Professional Documents
Culture Documents
BUILDERS,
RELATIONS
The corporate mask may be lifted and the corporate veil may be
pierced when a corporation is just but the alter ego of a person or of
another corporation. Where badges of fraud exist; where public
convenience is defeated; where a wrong is sought to be justified
thereby, the corporate fiction or the notion of legal entity should come
to naught. The law in these instances will regard the corporation as a
mere association of persons and, in case of two corporations, merge
them into one.
Thus, where a sister corporation is used as a shield to evade a
corporations subsidiary liability for damages, the corporation may not
be heard to say that it has a personality separate and distinct from the
other corporation. The piercing of the corporate veil comes into play.
This special civil action ostensibly raises the question of whether
the National Labor Relations Commission committed grave abuse of
discretion when it issued a break-open order to the sheriff to be
enforced against personal property found in the premises of petitioners
sister company.
Petitioner Concept Builders, Inc., a domestic corporation, with
principal office at 355 Maysan Road, Valenzuela, Metro Manila, is
engaged in the construction business. Private respondents were
employed by said company as laborers, carpenters and riggers.
On November, 1981, private respondents were served individual
written notices of termination of employment by petitioner, effective
on November 30, 1981. It was stated in the individual notices that their
contracts of employment had expired and the project in which they
were hired had been completed.
Public respondent found it to be, the fact, however, that at the
time of the termination of private respondents employment, the project
in which they were hired had not yet been finished and
completed. Petitioner had to engage the services of sub-contractors
whose workers performed the functions of private respondents.
Aggrieved, private respondents filed a complaint for illegal
dismissal, unfair labor practice and non-payment of their legal holiday
pay, overtime pay and thirteenth-month pay against petitioner.
On December 19, 1984, the Labor Arbiter rendered
judgment1ordering petitioner to reinstate private respondents and to
pay them back wages equivalent to one year or three hundred working
days.
On November
27, 1985, the
National
Labor
Relations
Commission (NLRC) dismissed the motion for reconsideration filed by
petitioner on the ground that the said decision had already become
final and executory.2
On October 16, 1986, the NLRC Research and Information
Department made the finding that private respondents backwages
amounted to P199,800.00.3
On October 29, 1986, the Labor Arbiter issued a writ of
execution directing the sheriff to execute the Decision,
dated December 19, 1984.The writ was partially satisfied through
garnishment of sums from petitioners debtor, the Metropolitan
Waterworks and Sewerage Authority, in the amount of
P81,385.34. Said amount was turned over to the cashier of the NLRC.
On February 1, 1989, an Alias Writ of Execution was issued by
the Labor Arbiter directing the sheriff to collect from herein petitioner
On July 13, 1989, the sheriff issued a report stating that he tried
to serve the alias writ of execution on petitioner through the security
guard on duty but the service was refused on the ground that petitioner
no longer occupied the premises.
On September 26, 1986, upon motion of private respondents,
the Labor Arbiter issued a second alias writ of execution.
The said writ had not been enforced by the special sheriff
because, as stated in his progress report, dated November 2, 1989:
1. All the employees inside petitioners premises at 355 Maysan Road,
Valenzuela, Metro Manila, claimed that they were employees of Hydro
Pipes Philippines, Inc. (HPPI) and not by respondent;
2. Levy was made upon personal properties he found in the premises;
3. Security guards with high-powered guns prevented him from
removing the properties he had levied upon.4
The said special sheriff recommended that a break-open order
be issued to enable him to enter petitioners premises so that he could
proceed with the public auction sale of the aforesaid personal
properties on November 7, 1989.
On November 6, 1989, a certain Dennis Cuyegkeng filed a thirdparty claim with the Labor Arbiter alleging that the properties sought to
be levied upon by the sheriff were owned by Hydro (Phils.), Inc. (HPPI)
of which he is the Vice-President.
On November 23, 1989, private respondents filed a Motion for
Issuance of a Break-Open Order, alleging that HPPI and petitioner
corporation were owned by the same incorporator! stockholders. They
also alleged that petitioner temporarily suspended its business
operations in order to evade its legal obligations to them and that
private respondents were willing to post an indemnity bond to answer
for any damages which petitioner and HPPI may suffer because of the
issuance of the break-open order.
In support of their claim against HPPI, private respondents
presented duly certified copies of the General Informations Sheet,
dated May 15, 1987, submitted by petitioner to the Securities and
Exchange Commission (SEC) and the General Information Sheet,
dated May 15, 1987, submitted by HPPI to the Securities and
Exchange Commission.
The General Information Sheet submitted by the petitioner1
revealed the following:
1. Breakdown of Subscribed Capital
Name of Stockholder Amount Subscribed
On the other hand, the General Information Sheet of HPPI
revealed the following:
1. Breakdown of Subscribed Capital
On February 1, 1990, HPPI filed an Opposition to private
respondents motion for issuance of a break-open order, contending
that HPPI is a corporation which is separate and distinct from
petitioner. HPPI also alleged that the two corporations are engaged in
two different kinds of businesses, i.e., HPPI is a manufacturing firm
while petitioner was then engaged in construction.
On March 2, 1990, the Labor Arbiter issued an Order which
denied private respondents motion for break-open order.
without
The Regional Trial Court of Pasig, Branch 167, did not issue a
temporary restraining order. Thus, General Credit Corporation
instituted two (2) petitions for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 27518 [15] and CA-G.R. SP No.
27683. These cases were later consolidated.
On July 7, 1994, the Court of Appeals rendered a decision in the
two consolidated cases, the dispositive portion of which reads:
WHEREFORE, in SP No. 27518 we declare the issue of the
respondent court's refusal to issue a restraining order as having been
rendered moot by our Resolution of 7 April 1992 which, by way of
injunctive relief, provided that "the respondents and their
representatives are hereby enjoined from conducting an auction sale
(on execution) of petitioner's properties as well as initiating similar acts
of levying (upon) and selling on execution other properties of said
petitioner". The injunction thus granted, as modified by the words in
parenthesis, shall remain in force until Civil Case No. 61777 shall have
been finally terminated.
In SP No. 27683, we grant the petition for certiorari and accordingly
NULLIFY and SET ASIDE, for having been issued in excess of
jurisdiction, the Order of 13 February 1992 in Civil Case No. Q-30583
as well as any other order or process through which the petitioner is
made liable under the judgment in said Civil Case No. Q-30583.
No damages and no costs.
SO ORDERED.[16]
Hence, this petition for review anchored on the following
arguments:
1. THE HONORABLE COURT OF APPEALS ERRED IN CA-G.R. SP
NO. 27683 WHEN IT NULLIFIED AND SET ASIDE THE 13
FEBRUARY 1992 ORDER AND OTHER ORDERS OR PROCESS OF
BRANCH 86 OF THE REGIONAL TRIAL COURT OF QUEZON CITY
THROUGH WHICH GENERAL CREDIT CORPORATION IS MADE
LIABLE UNDER THE JUDGMENT THAT WAS RENDERED IN CIVIL
CASE NO. Q-30583.
2. THE HONORABLE COURT OF APPEALS ERRED IN CA-G.R. SP
NO. 27518 WHEN IT ENJOINED THE AUCTION SALE ON
EXECUTION OF THE PROPERTIES OF GENERAL CREDIT
CORPORATION AS WELL AS INITIATING SIMILAR ACTS OF
LEVYING UPON AND SELLING ON EXECUTION OF OTHER
PROPERTIES OF GENERAL CREDIT CORPORATION.
3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT GENERAL CREDIT CORPORATION IS A STRANGER TO CIVIL
CASE NO. Q-30583, INSTEAD OF, DECLARING THAT
COMMERCIAL CREDIT CORPORATION OF QUEZON CITY IS THE
ALTER EGO, INSTRUMENTALITY, CONDUIT OR ADJUNCT OF
COMMERCIAL CREDIT CORPORATION AND ITS SUCCESSOR
GENERAL CREDIT CORPORATION.
At the outset, it must be stressed that there is no longer any
controversy over petitioners claims against his former employer, CCCQC, inasmuch as the decision in Civil Case No. Q-30583 of the
Regional Trial Court of Quezon City has long become final and
executory. The only issue, therefore, to be resolved in the instant
petition is whether or not the judgment in favor of petitioner may be
executed against respondent General Credit Corporation. The latter
contends that it is a corporation separate and distinct from CCC-QC
and, therefore, its properties may not be levied upon to satisfy the
[19]
In order to circumvent the Central Banks disapproval of CCCQCs mode of reducing its DOSRI lender accounts and its directive to
follow Central Bank requirements, resident managers, including
petitioner, were told to observe a pseudo-compliance with the phasing
out orders. For his unwillingness to satisfactorily conform to these
directives and his reluctance to resort to illegal practices, petitioner
earned the ire of his employers. Eventually, his services were
terminated, and criminal and civil cases were filed against him.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo,
JJ., concur.
The facts:
was able to secure license from the then Central Bank (CB) of the
Philippines and the Securities and Exchange Commission (SEC) to
engage also in quasi-banking activities.[4] On the other hand,
respondent CCC Equity Corporation (EQUITY, for brevity) was
organized in November 1994 by GCC for the purpose of, among other
things, taking over the operations and management of the various
franchise companies. At a time material hereto, respondent Alsons
Development and Investment Corporation (ALSONS, hereinafter) and
ALSONS et
al.,
bearer
promissory
note
Some four years later, the Alcantara family assigned its rights and
the holder thereof.[7] But even before the execution of the assignment
bearer promissory note marked as Exhibit K and over sixty (60) other
support by GCC.
On April 11, 2002, the appellate court rendered the herein assailed
GCC and EQUITY. And in a bid to negate the notion that it was
SO ORDERED.
any of the actionable documents ALSONS and its predecessors-ininterest had in their possession and that the November 27, 1985 deed
of assignment of rights over the promissory note was unenforceable.
Eventually, the trial court, on its finding that EQUITY was but
an instrumentality or adjunct of GCC and considering the legal
consequences and implications of such relationship, came out with its
decision on November 8, 1990, rendering judgment for ALSONS, to
wit:
WHEREFORE,
the
foregoing
premises
considered, judgment is hereby rendered in favor
of plaintiff [ALSONS] and against the defendants
[EQUITY and GCC] who are hereby ordered,
jointly and severally, to pay plaintiff:
1. the principal sum of Two Million Pesos
(P2,000,000.00) together with the interest due
thereon at the rate of eighteen percent (18%)
annually computed from Jan. 2, 1981 until the
obligation is fully paid;
2. liquidated damages due thereon equivalent to
three
percent
(3%)
monthly
computed
from January 2, 1982 until the obligation is fully
paid;
3. attorneys fees in an amount equivalent to
twenty four percent (24%) of the total obligation
due; and
2.
3.
4.
its motions were denied, if such indeed were the case. Such manner of
denial, while perhaps far from ideal, is not even a recognized ground
is not the case here. And lest it be overlooked, the CA prefaced its
allowed. For, well-settled is the rule that issues or grounds not raised
2002 Decision, suggesting that the appellate court gave the petitioners
fair play, justice and due process; hence, the proscription against a
party shifting from one theory at the trial court to a new and different
theories, issues not brought to the attention of the lower court or, in
question.
fine, not interposed during the trial cannot be raised for the first time on
appeal.[15]
Petitioners lament about being deprived of procedural due
process owing to the denial of its motion for oral argument is simply
specious. Under the CA Internal Rules, the appellate court may tap any
may be raised for the first time on appeal. Lack of jurisdiction over
of the three (3) alternatives therein provided to aid the court inresolving
when the issues raised present a matter of public policy [16] comes
argument. The option the Internal Rules thus gives the CA necessarily
suggests that the appellate court may, at its sound discretion, dispense
with a tedious oral argument exercise. Rule VI, Section 6 of the 2002
thus pressed, both the trial court and the CA, based on the evidence
the bearer promissory note. The judgment argues against the notion of
the note being simulated or altered or that respondent ALSONS has no
standing to sue on the note, not being the payee of the bearer note.
For, the declaration of liability not only presupposes the duly
in line with the prescription of its own rules, required the parties to just
submit, as they did, their respective memoranda to properly ventilate
their separate causes. Under this scenario, the petitioner cannot be
validly heard, having been deprived of due process.
Just like the first, the last three (3) arguments set forth in the
petition will not carry the day for the petitioner. In relation therewith, the
Court notes that these arguments and the issues behind them were not
raised before the trial court. This appellate maneuver cannot be
the Court will not hesitate to disregard the corporate veil when it is
Rules of Court, usually limits its inquiry only to questions of law. Stated
misused or when necessary in the interest of justice. [24] After all, the
otherwise, it is not the function of the Court to analyze and weigh all
promissory note in question was authentic and was issued at the first
this regard that even the issuing entity, i.e., respondent EQUITY, never
This brings us to the remaining but core issue tendered in this case
corporation.[29]
GCC, there being justifiable basis for such action. When the appellate
court spoke of a justifying factor, the reference was to what the trial
court
said
in
its
decision,
namely: the
existence
of certain
between the two, allowing the petitioner to handle the funds of the
latter; the virtual domination if not control wielded by the petitioner over
the finances, business policies and practices of respondent EQUITY;
inferences drawn therefrom, upon which the two (2) courts below
applied
stand,
for
the
most
part,
adjunct of GCC. With the view we take of this case, GCC did not
adduce any evidence, let alone rebut the testimonies and documents
presented by ALSONS, to establish the prevailing circumstances
adverted to that provided the justifying occasion to pierce the veil of
corporate fiction between GCC and EQUITY. We quote the trial court:
Verily, indeed, as the relationships binding herein
[respondent EQUITY and petitioner GCC] have
been that of parent-subsidiary corporations the
foregoing principles and doctrines find suitable
applicability in the case at bar; and, it having been
satisfactorily and indubitably shown that the said
relationships had been used to perform certain
functions not characterized with legitimacy, this
Court feels amply justified to pierce the veil of
corporate entityand disregard the separate
existence of the percent (sic) and subsidiary
the latter having been so controlled by the
parent that its separate identity is hardly
discernible
thus
becoming
a
mere
instrumentality or alter ego of the former.
Consequently, as the parent corporation,
[petitioner] GCC maybe (sic) held responsible for
the acts and contracts of its subsidiary
[respondent] EQUITY - most especially if the latter
(who had anyhow acknowledged its liability to
ALSONS) maybe (sic) without sufficient property
with which to settle its obligations. For, after all,
GCC was the entity which initiated and benefited
immensely
from
the
fraudulent
scheme
perpetrated in violation of the law. (Words in
parenthesis in the original; emphasis and
bracketed words added).
doctrine,
piercing
the
and
Resolution
accordingly AFFIRMED.
Costs against the petitioner.
SO ORDERED.
of
the
Court
of
Appeals
are
future
comply with the second merely gives the other party options and/or
remedies to protect his interests.
The Case
xxx
The Antecedents
xxx
JUN ALEGRE:
May I say Im sorry to Dean Justita Lola. But this is the truth. The truth
is this, that your are no longer fit to teach. You are too old. As an
aviation, your case is zero visibility. Dont insist.
Let us begin with the less burdensome: if you have children taking
medical course at AMEC-BCCM, advise them to pass all subjects
because if they fail in any subject they will repeat their year level,
taking up all subjects including those they have passed already.
Several students had approached me stating that they had consulted
with the DECS which told them that there is no such regulation. If
[there] is no such regulation why is AMEC doing the same?
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman
of the scholarship committee at that. The reason is practical cost
saving in salaries, because an old person is not fastidious, so long as
she has money to buy the ingredient of beetle juice. The elderly can
get by thats why she (Lola) was taken in as Dean.
xxx
xxx
Second: Earlier AMEC students in Physical Therapy
complained that the course is not recognized by DECS. xxx
MEL RIMA:
had
Third: Students are required to take and pay for the subject even if
the subject does not have an instructor - such greed for money
on the part of AMECs administration. Take the subject Anatomy:
students would pay for the subject upon enrolment because it is
offered by the school. However there would be no instructor for such
subject. Students would be informed that course would be moved to a
later date because the school is still searching for the appropriate
instructor.
xxx
It is a public knowledge that the Ago Medical and Educational Center
has survived and has been surviving for the past few years since its
inception because of funds support from foreign foundations. If you will
take a look at the AMEC premises youll find out that the names of the
buildings there are foreign soundings. There is a McDonald Hall. Why
not Jose Rizal or Bonifacio Hall? That is a very concrete and
undeniable evidence that the support of foreign foundations for AMEC
is substantial, isnt it? With the report which is the basis of the expose
in DZRC today, it would be very easy for detractors and enemies of the
Ago family to stop the flow of support of foreign foundations who assist
the medical school on the basis of the latters purpose. But if the
purpose of the institution (AMEC) is to deceive students at cross
purpose with its reason for being it is possible for these foreign
foundations to lift or suspend their donations temporarily.[8]
they were impelled by their moral and social duty to inform the public
about the students gripes.
The Court of Appeals found Rima also liable for libel since he
remarked that (1) AMEC-BCCM is a dumping ground for morally and
physically misfit teachers; (2) AMEC obtained the services of Dean
Justita Lola to minimize expenses on its employees salaries; and (3)
AMEC burdened the students with unreasonable imposition and false
regulations.[16]
The Court of Appeals held that FBNI failed to exercise due
diligence in the selection and supervision of its employees for allowing
Rima and Alegre to make the radio broadcasts without the proper KBP
accreditation. The Court of Appeals denied Agos claim for damages
and attorneys fees because the libelous remarks were directed against
AMEC, and not against her. The Court of Appeals adjudged FBNI,
Rima and Alegre solidarily liable to pay AMEC moral damages,
attorneys fees and costs of suit.
Issues
I.
The Court of Appeals upheld the trial courts ruling that the
questioned broadcasts are libelous per se and that FBNI, Rima and
Alegre failed to overcome the legal presumption of malice. The Court
of Appeals found Rima and Alegres claim that they were actuated by
their moral and social duty to inform the public of the students gripes
as insufficient to justify the utterance of the defamatory remarks.
are not based on established facts. The record supports the following
findings of the trial court:
xxx Although defendants claim that they were motivated by consistent
reports of students and parents against plaintiff, yet, defendants have
not presented in court, nor even gave name of a single student who
made the complaint to them, much less present written complaint or
petition to that effect. To accept this defense of defendants is too
dangerous because it could easily give license to the media to malign
people and establishments based on flimsy excuses that there were
reports to them although they could not satisfactorily establish it. Such
laxity would encourage careless and irresponsible broadcasting which
is inimical to public interests.
Secondly, there is reason to believe that defendant radio broadcasters,
contrary to the mandates of their duties, did not verify and analyze the
truth of the reports before they aired it, in order to prove that they are in
good faith.
Alegre contended that plaintiff school had no permit and is not
accredited to offer Physical Therapy courses. Yet, plaintiff produced a
certificate coming from DECS that as of Sept. 22, 1987 or more than 2
years before the controversial broadcast, accreditation to offer Physical
Therapy course had already been given the plaintiff, which certificate is
signed by no less than the Secretary of Education and Culture herself,
Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could have
easily known this were they careful enough to verify. And yet,
defendants were very categorical and sounded too positive when they
made the erroneous report that plaintiff had no permit to offer Physical
Therapy courses which they were offering.
The allegation that plaintiff was getting tremendous aids from foreign
foundations like Mcdonald Foundation prove not to be true also. The
truth is there is no Mcdonald Foundation existing. Although a big
building of plaintiff school was given the name Mcdonald building, that
was only in order to honor the first missionary in Bicol of plaintiffs
religion, as explained by Dr. Lita Ago. Contrary to the claim of
defendants over the air, not a single centavo appears to be received by
plaintiff school from the aforementioned McDonald Foundation which
does not exist.
Defendants did not even also bother to prove their claim, though
denied by Dra. Ago, that when medical students fail in one subject,
they are made to repeat all the other subject[s], even those they have
already passed, nor their claim that the school charges laboratory fees
even if there are no laboratories in the school. No evidence was
presented to prove the bases for these claims, at least in order to give
semblance of good faith.
As for the allegation that plaintiff is the dumping ground for misfits, and
immoral teachers, defendant[s] singled out Dean Justita Lola who is
said to be so old, with zero visibility already. Dean Lola testified in court
last Jan. 21, 1991, and was found to be 75 years old. xxx Even older
people prove to be effective teachers like Supreme Court Justices who
are still very much in demand as law professors in their late years.
Counsel for defendants is past 75 but is found by this court to be still
very sharp and effective. So is plaintiffs counsel.
Dr. Lola was observed by this court not to be physically decrepit yet,
nor mentally infirmed, but is still alert and docile.
The contention that plaintiffs graduates become liabilities rather than
assets of our society is a mere conclusion. Being from the place
himself, this court is aware that majority of the medical graduates of
plaintiffs pass the board examination easily and become prosperous
and responsible professionals.[33]
Had the comments been an expression of opinion based on
established facts, it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred from the facts.
[34]
However, the comments of Rima and Alegre were not backed up by
facts. Therefore, the broadcasts are not privileged and remain
libelous per se.
The broadcasts also violate the Radio Code [35] of the Kapisanan
ng mga Brodkaster sa Pilipinas, Ink. (Radio Code). Item I(B) of the
Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES
1. x x x
4. Public affairs program shall present public issues free
from personal bias, prejudice and inaccurate and
misleading information. x x x Furthermore, the
station shall strive to present balanced discussion of
issues. x x x.
xxx
7. The station shall be responsible at all times in the
supervision of public affairs, public issues and
commentary programs so that they conform to the
provisions and standards of this code.
8. It shall be the responsibility of the newscaster,
commentator, host and announcer to protect public
interest, general welfare and good order in the
presentation of public affairs and public issues.
[36]
(Emphasis supplied)
The broadcasts fail to meet the standards prescribed in the
Radio Code, which lays down the code of ethical conduct governing
practitioners in the radio broadcast industry. The Radio Code is a
voluntary code of conduct imposed by the radio broadcast industry on
its own members. The Radio Code is a public warranty by the radio
broadcast industry that radio broadcast practitioners are subject to a
code by which their conduct are measured for lapses, liability and
sanctions.
The public has a right to expect and demand that radio
broadcast practitioners live up to the code of conduct of their
profession, just like other professionals. A professional code of conduct
provides the standards for determining whether a person has acted
justly, honestly and with good faith in the exercise of his rights and
performance of his duties as required by Article 19[37] of the Civil Code.
A professional code of conduct also provides the standards for
determining whether a person who willfully causes loss or injury to
another has acted in a manner contrary to morals or good customs
under Article 21[38] of the Civil Code.
III.
Whether the award of attorneys fees is proper
II.
Whether AMEC is entitled to moral damages
FBNI contends that it is not solidarily liable with Rima and Alegre
for the payment of damages and attorneys fees because it exercised
due diligence in the selection and supervision of its employees,
particularly Rima and Alegre. FBNI maintains that its broadcasters,
including Rima and Alegre, undergo a very regimented process before
they are allowed to go on air. Those who apply for broadcaster are
subjected to interviews, examinations and an apprenticeship program.
FBNI further argues that Alegres age and lack of training are
irrelevant to his competence as a broadcaster. FBNI points out that the
minor deficiencies in the KBP accreditation of Rima and Alegre do not
in any way prove that FBNI did not exercise the diligence of a good
father of a family in selecting and supervising them. Rimas
accreditation lapsed due to his non-payment of the KBP annual fees
while Alegres accreditation card was delayed allegedly for reasons
attributable to the KBP Manila Office. FBNI claims that membership in
the KBP is merely voluntary and not required by any law or
government regulation.
FBNIs arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are
jointly and severally liable for the tort which they commit. [52] Joint tort
feasors are all the persons who command, instigate, promote,
encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for
NACHURA, J.:
(CA)
dated June
18,
1997 and
its
under
the
following
account
numbers:
09341-1322-
SO ORDERED.
Davide,
Jr.,
C.J.,
(Chairman),
Santiago, andAzcuna, JJ., concur.
Quisumbing,
Ynares-
1988 by virtue of a court order, for repeated violation of the terms and
revealed that the electric meters were not registering the correct power
consumption. Petitioner,
dated June 29, 1988.[14] Petitioner, thus, sent TEC another letter
thus,
sent
letter
dated June
18,
TEC of the results of the inspection and demanded from the latter the
from February 10, 1986 until September 28, 1987, as a result of the
alleged tampering of the meters.[8] TEC received the letters on January
damages against petitioner and Ultra[17] before the Regional Trial Court
the covered period, TECs Managing Director, Mr. Bobby Tan, referred
(RTC) of Pasig. The case was raffled to Branch 162 and was docketed
the demand letter to Ultra [9] which, in turn, informed TEC that its
as Civil Case No. 56851.[18] Upon the filing of the parties answer to the
further intimated that assuming that there was tampering of the meters,
petitioners assessment was excessive.[10] For failure of TEC to pay the
differential billing, petitioner disconnected the electricity supply to the
complaint on May 27, 1988 before the Energy Regulatory Board (ERB)
praying that electric power be restored to the DCIM building. [11] The
ERB immediately ordered the reconnection of the service but petitioner
complied
with
it
only
on October
12,
1988 after
TEC
paid P1,000,000.00, under protest. The complaint before the ERB was
favor of respondents TEC and TPC, and against respondent Ultra and
against
defendant
Meralco.
SO ORDERED.[20]
in the wire duct leading to the transformer vault did not, in themselves,
prove the alleged tampering, especially since access to the
transformer was given only to petitioners employees. [21] The sudden
drop in TECs (or Ultras) electric consumption did not, per se,show
Petitioner now comes before this Court in this petition for review
on certiorari contending that:
The Court of Appeals committed grievous errors
and decided matters of substance contrary to law
and the rulings of this Honorable Court:
building on September 28, 1987 and June 7, 1988; and once in the NS
after
the
meters
were
corrected,
TECs
electric
suffice it to state that the allegation was not proven, considering that
without prior notice. While it is true that petitioner sent a demand letter
the meters therein were enclosed in a metal cabinet the metal seal of
to TEC for the payment of differential billing, it did not include any
which was unbroken, with petitioner having sole access to the said
meters.[38]
abused the remedies granted to it under P.D. 401 and Revised General
Order No. 1 by outrightly depriving TEC of electrical services without
the same. Actual damages are compensation for an injury that will put
the injured party in the position where it was before the injury.They
pecuniary loss as is duly proven. Basic is the rule that to recover actual
damages, not only must the amount of loss be capable of proof; it must
meters and the criminal prosecution [42] of erring consumers who were
found to have tampered with their electric meters. It did not expressly
differential
erring
billing
and
immediate
disconnection
against
by the erring consumer. The Court has recognized the validity of such
was
stipulations.[43] However,
with
notice of disconnection.[44]
recourse
to
differential
billing
committed,
it
held
Ultra
solidarily
liable
with
petitioner
and its causal relation to petitioners acts. [52] In the present case, the
TEC
also
sufficiently
established
its
claim
for
the
the trial court simply awarded moral damages in the dispositive portion
made. However, the amount of P150,000.00 per month for five months,
Court of Appeals in CA-G.R. CV No. 40282 dated June 18, 1997 and
SO ORDERED.
serious anxiety, mental anguish and moral shock. The only exception
to this rule is when the corporation has a reputation that is debased,
resulting in its humiliation in the business realm. [51] But in such a case,
it is imperative for the claimant to present proof to justify the award. It
is essential to prove the existence of the factual basis of the damage
on 22 April 1991, after which the parties were required to submit their
memoranda, the latest of which was received on 2 July 1991. In
December 1991, the SEC was also required to elevate its records for
the perusal of this Court, the same not having been apparently before
respondent Court of Appeals.
We find basis for petitioners' plea.
As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115
(1927), the Court declared that a corporation's right to use its corporate
and trade name is a property right, a right in rem, which it may assert
and protect against the world in the same manner as it may protect its
tangible property, real or personal, against trespass or conversion. It is
regarded, to a certain extent, as a property right and one which cannot
be impaired or defeated by subsequent appropriation by another
corporation in the same field (Red Line Transportation Co. vs. Rural
Transit Co., September 8, 1934, 20 Phil 549).
A name is peculiarly important as necessary to the very existence of a
corporation (American Steel Foundries vs. Robertson, 269 US 372, 70
L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42;
First National Bank vs. Huntington Distilling Co. 40 W Va 530, 23 SE
792). Its name is one of its attributes, an element of its existence, and
essential to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule
as to corporations is that each corporation must have a name by which
it is to sue and be sued and do all legal acts. The name of a
corporation in this respect designates the corporation in the same
manner as the name of an individual designates the person (Cincinnati
Cooperage Co. vs. Bate. 96 Ky 356, 26 SW 538; Newport Mechanics
Mfg. Co. vs. Starbird. 10 NH 123); and the right to use its corporate
name is as much a part of the corporate franchise as any other
privilege granted (Federal Secur. Co. vs. Federal Secur. Corp., 129 Or
375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese Beneficial
Association, 18 RI 165, 26 A 36).
A corporation acquires its name by choice and need not select a name
identical with or similar to one already appropriated by a senior
corporation while an individual's name is thrust upon him
(See Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of
California, 56 F 2d 973, 977). A corporation can no more use a
corporate name in violation of the rights of others than an individual
can use his name legally acquired so as to mislead the public and
injure another (Armington vs. Palmer, 21 RI 109. 42 A 308).
Our own Corporation Code, in its Section 18, expressly provides that:
No corporate name may be allowed by the
Securities and Exchange Commission if the
proposed name is identical or deceptively or
confusingly similar to that of any existing
corporation or to any other name already
protected by law or is patently deceptive,
confusing or contrary to existing law. Where a
change in a corporate name is approved, the
commission shall issue an amended certificate of
incorporation under the amended name.
(Emphasis supplied)
The statutory prohibition cannot be any clearer. To come within its
scope, two requisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use
of such corporate name; and
(2) the proposed name is either:
(a)
identical;
or
(b)
deceptive
ly
or
confusing
ly similar
to that of any existing corporation or to any other name
already protected by law; or
(c) patently deceptive, confusing or contrary to existing law.
The right to the exclusive use of a corporate name with freedom from
infringement by similarity is determined by priority of adoption (1
Thompson, p. 80 citing Munn v. Americana Co., 82 N. Eq. 63, 88 Atl.
30; San Francisco Oyster House v. Mihich, 75 Wash. 274, 134 Pac.
921). In this regard, there is no doubt with respect to Petitioners' prior
adoption of' the name ''PHILIPS" as part of its corporate name.
Petitioners Philips Electrical and Philips Industrial were incorporated on
29 August 1956 and 25 May 1956, respectively, while Respondent
Standard Philips was issued a Certificate of Registration on 12 April
1982, twenty-six (26) years later (Rollo, p. 16). Petitioner PEBV has
also used the trademark "PHILIPS" on electrical lamps of all types and
their accessories since 30 September 1922, as evidenced by
Certificate of Registration No. 1651.
The second requisite no less exists in this case. In determining the
existence of confusing similarity in corporate names, the test is
whether the similarity is such as to mislead a person, using ordinary
care and discrimination. In so doing, the Court must look to the record
as well as the names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life
Ins. Co., 210 NE 2d 298). While the corporate names of Petitioners
and Private Respondent are not identical, a reading of Petitioner's
corporate names, to wit: PHILIPS EXPORT B.V., PHILIPS
ELECTRICAL
LAMPS,
INC.
and
PHILIPS
INDUSTRIAL
DEVELOPMENT, INC., inevitably leads one to conclude that
"PHILIPS" is, indeed, the dominant word in that all the companies
affiliated or associated with the principal corporation, PEBV, are known
in the Philippines and abroad as the PHILIPS Group of Companies.
Respondents maintain, however, that Petitioners did not present an
iota of proof of actual confusion or deception of the public much less a
single purchaser of their product who has been deceived or confused
or showed any likelihood of confusion. It is settled, however, that proof
of actual confusion need not be shown. It suffices that confusion is
probably or likely to occur (6 Fletcher [Perm Ed], pp. 107-108,
enumerating a long line of cases).
It may be that Private Respondent's products also consist of chain
rollers, belts, bearing and the like, while petitioners deal principally with
electrical products. It is significant to note, however, that even the
Director of Patents had denied Private Respondent's application for
registration of the trademarks "Standard Philips & Device" for chain,
rollers, belts, bearings and cutting saw. That office held that PEBV,
"had shipped to its subsidiaries in the Philippines equipment, machines
and their parts which fall under international class where "chains,
rollers, belts, bearings and cutting saw," the goods in connection with
which Respondent is seeking to register 'STANDARD PHILIPS' . . .
also belong" ( Inter Partes Case No. 2010, June 17, 1988, SEC Rollo).
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF
PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY
SIMILAR TO THAT OF ANY EXISTING CORPORATION,
PROHIBITED; CONFUSION AND DECEPTION EFFECTIVELY
PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO
THE WORD "LYCEUM". The Articles of Incorporation of a
corporation must, among other things, set out the name of the
corporation. Section 18 of the Corporation Code establishes a
restrictive rule insofar as corporate names are concerned: "Section 18.
Corporate name. No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical
or deceptively or confusingly similar to that of any existing corporation
or to any other name already protected by law or is patently deceptive,
confusing or contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended certificate
of incorporation under the amended name." The policy underlying the
prohibition in Section 18 against the registration of a corporate name
which is "identical or deceptively or confusingly similar" to that of any
existing corporation or which is "patently deceptive" or "patently
confusing" or "contrary to existing laws," is the avoidance of fraud upon
the public which would have occasion to deal with the entity
concerned, the evasion of legal obligations and duties, and the
reduction of difficulties of administration and supervision over
corporations. We do not consider that the corporate names of private
respondent institutions are "identical with, or deceptively or confusingly
similar" to that of the petitioner institution. True enough, the corporate
names of private respondent entities all carry the word "Lyceum" but
confusion and deception are effectively precluded by the appending of
geographic names to the word "Lyceum." Thus, we do not believe that
the "Lyceum of Aparri" can be mistaken by the general public for the
Lyceum of the Philippines, or that the "Lyceum of Camalaniugan"
would be confused with the Lyceum of the Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD
"LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. It is claimed,
however, by petitioner that the word "Lyceum" has acquired a
secondary meaning in relation to petitioner with the result that word,
although originally a generic, has become appropriable by petitioner to
the exclusion of other institutions like private respondents herein. The
doctrine of secondary meaning originated in the field of trademark law.
Its application has, however, been extended to corporate names sine
the right to use a corporate name to the exclusion of others is based
upon the same principle which underlies the right to use a particular
trademark or tradename. In Philippine Nut Industry, Inc. v. Standard
Brands, Inc., the doctrine of secondary meaning was elaborated in the
following terms: " . . . a word or phrase originally incapable of exclusive
appropriation with reference to an article on the market, because
geographically or otherwise descriptive, might nevertheless have been
used so long and so exclusively by one producer with reference to his
article that, in that trade and to that branch of the purchasing public,
the word or phrase has come to mean that the article was his product."
The question which arises, therefore, is whether or not the use by
petitioner of "Lyceum" in its corporate name has been for such length
of time and with such exclusivity as to have become associated or
identified with the petitioner institution in the mind of the general public
(or at least that portion of the general public which has to do with
schools). The Court of Appeals recognized this issue and answered it
in the negative: "Under the doctrine of secondary meaning, a word or
phrase originally incapable of exclusive appropriation with reference to
an article in the market, because geographical or otherwise descriptive
might nevertheless have been used so long and so exclusively by one
producer with reference to this article that, in that trade and to that
group of the purchasing public, the word or phrase has come to mean
that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil.
56). This circumstance has been referred to as the distinctiveness into
which the name or phrase has evolved through the substantial and
exclusive use of the same for a considerable period of time. . . . No
evidence was ever presented in the hearing before the Commission
which sufficiently proved that the word 'Lyceum' has indeed acquired
Buhi Lyceum;
Central Lyceum of Catanduanes;
Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines
Petitioner's original complaint before the SEC had included three (3)
other entities:
1. The Lyceum of Malacanay;
2. The Lyceum of Marbel; and
3. The Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the Lyceum of
Malacanay and the Lyceum of Marbel, for failure to serve summons
upon these two (2) entities. The case against the Liceum of Araullo
was dismissed when that school motu proprio change its corporate
name to "Pamantasan ng Araullo."
The background of the case at bar needs some recounting. Petitioner
had sometime before commenced in the SEC a proceeding (SECCase No. 1241) against the Lyceum of Baguio, Inc. to require it to
change its corporate name and to adopt another name not "similar [to]
or identical" with that of petitioner. In an Order dated 20 April 1977,
Associate Commissioner Julio Sulit held that the corporate name of
petitioner and that of the Lyceum of Baguio, Inc. were substantially
identical because of the presence of a "dominant" word, i.e., "Lyceum,"
the name of the geographical location of the campus being the only
word which distinguished one from the other corporate name. The SEC
also noted that petitioner had registered as a corporation ahead of the
Lyceum of Baguio, Inc. in point of time, 1 and ordered the latter to
change its name to another name "not similar or identical [with]" the
names of previously registered entities.
The Lyceum of Baguio, Inc. assailed the Order of the SEC before the
Supreme Court in a case docketed as G.R. No. L-46595. In a Minute
Resolution dated 14 September 1977, the Court denied the Petition for
Review for lack of merit. Entry of judgment in that case was made on
21 October 1977. 2
Armed with the Resolution of this Court in G.R. No. L-46595, petitioner
then wrote all the educational institutions it could find using the word
"Lyceum" as part of their corporate name, and advised them to
discontinue such use of "Lyceum." When, with the passage of time, it
became clear that this recourse had failed, petitioner instituted before
the SEC SEC-Case No. 2579 to enforce what petitioner claims as its
proprietary right to the word "Lyceum." The SEC hearing officer
rendered a decision sustaining petitioner's claim to an exclusive right to
use the word "Lyceum." The hearing officer relied upon the SEC ruling
in the Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and held that
the word "Lyceum" was capable of appropriation and that petitioner
had acquired an enforceable exclusive right to the use of that word.
In other words, while the appellant may have proved that it had been
using the word 'Lyceum' for a long period of time, this fact alone did not
amount to mean that the said word had acquired secondary meaning
in its favor because the appellant failed to prove that it had been using
the same word all by itself to the exclusion of others. More so, there
was no evidence presented to prove that confusion will surely arise if
the same word were to be used by other educational institutions.
Consequently, the allegations of the appellant in its first two assigned
errors must necessarily fail." 13 (Underscoring partly in the original and
partly supplied)
We agree with the Court of Appeals. The number alone of the private
respondents in the case at bar suggests strongly that petitioner's use
of the word "Lyceum" has not been attended with the exclusivity
essential for applicability of the doctrine of secondary meaning. It may
be noted also that at least one of the private respondents, i.e., the
Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen
(17) years before the petitioner registered its own corporate name with
the SEC and began using the word "Lyceum." It follows that if any
institution had acquired an exclusive right to the word "Lyceum," that
institution would have been the Western Pangasinan Lyceum, Inc.
rather than the petitioner institution.
In this connection, petitioner argues that because the Western
Pangasinan Lyceum, Inc. failed to reconstruct its records before the
SEC in accordance with the provisions of R.A. No. 62, which records
had been destroyed during World War II, Western Pangasinan Lyceum
should be deemed to have lost all rights it may have acquired by virtue
of its past registration. It might be noted that the Western Pangasinan
Lyceum, Inc. registered with the SEC soon after petitioner had filed its
own registration on 21 September 1950. Whether or not Western
Pangasinan Lyceum, Inc. must be deemed to have lost its rights under
its original 1933 registration, appears to us to be quite secondary in
importance; we refer to this earlier registration simply to underscore
the fact that petitioner's use of the word "Lyceum" was neither the first
use of that term in the Philippines nor an exclusive use thereof.
Petitioner's use of the word "Lyceum" was not exclusive but was in
truth shared with the Western Pangasinan Lyceum and a little later with
other private respondent institutions which registered with the SEC
using "Lyceum" as part of their corporation names. There may well be
other schools using Lyceum or Liceo in their names, but not registered
with the SEC because they have not adopted the corporate form of
organization.
This petition for certiorari seeks to annul and set aside the
decision of the Regional Trial Court, Branch 58, Angeles City which
ordered the Municipal Circuit Trial Court, Mabalacat and Magalang,
Pampanga to dismiss Civil Case No. 1214 for lack of jurisdiction.
[1]
SO ORDERED.