of the said compromise agreement the counsels of both parties submitted the names of the persons designated by them as their respective commissioners.

Atty. Ventura, one of the three lawyers for HI Cement Corporation, filed with the trial court a manifestation stating that he sent a copy of the Compromise Agreement to Mr. Antonio Diokno, President of the corporation, requesting the latter to intercede with the Board of Directors for the confirmation or approval of the commitment made by the plaintiff's lawyers to abide by the decision of the Court based on the reports of the Commissioners. In that letter Mr. Diokno said:

While I realize your interest in cooperating with the Court in its desire to expedite the disposition of the case, this commitment would deprive us of the right to appeal if we do not agree with the valuation set by the Court. Our Board, therefore, cannot waive its rights; only when it knows the value set by the Court on the properties can it decide whether to abide by it or appeal therefrom. I would like to stress that, under the law, the compromise agreement requires the express approval of our Board of Directors to be binding on our corporation. Such an approval, I regret to say, cannot be obtained at this time.

However, Bernabe answered praying that this be stricken out of the records on the ground that its filing after the consolidation of the Compromised agreement cast suspicion on the sincerity of the agreement; that Atty. Ventura himself was the first to sign the agreement and the rest of the representatives also signed partaking the nature of a stipulation of facts mutually agreed upon by the parties and approved by the court, hence, was binding and conclusive upon the parties; and that the nomination by the plaintiff of Mr. Larry G. Marquez as its Commissioner pursuant to the Compromise Agreement, was a clear indication of the plaintiff's tacit approval of the terms and conditions of the Compromise Agreement, if not an implied ratification of Atty. Ventura's acts. The court rendered a decision in which held that the Consolidated Report of the Commissioners is extensively quoted. Defendant Juan Bernabe filed an urgent motion for execution of judgment anchored on the proposition that the judgment, being based on a compromise agreement, is not appealable and is, on the other hand, immediately executory. The respondent court granted said motion.

Hi Cement filed with the court a motion for new trial on the ground that the decision of the court dated March 13, 1970 is null and void because it was based on the Compromise Agreement which was itself null and void for want of a special authority by the plaintiff's lawyers to enter into the said agreement. Hence, this petitionIssue:whether the respondent court, in setting aside its decision and denying the motions for execution of said decision, had acted without or in excess of its jurisdiction or with grave abuse of discretion.

Held: No. Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a judgment.Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special authority, compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash. The Compromise Agreement was signed only by the lawyers for petitioners and by the lawyers for private respondent corporation. It is not disputed that the lawyers of respondent corporation had not submitted to the Court any written authority from their client to enter into a compromise. A corporation officer's power as an agent of the corporation must therefore be sought from the statute, the charter, the by-laws, or in a delegation of authority to such officer, from the acts of board of directors, formally expressed or implied from a habit or custom of doing business.In the case at bar no provision of the charter and by-laws of the corporation or any resolution or any other act of the board of directors of HI Cement Corporation has been cited. Absent such authority to enter into the compromise, the signature of Atty. Cardenas on the agreement would be legally ineffectual. For ratification can never be made "on the part of the corporation by the same persons who wrongfully assume the power to make the contract, but the ratification must be by the officer or governing body having authority to make such contract and, as we have seen, must be with full knowledge."

Equally inapposite is petitioners' invocation of the principle of estoppel. In the case at bar, except those made by Attys. Ventura, Cardenas and Magpantay, petitioners have not demonstrated any act or declaration of the corporation amounting to false representation or concealment of material facts calculated to mislead said petitioners. The acts or conduct for which the corporation may be liable under the doctrine of estoppel must be those of the corporation, its governing body or authorized officers, and not those of the purported agent who is himself responsible for the misrepresentation.

LINA LIM LAO, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.Facts: Version of the prosecutionPetitioner/Appellant Lina Lim Lao was a junior officer of Premiere Investment House (Premiere) in its Binondo Branch. As such officer, she was authorized to sign checks for and in behalf of the corporation. She met complainant Father ArtelijoPelijo, the provincial treasurer of the Society of the Divine Word through Mrs. Rosemarie Lachenal, a trader for Premiere. Father Palijo was authorized to invest donations to the society and had been investing the societys money with Premiere . All the checks were issued in favor of Artelijo A. Palijo and signed by Lao and TeoduloAsprec, who was the head of operations. When Father Palijo presented the checks for encashment, the same were dishonored for the reason Drawn Against Insufficient Funds (DAIF). Father Palijo immediately made demands on premiere to pay him the necessary amounts then filed an affidavit-complaint against Lao and Asprec for violation of B.P. 22. After preliminary investigation,[5] three Informations charging Lao and Asprec with the offense defined were filed. Version of the DefensePetitioner Lina Lim Lao wa san employee of Premiere Financing Corporation and in the regular course of her duties as a junior officer, she was required to co-sign checks drawn against the account of the corporation. The other co-signor was her head of office, Mr.TeoduloAsprec. Since part of her duties required her to be mostly in the field and out of the office, it was normal procedure for her to sign the checks in blank, that is, without the names of the payees, the amounts and the dates of maturity. It was likewise Mr.Asprec, as head of office, who alone decided to whom the checks were to be ultimately issued and delivered. Lao had no knowledge of the actual funds available in the corporate account. The power, duty and responsibility of monitoring and assessing the balances against the checks issued, and funding the checks thus issued, devolved on the corporations Treasury Department in its main office in Cubao, Quezon City, headed then by the Treasurer, Ms.VeronilynOcampo. All bank statements regarding the corporate checking account were likewise sent to the main branch in Cubao, Quezon City, and not in Binondo, Manila, where petitioner was holding office. The foregoing circumstances attended the issuance of the checks subject of the instant prosecution.The checks were issued to guarantee payment of investments placed by private complainant Palijo with Premiere Financing Corporation. In his transactions with the corporation, private complainant dealt exclusively with one Rosemarie Lachenal, a trader connected with the corporation, and he never knew nor in any way dealt with petitioner Lina Lim Lao at any time before or during the issuance of the delivery of the checks. When the checks were co-signed by petitioner, they were signed in advance and in blank, delivered to the Head of Operations, Mr.TeoduloAsprec, who subsequently filled in the names of the payee, the amounts and the corresponding dates of maturity. After Mr.Asprec signed the checks, they were delivered to private complainant Palijo. At the time Lao signed the checks, she had no knowledge of the sufficiency or insufficiency of the funds of the corporate account. When the checks were subsequently dishonored, private complainant sent a notice of said dishonor to Premier Financing Corporation at its head office in Cubao, Quezon City. Private complainant did not send notice of dishonor to petitioner. It was the head office in Cubao, Quezon City, which received notice of dishonor of the bounced checks. The dishonor of the check came in the wake of the assassination of the late Sen. Benigno Aquino, as a consequence of which event a majority of the corporations clients pre-terminated their investments. As a result of the financial crisis and distress, the Securities and Exchange Commission placed Premier Financing Corporation under receivership.May an employee who, as part of her regular duties, signs blank corporate checks -- with the name of the payee and the amount drawn to be filled later by another signatory -- and, therefore, does so without actual knowledge of whether such checks are funded, be held criminally liable for violation of Batas PambansaBilang 22 (B.P. 22), when checks so signed are dishonored due to insufficiency of funds? Does a notice of dishonor sent to the main office of the corporation constitute a valid notice to the said employee who holds office in a separate branch and who had no actual knowledge thereof? In other words, is constructive knowledge of the corporation, but not of the signatory-employee, sufficient?Court of Appeals dismissed the appeal of petitioner and affirming the decision of the Regional Trial Court of Manila.The IssueWON lack of actual knowledge of insufficiency of funds is a defense in a prosecution for violation of B.P. 22and that notice of dishonor sent to the main office of the corporation, and not to petitioner herself who holds office in that corporations branch office, does not constitute the notice mandated in Section 2 of BP 22; thus, there can be no prima facie presumption that she had knowledge of the insufficiency of funds.The Courts RulingYES. The petition is meritorious.Lack of Actual Knowledge of Insufficiency of FundsKnowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense.[15] There is a prima facie presumption of the existence of this element from the fact of drawing, issuing or making a check, the payment of which was subsequently refused for insufficiency of funds. It is important to stress, however, that this is not a conclusive presumption that forecloses or precludes the presentation of evidence to the contrary.In the present case, the fact alone that petitioner was a signatory to the checks that were subsequently dishonored merely engenders the prima facie presumption that she knew of the insufficiency of funds, but it does not render her automatically guilty under B.P. 22. The prosecution has a duty to prove all the elements of the crime, including the acts that give rise to the prima facie presumption; petitioner, on the other hand, has a right to rebut the prima facie presumption.[16] Therefore, if such knowledge of insufficiency of funds is proven to be actually absent or non-existent, the accused should not be held liable for the offense defined under the first paragraph of Section 1 of B.P. 22. Although the offense charged is a malumprohibitum, the prosecution is not thereby excused from its responsibility of proving beyond reasonable doubt all the elements of the offense, one of which is knowledge of the insufficiency of funds.Since Petitioner Lina Lim Lao signed the checks without knowledge of the insufficiency of funds, knowledge she was not expected or obliged to possess under the organizational structure of the corporation, she may not be held liable under B.P. 22. For in the final analysis, penal statutes such as B.P. 22 must be construed with such strictness as to carefully safeguard the rights of the defendant xx x.[22] The element of knowledge of insufficiency of funds having been proven to be absent, petitioner is therefore entitled to an acquittal.Lack of Adequate Notice of DishonorThere is another equally cogent reason for the acquittal of the accused. There can be no prima facie evidence of knowledge of insufficiency of funds in the instant case because no notice of dishonor was actually sent to or received by the petitioner.The notice of dishonor may be sent by the offended party or the drawee bank. The trial court itself found absent a personal notice of dishonor to Petitioner Lina Lim Lao by the drawee bank based on the unrebutted testimony of Ocampo (t)hat the checks bounced when presented with the drawee bank but she did not inform anymore the Binondo branch and Lina Lim Lao as there was no need to inform them as the corporation was in distress.[29] The Court of Appeals affirmed this factual finding. Pursuant to prevailing jurisprudence, this finding is binding on this Court.[30]Indeed, this factual matter is borne by the records. The records show that the notice of dishonor was addressed to Premiere Financing Corporation and sent to its main office in Cubao, Quezon City. Furthermore, the same had not been transmitted to Premieres Binondo Office where petitioner had been holding office.Likewise no notice of dishonor from the offended party was actually sent to or received by Petitioner Lao. Because no notice of dishonor was actually sent to and received by the petitioner, the prima facie presumption that she knew about the insufficiency of funds cannot apply. Section 2 of B.P. 22 clearly provides that this presumption arises not from the mere fact of drawing, making and issuing a bum check; there must also be a showing that, within five banking days from receipt of the notice of dishonor, such maker or drawer failed to pay the holder of the check the amount due thereon or to make arrangement for its payment in full by the drawee of such check.It has been observed that the State, under this statute, actually offers the violator a compromise by allowing him to perform some act which operates to preempt the criminal action, and if he opts to perform it the action is abated. This was also compared to certain laws[32] allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed firearms to the Government, without incurring any criminal liability.[33] In this light, the full payment of the amount appearing in the check within five banking days from notice of dishonor is a complete defense.[34] The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution. Premiere has no obligation to forward the notice addressed to it to the employee concerned, especially because the corporation itself incurs no criminal liability under B.P. 22 for the issuance of a bouncing check. Responsibility under B.P. 22 is personal to the accused; hence, personal knowledge of the notice of dishonor is necessary. Consequently, constructive notice to the corporation is not enough to satisfy due process. Moreover, it is petitioner, as an officer of the corporation, who is the latters agent for purposes of receiving notices and other documents, and not the other way around. It is but axiomatic that notice to the corporation, which has a personality distinct and separate from the petitioner, does not constitute notice to the latter. Thus, this Court exhorts the prosecutors and the police authorities concerned to exert their best to arrest and prosecute Asprec so that justice in its pristine essence can be achieved in all fairness to the complainant, Fr. ArtelijoPalijo, and the People of the Philippines. By this Decision, the Court enjoins the Secretary of Justice and the Secretary of Interior and Local Government to see that essential justice is done and the real culprit(s) duly-prosecuted and punished.WHEREFORE, the questioned Decision of the Court of Appeals affirming that of the Regional Trial Court, is hereby REVERSED and SET ASIDE. Petitioner Lina Lim Lao is ACQUITTED.

SHIEN CASAABusiness Organization II

Case No. 6

1. Case Digest:

G.R. No. 125469October 27, 1997

THE PHILIPPINE STOCK EXCHANGE, INC., petitioner,vs.THE HONORABLE COURT OF APPEALS,SECURITIES AND EXCHANGE COMMISSION and PUERTO AZUL LAND, INC., respondents.

Facts:

Puerto Azul Land, Inc. (PALI),a domestic real estatecorporation, had sought to offer its shares to the public inorder toraise fundsfor development of properties and pay itsloans with several banks.The Securities and Exchange Commission (SEC) then issued a Permit to Sell to thepublic.To facilitate the trading of its shares, PALI sought thecourse of trading of its shares through the Philippine Stock Exchange (PSE), for purpose ofwhich it filed a listingapplication.PSE received a letter from the Heirsof Marcos, requesting todefer PALIs application.It claimed that the late President Marcoswas the legal andbeneficial ownerofcertain propertiesclaimed by PALI as its assets which are subject of a sequestration proceeding before the Sandiganbayan.Consequently, in its regular meeting held on March 27, 1996, the Board of Governors of the PSE reached its decision to reject PALI's application, citing the existence of serious claims, issues and circumstances surrounding PALI's ownership over its assets that adversely affect the suitability of listing PALI's shares in the stock exchange.

On April 11, 1996, PALI wrote a letter to the SEC addressed to the then Acting Chairman, Perfecto R. Yasay, Jr., bringing to the SEC's attention the action taken by the PSE in the application of PALI for the listing of its shares with the PSE, and requesting that the SEC, in the exercise of its supervisory and regulatory powers over stock exchanges under Section 6(j) of P.D. No. 902-A, review the PSE's action on PALI's listing application and institute such measures as are just and proper under the circumstances.

The SEC therebyrendered decision reversing PSEs decision.A Motion for Reconsideration was filed by the latter, however, denied.

On appeal, the Court of Appeals upheld the decision of the SEC, affirming thelattersjurisdiction and authority to look into thedecision of PSE andfor the purpose ofensuring fair administration of the stockexchange.

Thus, this petition.

Issue:

Whether or not SEC had authority to order PSE to list the shares of PALIin thestock exchange.

Held:

No.

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 SECs 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 it. 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, the SECs actions shall be subject to business judgment rule, whereby the SEC and the courts are barred from intruding intobusiness judgments ofa corporation when the same are made in goodfaith.In the case at bar, 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 PALIs 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.

2. Full Text:

G.R. No. 125469October 27, 1997

THE PHILIPPINE STOCK EXCHANGE, INC., petitioner,vs.THE HONORABLE COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and PUERTO AZUL LAND, INC., respondents.

TORRES, JR., J.:

The Securities and Exchange Commission is the government agency, under the direct general supervision of the Office of the President, 1 with the immense task of enforcing the Revised Securities Act, and all other duties assigned to it by pertinent laws. Among its inumerable functions, and one of the most important, is the supervision of all corporations, partnerships or associations, who are grantees of primary franchise and/or a license or permit issued by the government to operate in the Philippines. 2 Just how far this regulatory authority extends, particularly, with regard to the Petitioner Philippine Stock Exchange, Inc. is the issue in the case at bar.

In this Petition for Review on Certiorari, petitioner assails the resolution of the respondent Court of Appeals, dated June 27, 1996, which affirmed the decision of the Securities and Exchange Commission ordering the petitioner Philippine Stock Exchange, Inc. to allow the private respondent Puerto Azul Land, Inc. to be listed in its stock market, thus paving the way for the public offering of PALI's shares.

The facts of the case are undisputed, and are hereby restated in sum.

The Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, had sought to offer its shares to the public in order to raise funds allegedly to develop its properties and pay its loans with several banking institutions. In January, 1995, PALI was issued a Permit to Sell its shares to the public by the Securities and Exchange Commission (SEC). To facilitate the trading of its shares among investors, PALI sought to course the trading of its shares through the Philippine Stock Exchange, Inc. (PSE), for which purpose it filed with the said stock exchange an application to list its shares, with supporting documents attached.

On February 8, 1996, the Listing Committee of the PSE, upon a perusal of PALI's application, recommended to the PSE's Board of Governors the approval of PALI's listing application.

On February 14, 1996, before it could act upon PALI's application, the Board of Governors of the PSE received a letter from the heirs of Ferdinand E. Marcos, claiming that the late President Marcos was the legal and beneficial owner of certain properties forming part of the Puerto Azul Beach Hotel and Resort Complex which PALI claims to be among its assets and that the Ternate Development Corporation, which is among the stockholders of PALI, likewise appears to have been held and continue to be held in trust by one RebeccoPanlilio for then President Marcos and now, effectively for his estate, and requested PALI's application to be deferred. PALI was requested to comment upon the said letter.

PALI's answer stated that the properties forming part of the Puerto Azul Beach Hotel and Resort Complex were not claimed by PALI as its assets. On the contrary, the resort is actually owned by Fantasia Filipina Resort, Inc. and the Puerto Azul Country Club, entities distinct from PALI. Furthermore, the Ternate Development Corporation owns only 1.20% of PALI. The Marcoses responded that their claim is not confined to the facilities forming part of the Puerto Azul Hotel and Resort Complex, thereby implying that they are also asserting legal and beneficial ownership of other properties titled under the name of PALI.

On February 20, 1996, the PSE wrote Chairman MagtanggolGunigundo of the Presidential Commission on Good Government (PCGG) requesting for comments on the letters of the PALI and the Marcoses. On March 4, 1996, the PSE was informed that the Marcoses received a Temporary Restraining Order on the same date, enjoining the Marcoses from, among others, "further impeding, obstructing, delaying or interfering in any manner by or any means with the consideration, processing and approval by the PSE of the initial public offering of PALI." The TRO was issued by Judge Martin S. Villarama, Executive Judge of the RTC of Pasig City in Civil Case No. 65561, pending in Branch 69 thereof.

In its regular meeting held on March 27, 1996, the Board of Governors of the PSE reached its decision to reject PALI's application, citing the existence of serious claims, issues and circumstances surrounding PALI's ownership over its assets that adversely affect the suitability of listing PALI's shares in the stock exchange.

On April 11, 1996, PALI wrote a letter to the SEC addressed to the then Acting Chairman, Perfecto R. Yasay, Jr., bringing to the SEC's attention the action taken by the PSE in the application of PALI for the listing of its shares with the PSE, and requesting that the SEC, in the exercise of its supervisory and regulatory powers over stock exchanges under Section 6(j) of P.D. No. 902-A, review the PSE's action on PALI's listing application and institute such measures as are just and proper under the circumstances.

On the same date, or on April 11, 1996, the SEC wrote to the PSE, attaching thereto the letter of PALI and directing the PSE to file its comments thereto within five days from its receipt and for its authorized representative to appear for an "inquiry" on the matter. On April 22, 1996, the PSE submitted a letter to the SEC containing its comments to the April 11, 1996 letter of PALI.

On April 24, 1996, the SEC rendered its Order, reversing the PSE's decision. The dispositive portion of the said order reads:

WHEREFORE, premises considered, and invoking the Commissioner's authority and jurisdiction under Section 3 of the Revised Securities Act, in conjunction with Section 3, 6(j) and 6(m) of Presidential Decree No. 902-A, the decision of the Board of Governors of the Philippine Stock Exchange denying the listing of shares of Puerto Azul Land, Inc., is hereby set aside, and the PSE is hereby ordered to immediately cause the listing of the PALI shares in the Exchange, without prejudice to its authority to require PALI to disclose such other material information it deems necessary for the protection of the investigating public.

This Order shall take effect immediately.

SO ORDERED.

PSE filed a motion for reconsideration of the said order on April 29, 1996, which was, however denied by the Commission in its May 9, 1996 Order which states:

WHEREFORE, premises considered, the Commission finds no compelling reason to reconsider its order dated April 24, 1996, and in the light of recent developments on the adverse claim against the PALI properties, PSE should require PALI to submit full disclosure of material facts and information to protect the investing public. In this regard, PALI is hereby ordered to amend its registration statements filed with the Commission to incorporate the full disclosure of these material facts and information.

Dissatisfied with this ruling, the PSE filed with the Court of Appeals on May 17, 1996 a Petition for Review (with Application for Writ of Preliminary Injunction and Temporary Restraining Order), assailing the above mentioned orders of the SEC, submitting the following as errors of the SEC:

I.SEC COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN ISSUING THE ASSAILED ORDERS WITHOUT POWER, JURISDICTION, OR AUTHORITY; SEC HAS NO POWER TO ORDER THE LISTING AND SALE OF SHARES OF PALI WHOSE ASSETS ARE SEQUESTERED AND TO REVIEW AND SUBSTITUTE DECISIONS OF PSE ON LISTING APPLICATIONS;

II.SEC COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN FINDING THAT PSE ACTED IN AN ARBITRARY AND ABUSIVE MANNER IN DISAPPROVING PALI'S LISTING APPLICATION;

III.THE ASSAILED ORDERS OF SEC ARE ILLEGAL AND VOID FOR ALLOWING FURTHER DISPOSITION OF PROPERTIES IN CUSTODIA LEGIS AND WHICH FORM PART OF NAVAL/MILITARY RESERVATION; AND

IV.THE FULL DISCLOSURE OF THE SEC WAS NOT PROPERLY PROMULGATED AND ITS IMPLEMENTATION AND APPLICATION IN THIS CASE VIOLATES THE DUE PROCESS CLAUSE OF THE CONSTITUTION.

On June 4, 1996, PALI filed its Comment to the Petition for Review and subsequently, a Comment and Motion to Dismiss. On June 10, 1996, PSE fled its Reply to Comment and Opposition to Motion to Dismiss.

On June 27, 1996, the Court of Appeals promulgated its Resolution dismissing the PSE's Petition for Review. Hence, this Petition by the PSE.

The appellate court had ruled that the SEC had both jurisdiction and authority to look into the decision of the petitioner PSE, pursuant to Section 3 3 of the Revised Securities Act in relation to Section 6(j) and 6(m) 4 of P.D. No. 902-A, and Section 38(b) 5 of the Revised Securities Act, and for the purpose of ensuring fair administration of the exchange. Both as a corporation and as a stock exchange, the petitioner is subject to public respondent's jurisdiction, regulation and control. Accepting the argument that the public respondent has the authority merely to supervise or regulate, would amount to serious consequences, considering that the petitioner is a stock exchange whose business is impressed with public interest. Abuse is not remote if the public respondent is left without any system of control. If the securities act vested the public respondent with jurisdiction and control over all corporations; the power to authorize the establishment of stock exchanges; the right to supervise and regulate the same; and the power to alter and supplement rules of the exchange in the listing or delisting of securities, then the law certainly granted to the public respondent the plenary authority over the petitioner; and the power of review necessarily comes within its authority.

All in all, the court held that PALI complied with all the requirements for public listing, affirming the SEC's ruling to the effect that:

. . . the Philippine Stock Exchange has acted in an arbitrary and abusive manner in disapproving the application of PALI for listing of its shares in the face of the following considerations:

1.PALI has clearly and admittedly complied with the Listing Rules and full disclosure requirements of the Exchange;

2.In applying its clear and reasonable standards on the suitability for listing of shares, PSE has failed to justify why it acted differently on the application of PALI, as compared to the IPOs of other companies similarly situated that were allowed listing in the Exchange;

3.It appears that the claims and issues on the title to PALI's properties were even less serious than the claims against the assets of the other companies in that, the assertions of the Marcoses that they are owners of the disputed properties were not substantiated enough to overcome the strength of a title to properties issued under the Torrens System as evidence of ownership thereof;

4.No action has been filed in any court of competent jurisdiction seeking to nullify PALI's ownership over the disputed properties, neither has the government instituted recovery proceedings against these properties. Yet the import of PSE's decision in denying PALI's application is that it would be PALI, not the Marcoses, that must go to court to prove the legality of its ownership on these properties before its shares can be listed.

In addition, the argument that the PALI properties belong to the Military/Naval Reservation does not inspire belief. The point is, the PALI properties are now titled. A property losses its public character the moment it is covered by a title. As a matter of fact, the titles have long been settled by a final judgment; and the final decree having been registered, they can no longer be re-opened considering that the one year period has already passed. Lastly, the determination of what standard to apply in allowing PALI's application for listing, whether the discretion method or the system of public disclosure adhered to by the SEC, should be addressed to the Securities Commission, it being the government agency that exercises both supervisory and regulatory authority over all corporations.

On August 15, 19961 the PSE, after it was granted an extension, filed the instant Petition for Review on Certiorari, taking exception to the rulings of the SEC and the Court of Appeals. Respondent PALI filed its Comment to the petition on October 17, 1996. On the same date, the PCGG filed a Motion for Leave to file a Petition for Intervention. This was followed up by the PCGG's Petition for Intervention on October 21, 1996. A supplemental Comment was filed by PALI on October 25, 1997. The Office of the Solicitor General, representing the SEC and the Court of Appeals, likewise filed its Comment on December 26, 1996. In answer to the PCGG's motion for leave to file petition for intervention, PALI filed its Comment thereto on January 17, 1997, whereas the PSE filed its own Comment on January 20, 1997.

On February 25, 1996, the PSE filed its Consolidated Reply to the comments of respondent PALI (October 17, 1996) and the Solicitor General (December 26, 1996). On May 16, 1997, PALI filed its Rejoinder to the said consolidated reply of PSE.

PSE submits that the Court of Appeals erred in ruling that the SEC had authority to order the PSE to list the shares of PALI in the stock exchange. Under presidential decree No. 902-A, the powers of the SEC over stock exchanges are more limited as compared to its authority over ordinary corporations. In connection with this, the powers of the SEC over stock exchanges under the Revised Securities Act are specifically enumerated, and these do not include the power to reverse the decisions of the stock exchange. Authorities are in abundance even in the United States, from which the country's security policies are patterned, to the effect of giving the Securities Commission less control over stock exchanges, which in turn are given more lee-way in making the decision whether or not to allow corporations to offer their stock to the public through the stock exchange. This is in accord with the "business judgment rule" whereby the SEC and the courts are barred from intruding into business judgments of corporations, when the same are made in good faith. the said rule precludes the reversal of the decision of the PSE to deny PALI's listing application, absent a showing of bad faith on the part of the PSE. Under the listing rules of the PSE, to which PALI had previously agreed to comply, the PSE retains the discretion to accept or reject applications for listing. Thus, even if an issuer has complied with the PSE listing rules and requirements, PSE retains the discretion to accept or reject the issuer's listing application if the PSE determines that the listing shall not serve the interests of the investing public.

Moreover, PSE argues that the SEC has no jurisdiction over sequestered corporations, nor with corporations whose properties are under sequestration. A reading of Republic of the Philippines vs. Sadiganbayan, G.R. No. 105205, 240 SCRA 376, would reveal that the properties of PALI, which were derived from the Ternate Development Corporation (TDC) and the Monte del Sol Development Corporation (MSDC). are under sequestration by the PCGG, and subject of forfeiture proceedings in the Sandiganbayan. This ruling of the Court is the "law of the case" between the Republic and TDC and MSDC. It categorically declares that the assets of these corporations were sequestered by the PCGG on March 10, 1986 and April 4, 1988.

It is, likewise, intimated that the Court of Appeals' sanction that PALI's ownership over its properties can no longer be questioned, since certificates of title have been issued to PALI and more than one year has since lapsed, is erroneous and ignores well settled jurisprudence on land titles. That a certificate of title issued under the Torrens System is a conclusive evidence of ownership is not an absolute rule and admits certain exceptions. It is fundamental that forest lands or military reservations are non-alienable. Thus, when a title covers a forest reserve or a government reservation, such title is void.

PSE, likewise, assails the SEC's and the Court of Appeals reliance on the alleged policy of "full disclosure" to uphold the listing of PALI's shares with the PSE, in the absence of a clear mandate for the effectivity of such policy. As it is, the case records reveal the truth that PALI did not comply with the listing rules and disclosure requirements. In fact, PALI's documents supporting its application contained misrepresentations and misleading statements, and concealed material information. The matter of sequestration of PALI's properties and the fact that the same form part of military/naval/forest reservations were not reflected in PALI's application.

It is undeniable that the petitioner PSE is not an ordinary corporation, in that although it is clothed with the markings of a corporate entity, it functions as the primary channel through which the vessels of capital trade ply. The PSE's relevance to the continued operation and filtration of the securities transactions in the country gives it a distinct color of importance such that government intervention in its affairs becomes justified, if not necessarily. Indeed, as the only operational stock exchange in the country today, the PSE enjoys a monopoly of securities transactions, and as such, it yields an immense influence upon the country's economy.

Due to this special nature of stock exchanges, the country's lawmakers has seen it wise to give special treatment to the administration and regulation of stock exchanges. 6

These provisions, read together with the general grant of jurisdiction, and right of supervision and control over all corporations under Sec. 3 of P.D. 902-A, give the SEC the special mandate to be vigilant in the supervision of the affairs of stock exchanges so that the interests of the investing public may be fully safeguard.

Section 3 of Presidential Decree 902-A, standing alone, is enough authority to uphold the SEC's challenged control authority over the petitioner PSE even as it provides that "the Commission shall have absolute jurisdiction, supervision, and control over all corporations, partnerships or associations, who are the grantees of primary franchises and/or a license or permit issued by the government to operate in the Philippines. . ." The SEC's regulatory authority over private corporations encompasses a wide margin of areas, touching nearly all of a corporation's concerns. This authority springs from the fact that a corporation owes its existence to the concession of its corporate franchise from the state.

The SEC's power to look into the subject ruling of the PSE, therefore, may be implied from or be considered as necessary or incidental to the carrying out of the SEC's express power to insure fair dealing in securities traded upon a stock exchange or to ensure the fair administration of such exchange. 7 It is, likewise, observed that the principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment in these entities may be encouraged and protected, and their activities for the promotion of economic development. 8

Thus, it was in the alleged exercise of this authority that the SEC reversed the decision of the PSE to deny the application for listing in the stock exchange of the private respondent PALI. The SEC's action was affirmed by the Court of Appeals.

We affirm that 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. This is in line with the SEC's mission to ensure proper compliance with the laws, such as the Revised Securities Act and to regulate the sale and disposition of securities in the country. 9 As the appellate court explains:

Paramount policy also supports the authority of the public respondent to review petitioner's denial of the listing. Being a stock exchange, the petitioner performs a function that is vital to the national economy, as the business is affected with public interest. As a matter of fact, it has often been said that the economy moves on the basis of the rise and fall of stocks being traded. By its economic power, the petitioner certainly can dictate which and how many users are allowed to sell securities thru the facilities of a stock exchange, if allowed to interpret its own rules liberally as it may please. Petitioner can either allow or deny the entry to the market of securities. To repeat, the monopoly, unless accompanied by control, becomes subject to abuse; hence, considering public interest, then it should be subject to government regulation.

The role of the SEC in our national economy cannot be minimized. The legislature, through the Revised Securities Act, Presidential Decree No. 902-A, and other pertinent laws, has entrusted to it the serious responsibility of enforcing all laws affecting corporations and other forms of associations not otherwise vested in some other government office. 10

This is not to say, however, that the PSE's management prerogatives are under the absolute control of the SEC. The PSE is, alter all, a corporation authorized by its corporate franchise to engage in its proposed and duly approved business. One of the PSE's main concerns, as such, is still the generation of profit for its stockholders. Moreover, the PSE has all the rights pertaining to corporations, including the right to sue and be sued, to hold property in its own name, to enter (or not to enter) into contracts with third persons, and to perform all other legal acts within its allocated express or implied powers.

A corporation is but an association of individuals, allowed to transact under an assumed corporate name, and with a distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and perquisites appropriate to such a body. 11 As to its corporate and management decisions, therefore, the state will generally not interfere with the same. Questions of policy and of management are left to the honest decision of the officers and directors of a corporation, and the courts are without authority to substitute their judgment for the judgment of the board of directors. The board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts. 12

Thus, notwithstanding the regulatory power of the SEC over the PSE, and the resultant authority to reverse the PSE's decision in matters of application for listing in the market, the SEC may exercise such power only if the PSE's judgment is attended by bad faith. In Board of Liquidators vs. Kalaw, 13 it was held that bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through some motive or interest of ill will, partaking of the nature of fraud.

In reaching its decision to deny the application for listing of PALI, the PSE considered important facts, which, in the general scheme, brings to serious question the qualification of PALI to sell its shares to the public through the stock exchange. During the time for receiving objections to the application, the PSE heard from the representative of the late President Ferdinand E. Marcos and his family who claim the properties of the private respondent to be part of the Marcos estate. In time, the PCGG confirmed this claim. In fact, an order of sequestration has been issued covering the properties of PALI, and suit for reconveyance to the state has been filed in the Sandiganbayan Court. How the properties were effectively transferred, despite the sequestration order, from the TDC and MSDC to RebeccoPanlilio, and to the private respondent PALI, in only a short span of time, are not yet explained to the Court, but it is clear that such circumstances give rise to serious doubt as to the integrity of PALI as a stock issuer. The petitioner was in the right when it refused application of PALI, for a contrary ruling was not to the best interest of the general public. The purpose of the Revised Securities Act, after all, is to give adequate and effective protection to the investing public against fraudulent representations, or false promises, and the imposition of worthless ventures. 14

It is to be observed that the U.S. Securities Act emphasized its avowed protection to acts detrimental to legitimate business, thus:

The Securities Act, often referred to as the "truth in securities" Act, was designed not only to provide investors with adequate information upon which to base their decisions to buy and sell securities, but also to protect legitimate business seeking to obtain capital through honest presentation against competition from crooked promoters and to prevent fraud in the sale of securities. (Tenth Annual Report, U.S. Securities & Exchange Commission, p. 14).

As has been pointed out, the effects of such an act are chiefly (1) prevention of excesses and fraudulent transactions, merely by requirement of that their details be revealed; (2) placing the market during the early stages of the offering of a security a body of information, which operating indirectly through investment services and expert investors, will tend to produce a more accurate appraisal of a security, . . . Thus, the Commission may refuse to permit a registration statement to become effective if it appears on its face to be incomplete or inaccurate in any material respect, and empower the Commission to issue a stop order suspending the effectiveness of any registration statement which is found to include any untrue statement of a material fact or to omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (Idem).

Also, as the primary market for securities, the PSE has established its name and goodwill, and it has the right to protect such goodwill by maintaining a reasonable standard of propriety in the entities who choose to transact through its facilities. It was reasonable for the PSE, therefore, 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.

In this connection, it is proper to observe that the concept of government absolutism is a thing of the past, and should remain so.

The observation that the title of PALI over its properties is absolute and can no longer be assailed is of no moment. At this juncture, there is the claim that the properties were owned by TDC and MSDC and were transferred in violation of sequestration orders, to RebeccoPanlilio and later on to PALI, besides the claim of the Marcoses that such properties belong to the Marcos estate, and were held only in trust by RebeccoPanlilio. It is also alleged by the petitioner that these properties belong to naval and forest reserves, and therefore beyond private dominion. If any of these claims is established to be true, the certificates of title over the subject properties now held by PALI map be disregarded, as it is an established rule that a registration of a certificate of title does not confer ownership over the properties described therein to the person named as owner. The inscription in the registry, to be effective, must be made in good faith. The defense of indefeasibility of a Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw.

In any case, for the purpose of determining whether PSE acted correctly in refusing the application of PALI, the true ownership of the properties of PALI need not be determined as an absolute fact. What is material is that the uncertainty of the properties' ownership and alienability exists, and this puts to question the qualification of PALI's public offering. In sum, the Court finds that the SEC had acted arbitrarily in arrogating unto itself the discretion of approving the application for listing in the PSE of the private respondent PALI, since this is a matter addressed to the sound discretion of the PSE, a corporation entity, whose business judgments are respected in the absence of bad faith.

The question as to what policy is, or should be relied upon in approving the registration and sale of securities in the SEC is not for the Court to determine, but is left to the sound discretion of the Securities and Exchange Commission. In mandating the SEC to administer the Revised Securities Act, and in performing its other functions under pertinent laws, the Revised Securities Act, under Section 3 thereof, gives the SEC the power to promulgate such rules and regulations as it may consider appropriate in the public interest for the enforcement of the said laws. The second paragraph of Section 4 of the said law, on the other hand, provides that no security, unless exempt by law, shall be issued, endorsed, sold, transferred or in any other manner conveyed to the public, unless registered in accordance with the rules and regulations that shall be promulgated in the public interest and for the protection of investors by the Commission. Presidential Decree No. 902-A, on the other hand, provides that the SEC, as regulatory agency, has supervision and control over all corporations and over the securities market as a whole, and as such, is given ample authority in determining appropriate policies. Pursuant to this regulatory authority, the SEC has manifested that it has adopted the policy of "full material disclosure" where all companies, listed or applying for listing, are required to divulge truthfully and accurately, all material information about themselves and the securities they sell, for the protection of the investing public, and under pain of administrative, criminal and civil sanctions. In connection with this, a fact is deemed material if it tends to induce or otherwise effect the sale or purchase of its securities. 15 While the employment of this policy is recognized and sanctioned by the laws, nonetheless, the Revised Securities Act sets substantial and procedural standards which a proposed issuer of securities must satisfy. 16 Pertinently, Section 9 of the Revised Securities Act sets forth the possible Grounds for the Rejection of the registration of a security:

The Commission may reject a registration statement and refuse to issue a permit to sell the securities included in such registration statement if it finds that

(1)The registration statement is on its face incomplete or inaccurate in any material respect or includes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; or

(2)The issuer or registrant

(i)is not solvent or not in sound financial condition;

(ii)has violated or has not complied with the provisions of this Act, or the rules promulgated pursuant thereto, or any order of the Commission;

(iii)has failed to comply with any of the applicable requirements and conditions that the Commission may, in the public interest and for the protection of investors, impose before the security can be registered;

(iv)has been engaged or is engaged or is about to engage in fraudulent transaction;

(v)is in any way dishonest or is not of good repute; or

(vi)does not conduct its business in accordance with law or is engaged in a business that is illegal or contrary to government rules and regulations.

(3)The enterprise or the business of the issuer is not shown to be sound or to be based on sound business principles;

(4)An officer, member of the board of directors, or principal stockholder of the issuer is disqualified to be such officer, director or principal stockholder; or

(5)The issuer or registrant has not shown to the satisfaction of the Commission that the sale of its security would not work to the prejudice of the public interest or as a fraud upon the purchasers or investors. (Emphasis Ours)

A reading of the foregoing grounds reveals the intention of the lawmakers to make the registration and issuance of securities dependent, to a certain extent, on the merits of the securities themselves, and of the issuer, to be determined by the Securities and Exchange Commission. This measure was meant to protect the interests of the investing public against fraudulent and worthless securities, and the SEC is mandated by law to safeguard these interests, following the policies and rules therefore provided. The absolute reliance on the full disclosure method in the registration of securities is, therefore, untenable. As it is, the Court finds that the private respondent PALI, on at least two points (nos. 1 and 5) has failed to support the propriety of the issue of its shares with unfailing clarity, thereby lending support to the conclusion that the PSE acted correctly in refusing the listing of PALI in its stock exchange. This does not discount the effectivity of whatever method the SEC, in the exercise of its vested authority, chooses in setting the standard for public offerings of corporations wishing to do so. However, the SEC must recognize and implement the mandate of the law, particularly the Revised Securities Act, the provisions of which cannot be amended or supplanted by mere administrative issuance.

In resume, the Court finds that the PSE has acted with justified circumspection, discounting, therefore, any imputation of arbitrariness and whimsical animation on its part. Its action in refusing to allow the listing of PALI in the stock exchange is justified by the law and by the circumstances attendant to this case.

ACCORDINGLY, in view of the foregoing considerations, the Court hereby GRANTS the Petition for Review on Certiorari. The Decisions of the Court of Appeals and the Securities and Exchange Commission dated July 27, 1996 and April 24, 1996 respectively, are hereby REVERSED and SET ASIDE, and a new Judgment is hereby ENTERED, affirming the decision of the Philippine Stock Exchange to deny the application for listing of the private respondent Puerto Azul Land, Inc.

SO ORDERED

G.R. No. 137686 February 8, 2000RURAL BANK OF MILAOR (CAMARINES SUR),petitioner,vs.FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIO, FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON OCFEMIA,respondents.PANGANIBAN,J.:CASE DIGEST: FACTS:Several parcels of land were mortgaged by the respondents during the lifetime of the respondents grandparents to the Rural bank of Milaor as shown by the Deed ofReal Estate Mortgageand thePromissory Note. Spouses FelicisimoOcfemia and Juanita Ocfemiawere not able to redeem the mortgagedpropertiesso the mortgage was foreclosed and thereafter ownership was transferred to the petitioner bank. Out of the seven parcels of land that were foreclosed, five of them are in the possession of the respondents because these five parcels of land were sold by the petitioner bank to the respondents as evidenced by aDeed of Sale. However, the five parcels of land cannot be transferred in the name of the parents of Merife Nino, one of the respondents, because there is a need to have the document of sale registered. TheRegister of deeds, however, said that the document of sale cannot be registered without the board resolution of the petitioner bank confirming both theDeed of saleandthe authorityofthe bankmanager, Fe S. Tena, to enter such transaction.

The petitioner bank refused her request for a board resolution and made many alibis. Respondents initiated the present proceedings so that they could transfer to their names the subject five parcel of land and subsequently mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother.

ISSUE:May the Board of Directors of a ruralbankingcorporation be compelled to confirm a deed of absolute sale of real property owned by the corporation whichdeed of salewas executed bythe bankmanager without priorauthorityof the board of directors of the bank?

HELD:YES.The bankacknowledges, by its own acts or failure to act,the authorityof Fe S. Tena to enter into bindingcontracts. After the execution of theDeed of Sale, respondents occupied thepropertiesin dispute and paid the real estate taxes. Ifthe bankmanagement believed that it had title to the property, it should have taken measured to prevent the infringement and invasion of title thereto and possession thereof. Likewise, Tena had previously transacted business on behalf ofthe bank, and the latter had acknowledged herauthority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena even though such agent is abusing herauthority. Clearly, persons dealing with her could not be blamed for believing that she was authorized to transact business for and on behalf ofthe bank.

The bankis estopped from questioningthe authorityofthe bankto enter into contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparentauthority, it holdsthe agentout to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denyingthe agentsauthority.

FULL TEXT:When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell an acquired asset in the normal course of business, it is legally obliged to confirm the transaction by issuing a board resolution to enable the buyers to register the property in their names. It has a duty to perform necessary and lawful acts to enable the other parties to enjoy all benefits of the contract which it had authorized.The CaseBefore this Court is a Petition for Review onCertiorarichallenging the December 18, 1998 Decision of the Court of Appeals1(CA) in CA-GR SP No. 46246, which affirmed the May 20, 1997 Decision2of the Regional Trial Court (RTC) of Naga City (Branch 28). The CA disposed as follows:Wherefore, premises considered, the Judgment appealed from is hereby AFFIRMED. Costs against the respondent-appellant.3The dispositive portion of the judgment affirmed by the CA ruled in this wise:WHEREFORE, in view of all the foregoing findings, decision is hereby rendered whereby the [petitioner] Rural Bank of Milaor (Camarines Sur), Inc. through its Board of Directors is hereby ordered to immediately issue a Board Resolution confirming the Deed of Sale it executed in favor of Renato Ocfemia marked Exhibits C, C-1 and C-2); to pay [respondents] the sum of FIVE HUNDRED (P500.00) PESOS as actual damages; TEN THOUSAND (P10,000.00) PESOS as attorney's fees; THIRTY THOUSAND (P30,000.00) PESOS as moral damages; THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages; and to pay the costs.4Also assailed is the February 26, 1999 CA Resolution5which denied petitioner's Motion for Reconsideration.The FactsThe trial court's summary of the undisputed facts was reproduced in the CA Decision as follows:This is an action formandamuswith damages. On April 10, 1996, [herein petitioner] was declared in default on motion of the [respondents] for failure to file an answer within the reglementary-period after it was duly served with summons. On April 26, 1996, [herein petitioner] filed a motion to set aside the order of default with objection thereto filed by [herein respondents].On June 17, 1996, an order was issued denying [petitioner's] motion to set aside the order of default. On July 10, 1996, the defendant filed a motion for reconsideration of the order of June 17, 1996 with objection thereto by [respondents]. On July 12, 1996, an order was issued denying [petitioner's] motion for reconsideration. On July 31, 1996, [respondents] filed a motion to set case for hearing. A copy thereof was duly furnished the [petitioner] but the latter did not file any opposition and so [respondents] were allowed to present their evidenceex-parte. Acertioraricase was filed by the [petitioner] with the Court of Appeals docketed as CA GR No. 41497-SP but the petition was denied in a decision rendered on March 31, 1997 and the same is now final.The evidence presented by the [respondents] through the testimony of Marife O. Nio, one of the [respondents] in this case, show[s] that she is the daughter of Francisca Ocfemia, a co-[respondent] in this case, and the late Renato Ocfemia who died on July 23, 1994. The parents of her father, Renato Ocfemia, were Juanita Arellano Ocfemia and FelicisimoOcfemia. Her other co-[respondents] Rowena O. Barrogo, FelicisimoOcfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her brothers and sisters.1wphi1.ntMarife O. Nio knows the five (5) parcels of land described in paragraph 6 of the petition which are located in Bombon, Camarines Sur and that they are the ones possessing them which [were] originally owned by her grandparents, Juanita Arellano Ocfemia and FelicisimoOcfemia. During the lifetime of her grandparents, [respondents] mortgaged the said five (5) parcels of land and two (2) others to the [petitioner] Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage (Exhs. A and A-1) and the Promissory Note (Exh. B).The spouses FelicisimoOcfemia and Juanita Arellano Ocfemia were not able to redeem the mortgaged properties consisting of seven (7) parcels of land and so the mortgage was foreclosed and thereafter ownership thereof was transferred to the [petitioner] bank. Out of the seven (7) parcels that were foreclosed, five (5) of them are in the possession of the [respondents] because these five (5) parcels of land described in paragraph 6 of the petition were sold by the [petitioner] bank to the parents of Marife O. Nio as evidenced by a Deed of Sale executed in January 1988 (Exhs. C, C-1 and C-2).The aforementioned five (5) parcels of land subject of the deed of sale (Exh. C), have not been, however transferred in the name of the parents of Merife O. Nio after they were sold to her parents by the [petitioner] bank because according to the Assessor's Office the five (5) parcels of land, subject of the sale, cannot be transferred in the name of the buyers as there is a need to have the document of sale registered with the Register of Deeds of Camarines Sur.In view of the foregoing, Marife O. Nio went to the Register of Deeds of Camarines Sur with the Deed of Sale (Exh. C) in order to have the same registered. The Register of Deeds, however, informed her that the document of sale cannot be registered without a board resolution of the [petitioner] Bank. Marife Nio then went to the bank, showed to if the Deed of Sale (Exh. C), the tax declaration and receipt of tax payments and requested the [petitioner] for a board resolution so that the property can be transferred to the name of Renato Ocfemia the husband of petitioner Francisca Ocfemia and the father of the other [respondents] having died already.The [petitioner] bank refused her request for a board resolution and made many alibi[s]. She was told that the [petitioner] bank ha[d] a new manager and it had no record of the sale. She was asked and she complied with the request of the [petitioner] for a copy of the deed of sale and receipt of payment. The president of the [petitioner] bank told her to get an authority from her parents and other [respondents] and receipts evidencing payment of the consideration appearing in the deed of sale. She complied with said requirements and after she gave all these documents, Marife O. Nio was again told to wait for two (2) weeks because the [petitioner] bank would still study the matter.After two (2) weeks, Marife O. Nio returned to the [petitioner] bank and she was told that the resolution of the board would not be released because the [petitioner] bank ha[d] no records from the old manager. Because of this, Marife O. Nio brought the matter to her lawyer and the latter wrote a letter on December 22, 1995 to the [petitioner] bank inquiring why no action was taken by the board of the request for the issuance of the resolution considering that the bank was already fully paid [for] the consideration of the sale since January 1988 as shown by the deed of sale itself (Exh. D and D-1 ).On January 15, 1996 the [petitioner] bank answered [respondents'] lawyer's letter (Exh. D and D-1) informing the latter that the request for board resolution ha[d] already been referred to the board of directors of the [petitioner] bank with another request that the latter should be furnished with a certified machine copy of the receipt of payment covering the sale between the [respondents] and the [petitioner] (Exh. E). This request of the [petitioner] bank was already complied [with] by Marife O. Nio even before she brought the matter to her lawyer.On January 23, 1996 [respondents'] lawyer wrote back the branch manager of the [petitioner] bank informing the latter that they were already furnished the receipts the bank was asking [for] and that the [respondents] want[ed] already to know the stand of the bank whether the board [would] issue the required board resolution as the deed of sale itself already show[ed] that the [respondents were] clearly entitled to the land subject of the sale (Exh. F). The manager of the [petitioner] bank received the letter which was served personally to him and the latter told Marife O. Nio that since he was the one himself who received the letter he would not sign anymore a copy showing him as having already received said letter (Exh. F).After several days from receipt of the letter (Exh. F) when Marife O. Nio went to the [petitioner] again and reiterated her request, the manager of the [petitioner] bank told her that they could not issue the required board resolution as the [petitioner] bank ha[d] no records of the sale. Because of this Merife O. Nio already went to their lawyer and ha[d] this petition filed.The [respondents] are interested in having the property described in paragraph 6 of the petition transferred to their names because their mother and co-petitioner, Francisca Ocfemia, is very sickly and they want to mortgage the property for the medical expenses of Francisca Ocfemia. The illness of Francisca Ocfemia beg[a]n after her husband died and her suffering from arthritis and pulmonary disease already became serious before December 1995.Marife O. Nio declared that her mother is now in serious condition and they could not have her hospitalized for treatment as they do not have any money and this is causing the family sleepless nights and mental anguish, thinking that their mother may die because they could not submit her for medication as they do not have money.6The trial court granted the Petition. As noted earlier, the CA affirmed the RTC Decision.Hence, this recourse.7In a Resolution dated June 23, 1999, this Court issued a Temporary Restraining Order directing the trial court "to refrain and desist from executing [pending appeal] the decision dated May 20, 1997 in Civil Case No. RTC-96-3513, effective immediately until further orders from this Court."8Ruling of the Court of AppealsThe CA held that herein respondents were "able to prove their present cause of action" against petitioner. It ruled that the RTC had jurisdiction over the case, because (1) the Petition involved a matter incapable of pecuniary estimation; (2)mandamusfell within the jurisdiction of RTC; and (3) assuming that the action was for specific performance as argued by the petitioner, it was still cognizable by the said court.IssuesIn its Memorandum,9the bank posed the following questions:1.Question of Jurisdiction of the Regional Trial Court. Has a Regional Trial Court original jurisdiction over an action involving title to real property with a total assessed value of less than P20,000.00?2.Question of Law. May the board of directors of a rural banking corporation be compelled to confirm a deed of absolute sale of real property owned by the corporation which deed of sale was executed by the bank manager without prior authority of the board of directors of the rural banking corporation?10This Court's RulingThe present Petition has no merit.First Issue:Jurisdiction of the Regional Trial CourtPetitioner submits that the RTC had no jurisdiction over the case. Disputing the ruling of the appellate court that the present action was incapable of pecuniary estimation, petitioner argues that the matter in fact involved title to real property worth less than P20,000. Thus, under RA 7691, the case should have been filed before a metropolitan trial court, a municipal trial court or a municipal circuit trial court.We disagree. The well-settled rule is that jurisdiction is determined by the allegations of the complaint.11In the present case, the Petition for Mandamus filed by respondents before the trial court prayed that petitioner-bank be compelled to issue a board resolution confirming the Deed of Sale covering five parcels of unregistered land, which the bank manager had executed in their favor. The RTC has jurisdiction over such action pursuant to Section 21 of BP 129, which provides:Sec. 21.Original jurisdiction in other cases. Regional Trial Courts shall exercise original jurisdiction;(1) In the issuance of writ ofcertiorari, prohibition, mandamus,quo warranto,habeas corpusand injunction which may be enforced in any part of their respective regions; and(2) In actions affecting ambassadors and other public ministers and consuls.A perusal of the Petition shows that the respondents did not raise any question involving the title to the property, but merely asked that petitioner's board of directors be directed to issue the subject resolution. Moreover, the bank did not controvert the allegations in the said Petition. To repeat, the issue therein was not the title to the property; it was respondents' right to compel the bank to issue a board resolution confirming the Deed of Sale.Second Issue:Authority of the Bank ManagerRespondents initiated the present proceedings, so that they could transfer to their names the subject five parcels of land; and subsequently, to mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother. For the property to be transferred in their names, however, the register of deeds required the submission of a board resolution from the bank confirming both the Deed of Sale and the authority of the bank manager, Fe S. Tena, to enter into such transaction. Petitioner refused. After being given the runaround by the bank, respondents sued in exasperation.Allegations in the Petition for Mandamus Deemed AdmittedRespondents based their action before the trial court on the Deed of Sale, the substance of which was alleged in and a copy thereof was attached to the Petition forMandamus. The Deed named Fe S. Tena as the representative of the bank. Petitioner, however, failed to specifically deny under oath the allegations in that contract. In fact, it filed no answer at all, for which reason it was declared in default. Pertinent provisions of the Rules of Court read:Sec. 7.Action or defense based on document. Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.Sec. 8.How to contest genuineness of such documents. When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but this provision does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused.12In failing to file its answer specifically denying under oath the Deed of Sale, the bank admitted the due execution of the said contract. Such admission means that it acknowledged that Tena was authorized to sign the Deed of Sale on its behalf.13Thus, defenses that are inconsistent with the due execution and the genuineness of the written instrument are cut off by an admission implied from a failure to make a verified specific denial.Other Acts of the BankIn any event, the bank acknowledged, by its own acts or failure to act, the authority of Fe S. Tena to enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes due thereon. If the bank management believed that it had title to the property, it should have taken some measures to prevent the infringement or invasion of its title thereto and possession thereof.Likewise, Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena, even though such agent is abusing her authority.14Clearly, persons dealing with her could not be blamed for believing that she was authorized to transact business for and on behalf of the bank. Thus, this Court has ruled inBoard of Liquidators v.Kalaw:15Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authorization of the board of directors. In varying language, existence of such authority is established, by proof of the course of business, the usages and practices of the company and by the knowledge which the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. So also,. . . authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the power was in fact exercised.. . . Thus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business.Notwithstanding the putative authority of the manager to bind the bank in the Deed of Sale, petitioner has failed to file an answer to the Petition below within the reglementary period, let alone present evidence controverting such authority. Indeed, when one of herein respondents, Marife S. Nino, went to the bank to ask for the board resolution, she was merely told to bring the receipts. The bank failed to categorically declare that Tena had no authority. This Court stresses the following:. . . Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face. This Court has observed inRamirez vs.Orientalist Co., 38 Phil. 634, 654-655, that In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it presents itself to the third party with whom the contract is made. Naturally he can have little or no information as to what occurs in corporate meetings; and he must necessarily rely upon the external manifestation of corporate consent. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance with law; and we would be sorry to announce a doctrine which would permit the property of man in the city of Paris to be whisked out of his hands and carried into a remote quarter of the earth without recourse against the corporation whose name and authority had been used in the manner disclosed in this case. As already observed, it is familiar doctrine 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 anyone who has in good faith dealt with the corporation through such agent, be estopped from denying his authority; and where it is said "if the corporation permits this means the same as "if the thing is permitted by the directing power of the corporation."16In this light, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; 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.17Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale. Accordingly, it has a clear legal duty to issue the board resolution sought by respondents. Having authorized her to sell the property, it behooves the bank to confirm the Deed of Sale so that the buyers may enjoy its full use.The board resolution is, in fact, mere paper work. Nonetheless, it is paper work necessary in the orderly operations of the register of deeds and the full enjoyment of respondents' rights. Petitioner-bank persistently and unjustifiably refused to perform its legal duty. Worse, it was less than candid in dealing with respondents regarding this matter. In this light, the Court finds it proper to assess the bank treble costs, in addition to the award of damages.WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. The Temporary Restraining Order issued by this Court is hereby LIFTED. Treble costs against petitioner.SO ORDERED.Melo, Purisima and Gonzaga-Reyes, JJ.,concur.Vitug, J.,please see concurring opinion.

Separate OpinionsVITUG,J.,concurring opinion;I share the views expressed in theponenciawritten for the Court by our esteemed colleague Mr. Justice Artemio V. Panganiban. There is just a brief clarificatory statement that I thought could be made.The Civil Code, being a law of general application, can be suppletory to special laws and certainly not preclusive of those that govern commercial transactions. Indeed, in its generic sense, civil law can rightly be said to encompass commercial law.Jus civile, in ancient Rome, was merely used to distinguish it fromjus gentiumor the law common to all the nations within the empire and, at some time later, only in contrast to international law. In more recent times, civil law is so referred to as private law in distinction from public law and criminal law. Today, it may not be totally inaccurate to consider commercial law, among some other special laws, as being a branch of civil law.Sec. 45 of the Corporation Code provides:Sec. 45.Ultra vires acts of corporations. 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.The language of the Code appears to confine the termultra viresto an act outside or beyond express, implied and incidental corporate powers. Nevertheless, the concept can also include those acts that may ostensibly be within such powers but are, by general or special laws, either proscribed or declared illegal. In general, although perhaps loosely,ultra vireshas also been used to designate those acts of the board of directors or of corporate officers when acting beyond their respective spheres of authority. In the context that the law has used the term in Article 45 of the Corporation Code, anultra viresact would be void and not susceptible to ratification.1In determining whether or not a corporation may perform an act, one considers the logical and necessary relation between the act assailed and the corporate purpose expressed by the law or in the charter. For if the act were one which is lawful in itself or not otherwise prohibited and done for the purpose of serving corporate ends or reasonably contributes to the promotion of those ends in a substantial and not merely in a remote and fanciful sense, it may be fairly considered within corporate powers.2Sec. 23 of the Corporation Code states that the corporate powers are to be exercised, all business conducted, and all property of corporations controlled and held, by the Board of Directors. When the act of the board is within corporate powers but it is done without the concurrence of the shareholders as and when such approval is required by law3or when the act is beyond its competence to do,4the act has been described as void5or, as unenforceable,6or as ineffective and not legally binding.7These holdings notwithstanding, the act cannot accurately be likened to anultra viresact of the corporation itself defined in Section 45 of the Code. Where the act is within corporate powers but the board has acted without being competent to independently do so, the action is not necessarily and totally devoid of effects, and it may generally be ratified expressly or impliedly. Thus, an acceptance of benefits derived by the shareholders from an outside investment made by the board without the required concurrence of the stockholders may, nonetheless, be so considered as an effective investment.8It may be said, however, that when the board resolution is yet executory, the act should aptly be deemed inoperative and specific performance cannot be validly demanded but, if for any reason, the contemplated action is carried out, such principles as ratification or prescription when applicable, normally unknown in void contracts, can serve to negate a claim for the total nullity thereof.Corporate officers, in their case, may act on such matters as may be authorized either expressly by the By-laws or Board Resolutions or impliedly such as by general practice or policy or as are implied by express powers. When officers are allowed to act in certain particular cases, their acts conformably therewith can bind the company. Hence, a corporate officer entrusted with general management and control of the business has the implied authority to act or contract for the corporation which may be necessary or appropriate to conduct the ordinary business.9If the act of corporate officers comes within corporate powers but it is done without any express or implied authority therefor from the by-laws, board resolutions or corporate practices, such an act does not bind the corporation. The Board, however, acting within its competence, may ratify the unauthorized act of the corporate officer. So, too, a corporation may be held in estoppel from denying as against innocent third persons the authority of its officers or agents who have been clothed by it with ostensible or apparent authority.10The Corporation Code itself has not been that explicit with respect to the consequences ofultra viresacts; hence, the varied ascriptions to its effects heretofore expressed. It may well be to consider futile any further attempt to have these situations bear any exact equivalence to the civil law precepts of defective contracts. Nevertheless, general statements could be made. Here reiterated, while an act of the corporation which is either illegal or outside of express, implied or incidental powers as so provided by law or the charter would be void under Article 511of the Civil Code, and the act is not susceptible to ratification, an unauthorized act (if within corporate powers) of the board or a corporate officer, however, would only be unenforceable conformably with Article 140312of the Civil Code but, if the party with whom the agent has contracted is aware of the latter's limits of powers, the unauthorized act is declared void by Article 189813of the same Code, although still susceptible thereunder to ratification by the principal. Any person dealing with corporate boards and officers may be said to be charged with the knowledge that the latter can only act within their respective limits of power, and he is put to notice accordingly. Thus, it would generally behoove such a person to look into the extent of the authority of corporate agents since theonuswould ordinarily be with him.

Montelibano et al. vs. Bacolod-Murcia Milling Company, G.R. No. L-15092 May 18, 1962Facts: Plaintiffs-appellants, Alfredo Montelibano, Alejandro Montelibano, and the Limited co-partnership Gonzaga and Company, had been and are sugar planters adhered to the defendant-appellees sugar central mill under identical milling contracts. Originally executed in1919, said contracts were stipulated to be in force for 30 years starting with the 1920-21 crop, and provided that the resulting product should be divided in theratio of 45% for the mill and 55% for the planters.Sometime in 1936, it was proposed to execute amended milling contracts, increasing the planters share to 60% of the manufactured sugar and resulting molasses, besides other concessions, but extending the operation of the milling contract from the original 30 years to 45 years. The Board of Directors of the appellee Bacolod-Murcia Milling Co., Inc., adopted a resolution granting further concessions to the planters over and above those contained in the printed Amended Milling Contract. The appellants initiated the present action, contending that three Negros sugar centrals with a total annual production exceeding one-third of the production of all the sugar central mills in the province,had already granted increased participation (of 62.5%)to their planters, and that under the resolution the appellee had become obligated to grant similar concessions to the plaintiffs. The appellee Bacolod-Murcia Milling Co., Inc., resisted the claim, and defended by urging that the stipulations contained in the resolution were made without consideration; that the resolution in question was, therefore, null and voidab initio, being in effect a donation that wasultra viresand beyond the powers of the corporate directors to adopt.Issue: 1. WON the board resolution is an ultra vires act and in effect a donation from the board of directors?2. WON the act in question is in direct and immediate furtherance of the corporation's business, fairly incident to the express powers and reasonably necessary to their exercise.Held: 1. No. There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended Milling Contract for the purpose of making its terms more acceptable to the other contracting parties. As the resolution in question was passed in good faith by the board of directors, it is valid and binding, and whether or not it will cause losses or decrease the profits of the central, the court has no authority to review them. Whether the business of a corporation should be operated at a loss during depression, or close down at a smaller loss, is a purely business and economic problem to be determined by the directors of the corporation and not by the court. The appellee Bacolod-Murcia Milling Company is, under the terms of its Resolution of August 20, 1936, duty bound to grant similar increases to plaintiffs-appellants herein.2. According to the SUPREME COURT, the controverted resolution was adopted by appellee corporation as a supplement to, or further amendment of, the proposed milling contract,