Philippine Society for the Prevention of Cruelty to Animals vs Commission

on Audit

September 25, 2007

of the charter test had been introduced by the 1935 Constitution and not
earlier, the test cannot be applied to PSPCA which was incorporated on
January 19, 1905. Laws, generally, have no retroactive effect unless the
contrary is provided. There are a few exceptions: (1) when expressly provided;
(2) remedial statutes; (3) curative statutes; and (4) laws interpreting others.

Facts:

None of the exceptions apply in the instant case.

PSPCA was incorporated as a juridical entity by virtue of Act No. 1285 by the
Philippine Commission in order to enforce laws relating to the cruelty inflicted
upon animals and for the protection of and to perform all things which may
tend to alleviate the suffering of animals and promote their welfare.

The mere fact that a corporation has been created by a special law doesnt
necessarily qualify it as a public corporation. At the time PSPCA was formed,
the Philippine Bill of 1902 was the applicable law and no proscription similar
to the charter test can be found therein. There was no restriction on the
legislature to create private corporations in 1903. The amendments
introduced by CA 148 made it clear that PSPCA was a private corporation, not
a government agency.

G.R. No. 169752

In order to enhance its powers, PSPCA was initially imbued with (1) power to
apprehend violators of animal welfare laws and (2) share 50% of the fines
imposed and collected through its efforts pursuant to the violations of related
laws.
However, Commonwealth Act No. 148 recalled the said powers. President
Quezon then issued Executive Order No. 63 directing the Commission of
Public Safety, Provost Marshal General as head of the Constabulary Division
of the Philippine Army, Mayors of chartered cities and every municipal
president to detail and organize special officers to watch, capture, and
prosecute offenders of criminal-cruelty laws.
On December 1, 2003, an audit team from the Commission on Audit visited
petitioners office to conduct a survey. PSPCA demurred on the ground that
it was a private entity and not under the CoAs jurisdiction, citing Sec .2(1),
Art. IX of the Constitution.

Issues:
WON the PSPCA is subject to CoAs Audit Authority.
Held:
No.
The charter test cannot be applied. It is predicated on the legal regime
established by the 1935 Constitution, Sec.7, Art. XIII. Since the underpinnings

PSPCAs charter shows that it is not subject to control or supervision by any

agency of the State. Like all private corporations, the successors of its
members are determined voluntarily and solely by the petitioner, and may
exercise powers generally accorded to private corporations.
PSPCAs employees are registered and covered by the SSS at the latters
initiative and not through the GSIS.
The fact that a private corporation is impressed with public interest does not
make the entity a public corporation. They may be considered quasi-public
corporations which areprivate corporations that render public service, supply
public wants and pursue other exemplary objectives. The true criterion to
determine whether a corporation is public or private is found in the totality of
the relation of the corporate to the State. It is public if it is created by the
latters own agency or instrumentality, otherwise, it is private.

oy Scouts of the Philippines vs. Commission onAudit (2011) [Vital Role of

the Youth]Petition:
petition for prohibition with preliminaryinjunction and temporary restraining
order
Petitioner:
Boy Scouts of the Philippines
Respondent:
Commission on Audit
Ponencia:
Leonardo-De Castro
DOCTRINE:
An institution that molds and prepares the youth tobecome model citizens
and outstanding leaders of thecountry through lessons in patriotism,
civicconsciousness and
moral
values,
ultimately
redounds
tothe benefit of public welfare and the state. Theaforementioned functions
are undeniably sovereignfunctions enshrined under the Art. II- Sec. 13 of
theConstitution
FACTS:
-The BSP is a public corporation created under Commonwealth Act No. 111
dated October 31, 1936,and whose functions relate to the fostering of
publicvirtues of citizenship and patriotism and the generalimprovement of
the moral spirit and fiber of the youth.-On Aug 19, 1999, COA issued
Resolution No. 99-011"Defining the Commission's policy with respect to
theaudit of the Boy Scouts of the Philippines" whichprovides for the
conduction of an annual financial auditof the Boy Scouts of the Phil. and the
expression of anopinion on the fairness of their financial statements. TheBSP
shall also be classified among the governmentcorporations belonging to the
Educational, Social,Scientific, Civic and Research Sector.- The COA resolution
stated that the BSP was createdas a public corporation under Commonwealth
Act No.111 and is a government-controlled corporation. TheCOA Resolution
also cited its constitutional mandateunder Section 2 (1), Article IX (D).-On

Nov. 26, 1999, the BSP National President Jejomar Binay sought
reconsideration of the resolution statingthat the BSP is not subject to the
Commission's jurisdiction because it is not a unit of the government.Moreov
er, RA 7278 virtually eliminated the "substantialgovernment participation" in
the National ExecutiveBoard and that the BSP is not as a
governmentinstrumentality under the 1987 Administrative Codewhich
provides that instrumentality refers to "any agencyof the National
Government, not integrated within thedepartment framework, vested with
special functions or jurisdiction by law.-On July 3, 2000, Director Sunico,
Corporate AuditOfficer of the COA, furnished the BSP with a copy of the
Memorandum
that opined that the substantialgovernment participation is only one (1) of
the three (3)grounds relied upon by the Court in the resolution of thecase.
Other considerations include the character of theBSP's purposes and
functions which has a public aspectand the statutory designation of the BSP
as a "publiccorporation". On the argument that BSP is not "agovernment
instrumentality" and "agency" of thegovernment, the Supreme Court has
elucidated thismatter in the BSP vs NLRC case when it declared thatBSP is
both a "government-controlled corporation withan original charter" and as
an "instrumentality" of theGovernment.-Upon the BSP's request, the audit
was deferred for thirty (30) days. The BSP then filed a Petition for Prohibition
with Prayer for Preliminary Injunction and/or Temporary Restraining Order
before the COA.
ISSUES:
W/N the BSP is a public corporation and is
subject to COAs audit jurisdiction.

PROVISIONS:
Commonwealth Act No. 111 (Boy Scout Charter),

or An Act to Create a Public Corporation to be Known asthe Boy Scouts of

the Philippines, and to Define itsPowers and Purposes: Section 3.The purpose
of thiscorporation shall be to promote, through organization,and cooperation
with other agencies, the ability of boysto do things for themselves and others,
to train them inscoutcraft, and to teach them patriotism, courage, selfreliance, and kindred virtues, using the methods whichare now in common
use by boy scouts.Section 2(1), Article IX-D of the Constitution
providesthat COA shall have the power, authority, and duty toexamine, audit
and settle all accounts pertaining to therevenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by,
or pertaining to, the Government, or any of its subdivisions,agencies or
instrumentalities, including government-owned or controlled corporations
with original chartersART II-

Section 13 of the Constitution

. The Staterecognizes the vital role of the youth in nation-buildingand shall
promote and protect their physical, moral,spiritual, intellectual, and social
well-being. It shallinculcate in the youth patriotism and nationalism,
andencourage their involvement in public and civic affairs.
Article 44 of the Civil Code:
The following are juridical persons:(1)The State and its political
subdivisions;(2)

to
which
the
law
grants
a juridical personality, separate and distinct from that of each shareholder,
partner or member
RULING + RATIO:
Yes. BSP is a public corporation andits funds are subject to the COA's audit
jurisdiction.The BSP is a public corporation whose functions relateto the
fostering of public virtues of citizenship andpatriotism and the general
improvement of the moralspirit and fiber of the youth. The functions of the
BSPinclude, among others, the teaching to the youth of patriotism, courage,
self-reliance, and kindred virtues,are undeniably sovereign functions
enshrined under theConstitution. Any attempt to classify the BSP as aprivate
corporation would be incomprehensible since noless than the law which
created it had designated it as apublic corporation and its statutory mandate
embracesperformance of sovereign functions. The manner of creation and
the purpose for which the BSP was createdindubitably prove that it is a
government agency.Moreover, there are three classes of juridical
personsunder Article 44 of the Civil Code and the BSP, aspresently constituted
under Republic Act No. 7278,
fallsunder the second classification
.The purpose of the BSP as stated in its amended charter shows that it was
created in order to implement a Statepolicy declared in Article II, Section 13
of theConstitution.Evidently, the BSP, which was created by a special lawto
serve a public purpose in pursuit of a constitutionalmandate, comes within
the class of "public corporations"defined by paragraph 2, Article 44 of the
Civil Code andgoverned by the law which creates it.
DISPOSITION:

Other corporations, institutions and entities for public interest or purpose

created by law; their personality begins as soon as they have
beenconstituted according to law

WHEREFORE

;(3)Corporations, partnerships and associations for

, premises considered,the instant petition for prohibition is

private interest or purpose

DISMISSED

[G.R. No. 129552. June 29, 2005]

P.C. JAVIER & SONS, INC., SPS. PABLO C. JAVIER, SR. and ROSALINA F.
JAVIER, petitioners, vs. HON. COURT OF APPEALS, PAIC SAVINGS &
MORTGAGE BANK, INC., SHERIFFS GRACE BELVIS, SOFRONIO VILLARIN, PIO
MARTINEZ and NICANOR BLANCO, respondents.
D ECIS ION
CHICO-NAZARIO, J.:
Before Us is an appeal by certiorari under Rule 45 of the Rules of Court which
seeks to set aside the decision [1] of the Court of Appeals dated 31 January
1997 which affirmed in toto the decision of Branch 62 of the Regional Trial
Court (RTC) of Makati City, dismissing the complaint for Annulment of
Mortgage and Foreclosure with Preliminary Injunction, Prohibition and
Damages filed by petitioners, and its Resolution [2] dated 20 June 1997
denying petitioners motion for reconsideration.
A complaint[3] for Annulment of Mortgage and Foreclosure with Preliminary
Injunction, Prohibition and Damages was filed by petitioners P.C. Javier &
Sons, Inc. and spouses Pablo C. Javier, Sr. and Rosalina F. Javier against PAIC
Savings & Mortgage Bank, Inc., Grace S. Belvis, Acting Ex Officio Regional
Sheriff of Pasig, Metro Manila and Sofronio M. Villarin, Deputy Sheriff-inCharge, before Branch 62 of the RTC of Makati City, on 07 May 1984. The case
was docketed as Civil Case No. 7184.
On 10 May 1984, a Supplemental Complaint [4] was filed to include additional
defendants, namely: Pio Martinez, Acting Ex Officio Regional Sheriff of
Antipolo, Rizal, and Nicanor D. Blanco, Deputy Sheriff-in-Charge.
The facts that gave rise to the aforesaid complaint, as found by Branch 62 of
the RTC of Makati City, and adopted by the respondent court, are as follows:
In February, 1981, Plaintiff P.C. Javier and Sons Services, Inc., Plaintiff
Corporation, for short, applied with First Summa Savings and Mortgage Bank,
later on renamed as PAIC Savings and Mortgage Bank, Defendant Bank, for
short, for a loan accommodation under the Industrial Guarantee Loan Fund
(IGLF) for P1.5 Million. On March 21, 1981, Plaintiff Corporation through
Plaintiff Pablo C. Javier, Plaintiff Javier for short, was advised that its loan

application was approved and that the same shall be forwarded to the Central
Bank (CB) for processing and release (Exhibit A also Exhibit 8).
The CB released the loan to Defendant Bank in two (2) tranches of P750,000
each. The first tranche was released to the Plaintiff Corporation on May 18,
1981 in the amount of P750,000.00 and the second tranche was released to
Plaintiff Corporation on November 21, 1981 in the amount of P750,000.00.
From the second tranche release, the amount of P250,000.00 was deducted
and deposited in the name of Plaintiff Corporation under a time deposit.
Plaintiffs claim that the loan releases were delayed; that the amount
of P250,000.00 was deducted from the IGLF loan of P1.5 Million and placed
under time deposit; that Plaintiffs were never allowed to withdraw the
proceeds of the time deposit because Defendant Bank intended this time
deposit as automatic payments on the accrued principal and interest due on
the loan. Defendant Bank, however, claims that only the final proceeds of the
loan in the amount ofP750,000.00 was delayed the same having been
released to Plaintiff Corporation only on November 20, 1981, but this was
because of the shortfall in the collateral cover of Plaintiffs loan; that this
second tranche of the loan was precisely released after a firm commitment
was made by Plaintiff Corporation to cover the collateral deficiency through
the opening of a time deposit using a portion of the loan proceeds in the
amount of P250,000.00 for the purpose; that in compliance with their
commitment to submit additional security and open time deposit, Plaintiff
Javier in fact opened a time deposit for P250,000.00 and on February 15,
1983, executed a chattel mortgage over some machineries in favor of
Defendant Bank; that thereafter, Plaintiff Corporation defaulted in the
payment of its IGLF loan with Defendant Bank hence Defendant Bank sent a
demand letter dated November 22, 1983, reminding Plaintiff Javier to make
payments because their accounts have been long overdue; that on May 2,
1984, Defendant Bank sent another demand letter to Plaintiff spouses
informing them that since they have defaulted in paying their obligation, their
mortgage will now be foreclosed; that when Plaintiffs still failed to pay,
Defendant Bank initiated extrajudicial foreclosure of the real estate mortgage
executed by Plaintiff spouses and accordingly the auction sale of the property
covered by TCT No. 473216 was scheduled by the ExOfficio Sheriff on May 9,
1984.[5]

The instant complaint was filed to forestall the extrajudicial foreclosure sale
of a piece of land covered by Transfer Certificate of Title (TCT) No.
473216[6] mortgaged by petitioner corporation in favor of First Summa
Savings and Mortgage Bank which bank was later renamed as PAIC Savings
and Mortgage Bank, Inc. [7] It likewise asked for the nullification of the Real
Estate Mortgages it entered into with First Summa Savings and Mortgage
Bank. The supplemental complaint added several defendants who scheduled
for public auction other real estate properties contained in the same real
estate mortgages and covered by TCTs No. N-5510, No. 426872, No. 506346
and Original Certificate of Title No. 10146. [8]
Several extrajudicial foreclosures of the mortgaged properties were
scheduled but were temporarily restrained by the RTC notwithstanding the
denial [9] of petitioners prayer for a writ of preliminary injunction. In an
Order[10] dated 10 December 1990, the RTC ordered respondents-sheriffs to
maintain the status quo and to desist from further proceeding with the
extrajudicial foreclosure of the mortgaged properties.
Among the issues raised by petitioners at the RTC are whether or not First
Summa Savings and Mortgage Bank and PAIC Savings and Mortgage Bank, Inc.
are one and the same entity, and whether or not their obligation is already
due and demandable at the time respondent bank commenced to
extrajudicially foreclose petitioners properties in April 1984.
The RTC declared that First Summa Savings and Mortgage Bank and PAIC
Savings and Mortgage Bank, Inc. are one and the same entity and that
petitioner corporation is liable to respondent bank for the unpaid balance of
its Industrial Guarantee Loan Fund (IGLF) loans. The RTC further ruled that
respondent bank was justified in extrajudicially foreclosing the real estate
mortgages executed by petitioner corporation in its favor because the loans
were already due and demandable when it commenced foreclosure
proceedings in April 1984.
In its decision dated 06 July 1993, the RTC disposed of the case as follows:
Premises considered, judgment is hereby rendered dismissing the Complaint
against Defendant Bank and ordering Plaintiffs to pay Defendant Bank jointly
and severally, the following:

1. The principal amount of P700,453.45 under P.N. No. 713 plus all the
accrued interests, liquidated damages and other fees due thereon from
March 18, 1983 until fully paid as provided in said PN;
2. The principal amount of P749,879.38 under P.N. No. 841 plus all the
accrued interests, liquidated damages and other fees due thereon from
September 1, 1982 until fully paid as provided in such PN;
3. The amount of P40,000.00 as actual damages;
4. The amount of P30,000.00 as exemplary damages;
5. The amount of P50,000.00 as attorneys fees; plus
6. Cost of suit.[11]
Petitioners filed a Motion for Reconsideration [12] which was opposed[13] by
respondent bank. The motion was denied in an Order dated 11 May 1994.
Petitioners appealed the decision to the Court of Appeals. The latter
affirmed in toto the decision of the lower court. It also denied petitioners
motion for reconsideration.
Hence, this appeal by certiorari.
Petitioners assigned the following as errors:
a. PUBLIC RESPONDENT COURT GRAVELY ERRED WHEN IT SUSTAINED THE
DISMISSAL OF PETITIONERS COMPLAINT AND IN AFFIRMING THE RIGHT OF
THE RESPONDENT BANK TO COLLECT THE IGLF LOANS IN LIEU OF FIRST
SUMMA SAVINGS AND MORTGAGE BANK WHICH ORIGINALLY GRANTED SAID
LOANS.
COROLLARY TO THE ABOVE ARGUMENT, THE PUBLIC RESPONDENT COURT
ALSO GRAVELY ERRED WHEN IT RULED THAT THE PETITIONERS CANNOT
WITHHOLD
THEIR
PAYMENT
TO
THE
RESPONDENT BANK
NOTWITHSTANDING THE ADMITTED INABILITY OF THE RESPONDENT BANK
TO FURNISH THE PETITIONERS THE SAID REQUESTED DOCUMENTS.
b. PUBLIC RESPONDENT COURT GRAVELY ERRED WHEN IT SUSTAINED THE
COLLECTION OF THE ENTIRE PROCEEDS OF THE IGLF LOANS OF P1,500,000.00
DESPITE THE FACT THAT THE P250,000.00 OF THIS LOAN WAS WITHHELD BY

THE FIRST SUMMA SAVINGS AND MORTGAGE BANK TO BECOME PART OF

THE COLLATERALS TO THE SAID P1,500,000.00 LOAN.

corporate name, such notification remains to be a mere internal policy that

banks may or may not adopt.

c. PUBLIC RESPONDENT COURT GRAVELY ERRED WHEN IT SUSTAINED THE

DAMAGES AWARDED TO THE RESPONDENT BANK DESPITE THE ABSENCE OF
MALICE OR BAD FAITH ON THE PART OF THE PETITIONERS IN FILING THIS
CASE AGAINST THE RESPONDENT BANK.

In the case at bar, though there was no evidence showing that petitioners
were furnished copies of official documents showing the First Summa Savings
and Mortgage Banks change of corporate name to PAIC Savings and Mortgage
Bank, Inc., evidence abound that they had notice or knowledge thereof.
Several documents establish this fact. First, letter[17] dated 16 July 1983
signed by Raymundo V. Blanco, Accountant of petitioner corporation,
addressed to PAIC Savings and Mortgage Bank, Inc. Part of said letter reads:
In connection with your inquiry as to the utilization of funds we obtained from
the former First Summa Savings and Mortgage Bank, . . . Second, Board
Resolution[18] of petitioner corporation signed by Pablo C. Javier, Sr. on 24
August 1983 authorizing him to execute a Chattel Mortgage over certain
machinery in favor of PAIC Savings and Mortgage Bank, Inc. Third, Secretarys
Certificate [19] signed by Fortunato E. Gabriel, Corporate Secretary of
petitioner corporation, on 01 September 1983, certifying that a board
resolution was passed authorizing Mr. Pablo C. Javier, Sr. to execute a chattel
mortgage on the corporations equipment that will serve as collateral to cover
the IGLF loan with PAIC Savings and Mortgage Bank, Inc. Fourth, undated
letter[20] signed by Pablo C. Javier, Sr. and addressed to PAIC Savings and
Mortgage Bank, Inc., authorizing Mr. Victor F. Javier, General Manager of
petitioner corporation, to secure from PAIC Savings and Mortgage Bank, Inc.
certain documents for his signature.

On the first assigned error, petitioners argue that they are legally justified to
withhold their amortized payments to the respondent bank until such time
they would have been properly notified of the change in the corporate name
of First Summa Savings and Mortgage Bank. They claim that they have never
received any formal notice of the alleged change of corporate name of First
Summa Savings and Mortgage Bank to PAIC Savings & Mortgage Bank, Inc.
They further claim that the only and first time they received formal evidence
of a change in the corporate name of First Summa Savings and Mortgage Bank
surfaced when respondent bank presented its witness, Michael Caguioa, on
03 April 1990, where he presented the Securities and Exchange Commission
(SEC) Certificate of Filing of the Amended Articles of Incorporation of First
Summa Savings and Mortgage Bank, [14] the Central Bank (CB) Certificate of
Authority[15] to change the name of First Summa Savings and Mortgage Bank
to PAIC Savings and Mortgage Bank, Inc., and the CB Circular Letter [16] dated
27 June 1983.
Their argument does not hold water. Their defense that they should first be
formally notified of the change of corporate name of First Summa Savings and
Mortgage Bank to PAIC Savings and Mortgage Bank, Inc., before they will
continue paying their loan obligations to respondent bank presupposes that
there exists a requirement under a law or regulation ordering a bank that
changes its corporate name to formally notify all its debtors. After going over
the Corporation Code and Banking Laws, as well as the regulations and
circulars of both the SEC and the Bangko Sentral ng Pilipinas (BSP), we find
that there is no such requirement. This being the case, this Court cannot
impose on a bank that changes its corporate name to notify a debtor of such
change absent any law, circular or regulation requiring it. Such act would be
judicial legislation. The formal notification is, therefore, discretionary on the
bank. Unless there is a law, regulation or circular from the SEC or BSP
requiring the formal notification of all debtors of banks of any change in

From the foregoing documents, it cannot be denied that petitioner

corporation was aware of First Summa Savings and Mortgage Banks change
of corporate name to PAIC Savings and Mortgage Bank, Inc. Knowing fully well
of such change, petitioner corporation has no valid reason not to pay because
the IGLF loans were applied with and obtained from First Summa Savings and
Mortgage Bank. First Summa Savings and Mortgage Bank and PAIC Savings
and Mortgage Bank, Inc., are one and the same bank to which petitioner
corporation is indebted. A change in the corporate name does not make a
new corporation, whether effected by a special act or under a general law. It
has no effect on the identity of the corporation, or on its property, rights, or
liabilities.[21] The corporation, upon such change in its name, is in no sense a
new corporation, nor the successor of the original corporation. It is the same

corporation with a different name, and its character is in no respect

changed.[22]
Anent the second assigned error, this Court rules that respondent court did
not err when it sustained the collection of the entire proceeds of the IGLF
loans amounting to P1,500,000.00 despite the withholding of P250,000.00 to
become part of the collaterals to the said P1,500,000.00 IGLF loan.
Petitioners contend that the collaterals they submitted were more than
sufficient to cover the P1,500,000.00 IGLF loan. Such contention is untenable.
Petitioner corporation was required to place P250,000.00 in a time deposit
with respondent bank for the simple reason that the collateral it put up was
insufficient to cover the IGLF loans it has received. It admitted the shortfall of
its collateral when it authorized petitioner Pablo C. Javier, Sr., via a board
resolution,[23] to execute a chattel mortgage over certain machinery in favor
of PAIC Savings and Mortgage Bank, Inc. which was certified by its corporate
secretary.[24] If the collateral it put up was sufficient, why then did it execute
another chattel mortgage?
In his order dated 07 September 1984, Hon. Rafael T. Mendoza found that
the loanable value of the lands, buildings, machinery and equipment
amounted only to P934,000.00. The order reads in part:
The terms and conditions of the IGLF loan extended to plaintiff corporation
are governed by the loan and security documents evidencing said loan.
Although the loan agreement was approved by the defendant bank, the same
has to be processed and be finally approved by the Central Bank of the
Philippines, in pursuance to the IGLF program, of which the defendant bank
is an accredited participant. The defendant had to await Central Banks advise
(sic) regarding the final approval of the loan before the release of the
proceeds thereof. The proceeds of the loan was released to the plaintiff on 6
April and November 20, 1981, and the final proceeds was released only on
November 20, 1981, on account of short fall in the collateral covered by the
lands and buildings as well as the machineries and equipment then subject of
the existing mortgages in favor of the defendant bank, having only a loanable
value of P934,000.00, and only after a firm commitment made by plaintiff
corporation to the defendant bank to correct the collateral deficiency thru
the execution of a chattel mortgage on additional machineries, equipment
and tools and thru the opening of a time deposit with PAIC Bank using a

portion of the loan proceeds in the amount of P250,000.00 to answer for its
obligation to the defendant bank under the IGLF loan was the final proceeds
of the loan released in favor of the plaintiffs. The delay in the release of the
final proceeds of the IGLF loan was due to the aforestated collateral
deficiency.[25]
As declared by the respondent court, the finding in said order was not
disputed in the appeal before it. It said that what was contained in petitioners
brief was that their loans were overcollateralized, and fail to specify why or
in what manner it was so. [26] Having failed to raise this issue before the
respondent court, petitioners thus cannot raise this issue before this Court.
Moreover, since the issue of whether or not the collateral put up by
petitioners is sufficient is factual, the same is not proper for this Courts
consideration. The basic rule is that factual questions are beyond the
province of the Supreme Court in a petition for review. [27]
Petitioners maintain that to collect the P250,000.00 from them would be a
clear case of unjust enrichment because they have not availed or used said
amount for the same was unlawfully withheld from them.
We do not agree. The fundamental doctrine of unjust enrichment is the
transfer of value without just cause or consideration. The elements of this
doctrine are: enrichment on the part of the defendant; impoverishment on
the part of the plaintiff; and lack of cause. The main objective is to prevent
one to enrich himself at the expense of another. [28] It is commonly accepted
that this doctrine simply means that a person shall not be allowed to profit or
enrich himself inequitably at another's expense. [29] In the instant case, there
is no unjust enrichment to speak of. The amount of P225,905.79 was applied
as payment for petitioner corporations loan which was taken from the
P250,000.00, together with its accrued interest, that was placed in time
deposit with First Summa Savings and Mortgage Bank. The use of said amount
as payment was approved by petitioner Pablo C. Javier, Sr. on 17 March
1983.[30] As further found by the RTC in its decision, the balance of the time
deposit was withdrawn by petitioners. [31]
Petitioner corporation faults respondent bank, then known as First Summa
Savings and Mortgage Bank, for requiring it to put up as additional collateral
the amount of P250,000.00 inasmuch as the CB never required it to do so. It
added that respondent bank took advantage of its urgent and immediate

need at the time for the proceeds of the IGLF loans that it had no choice but
to comply with respondent banks requirement to put in time deposits the
said amount as additional collateral.
We agree with respondent court that the questioning of the propriety of the
placing of the P250,000.00 in time deposits [32] with respondent bank as
additional collateral was belatedly made. As above-discussed, the
requirement to give additional collateral was warranted because the
collateral petitioner corporation put up failed to cover its IGLF loans. If
petitioner corporation was really bent on questioning the reasonableness of
putting up the aforementioned amount as additional collateral, it shouldhave
done immediately after it made the time deposits on 26 November 1981.
This, it did not do. It questioned the placing of the time deposits only on 08
February 1984[33] or long after defendant bank had already demanded full
payment of the loans, then amounting to P2,045,401.79 as of 22 November
1983. It is too late in the day for petitioner corporation to question the placing
of the P250,000.00 in time deposits after it failed to pay its loan obligations
as scheduled, making them due and demandable, and after a demand for full
payment has been made. We will not allow petitioner corporation to have
ones cake and eat it too.
As regards the payments made by petitioner corporation, respondent court
has this to say:
The trial court held, based on plaintiffs own exhibits, that plaintiff[s] made
the following payments:
On Promissory Note No. 713:
Date

Actual Date of

Amount

(Per PN Schedule)

Payment

July 6, 1981

August 3, 1981

P 28,125.00

October 6, 1981

October 28, 1981

28,836.13

January 6, 1982

January 22, 1982

29,227.38

March 17, 1983

225,905.79

TOTAL

P 312,094.30

And on Promissory Note No. 841:

Date

Actual Date of

Amount

(Per PN Schedule)

Payment

February 20, 1982

April 13, 1982

P 28,569.30

May 20, 1982

July 7, 1982

29,254.31

August 20, 1982

August 31, 1982

36,795.44

TOTAL

P 94,619.05

Plaintiff-appellant[s] does not dispute the finding, which is obvious from the
foregoing summary, that plaintiff[s] stopped payments on March 17, 1983 on
Promissory Note No. 713, and on August 31, 1982 on Promissory Note No.
841.
By simply looking at the amortization schedule attached to the two
promissory notes, it is clear that plaintiff[s] already defaulted on its loan
obligations when the defendant Bank gave notice of the foreclosure
proceedings on April 28, 1984. On amortization payments alone, plaintiff[s]
should have paid a total of P459,339 as of April 6, 1984 on Promissory [Note]
No. 713, and a total of P328,173.00 as of February 20, 1984 on Promissory
Note [No.] 841. No extended computation is necessary to demonstrate that,
even without imputing the liquidated damages equivalent to 2% a month on
the delayed payments (see second paragraph of the promissory notes), the
plaintiffs were grossly deficient in amortization payments, and already in
default when the foreclosure proceedings were commenced. Further, we
note that under the terms of the promissory note, failure to pay an
installment when due shall entitle the bank or its assign to declare all the
obligations as immediately due and payable (second paragraph). [34]

As to the third assigned error, petitioners argue that there being no malice or
bad faith on their part when they filed the instant case, no damages should
have been awarded to respondent bank.
We cannot sustain such argument. The presence of malice or bad faith is very
evident in the case before us. By the documents it executed, petitioner
corporation was well aware that First Summa Savings and Mortgage Bank
changed its corporate name to PAIC Savings and Mortgage Bank, Inc. Despite
knowledge that First Summa Savings and Mortgage Bank and PAIC Savings
and Mortgage Bank, Inc., are one and the same entity, it pretended
otherwise. It used this purported ignorance as an excuse to renege on its
obligation to pay its loans after they became due and after demands for
payment were made, claiming that it never obtained the loans from
respondent bank.
No good faith was shown by petitioner corporation. If it were in good faith in
complying with its loan obligations since it believed that respondent bank had
no right to the payment, it should have made a valid consignation in court.
This, it did not do. If petitioner corporation were at a loss as to who should
receive the payment, it could have easily taken steps and inquired from the
SEC, CB of the Philippines or from the bank itself from which it received the
loans and to where it made previous payments. Further, the fact that it was
respondent bank that was demanding payment for loans already due and
demandable and not First Summa Savings and Mortgage Bank is sufficient to
make petitioner corporation wonder why this is so. It never took any initiative
to clear the matter. Instead, it paid no attention to the valid demands of
respondent bank.
The awarding of actual and compensatory damages, as well as attorneysfees,
is justified under the circumstances. We quote with approval the reasons
given by the RTC for the grant of the same:
Considering that Defendant Bank had been prevented at least four (4) times
from foreclosing the mortgages (i.e., Temporary Restraining Orders of May 9
and 19 and October 22, 1984 and status quo order of December 10, 1990
enjoining the extrajudicial foreclosure sales of May 9 and 16 and October 23,
1984 and December 20, 1990, respectively), it is proper that Defendant Bank
be reimbursed its actual expenses. The amount of P40,000.00 is reasonable
reimbursement for the publication and other expenses incurred in the four

(4) extrajudicial foreclosures which were enjoined by the Court. Considering

the wanton and reckless filing of this clearly unfounded and baseless legal
action and the fact that Defendant Bank had to defend itself against such suit,
attorneys fees in the amount of P50,000.00 should be paid by the Plaintiffs to
the Defendant Bank. Defendant Bank failed to adduce indubitable proof on
the moral and exemplary damages that it seeks. Nevertheless, since such
proof is not absolutely necessary and primarily as an example for the public
good to deter others from filing a similar clearly unfounded legal action,
Defendant Bank should be entitled to an award of exemplary damages. [35]
This Court finds that petitioners failed to comply with what is incumbent upon
them to pay their loans when they became due. The lame excuse they
belatedly advanced for their non-payment cannot and should not prevent
respondent bank from exercising its right to foreclose the real estate
mortgages executed in its favor.
WHEREFORE, premises considered, the Court of Appeals decision dated 31
January 1997 and its resolution dated 20 June 1997 are hereby AFFIRMED in
toto. Costs against petitioners.
SO ORDERED.

STONEHILL VS DIOKNO
Facts: Respondents issued, on different dates, 42 search warrants against
petitioners personally, and/or corporations for which they are officers
directing peace officers to search the persons of petitioners and premises of
their offices, warehouses and/or residences to search for personal properties
books of accounts, financial records, vouchers, correspondence, receipts,
ledgers, journals, portfolios, credit journals, typewriters, and other
documents showing all business transactions including disbursement
receipts, balance sheets and profit and loss statements and
Bobbins(cigarettes) as the subject of the offense for violations of Central
Bank Act, Tariff and Customs Laws, Internal Revenue Code, and Revised Penal
Code.
Upon effecting the search in the offices of the aforementioned corporations
and on the respective residences of the petitioners, there seized documents,
papers, money and other records. Petitioners then were subjected to
deportation proceedings and were constrained to question the legality of the
searches and seizures as well as the admissibility of those seized as evidence
against them.

officers as they are treated as personality different from that of the

corporation.

MAGSAYSAY-LABRADOR vs. COURT OF APPEALS

G.R. No. 58168. December 19, 1989.Fernan,
C.J.
FACTS:
P
rivate respondent Adelaida Rodriguez Magsaysay filed an action against Subic
LandCorporation (SUBIC), among others, to annul the deed of assignment and
deed of mortgageexecuted in favor of the latter by her late husband.
P

On March 20, 1962, the SC issued a writ of preliminary injunction and partially
lifted the same on June 29, 1962 with respect to some documents and papers.

rivate respondent alleged that the subjectland of the two deeds was acquired
through conjugal funds. Since her consent to the dispositionof the same was
not obtained, she claimed that the acts of assignment and mortgage
weredone to defraud the conjugal partnership. She further contended that
the same were donewithout consideration and hence null and void.

Held:

a. Search warrants issued were violative of the Constitution and the

Rules, thus, illegal or being general warrants. There is no probable
cause and warrant did not particularly specify the things to be seized.
The purpose of the requirement is to avoid placing the sanctity of the
domicile and the privacy of communication and correspondence at
the mercy of the whims, caprice or passion of peace officers.

etitioners, sisters of the deceased husband of the private respondent, filed a

motion for intervention on the ground that their brother conveyedto them
one-half of his shareholdings in SUBIC, or about 41%. The trial court denied
the motionfor intervention ruling that petitioners have no legal interest
because SUBIC has a personalityseparate and distinct from its stockholders.
The CA confirmed the denial on appeal. Hence, thispetition.

b. Document seized from an illegal search warrant is not admissible in

court as a fruit of a poisonous tee. However, they could not be
returned, except if warranted by the circumstances.

ISSUE:

c. Petitioners were not the proper party to question the validity and
return of those taken from the corporations for which they acted as

Whether petitioners, as stockholders of SUBIC, have a legal interest in the

action for annulment of the deed of assignment and deed of mortgage in
favor of the corporation.
HELD:

NO. The Court noted that the interest which entitles person to intervene in a
suitbetween other parties must be in the matter in litigation and of such
direct and immediatecharacter that the intervenor will either gain or lose by
the direct legal operation and effect of the judgment. In the instant petition,
it was said that the interest, if it exists at all, of petitioners-movants is indirect,
contingent, remote, conjectural, consequential and collateral. At the
veryleast, their interest is purely inchoate, or in sheer expectancy of a right in
the management of the corporation and to share in the profits thereof and in
the properties and assets thereof ondissolution, after payment of the
corporate debts and obligations. While a share of stockrepresents a
proportionate or aliquot interest in the property of the corporation, it does
not vestthe owner thereof with any legal right or title to any of the property,
his interest in the corporateproperty being equitable or beneficial in nature.
Shareholders are in no legal sense the ownersof corporate property, which is
owned by the corporation as a distinct legal person

PREMIUM MARBLE RESOURCES, INC., petitioner, vs. THE COURT OF

APPEALS and INTERNATIONAL CORPORATE BANK, respondents.
PRINTLINE CORPORATION, petitioner, vs. THE COURT OF APPEALS and
INTERNATIONAL CORPORATE BANK,respondents.
D ECIS ION
TORRES, JR., J.:
Assailed in the instant petition for review is the decision[1] of the Court of
Appeals in CA-G.R. CV No. 16810 dated September 28, 1990 which affirmed
the trial courts dismissal of petitioners complaint for damages.

cleared the same thus allowing Intervest to make use of the funds to the
prejudice of the plaintiff;
xxx
14. The plaintiff has demanded upon the defendant to restitute the amount
representing the value of the checks but defendant refused and continue to
refuse to honor plaintiffs demands up to the present;
15. As a result of the illegal and irregular acts perpetrated by the defendant
bank, the plaintiff was damaged to the extent of the amount of P31,663.88.

The antecedents:

Premium prayed that judgment be rendered ordering defendant bank to pay

the amount of P31,663.88 representing the value of the checks plus
interest, P100,000.00 as exemplary damages; and P30,000.00 as attorneys
fees.

On July 18, 1986, Premium Marble Resources, Inc. (Premium for brevity),
assisted by Atty. Arnulfo Dumadag as counsel, filed an action for damages
against International Corporate Bank which was docketed as Civil Case No.
14413. The complaint states, inter alia:

In its Answer International Corporate Bank alleged, inter alia, that Premium
has no capacity/personality/authority to sue in this instance and the
complaint should, therefore, be dismissed for failure to state a cause of
action.

3. Sometime in August to October 1982, Ayala Investment and Development

Corporation issued three (3) checks [Nos. 097088, 097414 & 27884] in the
aggregate amount of P31,663.88 payable to the plaintiff and drawn against
Citibank;

A few days after Premium filed the said case, Printline Corporation, a sister
company of Premium also filed an action for damages against International
Corporate Bank docketed as Civil Case No. 14444. Thereafter, both civil cases
were consolidated.

xxx

Meantime, the same corporation, i.e., Premium, but this time represented by
Siguion Reyna, Montecillio and Ongsiako Law Office as counsel, filed a motion
to dismiss on the ground that the filing of the case was without authority from
its duly constituted board of directors as shown by the excerpt of the minutes
of the Premiums board of directors meeting. [2]

5. On or about August to October 1982, former officers of the plaintiff

corporation headed by Saturnino G. Belen, Jr., without any authority
whatsoever from the plaintiff deposited the above-mentioned checks to the
current account of his conduit corporation, Intervest Merchant Finance
(Intervest, for brevity) which the latter maintained with the defendant bank
under account No. 0200-02027-8;
6. Although the checks were clearly payable to the plaintiff corporation and
crossed on their face and for payees account only, defendant bank accepted
the checks to be deposited to the current account of Intervest and thereafter
presented the same for collection from the drawee bank which subsequently

In its opposition to the motion to dismiss, Premium thru Atty. Dumadag

contended that the persons who signed the board resolution namely Belen,
Jr., Nograles & Reyes, are not directors of the corporation and were allegedly
former officers and stockholders of Premium who were dismissed for various
irregularities and fraudulent acts; that Siguion Reyna Law office is the lawyer
of Belen and Nograles and not of Premium and that the Articles of

Incorporation of Premium shows that Belen, Nograles and Reyes are not
majority stockholders.

resolution of the case involving intra-corporate controversy still pending

before the SEC.[3]

On the other hand, Siguion Reyna Law firm as counsel of Premium in a

rejoinder, asserted that it is the general information sheet filed with the
Securities and Exchange Commission, among others, that is the best evidence
that would show who are the stockholders of a corporation and not the
Articles of Incorporation since the latter does not keep track of the many
changes that take place after new stockholders subscribe to corporate shares
of stocks.

On appeal, the Court of Appeals affirmed the trial courts Order[4] which
dismissed the consolidated cases. Hence, this petition.

In the interim, defendant bank filed a manifestation that it is adopting in

toto Premiums motion to dismiss and, therefore, joins it in praying for the
dismissal of the present case on the ground that Premium lacks authority
from its duly constituted board of directors to institute the action.
In its Order, the lower court concluded that:
Considering that the officers (directors) of plaintiff corporation enumerated
in the Articles of Incorporation, filed on November 9, 1979, were to serve
until their successors are elected and qualified and considering further that
as of March 4, 1981, the officers of the plaintiff corporation were Alberto
Nograles, Fernando Hilario, Augusto Galace, Jose L.R. Reyes, Pido Aguilar and
Saturnino Belen, Jr., who presumably are the officers represented by the
Siguion Reyna Law Firm, and that together with the defendants, they are
moving for the dismissal of the above-entitled case, the Court finds that the
officers represented by Atty. Dumadag do not as yet have the legal capacity
to sue for and in behalf of the plaintiff corporation and/or the filing of the
present action (Civil Case 14413) by them before Case No. 2688 of the SEC
could be decided is a premature exercise of authority or assumption of legal
capacity for and in behalf of plaintiff corporation.
The issues raised in Civil Case No. 14444 are similar to those raised in Civil
Case No. 14413. This Court is of the opinion that before SEC Case No. 2688
could be decided, neither the set of officers represented by Atty. Dumadag
nor that set represented by the Siguion Reyna, Montecillo and Ongsiako Law
Office, may prosecute cases in the name of the plaintiff corporation.
It is clear from the pleadings filed by the parties in these two cases that the
existence of a cause of action against the defendants is dependent upon the

Petitioner submits the following assignment of errors:

I
The Court of Appeals erred in giving due course to the motion to dismiss filed
by the Siguion Reyna Law Office when the said motion is clearly filed not in
behalf of the petitioner but in behalf of the group of Belen who are the clients
of the said law office.
II
The Court of Appeals erred in giving due course to the motion to dismiss filed
by the Siguion Reyna Law Office in behalf of petitioner when the said law
office had already appeared in other cases wherein the petitioner is the
adverse party.
III
The Court of Appeals erred when it ruled that undersigned counsel was not
authorized by the Board of Directors to file Civil Case Nos. 14413 and 14444.
IV
The Court of Appeals erred in concluding that under SEC Case No. 2688 the
incumbent directors could not act for and in behalf of the corporation.
V
The Court of Appeals is without jurisdiction to prohibit the incumbent Board
of Directors from acting and filing this case when the SEC where SEC Case No.
2688 is pending has not even made the prohibition.
We find the petition without merit.
The only issue in this case is whether or not the filing of the case for damages
against private respondent was authorized by a duly constituted Board of
Directors of the petitioner corporation.

Petitioner, through the first set of officers, viz., Mario Zavalla, Oscar Gan,
Lionel Pengson, Jose Ma. Silva, Aderito Yujuico and Rodolfo Millare,
presented the Minutes[5] of the meeting of its Board of Directors held on April
1, 1982, as proof that the filing of the case against private respondent was
authorized by the Board. On the other hand, the second set of officers, viz.,
Saturnino G. Belen, Jr., Alberto C. Nograles and Jose L.R. Reyes, presented a
Resolution[6] dated July 30, 1986, to show that Premium did not authorize the
filing in its behalf of any suit against the private respondent International
Corporate Bank.
Later on, petitioner submitted its Articles of Incorporation [7] dated November
6, 1979 with the following as Directors: Mario C. Zavalla, Pedro C. Celso, Oscar
B. Gan, Lionel Pengson, and Jose Ma. Silva.
However, it appears from the general information sheet and the Certification
issued by the SEC on August 19, 1986[8] that as of March 4, 1981, the officers
and members of the board of directors of the Premium Marble Resources,
Inc. were:
Alberto C. Nograles President/Director
Fernando D. Hilario Vice President/Director
Augusto I. Galace Treasurer
Jose L.R. Reyes Secretary/Director
Pido E. Aguilar Director
Saturnino G. Belen, Jr. Chairman of the Board.
While the Minutes of the Meeting of the Board on April 1, 1982 states that
the newly elected officers for the year 1982 were Oscar Gan, Mario Zavalla,
Aderito Yujuico and Rodolfo Millare, petitioner failed to show proof that this
election was reported to the SEC. In fact, the last entry in their General
Information Sheet with the SEC, as of 1986 appears to be the set of officers
elected in March 1981.
We agree with the finding of public respondent Court of Appeals, that in the
absence of any board resolution from its board of directors the [sic] authority
to act for and in behalf of the corporation, the present action must necessarily

fail. The power of the corporation to sue and be sued in any court is lodged
with the board of directors that exercises its corporate powers. Thus, the
issue of authority and the invalidity of plaintiff-appellants subscription which
is still pending, is a matter that is also addressed, considering the premises,
to the sound judgment of the Securities & Exchange Commission. [9]
By the express mandate of the Corporation Code (Section 26), all corporations
duly organized pursuant thereto are required to submit within the period
therein stated (30 days) to the Securities and Exchange Commission the
names, nationalities and residences of the directors, trustees and officers
elected.
Sec. 26 of the Corporation Code provides, thus:
Sec. 26. Report of election of directors, trustees and officers. Within thirty (30)
days after the election of the directors, trustees and officers of the
corporation, the secretary, or any other officer of the corporation, shall
submit to the Securities and Exchange Commission, the names, nationalities
and residences of the directors, trustees and officers elected. xxx
Evidently, the objective sought to be achieved by Section 26 is to give the
public information, under sanction of oath of responsible officers, of the
nature of business, financial condition and operational status of the company
together with information on its key officers or managers so that those
dealing with it and those who intend to do business with it may know or have
the means of knowing facts concerning the corporations financial resources
and business responsibility. [10]
The claim, therefore, of petitioners as represented by Atty. Dumadag, that
Zaballa, et al., are the incumbent officers of Premium has not been fully
substantiated. In the absence of an authority from the board of directors, no
person, not even the officers of the corporation, can validly bind the
corporation.[11]
We find no reversible error in the decision sought to be reviewed.
ACCORDINGLY, for lack of merit, the petition is hereby DENIED.
SO ORDERED.

[G.R. No. 152542. July 8, 2004]

MONFORT HERMANOS AGRICULTURAL DEVELOPMENT CORPORATION, as
represented by MA. ANTONIA M. SALVATIERRA, petitioner, vs. ANTONIO B.
MONFORT III, MA. LUISA MONFORT ASCALON, ILDEFONSO B. MONFORT,
ALFREDO B. MONFORT, CARLOS M. RODRIGUEZ, EMILY FRANCISCA R.
DOLIQUEZ, ENCARNACION CECILIA R. PAYLADO, JOSE MARTIN M.
RODRIGUEZ and COURT OF APPEALS, respondents.
[G.R. No. 155472. July 8, 2004]
ANTONIO B. MONFORT III, MA. LUISA MONFORT ASCALON, ILDEFONSO B.
MONFORT, ALFREDO B. MONFORT, CARLOS M. RODRIGUEZ, EMILY
FRANCISCA R. DOLIQUEZ, ENCARNACION CECILIA R. PAYLADO, JOSE
MARTIN M. RODRIGUEZ, petitioners, vs. HON. COURT OF APPEALS,
MONFORT HERMANOS AGRICULTURAL DEVELOPMENT CORPORATION, as
represented by MA. ANTONIA M. SALVATIERRA, and RAMON H.
MONFORT, respondents.
D ECIS ION
YNARES-SANTIAGO, J.:
Before the Court are consolidated petitions for review of the decisions of the
Court of Appeals in the complaints for forcible entry and replevin filed by
Monfort Hermanos Agricultural Development Corporation (Corporation) and
Ramon H. Monfort against the children, nephews, and nieces of its original
incorporators (collectively known as the group of Antonio Monfort III).
The petition in G.R. No. 152542, assails the October 5, 2001 Decision[1] of the
Special Tenth Division of the Court of Appeals in CA-G.R. SP No. 53652, which
ruled that Ma. Antonia M. Salvatierra has no legal capacity to represent the
Corporation in the forcible entry case docketed as Civil Case No. 534-C, before
the Municipal Trial Court of Cadiz City. On the other hand, the petition in G.R.
No. 155472, seeks to set aside the June 7, 2002 Decision [2] rendered by the
Special Former Thirteenth Division of the Court of Appeals in CA-G.R. SP No.
49251, where it refused to address, on jurisdictional considerations, the issue
of Ma. Antonia M. Salvatierras capacity to file a complaint for replevin on
behalf of the Corporation in Civil Case No. 506-C before the Regional Trial
Court of Cadiz City, Branch 60.

Monfort Hermanos Agricultural Development Corporation, a domestic

private corporation, is the registered owner of a farm, fishpond and sugar
cane plantation known as Haciendas San Antonio II, Marapara, Pinanoag and
Tinampa-an, all situated in Cadiz City. [3] It also owns one unit of motor vehicle
and two units of tractors. [4] The same allowed Ramon H. Monfort, its
Executive Vice President, to breed and maintain fighting cocks in his personal
capacity at Hacienda San Antonio. [5]
In 1997, the group of Antonio Monfort III, through force and intimidation,
allegedly took possession of the 4 Haciendas, the produce thereon and the
motor vehicle and tractors, as well as the fighting cocks of Ramon H. Monfort.
In G.R. No. 155472:
On April 10, 1997, the Corporation, represented by its President, Ma. Antonia
M. Salvatierra, and Ramon H. Monfort, in his personal capacity, filed against
the group of Antonio Monfort III, a complaint [6] for delivery of motor vehicle,
tractors and 378 fighting cocks, with prayer for injunction and damages,
docketed as Civil Case No. 506-C, before the Regional Trial Court of Negros
Occidental, Branch 60.
The group of Antonio Monfort III filed a motion to dismiss contending, inter
alia, that Ma. Antonia M. Salvatierra has no capacity to sue on behalf of the
Corporation because the March 31, 1997 Board Resolution[7] authorizing Ma.
Antonia M. Salvatierra and/or Ramon H. Monfort to represent the
Corporation is void as the purported Members of the Board who passed the
same were not validly elected officers of the Corporation.
On May 4, 1998, the trial court denied the motion to dismiss.[8] The group of
Antonio Monfort III filed a petition for certiorari with the Court of Appeals but
the same was dismissed on June 7, 2002.[9] The Special Former Thirteenth
Division of the appellate court did not resolve the validity of the March 31,
1997 Board Resolution and the election of the officers who signed it,
ratiocinating that the determination of said question is within the
competence of the trial court.
The motion for reconsideration filed by the group of Antonio Monfort III was
denied.[10] Hence, they instituted a petition for review with this Court,
docketed as G.R. No. 155472.

In G.R. No. 152542:

On April 21, 1997, Ma. Antonia M. Salvatierra filed on behalf of the
Corporation a complaint for forcible entry, preliminary mandatory injunction
with temporary restraining order and damages against the group of Antonio
Monfort III, before the Municipal Trial Court (MTC) of CadizCity.[11] It
contended that the latter through force and intimidation, unlawfully took
possession of the 4 Haciendas and deprived the Corporation of the produce
thereon.
In their answer, [12] the group of Antonio Monfort III alleged that they are
possessing and controlling the Haciendas and harvesting the produce therein
on behalf of the corporation and not for themselves. They likewise raised the
affirmative defense of lack of legal capacity of Ma. Antonia M. Salvatierra to
sue on behalf of the Corporation.
On February 18, 1998, the MTC of Cadiz City rendered a decision dismissing
the complaint.[13] On appeal, the Regional Trial Court of Negros Occidental,
Branch 60, reversed the Decision of the MTCC and remanded the case for
further proceedings. [14]
Aggrieved, the group of Antonio Monfort III filed a petition for review with
the Court of Appeals. On October 5, 2001, the Special Tenth Division set aside
the judgment of the RTC and dismissed the complaint for forcible entry for
lack of capacity of Ma. Antonia M. Salvatierra to represent the
Corporation.[15] The motion for reconsideration filed by the latter was denied
by the appellate court. [16]
Unfazed, the Corporation filed a petition for review with this Court, docketed
as G.R. No. 152542 which was consolidated with G.R. No. 155472 per
Resolution dated January 21, 2004.[17]
The focal issue in these consolidated petitions is whether or not Ma. Antonia
M. Salvatierra has the legal capacity to sue on behalf of the Corporation.
The group of Antonio Monfort III claims that the March 31, 1997 Board
Resolution authorizing Ma. Antonia M. Salvatierra and/or Ramon H. Monfort
to represent the Corporation is void because the purported Members of the
Board who passed the same were not validly elected officers of the
Corporation.

A corporation has no power except those expressly conferred on it by the

Corporation Code and those that are implied or incidental to its existence. In
turn, a corporation exercises said powers through its board of directors
and/or its duly authorized officers and agents. Thus, it has been observed that
the power of a corporation to sue and be sued in any court is lodged with the
board of directors that exercises its corporate powers. In turn, physical acts
of the corporation, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose by corporate by-laws or by a
specific act of the board of directors. [18]
Corollary thereto, corporations are required under Section 26 of the
Corporation Code to submit to the SEC within thirty (30) days after the
election the names, nationalities and residences of the elected directors,
trustees and officers of the Corporation. In order to keep stockholders and
the public transacting business with domestic corporations properly
informed of their organizational operational status, the SEC issued the
following rules:
xxxxxxxxx
2. A General Information Sheet shall be filed with this Commission within
thirty (30) days following the date of the annual stockholders meeting. No
extension of said period shall be allowed, except for very justifiable reasons
stated in writing by the President, Secretary, Treasurer or other officers, upon
which the Commission may grant an extension for not more than ten (10)
days.
2.A. Should a director, trustee or officer die, resign or in any manner, cease
to hold office, the corporation shall report such fact to the Commission with
fifteen (15) days after such death, resignation or cessation of office.
3. If for any justifiable reason, the annual meeting has to be postponed, the
company should notify the Commission in writing of such postponement.
The General Information Sheet shall state, among others, the names of the
elected directors and officers, together with their corresponding position
title (Emphasis supplied)
In the instant case, the six signatories to the March 31, 1997 Board Resolution
authorizing Ma. Antonia M. Salvatierra and/or Ramon H. Monfort to

represent the Corporation, were: Ma. Antonia M. Salvatierra, President;

Ramon H. Monfort, Executive Vice President; Directors Paul M. Monfort,
Yvete M. Benedicto and Jaqueline M. Yusay; and Ester S. Monfort,
Secretary.[19] However, the names of the last four (4) signatories to the said
Board Resolution do not appear in the 1996 General Information Sheet
submitted by the Corporation with the SEC. Under said General Information
Sheet the composition of the Board is as follows:

Resolution dated July 30, 1986, to show that Premium did not authorize the
filing in its behalf of any suit against the private respondent International
Corporate Bank.
Later on, petitioner submitted its Articles of Incorporation dated November
6, 1979 with the following as Directors: Mario C. Zavalla, Pedro C. Celso, Oscar
B. Gan, Lionel Pengson, and Jose Ma. Silva.
However, it appears from the general information sheet and the Certification
issued by the SEC on August 19, 1986 that as of March 4, 1981, the officers
and members of the board of directors of the Premium Marble Resources,
Inc. were:

1. Ma. Antonia M. Salvatierra (Chairman);

2. Ramon H. Monfort (Member);
3. Antonio H. Monfort, Jr., (Member);

Alberto C. Nograles President/Director

4. Joaquin H. Monfort (Member);

Fernando D. Hilario Vice President/Director

5. Francisco H. Monfort (Member) and

Augusto I. Galace Treasurer

6. Jesus Antonio H. Monfort (Member). [20]

There is thus a doubt as to whether Paul M. Monfort, Yvete M. Benedicto,
Jaqueline M. Yusay and Ester S. Monfort, were indeed duly elected Members
of the Board legally constituted to bring suit in behalf of the Corporation. [21]

Jose L.R. Reyes Secretary/Director

Pido E. Aguilar Director
Saturnino G. Belen, Jr. Chairman of the Board.

[22]

In Premium Marble Resources, Inc. v. Court of Appeals, the Court was

confronted with the similar issue of capacity to sue of the officers of the
corporation who filed a complaint for damages. In the said case, we sustained
the dismissal of the complaint because it was not established that the
Members of the Board who authorized the filing of the complaint were the
lawfully elected officers of the corporation. Thus
The only issue in this case is whether or not the filing of the case for damages
against private respondent was authorized by a duly constituted Board of
Directors of the petitioner corporation.
Petitioner, through the first set of officers, viz., Mario Zavalla, Oscar Gan,
Lionel Pengson, Jose Ma. Silva, Aderito Yujuico and Rodolfo Millare,
presented the Minutes of the meeting of its Board of Directors held on April
1, 1982, as proof that the filing of the case against private respondent was
authorized by the Board. On the other hand, the second set of officers, viz.,
Saturnino G. Belen, Jr., Alberto C. Nograles and Jose L.R. Reyes, presented a

While the Minutes of the Meeting of the Board on April 1, 1982 states that
the newly elected officers for the year 1982 were Oscar Gan, Mario Zavalla,
Aderito Yujuico and Rodolfo Millare, petitioner failed to show proof that this
election was reported to the SEC. In fact, the last entry in their General
Information Sheet with the SEC, as of 1986 appears to be the set of officers
elected in March 1981.
We agree with the finding of public respondent Court of Appeals, that in the
absence of any board resolution from its board of directors the [sic] authority
to act for and in behalf of the corporation, the present action must necessarily
fail. The power of the corporation to sue and be sued in any court is lodged
with the board of directors that exercises its corporate powers. Thus, the
issue of authority and the invalidity of plaintiff-appellants subscription which
is still pending, is a matter that is also addressed, considering the premises,
to the sound judgment of the Securities & Exchange Commission.

By the express mandate of the Corporation Code (Section 26), all corporations
duly organized pursuant thereto are required to submit within the period
therein stated (30 days) to the Securities and Exchange Commission the
names, nationalities and residences of the directors, trustees and officers
elected.
Sec. 26 of the Corporation Code provides, thus:
Sec. 26. Report of election of directors, trustees and officers. Within thirty (30)
days after the election of the directors, trustees and officers of the
corporation, the secretary, or any other officer of the corporation, shall
submit to the Securities and Exchange Commission, the names, nationalities
and residences of the directors, trustees and officers elected. xxx
Evidently, the objective sought to be achieved by Section 26 is to give the
public information, under sanction of oath of responsible officers, of the
nature of business, financial condition and operational status of the company
together with information on its key officers or managers so that those
dealing with it and those who intend to do business with it may know or have
the means of knowing facts concerning the corporations financial resources
and business responsibility.
The claim, therefore, of petitioners as represented by Atty. Dumadag, that
Zaballa, et al., are the incumbent officers of Premium has not been fully
substantiated.In the absence of an authority from the board of directors, no
person, not even the officers of the corporation, can validly bind the
corporation.
In the case at bar, the fact that four of the six Members of the Board listed in
the 1996 General Information Sheet[23] are already dead[24] at the time the
March 31, 1997 Board Resolution was issued, does not automatically make
the four signatories (i.e., Paul M. Monfort, Yvete M. Benedicto, Jaqueline M.
Yusay and Ester S. Monfort) to the said Board Resolution (whose name do not
appear in the 1996 General Information Sheet) as among the incumbent
Members of the Board. This is because it was not established that they were
duly elected to replace the said deceased Board Members.
To correct the alleged error in the General Information Sheet, the retained
accountant of the Corporation informed the SEC in its November 11,
1998 letter that the non-inclusion of the lawfully elected directors in the 1996

General Information Sheet was attributable to its oversight and not the fault
of the Corporation. [25] This belated attempt, however, did not erase the doubt
as to whether an election was indeed held. As previously stated, a
corporation is mandated to inform the SEC of the names and the change in
the composition of its officers and board of directors within 30 days after
election if one was held, or 15 days after the death, resignation or cessation
of office of any of its director, trustee or officer if any of them died, resigned
or in any manner, ceased to hold office. This, the Corporation failed to do. The
alleged election of the directors and officers who signed the March 31, 1997
Board Resolution was held on October 16, 1996, but the SEC was informed
thereof more than two years later, or on November 11, 1998. The 4 Directors
appearing in the 1996 General Information Sheet died between the years
1984 1987,[26] but the records do not show if such demise was reported to the
SEC.
What further militates against the purported election of those who signed
the March 31, 1997 Board Resolution was the belated submission of the
alleged Minutes of the October 16, 1996 meeting where the questioned
officers were elected. The issue of legal capacity of Ma. Antonia M.
Salvatierra was raised before the lower court by the group of Antonio
Monfort III as early as 1997, but the Minutes of said October 16, 1996
meeting was presented by the Corporation only in its September 29,
1999 Comment before the Court of Appeals. [27] Moreover, the Corporation
failed to prove that the same October 16, 1996 Minutes was submitted to the
SEC. In fact, the 1997 General Information Sheet[28] submitted by the
Corporation does not reflect the names of the 4 Directors claimed to be
elected on October 16, 1996.
Considering the foregoing, we find that Ma. Antonia M. Salvatierra failed to
prove that four of those who authorized her to represent the Corporation
were the lawfully elected Members of the Board of the Corporation. As such,
they cannot confer valid authority for her to sue on behalf of the corporation.
The Court notes that the complaint in Civil Case No. 506-C, for replevin before
the Regional Trial Court of Negros Occidental, Branch 60, has 2 causes of
action, i.e., unlawful detention of the Corporations motor vehicle and
tractors, and the unlawful detention of the of 387 fighting cocks of Ramon H.
Monfort. Since Ramon sought redress of the latter cause of action in

his personal capacity, the dismissal of the complaint for lack of capacity to
sue on behalf of the corporation should be limited only to the corporations
cause of action for delivery of motor vehicle and tractors. In view, however,
of the demise of Ramon on June 25, 1999,[29] substitution by his heirs is
proper.
WHEREFORE, in view of all the foregoing, the petition in G.R. No. 152542
is DENIED. The October 5, 2001 Decision of the Special Tenth Division of the
Court of Appeals in CA-G.R. SP No. 53652, which set aside the August 14, 1998
Decision of the Regional Trial Court of Negros Occidental, Branch 60 in Civil
Case No. 822, is AFFIRMED.
In G.R. No. 155472, the petition is GRANTED and the June 7, 2002 Decision
rendered by the Special Former Thirteenth Division of the Court of Appeals in
CA-G.R. SP No. 49251, dismissing the petition filed by the group of Antonio
Monfort III, is REVERSED and SET ASIDE.
The complaint for forcible entry docketed as Civil Case No. 822 before
the Municipal Trial Court of Cadiz City is DISMISSED. In Civil Case No. 506-C
with the Regional Trial Court of Negros Occidental, Branch 60, the action for
delivery of personal property filed by Monfort Hermanos Agricultural
Development Corporation is likewise DISMISSED. With respect to the action
filed by Ramon H. Monfort for the delivery of 387 fighting cocks, the Regional
Trial Court of Negros Occidental, Branch 60, is ordered to effect the
corresponding substitution of parties.
No costs.
SO ORDERED.

[G.R. No. 144880. November 17, 2004]

PASCUAL AND SANTOS, INC., petitioner, vs. THE MEMBERS OF THE TRAMO
WAKAS NEIGHBORHOOD ASSOCIATION, INC. represented by DOMINGA
MAGNO, respondents.
D ECIS ION
CARPIO MORALES, J.:
At bar is a petition for review on certiorari assailing the May 17, 2000 and
August 8, 2000 Resolutions [1] of the Court of Appeals (CA) in CA-G.R. No.
57274 which respectively, dismissed the appeal instituted by petitioner
Pascual and Santos, Inc. (petitioner) and denied its motion for
reconsideration.
The Members of Tramo Wakas Neighborhood Association, represented by
Dominga Magno (respondents), lodged before the Presidential Action Center
a petition dated January 12, 1994 praying that ownership over three (3)
parcels of land situated in Barangay San Dionisio, Paraaque, Metro Manila,
identified as Lot Nos. 4087, 4088 and 5003, Psu-118886, Cad. 229 with an
aggregate area of 35,195 square meters be awarded to them. In their
petition, respondents alleged that petitioner claims ownership of the subject
lots which they have openly, peacefully and continuously occupied since
1957.
The petition was referred to the Land Management Bureau (LMB) where it
was docketed as LMB Case No. 2-96, for investigation and hearing.
By Decision[2] of February 21, 1996, Director Abelardo G. Palad, Jr. of the LMB
found for respondents. The dispositive portion of the decision reads,
quoted verbatim:
WHEREFORE, it is ordered that the claim of Pascual and Santos, Inc., over Lot
4087, Lot 4088 and Lot 5003, situated at Brgy. San Dionisio, Paraaque, Metro
Manila be, as hereby it is, dismissed. The individual members of TRAMO
WAKAS NEIGHBORHOOD ASSOCIATION, now represented by Dominga
Magno, if qualified may file appropriate public land applications over the land
they actually possessed and occupied. An individual survey shall be

conducted on the land at their own expense and after approval of the said
survey the same shall be given due course.
SO ORDERED.[3]
Its Motion for Reconsideration having been denied by Order of June 26, 1996,
petitioner lodged an appeal before the Office of the Department of
Environment and Natural Resources (DENR) Secretary, docketed as DENR
Case No. 7816.
By Decision[4] of November 25, 1997, then DENR Secretary Victor O. Ramos
dismissed the appeal for lack of merit and affirmed in toto the decision of the
Director of the LMB. Petitioners Motion for Reconsideration of the decision
having been denied by Order[5] of May 18, 1998, it filed an appeal before the
Office of the President (OP), docketed as O.P. Case No. 98-F-8459, which was
likewise dismissed for lack of merit by Decision [6] of January 20, 2000. The
November 25, 1997 DENR decision was affirmed in toto.
Petitioner received a copy of the OPs dismissal of its appeal on February 1,
2000,[7] following which or on February 16, 2000, it filed a Petition for
Time [8] before the CA for an additional period of fifteen days or until March
2, 2000 within which to file its petition for review.
By Resolution[9] of February 21, 2000, the CA granted petitioners Petition for
Time, giving it a non-extendible period of fifteen days from February 16, 2000
or until March 2, 2000 within which to file the petition.
Petitioner subsequently filed its Petition for Review[10] dated March 2, 2000
with the CA, praying that judgment be rendered (1) reversing and setting
aside the January 20, 2000 OP Decision and the November 25, 1997 DENR
Decision and May 18, 1998 Order, and (2) declaring the subject lots as no
longer forming part of the public domain and have been validly acquired by
petitioner; or in the alternative, (1) allowing it to present additional evidence
in support of its claim to the subject lots, (2) reversing and setting aside the
aforementioned Decisions and Order of the OP and the DENR, and (3)
declaring the subject lots as no longer forming part of the public domain and
have been validly acquired by petitioner. [11]
By Resolution of May 17, 2000, the CA dismissed the appeal due to infirm
Verification and Certification of non-forum shopping and belated filing.

For one, the Verification and Certification of non-forum shopping was signed
merely by Estela Lombos and Anita Pascual who allege that they are the duly
authorized representatives of petitioner corporation, without showing any
proof whatsoever of such authority.
For another, and importantly, the petition for review was filed a day after the
period petitioner corporation expressly sought. As indicated in its Petition for
Time, petitioner corporation asked for an additional fifteen (15) days, or until
March 2, 2000, within which to file its petition, which was granted by the
Court per Resolution dated February 21, 2000. However, despite the
foregoing, petitioner corporation filed the same only on MARCH 3, 2000 as
indicated by the date stamped on the envelope which contains the petition
for review.[12] (Citations omitted; underscoring supplied)
On June 14, 2000, petitioner filed a Motion for Reconsideration [13] of the CA
May 17, 2000 Resolution, arguing that there was no showing that the persons
acting on its behalf were not authorized to do so and that its petition was
filed within the additional 15-day period granted by the CA. Attached to the
Motion was a Secretarys Certificate [14] dated June 14, 2000 showing that
petitioners Board of Directors approved a Resolution on February 11, 2000
appointing Estela Lombos and Anita Pascual, incumbent directors of the
corporation, as its duly authorized representatives who may sign all papers,
execute all documents, and do such other acts as may be necessary to
prosecute the petition for review that it would file with the CA assailing the
decision rendered in OP Case No. 98-G-8459.[15]
By Resolution of August 23, 2000, the CA denied petitioners Motion for
Reconsideration for lack of merit.
xxx It must be stressed that any person who claims authority to sign, in behalf
of another, the Certificate of Non-Forum Shopping, as required by the rules,
must show sufficient proof thereof. Bare allegations are not proof, and the
representation of one who acts in behalf of another cannot, by itself, serve
as proof of his authority to act as agent or of the extent of his authority as
agent. Thus, absent such clear proof, the Court cannot accept at face value,
such authority to sign in behalf of the corporation.
xxx

Another perusal of the registry return receipts attached to the petition for
review (Nos. 182, 183 and 184) shows that copies of the Manifestation and
Petition for Review were served to private respondents (sic) counsel, the
Office of the President, and the Department of Environment and Natural
Resources, on March 2, 2000. However, it does not indicate therein when the
petition for review was filed with the Court. The registry return receipts (No.
185, 186, 187 and 188) being referred to by petitioner shows (sic) the
date March 2, 2000 only on that numbered 188, and does (sic) not show the
dates on those numbered 185-187. In fact, said receipts do not even indicate
which pertain to the copy filed with the Court.
Moreover, the Court cannot sustain petitioners supposition that a post office
employee might have stamped the wrong date, March 3, 2000, without any
proof whatsoever of such error. The date stamped on the envelope which
contained the Manifestation and Petition for Review clearly shows that the
same was filed onMarch 3, 2000, and petitioner having failed to rebut the
presumption of regularity in the performance of official functions, the same
must prevail.[16] (Citations omitted; emphasis in the original; underscoring
supplied)
Petitioner thus filed on September 27, 2000 before this Court a Petition For
Time to file its petition for review.
On October 30, 2000, petitioner filed a Petition for Review on Certiorari
raising the following issues:
I
WHETHER OR NOT THE PERSONS WHO EXECUTED THE VERIFICATION AND
CERTIFICATION OF NON-FORUM SHOPPING ATTACHED TO PSIS
MANIFESTATION/PETITION FOR REVIEW FILED WITH THE COURT OF APPEALS
WERE AUTHORIZED TO DO SO.
II
WHETHER OR NOT PSIS MANIFESTATION/PETITION FOR REVIEW WAS FILED
WITHIN THE REGLEMENTARY PERIOD. [17]
By Resolution[18] of December 6, 2000, this Court denied the Petition for
Review in view of petitioners failure to submit a valid affidavit of service

pursuant to Section 13 of Rule 13 and Sections 3 and 5 of Rule 45 in relation

to Section 5 (d) of Rule 56 of the Rules of Court and attach to the petition a
duplicate original or certified true copy of the assailed CA resolutions
pursuant to Sections 4 (d) and 5 of Rule 45 in relation to Section 5 (d) of Rule
56 of the Rules of Court.
Petitioner filed a Motion for Reconsideration, [19] averring that it had already
attached certified true copies of the assailed resolutions of the CA in its
Petition for Time filed before this Court on September 27, 2000, and while it
was the affidavit before the CA which was inadvertently attached to its
petition before this Court, the messengerial staff of petitioners counsel did in
fact serve copies of the petition on counsel for respondents, the DENR, the
OP and the court a quo as evidenced by registry receipts and return
cards[20] which it attached to its Motion for Reconsideration.
By Resolution[21] of March 7, 2001, this Court, finding petitioners explanation
satisfactory, granted the Motion for Reconsideration and reinstated the
petition, now the subject of this Decision.
The petition is impressed with merit.
Section 6 (d) of Rule 43 in relation to Section 2 of Rule 42 of the Rules of Court
mandates that a petition for review shall contain a sworn certification against
forum shopping in which the petitioner shall attest that he has not
commenced any other action involving the same issues in this Court, the
Court of Appeals or different divisions thereof, or any other tribunal or
agency; if there is such other action or proceeding, he must state the status
of the same; and if he should thereafter learn that a similar action or
proceeding has been filed or is pending before this Court, the Court of
Appeals, or different divisions thereof, or any other tribunal or agency, he
undertakes to promptly inform the aforesaid courts and other tribunal or
agency thereof within five days therefrom.
For failure to comply with this mandate, Section 7 of Rule 43 provides:
SEC. 7. Effect of failure to comply with requirements. The failure of the
petitioner to comply with any of the foregoing requirements regarding the
payment of the docket and other lawful fees, the deposit for costs, proof of
service of the petition, and the contents of and the documents which should
accompany the petition shall be sufficient ground for the dismissal thereof.

The requirement that the petitioner should sign the certificate of non-forum
shopping applies even to corporations, considering that the mandatory
directives of the Rules of Court make no distinction between natural and
juridical persons. [22]
In the case at bar, the CA dismissed the petition before it on the ground that
Lombos and Pascual, the signatories to the verification and certification on
non-forum shopping, failed to show proof that they were authorized by
petitioners board of directors to file such a petition.
Except for the powers which are expressly conferred on it by the Corporation
Code and those that are implied by or are incidental to its existence, a
corporation has no powers. It exercises its powers through its board of
directors and/or its duly authorized officers and agents. [23]Thus, its power to
sue and be sued in any court is lodged with the board of directors that
exercises its corporate powers.[24] Physical acts, like the signing of documents,
can be performed only by natural persons duly authorized for the purpose by
corporate by-laws or by a specific act of the board of directors. [25]
It is undisputed that when the petition for certiorari was filed with the CA,
there was no proof attached thereto that Lombos and Pascual were
authorized to sign the verification and non-forum shopping certification.
Subsequent to the CAs dismissal of the petition, however, petitioner filed a
motion for reconsideration to which it attached a certificate issued by its
board secretary stating that on February 11, 2000 or prior to the filing of the
petition, Lombos and Pascual had been authorized by petitioners board of
directors to file the petition before the CA.
This Court has ruled that the subsequent submission of proof of authority to
act on behalf of a petitioner corporation justifies the relaxation of the Rules
for the purpose of allowing its petition to be given due course. [26]
Thus, in Shipside Incorporated v. Court of Appeals,[27] this Court held:
xxx Moreover, in Loyola, Roadway and Uy, the Court excused noncompliance with the requirement as to the certificate of non-forum shopping.
With more reason should we allow the instant petition since petitioner
herein did submit a certification on non-forum shopping, failing only to show
proof that the signatory was authorized to do so. That petitioner
subsequently submitted a secretarys certificate attesting that Balbin was

authorized to file an action on behalf of petitioner likewise mitigate s this

oversight.
It must also be kept in mind that while the requirement of the certificate of
non-forum shopping is mandatory, nonetheless the requirements must not
be interpreted too literally and thus defeat the objective of preventing the
undesirable practice of forum shopping. [28]
As for the timeliness of the filing of its petition for review before the CA,
petitioner maintains in the affirmative.
Sections 3 and 12 of Rule 13 of the Rules of Court provide:
SEC. 3. Manner of filing. The filing of pleadings, appearances, motions,
notices, orders, judgments and all other papers shall be made by presenting
the original copies thereof, plainly indicated as such, personally to the clerk
of court or by sending them by registered mail. In the first case, the clerk of
court shall endorse on the pleading the date and hour of filing. In the second
case, the date of the mailing of motions, pleadings, or any other papers or
payments or deposits, as shown by the post office stamp on the envelope or
the registry receipt, shall be considered as the date of their filing, payment,
or deposit in court. The envelope shall be attached to the record of the case.
SEC. 12. Proof of filing. The filing of a pleading or paper shall be proved by its
existence in the record of the case. If it is not in the record, but is claimed to
have been filed personally, the filing shall be proved by the written or
stamped acknowledgment of its filing by the clerk of court on a copy of the
same; if filed by registered mail, by the registry receipt and by the affidavit of
the person who did the mailing, containing a full statement of the date and
place of depositing the mail in the post office in a sealed envelope addressed
to the court, with postage fully prepaid, and with instructions to the
postmaster to return the mail to the sender after ten (10) days if not
delivered.
Registry Receipt Nos. 185-188 covering the envelopes bearing the copies of
the petition which were sent to the CA indicate that such copies were filed by
registered mail at the Domestic Airport Post Office (DAPO) on March 2,
2000.[29]

The Affidavit of Service [30] filed by the person who did the mailing of the
petition in behalf of petitioner states that such petition was filed by registered
mail by depositing seven copies thereof in four separate sealed envelopes
and mailing the same to the Clerk of Court of the CA through the DAPO on
March 2, 2000. The affidavit likewise states that on even date, the petition
was served on counsel for respondents, the DENR and the OP by depositing
copies of the same in sealed envelopes and mailing them to said parties
respective addresses through the DAPO.
And in the Certification[31] dated October 26, 2000 issued by Postmaster Cesar
A. Felicitas of the DAPO, he states that the registered mail matter covered by
Registry Receipt Nos. 185-188 addressed to the Clerk of Court of the CA was
posted at their office for mailing on March 2, 2000, but that it was dispatched
to the CMEC on March 3, 2000 for proper disposition. This could very well
explain why the latter date was stamped on the envelope received by the CA
containing the petition.
At all events, strict adherence to rules of procedure must give way to
considerations of equity and substantial justice where, as in this case, there
is evidence showing that the appeal was filed on time. [32]
WHEREFORE, the petition is GRANTED. The Resolutions dated May 17, 2000
and August 23, 2000 of the Court of Appeals are SET ASIDE. The case, CA-G.R.
SP No. 57274, is REMANDED to the appellate court which is hereby directed
to give due course to the appeal of petitioner.

PARAGON MINING VS CA
The facts:
Prior to the instant controversy, private respondent Cesario F. Ermita
(Cesario, for brevity) was a regular employee working as a foreman of
petitioner United Paragon Mining Corporation (UPMC, hereafter).
On January 18, 1996, Cesario received a termination letter bearing
date January 16, 1996 and signed by UPMCs Personnel Superintendent,
Feliciano M. Daniel, informing Cesario that his employment as foreman is
terminated effective thirty days after his receipt of the letter. As stated in the
letter, the termination was on account of Cesarios violation of company rules
against infliction of bodily injuries on a co-employee, it being alleged therein
that Cesario inflicted bodily injuries on a co-employee, a certain Jerry
Romero, as well as for unlawfully possessing a deadly weapon, a bolo, again
in violation of company rules.
As a result of the termination, the matter was brought to the grievance
machinery as mandated under the Collective Bargaining Agreement existing
at that time between UPMC and the United Paragon Supervisors
Union. Having failed to reach a settlement thereat, the parties agreed to
submit the dispute to voluntary arbitration. Accordingly, the complaint for
illegal dismissal was referred to Voluntary Arbitrator Atty. Murly P. Mendez
of the National Conciliation and Mediation Board, Regional Branch No.
V, Legaspi City, whereat the same was docketed as VA Case No. RB5-657-04002-96.
On February 28, 1997, Voluntary Arbitrator Mendez rendered a
decision[4] in Cesarios favor, stating that although the procedural
requirements in the termination of an employee had been complied with, the
termination of Cesario was unjustified because it was arrived at through gross
misapprehension of facts. Explains the Voluntary Arbitrator:
An analysis of the tenor of the termination letter would seem to indicate that
Ceasario Ermita was separated from service simply because his explanation
was not acceptable to the company. Stated more bluntly, Ermita was
terminated not because there was a definite finding of fact relative to his
supposed culpability, but because his answer did not find favor with
management.

The evidence on record partakes of the uncorroborated statement of Jerry

Romero claiming that he was assaulted by [Cesario]. This claim has been
disputed and is denied by [Cesario] in the statement executed by him on
January 2, 1996 as well as in his written explanation (Annex 6, Respondent's
Position Paper).
On this point, it can be argued that since this is a case of one's word against
another, the best that could be said of management's evidence is that it has
achieved a level at an equi-poise with that of the Constitution. The spirit of
prevailing jurisprudence as well as a liberal interpretation of the new
Constitutional provision on labor, would mandate that where a doubt exists,
the same should be resolved in favor of labor. The position of [Cesario]
appears to have been strengthened by the document jointly signed by [him]
and Jerry Romero, the supposed victim of the assault charged.
This amicable settlement would serve to negate the charge of physical injury
against [Cesario] as a basis for termination, it appearing that even [his]
supposed victim, Jerry Romero, who has been made to appear as a
complainant in the proceedings which resulted in the termination letter, has
admitted in this amicable settlement (Annex A, Complainant's Position Paper)
that "hindi naming sinasadya yon at itong ginawa naming sulat na ito ay siya
ang magpapatunay na ayos kaming dalawa at walang problema sa isa't isa."
This admission, that comes no less from the supposed accuser of [Cesario],
clearly establishes the fact that whatever may have happened between them
on New Year's eve was something that neither of them willfully and
voluntarily did. Since it has been established that the supposed scuffle
between [Cesario] and Romero was "hindi sinasadya," then it would
necessarily follow that there could not have been a willful and voluntary
assault by [Cesario] upon Romero. This situation is further rendered more
puzzling by the fact that the suspected assailant was himself the bearer of the
tell-tale marks of injury.
It has been established to the satisfaction of this Arbitrator that the bolo seen
that night was used to chop wood to be burnt in the bonfire. This statement
by people who happened to be unbiased and disinterested remains
uncontested and undisputed.

Further, the preponderance of evidence shows that it was not [Cesario] who
used said bolo, but his son.

In the herein assailed Decision [7] dated July 24, 2001, the CA, without going
into the merits of the petition, dismissed the same on the following grounds:

On these points, it is the finding of this Arbitrator, and it is so ruled, that

Ceasario Ermita was unjustifiably terminated. [5] (Words in brackets supplied).

1) The petition for certiorari was not the proper remedy in order to seek
review or nullify decisions or final orders issued by the Labor Arbiter;

On the basis of the above, the Voluntary Arbitrator, in his aforementioned

decision of February 28, 1997, ordered Cesarios reinstatement, to wit:

2) The verification in the petition is ineffective and insufficient because it was

merely signed by the company's Personnel Superintendent without alleging
or showing that he is authorized for the said purpose and that the verification
was based on knowledge and information;

WHEREFORE, judgment is hereby issued ordering respondent United Paragon

Mining Corporation to immediately reinstate Ceasario F. Ermita to his former
position prior to the termination without loss of seniority nor interruption of
service, and to pay said Ceasario F. Ermita his back wages, including such
other fringe benefits as he would have been entitled to, from the date of his
termination effective February 17, 1996 up to the time of actual
reinstatement. Attorney's fees are hereby granted equivalent to 10 per cent
of such monetary award as the complainant is entitled to.

3) The petitioner's ground of grave abuse of discretion, erroneous

interpretation of the law and denial of justice are actually dwelling on the
appreciation of facts, which cannot be entertained in a petition for certiorari.

For lack of merit, all other claims for damages are hereby dismissed.

With its motion for reconsideration having been denied by the CA in its
Resolution of November 7, 2001, [8] petitioner UPMC is now with this
Court via the present recourse, submitting for our consideration the
following questions:

SO ORDERED.

In time, UPMC moved for a reconsideration of the decision insofar as it

ordered Cesarios reinstatement which UPMC sought to avert by offering
separation pay instead. UPMC cites the following against the decreed
reinstatement: 1) Cesarios position has already been filled up; and
2) reinstatement is no longer appropriate in view of the supposed strained
relations between Cesario and UPMC.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN DISMISSING THE

PETITION AFTER FINDING THAT THE PROPER REMEDY SHOULD HAVE BEEN A
PETITION FOR REVIEW ON CERTIORARI AND NOT A PETITION FOR
CERTIORARI;

In his Order[6] of April 22, 1997, the Voluntary Arbitrator denied the desired
reconsideration stressing that UPMCs management misapprehended the
facts when it caused Cesarios termination, which cannot support the claim of
the existence of strained relations between him and the corporation.
Unsatisfied, UPMC, thru its Personnel Superintendent Feliciano M. Daniel,
elevated the case to the CA on a Petition for Certiorari with Prayer for
Temporary Restraining Order and Injunction, thereat docketed as CA-G.R. SP
No. 44450, asserting that the Voluntary Arbitrator committed grave abuse of
discretion, erroneous interpretation of the law and denial of substantial
justice.

II
WHETHER OR NOT THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN
DISMISSING THE PETITION AFTER FINDING THAT THE VERIFICATION PORTION
OF THE PETITION WAS INEFFECTIVE AND INSUFFICIENT IN THE ABSENCE OF
ALLEGATION OR SHOWING THAT FELICIANO DANIEL, AS PERSONNEL
SUPERINTENDENT WAS DULY AUTHORIZED TO FILE THE PETITION;
III
WHETHER OR NOT THE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN
DISMISSING THE PETITION AFTER FINDING THAT THE PETITION LACKS MERIT
BECAUSE IT DWELLED ON THE APPRECIATION OF FACTS WHICH IS NOT
PROPER IN PETITION FOR CERTIORARI.

The recourse must have to be DENIED, no reversible error having been

committed by the CA in its challenged decision.
We start with the basic concept that a corporation, like petitioner UPMC, has
no power except those expressly conferred on it by the Corporation Code and
those that are implied or incidental to its existence. In turn, a corporation
exercises said powers through its board of directors and/or its duly
authorized officers and agents. It has thus been observed that the power of a
corporation to sue and be sued in any court is lodged with its board of
directors that exercises its corporate powers. In turn, physical acts of the
corporation, like the signing of documents, can be performed only by natural
persons duly authorized for the purpose by the corporate by-laws or by a
specific act of the board of directors. [9]
It is petitioners posture that there is no necessity for a board resolution
authorizing its Personnel Superintendent to file in its behalf the certiorari
petition in CA-G.R. SP No. 44450 because said petition arose out of the labor
dispute filed against it and its Personnel Superintendent, Feliciano M. Daniel.
It is argued that in Cesarios complaint for illegal dismissal, Daniel was made a
co-respondent of the corporation. Upon this premise, UPMC argues that
Daniel has all the right to answer the complaint and to appeal an unfavorable
judgment therein, which he actually did, in his capacity as the corporations
Personnel Superintendent and as its representative. Plodding on, petitioner
contends that were the CA to insist that Daniel could not represent the
corporation, it follows that the proceedings before the Voluntary Arbitrator
could only be binding as against Daniel because the company then could not
have been duly represented in said proceedings.
Throughout the proceedings before the Voluntary Arbitrator, that is, from the
filing of the position papers up to the filing of the motion for reconsideration,
UPMC was duly represented by its counsel, Atty. Archimedes O. Yanto. True
it is that Cesarios complaint for illegal dismissal was filed against the
corporation and Daniel. It appears obvious to us, however, that Daniel was
merely a nominal party in that proceedings, as in fact he
was impleaded thereat in his capacity as UPMCs Personnel Superintendent
who signed the termination letter. For sure, Cesarios complaint contains no
allegation whatsoever for specific claim or charge against Daniel in whatever
capacity. As it is, Daniel was not in anyway affected by the outcome of the

illegal dismissal case because only the corporation was made liable therein to
Cesario. Being not a real party-in-interest, Daniel has no right to file the
petition in CA-G.R. SP No. 44450 in behalf of the corporation without any
authority from its board of directors. It is basic in law that a corporation has
a legal personality entirely separate and distinct from that of its officers and
the latter cannot act for and on its behalf without being so authorized by its
governing board.
In Premium Marble Resources, Inc. v. Court of Appeals,[10] we made it clear
that in the absence of an authority from the board of directors, no person,
not even the officers of the corporation, can validly bind the latter:
We agree with the finding of public respondent Court of Appeals, that in the
absence of any board resolution from its board of directors the [sic] authority
to act for and in behalf of the corporation, the present action must necessary
fail. The power of the corporation to sue and be sued in any court is lodged
with the board of directors that exercises its corporate powers. Thus, the
issue of authority and the invalidity of plaintiff-appellants subscription which
is still pending, is a matter that is also addressed, considering the premises,
to the sound judgment of the Securities and Exchange Commission.
Given the reality that the petition in CA-G.R. SP No. 44450 was filed by Daniel
in behalf of and in representation of petitioner UPMC without an enabling
resolution of the latters board of directors, that petition was fatally defective,
inclusive of the verification and the certification of non-forum shopping
executed by Daniel himself.
True, ample jurisprudence exists to the effect that subsequent and
substantial compliance of a petitioner may call for the relaxation of the rules
of procedure in the interest of justice. [11] But to merit the Court's liberal
consideration, petitioner must show reasonable cause justifying noncompliance with the rules and must convince the Court that the outright
dismissal of the petition would defeat the administration of
justice.[12] Here, petitioner has not adequately explained its failure to have
the certification against forum shopping signed by its duly authorized officer.
Instead, it merely persisted in its thesis that it was not necessary to show
proof that its Personnel Superintendent was duly authorized to file that
petition and to sign the verification thereof and the certification
against forumshoppingdespite the absence of the necessary board

authorization, thereby repeating in the process its basic submission that CAG.R. SP No. 44450 is merely a continuation of the proceedings before the
Voluntary Arbitrator and that its Personnel Superintendent was impleaded as
one of the respondents in Cesarios complaint for illegal dismissal.
With the view we take of this case, we deem it unnecessary to address
petitioners other grievances.
WHEREFORE, the instant petition is DENIED and the assailed CA decision and
resolution are AFFIRMED.
Costs against petitioner.
SO ORDERED.

Sulo ng Bayan vs. Araneta

[GR L-31061, 17 August 1976
Facts: On 26 April 1966, Sulo ng Bayan, Inc. filed an accion de revindicacion
with the Court of First Instance of Bulacan, Fifth Judicial District, Valenzuela,
Bulacan, against Gregorio Araneta Inc. (GAI), Paradise Farms Inc., National
Waterworks & Sewerage Authority (NAWASA), Hacienda Caretas Inc., and the
Register of Deeds of Bulacan to recover the ownership and possession of a
large tract of land in San Jose del Monte, Bulacan, containing an area of
27,982,250 sq. ms., more or less, registered under the Torrens System in the
name of GAI, et. al.'s predecessors-in-interest (who are members of the
corporation). On 2 September 1966, GAI filed a motion to dismiss the
amended complaint on the grounds that (1) the complaint states no cause of
action; and (2) the cause of action, if any, is barred by prescription and laches.
Paradise Farms, Inc. and Hacienda Caretas, Inc. filed motions to dismiss based
on the same grounds. NAWASA did not file any motion to dismiss. However,
it pleaded in its answer as special and affirmative defenses lack of cause of
action by Sulo ng Bayan Inc. and the barring of such action by prescription
and laches. On 24 January 1967, the trial court issued an Order dismissing the
(amended) complaint. On 14 February 1967, Sulo ng Bayan filed a motion to
reconsider the Order of dismissal, arguing among others that the complaint
states a sufficient cause of action because the subject matter of the
controversy in one of common interest to the members of the corporation
who are so numerous that the present complaint should be treated as a class
suit. The motion was denied by the trial court in its Order dated 22 February
1967.
Sulo ng Bayan appealed to the Court of Appeals. On 3 September 1969, the
Court of Appeals, upon finding that no question of fact was involved in the
appeal but only questions of law and jurisdiction, certified the case to the
Supreme Court for resolution of the legal issues involved in the controversy.
Issue:
1. Whether the corporation (non-stock) may institute an action in
behalf of its individual members for the recovery of certain parcels of
land allegedly owned by said members, among others.

2. Whether the complaint filed by the corporation in behalf of its

members may be treated as a class suit
Held
1. It is a doctrine well-established and obtains both at law and in equity that
a corporation is a distinct legal entity to be considered as separate and apart
from the individual stockholders or members who compose it, and is not
affected by the personal rights, obligations and transactions of its
stockholders or members. The property of the corporation is its property and
not that of the stockholders, as owners, although they have equities in it.
Properties registered in the name of the corporation are owned by it as an
entity separate and distinct from its members. Conversely, a corporation
ordinarily has no interest in the individual property of its stockholders unless
transferred to the corporation, "even in the case of a one-man corporation."
The mere fact that one is president of a corporation does not render the
property which he owns or possesses the property of the corporation, since
the president, as individual, and the corporation are separate similarities.
Similarly, stockholders in a corporation engaged in buying and dealing in real
estate whose certificates of stock entitled the holder thereof to an allotment
in the distribution of the land of the corporation upon surrender of their stock
certificates were considered not to have such legal or equitable title or
interest in the land, as would support a suit for title, especially against parties
other than the corporation. It must be noted, however, that the juridical
personality of the corporation, as separate and distinct from the persons
composing it, is but a legal fiction introduced for the purpose of convenience
and to subserve the ends of justice. This separate personality of the
corporation may be disregarded, or the veil of corporate fiction pierced, in
cases where it is used as a cloak or cover for fraud or illegality, or to work -an
injustice, or where necessary to achieve equity. It has not been claimed that
the members have assigned or transferred whatever rights they may have on
the land in question to the corporation. Absent any showing of interest,
therefore, a corporation, has no personality to bring an action for and in
behalf of its stockholders or members for the purpose of recovering property
which belongs to said stockholders or members in their personal capacities.

2. In order that a class suit may prosper, the following requisites must be
present: (1) that the subject matter of the controversy is one of common or
general interest to many persons; and (2) that the parties are so numerous
that it is impracticable to bring them all before the court. Here, there is only
one party plaintiff, and the corporation does not even have an interest in the
subject matter of the controversy, and cannot, therefore, represent its
members or stockholders who claim to own in their individual capacities
ownership of the said property. Moreover, a class suit does not lie in actions
for the recovery of property where several persons claim partnership of their
respective portions of the property, as each one could alleged and prove his
respective right in a different way for each portion of the land, so that they
cannot all be held to have identical title through acquisition/prescription.

Santos vs. National Labor Relations Commission

[GR 101699, 13 March 1996]

Facts: Melvin D. Millena, on 1 October 1985, was hired to be the project

accountant for Mana Mining and Development Corporation's (MMDC) mining
operations in Gatbo, Bacon, Sorsogon. On 12 August 1986, Millena sent to
Mr. Gil Abao, the MMDC corporate treasurer, a memorandum calling the
latter's attention to the failure of the company to comply with the
withholding tax requirements of, and to make the corresponding monthly
remittances to, the Bureau of Internal Revenue (BIR) on account of delayed
payments of accrued salaries to the company's laborers and employees. In a
letter, dated 8 September 1986, Abao advised Millena that it was the
board's decision that it stop porduction (operation) in Sorsogon due to the
upcoming rainy seasons and the deterioration of the peace and order in the
said area; that the corporation will undertake only necessary maintenance
and repair work and will keep overhead down to the minimum manageable
level; and that the corporation will not need a project accountant until the
corporaton resumes full-scale operations. Millena expressed "shock" over the
termination of his employment.

He complained that he would not have resigned from the Sycip, Gores &
Velayo accounting firm, where he was already a senior staff auditor, had it
not been for the assurance of a "continuous job" by MMDC's Eng. Rodillano
E. Velasquez. Millena requested that he be reimbursed the "advances" he had
made for the company and be paid his "accrued salaries/claims." The claim
was not heeded. On October 1986, Millena filed with the NLRC Regional
Arbitration, Branch No. V, in Legazpi City, a complaint for illegal dismissal,
unpaid salaries, 13th month pay, overtime pay, separation pay and incentive
leave pay against MMDC and its two top officials, namely, Benjamin A Santos
(the President) and Rodillano A. Velasquez (the executive vice-president). In
his complaint-affidavit (position paper), submitted on 27 October 1986,
Millena alleged, among other things, that his dismissal was merely an
offshoot of his letter of 12 August 1986 to Abao about the company's

inability to pay its workers and to remit withholding taxes to the BIR. On 27
July 1988, Labor Arbiter Fructouso T. Aurellano, finding no valid cause for
terminating complaint's employment, ruledthat a partial closure of an
establishment due to losses was a retrenchment measure that rendered the
employer liable for unpaid salaries and other monetary claims.

The Labor Arbiter ordered Santos, et. al. to pay Millena the amount of
P37,132.25 corresponding to the latter's unpaid salaries and advances:
P5,400.00 for petitioner's 13th month pay; P3,340.95 as service incentive
leave pay; and P5, 400.00 as separation pay. Santos, et. al. were further
ordered to pay Millena 10% of the monetary awards as attorney's fees.
Alleging abuse of discretion by the Labor Arbiter, the company and its corespondents filed a "motion for reconsideration and /or appeal." 8 The
motion/appeal was forthwith indorsed to the Executive Director of the NLRC
in Manila. In a resolution, dated 04 September 1989, the NLRC affirmed the
decision of the Labor Arbiter. A writ of execution correspondingly issued;
however, it was returned unsatisfied for the failure of the sheriff to locate the
offices of the corporation in the addressed indicated. Another writ of
execution and an order of garnishment was thereupon served on Santos at
his residence. Contending that he had been denied due process, Santos filed
a motion for reconsideration of the NLRC's resolution along with a prayer for
the quashal of the writ of execution and order of garnishment. He averred
that he had never received any notice, summons or even a copy of the
complaint; hence, he said, the Labor Arbiter at no time had acquired
jurisdiction over him. On 16 August 1991, the NLRC dismissed the motion for
reconsideration. Santos filed the petition for certiorari.

Issue: Whether Santos should be made solidarily liable with MMDC.

Held: A corporation is a judicial entity with legal personality separated and

distinct from those acting for and in its behalf and, in general, from the people
comprising it. The rule is that obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole liabilities.
Nevertheless, being a mere fiction of law, peculiar situations or valid grounds

can exist to warrant, albeit done sparingly, the disregard of its independent
being and the lifting of the corporate veil. As a rule, this situation might arise
a corporation is used to evade a just and due obligation or to justify a wrong,
to shield or perpetrate fraud, to carry out similar other unjustifiable aims or
intentions, or as a subterfuge to commit injustice and so circumvent the law.
Without necessarily piercing the veil of corporate fiction, personal civil
liability can also be said to lawfully attach to a corporate director, trustee or
officer; to wit: When (1) He assents (a) to a patently unlawful act of the
corporation, or (b) for bad faith or gross negligence in directing its affairs, or
(b) for conflict of interest, resulting in damages to the corporation, its
stockholders or other persons; (2) He consents to the issuance of watered
stocks or who, having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto; (3) He agrees to hold
himself personally and solidarily liable with the corporation; or (4) He is made,
by a specific provision of law, to personally answer for his corporate action.
The case of Santos is way of these exceptional instances. It is not even shown
that Santos has had a direct hand in the dismissal of Millena enough to
attribute to Santos a patently unlawful act while acting for the corporation.
Neither can Article 289 of the Labor Code be applied since this specifically
refers only to the imposition of penalties under the Code. It is undisputed that
the termination of Millena's employment has, instead, been due, collectively,
to the need for a further mitigation of losses, the onset of the rainy season,
the insurgency problem, in Sorsogon and the lack of funds to further support
the mining operation in Gatbo. It is basic that a corporation is invested by law
with a personally separate and distinct from those of the persons composing
it as well as from that of any, other legal entity to which it may be related.
Mere ownership by a single stockholder or by another corporation of all
nearly all of the capital stock of a corporation is not of itself sufficient ground
for disregarding the separate corporate personally. Similar to the case of
Sunio vs. National Labor Relations Commission, Santos should not have been
made personally answerable for the payment of Millena's back salaries.

Benjamin Yu vs. National Labor Relations Commission (NLRC)

FACTS:
Petitioner Yu was hired as the Assistant General Manager of Jade Mountain
Products Company Limited primarily responsible for the overall operations of
marble quarrying and export business of said partnership. He was hired by a
virtue of a Partnership Resolution in 1985 with a monthly salary of P4,000.00.
Initially he received only half of his stipulated monthly salary and was
promised by the partners that the balance would be paid upon securing
additional operating funds from abroad. However, in 1988 without his
knowledge the general partners as well as one of the limited partners sold
and transferred their interest to Willy Co and Emmanuel Zapanta. Thus the
new major partners decided to transfer the firms main office but opted to
continue the operation of the old partnership under its old firm name and
with all its employees and workers except for the petitioner. Upon knowing
of the changes in the partnership, petitioner went to the new main office to
meet the new partners and demand the payment of his unpaid salaries, but
the latter refused to pay him and instead informed him that since he bought
the business from the original partners, it was for him to decide whether or
not he was responsible for the obligations of the old partnership including
petitioners unpaid salaries. Hence, petitioner was dismissed from said
partnership.

1. Yes. The legal effect of the changes in the membership of the

partnership was the dissolution of the old partnership which had hired the
petitioner in 1984 and the emergence of the new firm composed of Willy Co
and Emmanuel Zapanta in 1988. This is based on the following provisions:
Art. 1828. The dissolution of partnership is the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on as
a distinguished from the winding up of the business.
Art. 1830. Dissolution is caused:
1.

without violation of the agreement between the partners;

b. by the express will of any partner, who must act in good faith, when
no definite term or
particular undertaking is specified.
2. in contravention of the agreement between the partners, where the
circumstances do not
permit a dissolution under any other provision
of this article, by the express will of any partner
at any time;

However, the legal consequence of dissolution of a partnership do not

automatically result in the termination of the legal personality of the old
partnership as according to Art. 1829, on dissolution of the partnership is
not terminated, but continues until the winding up of the partnership affairs
is completed. The new partnership simply continued the operations of the
old partnership under its old firm name without winding up the business
affairs of the old partnership.

ISSUES:
1. Whether the partnership which had hired the petitioner as Asst. General
Manager had been extinguished and replaced by a new partnership
composed of Willy Co and Emmanuel Zapanta.
2. Whether petitioner could assert his rights under his employment
contract as against the new partnership

HELD:

2. Yes. Under Art. 1840, creditors of the old partnership are also creditors
of the new partnership which continued the business of former without
liquidation of the partnership affairs. Thus, creditor of the old Jade Mountain,
such as the petitioner is entitled to enforce his claim for unpaid salaries, as
well as other claims relating to his employment with the old partnership
against the new Jade Mountain.

KOPPEL INC VS YATCO

Facts:

Koppel Philippines Inc. (KPI) has a capital stock divided into thousand
(1,000) shares of P100 each.

The Koppel Industrial Car and Equipment Company (KICEC) owns 995
shares of the total capital stock. KICEC is organized under US laws and not
licensed to do business in the Philippines. The remaining five (5) shares only
were and are owned one each by officers of the KPI.

They have the following business process:

o (1) "When a local buyer was interested in the purchase of railway

materials, machinery, and supplies, it asked for price quotations from KPI";
o (2) "KPI then cabled for the quotation desired from Koppel Industrial Car
and Equipment Company";

The KPI's "share in the profits" realized from the transactions in which
it intervened was left virtually in the hands of KICEC

Where drafts were not paid by the purchasers, the local banks were
instructed not to protest them but to refer them to KPI which was fully
empowered by KICEC to instruct the banks with regards to disposition of the
drafts and documents

Where the goods were European origin, consular invoices, bill of lading,
and, in general, the documents necessary for clearance were sent directly to
KPI

If the KPI had in stock the merchandise desired by local buyers,

it immediately filled the orders of such local buyersand made delivery in the
Philippines without the necessity of cabling its principal in America either for
price quotations or confirmation or rejection of that agreed upon between it
and the buyer

o (4) "On the basis of these quotations, orders were placed by the local
purchasers

Whenever the deliveries made by KICEC were incomplete or

insufficient to fill the local buyer's orders, KPI used to make good the
deficiencies by deliveries from its own local stock, but in such cases it charged
its principal only the actual cost of the merchandise thus delivered by it from
its stock and in such transactionsKPI did not realize any profit#fluffypeaches

o (3) "KPI, however, quoted to the purchaser a selling price above the
figures quoted by Koppel Industrial Car and Equipment Company";

KPI paid under protest the P64,122.51 demanded by the CIR.

Total profit

CFI:

o KPI
is a3,772,403,82
mere dummy or branch ("hechura") of KICEC.
Php

o did
not132,201.30
deny legal personality to Koppel (Philippines), Inc. for any and all
Php
purposes, but in effect its conclusion was that, in the transactions involved
KPI paid commercial brokers tax (4% of KPI Share)
Php
5,288.05
herein,
the
public interest and convenience would be defeated and what
would
amount
to a tax evasion perpetrated, unless resort is had to the
CIR demanded (1% of Total Profit) + 25% surcharge for late payment Php 64,122.51
doctrine of "disregard of the corporate fiction."
Paid tax
KPI Share

It appears that KICEC is the only foreign principal of KPI.

The KPI corporation bore alone incidental expenses - as, for instance,
cable expenses-not only those of its own cables but also those of its
"principal" .

Issues/Ruling:
1. WON KPI is a domestic corporation distinct and separate from, and not a
mere branch of KICEC

KPI:


Its corporate existence as cannot be collaterally attacked and that the
Government is estopped from so doing.

intended to function as a bona fide separate corporation, we cannot conceive

how this arrangement could have been adopted.

SC:

No group of businessmen could be expected to organize a mercantile

corporation if the amount of that profit were to be subjected to such a
unilateral control of another corporation, unless indeed the former has
previously been designed by the incorporators to serve as a mere subsidiary,
branch or agency of the latter.

Koppel (Philippines), Inc. was a mere branch or agency or dummy

("hechura") of Koppel Industrial Car and Equipment Co. The lower court did
not hold that the corporate personality of KPI would also be disregarded in
other cases or for other purposes. It would have had no power to so hold. The
courts' action in this regard must be confined to the transactions involved in
the case at bar "for the purpose of adjudging the rights and liabilities of the
parties in the case. They have no jurisdiction to do more." <3 peaches

United States vs. Milwaukee Refrigeration Transit

o General Rule: a corporation will be looked upon as a legal entity as a

general rule, and until sufficient reason to the contrary appears;
o Exception: Wthe notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, the law will
regard the corporation as an association of persons.

Manifestly, the principle is the same whether the "person" be natural

or artificial.

A very numerous and growing class of cases wherein the corporate

entity is disregarded is that (it is so organized and controlled, and its affairs
are so conducted, as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation)."

Where it appears that two business enterprises are owned, conducted

and controlled by the same parties, both law and equity will, when necessary
to protect the rights of third persons, disregard the legal fiction that two
corporations are distinct entities, and treat them as identical. (Abney vs.
Belmont Peaches Country Club Properties, Inc., 279 Pac.,
829.) #bebegurrpeaches

The fact that KPI is a mere branch is conclusively borne out by the fact,
among others, that the amount of the so-called "share in the profits" of
KPIwas ultimately left to the sole, unbridled control of KICEC. If KPI was

KPI charged the parent corporation no more than actual cost - without
profit whatsoever - for merchandise allegedly of its own to complete
deficiencies of shipments made by said parent corporation.

PNB V. RITRATTO G.R. NO. 142616 362 SCRA 216

Facts:
PNB-IFL, a subsidiary company of PNB extended credit to Ritratto and secured
by the real estate mortgages on four parcels of land. Since there was default,
PNB-IFL thru PNB, foreclosed the property and were subject to public auction.
Ritratto Group filed a complaint for injunction. PNB filed a motion to dismiss
on the grounds of failure to state a cause of action and the absence of any
privity between respondents and petitioner.
Issue:
Is PNB privy to the loan contracts entered into by respondent & PNB-IFL being
that PNB-IFL is owned by PNB?
Held:
No. The contract questioned is one entered into between Ritratto and PNBIFL. PNB was admittedly an agent of the latter who acted as an agent with
limited authority and specific duties under a special power of attorney
incorporated in the real estate mortgage.
The mere fact that a corporation owns all of the stocks of another
corporation, taken alone is not sufficient to justify their being treated as one
entity. If used to perform legitimate functions, a subsidiarys separate
existence may be respected, and the liability of the parent corporation as well
as the subsidiary will be confined to those arising in their respective business.
The courts may, in the exercise of judicial discretion, step in to prevent the
abuses of separate entity privilege and pierce the veil of corporate entity.

KUKAN
INTERNATIONAL
CORPORATION, Petitioner,
vs.
HON. AMOR REYES, in her capacity as Presiding Judge of the Regional Trial
Court of Manila, Branch 21, and ROMEO M. MORALES, doing business under
the name and style "RM Morales Trophies and Plaques," Respondents.

Following the joinder of issues after Kukan, Inc. filed an answer with
counterclaim, trial ensued. However, starting November 2000, Kukan, Inc. no
longer appeared and participated in the proceedings before the trial court,
prompting the RTC to declare Kukan, Inc. in default and paving the way for
Morales to present his evidence ex parte.

DE CISION

On November 28, 2002, the RTC rendered a Decision finding for Morales and
against Kukan, Inc., disposing as follows:

VELASCO, JR., J.:

The Case
This Petition for Review on Certiorari under Rule 45 seeks to nullify and
reverse the January 23, 2008 Decision 1 and the April 16, 2008
Resolution2 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 100152.
The assailed CA decision affirmed the March 12, 20073 and June 7,
20074 Orders of the Regional Trial Court (RTC) of Manila, Branch 21, in Civil
Case No. 99-93173, entitled Romeo M. Morales, doing business under the
name and style RM Morales Trophies and Plaques v. Kukan, Inc. In the said
orders, the RTC disregarded the separate corporate identities of Kukan, Inc.
and Kukan International Corporation and declared them to be one and the
same entity. Accordingly, the RTC held Kukan International Corporation,
albeit not impleaded in the underlying complaint of Romeo M. Morales, liable
for the judgment award decreed in a Decision dated November 28, 20025 in
favor of Morales and against Kukan, Inc.
The Facts
Sometime in March 1998, Kukan, Inc. conducted a bidding for the supply and
installation of signages in a building being constructed in Makati City. Morales
tendered the winning bid and was awarded the PhP 5 million contract. Some
of the items in the project award were later excluded resulting in the
corresponding reduction of the contract price to PhP 3,388,502. Despite his
compliance with his contractual undertakings, Morales was only paid the
amount of PhP 1,976,371.07, leaving a balance of PhP 1,412,130.93, which
Kukan, Inc. refused to pay despite demands. Shortchanged, Morales filed a
Complaint6 with the RTC against Kukan, Inc. for a sum of money, the case
docketed as Civil Case No. 99-93173 and eventually raffled to Branch 17 of
the court.

WHEREFORE, consistent with Section 5, Rule 18 of the 1997 Rules of Civil

Procedure, and by preponderance of evidence, judgment is hereby rendered
in favor of the plaintiff, ordering Kukan, Inc.:
1. to pay the sum of ONE MILLION TWO HUNDRED ONE THOUSAND SEVEN
HUNDRED TWENTY FOUR PESOS (P1,201,724.00) with legal interest at 12%
per annum from February 17, 1999 until full payment;
2. to pay the sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
3. to pay the sum of TWENTY THOUSAND PESOS, (P20,000.00) as reasonable
attorneys fees; and
4. to pay the sum of SEVEN THOUSAND NINE HUNDRED SIXTY PESOS and SIX
CENTAVOS (P7,960.06) as litigation expenses.
For lack of factual foundation, the counterclaim is DISMISSED.
IT IS SO ORDERED.7
After the above decision became final and executory, Morales moved for and
secured a writ of execution 8 against Kukan, Inc. The sheriff then levied upon
various personal properties found at what was supposed to be Kukan, Inc.s
office at Unit 2205, 88 Corporate Center, Salcedo Village, Makati City. Alleging
that it owned the properties thus levied and that it was a different
corporation from Kukan, Inc., Kukan International Corporation (KIC) filed an
Affidavit of Third-Party Claim. Notably, KIC was incorporated in August 2000,
or shortly after Kukan, Inc. had stopped participating in Civil Case No. 9993173.
In reaction to the third party claim, Morales interposed an Omnibus Motion
dated April 30, 2003. In it, Morales prayed, applying the principle of piercing

the veil of corporate fiction, that an order be issued for the satisfaction of the
judgment debt of Kukan, Inc. with the properties under the name or in the
possession of KIC, it being alleged that both corporations are but one and the
same entity. KIC opposed Morales motion. By Order of May 29, 20039as
reiterated in a subsequent order, the court denied the omnibus motion.
In a bid to establish the link between KIC and Kukan, Inc., and thus de termine
the true relationship between the two, Morales filed a Motion for
Examination of Judgment Debtors dated May 4, 2005. In this motion Morales
sought that subponae be issued against the primary stockholders of Kukan,
Inc., among them Michael Chan, a.k.a. Chan Kai Kit. This too was denied by
the trial court in an Order dated May 24, 2005. 10
Morales then sought the inhibition of the presiding judge, Eduardo B. Peralta,
Jr., who eventually granted the motion. The case was re-raffled to Branch 21,
presided by public respondent Judge Amor Reyes.
Before the Manila RTC, Branch 21, Morales filed a Motion to Pierce the Veil
of Corporate Fiction to declare KIC as having no existence separate from
Kukan, Inc. This time around, the RTC, by Order dated March 12, 2007,
granted the motion, the dispositive portion of which reads:
WHEREFORE, premises considered, the motion is hereby GRANTED. The
Court hereby declares as follows:
1. defendant Kukan, Inc. and newly created Kukan International Corp. as one
and the same corporation;
2. the levy made on the properties of Kukan International Corp. is hereby
valid;
3. Kukan International Corp. and Michael Chan are jointly and severally liable
to pay the amount awarded to plaintiff pursuant to the decision of November
[28], 2002 which has long been final and executory.
SO ORDERED.
From the above order, KIC moved but was denied reconsideration in another
Order dated June 7, 2007.

KIC went to the CA on a petition for certiorari to nullify the aforesaid March
12 and June 7, 2007 RTC Orders.
On January 23, 2008, the CA rendered the assailed decision, the dispositive
portion of which states:
WHEREFORE, premises considered, the petition is hereby DENIED and the
assailed Orders dated March 12, 2007 and June 7, 2007 of the court a quo are
both AFFIRMED. No costs.
SO ORDERED.11
The CA later denied KICs motion for reconsideration in the assailed
resolution.
Hence, the instant petition for review, with the following issues KIC raises for
the Courts consideration:
1. There is no legal basis for the [CA] to resolve and declare that petitioners
Constitutional Right to Due Process was not violated by the public respondent
in rendering the Orders dated March 12, 2007 and June 7, 2007 and in
declaring petitioner to be liable for the judgment obligations of the
corporation "Kukan, Inc." to private respondent as petitioner is a stranger
to the case and was never made a party in the case before the trial court nor
was it ever served a summons and a copy of the complaint.
2. There is no legal basis for the [CA] to resolve and declare that the Orders
dated March 12, 2007 and June 7, 2007 rendered by public respondent
declaring the petitioner liable to the judgment obligations of the corporation
"Kukan, Inc." to private respondent are valid as said orders of the public
respondent modify and/or amend the trial courts final and executory
decision rendered on November 28, 2002.
3. There is no legal basis for the [CA] to resolve and declare that the Orders
dated March 12, 2007 and June 7, 2007 rendered by public respondent
declaring the petitioner [KIC] and the corporation "Kukan, Inc." as one and
the same, and, therefore, the Veil of Corporate Fiction between them be
pierced as the procedure undertaken by public respondent which the [CA]
upheld is not sanctioned by the Rules of Court and/or established
jurisprudence enunciated by this Honorable Supreme Court. 12

In gist, the issues to be resolved boil down to the question of, first, whether
the trial court can, after the judgment against Kukan, Inc. has attained finality,
execute it against the property of KIC; second, whether the trial court
acquired jurisdiction over KIC; and third, whether the trial and appellate
courts correctly applied, under the premises, the principle of piercing the veil
of corporate fiction.
The Ruling of the Court
The petition is meritorious.
First
Issue:
Against
Whom
Executory Judgment Be Executed

Can

Final

and

The preliminary question that must be answered is whether or not the trial
court can, after adjudging Kukan, Inc. liable for a sum of money in a final and
executory judgment, execute such judgment debt against the property of KIC.
The poser must be answered in the negative.
In Carpio v. Doroja, 13 the Court ruled that the deciding court has supervisory
control over the execution of its judgment:
A case in which an execution has been issued is regarded as still pending so
that all proceedings on the execution are proceedings in the suit. There is no
question that the court which rendered the judgment has a general
supervisory control over its process of execution, and this power carries with
it the right to determine every question of fact and law which may be involved
in the execution.
We reiterated the above holding in Javier v. Court of Appeals 14 in this wise:
"The said branch has a general supervisory control over its processes in the
execution of its judgment with a right to determine every question of fact and
law which may be involved in the execution."
The courts supervisory control does not, however, extend as to authorize the
alteration or amendment of a final and executory decision, save for certain
recognized exceptions, among which is the correction of clerical errors. Else,
the court violates the principle of finality of judgment and its immutability,
concepts which the Court, in Tan v. Timbal, 15 defined:

As we held in Industrial Management International Development Corporation

vs. NLRC:
It is an elementary principle of procedure that the resolution of the court in
a given issue as embodied in the dispositive part of a decision or order is the
controlling factor as to settlement of rights of the parties. Once a decision or
order becomes final and executory, it is removed from the power or
jurisdiction of the court which rendered it to further alter or amend it. It
thereby becomes immutable and unalterable and any amendment or
alteration which substantially affects a final and executory judgment is null
and void for lack of jurisdiction, including the entire proceedings held for that
purpose. An order of execution which varies the tenor of the judgment or
exceeds the terms thereof is a nullity. (Emphasis supplied.)
Republic v. Tango16 expounded on the same principle and its exceptions:
Deeply ingrained in our jurisprudence is the principle that a decision that has
acquired finality becomes immutable and unalterable. As such, it may no
longer be modified in any respect even if the modification is meant to correct
erroneous conclusions of fact or law and whether it will be made by the court
that rendered it or by the highest court of the land. x x x
The doctrine of finality of judgment is grounded on the fundamental principle
of public policy and sound practice that, at the risk of occasional error, the
judgment of courts and the award of quasi-judicial agencies must become
final on some definite date fixed by law. The only exceptions to the general
rule are the correction of clerical errors, the so-called nunc pro tunc entries
which cause no prejudice to any party, void judgments, and whenever
circumstances transpire after the finality of the decision which render its
execution unjust and inequitable. None of the exceptions obtains here to
merit the review sought. (Emphasis added.)
So, did the RTC, in breach of the doctrine of immutability and inalterability of
judgment, order the execution of its final decision in a manner as would
amount to its prohibited alteration or modification?
We repair to the dispositive portion of the final and executory RTC decision.
Pertinently, it provides:

WHEREFORE, consistent with Section 5, Rule 18 of the 1997 Rules of Civil

Procedure, and by preponderance of evidence, judgment is hereby rendered
in favor of the plaintiff, ordering Kukan, Inc.:
1. to pay the sum of ONE MILLION TWO HUNDRED ONE THOUSAND SEVEN
HUNDRED TWENTY FOUR PESOS (P1,201,724.00) with legal interest at 12%
per annum from February 17, 1999 until full payment;
2. to pay the sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
3. to pay the sum of TWENTY THOUSAND PESOS (P20,000.00) as reasonable
attorneys fees; and
4. to pay the sum of SEVEN THOUSAND NINE HUNDRED SIXTY PESOS and SIX
CENTAVOS (P7,960.06) as litigation expenses.

We cannot give imprimatur to the appellate courts appreciation of the thrust

of Sec. 20, Rule 14 of the Rules in concluding that the trial court acquired
jurisdiction over KIC.
Orion Security Corporation v. Kalfam Enterprises, Inc. 23 explains how courts
acquire jurisdiction over the parties in a civil case:

x x x x (Emphasis supplied.)
As may be noted, the above decision, in unequivocal terms, directed Kukan,
Inc. to pay the aforementioned awards to Morales. Thus, making KIC, thru the
medium of a writ of execution, answerable for the above judgment liability is
a clear case of altering a decision, an instance of granting relief not
contemplated in the decision sought to be executed. And the change does
not fall under any of the recognized exceptions to the doctrine of finality and
immutability of judgment. It is a settled rule that a writ of execution must
conform to the fallo of the judgment; as an inevitable corollary, a writ beyond
the terms of the judgment is a nullity.17
Thus, on this ground alone, the instant petition can already be granted.
Nonetheless, an examination of the other issues raised by KIC would be
proper.
Second
Issue:
Propriety
Assuming Jurisdiction over KIC

In the assailed decision, the appellate court deemed KIC to have voluntarily
submitted itself to the jurisdiction of the trial court owing to its filing of four
(4) pleadings adverted to earlier, namely: (a) the Affidavit of Third-Party
Claim;18 (b) the Comment and Opposition to Plaintiffs Omnibus Motion;19 (c)
the Motion for Reconsideration of the RTC Order dated March 12, 2007; 20 and
(d) the Motion for Leave to Admit Reply. 21 The CA, citing Section 20, Rule 14
of the Rules of Court, stated that "the procedural rule on service of summons
can be waived by voluntary submission to the courts jurisdiction through any
form of appearance by the party or its counsel." 22

of

the

RTC

The next issue turns on the validity of the execution the trial court authorized
against KIC and its property, given that it was neither made a party nor
impleaded in Civil Case No. 99-93173, let alone served with summons. In
other words, did the trial court acquire jurisdiction over KIC?

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint.
On the other hand, jurisdiction over the defendants in a civil case is acquired
either through the service of summons upon them or through their voluntary
appearance in court and their submission to its authority. (Emphasis
supplied.)
In the fairly recent Palma v. Galvez, 24 the Court reiterated its holding in Orion
Security Corporation, stating: "[I]n civil cases, the trial court acquires
jurisdiction over the person of the defendant either by the service of
summons or by the latters voluntary appearance and submission to the
authority of the former."
The courts jurisdiction over a party-defendant resulting from his voluntary
submission to its authority is provided under Sec. 20, Rule 14 of the Rules,
which states:
Section 20. Voluntary appearance. The defendants voluntary appearance
in the actions shall be equivalent to service of summons. The inclusion in a
motion to dismiss of other grounds aside from lack of jurisdiction over the
person of the defendant shall not be deemed a voluntary appearance.

To be sure, the CAs ruling that any form of appearance by the party or its
counsel is deemed as voluntary appearance finds support in the kindred
Republic v. Ker & Co., Ltd. 25 and De Midgely v. Ferandos. 26
Republic and De Midgely, however, have already been modified if not
altogether superseded27 by La Naval Drug Corporation v. Court of
Appeals,28 wherein the Court essentially ruled and elucidated on the current
view in our jurisdiction, to wit: "[A] special appearance before the court
challenging its jurisdiction over the person through a motion to dismiss even
if the movant invokes other groundsis not tantamount to estoppel or a
waiver by the movant of his objection to jurisdiction over his person; and such
is not constitutive of a voluntary submission to the jurisdiction of the court."29
In the instant case, KIC was not made a party-defendant in Civil Case No. 9993173. Even if it is conceded that it raised affirmative defenses through its
aforementioned pleadings, KIC never abandoned its challenge, however
implicit, to the RTCs jurisdiction over its person. The challenge was subsumed
in KICs primary assertion that it was not the same entity as Kukan, Inc.
Pertinently, in its Comment and Opposition to Plaintiffs Omnibus Motion
dated May 20, 2003, KIC entered its "special but not voluntary appearance"
alleging therein that it was a different entity and has a separate legal
personality from Kukan, Inc. And KIC would consistently reiterate this
assertion in all its pleadings, thus effectively resisting all along the RTCs
jurisdiction of its person. It cannot be overemphasized that KIC could not file
before the RTC a motion to dismiss and its attachments in Civil Case No. 9993173, precisely because KIC was neither impleaded nor served with
summons. Consequently, KIC could only assert and claim through its
affidavits, comments, and motions filed by special appearance before the RTC
that it is separate and distinct from Kukan, Inc.
Following La Naval Drug Corporation,30 KIC cannot be deemed to have waived
its objection to the courts lack of jurisdiction over its person. It would defy
logic to say that KIC unequivocally submitted itself to the jurisdiction of the
RTC when it strongly asserted that it and Kukan, Inc. are different entities. In
the scheme of things obtaining, KIC had no other option but to insist on its
separate identity and plead for relief consistent with that position.
Third
Issue:
Veil of Corporate Fiction

Piercing

the

The third and main issue in this case is whether or not the trial and appellate
courts correctly applied the principle of piercing the veil of corporate entity
called also as disregarding the fiction of a separate juridical personality of a
corporationto support a conclusion that Kukan, Inc. and KIC are but one
and the same corporation with respect to the contract award referred to at
the outset. This principle finds its context on the postulate that a corporation
is an artificial being invested with a personality separate and distinct from
those of the stockholders and from other corporations to which it may be
connected or related. 31
In Pantranco Employees Association (PEA-PTGWO) v. National Labor
Relations Commission, 32 the Court revisited the subject principle of piercing
the veil of corporate fiction and wrote:
Under the doctrine of "piercing the veil of corporate fiction," the court looks
at the corporation as a mere collection of individuals or an aggregation of
persons undertaking business as a group, disregarding the separate juridical
personality of the corporation unifying the group. Another formulation of this
doctrine is that when two business enterprises are owned, conducted and
controlled by the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that two
corporations are distinct entities and treat them as identical or as one and
the same.
Whether the separate personality of the corporation should be pierced
hinges on obtaining facts appropriately pleaded or proved. However, any
piercing of the corporate veil has to be done with caution, albeit the Court
will not hesitate to disregard the corporate veil when it is misused or when
necessary in the interest of justice. x x x (Emphasis supplied.)
The same principle was the subject and discussed in Rivera v. United
Laboratories, Inc.:
While a corporation may exist for any lawful purpose, the law will regard it as
an association of persons or, in case of two corporations, merge them into
one, when its corporate legal entity is used as a cloak for fraud or illegality.
This is the doctrine of piercing the veil of corporate fiction. The doctrine
applies only when such corporate fiction is used to defeat public convenience,
justify wrong, protect fraud, or defend crime, or when it is made as a shield

to confuse the legitimate issues, or where a corporation is the mere alter ego
or business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation.
To disregard the separate juridical personality of a corporation, the
wrongdoing must be established clearly and convincingly. It cannot be
presumed.33 (Emphasis supplied.)
Now, as before the appellate court, petitioner KIC maintains that the RTC
violated its right to due process when, in the execution of its November 28,
2002 Decision, the court authorized the issuance of the writ against KIC for
Kukan, Inc.s judgment debt, albeit KIC has never been a party to the
underlying suit. As a counterpoint, Morales argues that KICs specific concern
on due process and on the validity of the writ to execute the RTCs November
28, 2002 Decision would be mooted if it were established that KIC and Kukan,
Inc. are indeed one and the same corporation.
Morales contention is untenable.
The principle of piercing the veil of corporate fiction, and the resulting
treatment of two related corporations as one and the same juridical person
with respect to a given transaction, is basically applied only to determine
established liability;34 it is not available to confer on the court a jurisdiction it
has not acquired, in the first place, over a party not impleaded in a case.
Elsewise put, a corporation not impleaded in a suit cannot be subject to the
courts process of piercing the veil of its corporate fiction. In that situation,
the court has not acquired jurisdiction over the corporation and, hence, any
proceedings taken against that corporation and its property would infringe
on its right to due process. Aguedo Agbayani, a recognized authority on
Commercial Law, stated as much:
23. Piercing the veil of corporate entity applies to determination of liability
not of jurisdiction. x x x
This is so because the doctrine of piercing the veil of corporate fiction comes
to play only during the trial of the case after the court has already acquired
jurisdiction over the corporation. Hence, before this doctrine can be applied,
based on the evidence presented, it is imperative that the court must first
have jurisdiction over the corporation. 35 x x x (Emphasis supplied.)

The implication of the above comment is twofold: (1) the court must first
acquire jurisdiction over the corporation or corporations involved before its
or their separate personalities are disregarded; and (2) the doctrine of
piercing the veil of corporate entity can only be raised during a full-blown trial
over a cause of action duly commenced involving parties duly brought under
the authority of the court by way of service of summons or what passes as
such service.
The issue of jurisdiction or the lack of it over KIC has already been discussed.
Anent the matter of the time and manner of raising the principle in question,
it is undisputed that no full-blown trial involving KIC was had when the RTC
disregarded the corporate veil of KIC. The reason for this actuality is simple
and undisputed: KIC was not impleaded in Civil Case No. 99-93173 and that
the RTC did not acquire jurisdiction over it. It was dragged to the case after it
reacted to the improper execution of its properties and veritably hauled to
court, not thru the usual process of service of summons, but by mere motion
of a party with whom it has no privity of contract and after the decision in the
main case had already become final and executory. As to the propriety of a
plea for the application of the principle by mere motion, the following
excerpts are instructive:
Generally, a motion is appropriate only in the absence of remedies by regular
pleadings, and is not available to settle important questions of law, or to
dispose of the merits of the case. A motion is usually a proceeding incidental
to an action, but it may be a wholly distinct or independent proceeding. A
motion in this sense is not within this discussion even though the relief
demanded is denominated an "order."
A motion generally relates to procedure and is often resorted to in order to
correct errors which have crept in along the line of the principal actions
progress. Generally, where there is a procedural defect in a proceeding and
no method under statute or rule of court by which it may be called to the
attention of the court, a motion is an appropriate remedy. In many
jurisdictions, the motion has replaced the common-law pleas testing the
sufficiency of the pleadings, and various common-law writs, such as writ of
error coram nobis and audita querela. In some cases, a motion may be one of
several remedies available. For example, in some jurisdictions, a motion to
vacate an order is a remedy alternative to an appeal therefrom.

Statutes governing motions are given a liberal construction. 36 (Emphasis

supplied.)
The bottom line issue of whether Morales can proceed against KIC for the
judgment debt of Kukan, Inc.assuming hypothetically that he can, applying
the piercing the corporate veil principleresolves itself into the question of
whether a mere motion is the appropriate vehicle for such purpose.
Verily, Morales espouses the application of the principle of piercing the
corporate veil to hold KIC liable on theory that Kukan, Inc. was out to defraud
him through the use of the separate and distinct personality of another
corporation, KIC. In net effect, Morales adverted motion to pierce the veil of
corporate fiction dated January 3, 2007 stated a new cause of action, i.e., for
the liability of judgment debtor Kukan, Inc. to be borne by KIC on the alleged
identity of the two corporations. This new cause of action should be properly
ventilated in another complaint and subsequent trial where the doctrine of
piercing the corporate veil can, if appropriate, be applied, based on the
evidence adduced. Establishing the claim of Morales and the corresponding
liability of KIC for Kukan Inc.s indebtedness could hardly be the subject,
under the premises, of a mere motion interposed after the principal action
against Kukan, Inc. alone had peremptorily been terminated. After all, a
complaint is one where the plaintiff alleges causes of action.
In any event, the principle of piercing the veil of corporate fiction finds no
application to the instant case.
As a general rule, courts should be wary of lifting the corporate veil between
corporations, however related. Philippine National Bank v. Andrada Electric
Engineering Company 37 explains why:
A corporation is an artificial being created by operation of law. x x x It has a
personality separate and distinct from the persons composing it, as well as
from any other legal entity to which it may be related. This is basic.
Equally well-settled is the principle that the corporate mask may be removed
or the corporate veil pierced when the corporation is just an alter ego of a
person or of another corporation. For reasons of public policy and in the
interest of justice, the corporate veil will justifiably be impaled only when it
becomes a shield for fraud, illegality or inequity committed against third
persons.

Hence, any application of the doctrine of piercing the corporate veil should
be done with caution. A court should be mindful of the milieu where it is to
be applied. It must be certain that the corporate fiction was misused to such
an extent that injustice, fraud, or crime was committed against another, in
disregard of its rights. The wrongdoing must be clearly and convincingly
established; it cannot be presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application.
This Court has pierced the corporate veil to ward off a judgment credit, to
avoid inclusion of corporate assets as part of the estate of the decedent, to
escape liability arising from a debt, or to perpetuate fraud and/or confuse
legitimate issues either to promote or to shield unfair objectives or to cover
up an otherwise blatant violation of the prohibition against forumshopping. Only in these and similar instances may the veil be pierced and
disregarded. (Emphasis supplied.)
In fine, to justify the piercing of the veil of corporate fiction, it must be shown
by clear and convincing proof that the separate and distinct personality of the
corporation was purposefully employed to evade a legitimate and binding
commitment and perpetuate a fraud or like wrongdoings. To be sure, the
Court has, on numerous occasions,38 applied the principle where a
corporation is dissolved and its assets are transferred to another to avoid a
financial liability of the first corporation with the result that the second
corporation should be considered a continuation and successor of the first
entity.
In those instances when the Court pierced the veil of corporate fiction of two
corporations, there was a confluence of the following factors:
1. A first corporation is dissolved;
2. The assets of the first corporation is transferred to a second corporation to
avoid a financial liability of the first corporation; and
3. Both corporations are owned and controlled by the same persons such that
the second corporation should be considered as a continuation and successor
of the first corporation.
In the instant case, however, the second and third factors are conspicuously
absent. There is, therefore, no compelling justification for disregarding the

fiction of corporate entity separating Kukan, Inc. from KIC. In applying the
principle, both the RTC and the CA miserably failed to identify the presence
of the abovementioned factors. Consider:
The RTC disregarded the separate corporate personalities of Kukan, Inc. and
KIC based on the following premises and arguments:
While it is true that a corporation has a separate and distinct personality from
its stockholder, director and officers, the law expressly provides for an
exception. When Michael Chan, the Managing Director of defendant Kukan,
Inc. (majority stockholder of the newly formed corporation [KIC]) confirmed
the award to plaintiff to supply and install interior signages in the Enterprise
Center he (Michael Chan, Managing Director of defendant Kukan, Inc.) knew
that there was no sufficient corporate funds to pay its obligation/account,
thus implying bad faith on his part and fraud in contracting the obligation.
Michael Chan neither returned the interior signages nor tendered payment
to the plaintiff. This circumstance may warrant the piercing of the veil of
corporation fiction. Having been guilty of bad faith in the management of
corporate matters the corporate trustee, director or officer may be held
personally liable. x x x
Since fraud is a state of mind, it need not be proved by direct evidence but
may be inferred from the circumstances of the case. x x x [A]nd the
circumstances are: the signature of Michael Chan, Managing Director of
Kukan, Inc. appearing in the confirmation of the award sent to the plaintiff;
signature of Chan Kai Kit, a British National appearing in the Articles of
Incorporation and signature of Michael Chan also a British National appearing
in the Articles of Incorporation [of] Kukan International Corp. give the
impression that they are one and the same person, that Michael Chan and
Chan Kai Kit are both majority stockholders of Kukan International Corp. and
Kukan, Inc. holding 40% of the stocks; that Kukan International Corp. is
practically doing the same kind of business as that of Kukan, Inc.39 (Emphasis
supplied.)
As is apparent from its disquisition, the RTC brushed aside the separate
corporate existence of Kukan, Inc. and KIC on the main argument that Michael
Chan owns 40% of the common shares of both corporations, obviously
oblivious that overlapping stock ownership is a common business
phenomenon. It must be remembered, however, that KICs properties were

the ones seized upon levy on execution and not that of Kukan, Inc. or of
Michael Chan for that matter. Mere ownership by a single stockholder or by
another corporation of a substantial block of shares of a corporation does
not, standing alone, provide sufficient justification for disregarding the
separate corporate personality. 40 For this ground to hold sway in this case,
there must be proof that Chan had control or complete dominion of Kukan
and KICs finances, policies, and business practices; he used such control to
commit fraud; and the control was the proximate cause of the financial loss
complained of by Morales. The absence of any of the elements prevents the
piercing of the corporate veil.41 And indeed, the records do not show the
presence of these elements.
On the other hand, the CA held:
In the present case, the facts disclose that Kukan, Inc. entered into a
contractual obligation x x x worth more than three million pesos although it
had only Php5,000.00 paid-up capital; [KIC] was incorporated shortly before
Kukan, Inc. suddenly ceased to appear and participate in the trial; [KICs]
purpose is related and somewhat akin to that of Kukan, Inc.; and in [KIC]
Michael Chan, a.k.a., Chan Kai Kit, holds forty percent of the outstanding
stocks, while he formerly held the same amount of stocks in Kukan Inc. These
would lead to the inescapable conclusion that Kukan, Inc. committed
fraudulent representation by awarding to the private respondent the
contract with full knowledge that it was not in a position to comply with the
obligation it had assumed because of inadequate paid-up capital. It bears
stressing that shareholders should in good faith put at the risk of the business,
unencumbered capital reasonably adequate for its prospective liabilities. The
capital should not be illusory or trifling compared with the business to be
done and the risk of loss.
Further, it is clear that [KIC] is a continuation and successor of Kukan, Inc.
Michael Chan, a.k.a. Chan Kai Kit has the largest block of shares in both
business enterprises. The emergence of the former was cleverly timed with
the hasty withdrawal of the latter during the trial to avoid the financial
liability that was eventually suffered by the latter. The two companies have a
related business purpose. Considering these circumstances, the obvious
conclusion is that the creation of Kukan International Corporation served as
a device to evade the obligation incurred by Kukan, Inc. and yet profit from

the goodwill attained by the name "Kukan" by continuing to engage in the

same line of business with the same list of clients. 42 (Emphasis supplied.)
Evidently, the CA found the meager paid-up capitalization of Kukan, Inc. and
the similarity of the business activities in which both corporations are
engaged as a jumping board to its conclusion that the creation of KIC "served
as a device to evade the obligation incurred by Kukan, Inc." The appellate
court, however, left a gaping hole by failing to demonstrate that Kukan, Inc.
and its stockholders defrauded Morales. In fine, there is no showing that the
incorporation, and the separate and distinct personality, of KIC was used to
defeat Morales right to recover from Kukan, Inc. Judging from the records,
no serious attempt was made to levy on the properties of Kukan, Inc. Morales
could not, thus, validly argue that Kukan, Inc. tried to avoid liability or had no
property against which to proceed.
Morales further contends that Kukan, Inc.s closure is evidenced by its failure
to file its 2001 General Information Sheet (GIS) with the Securities and
Exchange Commission. However, such fact does not necessarily mean that
Kukan, Inc. had altogether ceased operations, as Morales would have this
Court believe, for it is stated on the face of the GIS that it is only upon a failure
to file the corporate GIS for five (5) consecutive years that non-operation shall
be presumed.
The fact that Kukan, Inc. entered into a PhP 3.3 million contract when it only
had a paid-up capital of PhP 5,000 is not an indication of the intent on the
part of its management to defraud creditors. Paid-up capital is merely seed
money to start a corporation or a business entity. As in this case, it merely
represented the capitalization upon incorporation in 1997 of Kukan, Inc. Paidup capitalization of PhP 5,000 is not and should not be taken as a reflection
of the firms capacity to meet its recurrent and long-term obligations. It must
be borne in mind that the equity portion cannot be equated to the viability
of a business concern, for the best test is the working capital which consists
of the liquid assets of a given business relating to the nature of the business
concern.lawphil
Neither should the level of paid-up capital of Kukan, Inc. upon its
incorporation be viewed as a badge of fraud, for it is in compliance with Sec.
13 of the Corporation Code, 43 which only requires a minimum paid-up capital
of PhP 5,000.1avvphi1

The suggestion that KIC is but a continuation and successor of Kukan, Inc.,
owned and controlled as they are by the same stockholders, stands without
factual basis. It is true that Michael Chan, a.k.a. Chan Kai Kit, owns 40% of the
outstanding capital stock of both corporations. But such circumstance,
standing alone, is insufficient to establish identity. There must be at least a
substantial identity of stockholders for both corporations in order to consider
this factor to be constitutive of corporate identity.
It would not avail Morales any to rely 44 on General Credit Corporation v.
Alsons Development and Investment Corporation. 45 General Credit
Corporation is factually not on all fours with the instant case. There, the
common stockholders of the corporations represented 90% of the
outstanding capital stock of the companies, unlike here where Michael Chan
merely represents 40% of the outstanding capital stock of both KIC and
Kukan, Inc., not even a majority of it. In that case, moreover, evidence was
adduced to support the finding that the funds of the second corporation
came from the first. Finally, there was proof in General Credit Corporation of
complete control, such that one corporation was a mere dummy or alter ego
of the other, which is absent in the instant case.
Evidently, the aforementioned case relied upon by Morales cannot justify the
application of the principle of piercing the veil of corporate fiction to the
instant case. As shown by the records, the name Michael Chan, the similarity
of business activities engaged in, and incidentally the word "Kukan"
appearing in the corporate names provide the nexus between Kukan, Inc. and
KIC. As illustrated, these circumstances are insufficient to establish the
identity of KIC as the alter ego or successor of Kukan, Inc.
It bears reiterating that piercing the veil of corporate fiction is frowned upon.
Accordingly, those who seek to pierce the veil must clearly establish that the
separate and distinct personalities of the corporations are set up to justify a
wrong, protect fraud, or perpetrate a deception. In the concrete and on the
assumption that the RTC has validly acquired jurisdiction over the party
concerned, Morales ought to have proved by convincing evidence that Kukan,
Inc. was collapsed and thereafter KIC purposely formed and operated to
defraud him. Morales has not to us discharged his burden.
WHEREFORE, the petition is hereby GRANTED. The CAs January 23, 2008
Decision and April 16, 2008 Resolution in CA-G.R. SP No. 100152 are hereby

REVERSED and SET ASIDE. The levy placed upon the personal properties of
Kukan International Corporation is hereby ordered lifted and the personal
properties ordered returned to Kukan International Corporation. The RTC of
Manila, Branch 21 is hereby directed to execute the RTC Decision dated
November 28, 2002 against Kukan, Inc. with reasonable dispatch.
No costs.
SO ORDERED.

FIRST PHILIPPINE INTL BANK VS CA

Producers Bank (now called First Philippine International Bank), which has
been under conservatorship since 1984, is the owner of 6 parcels of land. The
Bank had an agreement with Demetrio Demetria and Jose Janolo for the two
to purchase the parcels of land for a purchase price of P5.5 million pesos. The
said agreement was made by Demetria and Janolo with the Banks manager,
Mercurio Rivera. Later however, the Bank, through its conservator, Leonida
Encarnacion, sought the repudiation of the agreement as it alleged that
Rivera was not authorized to enter into such an agreement, hence there was
no valid contract of sale. Subsequently, Demetria and Janolo sued Producers
Bank. The regional trial court ruled in favor of Demetria et al. The Bank filed
an appeal with the Court of Appeals.
Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank,
filed a motion for intervention with the trial court. The trial court denied the
motion since the trial has been concluded already and the case is now
pending appeal. Subsequently, Co, assisted by ACCRA law office, filed a
separate civil case against Carlos Ejercito as successor-in-interest (assignee)
of Demetria and Janolo seeking to have the purported contract of sale be
declared unenforceable against the Bank. Ejercito et al argued that the
second case constitutes forum shopping.
ISSUE: Whether or not there is forum shopping.
HELD: Yes. There is forum shopping because there is identity of interest and
parties between the first case and the second case. There is identity of
interest because both cases sought to have the agreement, which involves
the same property, be declared unenforceable as against the Bank. There is
identity of parties even though the first case is in the name of the bank as
defendant, and the second case is in the name of Henry Co as plaintiff. There
is still forum shopping here because Henry Co essentially represents the bank.
Both cases aim to have the bank escape liability from the agreement it
entered into with Demetria et al.
The Supreme Court also discussed that to combat forum shopping, which
originated as a concept in international law, the principle of forum non
conveniens was developed. The doctrine of forum non conveniens provides
that a court, in conflicts of law cases, may refuse impositions on its

jurisdiction where it is not the most convenient or available forum and the
parties are not precluded from seeking remedies elsewhere.

PNB VS CA
Rita Tapnio owes PNB an amount of P2,000.00. The amount is secured by her
sugar crops about to be harvested including her export quota allocation
worth 1,000 piculs. The said export quota was later dealt by Tapnio to a
certain Jacobo Tuazon at P2.50 per picul or a total of P2,500. Since the subject
of the deal is mortgaged with PNB, the latter has to approve it. The branch
manager of PNB recommended that the price should be at P2.80 per picul
which was the prevailing minimum amount allowable. Tapnio and Tuazon
agreed to the said amount. And so the bank manager recommended the
agreement to the vice president of PNB. The vice president in turn
recommended it to the board of directors of PNB.
However, the Board of Directors wanted to raise the price to P3.00 per picul.
This Tuazon does not want hence he backed out from the agreement. This
resulted to Tapnio not being able to realize profit and at the same time
rendered her unable to pay her P2,000.00 crop loan which would have been
covered by her agreement with Tuazon.
Eventually, Tapnio was sued by her other creditors and Tapnio filed a third
party complaint against PNB where she alleged that her failure to pay her
debts was because of PNBs negligence and unreasonableness.
ISSUE: Whether or not Tapnio is correct.
HELD: Yes. In this type of transaction, time is of the essence considering that
Tapnios sugar quota for said year needs to be utilized ASAP otherwise her
allotment may be assigned to someone else, and if she cant use it, she wont
be able to export her crops. It is unreasonable for PNBs board of directors to
disallow the agreement between Tapnio and Tuazon because of the mere
difference of 0.20 in the agreed price rate. What makes it more unreasonable
is the fact that the P2.80 was recommended both by the bank manager and
PNBs VP yet it was disapproved by the board. Further, the P2.80 per picul
rate is the minimum allowable rate pursuant to prevailing market trends that
time. This unreasonable stand reflects PNBs lack of the reasonable degree of
care and vigilance in attending to the matter. PNB is therefore negligent.
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 it 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.

CRYSTAL vs. BANK OF THE PHILIPPINE ISLANDS

G.R. No. 172428 November 28, 2008
J. TINGA

Facts: On 28 March 1978, spouses Crystal obtained a P300, 000.00 loan in

behalf of the Cebu Contractors Consortium Co. (CCCC) from the BPI-Butuan.
The loan was secured by a chattel mortgage on heavy equipment and
machinery of CCCC. On the same date, the spouses executed in favor of BPIButuan a Continuing Suretyship where they bound themselves as surety of
CCCC in the aggregate principal sum of not exceeding P300, 000.00.
Thereafter, or on 29 March 1979, Raymundo Crystal executed a promissory
note for the amount of P300, 000.00, also in favor of BPI-Butuan. Sometime
in August 1979, CCCC renewed a previous loan, this time from BPI, Cebu City
branch (BPI-Cebu City). However, CCCC had no real property to offer as
security for the loan; hence, the spouses executed a real estate mortgage
over their own real property. They executed another real estate mortgage
over the same lot in favor of BPI-Cebu City, to secure an additional loan of
P20,000.00 of CCCC. CCCC failed to pay its loans to both BPI-Butuan and BPICebu City when they became due. CCCC, as well as the spouses, failed to pay
their obligations despite demands. Thus, BPI resorted to the foreclosure of
the chattel mortgage and the real estate mortgage. The foreclosure sale on
the chattel mortgage was initially stalled and done. BPI filed a complaint for
sum of money against CCCC and the spouses before the Regional Trial Court,
seeking to recover the deficiency of the loan of CCCC and the spouses with
BPI-Butuan Before the Court, petitioners who are the heirs of the spouses
argue that the failure of the spouses to pay the BPI-Cebu City loan of
P120,000.00 was due to BPIs illegal refusal to accept payment for the loan
unless the P300,000.00 loan from BPI-Butuan would also be paid.
Consequently, in view of BPIs unjust refusal to accept payment of the BPICebu City loan, the loan obligation of the spouses was extinguished,
petitioners contend.

Issues: Whether or not the obligation of the spouses is extinguished

Whether or not BPI is entitled to moral damages

Held: No, the obligation is not yet extinguished. Under Art. 1236 of the Civil
Code, the creditor is not bound to accept payment or performance by a third
person who has no interest in the fulfillment of the obligation, unless there is
a stipulation to the contrary. The Court sees no stipulation in the promissory
note which states that a third person may fulfill the spouses obligation. Thus,
it is clear that the spouses alone bear responsibility for the same. A solidary
obligation is one in which each of the debtors is liable for the entire
obligation, and each of the creditors is entitled to demand the satisfaction of
the whole obligation from any or all of the debtors. A liability is solidary "only
when the obligation expressly so states, when the law so provides or when
the nature of the obligation so requires."24 Thus, when the obligor
undertakes to be "jointly and severally" liable, it means that the obligation is
solidary. More importantly, the promissory note, wherein the spouses
undertook to be solidarily liable for the principal loan, partakes the nature of
a suretyship and therefore is an additional security for the loan.
No, they are not entitled to moral damages. BPI is not entitled to moral
damages. A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience physical suffering or
such sentiments as wounded feelings, serious anxiety, mental anguish or
moral shock. The Court of Appeals found BPI as "being famous and having
gained its familiarity and respect not only in the Philippines but also in the
whole world because of its good will and good reputation must protect and
defend the same against any unwarranted suit such as the case at bench.
Obviously, an artificial person like herein appellant corporation cannot
experience physical sufferings, mental anguish, fright, serious anxiety,
wounded feelings, moral shock or social humiliation which are basis of moral
damages. A corporation may have good reputation which, if besmirched may
also be a ground for the award of moral damages. Indeed, while the Court
may allow the grant of moral damages to corporations, it is not automatically
granted; there must still be proof of the existence of the factual basis of the
damage and its causal relation to the defendants acts. This is so because
moral damages, though incapable of pecuniary estimation, are in the
category of an award designed to compensate the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer.