1) PNB VS CA

2) Western Institute of Technology vs Salas

3) Board of Liquidators vs Kalaw

4) BenguEt Electric Coop vs NLRC

5) Prime White Cement vs IAC

6) Gokongwei vs SEC et al

7) Strong vs Repide

8) Steinberg vs Velasco

RIGHT OF INSPECTION

1) Pardo vs Hercules lumber

2) Gonzales vs PNB

3) Veraguth vs Isabela Sugar

4) Gokonwei vs SEC

Philippine National Bank vs. Court of Appeals, 83 SCRA 237, May 18, 1978 G.R. No. L-27155 May 18, 1978 PHILIPPINE NATIONAL BANK, petitioner, vs. THE COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO GUECO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., respondents. Medina, Locsin, Corua, & Sumbillo for petitioner. Manuel Lim & Associates for private respondents.

ANTONIO, J.: Certiorari to review the decision of the Court of Appeals which affirmed the judgment of the Court of First Instance of Manila in Civil Case No. 34185, ordering petitioner, as third-party defendant, to pay respondent Rita Gueco Tapnio, as third-party plaintiff, the sum of P2,379.71, plus 12% interest per annum from September 19, 1957 until the same is fully paid, P200.00 attorney's fees and costs, the same amounts which Rita Gueco Tapnio was ordered to pay the Philippine American General Insurance Co., Inc., to be paid directly to the Philippine American General Insurance Co., Inc. in full satisfaction of the judgment rendered against Rita Gueco Tapnio in favor of the former; plus P500.00 attorney's fees for Rita Gueco Tapnio and costs. The basic action is the complaint filed by Philamgen (Philippine American General Insurance Co., Inc.) as surety against Rita Gueco Tapnio and Cecilio Gueco, for the recovery of the sum of P2,379.71 paid by Philamgen to the Philippine National Bank on behalf of respondents Tapnio and Gueco, pursuant to an indemnity agreement. Petitioner Bank was made third-party defendant by Tapnio and Gueco on the theory that their failure to pay the debt was due to the fault or negligence of petitioner. The facts as found by the respondent Court of Appeals, in affirming the decision of the Court of First Instance of Manila, are quoted hereunder:

Plaintiff executed its Bond, Exh. A, with defendant Rita Gueco Tapnio as principal, in favor of the Philippine National Bank Branch at San Fernando, Pampanga, to guarantee the payment of defendant Rita Gueco Tapnio's account with said Bank. In turn, to guarantee the payment of whatever amount the bonding company would pay to the Philippine National Bank, both defendants executed the indemnity agreement, Exh. B. Under the terms and conditions of this indemnity agreement, whatever amount the plaintiff would pay would earn interest at the rate of 12% per annum, plus attorney's fees in the amount of 15 % of the whole amount due in case of court litigation. The original amount of the bond was for P4,000.00; but the amount was later reduced to P2,000.00. It is not disputed that defendant Rita Gueco Tapnio was indebted to the bank in the sum of P2,000.00, plus accumulated interests unpaid, which she failed to pay despite demands. The Bank wrote a letter of demand to plaintiff, as per Exh. C; whereupon, plaintiff paid the bank on September 18, 1957, the full amount due and owing in the sum of P2,379.91, for and on account of defendant Rita Gueco's obligation (Exhs. D and D-1). Plaintiff, in turn, made several demands, both verbal and written, upon defendants (Exhs. E and F), but to no avail. Defendant Rita Gueco Tapnio admitted all the foregoing facts. She claims, however, when demand was made upon her by plaintiff for her to pay her debt to the Bank, that she told the Plaintiff that she did not consider herself to be indebted to the Bank at all because she had an agreement with one Jacobo-Nazon whereby she had leased to the latter her unused export sugar quota for the 1956-1957 agricultural year, consisting of 1,000 piculs at the rate of P2.80 per picul, or for a total of P2,800.00, which was already in excess of her obligation guaranteed by plaintiff's bond, Exh. A. This lease agreement, according to her, was with the knowledge of the bank. But the Bank has placed obstacles to the consummation of the lease, and the delay caused by said obstacles forced 'Nazon to rescind the lease contract. Thus, Rita Gueco Tapnio filed her third-party complaint against the Bank to recover from the latter any and all sums of money which may be adjudged against her and in favor of the plaitiff plus moral damages, attorney's fees and costs.

Insofar as the contentions of the parties herein are concerned, we quote with approval the following findings of the lower court based on the evidence presented at the trial of the case: It has been established during the trial that Mrs. Tapnio had an export sugar quota of 1,000 piculs for the agricultural year 1956-1957 which she did not need. She agreed to allow Mr. Jacobo C. Tuazon to use said quota

for the consideration of P2,500.00 (Exh. "4"-Gueco). This agreement was called a contract of lease of sugar allotment.

At the time of the agreement, Mrs. Tapnio was indebted to the Philippine National Bank at San Fernando, Pampanga. Her indebtedness was known as a crop loan and was secured by a mortgage on her standing crop including her sugar quota allocation for the agricultural year corresponding to said standing crop. This arrangement was necessary in order that when Mrs. Tapnio harvests, the P.N.B., having a lien on the crop, may effectively enforce collection against her. Her sugar cannot be exported without sugar quota allotment Sometimes, however, a planter harvest less sugar than her quota, so her excess quota is utilized by another who pays her for its use. This is the arrangement entered into between Mrs. Tapnio and Mr. Tuazon regarding the former's excess quota for 1956-1957 (Exh. "4"-Gueco).

Since the quota was mortgaged to the P.N.B., the contract of lease had to be approved by said Bank, The same was submitted to the branch manager at San Fernando, Pampanga. The latter required the parties to raise the consideration of P2.80 per picul or a total of P2,800.00 (Exh. "2-Gueco") informing them that "the minimum lease rental acceptable to the Bank, is P2.80 per picul." In a letter addressed to the branch manager on August 10, 1956, Mr. Tuazon informed the manager that he was agreeable to raising the consideration to P2.80 per picul. He further informed the manager that he was ready to pay said amount as the funds were in his folder which was kept in the bank.

Explaining the meaning of Tuazon's statement as to the funds, it was stated by him that he had an approved loan from the bank but he had not yet utilized it as he was intending to use it to pay for the quota. Hence, when he said the amount needed to pay Mrs. Tapnio was in his folder which was in the bank, he meant and the manager understood and knew he had an approved loan available to be used in payment of the quota. In said Exh. "6-Gueco", Tuazon also informed the manager that he would want for a notice from the manager as to the time when the bank needed the money so that Tuazon could sign the corresponding promissory note. Further Consideration of the evidence discloses that when the branch manager of the Philippine National Bank at San Fernando recommended the approval of the contract of lease at the price of P2.80 per picul (Exh. 1 1-Bank), whose recommendation was concurred in by the Vice-president of said Bank, J. V. Buenaventura, the board of directors required that the amount be raised to 13.00 per picul. This act of the board of directors was communicated to Tuazon, who in turn asked for a reconsideration thereof. On November 19, 1956, the branch manager submitted Tuazon's request for reconsideration to the board of directors with another recommendation for the approval of the lease at P2.80 per picul, but the board returned the recommendation unacted upon, considering that the current price prevailing at the time was P3.00 per picul (Exh. 9-Bank).

The parties were notified of the refusal on the part of the board of directors of the Bank to grant the motion for reconsideration. The matter stood as it was until February 22, 1957, when Tuazon wrote a letter (Exh. 10-Bank informing the Bank that he was no longer interested to continue the deal, referring to the lease of sugar quota allotment in favor of defendant Rita Gueco Tapnio. The result is that the latter lost the sum of P2,800.00 which she should have received from Tuazon and which she could have paid the Bank to cancel off her indebtedness, The court below held, and in this holding we concur that failure of the negotiation for the lease of the sugar quota allocation of Rita Gueco Tapnio to Tuazon was due to the fault of the directors of the Philippine National Bank, The refusal on the part of the bank to approve the lease at the rate of P2.80 per picul which, as stated above, would have enabled Rita Gueco Tapnio to realize the amount of P2,800.00 which was more than sufficient to pay off her indebtedness to the Bank, and its insistence on the rental price of P3.00 per picul thus unnecessarily increasing the value by only a difference of P200.00. inevitably brought about the rescission of the lease contract to the damage and prejudice of Rita Gueco Tapnio in the aforesaid sum of P2,800.00. The unreasonableness of the position adopted by the board of directors of the Philippine National Bank in refusing to approve the lease at the rate of P2.80 per picul and insisting on the rate of P3.00 per picul, if only to increase the retail value by only P200.00 is shown by the fact that all the accounts of Rita Gueco Tapnio with the Bank were secured by chattel mortgage on standing crops, assignment of leasehold rights and interests on her properties, and surety bonds, aside from the fact that from Exh. 8-Bank, it appears that she was offering to execute a real estate mortgage in favor of the Bank to replace the surety bond This statement is further bolstered by the fact that Rita Gueco Tapnio apparently had

the means to pay her obligation fact that she has been granted several value of almost P80,000.00 for the agricultural years from 1952 to 56. 1

Its motion for the reconsideration of the decision of the Court of Appeals having been denied, petitioner filed the present petition.

The petitioner contends that the Court of Appeals erred:

(1) In finding that the rescission of the lease contract of the 1,000 piculs of sugar quota allocation of respondent Rita Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified refusal of petitioner to approve said lease contract, and its unreasonable insistence on the rental price of P3.00 instead of P2.80 per picul; and (2) In not holding that based on the statistics of sugar price and prices of sugar quota in the possession of the petitioner, the latter's Board of Directors correctly fixed the rental of price per picul of 1,000 piculs of sugar quota leased by respondent Rita Gueco Tapnio to Jacobo C. Tuazon at P3.00 per picul. Petitioner argued that as an assignee of the sugar quota of Tapnio, it has the right, both under its own Charter and under the Corporation Law, to safeguard and protect its rights and interests under the deed of assignment, which include the right to approve or disapprove the said lease of sugar quota and in the exercise of that authority, its Board of Directors necessarily had authority to determine and fix the rental price per picul of the sugar quota subject of the lease between private respondents and Jacobo C. Tuazon. It argued further that both under its Charter and the Corporation Law, petitioner, acting thru its Board of Directors, has the perfect right to adopt a policy with respect to fixing of rental prices of export sugar quota allocations, and in fixing the rentals at P3.00 per picul, it did not act arbitrarily since the said Board was guided by statistics of sugar price and prices of sugar quotas prevailing at the time. Since the fixing of the rental of the sugar quota is a function lodged with petitioner's Board of Directors and is a matter of policy, the respondent Court of Appeals could not substitute its own judgment for that of said Board of Directors, which acted in good faith, making as its basis therefore the prevailing market price as shown by statistics which were then in their possession.

Finally, petitioner emphasized that under the appealed judgment, it shall suffer a great injustice because as a creditor, it shall be deprived of a just claim against its debtor (respondent Rita Gueco Tapnio) as it would be required to return to respondent Philamgen the sum of P2,379.71, plus interest, which amount had been previously paid to petitioner by said insurance company in behalf of the principal debtor, herein respondent Rita Gueco Tapnio, and without recourse against respondent Rita Gueco Tapnio.

We must advert to the rule that this Court's appellate jurisdiction in proceedings of this nature is limited to reviewing only errors of law, accepting as conclusive the factual fin dings of the Court of Appeals upon its own assessment of the evidence. 2

The contract of lease of sugar quota allotment at P2.50 per picul between Rita Gueco Tapnio and Jacobo C. Tuazon was executed on April 17, 1956. This contract was submitted to the Branch Manager of the Philippine National Bank at San Fernando, Pampanga. This arrangement was necessary because Tapnio's indebtedness to petitioner was secured by a mortgage on her standing crop including her sugar quota allocation for the agricultural year corresponding to said standing crop. The latter required the parties to raise the consideration to P2.80 per picul, the minimum lease rental acceptable to the Bank, or a total of P2,800.00. Tuazon informed the Branch Manager, thru a letter dated August 10, 1956, that he was agreeable to raising the consideration to P2.80 per picul. He further informed the manager that he was ready to pay the said sum of P2,800.00 as the funds were in his folder which was kept in the said Bank. This referred to the approved loan of Tuazon from the Bank which he intended to use in paying for the use of the sugar quota. The Branch Manager submitted the contract of lease of sugar quota allocation to the Head Office on September 7, 1956, with a recommendation for approval, which recommendation was concurred in by the Vice-President of the Bank, Mr. J. V. Buenaventura. This notwithstanding, the Board of Directors of petitioner required that the consideration be raised to P3.00 per picul.

Tuazon, after being informed of the action of the Board of Directors, asked for a reconsideration thereof. On November 19, 1956, the Branch Manager submitted the request for reconsideration and again recommended the

approval of the lease at P2.80 per picul, but the Board returned the recommendation unacted, stating that the current price prevailing at that time was P3.00 per picul.

On February 22, 1957, Tuazon wrote a letter, informing the Bank that he was no longer interested in continuing the lease of sugar quota allotment. The crop year 1956-1957 ended and Mrs. Tapnio failed to utilize her sugar quota, resulting in her loss in the sum of P2,800.00 which she should have received had the lease in favor of Tuazon been implemented.

It has been clearly shown that when the Branch Manager of petitioner required the parties to raise the consideration of the lease from P2.50 to P2.80 per picul, or a total of P2,800-00, they readily agreed. Hence, in his letter to the Branch Manager of the Bank on August 10, 1956, Tuazon informed him that the minimum lease rental of P2.80 per picul was acceptable to him and that he even offered to use the loan secured by him from petitioner to pay in full the sum of P2,800.00 which was the total consideration of the lease. This arrangement was not only satisfactory to the Branch Manager but it was also approves by Vice-President J. V. Buenaventura of the PNB. Under that arrangement, Rita Gueco Tapnio could have realized the amount of P2,800.00, which was more than enough to pay the balance of her indebtedness to the Bank which was secured by the bond of Philamgen. There is no question that Tapnio's failure to utilize her sugar quota for the crop year 1956-1957 was due to the disapproval of the lease by the Board of Directors of petitioner. The issue, therefore, is whether or not petitioner is liable for the damage caused.

As observed by the trial court, time is of the essence in the approval of the lease of sugar quota allotments, since the same must be utilized during the milling season, because any allotment which is not filled during such milling season may be reallocated by the Sugar Quota Administration to other holders of allotments. 3 There was no proof that there was any other person at that time willing to lease the sugar quota allotment of private respondents for a price higher than P2.80 per picul. "The fact that there were isolated transactions wherein the consideration for the lease was P3.00 a picul", according to the trial court, "does not necessarily mean that there are always ready takers of said price. " The unreasonableness of the position adopted by the petitioner's Board of Directors is shown by the fact that the difference between the amount of P2.80 per picul offered by Tuazon and the P3.00 per picul demanded by the Board amounted only to a total sum of P200.00. Considering that all the accounts of Rita Gueco Tapnio with the Bank were secured by chattel mortgage on standing crops, assignment of leasehold rights and interests on her properties, and surety bonds and that she had apparently "the means to pay her obligation to the Bank, as shown by the fact that she has been granted several sugar crop loans of the total value of almost P80,000.00 for the agricultural years from 1952 to 1956", there was no reasonable basis for the Board of Directors of petitioner to have rejected the lease agreement because of a measly sum of P200.00.

While petitioner had the ultimate authority of approving or disapproving the proposed lease since the quota was mortgaged to the Bank, the latter certainly cannot escape its responsibility of observing, for the protection of the interest of private respondents, that degree of care, precaution and vigilance which the circumstances justly demand in approving or disapproving the lease of said sugar quota. The law makes it imperative that every person "must in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith, 4 This petitioner failed to do. Certainly, it knew that the agricultural year was about to expire, that by its disapproval of the lease private respondents would be unable to utilize the sugar quota in question. In failing to observe the reasonable degree of care and vigilance which the surrounding circumstances reasonably impose, petitioner is consequently liable for the damages caused on private respondents. Under Article 21 of the New Civil Code, "any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." The afore-cited provisions on human relations were intended to expand the concept of torts in this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically provide in the statutes.

5

A corporation is civilly liable in the same manner as natural persons for torts, because "generally speaking, the rules governing the liability of a principal or master for a tort committed by an agent or servant are the same whether the principal or master be a natural person or a corporation, and whether the servant or agent be a

natural or artificial person. All of the authorities agree that a principal or master is liable for every tort which he expressly directs or authorizes, and this is just as true of a corporation as of a natural person, A corporation is liable, therefore, whenever a tortious act is committed by an officer or agent under express direction or authority from the stockholders or members acting as a body, or, generally, from the directors as the governing body." 6 WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby AFFIRMED. Fernando, Aquino, Concepcion, Jr., and Santos, JJ., concur.

FIRST DIVISION

[G.R. No. 113032. August 21, 1997]

WESTERN INSTITUTE OF TECHNOLOGY, INC., HOMERO L. VILLASIS, DIMAS ENRIQUEZ, PRESTON F. VILLASIS & REGINALD F. VILLASIS, petitioners, vs. RICARDO T. SALAS, SOLEDAD SALAS-TUBILLEJA, ANTONIO S. SALAS, RICHARD S. SALAS & HON. JUDGE PORFIRIO PARIAN, respondents.

D E C I S I O N

HERMOSISIMA, JR., J.:

Up for review on certiorari are: (1) the Decision September 6, 1993 and (2) the order dated November 23, 1993 of Branch 33 of the Regional Trial Court of Iloilo City in Criminal Cases Nos. 37097 and 37098 for estafa and falsification of a public document, respectively. The judgment acquitted the private respondents of both charges, but petitioners seek to hold them civilly liable.

Private respondents Ricardo T. Salas, Salvador T. Salas, Soledad Salas-Tubilleja, Antonio S. Salas, and Richard S. Salas, belonging to the same family, are the majority and controlling members of the Board of Trustees of

Western Institute of Technology, Inc. (WIT, for short), a stock corporation engaged in the operation, among others, of an educational institution. According to petitioners, the minority stockholders of WIT, sometime on June 1, 1986 in the principal office of WIT at La Paz, Iloilo City, a Special Board meeting was held. In attendance were other members of the Board including one of the petitioners Reginald Villasis. Prior to aforesaid Special Board Meeting, copies of notice thereof, dated May 24, 1986, were distributed to all Board Members. The notice allegedly indicated that the meeting to be held on June 1, 1986 included item No. 6 which states:

"Possible implementation of Art. III, Sec. 6 of the Amended By-Laws of Western

Institute of Technology, Inc. on compensation of all officers of the corporation." [1]

In said meeting, the Board of Trustees passed Resolution No. 48, s. 1986, granting monthly compensation to the private respondents as corporate officers retroactive June 1, 1985, viz.:

Resolution No. 48 s. 1986

On the motion of Mr. Richard Salas (accused), duly seconded by Mrs. Soledad

Tubilleja (accused), it was unanimously resolved that:

The Officers of the Corporation be granted monthly compensation for services rendered as follows: Chairman - P9,000.00/month, Vice-Chairman -P3,500.00/month,

Corporate Treasurer - P3,500.00/month and Corporate Secretary - P3,500.00/month,

retroactive June 1, 1985 and the ten percentum of the net profits shall be distributed

equally among the ten members of the Board of Trustees. This shall amend and

superceed(sic) any previous resolution.

There were no other business.

The Chairman declared the meeting adjourned at 5:11 P.M.

This is to certify that the foregoing minutes of the regular meeting of the Board of

Trustees of Western Institute of Technology, Inc. held on March 30, 1986 is true and

correct to the best of my knowledge and belief.

(Sgd) ANTONIO S. SALAS

Corporate Secretary[2]

A few years later, that is, on March 13, 1991, petitioners Homero Villasis, Preston Villasis, Reginald Villasis and Dimas Enriquez filed an affidavit-

complaint against private respondents before the Office of the City Prosecutor of Iloilo, as a result of which two (2) separate criminal informations, one for falsification of a public document under Article 171 of the Revised Penal Code and the other for estafa under Article 315, par. 1(b) of the RPC, were filed before Branch 33 of the Regional Trial Court of Iloilo City. The charge for falsification of public document was anchored on the private respondents submission of WITs income statement for the fiscal year 1985-1986 with the Securities and Exchange Commission (SEC) reflecting therein the disbursement of corporate funds for the compensation of private respondents based on Resolution No. 4, series of 1986, making it appear that the same was passed by the board on March 30, 1986, when in truth, the same was actually passed on June 1, 1986, a date not covered by the corporations fiscal year 1985-1986 (beginning May 1, 1985 and ending April 30, 1986). The information for falsification of a public document states:

The undersigned City Prosecutor accuses RICARDO T. SALAS, SALVADOR T. SALAS, SOLEDAD SALAS-TUBILLEJA, ANTONIO S. SALAS and RICHARD S.

SALAS (whose dates and places of birth cannot be ascertained) of the crime of

FALSIFICATION OF A PUBLC DOCUMENT, Art. 171 of the Revised Penal Code,

committed as follows:

That on or about the 10th day of June, 1986, in the City of Iloilo, Philippines and

within the jurisdiction of this Honorable Court, the above-named accused, being then

the Chairman, Vice-Chairman, Treasurer, Secretary and Trustee (who later became

the secretary), respectively, of the board of trustees of the Western Institute of

Technology, Inc., a corporation duly organized and existing under the laws of the

Republic of the Philippines, conspiring and confederating together and mutually

helping one another, to better realized (sic) their purpose, did then and there wilfully,

unlawfully and criminally prepare and execute and subsequently cause to be

submitted to the Securities and Exchange Commission an income statement of the

corporation for the fiscal year 1985-1986, the same being required to be submitted

every end of the corporation fiscal year by the aforesaid Commission and therefore, a

public document, including therein the disbursement of the retroactive compensation

of accused corporate officers in the amount of P186,470.70, by then and there making

it appear that the basis thereof Resolution No. 4, Series of 1986 was passed by the

board of trustees on March 30, 1986, a date covered by the corporations fiscal year 1985-1986 (i.e., from May 1, 1985 to April 30, 1986), when in truth and in fact, as

said accused well knew, no such Resolution No. 48, Series of 1986 was passed on

March 30, 1986.

CONTRARY TO LAW.

Iloilo City, Philippines, November 22,1991.[3] [Underscoring ours].

The Information, on the other hand, for estafa reads:

The undersigned City Prosecutor accuses RICARDO SALAS, SALVADOR T. SALAS, SOLEDAD SALAS-TUBILLEJA, ANTONIO S. SALAS, RICHARD S.

SALAS (whose dates and places of birth cannot be ascertained) of the crime

of ESTAFA, Art. 315, par 1(b) of the Revised Penal Code, committed as follows:

That on or about the 1st day of June, 1986, in the City of Iloilo, Philippines and within

the jurisdiction of this Honorable Court, the above-named accused, being then the

Chairman, Vice-Chairman, Treasurer, Secretary and Trustee (who later became the

secretary), respectively, of the board of trustees of the Western Institute of

Technology, Inc., a corporation duly organized and existing under the laws of the

Republic of the Philippines, conspiring and confederating together and mutually

helping one another, to better realize their purpose, did then and there wilfully,

unlawfully and feloniously defraud the said corporation (and its stockholders) in the

following manner, to wit: herein accused, knowing fully well that they have no

sufficient, lawful authority to disburse--- let alone violation of applicable laws and

jurisprudence, disbursed the funds of the corporation by effecting payment of their

retroactive salaries in the amount of P186,470.70 and subsequently paying themselves

every 15th and 30th of the month starting June 15, 1986 until the present, in the

amount of P19,500.00 per month, as if the same were their own, and when herein

accused were informed of the illegality of these disbursements by the minority

stockholders by way of objections made in an annual stockholders meeting held on June 14, 1986 and every year thereafter, they refused, and still refuse, to rectify the

same to the damage and prejudice of the corporation (and its stockholders) in the

total sum of P1,453,970.79 as of November 15, 1991.

CONTRARY TO LAW.

Iloilo City, Philippines, November 22,1991.[4] [Underscoring ours]

Thereafter, trial for the two criminal cases, docketed as Criminal Cases Nos. 37097 and 37098, was consolidated. After a full-blown hearing, Judge Porfirio Parian handed down a verdict of acquittal on both counts [5] dated September 6, 1993 without imposing any civil liability against the accused therein.

Petitioners filed a Motion for Reconsideration[6] of the civil aspect of the RTC Decision which was, however, denied in an Order dated November 23, 1993.[7]

Hence, the instant petition.

Significantly on December 8, 1994, a Motion for Intervention, dated December 2, 1994, was filed before this Court by Western Institute of Technology, Inc., supposedly one of the petitioners herein, disowning its inclusion in the petition and submitting that Atty. Tranquilino R. Gale, counsel for the other petitioners, had no authority whatsoever to represent the corporation in filing the petition. Intervenor likewise prayed for the dismissal of the petition for being utterly without merit. The Motion for Intervention was granted on January 16, 1995.[8]

Petitioners would like us to hold private respondents civilly liable despite their acquittal in Criminal Cases Nos. 37097 and 37098. They base their claim on the alleged illegal issuance by private respondents of Resolution No. 48, series of 1986 ordering the disbursement of corporate funds in the amount of P186,470.70 representing the retroactive compensation as of June 1, 1985 in favor of private respondents, board members of WIT, plus P1,453,970.79 for the subsequent collective salaries of private respondent every 15 th and 30th of the month until the filing of the criminal complaints against them on March 1991. Petitioners maintain that this grant of compensation to private respondents is proscribed under Section 30 of the Corporation Code. Thus, private respondents are obliged to return these amounts to the corporation with interest.

We cannot sustain the petitioners. The pertinent section of the Corporation Code provides:

Sec. 30. Compensation of directors.--- In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation,as such

directors, except for reasonable per diems: Provided, however, That any such

compensation (other than per diems) may be granted to directors by the vote of the

stockholders representing at least a majority of the outstanding capital stock at a

regular or special stockholders meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net

income before income tax of the corporation during the preceding year. [Underscoring ours]

There is no argument that directors or trustees, as the case may be, are not entitled to salary or other compensation when they perform nothing more than the usual and ordinary duties of their office. This rule is founded upon a presumption that directors /trustees render service gratuitously and that the return upon their shares adequately furnishes the motives for service, without compensation[9] Under the foregoing section, there are only two (2) ways by

which members of the board can be granted compensation apart from reasonable per diems: (1) when there is a provision in the by-laws fixing their compensation; and (2) when the stockholders representing a majority of the outstanding capital stock at a regular or special stockholders meeting agree to give it to them.

This proscription, however, against granting compensation to directors/trustees of a corporation is not a sweeping rule. Worthy of note is the clear phraseology of Section 30 which states: xxx [T]he directors shall not receive any compensation, as such directors, xxx. The phrase as such directors is not without significance for it delimits the scope of the prohibition to compensation given to them for services performed purely in their capacity as directors or trustees. The unambiguous implication is that members of the board may receive compensation, in addition to reasonable per diems, when they render services to the corporation in a capacity other than as directors/trustees.[10] In the case at bench, Resolution No. 48, s. 1986 granted monthly compensation to private respondents not in their capacity as members of the board, but rather as officers of the corporation, more particularly as Chairman, Vice-Chairman, Treasurer and Secretary of Western Institute of Technology. We quote once more Resolution No. 48, s. 1986 for easy reference, viz.:

Resolution No. 48 s. 1986

On the motion of Mr. Richard Salas (accused), duly seconded by Mrs. Soledad

Tubilleja (accused), it was unanimously resolved that:

The Officers of the Corporation be granted monthly compensation for services rendered as follows: Chairman - P9,000.00/month, Vice-Chairman -

P3,500.00/month, Corporate Treasurer - P3,500.00/month and Corporate Secretary -

P3,500.00/month, retroactive June 1, 1985 and the ten percentum of the net profits

shall be distributed equally among the ten members of the Board of Trustees. This

shall amend and superceed(sic) any previous resolution.

There were no other business.

The Chairman declared the meeting adjourned at 5:11 P.M.

This is to certify that the foregoing minutes of the regular meeting of the Board of

Trustees of Western Institute of Technology, Inc. held on March 30, 1986 is true and

correct to the best of my knowledge and belief.

(Sgd) ANTONIO S. SALAS

Corporate

Secretary[11] [Underscoring ours]

Clearly, therefore , the prohibition with respect to granting compensation to corporate directors/trustees as such under Section 30 is not violated in this particular case. Consequently, the last sentence of Section 30 which provides:

xxx xxx. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income before income tax of the

corporation during the preceding year. [Underscoring ours]

does not likewise find application in this case since the compensation is being given to private respondents in their capacity as officers of WIT and not as board members.

Petitioners assert that the instant case is a derivative suit brought by them as minority shareholders of WIT for and on behalf of the corporation to annul Resolution No. 48, s. 1986 which is prejudicial to the corporation.

We are unpersuaded. A derivative suit is an action brought by minority shareholders in the name of the corporation to redress wrongs committed against it, for which the directors refuse to sue.[12] It is a remedy designed by equity and has been the principal defense of the minority shareholders against abuses by the majority.[13] Here, however, the case is not a derivative suit but is merely an appeal on the civil aspect of Criminal Cases Nos. 37097 and 37098 filed with the RTC of Iloilo for estafa and falsification of public document. Among the basic requirements for a derivative suit to prosper is that the minority shareholder who is suing for and on behalf of the corporation must allege his complaint before the proper forum that he is suing on a derivative cause of action on behalf of the corporation and all other shareholders similarly situated who wish to join. [14] This is necessary to vest jurisdiction upon the tribunal in line with the rule that it is the allegations in the complaint that vests jurisdiction upon the court or quasi-judicial body concerned over the subject matter and nature of the action. [15] This was not complied with by the petitioners either in their complaint before the court a quo nor in the instant petition which, in part, merely states that this is a petition for review on certiorari on pure questions of law to set aside a portion of the RTC decision in Criminal Cases Nos. 37097 and 37098 [16] since the trial courts judgment of acquittal failed to impose any civil liability against the private respondents. By no amount of equity considerations, if at all

deserved, can a mere appeal on the civil aspect of a criminal case be treated as a derivative suit.

Granting, for purposes of discussion, that this is a derivative suit as insisted by petitioners, which it is not, the same is outrightly dismissible for having been wrongfully filed in the regular court devoid of any jurisdiction to entertain the complaint. The case should have been filed with the Securities and Exchange Commission (SEC) which exercises original and exclusive jurisdiction over derivative suits, they being intra-corporate disputes, per Section 5(b) of P.D. No. 902-A:

In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations

registered with it as expressly granted under existing laws and decrees, it shall have

original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx

b) Controversies arising out of intra-corporate 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; and between such corporation, partnership or association and

the State insofar as it concerns their individual franchise or right to exist as such

entity;

xxx xxx xxx. [Underscoring ours]

Once the case is decided by the SEC, the losing party may file a petition for review before the Court of Appeals raising questions of fact, of law, or mixed questions of fact and law.[17] It is only after the case has ran this course, and not earlier, can it be brought to us via a petition for review on certiorari under Rule 45 raising only pure questions of law. [18] Petitioners, in pleading that we treat the instant petition as a derivative suit, are trying to short-circuit the entire process which we cannot here sanction.

As an appeal on the civil aspect of Criminal Cases Nos. 37097 and 37098 for falsification of public document and estafa, which this petition truly is, we have to deny the petition just the same. It will be well to quote the respondent courts ratiocinations acquitting the private respondents on both counts:

The prosecution wants this Court to believe and agree that there is falsification of public document because, as claimed by the prosecution, Resolution No. 48, Series of

1986 (Exh. 1-E-1) was not taken up and passed during the Regular Meeting of the

Board of Trustees of the western Institute of Technology (WIT), Inc. on March 30,

1986, but on June 1, 1986 special meeting of the same board of trustees.

This Court is reluctant to accept this claim of falsification. The prosecution omitted to

submit the complete minutes of the regular meeting of the Board of Trustees on March

30, 1986. It only presented in evidence Exh. C, which is page 5 or the last page of the said minutes. Had the complete minutes (Exh. 1 consisting of five (5) pages, been submitted, it can readily be seen and understood that Resolution No. 48, Series

of 1986 (Exh. 1-E-1) giving compensation to corporate officers, was indeed included in Other Business, No. 6 of the Agenda, and was taken up and passed on March 30,

1986. The mere fact of existence of Exh. C also proves that it was passed on March 30, 1986 for Exh,. C is a part and parcel of the whole minutes of the Board of Trustees Regular Meeting on March 30, 1986. No better and more credible proof can

be considered other than the Minutes (Exh. 1) itself of the Regular Meeting of the Board of Trustees on March 30, 1986. The imputation that said Resolution No.48 was

neither taken up nor passed on March 30, 1986 because the matter regarding

compensation was not specifically stated or written in the Agenda and that the words

possible implementation of said Resolution No. 48, was expressly written in the Agenda for the Special Meeting of the Board on June 1, 1986, is simply an

implication. This evidence by implication to the mind of the court cannot prevail over

the Minutes (Exh. 1) and cannot ripen into proof beyond reasonable doubt which is demanded in all criminal prosecutions.

This Court finds that under the Eleventh Article (Exh. 3-D-1) of the Articles of Incorporation (Exh. 3-B) of the Panay Educational Institution, Inc., now the Western Institute of Technology, Inc., the officers of the corporation shall receive such

compensation as the Board of Directors may provide. These Articles of Incorporation

was adopted on May 17, 1957 (Exh. 3-E). The Officers of the corporation and their corresponding duties are enumerated and stated in Sections 1, 2, 3 and 4 of Art. III of

the Amended By-Laws of the Corporation (Exh. 4-A) which was adopted on May 31, 1957. According to Sec. 6, Art. III of the same By-Laws, all officers shall receive

such compensation as may be fixed by the Board of Directors.

It is the perception of this Court that the grant of compensation or salary to the

accused in their capacity as officers of the corporation, through Resolution No. 48,

enacted on March 30, 1986 by the Board of Trustees, is authorized by both the

Articles of Incorporation and the By-Laws of the Corporation. To state otherwise is to

depart from the clear terms of the said articles and by-laws. In their defense the

accused have properly and rightly asserted that the grant of salary is not for

directors, but for their being officers of the corporation who oversee the day to day

activities and operations of the school.

xxx xxx xxx

xxx [O]n the question of whether or not the accused can be held liable for estafa

under Sec. 1 (b) of Art. 315 of the Revised Penal Code, it is perceived by this Court

that the receipt and the holding of the money by the accused as salary on basis of the

authority granted by the Articles and By-Laws of the corporation are not tainted with

abuse of confidence. The money they received belongs to them and cannot be said to

have been converted and/or misappropriated by them.

xxx xxx xxx.[19] [Underscoring ours]

From the foregoing factual findings, which we find to be amply substantiated by the records, it is evident that there is simply no basis to hold the accused, private respondents herein, civilly liable. Section 2(b) of Rule 111 on the New Rules on Criminal Procedure provides:

SEC. 2. Institution of separate civil action.

xxx xxx xxx

(b) Extinction of the penal action does not carry with it extinction of the civil, unless

the extinction proceeds from a declaration in a final judgment that the fact from which

the civil might arise did not exist. [Underscoring ours]

Likewise, the last paragraph of Section 2, Rule 120 reads:

SEC. 2. Form and contents of judgment.

xxx xxx xxx

In case of acquittal, unless there is a clear showing that the act from which the civil

liability might arise did not exist, the judgment shall make a finding on the civil

liability of the accused in favor of the offended party. [Underscoring ours]

The acquittal in Criminal Cases Nos. 37097 and 37098 is not merely based on reasonable doubt but rather on a finding that the accused-private respondents did not commit the criminal acts complained of. Thus, pursuant to the above rule and settled jurisprudence, any civil actionex delicto cannot prosper. Acquittal in a criminal action bars the civil action arising therefrom where the judgment of acquittal holds that the accused did not commit the criminal acts imputed to them.[20]

WHEREFORE, the instant petition is hereby DENIED with costs against petitioners.

SO ORDERED.

Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.