Gala

7/20/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 418
*
G.R. No. 156819. December 11, 2003.
ALICIA E. GALA, GUIA G. DOMINGO and RITA G.

BENSON, petitioners, vs. ELLICE AGRO-INDUSTRIAL
CORPORATION, MARGO MANAGEMENT AND
DEVELOPMENT CORPORATION, RAUL E. GALA,
VITALIANO N. AGUIRRE II, ADNAN V. ALONTO,
ELIAS N. CRESENCIO, MOISES S. MANIEGO,
RODOLFO B. REYNO, RENATO S. GONZALES,
VICENTE C. NOLAN, NESTOR N. BATICULON,
respondents.
Corporation Law; Actions; Collateral attacks on the legality of

the purposes for which a corporation was organized are prohibited
in this jurisdiction.—The petitioners’ first contention in support of
this theory is that the purposes for which Ellice and Margo were
organized should be declared as illegal and contrary to public
policy. They claim that the respondents never pursued exemption
from land reform coverage in good faith and instead merely used
the corporations as tools to circumvent land reform laws and to
avoid estate taxes. Specifically, they point out that respondents
have not shown that the transfers of the land in favor of Ellice
were executed in compliance with the requirements of Section 13
of R.A. 3844. Furthermore, they alleged that respondent
corporations were
_______________
* FIRST DIVISION.
432
432 SUPREME COURT REPORTS ANNOTATED
Gala vs. Ellice Agro-Industrial Corporation
run without any of the conventional corporate formalities. At the

outset, the Court holds that petitioners’ contentions impugning
the legality of the purposes for which Ellice and Margo were
http://www.central.com.ph/sfsreader/session/00000164b68db31d70d8ca25003600fb002c009e/t/?o=False 1/20
organized, amount to collateral attacks which are prohibited in

this jurisdiction.
Same; If a corporation’s purpose, as stated in the Articles of
Incorporation, is lawful, then the SEC has no authority to inquire
whether the corporation has purposes other than those stated, and
mandamus will lie to compel it to issue the certificate of
incorporation.—The best proof of the purpose of a corporation is
its articles of incorporation and by-laws. The articles of
incorporation must state the primary and secondary purposes of
the corporation, while the by-laws outline the administrative
organization of the corporation, which, in turn, is supposed to
insure or facilitate the accomplishment of said purpose. In the
case at bar, a perusal of the Articles of Incorporation of Ellice and
Margo shows no sign of the allegedly illegal purposes that
petitioners are complaining of. It is well to note that, if a
corporation’s purpose, as stated in the Articles of Incorporation, is
lawful, then the SEC has no authority to inquire whether the
corporation has purposes other than those stated, and mandamus
will lie to compel it to issue the certificate of incorporation.
Same; Administrative Law; Doctrine of Primary Jurisdiction;
Agrarian Reform; Jurisdiction; Taxation; The doctrine of primary
jurisdiction precludes a court from arrogating unto itself the
authority to resolve a controversy the jurisdiction over which is
initially lodged with an administrative body of special competence;
Primary jurisdiction over any violation of Section 13 of RA. No.
3844 that may have been committed is vested in the Department of
Agrarian Reform Adjudication Board (DARAB); The legal right of
a taxpayer to reduce the amount of what otherwise could be his
taxes or altogether avoid them, by means which the law permits,
cannot be doubted.—Assuming there was even a grain of truth to
the petitioners’ claims regarding the legality of what are alleged
to be the corporations’ true purposes, we are still precluded from
granting them relief. We cannot address here their concerns
regarding circumvention of land reform laws, for the doctrine of
primary jurisdiction precludes a court from arrogating unto itself
the authority to resolve a controversy the jurisdiction over which
is initially lodged with an administrative body of special
competence. Since primary jurisdiction over any violation of
Section 13 of Republic Act No. 3844 that may have been
committed is vested in the Department of Agrarian Reform
Adjudication Board (DARAB), then it is with said administrative
agency that the petitioners must first plead their case. With
regard to their claim that Ellice and Margo were meant to be used
as mere tools for the avoidance of estate taxes, suffice it to say
that the legal right of a taxpayer to reduce the amount of what
otherwise could be his
433
VOL. 418, DECEMBER 11, 2003 433
taxes or altogether avoid them, by means which the law permits,

cannot be doubted.
Courts; Speedy Disposition of Cases; As long as the lower
court does not sacrifice the orderly administration of justice in
favor of a speedy but reckless disposition of a case, it cannot be
taken to task for rendering its decision with due dispatch.—In
People v. Mercado, we ruled that the speed with which a lower
court disposes of a case cannot thus be attributed to the
injudicious performance of its function. Indeed, magistrates are
not supposed to study a case only after all the pertinent pleadings
have been filed. It is a mark of diligence and devotion to duty that
jurists study a case long before the deadline set for the
promulgation of their decision has arrived. The two-day period
between the filing of petitioners’ Comment and the promulgation
of the decision was sufficient time to consider their arguments
and to incorporate these in the decision. As long as the lower
court does not sacrifice the orderly administration of justice in
favor of a speedy but reckless disposition of a case, it cannot be
taken to task for rendering its decision with due dispatch. The
Court of Appeals in this intra-corporate controversy committed no
reversible error and, consequently, its decision should be
affirmed. Verily, if such swift disposition of a case is considered a
non-issue in cases where the life or liberty of a person is at stake,
then we see no reason why the same principle cannot apply when
only private rights are involved.
Actions; Succession; Estate Proceedings; If some heirs are
genuinely interested in securing that part of their late father’s
property which has been reserved for them in their capacity as
compulsory heirs, then they should simply exercise their actio ad
supplendam legitimam, or their right of completion of legitime.—
In an attempt to bolster their theory that the organization of the
respondent corporations was illegal, the petitioners aver that the
legitime pertaining to petitioners Rita G. Benson and Guia G.
Domingo from the estate of their father had been subject to
unwarranted reductions as a result thereof. In sum, they claim
that stockholdings in Ellice which the late Manuel Gala had
assigned to them were insufficient to cover their legitimes, since
Benson was only given two shares while Domingo received only
sixteen shares out of a total number of 35,000 issued shares.
Moreover, the reliefs sought by petitioners should have been
raised in a proceeding for settlement of estate, rather than in the
present intra-corporate controversy. If they are genuinely
interested in securing that part of their late father’s property
which has been reserved for them in their capacity as compulsory

heirs, then they should simply exercise their actio ad supplendam
legitimam, or their right of completion of legitime. Such relief
must be sought during the distribution and partition stage of a
case for the settlement of the estate of Manuel Gala, filed before a
court which has taken jurisdiction over the settlement of said
estate.
434
Corporation Law; To warrant resort to the extraordinary

remedy of piercing the veil of corporate fiction, there must be proof
that the corporation is being used as a cloak or cover for fraud or
illegality, or to work injustice.—Finally, the petitioners pray that
the veil of corporate fiction that shroud both Ellice and Margo be
pierced, consistent with their earlier allegation that both
corporations were formed for purposes contrary to law and public
policy. In sum, they submit that the respondent corporations are
mere business conduits of the deceased Manuel Gala and thus
may be disregarded to prevent injustice, the distortion or hiding
of the truth or the “letting in” of a just defense. However, to
warrant resort to the extraordinary remedy of piercing the veil of
corporate fiction, there must be proof that the corporation is being
used as a cloak or cover for fraud or illegality, or to work injustice,
and the petitioners have failed to prove that Ellice and Margo
were being used thus. They have not presented any evidence to
show how the separate juridical entities of Ellice and Margo were
used by the respondents to commit fraudulent, illegal or unjust
acts. Hence, this contention, too, must fail.
Same; Appeals; Evidence; As a rule, no question will be
entertained on appeal unless it has been raised in the court below,
for points of law, theories, issues and arguments not brought to the
attention of the lower court need not be, and ordinarily will not be,
considered by a reviewing court; The books and records of the
corporation are, ordinarily, the best evidence of corporate acts and
proceedings.—On June 5, 2003, the petitioners filed a Reply,
where, aside from reiterating the contentions raised in their
Petition, they averred that there is no proof that either capital
gains taxes or documentary stamp taxes were paid in the series of
transfers of Ellice and Margo shares. Thus, they invoke Sections
176 and 201 of the National Internal Revenue Code, which would
bar the presentation or admission into evidence of any document
that purports to transfer any benefit derived from certificates of
stock if the requisite documentary stamps have not been affixed
thereto and cancelled. Curiously, the petitioners never raised this

issue before the SEC Hearing Officer, the SEC En Banc or the
Court of Appeals. Thus, we are precluded from passing upon the
same for, as a rule, no question will be entertained on appeal
unless it has been raised in the court below, for points of law,
theories, issues and argument not brought to the attention of the
lower court need not be, and ordinarily will not be, considered by
a reviewing court, as they cannot be raised for the first time at
that late stage. Basic considerations of due process impel this
rule. Furthermore, even if these allegations were proven to be
true, such facts would not render the underlying transactions
void, for these instruments would not be the sole means, much
less the best means, by which the existence of these transactions
could be proved. For this purpose, the books and records of a
corporation, which include the stock and transfer book, are
generally admissible in evidence in favor of or against the
corporation and its members. They can be used to prove corpo-
435
VOL. 418, DECEMBER 11, 2003 435
rate acts, a corporation’s financial status and other matters,

including one’s status as a stockholder. Most importantly, these
books and records are, ordinarily, the best evidence of corporate
acts and proceedings. Thus, reference to these should have been
made before the SEC Hearing Officer, for this Court will not
entertain this belated questioning of the evidence now.
Same; Close Corporations; The concept of a close corporation
organized for the purpose of running a family business or
managing family property has formed the backbone of Philippine
commerce and industry; A family corporation should serve as a
rallying point for family unity and prosperity, not as a flashpoint
for familial strife.—It is always sad to see families torn apart by
money matters and property disputes. The concept of a close
corporation organized for the purpose of running a family
business or managing family property has formed the backbone of
Philippine commerce and industry. Through this device, Filipino
families have been able to turn their humble, hard-earned life
savings into going concerns capable of providing them and their
families with a modicum of material comfort and financial
security as a reward for years of hard work. A family corporation
should serve as a rallying point for family unity and prosperity,
not as a flashpoint for familial strife. It is hoped that people
reacquaint themselves with the concepts of mutual aid and
security that are the original driving forces behind the formation
of family corporations and use these tenets in order to facilitate
more civil, if not more amicable, settlements of family corporate
disputes.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.

Chavez, Laureta and Associates for petitioners.
Wilfredo M. Garrido, Jr. collaborating counsel for
petitioners.
Ricafrente, San Vicente & Cacho Law Firm for
private respondents.
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of

Court, seeking
1
the reversal of the decision dated November
8, 2002 and
_______________
1 CA Rollo, p. 452; penned by Associate Justice Martin S. Villanueva,

Jr., concurred in by Associate Justice Godardo A. Jacinto and Mario L.
Guariña III.
436

2
the resolution dated December 27, 2002 of the Court of
Appeals in CA-G.R. SP No. 71979.
On March 28, 1979, the spouses Manuel and Alicia Gala,
their children Guia Domingo, Ofelia Gala, Raul Gala, and
Rita Benson, and their encargados Virgilio Galeon and
Julian Jader formed 3 and organized the Ellice Agro-
Industrial Corporation. The total subscribed capital stock
of the corporation was apportioned as follows:
Name Number of Shares Amount

Manuel R. Gala 11,700 1,170,000.00
Alicia E. Gala 23,200 2,320,000.00
Guia G. Domingo 16 1,600.00
Ofelia E. Gala 40 4,000.00
Raul E. Gala 40 4,000.00

Rita G. Benson 2 200.00
Virgilio Galeon 1 100.00
Julian Jader 1 100.00
4
TOTAL 35,000 P3,500,000.00
As payment for their subscriptions, the Gala spouses

transferred several parcels of land
5
located in the provinces
of Quezon and Laguna to Ellice.
In 1982, Manuel Gala, Alicia Gala and Ofelia Gala
subscribed to an additional 3,299
6
shares, 10,652.5 shares
and 286.5 shares, respectively.
On June 28, 1982, Manuel Gala and Alicia Gala
acquired an7 additional 550 shares and 281 shares,
respectively.
Subsequently, on September 16, 1982, Guia Domingo,
Ofelia Gala, Raul Gala, Virgilio Galeon and Julian Jader
incorporated the Margo
8
Management and Development
Corporation (Margo). The total subscribed capital stock of
Margo was apportioned as follows:
_______________
2 Id.
3 CA Rollo, pp. 101-101, 452.
4 Id., p. 102.
5 Id., p. 91.
6 Id., p. 454.
7 Id.
8 Id., pp. 111, 453.
437
VOL. 418, DECEMBER 11, 2003 437


Raul E. Gala 6,640 66,400.00
Ofelia E. Gala 6,640 66,400.00
Guia G. Domingo 6,640 66,400.00
9
TOTAL 20,000 P200,000.00
On November 10, 1982, 10Manuel Gala sold 13,314 of his

shares in Ellice to Margo.
Alicia Gala transferred 1,000 of her shares in Ellice to a
certain Victor de Villa on March 2, 1983. That
11
same day, de
Villa transferred said shares to Margo. A few months
later, on August 28, 1983, Alicia Gala transferred 854.3 of
her shares 12to Ofelia Gala, 500 to Guia Domingo and 500 to
Raul Gala.
Years later, on February 8, 1988, Manuel Gala
transferred all of his remaining holdings 13
in Ellice,
amounting to 2,164 shares, to Raul Gala.
On July 20, 1988,
14
Alicia Gala transferred 10,000 of her
shares to Margo.
Thus, as of the date on which this case was commenced,
the stockholdings in Ellice were allocated as follows:

Margo 24,312.5 2,431,250.00
Alicia Gala 21,480.2 2,148,020.00
Raul Gala 2,704.5 270,450.00
Ofelia Gala 980.8 98,080.00
Gina Domingo 516 51,600.00
Rita Benson 2 200.00
_______________
9 Id., p. 112.
10 Id., p. 454.
11 Id.
12 Id.
13 Id.
14 Id.
438


Adnan Alonto 1 100.00
Elias Cresencio 1 100.00
TOTAL 50,000 P5,000,000.00
On June 23, 1990, a special stockholders’ meeting of Margo 15

was held, where a new board of directors was elected.
That same day, the newly-elected board elected a new set
of officers. Raul Gala was elected as chairman, president
and general manager. During the meeting, the board
approved several actions, including the commencement of
proceedings to annul certain dispositions of Margo’s
property made by Alicia Gala. The board also resolved to
change the name of the corporation
16
to MRG Management
and Development Corporation.
Similarly, a special stockholders’ meeting of Ellice was
held on August 24, 1990 to elect a new board of directors.
In the ensuing organizational meeting later that day, a
new set of corporate officers was elected. Likewise, Raul
Gala was elected as chairman, president and general
manager.
On March 27, 1990, respondents filed against petitioners
with the Securities and Exchange Commission (SEC) a
petition for the appointment of a management committee
or receiver, accounting and restitution by the directors and
officers, and the dissolution of Ellice Agro-Industrial
Corporation for alleged mismanagement, diversion of
funds, financial losses and the dissipation
17
of assets,
docketed as SEC Case No. 3747. The petition was
amended to delete the prayer for the appointment of a
management committee or receiver and for the dissolution
of Ellice. Additionally, respondents prayed that they be
allowed18
to inspect the corporate books and documents of
Ellice.
In turn, petitioners initiated a complaint against the
respondents on June 26, 1991, docketed as SEC Case No.
4027, praying for, among others, the nullification of the
elections of directors and officers of both Margo
Management and Development Corporation and Ellice
Industrial Corporation; the nullification of all board
_______________
15 Id., p. 136.
16 Id., p. 140.
17 Id., p. 455.
18 Id., pp. 155-156.
439
VOL. 418, DECEMBER 11, 2003 439

resolutions issued by Margo from June 23, 1990 up to the

present and all board resolutions issued by Ellice from
August 24, 1990 up to the present; and the return of all
titles to real property in the name of Margo and Ellice, as
well as all corporate papers and records of both Margo and
Ellice which19 are in the possession and control of the
respondents.
The two cases were
20
consolidated in an Order dated
November 23, 1993.
Meanwhile, during the pendency of the SEC cases, the
shares of stock of Alicia and Ofelia Gala in Ellice were
levied and sold at public auction to satisfy a judgment
rendered against them by he Regional Trial Court of
Makati, Branch 66, in Civil Case No. 42560, entitled
“Regines
21
Condominium v. Ofelia (Gala) Panes and Alicia
Gala.”
On November 3, 1998, the SEC rendered a Joint
Decision in SEC Cases Nos. 3747 and 4027, the dispositive
portion of which states:
“WHEREFORE, premises considered, judgment is hereby

rendered, as follows:
1. Dismissing the petition in SEC Case No. 3747,

2. Issuing the following orders in SEC Case No. 4027;
(a) Enjoining herein respondents to perform corporate acts of

both Ellice and Margo, as directors and officers thereof.
(b) Nullifying the election of the new sets of Board of
Directors and Officers of Ellice and Margo from June 23,
1990 to the present, and that of Ellice from August 24,
1990 to the present.
(c) Ordering the respondent Raul Gala to return all the titles
of real properties in the names of Ellice and Margo which
were unlawfully taken and held by him.
(d) Directing the respondents to return to herein petitioners
all corporate papers, records of both Ellice and Margo
which are in their possession and control.
22
SO ORDERED.”
_______________
19 Id., p. 180.
20 Id., p. 208; penned by SEC Hearing Officer Alberto P. Atas.
21 Id., p. 455.
22 Rollo, pp. 144-145; penned by SEC Hearing Officer Juanito B.
Almosa, Jr.
440

Respondents appealed to the SEC En Banc, which, on July

4, 2002, rendered its Decision, the decretal portion of which
reads:
“WHEREFORE, the Decision of the Hearing Officer dated

November 3, 1998 is hereby REVERSED and SET ASIDE and a
new one hereby rendered granting the appeal, upholding the
Amended Petition in SEC Case No. 3747, and dismissing the
Petition with Prayer for Issuance of Preliminary Restraining
Order and granting the Compulsory Counter-claim in SEC Case
No. 4027.
Accordingly, appellees Alicia Gala and Guia G. Domingo are
ordered as follows:
(1) jointly and solidarily pay ELLICE and/or MARGO the

amount of P700,000.00 representing the consideration for
the unauthorized sale of a parcel of land to Lucky Homes
and Development Corporation (Exhs. “N” and “CCC”);
(2) jointly and severally pay ELLICE and MARGO the
proceeds of sales of agricultural products averaging
P120,000.00 per month from February 17, 1988;
(3) jointly and severally indemnify the appellants P90,000.00
as attorney’s fees;
(4) jointly and solidarily pay the costs of suit;
(5) turn over to the individual appellants the corporate
records of ELLICE and MARGO in their possession; and
(6) desist and refrain from interfering with the management
of ELLICE and MARGO.
23
SO ORDERED.”
Petitioners filed a petition for review with the Court of

Appeals which dismissed the petition 24for review and
affirmed the decision of the SEC En Banc.
Hence, this petition, raising the following issues:
WHETHER OR NOT THE LOWER COURT ERRED IN NOT

DECLARING AS ILLEGAL AND CONTRARY TO PUBLIC
POLICY THE PURPOSES AND MANNER IN WHICH
RESPONDENT CORPORATIONS
_______________
23 Id., pp. 170-171; docketed as SEC AC No. 642. Signed by Chairperson Lilia R.
Bautista, Commissioners Fe Eloisa C. Gloria, Josella L. Poblador, Ma. Juanita E.
Cueto, and Jesus G. Martinez Enrique.
24 CA Rollo, p. 466.
441
VOL. 418, DECEMBER 11, 2003 441

WERE ORGANIZED—WHICH WERE, E.G. TO (1) “PREVENT

THE GALA ESTATE FROM BEING BROUGHT UNDER THE
COVERAGE (SIC)” OF THE COMPREHENSIVE AGRARIAN
REFORM PROGRAM (CARP); AND (2) PURPORTEDLY FOR
“ESTATE PLANNING.”
II
WHETHER OR NOT THE LOWER COURT ERRED (1) IN

SUSPICIOUSLY RESOLVING THE CASE WITHIN TWO (2)
DAYS FROM RECEIPT OF RESPONDENTS’ COMMENT; AND
(2) IN NOT MAKING A DETERMINATION OF THE ISSUES OF
FACTS AND INSTEAD RITUALLY CITING THE FACTUAL
FINDINGS OF THE COMMISSION A QUO WITHOUT
DISCUSSION AND ANALYSIS;
III
WHETHER OR NOT THE LOWER COURT ERRED IN

RULING THAT THE ORGANIZATION OF RESPONDENT
CORPORATIONS WAS NOT ILLEGAL FOR DEPRIVING
PETITIONER RITA G. BENSON OF HER LEGITIME.
IV
WHETHER OR NOT THE LOWER COURT ERRED IN NOT

PIERCING THE VEILS OF CORPORATE FICTION25 OF
RESPONDENTS’ CORPORATIONS ELLICE AND MARGO.
In essence, petitioners want this Court to disregard the

separate juridical personalities of Ellice and Margo for the
purpose of treating all property purportedly owned by said
corporations as property solely owned by the Gala spouses.
The petitioners’ first contention in support of this theory
is that the purposes for which Ellice and Margo were
organized should be declared as illegal and contrary to
public policy. They claim that the respondents never
pursued exemption from land reform coverage in good faith
and instead merely used the corporations as tools to
circumvent land reform laws and to avoid estate taxes.

Specifically, they point out that respondents have not
shown that the transfers of the land in favor of Ellice were
executed in compliance
26
with the requirements of Section 13
of R.A. 3844. Furthermore,
_______________
25 Rollo, p. 37 (emphasis in the original).

26 Id., pp. 40-41. Section 13 of R.A. 3844 provides:
442

they alleged that respondent corporations were 27

run without
any of the conventional corporate formalities.
At the outset, the Court holds that petitioners’
contentions impugning the legality of the purposes for
which Ellice and Margo were organized, amount to 28
collateral attacks which are prohibited in this jurisdiction.
The best proof of the purpose of a corporation is its
articles of incorporation and by-laws. The articles of
incorporation must state the primary and secondary
purposes of the corporation, while the by-laws outline the
administrative organization of the corporation, which, in
turn, is supposed29
to insure or facilitate the accomplishment
of said purpose.
In the case at bar, a perusal of the Articles of
Incorporation of Ellice and Margo shows no sign of the
allegedly illegal purposes that petitioners are complaining
of. It is well to note that, if a corporation’s purpose, as
stated in the Articles of Incorporation, is lawful, then the
SEC has no authority to inquire whether the corporation
has purposes other than those stated, and mandamus30 will
lie to compel it to issue the certificate of incorporation.
Assuming there was even a grain of truth to the
petitioners’ claims regarding the legality of what are
alleged to be the corporations’ true purposes, we are still
precluded from granting them relief. We cannot address
here their concerns regarding circumvention of land reform
laws, for the doctrine of primary jurisdiction precludes a
court from arrogating unto itself the authority to re-
_______________
SEC. 13. Affidavit Required in Sale of Land Subject to Right to

Preemption.—No deed of sale of agricultural land under cultivation by an
agricultural lessee or lessees shall be recorded in the Registry of Property
unless accompanied by an affidavit of the vendor that he has given the
written notice required in Section eleven of this chapter or that the land is
not worked by an agricultural lessee.
27 Rollo, p. 40.
28 Corporation Code, sec. 20.
29 Jesus Sacred Heart College v. Collector of Internal Revenue, 95 Phil.
16, 22 (1954); cited in Commissioner of Internal Revenue v. Court of
Appeals, 358 Phil. 562, 584; 298 SCRA 83 (1998), dissenting opinion of
Senior Associate Justice Josue N. Bellosillo.
30 I CAMPOS, THE CORPORATION CODE: COMMENTS, NOTES
AND SELECTED CASES 75-76 (1990 ed.); citing Asuncion v. Yriarte, 28
Phil. 67 (1914).
443
VOL. 418, DECEMBER 11, 2003 443

solve a controversy the jurisdiction over which is initially 31

lodged with an administrative body of special competence.
Since primary jurisdiction over any violation of Section 13
of Republic Act No. 3844 that may have been committed is
vested in the Department
32
of Agrarian Reform Adjudication
Board (DARAB), then it is with said administrative
agency that the petitioners must first plead their case.
With regard to their claim that Ellice and Margo were
meant to be used as mere tools for the avoidance of estate
taxes, suffice it to say that the legal right of a taxpayer to
reduce the amount of what otherwise could be his taxes or
altogether avoid them,33
by means which the law permits,
cannot be doubted.
The petitioners’ allegation that Ellice and Margo were
run without any of the typical corporate formalities, even if
true, would not merit the grant of any of the relief set forth
in their prayer. We cannot disregard the corporate entities
of Ellice and Margo on this ground. At most, such
allegations, if proven to be true, should
34
be addressed in an
administrative case before the SEC.
Thus, even if Ellice and Margo were organized for the
purpose of exempting the properties of the Gala spouses
from the coverage of land reform legislation and avoiding
estate taxes, we cannot disregard their separate juridical
personalities.
Next, petitioners make much of the fact that the Court
of Appeals promulgated its assailed Decision a mere two
days from the time the respondents filed their Comment.

They alleged that the appellate court could not have made
a deliberate study of the factual questions in the case,
35
considering the sheer volume of evidence available. In
support of this allegation, they point out that
_______________
31 Machete v. Court of Appeals, 320 Phil. 227; 250 SCRA 176 (1995);
citing Vidad v. Regional Trial Court of Negros Oriental, G.R. No. 98084,
18 October 1993, 227 SCRA 271.
32 Rep. Act No. 6657, sec. 50.
33 Delpher Trades Corporation v. Intermediate Appellate Court, G.R.
No. 69259, 26 January 1988, 157 SCRA 349, 356; citing Liddell & Co., Inc.
v. The Collector of Internal Revenue, G.R. No. 9687, 30 June 1961, 2 SCRA
632, 641.
34 CORPORATION CODE, sec. 144; Pres. Dec. No. 902-A, sec. 6 (i),
Rep. Act No. 8799, sec. 5 (d) and (f).
35 Rollo, p. 43.
444

the Court of Appeals merely adopted the factual findings of

the SEC36 En Banc verbatim, without deliberation and
analysis. 37
In People v. Mercado, we ruled that the speed with
which a lower court disposes of a case cannot thus be
attributed to the injudicious performance of its function.
Indeed, magistrates are not supposed to study a case only
after all the pertinent pleadings have been filed. It is a
mark of diligence and devotion to duty that jurists study a
case long before the deadline set for the promulgation of
their decision has arrived. The two-day period between the
filing of petitioners’ Comment and the promulgation of the
decision was sufficient time to consider their arguments
and to incorporate these in the decision. As long as the
lower court does not sacrifice the orderly administration of
justice in favor of a speedy but reckless disposition of a
case, it cannot be taken to task for rendering its decision
with due dispatch. The Court of Appeals in this
intracorporate controversy committed no reversible 38
error
and, consequently, its decision should be affirmed. Verily,
if such swift disposition of a case is considered a non-issue
in cases where the life or liberty of a person is at stake,
then we see no reason why the same principle cannot apply

when only private rights are involved.
Furthermore, well-settled is the rule that the factual
findings of the Court of Appeals are conclusive on the
parties and are not reviewable by the Supreme Court. They
carry even more weight when the Court of Appeals 39
affirms
the factual findings of a lower fact-finding body. Likewise,
the findings of fact of administrative bodies, such as the
SEC, will not be interfered with by the courts in the
absence of grave abuse of discretion on the part of said
agencies, or unless the aforementioned
40
findings are not
supported by substantial evidence.
_______________
36 Id., p. 45.
37 G.R. No. 116239, 29 November 2000, 346 SCRA 256.
38 People v. Mercado, G.R. No. 116239, 29 November 2000, 346 SCRA
256.
39 Colegio de San Juan de Letran-Calamba v. Villas, G.R. No. 137795,
26 March 2003, 399 SCRA 550; citing Spouses Uy v. Court of Appeals, 411
Phil. 788; 359 SCRA 262 (2001).
40 Gokongwei v. Securities and Exchange Commission, G.R. No. 52129,
21 April 1980, 97 SCRA 78; citing Central Bank v. Cloribel, G.R. No.
26971, 11 April 1972, 44 SCRA 307.
445
VOL. 418, DECEMBER 11, 2003 445

However, in the interest of equity, this Court has reviewed

the factual findings of the SEC En Banc, which were
affirmed in toto by the Court of Appeals, and has found no
cogent reason to disturb the same. Indeed, we are
convinced that the arguments raised by the petitioners are
nothing but unwarranted conclusions of law. Specifically,
they insist that the Gala spouses never meant to part with
the ownership of the shares which are in the names of their
children and encargados, and that all transfers of property
to these individuals are supposedly void 41 for being
absolutely simulated for lack of consideration. However,
as correctly held by the SEC En Banc, the transfers were
only relatively simulated, inasmuch as the evident
intention of the Gala spouses was to donate 42portions of
their property to their children and encargados.
In an attempt to bolster their theory that the
organization of the respondent corporations was illegal, the
petitioners aver that the legitime pertaining to petitioners

Rita G. Benson and Guia G. Domingo from the estate of
their father had been subject to unwarranted reductions as
a result thereof. In sum, they claim that stockholdings in
Ellice which the late Manuel Gala had assigned to them
were insufficient to cover their legitimes, since Benson was
only given two shares while Domingo received only sixteen
43
shares out of a total number of 35,000 issued shares.
Moreover, the reliefs sought by petitioners should have
been raised in a proceeding for settlement of estate, rather
than in the present intra-corporate controversy. If they are
genuinely interested in securing that part of their late
father’s property which has been reserved for them in their
capacity as compulsory heirs, then they should simply
exercise their actio ad supplendam
44
legitimam, or their
right of completion of legitime. Such relief must be sought
during the distribution and partition stage of a case for the
settlement of the estate of Manuel Gala, filed before a court
which 45has taken jurisdiction over the settlement of said
estate.
_______________
41 Id.
42 CA Rollo, p. 89.
43 Rollo, pp. 54-55, 287.
44 Civil Code, art. 906; Ruben F. Balane, Jottings and Jurisprudence in
Civil Law; Succession 328-329 (1998).
45 Rules of Court, Rule 73. sec. 1 and Rule 90, sec. 1.
446

Finally, the petitioners pray that the veil of corporate

fiction that shroud both Ellice and Margo be pierced,
consistent with their earlier allegation that both
corporations were formed for purposes contrary to law and
public policy. In sum, they submit that the respondent
corporations are mere business conduits of the deceased
Manuel Gala and thus may be disregarded to prevent
injustice, the distortion
46
or hiding of the truth or the “letting
in” of a just defense.
However, to warrant resort to the extraordinary remedy
of piercing the veil of corporate fiction, there must be proof
that the corporation is being used as 47a cloak or cover for
fraud or illegality, or to work injustice, and the petitioners
have failed to prove that Ellice and Margo were being used
thus. They have not presented any evidence to show how
the separate juridical entities of Ellice and Margo were
used by the respondents to commit fraudulent, illegal or
unjust acts. Hence, this contention, too, must fail.
On June 5, 2003, the petitioners filed a Reply, where,
aside from reiterating the contentions raised in their
Petition, they averred that there is no proof that either
capital gains taxes or documentary stamp taxes were paid
in the series of transfers of Ellice and Margo shares. Thus,
they invoke Sections 176 and 201 of the National Internal
Revenue Code, which would bar the presentation or
admission into evidence of any document that purports to
transfer any benefit derived from certificates of stock if the
requisite documentary stamps have not been affixed
thereto and cancelled.
Curiously, the petitioners never raised this issue before
the SEC Hearing Officer, the SEC En Banc or the Court of
Appeals. Thus, we are precluded from passing upon the
same for, as a rule, no question will be entertained on
appeal unless it has been raised in the court below, for
points of law, theories, issues and argument not brought to
the attention of the lower court need not be, and ordinarily
will not be, considered by a reviewing court, as they cannot
be raised for the first time at that late stage. Basic 48
considerations of due process impel this rule.
Furthermore, even if these
_______________
46 Rollo, p. 56.
47 Ong Yong v. Tiu, G.R. No. 144476, 8 April 2003, 401 SCRA 1.
48 Del Rosario v. Bonga, G.R. No. 136308, 23 January 2001, 350 SCRA
101, cited in Twin Towers Condominium Corporation v. Court of Appeals,
G.R. No. 123552, 27 February 2003, 398 SCRA 203.
447
VOL. 418, DECEMBER 11, 2003 447

allegations were proven to be true, such facts would not

render the underlying transactions void, for these
instruments would not be the sole means, much less the
best means, by which the existence of these transactions
could be proved. For this purpose, the books and records of
a corporation, which include the stock and transfer book,
are generally admissible in evidence in favor of or against
the corporation and its members. They can be used to prove

corporate acts, a corporation’s financial status and other
matters, including one’s status as a stockholder. Most
importantly, these books and records are, ordinarily,
49
the
best evidence of corporate acts and proceedings. Thus,
reference to these should have been made before the SEC
Hearing Officer, for this Court will not entertain this
belated questioning of the evidence now.
It is always sad to see families torn apart by money
matters and property disputes. The concept of a close
corporation organized for the purpose of running a family
business or managing family property has formed the
backbone of Philippine commerce and industry. Through
this device, Filipino families have been able to turn their
humble, hard-earned life savings into going concerns
capable of providing them and their families with a
modicum of material comfort and financial security as a
reward for years of hard work. A family corporation should
serve as a rallying point for family unity and prosperity,
not as a flashpoint for familial strife. It is hoped that
people reacquaint themselves with the concepts of mutual
aid and security that are the original driving forces behind
the formation of family corporations and use these tenets in
order to facilitate more civil, if not more amicable,
settlements of family corporate disputes.
WHEREFORE, in view of the foregoing, the petition is
DENIED. The Decision dated November 8, 2002 and the
Resolution dated December 27, 2002, both of the Court of
Appeals, are AFFIRMED. Costs against petitioners.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Panganiban, Carpio

and Azcuna, JJ., concur.
_______________
49 Bitong v. Court of Appeals, 354 Phil. 516, 536; 292 SCRA 503 (1998).
448

Lorenzo vs. Commission on Elections
Petition denied, judgment and resolution affirmed.
Notes.—Stockholders who are actively engaged in the

management or operation of the business and affairs of a
close corporation shall be personally liable for corporate
torts unless the corporation has obtained reasonably

adequate liability insurance. (Naguiat vs. National Labor
Relations Commission, 269 SCRA 564 [1997])
A corporation does not become a close corporation just
because a man and his wife owns 99.866% of its subscribed
capital stock; So, too, a narrow distribution of ownership
does not, by itself, make a close corporation. (San Juan
Structural and Steel Fabricators, Inc. vs. Court of Appeals,
296 SCRA 631 [1998])
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7/20/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 418

ALICIA E. GALA, GUIA G. DOMINGO and RITA G.

Corporation Law; Actions; Collateral attacks on the legality of

432 SUPREME COURT REPORTS ANNOTATED

Gala vs. Ellice Agro-Industrial Corporation

run without any of the conventional corporate formalities. At the

organized, amount to collateral attacks which are prohibited in

VOL. 418, DECEMBER 11, 2003 433

Gala vs. Ellice Agro-Industrial Corporation

taxes or altogether avoid them, by means which the law permits,

which has been reserved for them in their capacity as compulsory

434 SUPREME COURT REPORTS ANNOTATED

Gala vs. Ellice Agro-Industrial Corporation

Corporation Law; To warrant resort to the extraordinary

thereto and cancelled. Curiously, the petitioners never raised this

VOL. 418, DECEMBER 11, 2003 435

Gala vs. Ellice Agro-Industrial Corporation

rate acts, a corporation’s financial status and other matters,

PETITION for review on certiorari of the decision and

The facts are stated in the opinion of the Court.

This is a petition for review under Rule 45 of the Rules of

1 CA Rollo, p. 452; penned by Associate Justice Martin S. Villanueva,

436 SUPREME COURT REPORTS ANNOTATED

Name Number of Shares Amount

Name Number of Shares Amount

As payment for their subscriptions, the Gala spouses

VOL. 418, DECEMBER 11, 2003 437

Name Number of Shares Amount

On November 10, 1982, 10Manuel Gala sold 13,314 of his

Name Number of Shares Amount

438 SUPREME COURT REPORTS ANNOTATED

Julian Jader 1 100.00

On June 23, 1990, a special stockholders’ meeting of Margo 15

VOL. 418, DECEMBER 11, 2003 439

resolutions issued by Margo from June 23, 1990 up to the

“WHEREFORE, premises considered, judgment is hereby

1. Dismissing the petition in SEC Case No. 3747,

(a) Enjoining herein respondents to perform corporate acts of

440 SUPREME COURT REPORTS ANNOTATED

Respondents appealed to the SEC En Banc, which, on July

“WHEREFORE, the Decision of the Hearing Officer dated

(1) jointly and solidarily pay ELLICE and/or MARGO the

Petitioners filed a petition for review with the Court of

WHETHER OR NOT THE LOWER COURT ERRED IN NOT

VOL. 418, DECEMBER 11, 2003 441

WERE ORGANIZED—WHICH WERE, E.G. TO (1) “PREVENT

WHETHER OR NOT THE LOWER COURT ERRED (1) IN

WHETHER OR NOT THE LOWER COURT ERRED IN

WHETHER OR NOT THE LOWER COURT ERRED IN NOT

In essence, petitioners want this Court to disregard the

circumvent land reform laws and to avoid estate taxes.

25 Rollo, p. 37 (emphasis in the original).

442 SUPREME COURT REPORTS ANNOTATED

they alleged that respondent corporations were 27

SEC. 13. Affidavit Required in Sale of Land Subject to Right to

VOL. 418, DECEMBER 11, 2003 443

solve a controversy the jurisdiction over which is initially 31

days from the time the respondents filed their Comment.