G.R. No.

182397

September 14, 2011

ALERT SECURITY AND INVESTIGATION AGENCY, INC. AND/OR MANUEL D.

DASIG,
Petitioners,
vs.
SAIDALI PASAWILAN, WILFREDO VERCELES AND MELCHOR BULUSAN,
Respondents.
DECISION
VILLARAMA, JR., J.:
This petition for review on certiorari assails the Decision 1 dated February 1, 2008 of
the Court of Appeals (CA) in CA-G.R. SP No. 99861. The appellate court reversed and
set aside the January 31, 2007 Decision 2 and March 15, 2007 Resolution 3 of the
National Labor Relations Commission (NLRC) and reinstated the Labor Arbiters
Decision4 finding petitioners guilty of illegal dismissal.
The facts follow.
Respondents Saidali Pasawilan, Wilfredo Verceles and Melchor Bulusan were all
employed by petitioner Alert Security and Investigation Agency, Inc. (Alert Security)
as security guards beginning March 31, 1996, January 14, 1997, and January 24,
1997, respectively. They were paid 165.00 pesos a day as regular employees, and
assigned at the Department of Science and Technology (DOST) pursuant to a
security service contract between the DOST and Alert Security.
Respondents aver that because they were underpaid, they filed a complaint for
money claims against Alert Security and its president and general manager,
petitioner Manuel D. Dasig, before Labor Arbiter Ariel C. Santos. As a result of their
complaint, they were relieved from their posts in the DOST and were not given new
assignments despite the lapse of six months. On January 26, 1999, they filed a joint
complaint for illegal dismissal against petitioners.
Petitioners, on the other hand, deny that they dismissed the respondents. They
claimed that from the DOST, respondents were merely detailed at the Metro Rail
Transit, Inc. at the Light Rail Transit Authority (LRTA) Compound in Aurora Blvd.
because the wages therein were already adjusted to the latest minimum wage.
Petitioners presented "Duty Detail Orders"5 that Alert Security issued to show that
respondents were in fact assigned to LRTA. Respondents, however, failed to report
at the LRTA and instead kept loitering at the DOST and tried to convince other
security guards to file complaints against Alert Security. Thus, on August 3, 1998,
Alert Security filed a "termination report" 6 with the Department of Labor and
Employment relative to the termination of the respondents.
Upon motion of the respondents, the joint complaint for illegal dismissal was
ordered consolidated with respondents earlier complaint for money claims. The
records of the illegal dismissal case were sent to Labor Arbiter Ariel C. Santos, but
later returned to the Office of the Labor Arbiter hearing the illegal dismissal

complaint because a Decision7 has already been rendered in the complaint for
money claims on July 14, 1999. In that decision, the complaint for money claims
was dismissed for lack of merit but petitioners were ordered to pay respondents
their latest salary differentials.
On July 28, 2000, Labor Arbiter Melquiades Sol D. Del Rosario rendered a Decision 8
on the complaint for illegal dismissal. The Labor Arbiter ruled:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding
complainants to have been illegally dismissed. Consequently, each complainant
should be paid in solidum by the respondents the individual awards computed in the
body of the decision, which is hereto adopted as part of this disposition.
SO ORDERED.9
Aggrieved, petitioners appealed the decision to the NLRC claiming that the Labor
Arbiter erred in deciding a re-filed case when it was filed in violation of the
prohibitions against litis pendencia and forum shopping. Further, petitioners argued
that complainants were not illegally dismissed but were only transferred. They
claimed that it was the respondents who refused to report for work in their new
assignment.
On January 31, 2007, the NLRC rendered a Decision 10 ruling that Labor Arbiter Del
Rosario did not err in taking cognizance of respondents complaint for illegal
dismissal because the July 14, 1999 Decision of Labor Arbiter Santos on the
complaint for money claims did not at all pass upon the issue of illegal dismissal.
The NLRC, however, dismissed the complaint for illegal dismissal after ruling that
the fact of dismissal or termination of employment was not sufficiently established.
According to the NLRC, "[the] sweeping generalization that the complainants were
constructively dismissed is not sufficient to establish the existence of illegal
dismissal."11 The dispositive portion of the NLRC decision reads:
WHEREFORE, premises considered, the respondents appeal is hereby given due
course and the decision dated July 28, 2000 is hereby REVERSED and SET-ASIDE and
a new one entered DISMISSING the complaint for illegal dismissal for lack of merit.
SO ORDERED.12
Unfazed, respondents filed a petition for certiorari with the CA questioning the NLRC
decision and alleging grave abuse of discretion.
On February 1, 2008, the CA rendered the assailed Decision 13 reversing and setting
aside the NLRC decision and reinstating the July 28, 2000 Decision of Labor Arbiter
Del Rosario. The CA ruled that Alert Security, as an employer, failed to discharge its
burden to show that the employees separation from employment was not
motivated by discrimination, made in bad faith, or effected as a form of punishment
or demotion without sufficient cause. The CA also found that respondents were
never informed of the "Duty Detail Orders" transferring them to a new post, thereby

making the alleged transfer ineffective. The dispositive portion of the CA decision
states:
WHEREFORE, premises considered, the January 31, 2007 decision of the NLRC is
hereby REVERSED and SET ASIDE and the July 28, 2000 decision of the Labor Arbiter
is hereby REVIVED.
SO ORDERED.14
Petitioners filed a motion for reconsideration, but the motion was denied in a
Resolution15 dated March 31, 2008.
Petitioners are now before this Court to seek relief by way of a petition for review on
certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended.
Petitioners argue that the CA erred when it held that the NLRC committed grave
abuse of discretion. According to petitioners, the NLRC was correct when it ruled
that there was no sufficient basis to rule that respondents were terminated from
their employment while there was proof that they were merely transferred from
DOST to LRTA as shown in the "Duty Detail Orders". Verily, petitioners claim that
there was no termination at all; instead, respondents abandoned their employment
by refusing to report for duty at the LRTA Compound.
Further, petitioners argue that the CA erred when it reinstated the July 28, 2000
Decision of Labor Arbiter Del Rosario in its entirety. The dispositive portion of said
decision ruled that respondents should be paid their monetary awards in solidum by
Alert Security and Manuel D. Dasig, its President and General Manager. They argue
that Alert Security is a duly organized domestic corporation which has a legal
personality separate and distinct from its members or owners. Hence, liability for
whatever compensation or money claims owed to employees must be borne solely
by Alert Security and not by any of its individual stockholders or officers.
On the other hand, respondents claim that the NLRC committed a serious error in
ruling that they failed to provide factual substantiation of their claim of constructive
dismissal. Respondents aver that their Complaint Form 16 sufficiently constitutes the
basis of their claim of illegal dismissal. Also, respondents aver that Alert Security
itself admitted that respondents were relieved from their posts as security guards in
DOST, albeit raising the defense that it was a mere transfer as shown by "Duty
Detail Orders", which, however, were never received by respondents, as observed
by the Labor Arbiter.
Essentially, the issue for resolution is whether respondents were illegally dismissed.
We rule in the affirmative.
As a rule, employment cannot be terminated by an employer without any just or
authorized cause. No less than the 1987 Constitution in Section 3, Article 13
guarantees security of tenure for workers and because of this, an employee may
only be terminated for just17 or authorized18 causes that

must comply with the due process requirements mandated 19 by law. Hence,
employers are barred from arbitrarily removing their workers whenever and
however they want. The law sets the valid grounds for termination as well as the
proper procedure to take when terminating the services of an employee.
In De Guzman, Jr. v. Commission on Elections, 20 the Court, speaking of the
Constitutional guarantee of security of tenure to all workers, ruled:
x x x It only means that an employee cannot be dismissed (or transferred) from the
service for causes other than those provided by law and after due process is
accorded the employee. What it seeks to prevent is capricious exercise of the power
to dismiss. x x x (Emphasis supplied.)
Although we recognize the right of employers to shape their own work force, this
management prerogative must not curtail the basic right of employees to security
of tenure. There must be a valid and lawful reason for terminating the employment
of a worker. Otherwise, it is illegal and would be dealt with by the courts accordingly.
As stated in Bascon v. Court of Appeals: 21
x x x The employers power to dismiss must be tempered with the employees right
to security of tenure. Time and again we have said that the preservation of the
lifeblood of the toiling laborer comes before concern for business profits. Employers
must be reminded to exercise the power to dismiss with great caution, for the State
will not hesitate to come to the succor of workers wrongly dismissed by capricious
employers.
In the case at bar, respondents were relieved from their posts because they filed
with the Labor Arbiter a complaint against their employer for money claims due to
underpayment of wages. This reason is unacceptable and illegal. Nowhere in the
law providing for the just and authorized causes of termination of employment is
there any direct or indirect reference to filing a legitimate complaint for money
claims against the employer as a valid ground for termination.
The Labor Code, as amended, enumerates several just and authorized causes for a
valid termination of employment. An employee asserting his right and asking for
minimum wage is not among those causes. Dismissing an employee on this ground
amounts to retaliation by management for an employees legitimate grievance
without due process. Such stroke of retribution has no place in Philippine Labor
Laws.
Petitioners aver that respondents were merely transferred to a new post wherein
the wages are adjusted to the current minimum wage standards. They maintain that
the respondents voluntarily abandoned their jobs when they failed to report for duty
in the new location.
Assuming this is true, we still cannot hold that the respondents abandoned their
posts. For abandonment of work to fall under Article 282 (b) of the Labor Code, as
amended, as gross and habitual neglect of duties there must be the concurrence of

two elements. First, there should be a failure of the employee to report for work
without a valid or justifiable reason, and second, there should be a showing that the
employee intended to sever the employer-employee relationship, the second
element being the more determinative factor as manifested by overt acts. 22
As regards the second element of intent to sever the employer-employee
relationship, the CA correctly ruled that:
x x x the fact that petitioners filed a complaint for illegal dismissal is indicative of
their intention to remain employed with private respondent considering that one of
their prayers in the complaint is for re-instatement. As declared by the Supreme
Court, a complaint for illegal dismissal is inconsistent with the charge of
abandonment, because when an employee takes steps to protect himself against a
dismissal, this cannot, by logic, be said to be abandonment by him of his right to be
able to work.23
Further, according to Alert Security itself, respondents continued to report for work
and loiter in the DOST after the alleged transfer order was issued. Such
circumstance makes it unlikely that respondents have clear intention of leaving
their respective jobs. In any case, there is no dispute that in cases of abandonment
of work, notice shall be served at the workers last known address. 24 This petitioners
failed to do.
On the element of the failure of the employee to report for work, we also cannot
accept the allegations of petitioners that respondents unjustifiably refused to report
for duty in their new posts. A careful review of the records reveals that there is no
showing that respondents were notified of their new assignments. Granting that the
"Duty Detail Orders" were indeed issued, they served no purpose unless the
intended recipients of the orders are informed of such.
The employer cannot simply conclude that an employee is ipso facto notified of a
transfer when there is no evidence to indicate that the employee had knowledge of
the transfer order. Hence, the failure of an employee to report for work at the new
location cannot be taken against him as an element of abandonment.
We acknowledge and recognize the right of an employer to transfer employees in
the interest of the service. This exercise is a management prerogative which is a
lawful right of an employer. However, like all rights, there are limitations to the right
to transfer employees. As ruled in the case of Blue Dairy Corporation v. NLRC: 25
x x x The managerial prerogative to transfer personnel must be exercised without
grave abuse of discretion, bearing in mind the basic elements of justice and fair
play. Having the right should not be confused with the manner in which that right is
exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of
an undesirable worker. In particular, the employer must be able to show that the
transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does
it involve a demotion in rank or a diminution of his salaries, privileges and other
benefits. x x x

In addition to these tests for a valid transfer, there should be proper and effective
notice to the employee concerned. It is the employers burden to show that the
employee was duly notified of the transfer. Verily, an employer cannot reasonably
expect an employee to report for work in a new location without first informing said
employee of the transfer. Petitioners insistence on the sufficiency of mere issuance
of the transfer order is indicative of bad faith on their part.
Besides, according to petitioners, the reason for the transfer to LRTA of the
respondents was that the wages in LRTA were already adjusted to comply with the
minimum wage rates. Now it is hard to believe that after being ordered to transfer
to LRTA where the wages are better, the respondents would still refuse the transfer.
That would mean that the respondents refused better wages and instead chose to
remain in DOST, underpaid, and go through the lengthy process of claiming and
asking for minimum wage. This proposed scenario of petitioners simply does not
jibe with human logic and experience.
On the question of the propriety of holding petitioner Manuel D. Dasig, president
and general manager of Alert Security, solidarily liable with Alert Security for the
payment of the money awards in favor of respondents, we find petitioners
arguments meritorious.
Basic is the rule that a corporation has a separate and distinct personality apart
from its directors, officers, or owners. In exceptional cases, courts find it proper to
breach this corporate personality in order to make directors, officers, or owners
solidarily liable for the companies acts. Section 31, Paragraph 1 of the Corporation
Code26 provides:
Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully
and knowingly vote for or assent to patently unlawful acts of the corporation or who
are guilty of gross negligence or bad faith in directing the affairs of the corporation
or acquire any personal or pecuniary interest in conflict with their duty as such
directors, or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other
persons.
xxxx
Jurisprudence has been consistent in defining the instances when the separate and
distinct personality of a corporation may be disregarded in order to hold the
directors, officers, or owners of the corporation liable for corporate debts. In McLeod
v. National Labor Relations Commission,27 the Court ruled:
Thus, the rule is still that the doctrine of piercing the corporate veil applies only
when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime. In the absence of malice, bad faith, or a specific
provision of law making a corporate officer liable, such corporate officer cannot be
made personally liable for corporate liabilities. x x x

Further, in Carag v. National Labor Relations Commission, 28 the Court clarified the
McLeod doctrine as regards labor laws, to wit:
We have already ruled in McLeod v. NLRC29 and Spouses Santos v. NLRC30 that
Article 212(e)31 of the Labor Code, by itself, does not make a corporate
officer personally liable for the debts of the corporation.1awphi1 The
governing law on personal liability of directors for debts of the corporation is still
Section 31 of the Corporation Code. x x x
In the present case, there is no evidence to indicate that Manuel D. Dasig, as
president and general manager of Alert Security, is using the veil of corporate
fiction to defeat public convenience, justify wrong, protect fraud, or defend crime.
Further, there is no showing that Alert Security has folded up its business or is
reneging in its obligations. In the final analysis, it is Alert Security that respondents
are after and it is also Alert Security who should take responsibility for their illegal
dismissal.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the
Court of Appeals in CA-G.R. SP No. 99861 and the Decision dated July 28, 2000 of
the Labor Arbiter are MODIFIED. Petitioner Manuel D. Dasig is held not solidarily
liable with petitioner Alert Security and Investigation, Inc. for the payment of the
monetary awards in favor of respondents. Said Decision of the Court of Appeals in
all other aspects is AFFIRMED.
With costs against the petitioners.
SO ORDERED.

G.R. No. 157549

May 30, 2011

DONNINA
C.
vs.
PRINTWELL, INC., Respondent.

HALLEY,

Petitioner,

DECISION
BERSAMIN, J:
Stockholders of a corporation are liable for the debts of the corporation up to the
extent of their unpaid subscriptions. They cannot invoke the veil of corporate
identity as a shield from liability, because the veil may be lifted to avoid defrauding
corporate creditors.

Weaffirm with modification the decisionpromulgated on August 14, 2002, 1whereby

the Court of Appeals(CA) upheld thedecision of the Regional Trial Court, Branch 71,
in Pasig City (RTC),2ordering the defendants (including the petitioner)to pay to
Printwell, Inc. (Printwell) the principal sum of P291,342.76 plus interest.
Antecedents
The petitioner wasan incorporator and original director of Business Media
Philippines, Inc. (BMPI), which, at its incorporation on November 12, 1987, 3had an
authorized capital stock of P3,000,000.00 divided into 300,000 shares each with a
par value of P10.00,of which 75,000 were initially subscribed, to wit:
No.
of Total
shares
subscription

Subscriber

Amount
paid

Donnina C. Halley 35,000

P 350,000.00

P87,500.0
0

Roberto
Cabrera, Jr.

V. 18,000

P 180,000.00

P45,000.0
0

Albert T. Yu

18,000

P 180,000.00

P45,000.0
0

Zenaida V. Yu

2,000

P 20,000.00

P5,000.00

Rizalino C. Vineza 2,000

P 20,000.00

P5,000.00

TOTAL

P750,000.00

P187,500.
00

75,000

Printwellengaged in commercial and industrial printing.BMPI commissioned Printwell

for the printing of the magazine Philippines, Inc. (together with wrappers and
subscription cards) that BMPI published and sold. For that purpose, Printwell
extended 30-day credit accommodations to BMPI.
In the period from October 11, 1988 until July 12, 1989, BMPI placedwith Printwell
several orders on credit, evidenced byinvoices and delivery receipts
totalingP316,342.76.Considering
that
BMPI
paidonlyP25,000.00,Printwell
suedBMPIon January 26, 1990 for the collection of the unpaid balance of
P291,342.76 in the RTC.4
On February 8, 1990,Printwell amended thecomplaint in order to implead as
defendants all the original stockholders and incorporators to recover on theirunpaid
subscriptions, as follows:5
Name

Unpaid Shares

Donnina C. Halley

P 262,500.00

Roberto V. Cabrera, Jr.

P135,000.00

Albert T. Yu

P135,000.00

Zenaida V. Yu

P15,000.00

Rizalino C. Vieza

P15,000.00

TOTAL

P 562,500.00

The defendants filed a consolidated answer, 6averring that they all had paid their
subscriptions in full; that BMPI had a separate personality from those of its
stockholders; thatRizalino C. Vieza had assigned his fully-paid up sharesto a
certain Gerardo R. Jacinto in 1989; andthat the directors and stockholders of BMPI
had resolved to dissolve BMPI during the annual meetingheld on February 5, 1990.
To prove payment of their subscriptions, the defendantstockholderssubmitted in
evidenceBMPI official receipt (OR) no. 217, OR no. 218, OR no. 220,OR no. 221, OR
no. 222, OR no. 223, andOR no. 227,to wit:
Receipt
No.

Date

Name

217

November
1987

218

May 13, 1988

Albert T. Yu

P
135,000.0
0

220

May 13, 1988

Roberto
Cabrera, Jr.

V. P
135,000.0
0

221

November
1987

5, Roberto
Cabrera, Jr.

V. P
45,000.00

222

November
1987

5, Zenaida V. Yu

223

May 13, 1988

Zenaida V. Yu

227

May 13, 1988

Donnina
Halley

5, Albert T. Yu

Amount
P
45,000.00

P
5,000.00
P
15,000.00
C. P
262,500.0
0

In addition, the stockholderssubmitted other documentsin evidence, namely:(a) an

audit report dated March 30, 1989 prepared by Ilagan, Cepillo & Associates
(submitted to the SEC and the BIR); 7(b) BMPIbalance sheet8 and income
statement9as of December 31, 1988; (c) BMPI income tax return for the year 1988
(stamped "received" by the BIR); 10(d) journal vouchers;11(e) cash deposit slips;12
and(f)Bank of the Philippine Islands (BPI) savings account passbookin the name of
BMPI.13
Ruling of the RTC

On November 3, 1993, the RTC rendereda decision in favor of Printwell, rejecting the
allegation of payment in full of the subscriptions in view of an irregularity in the
issuance of the ORs and observingthat the defendants had used BMPIs corporate
personality to evade payment and create injustice, viz:
The claim of individual defendants that they have fully paid their subscriptions to
defend[a]nt corporation, is not worthy of consideration, because:
a) in the case of defendants-spouses Albert and Zenaida Yu, it will be noted that the
alleged payment made on May 13, 1988 amounting to P135,000.00, is covered by
Official Receipt No. 218 (Exh. "2"), whereas the alleged payment made earlier on
November 5, 1987, amounting to P5,000.00, is covered by Official Receipt No. 222
(Exh. "3"). This is cogent proof that said receipts were belatedly issued just to suit
their theory since in the ordinary course of business, a receipt issued earlier must
have serial numbers lower than those issued on a later date. But in the case at bar,
the receipt issued on November 5, 1987 has serial numbers (222) higher than those
issued on a later date (May 13, 1988).
b) The claim that since there was no call by the Board of Directors of defendant
corporation for the payment of unpaid subscriptions will not be a valid excuse to
free individual defendants from liability. Since the individual defendants are
members of the Board of Directors of defendantcorporation, it was within their
exclusive power to prevent the fulfillment of the condition, by simply not making a
call for the payment of the unpaid subscriptions. Their inaction should not work to
their benefit and unjust enrichment at the expense of plaintiff.
Assuming arguendo that the individual defendants have paid their unpaid
subscriptions, still, it is very apparent that individual defendants merely used the
corporate fiction as a cloak or cover to create an injustice; hence, the alleged
separate personality of defendant corporation should be disregarded (Tan Boon Bee
& Co., Inc. vs. Judge Jarencio, G.R. No. 41337, 30 June 1988). 14
Applying the trust fund doctrine, the RTC declared the defendant stockholders liable
to Printwell pro rata, thusly:
Defendant Business Media, Inc. is a registered corporation (Exhibits "A", "A-1" to "A9"), and, as appearing from the Articles of Incorporation, individual defendants have
the following unpaid subscriptions:
Unpaid
Subscription

Names

Donnina C. Halley P262,500.00

Roberto
Cabrera, Jr.

V. 135.000.00

Albert T. Yu

135,000.00

Zenaida V. Yu

15,000.00

Rizalino V. Vineza

15,000.00

-------------------------------Total

P562,500.00

and it is an established doctrine that subscriptions to the capital stock of a

corporation constitute a fund to which creditors have a right to look for satisfaction
of their claims (Philippine National Bank vs. Bitulok Sawmill, Inc., 23 SCRA 1366)
and, in fact, a corporation has no legal capacity to release a subscriber to its capital
stock from the obligation to pay for his shares, and any agreement to this effect is
invalid (Velasco vs. Poizat, 37 Phil. 802).
The liability of the individual stockholders in the instant case shall be pro-rated as
follows:
Names

Amount

Donnina C. Halley P149,955.6

5
Roberto
Cabrera, Jr.

V. 77,144.55

Albert T. Yu

77,144.55

Zenaida V. Yu

8,579.00

Rizalino V. Vineza

8,579.00

-------------------------------Total

P321,342.7
515

The RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendants, ordering defendants to pay to plaintiff the amount of P291,342.76, as
principal, with interest thereon at 20% per annum, from date of default, until fully
paid, plus P30,000.00 as attorneys fees, plus costs of suit.
Defendants counterclaims are ordered dismissed for lack of merit.
SO ORDERED.16
Ruling of the CA
All the defendants, except BMPI, appealed.
Spouses Donnina and Simon Halley, andRizalinoVieza defined the following errors
committed by the RTC, as follows:
I.

THE TRIAL COURT ERRED IN HOLDING APPELLANTS-STOCKHOLDERS LIABLE FOR

THE LIABILITIES OF THE DEFENDANT CORPORATION.
II.
ASSUMING ARGUENDO THAT APPELLANTS MAY BE LIABLE TO THE EXTENT OF THEIR
UNPAID SUBSCRIPTION OF SHARES OF STOCK, IF ANY, THE TRIAL COURT
NONETHELESS ERRED IN NOT FINDING THAT APPELLANTS-STOCKHOLDERS HAVE, AT
THE TIME THE SUIT WAS FILED, NO SUCH UNPAID SUBSCRIPTIONS.
On their part, Spouses Albert and Zenaida Yu averred:
I.
THE RTC ERRED IN REFUSING TO GIVE CREDENCE AND WEIGHT TO DEFENDANTSAPPELLANTS SPOUSES ALBERT AND ZENAIDA YUS EXHIBITS 2 AND 3 DESPITE THE
UNREBUTTED TESTIMONY THEREON BY APPELLANT ALBERT YU AND THE ABSENCE
OF PROOF CONTROVERTING THEM.
II.
THE RTC ERRED IN HOLDING DEFENDANTS-APPELLANTS SPOUSES ALBERT AND
ZENAIDA YU PERSONALLY LIABLE FOR THE CONTRACTUAL OBLIGATION OF BUSINESS
MEDIA PHILS., INC. DESPITE FULL PAYMENT BY SAID DEFENDANTS-APPELLANTS OF
THEIR RESPECTIVE SUBSCRIPTIONS TO THE CAPITAL STOCK OF BUSINESS MEDIA
PHILS., INC.
Roberto V. Cabrera, Jr. argued:
I.
IT IS GRAVE ERROR ON THE PART OF THE COURT A QUO TO APPLY THE DOCTRINE OF
PIERCING THE VEIL OF CORPORATE PERSONALITY IN ABSENCE OF ANY SHOWING OF
EXTRA-ORDINARY CIRCUMSTANCES THAT WOULD JUSTIFY RESORT THERETO.
II.
IT IS GRAVE ERROR ON THE PART OF THE COURT A QUO TO RULE THAT INDIVIDUAL
DEFENDANTS ARE LIABLE TO PAY THE PLAINTIFF-APPELLEES CLAIM BASED ON
THEIR RESPECTIVE SUBSCRIPTION. NOTWITHSTANDING OVERWHELMING EVIDENCE
SHOWING FULL SETTLEMENT OF SUBSCRIBED CAPITAL BY THE INDIVIDUAL
DEFENDANTS.
On August 14, 2002, the CA affirmed the RTC, holding that the defendants resort to
the corporate personality would createan injustice becausePrintwell would thereby
be at a loss against whom it would assert the right to collect, viz:
Settled is the rule that when the veil of corporate fiction is used as a means of
perpetrating fraud or an illegal act or as a vehicle for the evasion of an existing

obligation, the circumvention of statutes, the achievements or perfection of

monopoly or generally the perpetration of knavery or crime, the veil with which the
law covers and isolates the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely as an aggregation of
individuals (First Philippine International Bank vs. Court of Appeals, 252 SCRA 259).
Moreover, under this doctrine, the corporate existence may be disregarded where
the entity is formed or used for non-legitimate purposes, such as to evade a just
and due obligations or to justify wrong (Claparols vs. CIR, 65 SCRA 613).
In the case at bench, it is undisputed that BMPI made several orders on credit from
appellee PRINTWELL involving the printing of business magazines, wrappers and
subscription cards, in the total amount of P291,342.76 (Record pp. 3-5, Annex "A")
which facts were never denied by appellants stockholders that they owe appellee
the amount of P291,342.76. The said goods were delivered to and received by BMPI
but it failed to pay its overdue account to appellee as well as the interest thereon,
at the rate of 20% per annum until fully paid. It was also during this time that
appellants stockholders were in charge of the operation of BMPI despite the fact
that they were not able to pay their unpaid subscriptions to BMPI yet greatly
benefited from said transactions. In view of the unpaid subscriptions, BMPI failed to
pay appellee of its liability, hence appellee in order to protect its right can collect
from the appellants stockholders regarding their unpaid subscriptions. To deny
appellee from recovering from appellants would place appellee in a limbo on where
to assert their right to collect from BMPI since the stockholders who are appellants
herein are availing the defense of corporate fiction to evade payment of its
obligations.17
Further, the CA concurred with the RTC on theapplicability of thetrust fund doctrine,
under which corporate debtors might look to the unpaid subscriptions for the
satisfaction of unpaid corporate debts, stating thus:
It is an established doctrine that subscription to the capital stock of a corporation
constitute a fund to which creditors have a right to look up to for satisfaction of their
claims, and that the assignee in insolvency can maintain an action upon any unpaid
stock subscription in order to realize assets for the payment of its debts (PNB vs.
Bitulok Sawmill, 23 SCRA 1366).
Premised on the above-doctrine, an inference could be made that the funds, which
consists of the payment of subscriptions of the stockholders, is where the creditors
can claim monetary considerations for the satisfaction of their claims. If these funds
which ought to be fully subscribed by the stockholders were not paid or remain an
unpaid subscription of the corporation then the creditors have no other recourse to
collect from the corporation of its liability. Such occurrence was evident in the case
at bar wherein the appellants as stockholders failed to fully pay their unpaid
subscriptions, which left the creditors helpless in collecting their claim due to
insufficiency of funds of the corporation. Likewise, the claim of appellants that they
already paid the unpaid subscriptions could not be given weight because said
payment did not reflect in the Articles of Incorporations of BMPI that the unpaid
subscriptions were fully paid by the appellants stockholders. For it is a rule that a
stockholder may be sued directly by creditors to the extent of their unpaid
subscriptions to the corporation (Keller vs. COB Marketing, 141 SCRA 86).

Moreover, a corporation has no power to release a subscription or its capital stock,

without valuable consideration for such releases, and as against creditors, a
reduction of the capital stock can take place only in the manner and under the
conditions prescribed by the statute or the charter or the Articles of Incorporation.
(PNB vs. Bitulok Sawmill, 23 SCRA 1366).18
The CAdeclared thatthe inconsistency in the issuance of the ORs rendered the claim
of full payment of the subscriptions to the capital stock unworthy of consideration;
andheld that the veil of corporate fiction could be pierced when it was used as a
shield to perpetrate a fraud or to confuse legitimate issues, to wit:
Finally, appellants SPS YU, argued that the fact of full payment for the unpaid
subscriptions was incontrovertibly established by competent testimonial and
documentary evidence, namely Exhibits "1", "2", "3" & "4", which were never
disputed by appellee, clearly shows that they should not be held liable for payment
of the said unpaid subscriptions of BMPI.
The reliance is misplaced.
We are hereby reproducing the contents of the above-mentioned exhibits, to wit:
Exh: "1" YU Official Receipt No. 217 dated November 5, 1987 amounting to
P45,000.00 allegedly representing the initial payment of subscriptions of
stockholder Albert Yu.
Exh: "2" YU Official Receipt No. 218 dated May 13, 1988 amounting to
P135,000.00 allegedly representing full payment of balance of subscriptions of
stockholder Albert Yu. (Record p. 352).
Exh: "3" YU Official Receipt No. 222 dated November 5, 1987 amounting to
P5,000.00 allegedly representing the initial payment of subscriptions of stockholder
Zenaida Yu.
Exh: "4" YU Official Receipt No. 223 dated May 13, 1988 amounting to
P15,000.00 allegedly representing the full payment of balance of subscriptions of
stockholder Zenaida Yu. (Record p. 353).
Based on the above exhibits, we are in accord with the lower courts findings that
the claim of the individual appellants that they fully paid their subscription to the
defendant BMPI is not worthy of consideration, because, in the case of appellants
SPS. YU, there is an inconsistency regarding the issuance of the official receipt since
the alleged payment made on May 13, 1988 amounting to P135,000.00 was
covered by Official Receipt No. 218 (Record, p. 352), whereas the alleged payment
made earlier on November 5, 1987 amounting to P5,000.00 is covered by Official
Receipt No. 222 (Record, p. 353). Such issuance is a clear indication that said
receipts were belatedly issued just to suit their claim that they have fully paid the
unpaid subscriptions since in the ordinary course of business, a receipt is issued
earlier must have serial numbers lower than those issued on a later date. But in the
case at bar, the receipt issued on November 5, 1987 had a serial number (222)

higher than those issued on May 13, 1988 (218). And even assuming arguendo that
the individual appellants have paid their unpaid subscriptions, still, it is very
apparent that the veil of corporate fiction may be pierced when made as a shield to
perpetuate fraud and/or confuse legitimate issues. (Jacinto vs. Court of Appeals, 198
SCRA 211).19
Spouses Halley and Vieza moved for a reconsideration, but the CA denied their
motion for reconsideration.
Issues
Only Donnina Halley has come to the Court to seek a further review, positing
the following for our consideration and resolution, to wit:
I.
THE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION THAT
DID NOTSTATE THE FACTS AND THE LAW UPON WHICH THE JUDGMENT WAS
BASED BUT MERELY COPIED THE CONTENTS OF RESPONDENTS
MEMORANDUM ADOPTING THE SAME AS THE REASON FOR THE DECISION
II.
THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE
REGIONAL TRIAL COURT WHICH ESSENTIALLY ALLOWED THE PIERCING OF THE
VEIL OF CORPORATE FICTION
III.
THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE TRUST FUND
DOCTRINE WHEN THE GROUNDS THEREFOR HAVE NOT BEEN SATISFIED.
On the first error, the petitioner contends that the RTC lifted verbatim from the
memorandum of Printwell; and submits that the RTCthereby violatedthe
requirement imposed in Section 14, Article VIII of the Constitution 20 as well as in
Section 1,Rule 36 of the Rules of Court, 21to the effect that a judgment or final order
of a court should state clearly and distinctly the facts and the law on which it is
based. The petitioner claims that the RTCs violation indicated that the RTC did not
analyze the case before rendering its decision, thus denying her the opportunity to
analyze the decision; andthat a suspicion of partiality arose from the fact that the
RTC decision was but a replica of Printwells memorandum.She cites Francisco v.
Permskul,22 in which the Court has stated that the reason underlying the
constitutional requirement, that every decision should clearly and distinctly state
the facts and the law on which it is based, is to inform the reader of how the court
has reached its decision and thereby give the losing party an opportunity to study
and analyze the decision and enable such party to appropriately assign the errors
committed therein on appeal.

On the second and third errors, the petitioner maintains that the CA and the RTC
erroneously pierced the veil of corporate fiction despite the absence of cogent proof
showing that she, as stockholder of BMPI, had any hand in transacting with
Printwell; thatthe CA and the RTC failed to appreciate the evidence that she had
fully paid her subscriptions; and the CA and the RTCwrongly relied on the articles of
incorporation in determining the current list of unpaid subscriptions despite the
articles of incorporationbeing at best reflectiveonly of the pre-incorporation status
of BMPI.
As her submissions indicate, the petitioner assails the decisions of the CA on: (a) the
propriety of disregarding the separate personalities of BMPI and its stockholdersby
piercing the thin veil that separated them; and (b) the application of the trust fund
doctrine.
Ruling
The petition for review fails.
I
The
RTC
did
the Constitution and the Rules of Court

not

violate

The contention of the petitioner, that the RTC merely copied the memorandum of
Printwell in writing its decision, and did not analyze the records on its own, thereby
manifesting a bias in favor of Printwell, is unfounded.
It is noted that the petition for review merely generally alleges that starting from its
page 5, the decision of the RTC "copied verbatim the allegations of herein
Respondents in its Memorandum before the said court," as if "the Memorandum was
the draft of the Decision of the Regional Trial Court of Pasig," 23but fails to specify
either the portions allegedly lifted verbatim from the memorandum, or why she
regards the decision as copied. The omission renders thepetition for review
insufficient to support her contention, considering that the mere similarityin
language or thought between Printwells memorandum and the trial courts
decisiondid not necessarily justify the conclusion that the RTC simply lifted verbatim
or copied from thememorandum.
It is to be observed in this connection that a trial or appellate judge may
occasionally viewa partys memorandum or brief as worthy of due consideration
either entirely or partly. When he does so, the judgemay adopt and incorporatein his
adjudicationthe memorandum or the parts of it he deems suitable,and yet not be
guilty of the accusation of lifting or copying from the memorandum. 24 This isbecause
ofthe avowed objective of the memorandum to contribute in the proper illumination
and correct determination of the controversy.Nor is there anything untoward in the
congruence of ideas and views about the legal issues between himself and the party
drafting the memorandum.The frequency of similarities in argumentation,
phraseology, expression, and citation of authorities between the decisions of the
courts and the memoranda of the parties, which may be great or small, can be fairly
attributable tothe adherence by our courts of law and the legal profession to widely

knownor universally accepted precedents set in earlier judicial actions with identical
factual milieus or posing related judicial dilemmas.
We also do not agree with the petitioner that the RTCs manner of writing the
decisiondeprivedher ofthe opportunity to analyze its decisionas to be able to assign
errors on appeal. The contrary appears, considering that she was able to impute
and assignerrors to the RTCthat she extensively discussed in her appeal in the CA,
indicating her thorough analysis ofthe decision of the RTC.
Our own readingof the trial courts decision persuasively shows that the RTC did
comply with the requirements regarding the content and the manner of writing a
decision prescribed in the Constitution and the Rules of Court. The decision of the
RTC contained clear and distinct findings of facts, and stated the applicablelaw and
jurisprudence, fully explaining why the defendants were being held liable to the
plaintiff. In short, the reader was at once informed of the factual and legal reasons
for the ultimate result.
II
Corporate personality not to be used to foster injustice
Printwell impleaded the petitioner and the other stockholders of BMPI for two
reasons, namely: (a) to reach the unpaid subscriptions because it appeared that
such subscriptions were the remaining visible assets of BMPI; and (b) to avoid
multiplicity of suits.25
The petitionersubmits that she had no participation in the transaction between BMPI
and Printwell;that BMPI acted on its own; and that shehad no hand in persuading
BMPI to renege on its obligation to pay. Hence, she should not be personally liable.
We rule against the petitioners submission.
Although a corporation has a personality separate and distinct from those of its
stockholders, directors, or officers, 26such separate and distinct personality is merely
a fiction created by law for the sake of convenience and to promote the ends of
justice.27The corporate personality may be disregarded, and the individuals
composing the corporation will be treated as individuals, if the corporate entity is
being used as a cloak or cover for fraud or illegality;as a justification for a wrong; as
an alter ego, an adjunct, or a business conduit for the sole benefit of the
stockholders.28 As a general rule, a corporation is looked upon as a legal entity,
unless and until sufficient reason to the contrary appears. Thus,the courts always
presume good faith, andfor that reason accord prime importance to the separate
personality of the corporation, disregarding the corporate personality only after the
wrongdoing is first clearly and convincingly established. 29It thus behooves the
courts to be careful in assessing the milieu where the piercing of the corporate veil
shall be done.30
Although nowhere in Printwells amended complaint or in the testimonies Printwell
offered can it be read or inferred from that the petitioner was instrumental in
persuading BMPI to renege onits obligation to pay; or that sheinduced Printwell to

extend the credit accommodation by misrepresenting the solvency of BMPI

toPrintwell, her personal liability, together with that of her co-defendants,
remainedbecause the CA found her and the other defendant stockholders to be in
charge of the operations of BMPI at the time the unpaid obligation was transacted
and incurred, to wit:
In the case at bench, it is undisputed that BMPI made several orders on credit from
appellee PRINTWELL involving the printing of business magazines, wrappers and
subscription cards, in the total amount of P291,342.76 (Record pp. 3-5, Annex "A")
which facts were never denied by appellants stockholders that they owe(d)
appellee the amount of P291,342.76. The said goods were delivered to and received
by BMPI but it failed to pay its overdue account to appellee as well as the interest
thereon, at the rate of 20% per annum until fully paid. It was also during this time
that appellants stockholders were in charge of the operation of BMPI despite the
fact that they were not able to pay their unpaid subscriptions to BMPI yet greatly
benefited from said transactions. In view of the unpaid subscriptions, BMPI failed to
pay appellee of its liability, hence appellee in order to protect its right can collect
from the appellants stockholders regarding their unpaid subscriptions. To deny
appellee from recovering from appellants would place appellee in a limbo on where
to assert their right to collect from BMPI since the stockholders who are appellants
herein are availing the defense of corporate fiction to evade payment of its
obligations.31
It follows, therefore, that whether or not the petitioner persuaded BMPI to renege on
its obligations to pay, and whether or not she induced Printwell to transact with
BMPI were not gooddefensesin the suit.1avvphi1
III
Unpaid
creditor
may
satisfy
its
unpaid
subscriptions;stockholders
prove full payment oftheir subscriptions

claim

from
must

Both the RTC and the CA applied the trust fund doctrineagainst the defendant
stockholders, including the petitioner.
The petitionerargues, however,that the trust fund doctrinewas inapplicablebecause
she had already fully paid her subscriptions to the capital stock of BMPI. She thus
insiststhat both lower courts erred in disregarding the evidence on the complete
payment of the subscription, like receipts, income tax returns, and relevant financial
statements.
The petitioners argumentis devoid of substance.
The trust fund doctrineenunciates a
xxx rule that the property of a corporation is a trust fund for the payment of
creditors, but such property can be called a trust fund only by way of analogy or
metaphor. As between the corporation itself and its creditors it is a simple debtor,

and as between its creditors and stockholders its assets are in equity a fund for the
payment of its debts.32
The trust fund doctrine, first enunciated in the American case of Wood v.
Dummer,33was adopted in our jurisdiction in Philippine Trust Co. v. Rivera, 34where
thisCourt declared that:
It is established doctrine that subscriptions to the capital of a corporation constitute
a fund to which creditors have a right to look for satisfaction of their claims and that
the assignee in insolvency can maintain an action upon any unpaid stock
subscription in order to realize assets for the payment of its debts. (Velasco vs.
Poizat, 37 Phil., 802) xxx35
We clarify that the trust fund doctrineis not limited to reaching the stockholders
unpaid subscriptions. The scope of the doctrine when the corporation is insolvent
encompasses not only the capital stock, but also other property and assets
generally regarded in equity as a trust fund for the payment of corporate debts. 36All
assets and property belonging to the corporation held in trust for the benefit of
creditors thatwere distributed or in the possession of the stockholders, regardless of
full paymentof their subscriptions, may be reached by the creditor in satisfaction of
its claim.
Also, under the trust fund doctrine,a corporation has no legal capacity to release an
original subscriber to its capital stock from the obligation of paying for his shares, in
whole or in part,37 without a valuable consideration, 38 or fraudulently, to the
prejudice of creditors.39The creditor is allowed to maintain an action upon any
unpaid subscriptions and thereby steps into the shoes of the corporation for the
satisfaction of its debt.40To make out a prima facie case in a suit against
stockholders of an insolvent corporation to compel them to contribute to the
payment of its debts by making good unpaid balances upon their subscriptions, it is
only necessary to establish that thestockholders have not in good faith paid the par
value of the stocks of the corporation. 41
The petitionerposits that the finding of irregularity attending the issuance of the
receipts (ORs) issued to the other stockholders/subscribers should not affect her
becauseher receipt did not suffer similar irregularity.
Notwithstanding that the RTC and the CA did not find any irregularity in the OR
issued in her favor,we still cannot sustain the petitioners defense of full payment of
her subscription.
In civil cases, theparty who pleads payment has the burden of proving it, that even
where the plaintiff must allege nonpayment, the general rule is that the burden
rests on the defendant to prove payment, rather than on the plaintiff to prove
nonpayment. In other words, the debtor bears the burden of showing with legal
certainty that the obligation has been discharged by payment. 42
Apparently, the petitioner failed to discharge her burden.

A receipt is the written acknowledgment of the fact of payment in money or other

settlement between the seller and the buyer of goods, thedebtor or thecreditor, or
theperson rendering services, and theclient or thecustomer. 43Althougha receipt is
the best evidence of the fact of payment, it isnot conclusive, but merely
presumptive;nor is it exclusive evidence,considering thatparole evidence may also
establishthe fact of payment.44
The petitioners ORNo. 227,presentedto prove the payment of the balance of her
subscription, indicated that her supposed payment had beenmade by means of a
check. Thus, to discharge theburden to prove payment of her subscription, she had
to adduce evidence satisfactorily proving that her payment by check wasregardedas
payment under the law.
Paymentis defined as the delivery of money. 45Yet, because a check is not money and
only substitutes for money, the delivery of a check does not operate as payment
and does not discharge the obligation under a judgment. 46 The delivery of a bill of
exchange only produces the fact of payment when the bill has been encashed. 47The
following passage fromBank of Philippine Islands v. Royeca 48is enlightening:
Settled is the rule that payment must be made in legal tender. A check is not legal
tender and, therefore, cannot constitute a valid tender of payment. Since a
negotiable instrument is only a substitute for money and not money, the delivery of
such an instrument does not, by itself, operate as payment. Mere delivery of checks
does not discharge the obligation under a judgment. The obligation is not
extinguished and remains suspended until the payment by commercial document is
actually realized.
To establish their defense, the respondents therefore had to present proof, not only
that they delivered the checks to the petitioner, but also that the checks were
encashed. The respondents failed to do so. Had the checks been actually encashed,
the respondents could have easily produced the cancelled checks as evidence to
prove the same. Instead, they merely averred that they believed in good faith that
the checks were encashed because they were not notified of the dishonor of the
checks and three years had already lapsed since they issued the checks.
Because of this failure of the respondents to present sufficient proof of payment, it
was no longer necessary for the petitioner to prove non-payment, particularly proof
that the checks were dishonored. The burden of evidence is shifted only if the party
upon whom it is lodged was able to adduce preponderant evidence to prove its
claim.
Ostensibly, therefore, the petitioners mere submission of the receipt issued in
exchange of the check did not satisfactorily establish her allegation of full payment
of her subscription. Indeed, she could not even inform the trial court about the
identity of her drawee bank, 49and about whether the check was cleared and its
amount paid to BMPI.50In fact, she did not present the check itself.
Theincome tax return (ITR) and statement of assets and liabilities of BMPI, albeit
presented, had no bearing on the issue of payment of the subscription because they

did not by themselves prove payment. ITRsestablish ataxpayers liability for taxes or
a taxpayers claim for refund. In the same manner, the deposit slips and entries in
the passbook issued in the name of BMPI were hardly relevant due to their not
reflecting the alleged payments.
It is notable, too, that the petitioner and her co-stockholders did not support their
allegation of complete payment of their respective subscriptions with the stock and
transfer book of BMPI. Indeed, books and records of a corporation (including the
stock and transfer book) are admissible in evidence in favor of or against the
corporation and its members to prove the corporate acts, its financial status and
other matters (like the status of the stockholders), and are ordinarily the best
evidence of corporate acts and proceedings. 51Specifically, a stock and transfer book
is necessary as a measure of precaution, expediency, and convenience because it
provides the only certain and accurate method of establishing the various corporate
acts and transactions and of showing the ownership of stock and like matters. 52That
she tendered no explanation why the stock and transfer book was not presented
warrants the inference that the book did not reflect the actual payment of her
subscription.
Nor did the petitioner present any certificate of stock issued by BMPI to her. Such a
certificate covering her subscription might have been a reliable evidence of full
payment of the subscriptions, considering that under Section 65 of the Corporation
Code a certificate of stock issues only to a subscriber who has fully paid his
subscription. The lack of any explanation for the absence of a stock certificate in her
favor likewise warrants an unfavorable inference on the issue of payment.
Lastly, the petitioner maintains that both lower courts erred in relying on the articles
of incorporationas proof of the liabilities of the stockholders subscribing to BMPIs
stocks, averring that the articles of incorporationdid not reflect the latest
subscription status of BMPI.
Although the articles of incorporation may possibly reflect only the pre-incorporation
status of a corporation, the lower courts reliance on that document to determine
whether the original subscribersalready fully paid their subscriptions or not was
neither unwarranted nor erroneous. As earlier explained, the burden of establishing
the fact of full payment belonged not to Printwell even if it was the plaintiff, but to
the stockholders like the petitioner who, as the defendants, averredfull payment of
their subscriptions as a defense. Their failure to substantiate their averment of full
payment, as well as their failure to counter the reliance on the recitals found in the
articles of incorporation simply meant their failure or inability to satisfactorily prove
their defense of full payment of the subscriptions.
To reiterate, the petitionerwas liablepursuant to the trust fund doctrine for the
corporate obligation of BMPI by virtue of her subscription being still unpaid.
Printwell, as BMPIs creditor,had a right to reachher unpaid subscription in
satisfaction of its claim.
IV
Liability
of
stockholders
for
to the extentof their unpaid subscription

corporate

debts

isup

The RTC declared the stockholders pro rata liable for the debt(based on the
proportion to their shares in the capital stock of BMPI); and held the
petitionerpersonally liable onlyin the amount of P149,955.65.
We do not agree. The RTC lacked the legal and factual support for its prorating the
liability. Hence, we need to modify the extent of the petitioners personal liability to
Printwell. The prevailing rule is that a stockholder is personally liable for the
financial obligations of the corporation to the extent of his unpaid subscription. 53In
view ofthe petitioners unpaid subscription being worth P262,500.00, shewas liable
up to that amount.
Interest is also imposable on the unpaid obligation. Absent any stipulation, interest
is fixed at 12% per annum from the date the amended complaint was filed on
February 8, 1990 until the obligation (i.e., to the extent of the petitioners personal
liability of P262,500.00) is fully paid.54
Lastly, we find no basis togrant attorneys fees, the award for which must be
supported by findings of fact and of law as provided under Article 2208 of the Civil
Code55incorporated in the body of decision of the trial court. The absence of the
requisite findings from the RTC decision warrants the deletion of the attorneys fees.
ACCORDINGLY, we deny the petition for review on certiorari;and affirm with
modification the decision promulgated on August 14, 2002by ordering the
petitionerto pay to Printwell, Inc. the sum of P262,500.00, plus interest of 12% per
annum to be computed from February 8, 1990 until full payment.
The petitioner shall paycost of suit in this appeal.
SO ORDERED.

G.R. No. 171660

October 17, 2011

CONTINENTAL
CEMENT
CORPORATION
Petitioner,
vs.
ASEA BROWN BOVERI, INC., BBC BROWN BOVERI, CORP., AND TORD B.
ERIKSON,** Respondents.
DECISION
DEL CASTILLO, J.:
"Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved.
Such compensation is referred to as actual or compensatory damages." 1
This Petition for Review on Certiorari2 under Rule 45 of the Rules of Court assails the
Decision3 dated August 25, 2005 and the Resolution 4 dated February 16, 2006 of the
Court of Appeals (CA) in CA-G.R. CV No. 58551.
Factual Antecedents
Sometime in July 1990, petitioner Continental Cement Corporation (CCC),
a corporation engaged in the business of producing cement, 5 obtained the services
of respondents6 Asea Brown Boveri, Inc. (ABB) and BBC Brown Boveri, Corp. to
repair its 160 KW Kiln DC Drive Motor (Kiln Drive Motor). 7
On October 23, 1991, due to the repeated failure of respondents to repair the Kiln
Drive Motor, petitioner filed with Branch 101 of the Regional Trial Court (RTC) of
Quezon City a Complaint8 for sum of money and damages, docketed as Civil Case
No. Q-91-10419, against respondent corporations and respondent Tord B. Eriksson

(Eriksson), Vice-President of the Service Division of the respondent ABB. 9 Petitioner

alleged that:
4. On July 11, 1990, the plaintiff delivered the 160 KW Kiln DC Drive Motor to
the defendants to be repaired under PO No. 17136-17137, x x x
The defendant, Tord B. Eriksson, was personally directing the repair of the
said Kiln Drive Motor. He has direction and control of the business of the
defendant corporations. Apparently, the defendant Asea Brown Boveri, Inc.
has no separate personality because of the 4,000 shares of stock, 3996
shares were subscribed by Honorio Poblador, Jr. The four other stockholders
subscribed for one share of stock each only.
5. After the first repair by the defendants, the 160 KW Kiln Drive Motor was
installed for testing on October 3, 1990. On October 4, 1990 the test failed.
The plaintiff removed the DC Drive Motor and replaced it with its old motor. It
was only on October 9, 1990 that the plaintiff resumed operation. The plaintiff
lost 1,040 MTD per day from October 5 to October 9, 1990.
6. On November 14, 1990, after the defendants had undertaken the second
repair of the motor in question, it was installed in the kiln. The test failed
again. The plaintiff resumed operation with its old motor on November 19,
1990. The plaintiff suffered production losses for five days at the rate of
1,040 MTD daily.
7. The defendants were given a third chance to repair the 160 KW Kiln DC
Drive Motor.1avvphi1 On March 13, 1991, the motor was installed and tested.
Again, the test failed. The plaintiff resumed operation on March 15, 1991. The
plaintiff sustained production losses at the rate of 1,040 MTD for two days.
8. As a consequence of the failure of the defendants to comply with their
contractual obligation to repair the 160 KW Kiln DC Drive Motor, the plaintiff
sustained the following losses:
(a) Production and opportunity losses - P10,600,000.00
This amount represents only about 25% of the production losses at the
rate of P72.00 per bag of cement.
(b) Labor Cost and Rental of Crane - 26,965.78
(c)
Penalties
(at
P987.25
failure
to
deliver
the
Aug. 29, 1990 to July 31, 1991. - 331,716.00

(d)
Cost
of
money
interest
P987.25
a
day
from
July
to April 5, 1991 at 34% for 261 days - 24,335.59

day)
motor
of
18,

for
from
the
1990

Total Damages 10,983,017.42

9. The plaintiff has made several demands on the defendants for the
payment of the above-enumerated damages, but the latter refused to do so
without valid justification.
10. The plaintiff was constrained to file this action and has undertaken to pay
its counsel Twenty Percentum (20%) of the amount sought to be recovered as
attorneys fees.10
Respondents, however, claimed that under Clause 7 of the General Conditions, 11
attached to the letter of offer 12 dated July 4, 1990 issued by respondent ABB to
petitioner, the liability of respondent ABB "does not extend to consequential
damages either direct or indirect." 13 Moreover, as to respondent Eriksson, there is
no lawful and tenable reason for petitioner to sue him in his personal capacity
because he did not personally direct the repair of the Kiln Drive Motor. 14
Ruling of the Regional Trial Court
On August 30, 1995, the RTC rendered a Decision 15 in favor of petitioner. The RTC
rejected the defense of limited liability interposed by respondents since they failed
to prove that petitioner received a copy of the General Conditions. 16 Consequently,
the RTC granted petitioners claims for production loss, labor cost and rental of
crane, and attorneys fees.17 Thus:
WHEREFORE, premises above considered, finding the complaint substantiated by
plaintiff, judgment is hereby rendered in favor of plaintiff and against defendants,
hereby ordering the latter to pay jointly and severally the former, the following
sums:
P10,600,00.00 for loss of production;
P 26,965.78 labor cost and rental of crane;
P 100,000.00 attorneys fees and cost.
SO ORDERED.18
Ruling of the Court of Appeals
On appeal, the CA reversed the ruling of the RTC. The CA applied the exculpatory
clause in the General Conditions and ruled that there is no implied warranty on
repair work; thus, the repairman cannot be made to pay for loss of production as a
result of the unsuccessful repair. 19 The fallo of the CA Decision20 reads:
WHEREFORE, premises considered, the assailed August 30, 1995 Decision of the
Regional Trial Court of Quezon City, Branch 101 is hereby REVERSED and SET
ASIDE. The October 23, 1991 Complaint is hereby DISMISSED.

SO ORDERED.21
Petitioner moved for reconsideration 22 but the CA denied the same in its Resolution 23
dated February 16, 2006.
Issues
Hence, the present recourse where petitioner interposes the following issues:
1. Whether x x x the [CA] gravely erred in applying the terms of the "General
Conditions" of Purchase Orders Nos. 17136 and 17137 to exculpate the
respondents x x x from liability in this case.
2. Whether x x x the [CA] seriously erred in applying the concepts of implied
warranty and warranty against hidden defects of the New Civil Code in
order to exculpate the respondents x x x from its contractual obligation. 24
Petitioners Arguments
Petitioner reiterates that the General Conditions cannot exculpate respondents
because petitioner never agreed to be bound by it nor did petitioner receive a copy
of it.25 Petitioner also imputes error on the part of the CA in applying the concepts of
warranty against hidden defects and implied warranty. 26 Petitioner contends that
these concepts are not applicable because the instant case does not involve a
contract of sale.27 What applies are Articles 1170 and 2201 of
the Civil Code.28
Respondents Arguments
Conversely, respondents insist that petitioner is bound by the General Conditions. 29
By issuing Purchase Order Nos. 17136-37, petitioner in effect accepted the General
Conditions appended to respondent ABBs letter of offer. 30 Respondents likewise
defend the ruling of the CA that there could be no implied warranty on the repair
made by respondent ABB as the warranty of the fitness of the equipment should be
enforced directly against the manufacturer of the Kiln Drive Motor. 31 Respondents
also deny liability for damages claiming that they performed their obligation in good
faith.32
Our Ruling
The petition has merit.
Petitioner and respondent ABB entered into a contract for the repair of petitioners
Kiln Drive Motor, evidenced by Purchase Order Nos. 17136-37, 33 with the following
terms and conditions:
a) Total Price: P197,450.00

b) Delivery Date: August 29, 1990 or six (6) weeks from receipt of order and
down payment34
c) Penalty: One half of one percent of the total cost or Nine Hundred Eighty
Seven Pesos and Twenty five centavos (P987.25) per day of delay.
Respondent ABB, however, not only incurred delay in performing its obligation but
likewise failed to repair the Kiln Drive Motor; thus, prompting petitioner to sue for
damages.
Clause 7 of the General Conditions is not binding on petitioner
Respondents contend that under Clause 7 of the General Conditions their liability
"does not extend to consequential damages either direct or indirect." 35 This
contention, however, is unavailing because respondents failed to show that
petitioner was duly furnished with a copy of said General Conditions. Hence, it is not
binding on petitioner.
Having breached the contract it entered with petitioner, respondent ABB is liable for
damages pursuant to Articles 1167, 1170, and 2201 of the Civil Code, which state:
Art. 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the
obligation. Furthermore, it may be decreed that what has been poorly done be
undone.
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages.
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen
or could have reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the nonperformance of the obligation.
Based on the foregoing, a repairman who fails to perform his obligation is liable to
pay for the cost of the execution of the obligation plus damages. Though entitled,
petitioner in this case is not claiming reimbursement for the repair allegedly done
by Newton Contractor, 36 but is instead asking for damages for the delay caused by
respondent ABB.
Petitioner is entitled to penalties under Purchase Order Nos. 17136-37

As per Purchase Order Nos. 17136-37, petitioner is entitled to penalties in the

amount of P987.25 per day from the time of delay, August 30, 1990, up to the time
the Kiln Drive Motor was finally returned to petitioner. Records show that although
the testing of Kiln Drive Motor was done on March 13, 1991, the said motor was
actually delivered to petitioner as early as January 7, 1991. 37 The installation and
testing was done only on March 13, 1991 upon the request of petitioner because the
Kiln was under repair at the time the motor was delivered; hence, the load testing
had to be postponed.38
Under Article 122639 of the Civil Code, the penalty clause takes the place of
indemnity for damages and the payment of interests in case of non-compliance with
the obligation, unless there is a stipulation to the contrary. In this case, since there
is no stipulation to the contrary, the penalty in the amount of P987.25 per day of
delay covers all other damages (i.e. production loss, labor cost, and rental of the
crane) claimed by petitioner.
Petitioner is not entitled to recover production loss, labor cost and the rental of
crane
Article 1226 of the Civil Code further provides that if the obligor refuses to pay the
penalty, such as in the instant case, 40 damages and interests may still be recovered
on top of the penalty. Damages claimed must be the natural and probable
consequences of the breach, which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted. 41
Thus, in addition to the penalties, petitioner seeks to recover as damages
production loss, labor cost and the rental of the crane.
Petitioner avers that every time the Kiln Drive Motor is tested, petitioner had to rent
a crane and pay for labor to install the motor. 42 But except for the Summary of
Claims for Damages,43 no other evidence was presented by petitioner to show that it
had indeed rented a crane or that it incurred labor cost to install the motor.
Petitioner likewise claims that as a result of the delay in the repair of the Kiln Drive
Motor, its production from August 29, 1990 to March 15, 1991 decreased since it
had to use its old motor which was not able to produce cement as much as the one
under repair;44 and that every time the said motor was installed and tested,
petitioner had to stop its operations; thereby, incurring more production losses. 45 To
support its claim, petitioner presented its monthly production reports 46 for the
months of April to June 1990 showing that on the average it was able to produce
1040 MT of cement per day. However, the production reports for the months of
August 1990 to March 1991 were not presented. Without these production reports, it
cannot be determined with reasonable certainty whether petitioner indeed incurred
production losses during the said period. It may not be amiss to say that competent
proof and a reasonable degree of certainty are needed to justify a grant of actual or
compensatory damages; speculations, conjectures, assertions or guesswork are not
sufficient.47

Besides, consequential damages, such as loss of profits on account of delay or

failure of delivery, may be recovered only if such damages were reasonably
foreseen or have been brought within the contemplation of the parties as the
probable result of a breach at the time of or prior to contracting. 48 Considering the
nature of the obligation in the instant case, respondent ABB, at the time it agreed to
repair petitioners Kiln Drive Motor, could not have reasonably foreseen that it would
be made liable for production loss, labor cost and rental of the crane in case it fails
to repair the motor or incurs delay in delivering the same, especially since the
motor under repair was a spare motor. 49
For the foregoing reasons, petitioner is not entitled to recover production loss, labor
cost and the rental of the crane.
Petitioner is not entitled to attorneys fees
Neither is petitioner entitled to the award of attorneys fees. Jurisprudence requires
that the factual basis for the award of attorneys fees must be set forth in the body
of the decision and not in the dispositive portion only. 50 In this case, no explanation
was given by the RTC in awarding attorneys fees in favor of petitioner. In fact, the
award of attorneys fees was mentioned only in the dispositive portion of the
decision.
Respondent Eriksson cannot be made jointly and severally liable for the penalties
Respondent Eriksson, however, cannot be made jointly and severally liable for the
penalties. There is no showing that respondent Eriksson directed or participated in
the repair of the Kiln Drive Motor or that he is guilty of bad faith or gross negligence
in directing the affairs of respondent ABB. It is a basic principle that a corporation
has a personality separate and distinct from the persons composing or representing
it; hence, personal liability attaches only in exceptional cases, such as when the
director, trustee, or officer is guilty of bad faith or gross negligence in directing the
affairs of the corporation. 51
In sum, we find petitioner entitled to penalties in the amount of P987.25 per day
from August 30, 1990 up to January 7, 1991 (131 days) or a total amount of
P129,329.75 for the delay caused by respondent ABB. Finally, we impose interest at
the rate of six percent (6%) on the total amount due from the date of filing of the
complaint until finality of this Decision. However, from the finality of judgment until
full payment of the total award, the interest rate of twelve percent (12%) shall
apply.52
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated August
25, 2005 and the Resolution dated February 16, 2006 of the Court of Appeals in CAG.R. CV No. 58551 are hereby REVERSED and SET ASIDE. Respondent ABB is
ORDERED to pay petitioner the amount of P129,329.75, with interest at 6% per
annum to be computed from the date of the filing of the complaint until finality of
this Decision and 12% per annum thereafter until full payment.
SO ORDERED.

G.R. No. 167291

January 12, 2011

PRINCE TRANSPORT, Inc. and Mr. RENATO CLAROS, Petitioners,

vs.
DIOSDADO GARCIA, LUISITO GARCIA, RODANTE ROMERO, REX BARTOLOME,
FELICIANO GASCO, JR., DANILO ROJO, EDGAR SANFUEGO, AMADO
GALANTO, EUTIQUIO LUGTU, JOEL GRAMATICA, MIEL CERVANTES, TERESITA
CABANES, ROE DELA CRUZ, RICHELO BALIDOY, VILMA PORRAS, MIGUELITO
SALCEDO, CRISTINA GARCIA, MARIO NAZARENO, DINDO TORRES, ESMAEL
RAMBOYONG, ROBETO* MANO, ROGELIO BAGAWISAN, ARIEL SNACHEZ,
ESTAQULO VILLAREAL, NELSON MONTERO, GLORIA ORANTE, HARRY TOCA,
PABLITO MACASAET and RONALD GARCITA Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court praying for the annulment of the Decision 1 and Resolution2 of the Court of
Appeals (CA) dated December 20, 2004 and February 24, 2005, respectively, in CAG.R. SP No. 80953. The assailed Decision reversed and set aside the Resolutions
dated May 30, 20033 and September 26, 20034 of the National Labor Relations

Commission (NLRC) in CA No. 029059-01, while the disputed Resolution denied

petitioners' Motion for Reconsideration.
The present petition arose from various complaints filed by herein respondents
charging petitioners with illegal dismissal, unfair labor practice and illegal
deductions and praying for the award of premium pay for holiday and rest day,
holiday pay, service leave pay, 13th month pay, moral and exemplary damages and
attorney's fees.
Respondents alleged in their respective position papers and other related pleadings
that they were employees of Prince Transport, Inc. (PTI), a company engaged in the
business of transporting passengers by land; respondents were hired either as
drivers, conductors, mechanics or inspectors, except for respondent Diosdado
Garcia (Garcia), who was assigned as Operations Manager; in addition to their
regular monthly income, respondents also received commissions equivalent to 8 to
10% of their wages; sometime in October 1997, the said commissions were reduced
to 7 to 9%; this led respondents and other employees of PTI to hold a series of
meetings to discuss the protection of their interests as employees; these meetings
led petitioner Renato Claros, who is the president of PTI, to suspect that
respondents are about to form a union; he made known to Garcia his objection to
the formation of a union; in December 1997, PTI employees requested for a cash
advance, but the same was denied by management which resulted in
demoralization on the employees' ranks; later, PTI acceded to the request of some,
but not all, of the employees; the foregoing circumstances led respondents to form
a union for their mutual aid and protection; in order to block the continued
formation of the union, PTI caused the transfer of all union members and
sympathizers to one of its sub-companies, Lubas Transport (Lubas); despite such
transfer, the schedule of drivers and conductors, as well as their company
identification cards, were issued by PTI; the daily time records, tickets and reports of
the respondents were also filed at the PTI office; and, all claims for salaries were
transacted at the same office; later, the business of Lubas deteriorated because of
the refusal of PTI to maintain and repair the units being used therein, which resulted
in the virtual stoppage of its operations and respondents' loss of employment.
Petitioners, on the other hand, denied the material allegations of the complaints
contending that herein respondents were no longer their employees, since they all
transferred to Lubas at their own request; petitioners have nothing to do with the
management and operations of Lubas as well as the control and supervision of the
latter's employees; petitioners were not aware of the existence of any union in their
company and came to know of the same only in June 1998 when they were served a
copy of the summons in the petition for certification election filed by the union; that
before the union was registered on April 15, 1998, the complaint subject of the
present petition was already filed; that the real motive in the filing of the complaints
was because PTI asked respondents to vacate the bunkhouse where they
(respondents) and their respective families were staying because PTI wanted to
renovate the same.
Subsequently, the complaints filed by respondents were consolidated.

On October 25, 2000, the Labor Arbiter rendered a Decision, 5 the dispositive portion
of which reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the complaints for Unfair Labor Practice, non-payment of
holiday pay and holiday premium, service incentive leave pay and 13th
month pay;
Dismissing the complaint of Edgardo Belda for refund of boundary-hulog;
2. Dismissing the complaint for illegal dismissal against the respondents
Prince Transport, Inc. and/or Prince Transport Phils. Corporation, Roberto
Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy, Mario Feranil and
Peter Buentiempo;
3. Declaring that the complainants named below are illegally dismissed by
Lubas Transport; ordering said Lubas Transport to pay backwages and
separation pay in lieu of reinstatement in the following amount:
Complainants

Backwage Separation
s
Pay

(1) Diosdado Garcia

P222,348.
P79,456.00
70

(2) Feliciano Gasco, 203,350.0

54,600.00
Jr.
0
(3) Pablito Macasaet

145,250.0
13,000.00
0

(4)
Esmael 221,500.0
30,000.00
Ramboyong
0
(5) Joel Gramatica

221,500.0
60,000.00
0

(6) Amado Galanto

130,725.0
29,250.00
0

(7) Miel Cervantes

265,800.0
60,000.00
0

(8) Roberto Mano

221,500.0
50,000.00
0

(9) Roe dela Cruz

265,800.0
60,000.00
0

(10) Richelo Balidoy

130,725.0
29,250.00
0

(11) Vilma Porras

221,500.0
70,000.00
0

(12)
Salcedo

Miguelito 265,800.0
60,000.00
0

(13) Cristina Garcia

130,725.0
35,100.00
0

(14) Luisito Garcia

145,250.0
19,500.00
0

(15)
Bagawisan

Rogelio 265,800.0
60,000.00
0

(16)
Rodante
Romero

H. 221,500.0
60,000.00
0

(17) Dindo Torres

(18)
Sanfuego

265,800.0
50,000.00
0

Edgar 221,500.0
40,000.00
0

(19) Ronald Gacita

221,500.0
40,000.00
0

(20) Harry Toca

174,300.0
23,400.00
0

(21) Amado Galanto

130,725.0
17,550.00
0

(22)
Cabaes

Teresita 130,725.0
17,550.00
0

(23) Rex Bartolome

301,500.0
30,000.00
0

(24) Mario Nazareno

221,500.0
30,000.00
0

(25)
Villareal

Eustaquio 145,250.0
19,500.00
0

(26) Ariel Sanchez

265,800.0
60,000.00
0

(27) Gloria Orante

263,100.0
60,000.00
0

(28) Nelson Montero

264,600.0
60,000.00
0

(29) Rizal Beato

295,000.0
40,000.00
0

(30) Eutiquio Lugtu

354,000.0
48,000.00
0

(31)
Warlito 295,000.0
40,000.00
Dickensomn
0

(32) Edgardo Belda

354,000.0
84,000.00
0

(33) Tita Go

295,000.0
70,000.00
0

(34) Alex Lodor

295,000.0
50,000.00
0

(35)
Arguilles

Glenda 295,000.0
40,000.00
0

(36) Erwin Luces

354,000.0
48,000.00
0

(37) Jesse Celle

354,000.0
48,000.00
0

(38) Roy Adorable

295,000.0
40,000.00
0

(39)
Bangcoro

Marlon 295,000.0
40,000.00
0

(40)Edgardo
Bangcoro

354,000.0
36,000.00
0

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) of

the total monetary award; and
6. Ordering the dismissal of the claim for moral and exemplary damages for
lack merit.
SO ORDERED.6
The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the
absence of evidence to show that they violated respondents right to selforganization. The Labor Arbiter also held that Lubas is the respondents employer
and that it (Lubas) is an entity which is separate, distinct and independent from PTI.
Nonetheless, the Labor Arbiter found that Lubas is guilty of illegally dismissing
respondents from their employment.
Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI
should also be held equally liable as Lubas.
In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor
Arbiter and disposed as follows:
WHEREFORE, premises considered, the appeal is hereby PARTIALLY GRANTED.
Accordingly, the Decision appealed from is SUSTAINED subject to the modification
that Complainant-Appellant Edgardo Belda deserves refund of his boundary-hulog in
the amount of P446,862.00; and that Complainants-Appellants Danilo Rojo and

Danilo Laurel should be included in the computation of Complainants-Appellants

claim as follows:
Complainants
41.
Rojo

Backwage Separation
s
Pay

Danilo P355,560.
P48,000.00
00

42.
Danilo P357,960.
P72,000.00
Laurel
00
As regards all other aspects, the Decision appealed from is SUSTAINED.
SO ORDERED.7
Respondents filed a Motion for Reconsideration, but the NLRC denied it in its
Resolution8 dated September 26, 2003.
Respondents then filed a special civil action for certiorari with the CA assailing the
Decision and Resolution of the NLRC.
On December 20, 2004, the CA rendered the herein assailed Decision which granted
respondents' petition. The CA ruled that petitioners are guilty of unfair labor
practice; that Lubas is a mere instrumentality, agent conduit or adjunct of PTI; and
that petitioners act of transferring respondents employment to Lubas is indicative
of their intent to frustrate the efforts of respondents to organize themselves into a
union. Accordingly, the CA disposed of the case as follows:
WHEREFORE, the Petition for Certiorari is hereby GRANTED. Accordingly, the
subject decision is hereby REVERSED and SET ASIDE and another one ENTERED
finding the respondents guilty of unfair labor practice and ordering them to
reinstate the petitioners to their former positions without loss of seniority rights and
with full backwages.
With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in
the computation of petitioner's claim for backwages and with respect to the portion
ordering the refund of Edgardo Belda's boundary-hulog in the amount of
P446,862.00, the NLRC decision is affirmed and maintained.
SO ORDERED.9
Petitioners filed a Motion for Reconsideration, but the CA denied it via its
Resolution10 dated February 24, 2005.
Hence, the instant petition for review on certiorari based on the following grounds:
A

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING DUE

COURSE TO THE RESPONDENTS' PETITION FOR CERTIORARI
1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE FINDINGS
OF THE LABOR ARBITER AND AFFIRMED BY THE NLRC
2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE PETITION
3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO
THE PETITION WITH RESPECT TO RESPONDENTS REX BARTOLOME,
FELICIANO GASCO, DANILO ROJO, EUTIQUIO LUGTU, AND NELSON
MONTERO AS THEY FAILED TO FILE AN APPEAL TO THE NLRC
B
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS
PRINCE TRANSPORT, INC. AND MR. RENATO CLAROS AND LUBAS TRANSPORT ARE
ONE AND THE SAME CORPORATION AND THUS, LIABLE IN SOLIDUM TO
RESPONDENTS.
C
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING
THE REINSTATEMENT OF RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS
NOT ONE OF THE ISSUES RAISED IN RESPONDENTS' PETITION FOR CERTIORARI. 11
Petitioners assert that factual findings of agencies exercising quasi-judicial functions
like the NLRC are accorded not only respect but even finality; that the CA should
have outrightly dismissed the petition filed before it because in certiorari
proceedings under Rule 65 of the Rules of Court it is not within the province of the
CA to evaluate the sufficiency of evidence upon which the NLRC based its
determination, the inquiry being limited essentially to whether or not said tribunal
has acted without or in excess of its jurisdiction or with grave abuse of discretion.
Petitioners assert that the CA can only pass upon the factual findings of the NLRC if
they are not supported by evidence on record, or if the impugned judgment is based
on misapprehension of facts which circumstances are not present in this case.
Petitioners also emphasize that the NLRC and the Labor Arbiter concurred in their
factual findings which were based on substantial evidence and, therefore, should
have been accorded great weight and respect by the CA.
Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction
nor committed error in re-evaluating the NLRCs factual findings since such findings
are not in accord with the evidence on record and the applicable law or
jurisprudence.
The Court agrees with respondents.
The power of the CA to review NLRC decisions via a petition for certiorari under Rule
65 of the Rules of Court has been settled as early as this Courts decision in St.

Martin Funeral Homes v. NLRC.12 In said case, the Court held that the proper vehicle
for such review is a special civil action for certiorari under Rule 65 of the said Rules,
and that the case should be filed with the CA in strict observance of the doctrine of
hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas
Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA pursuant to
the exercise of its original jurisdiction over petitions for certiorari is specifically
given the power to pass upon the evidence, if and when necessary, to resolve
factual issues.13 Section 9 clearly states:
xxxx
The Court of Appeals shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual issues
raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings. x x x
However, equally settled is the rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are generally
accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. 14 But these findings are not
infallible. When there is a showing that they were arrived at arbitrarily or in
disregard of the evidence on record, they may be examined by the courts. 15 The CA
can grant the petition for certiorari if it finds that the NLRC, in its assailed decision
or resolution, made a factual finding not supported by substantial evidence. 16 It is
within the jurisdiction of the CA, whose jurisdiction over labor cases has been
expanded to review the findings of the NLRC. 17
In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus,
these findings are generally binding on the appellate court, unless there was a
showing that they were arrived at arbitrarily or in disregard of the evidence on
record. In respondents' petition for certiorari with the CA, these factual findings
were reexamined and reversed by the appellate court on the ground that they were
not in accord with credible evidence presented in this case. To determine if the CA's
reexamination of factual findings and reversal of the NLRC decision are proper and
with sufficient basis, it is incumbent upon this Court to make its own evaluation of
the evidence on record.18
After a thorough review of the records at hand, the Court finds that the CA did not
commit error in arriving at its own findings and conclusions for reasons to be
discussed hereunder.
Firstly, petitioners posit that the petition filed with the CA is fatally defective,
because the attached verification and certificate against forum shopping was signed
only by respondent Garcia.
The Court does not agree.

While the general rule is that the certificate of non-forum shopping must be signed
by all the plaintiffs in a case and the signature of only one of them is insufficient,
the Court has stressed that the rules on forum shopping, which were designed to
promote and facilitate the orderly administration of justice, should not be
interpreted with such absolute literalness as to subvert its own ultimate and
legitimate objective.19 Strict compliance with the provision regarding the certificate
of non-forum shopping underscores its mandatory nature in that the certification
cannot be altogether dispensed with or its requirements completely disregarded. 20 It
does not, however, prohibit substantial compliance therewith under justifiable
circumstances, considering especially that although it is obligatory, it is not
jurisdictional.21
In a number of cases, the Court has consistently held that when all the petitioners
share a common interest and invoke a common cause of action or defense, the
signature of only one of them in the certification against forum shopping
substantially complies with the rules.22 In the present case, there is no question that
respondents share a common interest and invoke a common cause of action. Hence,
the signature of respondent Garcia is a sufficient compliance with the rule governing
certificates of non-forum shopping. In the first place, some of the respondents
actually executed a Special Power of Attorney authorizing Garcia as their attorneyin-fact in filing a petition for certiorari with the CA. 23
The Court, likewise, does not agree with petitioners' argument that the CA should
not have given due course to the petition filed before it with respect to some of the
respondents, considering that these respondents did not sign the verification
attached to the Memorandum of Partial Appeal earlier filed with the NLRC.
Petitioners assert that the decision of the Labor Arbiter has become final and
executory with respect to these respondents and, as a consequence, they are
barred from filing a petition for certiorari with the CA.
With respect to the absence of some of the workers signatures in the verification,
the verification requirement is deemed substantially complied with when some of
the parties who undoubtedly have sufficient knowledge and belief to swear to the
truth of the allegations in the petition had signed the same. Such verification is
deemed a sufficient assurance that the matters alleged in the petition have been
made in good faith or are true and correct, and not merely speculative. Moreover,
respondents' Partial Appeal shows that the appeal stipulated as complainantsappellants "Rizal Beato, et al.", meaning that there were more than one appellant
who were all workers of petitioners.
In any case, the settled rule is that a pleading which is required by the Rules of
Court to be verified, may be given due course even without a verification if the
circumstances warrant the suspension of the rules in the interest of justice. 24
Indeed, the absence of a verification is not jurisdictional, but only a formal defect,
which does not of itself justify a court in refusing to allow and act on a case. 25
Hence, the failure of some of the respondents to sign the verification attached to
their Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.
Petitioners also contend that the CA erred in applying the doctrine of piercing the
corporate veil with respect to Lubas, because the said doctrine is applicable only to

corporations and Lubas is not a corporation but a single proprietorship; that Lubas
had been found by the Labor Arbiter and the NLRC to have a personality which is
separate and distinct from that of PTI; that PTI had no hand in the management and
operation as well as control and supervision of the employees of Lubas.
The Court is not persuaded.
On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit
or adjunct of PTI. A settled formulation of the doctrine of piercing the corporate veil
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 these two entities are distinct and treat them
as identical or as one and the same. 26 In the present case, it may be true that Lubas
is a single proprietorship and not a corporation. However, petitioners attempt to
isolate themselves from and hide behind the supposed separate and distinct
personality of Lubas so as to evade their liabilities is precisely what the classical
doctrine of piercing the veil of corporate entity seeks to prevent and remedy.
Thus, the Court agrees with the observations of the CA, to wit:
As correctly pointed out by petitioners, if Lubas were truly a separate entity, how
come that it was Prince Transport who made the decision to transfer its employees
to the former? Besides, Prince Transport never regarded Lubas Transport as a
separate entity. In the aforesaid letter, it referred to said entity as "Lubas
operations." Moreover, in said letter, it did not transfer the employees; it "assigned"
them. Lastly, the existing funds and 201 file of the employees were turned over not
to a new company but a "new management." 27
The Court also agrees with respondents that if Lubas is indeed an entity separate
and independent from PTI why is it that the latter decides which employees shall
work in the former?
What is telling is the fact that in a memorandum issued by PTI, dated January 22,
1998, petitioner company admitted that Lubas is one of its sub-companies. 28 In
addition, PTI, in its letters to its employees who were transferred to Lubas, referred
to the latter as its "New City Operations Bus." 29
Moreover, petitioners failed to refute the contention of respondents that despite the
latters transfer to Lubas of their daily time records, reports, daily income
remittances of conductors, schedule of drivers and conductors were all made,
performed, filed and kept at the office of PTI. In fact, respondents identification
cards bear the name of PTI.
It may not be amiss to point out at this juncture that in two separate illegal
dismissal cases involving different groups of employees transferred by PTI to other
companies, the Labor Arbiter handling the cases found that these companies and
PTI are one and the same entity; thus, making them solidarily liable for the payment
of backwages and other money claims awarded to the complainants therein. 30

Petitioners likewise aver that the CA erred and committed grave abuse of discretion
when it ordered petitioners to reinstate respondents to their former positions,
considering that the issue of reinstatement was never brought up before it and
respondents never questioned the award of separation pay to them.
The Court is not persuaded.
It is clear from the complaints filed by respondents that they are seeking
reinstatement.31
In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall
specify the relief sought, but may add a general prayer for such further or other
reliefs as may be deemed just and equitable. Under this rule, a court can grant the
relief warranted by the allegation and the proof even if it is not specifically sought
by the injured party; the inclusion of a general prayer may justify the grant of a
remedy different from or together with the specific remedy sought, if the facts
alleged in the complaint and the evidence introduced so warrant. 321avvphi1
Moreover, in BPI Family Bank v. Buenaventura, 33 this Court ruled that the general
prayer is broad enough "to justify extension of a remedy different from or together
with the specific remedy sought." Even without the prayer for a specific remedy,
proper relief may be granted by the court if the facts alleged in the complaint and
the evidence introduced so warrant. The court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for. The prayer in the
complaint for other reliefs equitable and just in the premises justifies the grant of a
relief not otherwise specifically prayed for. 34 In the instant case, aside from their
specific prayer for reinstatement, respondents, in their separate complaints, prayed
for such reliefs which are deemed just and equitable.
As to whether petitioners are guilty of unfair labor practice, the Court finds no
cogent reason to depart from the findings of the CA that respondents transfer of
work assignments to Lubas was designed by petitioners as a subterfuge to foil the
formers right to organize themselves into a union. Under Article 248 (a) and (e) of
the Labor Code, an employer is guilty of unfair labor practice if it interferes with,
restrains or coerces its employees in the exercise of their right to self-organization
or if it discriminates in regard to wages, hours of work and other terms and
conditions of employment in order to encourage or discourage membership in any
labor organization.
Indeed, evidence of petitioners' unfair labor practice is shown by the established
fact that, after respondents' transfer to Lubas, petitioners left them high and dry
insofar as the operations of Lubas was concerned. The Court finds no error in the
findings and conclusion of the CA that petitioners "withheld the necessary financial
and logistic support such as spare parts, and repair and maintenance of the
transferred buses until only two units remained in running condition." This left
respondents virtually jobless.

WHEREFORE, the instant petition is denied. The assailed Decision and Resolution of
the Court of Appeals, dated December 20, 2004 and February 24, 2005,
respectively, in CA-G.R. SP No. 80953, are AFFIRMED.
SO ORDERED.

G.R. No. 147964

January 20, 2004

FAR
EAST
BANK
&
vs.
ARTURO L. MARQUEZ, Respondent.

TRUST

CO.,

Petitioner,

DECISION
PANGANIBAN, J.:
Under PD 957, the mortgage of a subdivision lot or a condominium unit is void, if
executed by a property developer without the prior written approval of the Housing
and Land Use Regulatory Board (HLURB). That an encumbrance has been
constituted over an entire property, of which the subject lot or unit is merely a part,
does not affect the invalidity of the lien over the specific portion at issue.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the
April 27, 2001 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 56813. The
decretal portion of the Decision reads as follows:
"WHEREFORE, the petition for review is DENIED, for lack of merit." 3
The Facts
The undisputed facts of the case are summarized in the CA Decision as follows:
"1. On 13 March 1989, respondent [Arturo] Marquez entered into a Contract
to Sell with Transamerican Sales and Exposition (TSE), through the latters
Owner/General Manager Engr. Jesus Garcia, involving a 52.5 sq. m. lot in
Diliman, Quezon City with a three-storey townhouse unit denominated as Unit
No. 10 to be constructed thereon for a total consideration of P800,000.00.
The parcel of land in question is a portion of that property covered by TCT No.
156254 (now TCT No. 383697).
"2. On 22 May 1989, TSE obtained a loan from petitioner FEBTC in the
amount of P7,650,000.00 and mortgaged the property covered by TCT No.
156254.

"3. For failure of TSE to pay its obligation, petitioner FEBTC extrajudicially
foreclosed the real estate mortgage and became the highest bidder (P15.7
million) in the auction sale conducted for the purpose.
"4. Respondent had already paid a total of P600,000.00 when he stopped
payment because the construction of his townhouse unit slackened. He
discovered later on that this was due to the foreclosure.
"5. Consequently, [respondent] instituted a case with the Office of Appeals,
Adjudication and Legal Affairs (OAALA) of the Housing and Land Use
Regulatory Board (HLURB) on 29 January 1991 entitled Arturo Marquez vs.
Transamerican Sales, et al docketed as HLRB Case No. REM-012991-4712 to
compel TSE to complete the construction of the townhouse and to prevent
the enforceability of the extra-judicial foreclosure made by petitioner FEBTC
and to have the mortgage between TSE and petitioner FEBTC declared
invalid, said mortgage having been entered into by the parties in violation of
section 18 of P.D. 957.
"6. The OAALA ruled in favor of the respondent via a Decision dated 11
November 1991, the decretal portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring the mortgage executed by and between x x x Engr. Jesus
Garcia/Transamerican Sales and Exposition and Far East Bank and Trust
Company to be unenforceable against [respondent];
2. Ordering the x x x Far East Bank and Trust Company to compute and/or
determine the loan value of the [respondent] who was not able to complete
or make full payment and accept payment and/or receive the amortization
from the [respondent] and upon full payment to deliver the title
corresponding to Unit No. 10 of that Townhouse Project located at No. 10
Panay Ave., Quezon City;
3. Ordering the Register of Deeds of Quezon City to cancel the annotations of
the mortgage indebtedness between x x x Engr. Jesus Garcia and Far East
Bank and Trust Company;
4. Ordering, likewise, the Register of Deeds of Quezon City to cancel the
annotation of the Certificate of Sale in favor of the Far East Bank and Trust
Company on Transfer Certificate of Title No. 156254 to which the lot subject
of this case is a part thereof, without prejudice to its right to require x x x
Engr. Jesus Garcia/Transamerican Sales and Exposition to constitute new
collateral in lieu of said title sufficient in value to cover the mortgage
obligation.
xxx

xxx

x x x

"7. Petitioner FEBTC interposed a Petition for Review from the decision issued by the
OAALA with the Board of Commissioners of the HLURB, docketed as HLRB Case No.
REM-A-1126, which in a Decision dated 18 July 1994 affirmed in toto the OAALA
decision.
"8. Hence, petitioner FEBTC appealed the Decision dated 18 July 1994 to the Office
of the President xxx.
xxx

xxx

x x x

"9. The Office of the President dismissed the appeal and affirmed the Decision dated
18 July 1994 x x x."4 (Citations omitted)
Petitioner then elevated the case to the CA through a Petition for review under Rule
43.
Ruling of the Court of Appeals
The CA found that petitioner had known that a "subdivision was forthcoming
inasmuch as the loan was obtained by TSE to partially finance the construction of a
20-unit townhouse project, as stated in the Whereas clause in the mortgage
contract."5 Thus, the CA ruled that "petitioner should not have merely relied on the
representation of TSE that it had obtained the approval and authorization of the
proper government agencies but should have required the submission of said
documents."6
Further, the appellate court found that the Certification against forum shopping
attached to the Petition before it had not been made under oath, in violation of the
Rules of Court.
Hence, this Petition.7
The Issues
Petitioner raises the following issues for our consideration:
"Whether or not the mortgage contract violated Section 18 of P.D. 957, hence, void
insofar as third persons are concerned.
"Assuming arguendo that the mortgage contract violated Section 18 of P.D. 957,
whether or not the remedy granted and imposed by the HLURB, as sustained by the
Office of the President and the Court of Appeals, is proper.
"Whether or not the inadvertent failure of the notary public to affix his signature on
the Certification against forum shopping executed by petitioner FEBTC in connection
with the Petition for Review it filed with the Court of Appeals provided a sufficient
basis for the dismissal of the appeal."8
The Court's Ruling

The Petition is partly meritorious.

First Issue:
Violation of Section 18 of PD 957
Section 18 of PD 9579 provides as follows:
"SEC. 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner
or developer without prior written approval of the Authority. Such approval shall not
be granted unless it is shown that the proceeds of the mortgage loan shall be used
for the development of the condominium or subdivision project and effective
measures have been provided to ensure such utilization. The loan value of each lot
or unit covered by the mortgage shall be determined and the buyer thereof, if any,
shall be notified before the release of the loan. The buyer may, at his option, pay his
installment for the lot or unit directly to the mortgagee who shall apply the
payments to the corresponding mortgage indebtedness secured by the particular lot
or unit being paid for, with a view to enabling said buyer to obtain title over the lot
or unit promptly after full payment thereof."
Petitioner contends that the above-quoted provision does not apply to this case,
because the land mortgaged to it was one whole parcel, not of a "subdivision lot,"
but of an unsubdivided one. It insists that the written approval of the National
Housing Authority (now the Housing and Land Use Regulatory Board) was not a
requirement for the constitution of a mortgage on the property.
We are not persuaded. It is undisputed that the subject 52.5-square-meter lot with a
three-storey town house unit denominated as Unit No. 10 (the "lot") is part of the
property mortgaged to petitioner and is covered by TCT No. 156254. The lot was
technically described and segregated in a Contact to Sell that had been entered into
before the mortgage loan was contracted. The fact that the lot had no separate TCT
did not make it less of a "subdivision lot" entitled to the protection of PD 957.
That the subject of the mortgage loan was the entire land, not the individual
subdivided lots, does not take the loan beyond the coverage of Section 18 of PD
957. Undeniably, the lot was also mortgaged when the entire parcel of land, of
which it was a part, was encumbered.
Petitioner also contends that Section 18 of PD 957 is merely a directory provision,
noncompliance with which does not render the mortgage transaction void.
In determining whether a law is mandatory, it is necessary to ascertain the
legislative intent, as stated by Sen. Arturo M. Tolentino, an authority on civil law:
"There is no well-defined rule by which a mandatory or prohibitory law may, in all
circumstances, be distinguished from one which is directory, suppletory, or
permissive. In the determination of this question, the prime object is to ascertain
the legislative intention. Generally speaking, those provisions which are mere
matter of form, or which are not material, do not affect any substantial right, and do

not relate to the essence of the thing to be done, so that compliance is a matter of
convenience rather that substance, are considered to be directory. On the other
hand, statutory provisions which relate to matters of substance, affect substantial
rights and are the very essence of the thing required to be done, are regarded as
mandatory."10
In Philippine National Bank v. Office of the President, 11 we had occasion to mull over
the intent of PD 957 thus:
"x x x [T]he unmistakable intent of the law [is] to protect innocent lot buyers from
scheming subdivision developers. As between these small lot buyers and the
gigantic financial institutions which the developers deal with, it is obvious that the
law -- as an instrument of social justice -- must favor the weak. Indeed, the
petitioner Bank had at its disposal vast resources with which it could adequately
protect its loan activities, and therefore is presumed to have conducted the usual
due diligence checking and ascertaining (whether thru ocular inspection or other
modes of investigation) the actual status, condition, utilization and occupancy of the
property offered as collateral, x x x On the other hand, private respondents
obviously were powerless to discover the attempt of the land developer to
hypothecate the property being sold to them. It was precisely in order to deal with
this kind of situation that P.D. 957 was enacted, its very essence and intendment
being to provide a protective mantle over helpless citizens who may fall prey to the
razzmatazz of what P.D. 957 termed unscrupulous subdivision and condominium
sellers."12
Concededly, PD 957 aims to protect innocent lot buyers. Section 18 of the decree
directly addresses the problem of fraud committed against buyers when the lot they
have contracted to purchase, and which they have religiously paid for, is mortgaged
without their knowledge. The avowed purpose of PD 957 compels the reading of
Section 18 as prohibitory -- acts committed contrary to it are void. 13 Such construal
ensures the attainment of the purpose of the law: to protect lot buyers, so that they
do not end up still homeless despite having fully paid for their home lots with their
hard-earned cash.
Petitioner argues that it is an innocent mortgagee whose lien must be respected
and protected, since the title offered as security was clean of any encumbrance or
lien. We do not agree.
"x xx. As a general rule, where there is nothing on the certificate of title to indicate
any cloud or vice in the ownership of the property, or any encumbrance thereon,
the purchaser is not required to explore further than what the Torrens Title upon its
face indicates in quest for any hidden defect or inchoate right that may
subsequently defeat his right thereto. This rule, however, admits of an exception as
where the purchaser or mortgagee has knowledge of a defect or lack of title in the
vendor, or that he was aware of sufficient facts to induce a reasonably prudent man
to inquire into the status of the property in litigation." 14
Petitioner bank should have considered that it was dealing with a town house
project that was already in progress. A reasonable person should have been aware
that, to finance the project, sources of funds could have been used other than the

loan, which was intended to serve the purpose only partially. Hence, there was need
to verify whether any part of the property was already the subject of any other
contract involving buyers or potential buyers. In granting the loan, petitioner bank
should not have been content merely with a clean title, considering the presence of
circumstances indicating the need for a thorough investigation of the existence of
buyers like respondent. Having been wanting in care and prudence, the latter
cannot be deemed to be an innocent mortgagee.
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as
found by the Office of the President and by the CA. Petitioner should not have relied
only on the representation of the mortgagor that the latter had secured all requisite
permits and licenses from the government agencies concerned. The former should
have required the submission of certified true copies of those documents and
verified their authenticity through its own independent effort.
Having been negligent in finding out what respondents rights were over the lot,
petitioner must be deemed to possess constructive knowledge of those rights. 15
Second Issue:
Remedy Granted
To retain possession of the lot, petitioner claims that its rights as the buyer in the
foreclosure sale are superior to those of respondent.
We are not persuaded. Aside from being a buyer of the lot, petitioner was also the
mortgagee, which, as previously discussed, was presumed to know the rights of
respondent over that lot. The conversion of the status of the former from mortgagee
to buyer-owner will not lessen the importance of such knowledge. Neither will the
conversion set aside the consequences of its negligence as a mortgagee.
The lot was mortgaged in violation of Section 18 of PD 957. Respondent, who was
the buyer of the property, was not notified of the mortgage before the release of the
loan proceeds by petitioner. Acts executed against the provisions of mandatory or
prohibitory laws shall be void.16 Hence, the mortgage over the lot is null and void
insofar as private respondent is concerned. 17
The remedy granted by the HLURB and sustained by the Office of the President is
proper only insofar as it refers to the lot of respondent.1wphi1 In short, the
mortgage contract is void as against him. Since there is no law stating the specifics
of what should be done under the circumstances, that which is in accord with equity
should be ordered.1wphi1 The remedy granted by the HLURB in the first and the
second paragraphs of the dispositive portion of its Decision insofar as it referred to
respondent's lot is in accord with equity.
The HLURB, however, went overboard in its disposition in paragraphs 3 and 4, which
pertained not only to the lot but to the entire parcel of land mortgaged. Such ruling
was improper. The subject of this litigation is limited only to the lot that respondent

is buying, not to the entire parcel of land. He has no personality or standing to bring
suit on the whole property, as he has actionable interest over the subject lot only.
Third Issue:
Certification Against Forum Shopping
We find no cogent reason to alter the ruling of the CA regarding the Certification
against forum shopping that did not bear the notary public's signature. It is worth
emphasizing that despite petitioner's noncompliance with the technical
requirements regarding the Certification, the CA still ruled on the merits of the
case.18 In fact, there is no more need to pass upon this issue inasmuch as, on the
merits, we have already turned down petitioners plea against respondent.
WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the HLURB is
AFFIRMED, but it shall be applicable only to the 52.5-square-meter lot with a threestorey town house unit denominated as Unit No. 10. No costs.
SO ORDERED