TIMES TRANSPORTATION COMPANY, INC. vs. SANTOS SOTELO [G.R. No.

163786. February 16, 2005] YNARES-SANTIAGO,

J.
: FACTS
: Petitioner (Times) is a corporation engaged in the business of land transportation.
Prior to its closure, the Times Employees Union (TEU) was formed.
Respondents were retrenched after Times management implemented a retrenchment
program in the height of a labor dispute between Times and TEU. In the meantime,
Mencorp Transport Systems, Inc. (Mencorp) had acquired ownership over
Times
Certificates of Public Convenience and a number of its bus units by virtue of several
deeds of sale. Mencorp is controlled and operated by Mrs. Virginia Mendoza, daughter
of Santiago Rondaris, the majority stockholder of Times. After the closure of Times, the
retrenched employees filed cases for illegal dismissal, money claims and unfair labor
practices against Times. The Labor Arbiter ruled that Times and Rondaris are liable for
unfair labor practice.
ISSUE

neverobtained a franchise since its supposed incorporation but at present, all the
buses of Times arealready being run/operated by Mencorp, the franchise of Times
having been transferred to it.The sale of Times franchise as well as most of its bus
units to a company owned by Rondarisdaughter and family members, right in the
middle of a labor dispute, is highly suspicious. It isevident that the transaction was
made in order to remove Timesremaining assets from thereach of any judgment that
may be rendered in the unfair labor practice cases filed against it.The petition was
DENIED
SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN
PHILIPPINES, INC., and/orrepresented by MANASSEH C. ARRANGUEZ, BRIGIDO P.
GULAY, FRANCISCO M. LUCENARA, DIONICESO. TIPGOS, LORESTO C.
MURILLON, ISRAEL C. NINAL, GEORGE G. SOMOSOT, JESSIE T. ORBISO,
LORETOPAEL and JOEL BACUBAS, petitioners vs. NORTHEASTERN MINDANAO
MISSION OF SEVENTH DAYADVENTIST, INC., and/or represented by JOSUE A.
LAYON, WENDELL M. SERRANO, FLORANTE P. TYand JETHRO CALAHAT and/or
SEVENTH DAY ADVENTIST CHURCH [OF] NORTHEASTERN MINDANAOMISSION,
Respondents
G.R. No. 150416 July 21, 2006
FACTS: This case involves two supposed transfers of the lot previously owned by the
spouses Cosio. Thefirst transfer was
a donation to petitioners alleged predecessors

: WON the doctrine of piercing the veil of corporate fiction was properly applied.

-in-interest in 1959 while the secondtransfer was through a contract of sale to

respondents in 1980. A TCT was later issued in the name of respondents.

HELD

Claiming to be the alleged donees successors

: YES. Piercing the corporate veil may be allowed only if the following elements
concur: (1) control

-in-interest, petitioners filed a case forcancellation of title, quieting of ownership and

possession, declaratory relief and reconveyance withprayer for preliminary injunction
and damages against respondents. Respondents, on the other hand,argued that at the
time of the donation

not mere stock control, but complete domination

, petitioners predecessors

The sale of Times franchise as well as most of its bus units to a company owned by
Rondaris daughter and family members, right in the middle of a labor

-in-interest has no juridical personalityto accept the donation because it was not yet
incorporated. Moreover, petitioners were not membersof the local church then.The
RTC upheld the sale in favor of respondents, which was affirmed by the Court of
Appeals, onthe ground that all the essential requisites of a contract were present and it
also applied theindefeasibility of title.ISSUE: Whether or not the donation was
void.HELD: Yes, the donation was void because the local church had neither juridical
personality nor capacityto accept such gift since it was inexistent at the time it was
made.

dispute, is highly suspicious.

The Court denied petitioners contention that there exists a de facto corporation.

It is evident that the transaction was made in order to remove Times remaining assets

While thereexisted the old Corporation Law (Act 1459), a law under which the local
church could have beenorganized, petitioners admitted that they did not even attempt
to incorporate at that time nor theorganization was registered at the Securities and
Exchange Commission. Hence, petitioners obviouslycould not have claimed
succession to an entity that never came to exist. And since some of therepresentatives
of petitioner Seventh Day Adventist Conference Church of Southern Philippines,
Inc.were not even members of the local church then, it necessarily follows that they
could not even claimthat the donation was particularly for them.

not only of finances, but of policy and business practice in respect to the transaction
attacked; (2) such control must have been used to commit a fraud or a wrong to
perpetuate the violation of a statutory or other positive legal duty, or a dishonest and
an unjust act in contravention of a legal right; and (3) the said control and breach of
duty must have proximately caused the injury or unjust loss complained of.

from the reach of any judgment that may be rendered in the unfair labor practice cases
filed against it.

missals of complainants Times, effected, participated in, authorized or ratified by

Santiago Rondaris constituted the prohibited act of unfair labor practice and hence,
illegal and that thesale of said respondent company to respondents Mencorp Transport
Systems Company (sic),Inc. and/or Virginia Mendoza and Reynaldo Mendoza was
simulated and/or effected in badfaith. Times, Mencorp and the Spouses Mendoza
submitted their respective memorandum of appeal to the NLRC. NLRC rendered its
decision remanding the records of the consolidated cases to the Arbitration Branch of
origin for disposition and for the conduct of appropriateproceedings. NLRC denied the
Motion for Reconsideration. Thus, the employees appealed tothe CA by way of a
petition for certiorari, which ganted the petition and set aside the decision of the N
LRC. Times, Mencorp and the Spouses Mendoza filed Motions for Reconsideration,
which were denied. Hence, this petition for review on certiorari.ISSUE: Whether or not
piercing the corporate veil in this case was proper.HELD: Yes. We have held that
piercing the corporate veil is warranted only in cases whentheseparate legal
entity is used to defeat public convenience, justify wrong, protect fraud, ordefendcrime,
such that in the case of two corporations, the law will regard the corporations
asmerged into one. It may be allowed only if the following elements concur: (1) control
not merestockcontrol, but complete dominationnot only of finances, but of policy
and business practiceinrespect to the transaction attacked; (2) such control must have
been used to commit a fraudor a wrong to perpetuate the violation of a statutory or
other positive legal duty, or a dishonestandan unjust act in contravention of a legal
right; and (3) the said control and breach of duty musthave proximately caused the
injury or unjust loss complained of. In this case, the sale was transferred to a
corporation controlled by V. Mendoza, thedaughter of S. Rondaris of Times
where she is/was also a director. All ofthestockholders/incorporators of
Mencorp are all relatives of S. Rondaris. The timing of the saleevidently was to negate
the employees/complainants/members right to organization as it waseffected when
their union (TEU) was just organized/requesting Times to bargain. Mencorp

Litong Lim vs Phil. Gear Industries, Inc., GR No. 136448, 3 November 1999
FACTS
Antonio Chua and Peter Yao entered into a contract in behalf of Ocean Quest Fishing
Corporation for the purchase of fishing nets from respondent Philippine Fishing Gear
Industries, Inc. Chua and Yao claimed that they were engaged in business venture
with petitioner Lim Tong Lim, who, however, was not a signatory to the contract. The
buyers failed to pay the fishing nets. Respondent filed a collection against Chua, Yao
and petitioner Lim in their capacities as general partners because it turned out that
Ocean Quest Fishing Corporation is a non-existent corporation. The trial court issued a
Writ of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets.
The trial court rendered its decision ruling that respondent was entitled to the Writ of
Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay
respondent. Lim appealed to the Court of Appeals, but the appellate court affirmed the
decision of the trial court that petitioner Lim is a partner and may thus be held liable as
such. Hence, the present petition. Petitioner claimed that since his name did not
appear on any of the contracts and since he never directly transacted with the
respondent corporation, ergo, he cannot be held liable.

ISSUE

Page 1 of 3

WON petitioner can be held liable as a general partner.

HELD
The Supreme Court denied the petition. The Court ruled that having reaped the
benefits of the contract entered into by Chua and Yao, with whom he had an existing
relationship, petitioner Lim is deemed a part of said association and is covered by the
doctrine of corporation by estoppel. The Court also ruled that under the principle of
estoppel, those acting on behalf of a corporation and those benefited by it, knowing it
to be without valid existence, are held liable as general partners.

On 14 December 1992, the trial court rendered a Decision ] finding FBNI and
Alegre liable for libel except Rima. In holding FBNI liable for libel, the trial court found
that FBNI failed to exercise diligence in the selection and supervision of its employees.
The Court of Appeals affirmed the trial courts judgment with modification. The
appellate court made Rima solidarily liable with FBNI and Alegre.
Issues:
1.
2.
3.

Lim Tong Lim vs Philippine Fishing Gear Industries, Inc.

Business Organization Partnership, Agency, Trust Corporation by Estoppel
It was established that Lim Tong Lim requested Peter Yao to engage in commercial
fishing with him and one Antonio Chua. The three agreed to purchase two fishing
boats but since they do not have the money they borrowed from one Jesus Lim
1.
(brother of Lim Tong Lim). They again borrowed money and they agreed to purchase
fishing nets and other fishing equipments. Now, Yao and Chua represented
themselves as acting in behalf of Ocean Quest Fishing Corporation (OQFC) they
contracted with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing
nets amounting to more than P500k.
They were however unable to pay PFGI and so they were sued in their own names
because apparently OQFC is a non-existent corporation. Chua admitted liability and
asked for some time to pay. Yao waived his rights. Lim Tong Lim however argued that
hes not liable because he was not aware that Chua and Yao represented themselves
as a corporation; that the two acted without his knowledge and consent.
ISSUE: Whether or not Lim Tong Lim is liable.
HELD: Yes. From the factual findings of both lower courts, it is clear that Chua, Yao
and Lim had decided to engage in a fishing business, which they started by buying
boats worth P3.35 million, financed by a loan secured from Jesus Lim. In their
Compromise Agreement, they subsequently revealed their intention to pay the loan
with the proceeds of the sale of the boats, and to divide equally among them the
excess or loss. These boats, the purchase and the repair of which were financed with
borrowed money, fell under the term common fund under Article 1767. The
contribution to such fund need not be cash or fixed assets; it could be an intangible
like credit or industry. That the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among them also shows that they had
indeed formed a partnership.

Whether or not the broadcasts are libelous.

Whether or not AMEC is entitled to moral damages.
Whether or not the award of attorneys fees is proper.

Ruling:
A libel is a public and malicious imputation of a crime, or of a vice or defect, real or
imaginary, or any act or omission, condition, status, or circumstance tending to cause
the dishonor, discredit, or contempt of a natural or juridical person, or to blacken the
memory of one who is dead.
Every defamatory imputation is presumed malicious. Rima and Alegre failed to
show adequately their good intention and justifiable motive in airing the supposed
gripes of the students. As hosts of a documentary or public affairs program, Rima and
Alegre should have presented the public issues free from inaccurate and misleading
information. Hearing the students alleged complaints a month before the expos, they
had sufficient time to verify their sources and information. However, Rima and Alegre
hardly made a thorough investigation of the students alleged gripes. Neither did they
inquire about nor confirm the purported irregularities in AMEC from the Department of
Education, Culture and Sports. Alegre testified that he merely went to AMEC to verify
his report from an alleged AMEC official who refused to disclose any information.
Alegre simply relied on the words of the students because they were many and not
because there is proof that what they are saying is true. This plainly shows Rima and
Alegres reckless disregard of whether their report was true or not.
Had the comments been an expression of opinion based on established facts, it
is immaterial that the opinion happens to be mistaken, as long as it might reasonably
be inferred from the facts. However, the comments of Rima and Alegre were not
backed up by facts. Therefore, the broadcasts are not privileged and remain
libelous per se.
The broadcasts also violate the Radio Code of the Kapisanan ng mga
Brodkaster sa Pilipinas, Ink. (Radio Code). Item I(B) of the Radio Code provides:
B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES

Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be
imputed to Yao and Chua. Unquestionably, Lim Tong Lim benefited from the use of the
nets found in his boats, the boat which has earlier been proven to be an asset of the
partnership. Lim, Chua and Yao decided to form a corporation. Although it was never
legally formed for unknown reasons, this fact alone does not preclude the liabilities of
the three as contracting parties in representation of it. Clearly, under the law on
estoppel, those acting on behalf of a corporation and those benefited by it, knowing it
to be without valid existence, are held liable as general partners

1. x x x
4. Public affairs program shall present public issues free from personal
bias, prejudice and inaccurate and misleading information. x x x
Furthermore, the station shall strive to present balanced discussion
of issues. x x x.
xxx

G.R. No. 141994. January 17, 2005

7. The station shall be responsible at all times in the supervision of public

affairs, public issues and commentary programs so that they
conform to the provisions and standards of this code.

FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs. AGO MEDICAL AND

EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F. AGO, respondents.

8. It shall be the responsibility of the newscaster, commentator, host and

announcer to protect public interest, general welfare and good
order in the presentation of public affairs and public issues.[36]

Facts:
Expos is a radio documentary program hosted by Carmelo Mel Rima (Rima)
and Hermogenes Jun Alegre (Alegre). Expos is aired every morning over DZRC-AM
which is owned by Filipinas Broadcasting Network, Inc. (FBNI). Expos is heard over
Legazpi City, the Albay municipalities and other Bicol areas.
In the morning of 14 and 15 December 1989, Rima and Alegre exposed various
alleged complaints from students, teachers and parents against Ago Medical and
Educational Center-Bicol Christian College of Medicine (AMEC) and its administrators.
Claiming that the broadcasts were defamatory, AMEC and Angelita Ago (Ago), as
Dean of AMECs College of Medicine, filed a complaint for damages against FBNI,
Rima and Alegre on 27 February 1990.
The complaint further alleged that AMEC is a reputable learning institution. With
the supposed expose, FBNI, Rima and Alegre transmitted malicious imputations, and
as such, destroyed plaintiffs (AMEC and Ago) reputation. AMEC and Ago included
FBNI as defendant for allegedly failing to exercise due diligence in the selection and
supervision of its employees, particularly Rima and Alegre.

The broadcasts fail to meet the standards prescribed in the Radio Code, which
lays down the code of ethical conduct governing practitioners in the radio broadcast
industry. The Radio Code is a voluntary code of conduct imposed by the radio
broadcast industry on its own members. The Radio Code is a public warranty by the
radio broadcast industry that radio broadcast practitioners are subject to a code by
which their conduct are measured for lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast practitioners
live up to the code of conduct of their profession, just like other professionals. A
professional code of conduct provides the standards for determining whether a person
has acted justly, honestly and with good faith in the exercise of his rights and
performance of his duties as required by Article 19 of the Civil Code. A professional
code of conduct also provides the standards for determining whether a person who
willfully causes loss or injury to another has acted in a manner contrary to morals or
good customs under Article 21 of the Civil Code.

Page 2 of 3

FBNI contends that AMEC is not entitled to moral damages because it is a corporation.
A juridical person is generally not entitled to moral damages because, unlike a
natural person, it cannot experience physical suffering or such sentiments as wounded
feelings, serious anxiety, mental anguish or moral shock. The Court of Appeals
cites Mambulao Lumber Co. v. PNB, et al. to justify the award of moral damages.
However, the Courts statement in Mambulao that a corporation may have a good
reputation which, if besmirched, may also be a ground for the award of moral damages
is an obiter dictum.
Nevertheless, AMECs claim for moral damages falls under item 7 of Article
2219 of the Civil Code. This provision expressly authorizes the recovery of moral
damages in cases of libel, slander or any other form of defamation. Article 2219(7)
does not qualify whether the plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly complain for libel or any other form of
defamation and claim for moral damages.
Moreover, where the broadcast is libelous per se, the law implies damages. In
such a case, evidence of an honest mistake or the want of character or reputation of
the party libeled goes only in mitigation of damages. [46] Neither in such a case is the
plaintiff required to introduce evidence of actual damages as a condition precedent to
the recovery of some damages. In this case, the broadcasts are libelousper se. Thus,
AMEC is entitled to moral damages.
However, we find the award of P300,000 moral damages unreasonable. The
record shows that even though the broadcasts were libelous per se, AMEC has not
suffered any substantial or material damage to its reputation. Therefore, we reduce the
award of moral damages from P300,000 to P150,000.
The award of attorneys fees is not proper.
AMEC failed to justify satisfactorily its claim for attorneys fees. AMEC did not
adduce evidence to warrant the award of attorneys fees. Moreover, both the trial and
appellate courts failed to explicitly state in their respective decisions the rationale for
the award of attorneys fees.
In Inter-Asia Investment Industries, Inc. v. Court of Appeals, we held that:
[I]t is an accepted doctrine that the award thereof as an item of damages is the
exception rather than the rule, and counsels fees are not to be awarded every time a
party wins a suit. The power of the court to award attorneys fees under Article 2208 of
the Civil Code demands factual, legal and equitable justification, without which the
award is a conclusion without a premise, its basis being improperly left to speculation
and conjecture. In all events, the court must explicitly state in the text of the decision,
and not only in the decretal portion thereof, the legal reason for the award of attorneys
fees.[51] (Emphasis supplied)

Petition denied.

Coastal Pacific Trading, Inc. vs. Southern Rolling Mills Co. G.R. No. 118692 July 28,
2006 FACTS: Southern Rolling Mills was renamed into Visayan Integrated Steel Corp
(VISCO). On Dec. 11, 1961-VISCO obtained a loan from DBP amounting to P836,000.
It was secured by a Real Estate Mortgage covering VISCO's 3 parcels of land
including the machinery and equipments therein. Second Loan: VISCO entered a Loan
Agreement with respondent banks ( referred as "Consortium") to finance its
importation for various raw materials. VISCO executed a second mortgage over the
previous properties mentioned, however they were unrecorded VISCO was unable to
pay its second mortgage with the consortium, which resulted in the latter acquiring
90% of the equity of VISCO giving the Consortium the control and management of
VISCO. Despite the acquisition, VISCO still remained indebted to the Consortium.
Transaction to Coastal: Between 1964 to 1965, VISCO entered a processing
agreement with Coastal wherein Coastal delivered 3,000 metric tons of hot rolled steel
coils which VISCO would process into block iron sheets. However, VISCO was only
able to return 1,600 metric tons of those sheets. On the loan to DBP: To pay its first
mortgage with DBP, VISCO sold 2 of its generators to FILMAG Phils, Inc. DBP
executed a Deed of Assignment of the mortgage in favor of the consortium. The
Consortium foreclosed the mortgage and was the highest bidder in an auction sale of
VISCO's properties. The Consortium later sold the properties in favor of National Steel
Corporation. Coastal files a civil action for Annulment or Rescission of Sale, Damages
with Preliminary Injunction. Coastal imputes bad faith on the action of the Consortium,
the latter being able to sell the properties of VISCO despite the attachment of the
properties, placing them beyond the reach of VISCO's other creditors. The lower court
ruled in favor of VISCO, declaring the sale valid and legal. The CA affirmed this.
ISSUE 1: Whether the consortium disposed VISCO's assets in fraud of creditors?
HELD: Yes. What the consortium did was to pay to them the proceeds from the sale of
the generator sets which in turn they used to pay DBP. Due to the Deed of Assignment
issued by DBP, the respondent banks recovered what they remitted to DBP & it
allowed the Consortium to acquire DBP's primary lien on the mortgaged properties.
Allowing them as unsecured creditors ( as the mortgage was unrecorded) to foreclose
on the assets of the corporation without regard to inferior claims ISSUE 2: Whether
petitioner is entitled to moral damages? No. As a rule, a corporation is not entitled to
moral damages because, not being a natural person, it cannot experience physical
suffering or sentiments like wounded feelings, serious anxiety, mental anguish and
moral shock. The only exception to this rule is when the corporation has a good
reputation that is debased, resulting in its humiliation in the business realm. In the
present case, the records do not show any evidence that the name or reputation of
petitioner has been sullied as a result of the Consortium's fraudulent acts. Accordingly,
moral damages are not warranted. Petitioner was able to recover exemplary damages.

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