9/23/22, 2:57 AM G.R. No. 51765 March 3, 1997 - REPUBLIC PLANTERS BANK v. ENRIQUE A. AGANA, SR., ET AL.

SR., ET AL. : March 1997 - Philipppine …

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March 1997 - Philippine Supreme Court Decisions/Resolutions

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Philippine Supreme Court Jurisprudence > Year 1997 > March 1997 Decisions >
G.R.
No. 51765 March 3, 1997 - REPUBLIC PLANTERS BANK v. ENRIQUE A. AGANA, SR.,
ET AL.:

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Review

FIRST DIVISION

[G.R. No. 51765. March 3, 1997.]

REPUBLIC PLANTERS BANK, Petitioner, v. HON. ENRIQUE A. AGANA, SR., as

Presiding Judge, Court of First Instance of Rizal, Branch XXVIII, Pasay City,
ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION and ADALIA F.

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ROBES, Respondents.

The Chief Legal Counsel and Dorado Sarmen Sarson Ian & Associates for
Petitioner.

Rodrigo P. Villaroman and Roberto Y Miranda for Private Respondents.

SYLLABUS

1. COMMERCIAL LAW; CORPORATION CODE; SHARES OF STOCK; PREFERRED

SHARES OF STOCK; NATURE THEREOF. — A preferred share of stock, on one hand, is
one which entitles the holder thereof to certain preferences over the holders of
ChanRobles CPA Review
common stock. The preferences are designed to induce persons to subscribe for
Online

shares of a corporation. Preferred shares take a multiplicity of forms. The most

common forms may be classified into two: (1) preferred shares as to assets; and (2)
preferred shares as to dividends. The former is a share which gives the holder thereof
preference in the distribution of the assets of the corporation in case of liquidation;
the latter is a share the holder of which is entitled to receive dividends on said share
to the extent agreed upon before any dividends at all are paid to the holders of
common stock. There is no guaranty, however, that the share will receive any
dividends. Under the old Corporation Law in force at the time the contract between
the petitioner and the private respondents was entered into, it was provided that "no
corporation shall make or declare any dividend except from the surplus profits arising
from its business, or distribute its capital stock or property other than actual profits
among its members or stockholders until after the payment of its debts and the
termination of its existence by limitation or lawful dissolution." Similarly, the present
Corporation Code provides that the board of directors of a stock corporation may

ChanRobles Special Lecture declare dividends only out of unrestricted retained earnings. The Code, in Section 43,

Series
adopting the change made in accounting terminology, substituted the phrase

"unrestricted retained earnings," which may be a more precise term in place of
"surplus profits arising from its business" in the former law. Thus, the declaration of
dividends is dependent upon the availability of surplus profit or unrestricted retained
earnings, as the case may be. Preferences granted to preferred stockholders,
moreover, do not give them a lien upon the property of the corporation nor make
them creditors of the corporation the right of the former being always subordinate to
the latter. Dividends are thus payable only when there are profits earned by the
corporation and as a general rule, even if there are existing profits, the board of
directors has the discretion to determine whether or not dividends are to be declared.
Shareholders, both common and preferred, are considered risk takers who invest
capital in the business and who can look only to what is left after corporate debts and
liabilities are fully paid.

2. ID.; ID.; ID.; ID.; REDEEMABLE SHARES. — Redeemable shares, on the other
hand, are shares usually preferred, which by, their terms are redeemable at a fixed
date, or at the option of either issuing corporation or the stockholder, or both at a
certain redemption price. A redemption by the corporation of its stock is, in a sense,
a repurchase of it for cancellation. The present Code allows redemption of shares
even if there are no unrestricted retained earnings on the books of the corporation.
This is a new provision which in effect qualifies the general rule that the corporation
cannot purchase its own shares except out of current retained earnings. However,
while redeemable shares may be redeemed regardless of the existence of
unrestricted retained earnings, this is subject to the condition that the corporation
has, after such redemption, assets in its books to cover debts and liabilities inclusive
of capital stock. Redemption, therefore, may not be made where the corporation is
insolvent or if such redemption will cause insolvency or inability of the corporation to
meet its debts as they mature.

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3. ID.; ID.; ID.; ID.; WHILE THE STOCK CERTIFICATE IN CASE AT BAR DOES NOT
ALLOW REDEMPTION, THE OPTION TO DO SO WAS CLEARLY VESTED IN THE
PETITIONER BANK. — The petitioner argues that it cannot be compelled to redeem
the preferred shares issued to the private Respondent. We agree. Respondent judge,
in ruling that petitioner must redeem the shares in question, stated that: "On the
question of the redemption by the defendant of said preferred shares of stock, the
very wordings of the terms and conditions in said stock certificates clearly allows the
same." What respondent Judge failed to recognize was that while the stock certificate
does allow redemption, the option to do so was clearly vested in the petitioner bank.
The redemption therefore is clearly the type known as "optional." Thus, except as
otherwise provided in the stock certificate, the redemption rests entirely with the
corporation and the stockholder is without right to either compel or refuse the
redemption of its stock. Furthermore, the terms and conditions set forth therein use
the word "may." It is a settled doctrine in statutory construction that the word "may"
denotes discretion, and cannot be construed as having a mandatory effect. We fail to
see how respondent judge can ignore what, in his words, are the "very wordings of
the terms and conditions in said stock certificates" and construe what is clearly a
mere option to be his legal basis for compelling the petitioner to redeem the shares in
question.

4. ID.; ID.; ID.; PAYMENT OF DIVIDENDS TO A STOCKHOLDER IS NOT A MATTER OF

RIGHT BUT A MATTER OF CONSENSUS. — The respondent judge also stated that
since the stock certificate granted the private respondents the right to receive a
quarterly dividend of One Per Centum (1%), cumulative and participating, it "clearly
and unequivocably (sic) indicates that the same are ‘interest bearing stocks’ or stocks
issued by a corporation under an agreement to pay a certain rate of interest thereon.
As such, plaintiffs (private respondents herein) become entitled to the payment
thereof as a matter of right without necessity of a prior declaration of dividend."
There is no legal basis for this observation. Both Sec. 16 of the Corporation Law and
Sec. 43 of the present Corporation Code prohibit the issuance of any stock dividend
without the approval of stockholders, representing not less than two-thirds (2/3) of
the outstanding capital stock at a regular or special meeting duly called for the
purpose. These provisions underscore the fact that payment of dividends to a
stockholder is not a matter of right but a matter of consensus. Furthermore, "interest
bearing stocks," on which the corporation agrees absolutely to pay interest before
dividends are paid to common stockholders, is legal only when construed as requiring
payment of interest as dividends from net earnings or surplus only. Clearly, the
respondent judge, in compelling the petitioner to redeem the shares in question and
to pay the corresponding dividends, committed grave abuse of discretion amounting
to lack or excess of jurisdiction in ignoring both the terms and conditions specified in
the stock certificate, as well as the clear mandate of the law.

5. CIVIL LAW, PRESCRIPTION OF ACTIONS; THE CLAIM OF PRIVATE RESPONDENT IS

ALREADY BARRED BY PRESCRIPTION AS WELL AS LACHES. — This Court so holds
that the claim of private respondent is already barred by prescription as well as
laches. Art. 1144 of the New Civil Code provides that a right of action that is founded
upon a written contract prescribes in ten (10) years. The letter-demand made by the
private respondents to the petitioner was made only on January 5, 1979, or almost
eighteen years after receipt of the written contract in the form of the stock certificate.
As noted earlier, this letter-demand, significantly, was not formally offered in
evidence, nor were any other evidence of demand presented. Therefore, we conclude
that the only time the private respondents saw it fit to assert their rights, if any, to
the preferred shares of stock, was after the lapse of almost eighteen years. The same
clearly indicates that the right of the private respondents to any relief under the law
has already prescribed. Moreover, the claim of the private respondents is also barred
by laches. Laches has been defined as the failure or neglect, for an unreasonable
length of time, to do that which by exercising due diligence could or should have

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been done earlier, it is negligence or omission to assert a right within a reasonable

time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it.

6. CONSTITUTIONAL LAW; BILL OF RIGHTS; THE DIRECTIVE ISSUED BY THE

CENTRAL BANK GOVERNOR PROHIBITING THE PETITIONER BANK FROM REDEEMING
ANY PREFERRED SHARE ON THE GROUND THAT SAID REDEMPTION WOULD REDUCE
THE ASSETS OF THE BANK TO THE PREJUDICE OF ITS DEPOSITORS AND CREDITORS
MAY BE CONSIDERED AS AN EXERCISE OF POLICE POWER; IT DOES NOT
CONSTITUTE AN IMPAIRMENT OF THE OBLIGATION OF CONTRACTS; CASE AT BAR.
— The redemption of shares in case at bar cannot be allowed. As pointed out by the
petitioner, the Central Bank made a finding that said petitioner has been suffering
from chronic reserve deficiency, and that such finding resulted in a directive, issued
on January 31, 1973 by then Gov. G. S. Licaros of the Central Bank, to the President
and Acting Chairman of the Board of the petitioner bank prohibiting the latter from
redeeming any preferred share, on the ground that said redemption would reduce the
assets of the Bank to the prejudice of its depositors and creditors. Redemption of
preferred shares was prohibited for a just and valid reason. The directive issued by
the Central Bank Governor was obviously meant to preserve the status quo, and to
prevent the financial ruin of a banking institution that would have resulted in adverse
repercussions, not only to its depositors and creditors, but also to the banking
industry as a whole. The directive, in limiting the exercise of a right granted by law to
a corporate entity, may thus be considered as an exercise of police power. The
respondent judge insists that the directive constitutes an impairment of the obligation
of contracts. It has, however, been settled that the constitutional guaranty of non-
impairment of obligations of contract is limited by the exercise of the police power of
the state, the reason being that public welfare is superior to private rights.

DECISION

HERMOSISIMA, JR., J.:

This is a petition for certiorari seeking the annulment of the Decision 1 of the then
Court of First Instance of Rizal 2 for having been rendered in grave abuse of
discretion. Private respondents Robes-Francisco Realty and Development Corporation
(hereafter, "the Corporation") and Adalia F. Robes filed in the court a quo, an action
for specific performance to compel petitioner to redeem 800 preferred shares of stock
with a face value of P8,000.00 and to pay 1% quarterly interest thereon as quarterly
dividend owing them under the terms and conditions of the certificates of stock.

The court a quo rendered judgment in favor of private respondents; hence, this
instant petition.

Herein parties debate only legal issues, no issues of fact having been raised by them
in the court a quo. For ready reference, however, the following narration of pertinent
transactions and events is in order:

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On September 18, 1961, private respondent Corporation secured a loan from

petitioner in the amount of P120,000.00. As part of the proceeds of the loan,
preferred shares of stocks were issued to private respondent Corporation, through its
officers then, private respondent Adalia F. Robes and one Carlos F. Robes. In other
words, instead of giving the legal tender totaling to the full amount of the loan, which
is P120,000.00, petitioner lent such amount partially in the form of money and
partially in the form of stock certificates numbered 3204 and 3205, each for 400
shares with a par value of P10.00 per share, or for P4,000.00 each, for a total of

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P8,000.00. Said stock certificates were in the name of private respondent Adalia F.
Robes and Carlos F. Robes, who subsequently, however, endorsed his shares in favor
of Adalia F. Robes.

Said certificates of stock bear the following terms and conditions:

jgc:chanrobles.com.ph

"The Preferred Stock shall have the following rights, preferences, qualifications and
limitations, to wit:

chanrob1es virtual 1aw library

1. Of the right to receive a quarterly dividend of One Per Centum (1%), cumulative
and participating.

x       x       x

2. That such preferred shares may be redeemed, by the system of drawing lots, at
any time after two (2) years from the date of issue at the option of the Corporation. .
. ."

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On January 31, 1979, private respondents proceeded against petitioner and filed a
complaint anchored on private respondents’ alleged rights to collect dividends under
the preferred shares in question and to have petitioner redeem the same under the
terms and conditions of the stock certificates. Private respondents attached to their
complaint, a letter-demand dated January 5, 1979 which, significantly, was not
formally offered in evidence.

Petitioner filed a Motion to Dismiss 3 private respondents’ Complaint on the following

grounds: (1) that the trial court had no jurisdiction over the subject-matter of the
action; (2) that the action was unenforceable under substantive law; and (3) that the
action was barred by the statute of limitations and/or laches.

Petitioner’s Motion to Dismiss was denied by the trial court in an order dated March
16, 1979. 4 Petitioner then filed its Answer on May 2, 1979. 5 Thereafter, the trial
court gave the parties ten (10) days from July 30, 1979 to submit their respective
memoranda after the submission of which the case would be deemed submitted for
resolution. 6

On September 7, 1979, the trial court rendered the herein assailed decision in favor
of private respondents. In ordering petitioner to pay private respondents the face
value of the stock certificates as redemption price, plus 1% quarterly interest thereon
until full payment, the trial court ruled:

jgc:chanrobles.com.ph

"There being no issue of fact raised by either of the parties who filed their respective
memoranda delineating their respective contentions, a judgment on the pleadings,
conformably with an earlier order of the Court, appears to be in order.

From a further perusal of the pleadings, it appears that the provision of the stock

certificates in question to the effect that the plaintiffs shall have the right to receive a

quarterly dividend of One Per Centum (1%), cumulative and participating, clearly and

March-1997 Jurisprudence            unequivocably [sic] indicates that the same are ‘interest bearing stocks’ which are

     
stocks issued by a corporation under an agreement to pay a certain rate of interest

thereon (5 Thompson, Sec. 3439). As such, plaintiffs become entitled to the payment

G.R. No. 51765 March 3, 1997 thereof as a matter of right without necessity of a prior declaration of dividend.

- REPUBLIC PLANTERS BANK v.

ENRIQUE A. AGANA, SR., ET AL. On the question of the redemption by the defendant of said preferred shares of stock,

the very wordings of the terms and conditions in said stock certificates clearly allows
the same.

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G.R. No. 93397 March 3, 1997 To allow the herein defendant not to redeem said preferred shares of stock and/or
- TRADERS ROYAL BANK v. pay the interest due thereon despite the clear import of said provisions by the mere
COURT OF APPEALS, ET AL. invocation of alleged Central Bank Circulars prohibiting the same is tantamount to an

impairment of the obligation of contracts enshrined in no less than the fundamental
G.R. No. 99425 March 3, 1997 law itself.

- ANTONIO RAMOS, ET AL. v.

COURT OF APPEALS, ET AL. Moreover, the herein defendant is considered in estoppel from taking shelter behind a

General Banking Act provision to the effect that it cannot buy its own shares of stocks
G.R. Nos. 100487 & 100607 considering that the very terms and conditions in said stock certificates allowing their
March 3, 1997 - ARTURO redemption are its own handiwork.

JULIANO v. SANDIGANBAYAN, ET

AL. As to the claim by the defendant that plaintiffs’ cause of action is barred by

prescription, suffice it to state that the running of the prescriptive period was
G.R. No. 106581 March 3, considered interrupted by the written extrajudicial demands made by the plaintiffs
1997 - PEOPLE OF THE PHIL. v. from the defendant." 7

RENATO FLORES, ET AL.

Aggrieved by the decision of the trial court, petitioner elevated the case before us
G.R. No. 110419 March 3, essentially on pure questions of law. Petitioner’s statement of the issues that it
1997 - UERM-MEMORIAL submits for us to adjudicate upon, is as follows:

jgc:chanrobles.com.ph

MEDICAL CENTER, ET AL. v.

NLRC, ET AL. "A. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OR EXCESS OF JURISDICTION IN ORDERING PETITIONER TO PAY
G.R. No. 114383 March 3, RESPONDENT ADALIA F. ROBES THE AMOUNT OF P8,213.69 AS INTERESTS FROM
1997 - PEOPLE OF THE PHIL. v. 1961 To 1979 ON HER PREFERRED SHARES.
JOEL COREA

B. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING
G.R. No. 116437 March 3, TO LACK OR EXCESS OF JURISDICTION IN ORDERING PETITIONER TO REDEEM
1997 - PEOPLE OF THE PHIL. v. RESPONDENT ADALIA F. ROBES’ PREFERRED SHARES FOR P8,000.00

PABLITO ANDAN

C. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING
G.R. No. 117161 March 3, TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE ORDER OF THE
1997 - RAMON INGLES v. COURT CENTRAL BANK TO PETITIONER TO DESIST FROM REDEEMING ITS PREFERRED
OF APPEALS, ET AL. SHARES AND FROM PAYING DIVIDENDS THEREON . . ..

G.R. No. 120704 March 3, D. THE TRIAL COURT ERRED IN NOT HOLDING THAT THE COMPLAINT DOES NOT
1997 - BARTOLOME C. CARALE, STATE A CAUSE OF ACTION.

ET AL. v. PAMPIO A. ABARINTOS,

ET AL. E. THE TRIAL COURT ERRED IN NOT HOLDING THAT THE CLAIM OF RESPONDENT

ADALIA F. ROBES IS BARRED BY PRESCRIPTION OR LACHES." 8

G.R. No. 123321 March 3,

1997 - ROMAN CATHOLIC The petition is meritorious.

ARCHBISHOP OF MANILA v.

COURT OF APPEALS, ET AL. Before passing upon the merits of this petition, it may be pertinent to provide an

overview on the nature of preferred shares and the redemption thereof, considering
G.R. No. 123361 March 3, that these issues lie at the heart of the dispute.

1997 - TEOFILO CACHO v. COURT

OF APPEALS, ET AL. A preferred share of stock, on one hand, is one which entitles the holder thereof to

certain preferences over the holders of common stock. The preferences are designed
G.R. No. 125198 March 3, to induce persons to subscribe for shares of a corporation. 9 Preferred shares take a
1997 - MSCI-NACUSIP v. NWPC, multiplicity of forms. The most common forms may be classified into two: (1)
ET AL. preferred shares as to assets; and (2) preferred shares as to dividends. The former is

a share which gives the holder thereof preference in the distribution of the assets of
G.R. No. 84449 March 4, 1997 the corporation in case of liquidation; 10 the latter is a share the holder of which is
- PEOPLE OF THE PHIL. v. entitled to receive dividends on said share to the extent agreed upon before any
BENEDICTO JAVIER, ET AL. dividends at all are paid to the holders of common stock. 11 There is no guaranty,

however, that the share will receive any dividends. Under the old Corporation Law in
G.R. No. 102876 March 4, force at the time the contract between the petitioner and the private respondents was
1997 - BATAAN SHIPYARD AND entered into, it was provided that "no corporation shall make or declare any dividend

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ENG’G CORP. v. NLRC, ET AL. except from the surplus profits arising from its business, or distribute its capital stock

or property other than actual profits among its members or stockholders until after
G.R. No. 118607 March 4, the payment of its debts and the termination of its existence by limitation or lawful
1997 - PEOPLE OF THE PHIL. v. dissolution." 12 Similarly, the present Corporation Code 13 provides that the board of
JULITO FRANCO directors of a stock corporation may declare dividends only out of unrestricted

retained earnings. 14 The Code, in Section 43, adopting the change made in
Adm. Matter No. RTJ-96-1335 accounting terminology, substituted the phrase unrestricted retained earnings," which
March 5, 1997 - INOCENCIO may be a more precise term, in place of "surplus profits arising from its business" in
BASCO v. LEO H. RAPATALO the former law. Thus, the declaration of dividends is dependent upon the availability

of surplus profit or unrestricted retained earnings, as the case may be. Preferences
G.R. No. 126576 March 5, granted to preferred stockholders, moreover, do not give them a lien upon the
1997 - RICARDO M. ANGOBUNG property of the corporation nor make them creditors of the corporation, the right of
v. COMELEC, ET AL. the former being always subordinate to the latter. Dividends are thus payable only

when there are profits earned by the corporation and as a general rule, even if there
G.R. No. 83598 March 7, 1997 are existing profits, the board of directors has the discretion to determine whether or
- LEONCIA BALOGBOG, ET AL. v. not dividends are to be declared. 15 Shareholders, both common and preferred, are
COURT OF APPEALS, ET AL. considered risk takers who invest capital in the business and who can look only to

what is left after corporate debts and liabilities are fully paid. 16

chanroblesvirtuallawlibrary

G.R. Nos. 94994-95 March 7,

1997 - PEOPLE OF THE PHIL. v. Redeemable shares, on the other hand, are shares usually preferred, which by their
LILIBETH CACO terms are redeemable at a fixed date, or at the option of either issuing corporation,

or the stockholder, or both at a certain redemption price. 17 A redemption by the
G.R. No. 106212 March 7, corporation of its stock is, in a sense, a repurchase of it for cancellation. 18 The
1997 - PROGRESS HOMES, ET AL. present Code allows redemption of shares even if there are no unrestricted retained
v. NLRC, ET AL. earnings on the books of the corporation. This is a new provision which in effect

qualifies the general rule that the corporation cannot purchase its own shares except
G.R. No. 108395 March 7, out of current retained earnings. 19 However, while redeemable shares may be
1997 - HEIRS OF TEODORO redeemed regardless of the existence of unrestricted retained earnings, this is
GUARING, JR. v. COURT OF subject to the condition that the corporation has, after such redemption, assets in its
APPEALS, ET AL. books to cover debts and liabilities inclusive of capital stock. Redemption, therefore,

may not be made where the corporation is insolvent or if such redemption will cause
G.R. Nos. 108604-10 March 7, insolvency or inability of the corporation to meet its debts as they mature. 20

1997 - PEOPLE OF THE PHIL. v.

FEDERICO A. BURCE We come now to the merits of the case. The petitioner argues that it cannot be

compelled to redeem the preferred shares issued to the private Respondent. We
G.R. No. 113420 March 7, agree. Respondent judge, in ruling that petitioner must redeem the shares in
1997 - REPUBLIC OF THE PHIL. v. question, stated that:

jgc:chanrobles.com.ph

SANDIGANBAYAN, ET AL.

"On the question of the redemption by the defendant of said preferred shares of
G.R. No. 113905 March 7,
stock, the very wordings of the terms and conditions in said stock certificates clearly
1997 - LEOPOLDO ALICBUSAN v.
allows the same." 21

COURT OF APPEALS, ET AL.

What respondent Judge failed to recognize was that while the stock certificate does
G.R. No. 116211 March 7,
allow redemption, the option to do so was clearly vested in the petitioner bank. The
1997 - MEYNARDO POLICARPIO
redemption therefore is clearly the type known as "optional." Thus, except as
v. COURT OF APPEALS, ET AL.
otherwise provided in the stock certificate, the redemption rests entirely with the

corporation and the stockholder is without right to either compel or refuse the
G.R. No. 116512 March 7,
redemption of its stock. 22 Furthermore, the terms and conditions set forth therein
1997 - PEOPLE OF THE PHIL. v.
use the word "may." It is a settled doctrine in statutory construction that the word
WILLIAM O. CASIDO, ET AL.
"may" denotes discretion, and cannot be construed as having a mandatory effect. We

fail to see how respondent judge can ignore what, in his words, are the "very
Adm. Matter No. RTJ-96-1353
wordings of the terms and conditions in said stock certificates" and construe what is
March 11, 1997 - DANILO B.
clearly a mere option to be his legal basis for compelling the petitioner to redeem the
PARADA v. LORENZO B.
shares in question.

VENERACION

The redemption of said shares cannot be allowed. As pointed out by the petitioner,
G.R. No. 127066 March 11,
the Central Bank made a finding that said petitioner has been suffering from chronic
1997 - REYNALDO O. MALONZO
reserve deficiency, 23 and that such finding resulted in a directive, issued on January

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v. COMELEC, ET AL. 31, 1973 by then Gov. G. S. Licaros of the Central Bank, to the President and Acting

Chairman of the Board of the petitioner bank prohibiting the latter from redeeming
G.R. No. 117169 March 12, any preferred share, on the ground that said redemption would reduce the assets of
1997 - PHILTREAD WORKERS the Bank to the prejudice of its depositors and creditors. 24 Redemption of preferred
UNION, ET AL. v. NIEVES R. shares was prohibited for a just and valid reason. The directive issued by the Central
CONFESOR, ET AL. Bank Governor was obviously meant to preserve the status quo, and to prevent the

financial ruin of a banking institution that would have resulted in adverse
G.R. No. 121917 March 12, repercussions, not only to its depositors and creditors, but also to the banking
1997 - ROBIN CARIÑO PADILLA v. industry as a whole. The directive, in limiting the exercise of a right granted by law to
COURT OF APPEALS, ET AL. a corporate entity, may thus be considered as an exercise of police power. The

respondent judge insists that the directive constitutes an impairment of the obligation
G.R. Nos. 99301 & 99343 of contracts. It has, however, been settled that the Constitutional guaranty of non-
March 13, 1997 - VICTOR impairment of obligations of contract is limited by the exercise of the police power of
KIERULF, ET AL. v. COURT OF the state, the reason being that public welfare is superior to private rights.25

cralaw:red

APPEALS, ET AL.

The respondent judge also stated that since the stock certificate granted the private
G.R. No. 100333 March 13, respondents the right to receive a quarterly dividend of one Per Centum (1%),
1997 - HILARIO MAGCALAS, ET cumulative and participating, it "clearly and unequivocably (sic) indicates that the
AL. v. NLRC, ET AL. same are ‘interest bearing stocks’ or stocks issued by a corporation under an

agreement to pay a certain rate of interest thereon. As such, plaintiffs (private
G.R. No. 103611 March 13, respondents herein) become entitled to the payment thereof as a matter of right
1997 - PEOPLE OF THE PHIL. v. without necessity of a prior declaration of dividend." 26 There is no legal basis for this
CESAR HERBIETO, ET AL. observation. Both Sec. 16 of the Corporation Law and Sec. 43 of the present

Corporation Code prohibit the issuance of any stock dividend without the approval of
G.R. No. 107131 March 13, stockholders, representing not less than two-thirds (2/3) of the outstanding capital
1997 - NFD INT’L. MANNING stock at a regular or special meeting duly called for the purpose. These provisions
AGENTS, INC. v. NLRC, ET AL. underscore the fact that payment of dividends to a stockholder is not a matter of

right but a matter of consensus. Furthermore, "interest bearing stocks", on which the
G.R. No. 108454 March 13, corporation agrees absolutely to pay interest before dividends are paid to common
1997 - PEOPLE OF THE PHIL. v. stockholders, is legal only when construed as requiring payment of interest as
TEDDY QUINAO, ET AL. dividends from net earnings or surplus only. 27 Clearly, the respondent judge, in

compelling the petitioner to redeem the shares in question and to pay the
G.R. No. 109779 March 13, corresponding dividends, committed grave abuse of discretion amounting to lack or
1997 - PEOPLE OF THE PHIL. v. excess of jurisdiction in ignoring both the terms and conditions specified in the stock
NESTOR MAÑOZCA certificate, as well as the clear mandate of the law.

G.R. No. 110067 March 13, Anent the issue of prescription, this Court so holds that the claim of private
1997 - LINDA T. ALMENDRAS v. respondent is already barred by prescription as well as laches. Art. 1144 of the New
COURT OF APPEALS, ET AL. Civil Code provides that a right of action that is founded upon a written contract

prescribes in ten (10) years. The letter-demand made by the private respondents to
G.R. No. 111478 March 13, the petitioner was made only on January 5, 1979, or almost eighteen years after
1997 - GEORGE F. SALONGA, ET receipt of the written contract in the form of the stock certificate. As noted earlier,
AL. v. COURT OF APPEALS, ET AL. this letter-demand, significantly, was not formally offered in evidence, nor were any

other evidence of demand presented. Therefore, we conclude that the only time the
G.R. No. 111567 March 13, private respondents saw it fit to assert their rights, if any, to the preferred shares of
1997 - PEOPLE OF THE PHIL. v. stock, was after the lapse of almost eighteen years. The same clearly indicates that
TEODORICO AVILLANO, ET AL. the right of the private respondents to any relief under the law has already

prescribed. Moreover, the claim of the private respondents is also barred by laches.
G.R. No. 116123 March 13, Laches has been defined as the failure or neglect, for an unreasonable length of time,
1997 - SERGIO NAGUIAT, ET AL. to do that which by exercising due diligence could or should have been done earlier;
v. NLRC, ET AL. it is negligence or omission to assert a right within a reasonable time, warranting a

presumption that the party entitled to assert it either has abandoned it or declined to
G.R. No. 116228 March 13, assert it. 28

1997 - PEOPLE OF THE PHIL. v.

EPIFANIO GAYON, ET AL. Considering that the terms and conditions set forth in the stock certificate clearly

indicate that redemption of the preferred shares may be made at any time after the
G.R. No. 116352 March 13, lapse of two years from the date of issue, private respondents should have taken it
1997 - J. & D.O. AGUILAR CORP. upon themselves, after the lapse of the said period, to inquire from the petitioner the

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v. NLRC, ET AL. reason why the said shares have not been redeemed. As it is, not only two years had

lapsed, as agreed upon, but an additional sixteen years passed before the private
G.R. Nos. 116596-98 March respondents saw it fit to demand their right. The petitioner, at the time it issued said
13, 1997 - PEOPLE OF THE PHIL. preferred shares to the private respondents in 1961, could not have known that it
v. LORENZO TOPAGUEN would be suffering from chronic reserve deficiency twelve years later. Had the private

respondents been vigilant in asserting their rights, the redemption could have been
G.R. No. 117266 March 13, effected at a time when the petitioner bank was not suffering from any financial
1997 - CONTEMPT PROCEEDINGS crisis.

AGAINST VENTURA O. DUCAT, ET

AL. WHEREFORE, the instant petition, being impressed with merit, is hereby GRANTED.

The challenged decision of respondent judge is set aside and the complaint against
G.R. Nos. 117955-58 March the petitioner is dismissed.

13, 1997 - HERMINIGILDO

TOMARONG, ET AL. v. ANTONIO Costs against the private respondents.

C. LUBGUBAN, ET AL.

SO ORDERED.

G.R. No. 119058 March 13,

1997 - PEOPLE OF THE PHIL. v. Bellosillo, Vitug and Kapunan, JJ., concur.

ERLINDA VILLARAN

Padilla, J., concurs in the result.

G.R. No. 120853 March 13,

1997 - RUDY ALMEDA v. COURT

Endnotes:
OF APPEALS, ET AL.

G.R. No. 122427 March 13,

1. Promulgated on September 7, 1979 in Civil Case No. 6965-P, penned
1997 - BENJAMIN LAZA, ET AL. v.
by District Judge Enrique A. Agana, Sr.; Rollo, pp. 57-59.

COURT OF APPEALS, ET AL.

2. Branch XXVIII, Seventh Judicial District, Pasay City.

G.R. No. 123881 March 13,

1997 - VIVA PRODUCTIONS, INC.

3. Dated February 12, 1979.

v. COURT OF APPEALS, ET AL.

4. Rollo, p. 37.

G.R. No. 91694 March 14,

1997 - PEOPLE OF THE PHIL. v.

5. Rollo, pp. 38-40.

SABAS CALVO, JR., ET AL.

6. Order dated July 30, 1979; Rollo, p. 43.

G.R. No. 97626 March 14,

1997 - PHIL. BANK OF

7. Decision dated September 7, 1979, pp. 2-3; Rollo, pp. 58-59.

COMMERCE, ET AL. v. COURT OF

APPEALS, ET AL.
8. Petition, pp. 10-11; Rollo, pp. 11-12.

G.R. No. 114387 March 14,

9. DE LEON, The Corporation Code of the Philippines, p. 62 (1989 ed.).

1997 - PEOPLE OF THE PHIL. v.

ALEJANDRO DEVILLERES
10. Id.

G.R. No. 120592 March 14,

11. DE LEON, p. 69, citing 2 Fletcher, p. 44.

1997 - TRADERS ROYAL BANK

EMPLOYEES UNION v. NLRC, ET

12. Act No. 1459, Sec. 16, as amended.

AL.

13. Effective May 1, 1980.

G.R. No. 121765 March 14,

1997 - PEOPLE OF THE PHIL. v.

14. The Corporation Code, Sec. 16.

RANDOLF B. MONTEALTO

15. CAMPOS, THE CORPORATION CODE, p. 9 [1990 ed.].

G.R. No. 122646 March 14,

1997 - ADELIA C. MENDOZA v.

16. DE LEON, p. 69, citing SEC Opinion, February 10, 1969.

ANGELITO C. TEH, ET AL.

17. Id., at p. 75.

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G.R. No. 112229 March 18,

1997 - RAYMOND PE LIM v. 18. Id., at p. 77.

COURT OF APPEALS, ET AL.

19. CAMPOS, p. 33.

G.R. Nos. 114924-27 March

18, 1997 - DANTE NACURAY, ET 20. DE LEON, p. 76, citing SEC Opinion of January 23, 1985.

AL. v. NLRC, ET AL.

21. Decision dated September 7, 1979 in Civil Case No. 6965-P penned by
G.R. No. 119321 March 18, Judge Enrique A. Agana, Sr., pp. 2-3; Rollo, pp. 58-59.

1997 - CATALINO F. BAÑEZ, ET

AL. v. COURT OF APPEALS, ET AL. 22. DE LEON, pp. 76-77, citing Section 8 of the Corporation Code.

Bar Matter No. 712 March 19, 23. Rollo, p. 12.

1997 - PETITION OF AL

ARGOSINO TO TAKE THE 24. Rollo, p. 8.

LAWYER’S OATH

25. Philippine National Bank v. Remigio, G.R. No. 78508, March 21, 1994.

G.R. Nos. 100382-100385

March 19, 1997 - PEOPLE OF THE 26. Rollo, p. 58.

PHIL. v. MARIO TABACO

27. DE LEON, p. 62, citing Sec. 43 of the Corporation Code.

G.R. No. 111157 March 19,

1997 - ITOGON-SUYOC MINES, 28. Olizon v. Court of Appeals, Et Al., G.R. 107075, September 1, 1994.
INC. v. OFFICE OF THE

PRESIDENT, ET AL.

G.R. No. 117029 March 19,

1997 - PELTAN DEVELOPMENT, Back to Home | Back to Main
INC., ET AL. v. COURT OF
APPEALS, ET AL.

G.R. No. 121112 March 19,

1997 - FELICIDAD MIRANO, ET
AL. v. NLRC, ET AL.

G.R. No. 127325 March 19,

1997 - MIRIAM DEFENSOR
SANTIAGO, ET AL. v. COMELEC,
ET AL.

Adm. Matter No. P-95-1159

March 20, 1997 - COURT
ADMINISTRATOR v. WILLIAM C.
SEVILLO

G.R. No. 88684 March 20,

1997 - PEOPLE OF THE PHIL. v.
CESAR LACBANES

G.R. No. 95551 March 20,

1997 - REPUBLIC OF THE PHIL. v.
CONCEPCION S. ALARCON
VERGARA, ET AL.

G.R. No. 107019 March 20,

1997 - FRANKLIN M. DRILON, ET
AL. v. COURT OF APPEALS, ET AL.

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