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[G.R. No. 155214.

February 13, 2004] [Latag] got sick in January 1995 and was
forced to apply for partial disability with the
R & E TRANSPORT, INC., and HONORIO SSS, which was granted. When he recovered,
ENRIQUEZ, petitioners, vs. AVELINA P. LATAG,
he reported for work in September 1998 but
representing her deceased husband, PEDRO M. was no longer allowed to continue working on
LATAG, respondents.
account of his old age.
DECISION Latag thus asked Felix Fabros, the
PANGANIBAN, J.: administrative officer of [petitioners], for his
retirement pay pursuant to Republic Act 7641
Factual issues may be reviewed by the Court but he was ignored. Thus, on December 21,
of Appeals (CA) when the findings of fact of 1998, [Latag] filed a case for payment of his
the National Labor Relations Commission retirement pay before the NLRC.
(NLRC) conflict with those of the labor arbiter.
By the same token, this Court may review Latag however died on April 30, 1999.
factual conclusions of the CA when they are Subsequently, his wife, Avelina Latag,
contrary to those of the NLRC or of the labor substituted him. On January 10, 2000, the Labor
arbiter. Arbiter rendered a decision in favor of [Latag],
the dispositive portion of which reads:
The Case
WHEREFORE, judgment is hereby rendered
Before us is a Petition for Review[1] under Rule ordering x x x LA MALLORCA TAXI, R & E
45 of the Rules of Court, seeking to nullify the TRANSPORT, INC. and their owner/chief
June 3, 2002 Decision[2] and the August 28, executive officer HONORIO ENRIQUEZ to jointly
2002 Resolution[3] of the Court of Appeals in and severally pay MRS. AVELINA P. LATAG the
CA-GR SP No. 67998. The appellate court sum of P277,500.00 by way of retirement pay
disposed as follows: for her deceased husband, PEDRO M. LATAG.

WHEREFORE, premises considered, the petition SO ORDERED.


is hereby GRANTED. The assailed Order of
public respondent NLRC is SET ASIDE. The On January 21, 2000, [Respondent Avelina
March 14, 2001[4] [D]ecision of the Labor Latag,] with her then counsel[,] was invited to
Arbiter a quo is REINSTATED.[5] the office of [petitioners] counsel and was
offered the amount of P38,500.00[,] which she
The challenged Resolution denied petitioners accepted. [Respondent] was also asked to
Motion for Reconsideration. sign an already prepared quitclaim and
release and a joint motion to dismiss the case.
The Factual Antecedents
After a day or two, [respondent] received a
The antecedents of the case are narrated by
copy of the January 10, 2000 [D]ecision of the
the CA as follows:
Labor Arbiter.
Pedro Latag was a regular employee x x x of
On January 24, 2000, [petitioners] filed the
La Mallorca Taxi since March 1, 1961. When La
quitclaim and motion to dismiss. Thereafter, on
Mallorca ceased from business operations,
May 23, 2000, the Labor Arbiter issued an order,
[Latag] x x x transferred to [petitioner] R & E
the relevant portion of which states:
Transport, Inc. x x x. He was receiving an
average daily salary of five hundred pesos
(P500.00) as a taxi driver.
WHEREFORE, the decision stands and the Labor Issues
Arbitration Associate of this Office is directed
to prepare the Writ of Execution in due course. Petitioners submit the following issues for our
consideration:
SO ORDERED.
I
On January 21, 2000, [petitioners] interposed
Whether or not the Court should respect the
an appeal before the NLRC. On March 14,
2001, the latter handed down a [D]ecision[,] findings of fact [of] the NLRC as against [those]
the decretal portion of which provides: of the labor arbiter.

WHEREFORE, in view of the foregoing, II


respondents Appeal is hereby DISMISSED for Whether or not, in rendering judgment in favor
failure to post a cash or surety bond, as of petitioners, the NLRC committed grave
mandated by law. abuse of discretion.
SO ORDERED. III
On April 10, 2001, [petitioners] filed a motion for Whether or not private respondent violated the
reconsideration of the above resolution. On rule on forum-shopping.
September 28, 2001, the NLRC came out with
the assailed [D]ecision, which gave due course IV
to the motion for reconsideration.[6] (Citations
Whether or not the appeal of petitioners from
omitted)
the Order of the labor arbiter to the NLRC
Respondent appealed to the CA, contending involves [a] monetary award.[8]
that under Article 223 of the Labor Code and
In short, petitioners raise these issues: (1)
Section 3, Rule VI of the New Rules of
whether the CA acted properly when it
Procedure of the NLRC, an employers appeal
overturned the NLRCs factual findings; (2)
of a decision involving monetary awards may
whether the rule on forum shopping was
be perfected only upon the posting of an
violated; and (3) whether the labor arbiters
adequate cash or surety bond.
Order of May 23, 2000 involved a monetary
Ruling of the Court of Appeals award.

The CA held that the labor arbiters May 23, The Courts Ruling
2000 Order had referred to the earlier January
The Petition is partly meritorious.
10, 2000 Decision awarding
respondent P277,500 as retirement benefit. First Issue:

According to the appellate court, because Factual Findings of the NLRC


petitioners appeal before the NLRC was not
accompanied by an appropriate cash or Petitioners maintain that the CA erred in
surety bond, such appeal was not perfected. disregarding the factual findings of the NLRC
The CA thus ruled that the labor arbiters and in deciding to affirm those of the labor
January 10, 2000 Decision and May 23, 2000 arbiter. Allegedly, the NLRC findings were
Order had already become final and based on substantial evidence, while those of
executory. the labor arbiter were groundless. Petitioners
add that the appellate court should have
Hence, this Petition.[7]
refrained from tackling issues of fact and, Number of Creditable Years
instead, limited itself to those of jurisdiction or
grave abuse of discretion on the part of the of Service for Retirement Benefits
NLRC. Petitioners do not dispute the fact that the late
The power of the CA to review NLRC decisions Pedro M. Latag is entitled to retirement
via a Rule 65 petition is now a settled issue. As benefits. Rather, the bone of contention is the
early as St. Martin Funeral Homes v. NLRC,[9] we number of years that he should be credited
with in computing those benefits. On the one
have definitively ruled that the proper remedy
to ask for the review of a decision of the NLRC hand, we have the findings of the labor
is a special civil action for certiorari under Rule arbiter,[20] which the CA affirmed. According to
65 of the Rules of Court,[10] and that such those findings, the 23 years of employment of
petition should be filed with the CA in strict Pedro with La Mallorca Taxi must be added to
observance of the doctrine on the hierarchy of his 14 years with R & E Transport, Inc., for a total
courts.[11] Moreover, it has already been of 37 years. On the other, we also have the
explained that under Section 9 of Batas findings of the NLRC[21] that Pedro must be
Pambansa (BP) 129, as amended by Republic credited only with his service to R & E Transport,
Act 7902,[12] the CA -- pursuant to the exercise Inc., because the evidence shows that the
of its original jurisdiction over petitions aforementioned companies are two different
entities.
for certiorari -- was specifically given the power
to pass upon the evidence, if and when After a careful and painstaking review of the
necessary, to resolve factual issues.[13] evidence on record, we support the NLRCs
Likewise settled is the rule that when supported findings. The labor arbiters conclusion -- that
Mallorca Taxi and R & E Transport, Inc., are one
by substantial evidence,[14] factual findings
and the same entity -- is negated by the
made by quasi-judicial and administrative
documentary evidence presented by
bodies are accorded great respect and even
finality by the courts. These findings are not petitioners. Their evidence[22] sufficiently shows
the following facts: 1) R & E Transport, Inc., was
infallible, though; when there is a showing that
they were arrived at arbitrarily or in disregard of established only in 1978; 2) Honorio Enriquez, its
the evidence on record, they may be president, was not a stockholder of La
examined by the courts.[15] Hence, when Mallorca Taxi; and 3) none of the stockholders
factual findings of the NLRC are contrary to of the latter company hold stocks in the
those of the labor arbiter, the evidentiary facts former. In the face of such evidence, which
the NLRC appreciated in its Decision, it seems
may be reviewed by the appellate
court.[16] Such is the situation in the present that mere surmises and self-serving assertions of
case; thus, the doors to a review are open.[17] Respondent Avelina Latag formed the bases
for the labor arbiters conclusions as follows:
The very same reason that behooved the CA
to review the factual findings of the NLRC While [Pedro M. Latag] claims that he worked
as taxi driver since March 1961 since the days
impels this Court to take its own look at the
findings of fact. Normally, the Supreme Court is of the La Mallorca Taxi, which was later
renamed R & E Transport, Inc., [petitioners] limit
not a trier of facts.[18] However, since the
findings of fact in the present case are the employment period to 14 years.
conflicting,[19] it waded through the records to Resolving this matter, we note [respondents] ID
find out if there was enough basis for the (Annex A, [Latag] position paper), which
appellate courts reversal of the NLRC Decision. appears to bear the signature of Miguel
Enriquez on the front portion and the date mere stock control, but complete domination -
February 27, 1961 when [x x x Latag] started - not only of finances, but of policy and
with the company. We also note an SSS business practice in respect to the transaction
document (Annex C) which shows that the attacked, must have been such that the
date of initial coverage of Pedro Latag, with corporate entity as to this transaction had at
SSS No. 03-0772155, is February 1961. the time no separate mind, will or existence of
its own; (2) such control must have been used
Viewed against [petitioners] non-disclaimer by the defendant to commit a fraud or a
[sic] that La Mallorca preceded R & E Taxi, wrong to perpetuate the violation of a
Inc.[;] x x x that both entities were/are owned
statutory or other positive legal duty, or a
by the Enriquez family, with [petitioner] Honorio dishonest and an unjust act in contravention of
[Enriquez] as the latters President[; and] x x x plaintiffs legal right; and (3) the said control
that La Mallorca was a different entity (page 2, and breach of duty must have proximately
[petitioners] position paper), we are of the
caused the injury or unjust loss complained
conclusion that [Latags] stint with the Enriquez of.[26]
family dated back since February 1961 and
thus, he should be entitled to retirement Respondent has not shown by competent
benefits for 37 years, as of the date of the filing evidence that one taxi company had stock
of this case on December 12, 1998.[23] control and complete domination over the
other or vice versa. In fact, no evidence was
Furthermore, basic is the rule that the presented to show the alleged renaming of La
corporate veil may be pierced only if it
Mallorca Taxi to R & E Transport, Inc. The seven-
becomes a shield for fraud, illegality or inequity
year gap between the time the former closed
committed against a third person.[24] We have shop and the date when the latter came into
thus cautioned against the inordinate
being also casts doubt on any alleged
application of this doctrine. In Philippine intention of petitioners to commit a wrong or to
National Bank v. Andrada Electric & violate a statutory duty. This lacuna in the
Engineering Company,[25] we said:
evidence compels us to reverse the Decision of
x x x [A]ny application of the doctrine of the CA affirming the labor arbiters finding of
piercing the corporate veil should be done fact that the basis for computing Pedros
with caution. A court should be mindful of the retirement pay should be 37 years, instead of
milieu where it is to be applied. It must be only 14 years.
certain that the corporate fiction was misused Validity of the Quitclaim
to such an extent that injustice, fraud, or crime
was committed against another, in disregard and Waiver
of its rights. The wrongdoing must be clearly
and convincingly established; it cannot be As to the Quitclaim and Waiver signed by
presumed. Otherwise, an injustice that was Respondent Avelina Latag, the appellate
never unintended may result from an court committed no error when it ruled that the
document was invalid and could not bar her
erroneous application.
from demanding the benefits legally due her
xxxxxxxxx husband. This is not say that all quitclaims are
invalid per se. Courts, however, are wary of
The question of whether a corporation is a schemes that frustrate workers rights and
mere alter ego is one of fact. Piercing the veil benefits, and look with disfavor upon
of corporate fiction may be allowed only if the
following elements concur: (1) control -- not
quitclaims and waivers that bargain these The rules implementing the New Retirement
away. Law similarly provide the above-mentioned
formula for computing the one-half month
Courts have stepped in to annul questionable
salary.[31] Since Pedro was paid according to
transactions, especially where there is clear the boundary system, he is not entitled to the
proof that a waiver, for instance, was wangled 13th month[32] and the service incentive
from an unsuspecting or a gullible person; or pay;[33] hence, his retirement pay should be
where the agreement or settlement was computed on the sole basis of his salary.
unconscionable on its face.[27] A quitclaim is
ineffective in barring recovery of the full It is accepted that taxi drivers do not receive
measure of a workers rights, and the fixed wages, but retain only those sums in
acceptance of benefits therefrom does not excess of the boundary or fee they pay to the
amount to estoppel.[28] Moreover, a quitclaim owners or operators of their vehicles.[34] Thus,
in which the consideration is scandalously low the basis for computing their benefits should
and inequitable cannot be an obstacle to the be the average daily income. In this case, the
pursuit of a workers legitimate claim.[29] CA found that Pedro was earning an
average of five hundred pesos (P500) per day.
Undisputably, Pedro M. Latag was credited We thus compute his retirement pay as
with 14 years of service with R & E Transport, follows: P500 x 15 days x 14 years of service
Inc. Article 287 of the Labor Code, as
equals P105,000. Compared with this amount,
amended by Republic Act No. the P38,850 he received, which represented
7641,[30] provides:
just over one third of what was legally due him,
Art. 287. Retirement. - x x x was unconscionable.

xxxxxxxxx Second Issue:

In the absence of a retirement plan or Was There Forum Shopping?


agreement providing for retirement benefits of Also assailed are the twin appeals that two
employees in the establishment, an employee different lawyers filed for respondent before
upon reaching the age of sixty (60) years or
the CA. Petitioners argue that instead of
more, but not beyond sixty-five (65) years accepting her explanation, the appellate
which is hereby declared the compulsory court should have dismissed the appeals
retirement age, who has served at least five (5) outright for violating the rule on forum
years in said establishment, may retire and shall shopping.
be entitled to retirement pay equivalent to at
least one-half (1/2) month salary for every year Forum shopping is the institution of two or more
of service, a fraction of at least six (6) months actions or proceedings grounded on the same
being considered as one whole year. cause, on the supposition that one or the other
court would render a favorable
Unless the parties provide for broader disposition.[35] Such act is present when there is
inclusions, the term one half-month salary shall an identity of parties, rights or causes of action,
mean fifteen (15) days plus one-twelfth (1/12) and reliefs sought in two or more pending
of the 13thmonth pay and the cash equivalent cases.[36] It is usually resorted to by a party
of not more than five (5) days of service against whom an adverse judgment or order
incentive leaves. has been issued in one forum, in an attempt to
x x x x x x x x x (Italics supplied) seek and possibly to get a favorable opinion in
another forum, other than by an appeal or a Under the circumstances, the case was in
special civil action for certiorari.[37] effect reopened by the proceedings held after
respondent had filed her Manifestation and
We find, as the CA[38] did, that respondent has
Motion to Set Aside the Motion to Dismiss. This
adequately explained why she had filed two ruling is in accordance with the fourth
appeals before the appellate court. In the paragraph of Section 2, Rule V of the New
August 5, 2002 Affidavit[39] that she attached as Rules of Procedure of the NLRC,[44] which
Annex A to her Compliance to Show Cause therefore correctly held as follows:
Order with Comment on petitioners Motion for
Reconsideration,[40] she averred that she had x x x Thus, the further hearings conducted
sought the services of another counsel to file thereafter, to determine the validity of
her Petition for certiorari before the CA. She complainants manifestation and motion are
did so after her original counsel had asked for but mute confirmation that indeed the 10
an extension of time to file the Petition January 2000 decision in this case has not as
because of time constraints and a tremendous yet attained finality. Finally, the appealed
workload, only to discover later that the order of 23 May 2000 itself declaring [that] the
original counsel had filed a similar Petition. decision stands and the Labor Arbitration
Associate of this office is directed to prepare
We cannot fault respondent for her tenacity. the Writ of Execution in due course, obviously,
Besides, to disallow her appeal would not be in
is a conclusion that the decision in this case
keeping with the policy of labor laws[41] to shun has been supplanted and rendered functus
highly technical procedural laws in the higher
officio by the herein parties acts. Thus, when
interest of justice.
the Labor Arbiter a quo found in his appealed
Third Issue: order that the amount of P38,850.00 is
unconscionable viewed against the amount
Monetary Award awarded in the decision, the same became
appealable independently of the 10 January
Petitioners contention is that the labor arbiters
2000 decision, which has not attained finality,
January 10, 2000 Decision was supplanted by
in the first place.[45]
the Compromise Agreement that had
preceded the formers official release[42] to, and
receipt[43] by, the parties. It appears from the
records that they had entered into an We cannot concur, however, in petitioners
Amicable Settlement on January 21, 2000; that other contention that the May 23, 2000 Order
based on that settlement, respondent filed a did not involve a monetary award. If the
Motion to Dismiss on January 24, 2000, before amicable settlement between the parties had
the labor arbiter who officially released on the rendered the January 10, 2000 Decision functus
same day his Decision dated January 10, 2000; oficio, then it follows that the monetary award
that upon receipt of a copy thereof, stated therein was reinstated -- by reference --
respondent filed a Manifestation and Motion to by the aforementioned Order. The appeal
Set Aside the Motion to Dismiss; and that the from the latter should perforce have followed
labor arbiter subsequently calendared the the procedural requirements under Article 223
case for conference, held hearings thereon, of the Labor Code.
and required the parties to exchange positions As amended, this provision explicitly provides
-- by way of comments, replies and rejoinders - that an appeal from the labor arbiters
- after which he handed down his May 23, decision, award or order must be made within
2000 Order.
ten (10) calendar days from receipt of a copy percent interest thereon from December 21,
thereof by the party intending to appeal it; 1998 until its full payment. No costs.
and, if the judgment involves a monetary
SO ORDERED.
award, an appeal by the employer may be
perfected only upon the posting of a cash or THIRD DIVISION
surety bond. Such cash or bond must have
been issued by a reputable bonding company [G.R. No. 136456. October 24, 2000]
duly accredited by the NLRC in the amount
HEIRS OF RAMON DURANO, SR., RAMON
equivalent to the monetary award stated in
DURANO III, AND ELIZABETHHOTCHKISS
the judgment. Sections 1, 3 and 6 of Rule VI of
DURANO, petitioners, vs. SPOUSES ANGELES
the New Rules of Procedure of the NLRC
SEPULVEDA UY AND EMIGDIO BING SING UY,
implement this Article.
SPOUSES FAUSTINO ALATAN AND VALERIANA
Indeed, this Court has repeatedly ruled that GARRO, AURELIA MATA, SILVESTRE RAMOS,
the perfection of an appeal in the manner and HERMOGENES TITO, TEOTIMO GONZALES,
within the period prescribed by law is not only PRIMITIVA GARRO, JULIAN GARRO, ISMAEL
mandatory but jurisdictional, and the failure to GARRO, BIENVENIDO CASTRO, GLICERIO
perfect an appeal has the effect of rendering BARRIGA, BEATRIZ CALZADA, ANDREA MATA DE
the judgment final and BATULAN, TEOFISTA ALCALA, FILEMON
executory.[46] Nonetheless, procedural lapses LAVADOR, CANDELARIO LUMANTAO, GAVINO
may be disregarded because of fundamental QUIMBO, JUSTINO TITO, MARCELINO GONZALES,
considerations of substantial justice;[47]or SALVADOR DAYDAY, VENANCIA REPASO,
because of the special circumstances of the LEODEGARIO GONZALES, and RESTITUTA
case combined with its legal merits or the GONZALES, respondents.
amount and the issue involved.[48]
DECISION
The requirement to post a bond to perfect an
GONZAGA-REYES, J.:
appeal has also been relaxed in cases when
the amount of the award has not been Petitioners seek the reversal of the decision of
included in the decision of the labor the First Division of the Court of Appeals dated
arbiter.[49] Besides, substantial justice will be November 14, 1997 in CA-G.R. CV No. 27220,
better served in the present case by allowing entitled Heirs of Ramon Durano, Sr., et. al.
petitioners appeal to be threshed out on the versus Spouses Angeles Supelveda Uy, et. al.,
merits,[50] especially because of serious errors in and the resolution of the Court of Appeals
the factual conclusions of the labor arbiter as dated October 29, 1998 which denied
to the award of retirement benefits. petitioners motion for reconsideration.

The antecedents of this case may be traced as


far back as August 1970; it involves a 128-
WHEREFORE, this Petition is partly GRANTED. The
hectare parcel of land located in the barrios of
Decision of the Court of Appeals
Dunga and Cahumayhumayan, Danao
is MODIFIED by crediting Pedro M. Latag with
City. On December 27, 1973, the late
14 years of service. Consequently, he is entitled
Congressman Ramon Durano, Sr., together
to retirement pay, which is hereby computed
with his son Ramon Durano III, and the latters
at P105,000 less the P38,850 which has already
wife, Elizabeth Hotchkiss Durano (petitioners in
been received by respondent, plus six (6)
the herein case), instituted an action for
damages against spouses Angeles Supelveda
Uy and Emigdio Bing Sing Uy, spouses Faustino finding that (petitioners) should not be held
Alatan and Valeriana Garro, spouses Rufino answerable therefor.[2]
Lavador and Aurelia Mata, Silvestre Ramos,
Petitioners further alleged in their complaint
Hermogenes Tito, Teotimo Gonzales, Primitiva
Garro, Julian Garro, Ismael Garro, Bienvenido before the CFI that during the course of the
Castro, Glicerio Barriga, Beatriz Calzada, above investigations, respondents kept
Andrea Mata de Batulan, Teofista Alcala, spreading false rumors and damaging tales
Filemon Lavador, Candelario Lumantao, which put petitioners into public contempt and
Gavino Quimbo, Justino Tito, Marcelino ridicule.[3]
Gonzales, Salvador Dayday, Venancia In their Answer, respondents lodged their
Repaso, Leodegario Gonzales, Jose de la affirmative defenses, demanded the return of
Calzada, Restituta Gonzales, and Cosme their respective properties, and made
Ramos (herein respondents[1]) before Branch counterclaims for actual, moral and exemplary
XVII of the then Court of First Instance of Cebu, damages. Respondents stated that sometime
Danao City. in the early part of August 1970 and months
In that case, docketed as Civil Case No. DC- thereafter they received mimeographed
56, petitioners accused respondents of notices dated August 2, 1970 and signed by
officiating a hate campaign against them by the late Ramon Durano, Sr., informing them
that the lands which they are tilling and
lodging complaints in the Police Department
of Danao City in August 1970, over petitioners residing in, formerly owned by the Cebu
Portland Cement Company (hereafter,
so-called invasion of respondents alleged
Cepoc), had been purchased by Durano &
properties in Cahumayhumayan, Danao
City. This was followed by another complaint Co., Inc. The notices also declared that the
lands were needed by Durano & Co. for
sent by respondents to the President of the
Philippines in February 1971, which depicted planting to sugar and for roads or residences,
petitioners as oppressors, landgrabbers and and directed respondents to immediately turn
over the said lands to the representatives of
usurpers of respondents alleged rights. Upon
the direction of the President, the Department the company. Simultaneously, tall bamboo
poles with pennants at the tops thereof were
of Justice through City Fiscal Jesus Navarro
planted in some areas of the lands and metal
and the Philippine Constabulary of Cebu
simultaneously conducted investigations on sheets bearing the initials RMD were nailed to
the matter. Respondents complaints were posts.
dismissed as baseless, and they appealed the As early as the first week of August 1970, and
same to the Secretary of Justice, who called even before many of the respondents
for another investigation to be jointly received notices to vacate, men who
conducted by the Special Prosecutor and the identified themselves as employees of Durano
Office of the City Fiscal of Danao City. During & Co. proceeded to bulldoze the lands
the course of said joint investigation, occupied by various respondents, destroying in
respondents Hermogenes Tito and Salvador their wake the plantings and improvements
Dayday again lodged a complaint with the made by the respondents therein. On some
Office of the President, airing the same occasions, respondents alleged, these men
charges of landgrabbing. The investigations on fired shots in the air, purportedly acting upon
this new complaint, jointly conducted by the the instructions of petitioner Ramon Durano III
3rd Philippine Constabulary Zone and the and/or Ramon Durano, Jr. On at least one
Citizens Legal Assistance Office resulted in the instance, petitioners Ramon Durano III and
Elizabeth Hotchkiss Durano were seen on the the complaint, respondents demanded actual
site of the bulldozing operations. damages for the cost of the improvements
they made on the land, together with the
On September 15, 1970, Durano & Co. sold the
damage arising from the dispossession itself;
disputed property to petitioner Ramon Durano moral damages for the anguish they
III, who procured the registration of these lands underwent as a result of the high-handed
in his name under TCT No. T-103 and TCT No. T- display of power by petitioners in depriving
104. them of their possession and property; as well
Respondents contended that the display of as exemplary damages, attorneys fees and
force and the known power and prestige of expenses of litigation.
petitioners and their family restrained them Respondents respective counterclaims ---
from directly resisting this wanton depredation referring to the improvements destroyed, their
upon their property. During that time, the values, and the approximate areas of the
mayor of Danao City was Mrs. Beatriz Durano, properties they owned and occupied --- are as
wife of Ramon Durano, Sr. and mother of follows:
petitioner Ramon Durano III. Finding no relief
from the local police, who respondents said a) TEOFISTA ALCALA - Tax Declaration No.
merely laughed at them for daring to 00223; .2400 ha.; bulldozed on August, 10,
complain against the Duranos, they organized 1970. Improvements destroyed consist of 47
themselves and sent a letter to then President trees, 10 bundles beatilis firewood and 2 sacks
Ferdinand Marcos reporting dispossession of of cassava, all valued at P5,437.00. (Exh. B,
their properties and seeking a determination of including submarkings)
the ownership of the land. This notwithstanding,
b) FAUSTINO ALATAN and VALERIANA GARRO -
the bulldozing operations continued until the
Tax Declaration No. 30758; .2480 ha.; Tax
City Fiscal was requested by the Department
Declaration No. 32974; .8944 ha.; Tax
of Justice to conduct an investigation on the
matter. When, on July 27, 1971, the City Fiscal Declaration No. 38908; .8000 ha.; Bulldozed on
September 9, 1970; Improvements destroyed
announced that he would be unable to
conduct a preliminary investigation, consist of 682 trees, a cornfield with one cavan
respondents urged the Department of Justice per harvest 3 times a year, valued at
to conduct the preliminary investigation. This P71,770.00; Bulldozed on March 13, 1971; 753
was granted, and the investigations which trees, 1,000 bundles beatilis firewood every
spanned the period March 1972 to April 1973 year, valued at P29,100.00; Cut down in the
later part of March, 1971 - 22 trees, 1,000
led to the conclusion that respondents
complaint was untenable.[4] bundles beatilis firewood every year, 6 cavans
corn harvest per year, valued at P1,940.00 or a
In their counterclaim, respondents alleged that total value of P102,810.00. (Exh. C, including
petitioners acts deprived most of them of their submarkings)
independent source of income and have
c) ANDREA MATA DE BATULAN - Tax
made destitutes of some of them. Also,
petitioners have done serious violence to Declaration No. 33033; .4259 has.; bulldozed on
September 11, 1970. Improvements destroyed
respondents spirit, as citizens and human
beings, to the extent that one of them had consist of 512 trees and 15 sacks cassava all
been widowed by the emotional shock that valued at P79,425.00. (Exh. D, including
the damage and dispossession has submarkings)
caused.[5] Thus, in addition to the dismissal of
d) GLICERIO BARRIGA - Tax Declaration No. valued at P10,410.00. (Exh. J, including
32290; .4000 ha.; bulldozed on September 10, submarkings)
1990. Improvements destroyed consist of 354
j) TEOTIMO GONZALES - Tax Declaration No.
trees, cassava field if planted with corn good
for one liter, 30 cavans harvest a year of corn, 38159; .8644 ha.; Tax Declaration No. 38158;
and one resthouse, all valued at .8000 ha.; Bulldozed on September 10, 1970 -
P35,500.00. (Exh. E, including submarkings) improvements destroyed consist of 460 trees
valued at P20,000.00. Bulldozed on December
e) BEATRIZ CALZADA - Tax Declaration No. 10, 1970 - Improvements destroyed consist of
03449; .900 ha.; Bulldozed on June 16, 254 trees valued at P65,600.00 - or a total value
1971. Improvements destroyed consist of 2,864 of P85,600.00. (Exh. K, including submarkings)
trees, 1,600 bundles of beatilis firewood, 12
kerosene cans cassava every year and 48 k) LEODEGARIO GONZALES - Tax Declaration
cavans harvest a year of corn all valued at No. 36884; Bulldozed on February 24,
P34,800.00. (Exh. F, including submarkings) 1971. Improvements destroyed consist of 946
trees, 40 ubi, 15 cavans harvest a year of corn,
f) BIENVENIDO CASTRO - Tax Declaration No. all valued at P72,270.00. (Exh. L, including
04883; .6000 ha.; bulldozed on September 10, submarkings)
1970. Improvements destroyed consist of 170
trees, 10 sacks cassava every year, 500 l) FILEMON LAVADOR - Tax Declaration No.
14036; 1 ha.; Bulldozed on February 5,
bundles beatilis firewood every year, 60
cavans corn harvest per year, all valued at 1971. Improvements destroyed consist of 675
(5,550.00. (Exh. G, including submarkings) trees and 9 cavans harvest a year of corn all
valued at P63,935.00. (Exh. M, including
g) ISMAEL GARRO - Tax Declaration No. 7185; 2 submarkings)
has. Bulldozed in August, 1970. Improvements
destroyed consist of 6 coconut trees valued at m) CANDELARIO LUMANTAO - Tax Declaration
No. 18791; 1.660 ha. Bulldozed on the second
P1,800.00. Bulldozed on February 3, 1971 -
improvements destroyed consist of 607 trees, a week of August, 1970 - Improvements
corn field of 5 cavans produce per harvest destroyed consist of 1,377 trees, a cornfield
thrice a year, all valued at P67,890.00. (Exh. H, with 3 cavans per harvest thrice a year and a
copra dryer all valued at P193,960.00.Bulldozed
including submarkings)
on February 26, 1971 - Improvements
h) JULIAN GARRO - Tax Declaration No. 28653; destroyed consist of 44 trees, one pig pen and
1 ha.; Bulldozed in the latter week of August, the fence thereof and the chicken roost all
1970. Improvements destroyed consist of 365 valued at P12,650.00. Tax Declaration No.
trees, 1 bamboo grove, 1 tisa, 1,000 bundles of 33159; 3.500 has. Bulldozed in the last week of
beatilis firewood, 24 cavans harvest a year of March, 1971 - Improvements destroyed consist
corn, all valued at P46,060.00.(Exh. I, including of 13 trees valued at P1,550.00. Bulldozed in the
submarkings) latter part consist of 6 Bamboo groves and Ipil-
Ipil trees valued at P700.00 with total value of
i) PRIMITIVA GARRO - Tax Declaration No. P208,860.00. (Exh. N, including submarkings)
28651; .3000 ha.; Bulldozed on September 7,
1970. Improvements destroyed consist of 183 n) AURELIA MATA - Tax Declaration No. 38071;
trees, 10 pineapples, a cassava field, area if .3333 ha.; Bulldozed sometime in the first
planted with corn good for liter, sweet potato, week of March, 1971 - Improvements
area if planted with corn good for liter all destroyed consist of 344 trees and 45 cavans
corn harvest per year valued at 8,520 madri-cacao trees and 24 cylindrical
P30,965.00. (Exh. Q, including submarkings) cement posts boundaries valued at
P18,540.00. Bulldozed on November 24, 1970 -
o) GAVINO QUIMBO - Tax Declaration No.
destroying 90 coconut trees, 3 years old
33231; 2.0978 has.; Tax Declaration No. 24377; cornfield at 40 cavans per harvest and at 3
.4960 ha. (.2480 ha. Belonging to your harvests a year (120 cavans) valued at
defendant) Bulldozed on September 12, 1970 - P31,800.00. Bulldozed on February 16, 1971 -
Improvements destroyed consist of 200 destroying 25,727 trees and sugarcane field
coconut trees and 500 banana fruit trees value P856,725.00 or a total value of
valued at P68,500.00. Bulldozed on consist of 59
P1,123,825.00. (Exh. V, including submarkings)
trees, 20 sacks cassava and 60 cavans harvest
a year of corn valued at P9,660.00 or a total t) SALVADOR DAYDAY - Tax Declaration No.
value of P78,160.00. (Exh. R, including (unnumbered) dated September 14, 1967;
submarkings) 4.000 has. Bulldozed on May 6, 1971 -
destroying 576 trees, 9 cavans yearly of corn,
p) SILVESTRE RAMOS - Tax Declaration No. 30 kerosene cans of cassava yearly valued at
24288; 1.5568 has.; Bulldozed on February 23, P4,795.00. Bulldozed from March 26, 1973 to
1971. - Improvements destroyed consist of 737 the first week of April, 1973 - destroying 108
trees, a cornfield with 3 cavans per harvest 3 trees and cornland, 6 cavans harvest per year
times a year and 50 bundles of beatilis
valued at P53,900.00 or a total value of
firewood, all valued at P118,170.00.(Exh. S, P58,695.00. (Exh. A, including submarkings)
including submarkings)
u) VENANCIA REPASO - Tax Declaration No.
q) MARCELINO GONZALES - Tax Declaration 18867; 1.1667 has. Bulldozed on April 15, 1971 -
No. 34057; .4049 ha. Bulldozed on March 20,
Improvements destroyed were 775 trees, 500
1972 - Improvements destroyed consist of 5
abaca, about to be reaped, and being
coconut trees and 9 cavans harvest a year of
reaped 3 times a year 2 bamboo groves all
corn valued at P1,860.00. Bulldozed on July 4, valued at P47,700.00. (Exh. O,
1972 - destroying 19 coconut trees valued at
including submarkings)
P5,700.00 or a total value of P7,560.00. (Exh. U,
including submarkings) v) HERMOGENES TITO - Tax Declaration No.
38009; over one (1) ha. Bulldozed in the latter
r) JUSTINO TITO -Tax Declaration No. 38072; part of September, 1970 - destroying 1 coconut
.2000 has.; Bulldozed on February 25, 1971 - tree, 18 sacks of corn per year valued at
Improvements destroyed consist of 338 trees P1,020.00. Bulldozed on March 15, 1973 -
and 5 kamongay all valued at P29,650.00. (Exh. destroying 2 coconut trees, 5 buri trees, 1
T, including submarkings) bamboo grove valued at P1,400.00. Bulldozed
s) EMIGDIO BING SING UY and ANGELES on March 26, 1974 - destroying 3 coconut trees
SEPULVEDA UY - Transfer Certificate of Title No. valued at P1,500.00 with a total value of
T-35 (Register of Deeds of Danao City); P3,920.00. (Exh. P, including submarkings).[6]
140.4395 has.; Area bulldozed- 20.000 On April 22, 1975, petitioners moved to dismiss
has. Bulldozed on August 5, 6 and 7, 1970 - their complaint with the trial court. The trial
destroying 565 coconut trees, 2-1/2 yrs. old, court granted the motion to dismiss, without
65,422 banana groves with 3,600 mango trees, prejudice to respondents right to proceed with
3 years old, grafted and about to bear fruit their counterclaim.
valued at P212,260.00. Bulldozed on November
24, 1970 and on February 16, 1971 - destroying
Hence, the trial proceeded only on the effort even if the properties do not belong to
counterclaim. them but to Cepoc, and that he was directed
by Ramonito Durano to do a listing of the
On September 23, 1980, this Court issued a
improvements as well as the owners. After he
resolution in Administrative Matter No. 6290 made a listing, this was given to Ramonito who
changing the venue of trial in Civil Case No. directed Benedicto Ramos to do payment.
DC-56 to the Regional Trial Court of Cebu
City. The change was mainly in line with the When he was preparing the list, they did not
transfer of Judge Bernardo Ll. Salas, who object to the removal of the plants because
presided over the case in Danao City, to Cebu the counterclaimants understood that the
City. lands did not belong to them, but later and
because of politics a complaint was filed, and
The parties agreed to dispense with pre-trial, finally that when he was doing the listing, the
and for the evidence-in-chief to be submitted improvements were even pointed to him by
by way of affidavits together with a schedule the counterclaimants themselves. (Exh. 48,
of documentary exhibits, subject to additional Records, p. 385-386).
direct examination, cross examination and
presentation of rebuttal evidence by the xxx xxx xxx
parties.
Ruperto Rom said that he had an occasion to
The trial court and later, the Court of Appeals, work at Cepoc from 1947 to 1950 together with
took note of the following portions of affidavits Benedicto and Tomas Ramos, the latter
submitted by petitioners: a capataz of the Durano Sugar Mills. Owner of
the properties, subject of the complaint, was
xxx City Fiscal Jesus Navarro said that in Cepoc.
August, 1967, he issued subpoenas to several
tenants in Cahumayhumayan upon The persons who eventually tilled the Cepoc
representation by Cepoc, the latter protesting properties were merely allowed to do
failure by the tenants to continue giving cultivation if planted to corn, and for Cepoc to
Cepoc its share of the corn produce. He be given a share, which condition was
learned from the tenants that the reason why complied with by all including the
they were reluctant and as a matter of fact counterclaimants. He even possessed one
some defaulted in giving Cepoc its share, was parcel which he planted to coconuts, jackfruit
that Uy Bing Sepulveda made similar demands trees and other plants. (Exh. 51, Records, pp.
to them for his share in the produce, and that 383-384)
they did not know to whom the shares should
xxx xxx xxx
be given.
Co-defendant Ramon Durano III said that he
xxx xxx xxx
agreed with the dismissal of the complaint
Jesus Capitan said that he is familiar with the because his fathers wish was reconciliation
place Cahumayhumayan and that the with the defendants following the death of
properties in said locality were acquired by Pedro Sepulveda, father of Angeles Sepulveda
Durano and Company and Ramon Durano III, Uy, but inspite of the dismissal of the complaint,
but formerly owned by Cepoc. the defendants still prosecuted their
counterclaim.
When the properties of Ramonito Durano were
cultivated, the owners of the plants requested The disputed properties were owned formerly
him that they be given something for their by Cepoc, and then of the latter selling the
properties to Durano and Company and then the property adjacent to Cepoc, developed
by the latter to him as of September 15, the area, mined the coal and had the
1970. As a matter of fact, TCT T-103 and T-104 surveyed area planted with sugar cane, and
were issued to him and that from that time on, finally the notices to the occupants because of
he paid the taxes. their intention to plant sugar cane and other
crops (T.S. N. December 4, 1985, pp. 31-32, 44-
At the time he purchased the properties, they 54, RTC Decision, pp. 16-19, Records, pp. 842-
were not occupied by the defendants. The first 845).[7]
time he learned about the alleged bulldozing
of the improvements was when the Petitioners also presented Court Commissioner,
defendants filed the complaint of land Engineer Leonidas Gicain, who was directed
grabbing against their family with the Office of by the trial court to conduct a field survey of
the President and the attendant the disputed property. Gicain conducted
publicity. Precisely his family filed the complaint surveys on the areas subjected to bulldozing,
against them. (Exh. 57, Records, pp. 723-730) including those outside the Cepoc
properties. The survey --- which was based on
xxx xxx xxx TCT No. T-103 and TCT No. T-104, titled in the
Congressman Ramon Durano said he is familiar name of Ramon Durano III, and TCT No. 35, in
with the properties, being owned originally by the name of respondent Emigdio Bing Sing Uy -
Cepoc. Thereafter they were purchased by -- was paid for by petitioners.[8]
Durano and Company and then sold to Respondents, for their part, also presented their
Ramon Durano III, the latter now the owner. He affidavits and supporting documentary
filed a motion to dismiss the case against evidence, including tax declarations covering
Angeles Sepulveda et al. as a gesture of
such portions of the property as they formerly
respect to the deceased Pedro Sepulveda,
inhabited and cultivated.
father of Angeles Sepulveda, and as a
Christian, said Pedro Sepulveda being the On March 8, 1990, the RTC issued a decision
former Mayor of Danao, if only to stop all upholding respondents counterclaim. The
misunderstanding between their families. dispositive portion of said decision reads:

xxx xxx xxx THE FOREGOING CONSIDERED, judgment is


hereby rendered in favor of the counter
He was the one who did the discovery of the claimants and against the plaintiffs directing
properties that belonged to Cepoc, which the latter to pay the former:
happened when he was doing mining work
near Cahumayhumayan and without his a) With respect to Salvador Dayday P 14,400.00
knowledge extended his operation within the
b) With respect to Teofista Alcala 4,400.00
area belonging to Cepoc. After Cepoc
learned of the substantial coal deposits, the c) With respect to Faustino Alatan 118,400.00
property was claimed by Cepoc and then a
survey was made to relocate the muniments. d) With respect to Andrea Mata de
Eventually he desisted doing mining work and Batulan 115,050.00
limited himself within the confines of his
e) With respect to Glicerio Barriga 35,500.00
property that was adjacent to Cepocs
property. All the claimants except Sepulveda f) With respect to Beatriz Galzada 70,300.00
Uy were occupants of the Cepoc
properties. Durano and Company purchased g) With respect to Bienvenido Castro 5,000.00
h) With respect to Ismael Garro 66,060.00 respective portions of the property covered by
TCT Nos. T-103 and T-104 thinking that they
i) With respect to Julian Garro 48,600.00 were the absolute owners thereof. A number of
j) With respect to Primitiva Garro 13,000.00 these respondents alleged that they inherited
these properties from their parents, who in turn
k) With respect to Teotimo Gonzales 63,200.00 inherited them from their own parents. Some
others came into the properties by purchase
l) With respect to Leodegario
from the former occupants thereof. They and
Gonzales 85,300.00
their predecessors were responsible for the
m) With respect to Filemon Lavador 70,860.00 plantings and improvements on the
property. They were the ones who sought for
n) With respect to Venancia Repaso 101,700.00 the properties to be tax-declared in their
respective names, and they continually paid
o) With respect to Candelario
the taxes thereto. Respondents maintained
Lumantao 192,550.00
that they were unaware of anyone claiming
p) With respect to Hermogenes Tito 1,200.00 adverse possession or ownership of these lands
until the bulldozing operations in 1970.
q) With respect to Aurelia Mata 28,560.00
As for Venancia Repaso, Hermogenes Tito and
r) With respect to Gavino Quimbo 81,500.00 Marcelino Gonzales, the Court found that the
properties they laid claim to were not part of
s) With respect to Silvestre Ramos 101,700.00
the land that was purchased by Durano & Co.
t) With respect to Justino Tito 27,800.00 from Cepoc. Thus, it found the bulldozing of
these lands by petitioners totally unjustified and
u) With respect to Marcelino Gonzales 2,360.00 ordered not only the total reimbursement of
useful and necessary expenses on the
v) With respect to Angeles
properties but also the return of these
Supelveda 902,840.00
properties to Repaso, Tito and Gonzales,
P120,000.00 should be the figure in terms of respectively. As for all the other respondents,
litigation expenses and a separate amount the RTC found their possession of the properties
of P100,000.00 as attorneys fees. to be in the concept of owner and adjudged
them to be builders in good faith. Considering
Return of the properties to Venancia Repaso, that petitioners in the instant case
Hermogenes Tito and Marcelino Gonzales is appropriated the improvements on the areas
hereby directed. overran by the bulldozers, the RTC ruled that
With respect to counter claimant Angeles (t)he right of retention to the improvements
Sepulveda Uy, return of the property to her necessarily should be secured (in favor of
should be with respect to the areas outside of respondents) until reimbursed not only of the
the Cepoc property, as mentioned in the necessary but also useful expenses.[10]
sketch, Exhibit 56-A. On the matter of litigation expenses and
Finally with costs against the plaintiffs. attorneys fees, the RTC observed that the trial
period alone consisted of forty (40) trial dates
SO ORDERED. [9] spread over a period of sixteen (16) years. At
the time, respondents were represented by
The RTC found that the case preponderated in
counsel based in Manila, and the trial court
favor of respondents, who all possessed their
took into consideration the travel,
accommodation and miscellaneous expenses Original Certificate of Title No. N.A., pursuant to
of their lawyer that respondents must have a N.A. patent granted by the President of the
shouldered during the trial of the case. Philippines, on the N.A. day of N.A., in the year
nineteen hundred and N.A., under Act
Dissatisfied, petitioners appealed the RTC No. N.A.
decision to the Court of Appeals, which, in
turn, affirmed the said decision and ordered This certificate is a transfer
the return of the property to all the from Transfer Certificate of Title No. (RT-39) (T-
respondents-claimants, in effect modifying the 14456) -3 which is cancelled by virtue hereof in
RTC decision which allowed return only in favor so far as the above described land is
of respondents Repaso, Tito and Gonzales. concerned.

In its decision, the Court of Appeals upheld the xxx xxx


factual findings and conclusions of the RTC,
including the awards for actual damages, TRANSFER CERTIFICATE OF TITLE
attorneys fees and litigation expenses, and NO. T - 104 -
found additionally that the issuance of TCT
Nos. T-103 and T-104 in the name of Ramon xxx xxx
Durano III was attended by fraud. Evaluating
IT IS FURTHER CERTIFIED that said land was
the evidence before it, the Court of Appeals
originally registered on the N.A. day of N.A., in
observed that the alleged reconstituted titles
the year nineteen hundred and N.A. in
of Cepoc over the property, namely, TCT No.
Registration Book No. N.A. page N.A. of the
(RT-38) (T-14457) -4 and TCT No. (RT-39) (T-
Office of the Register of Deeds of N.A., as
14456) -3 (Exhibits 19 and 20 of this case),
Original Certificate of Title No. N.A., pursuant to
which were claimed to be the derivative titles
a N.A. patent granted by the President of the
of TCT Nos. T-103 and T-104, were not submitted
Philippines, on the N.A. day of N.A., in the year
in evidence before the RTC. Thus, in an Order
nineteen hundred and N.A., under Act
dated June 15, 1988, the RTC ordered Exhibits
No. N.A.
19 and 20 deleted from petitioners Offer of
Exhibits. The Court of Appeals further noted This certificate is a transfer
that even among the exhibits subsequently from Transfer Certificate of Title No. (RT-38) (T-
produced by petitioners before the RTC, said 14457) -4 which is cancelled by virtue hereof in
Exhibits 19 and 20 were still not so far as the above described land is
submitted.[11] Moreover, Cepoc had no concerned.[12]
registered title over the disputed property as
indicated in TCT Nos. T-103 and T-104. Thus: From the foregoing, the Court of Appeals
concluded that the issuance of the TCT Nos. T-
TRANSFER CERTIFICATE OF TITLE 103 and T-104 in favor of petitioner Ramon
Durano III was attended by fraud; hence,
NO. - 103 -
petitioners could not invoke the principle of
xxx xxx indefeasibility of title. Additionally, the Court of
Appeals found that the alleged Deed of
IT IS FURTHER CERTIFIED that said land was Absolute Sale, undated, between Cepoc
originally registered on the N.A. day of N.A., in Industries, Inc. and Durano & Co. was not
the year nineteen hundred and N.A. in notarized and thus, unregistrable.
Registration Book No. N.A. page N.A. of the
Office of the Register of Deeds of N.A., as
The Court of Appeals went on to state that On October 29, 1998, the Court of Appeals
while, on the one hand, no valid issuance of denied petitioners motion for reconsideration
title may be imputed in favor of petitioners for lack of merit. Hence, this petition.
from the private Deed of Sale and the alleged
reconstituted titles of Cepoc that were not Petitioners assign the following errors from the
presented in evidence, respondents, in CA decision:
contrast --- who although admittedly had no 1. The Court of Appeals erred in granting relief
registered titles in their names --- were able to to the respondents who did not appeal the
demonstrate possession that was public, decision of the lower court.
continuous and adverse --- or possession in the
concept of owner, and which was much prior 2. The Court of Appeals erred in collaterally
(one or two generations back for many of attacking the validity of the title of petitioner
respondents) to the claim of ownership of Ramon Durano III.
petitioners.
3. The respondents should not have been
Thus, the Court of Appeals ordered the return adjudged builders in good faith.
of the properties covered by TCT Nos. T-103
4. The petitioners should not be held personally
and T-104 to all respondents who made
liable for damages because of the doctrine of
respective claims thereto. Corollarily, it
separate corporate personality.
declared that petitioners were possessors in
bad faith, and were not entitled to 5. It was an error to hold that the respondents
reimbursement for useful expenses incurred in had proved the existence of improvements on
the conversion of the property into sugarcane the land by preponderance of evidence, and
lands. It also gave no merit to petitioners in awarding excessive damages therefor.
allegation that the actual damages awarded
by the trial court were excessive, or to 6. It was error to direct the return of the
petitioners argument that they should not have properties to respondents Venancia Repaso,
been held personally liable for any damages Hermogenes Tito and Marcelino Gonzales.
imputable to Durano & Co.
7. The award of litigation expenses and
Following is the dispositive portion of the attorneys fees was erroneous.
decision of the Court of Appeals:
8. The petitioners are not possessors in bad
WHEREFORE, the appealed decision of the faith.
lower court in Civil Case No. DC-56 is hereby
On their first assignment of error, petitioners
AFFIRMED with MODIFICATION ordering the
contend that before the Court of Appeals,
return of the respective subject properties to all
they only questioned that portion of the RTC
the defendants-appellees, without indemnity
decision which directed the return of the
to the plaintiffs-appellants as regards whatever
properties to respondents Repaso, Tito and
improvements made therein by the latter. In all
Gonzales. They argued that the return of the
other respects, said decision in affirmed.
properties to all the other respondents by the
Costs against plaintiffs-appellants. Court of Appeals was erroneous because it
was not among the errors assigned or argued
SO ORDERED.[13] by petitioners on appeal. Besides, since
respondents themselves did not appeal from
the RTC decision on the issue of return of the
physical possession of the property, it is
understood that judgment as to them has of possession than petitioners over the disputed
already become final by operation of law. To properties, the former being possessors in the
support its argument, petitioners cited the concept of owner. Thus, it held ---
cases of Madrideo vs. Court of
Appeals[14] and Medida vs. Court of Plaintiffs-appellants have to return possession
Appeals[15], which held that whenever an of the subject property, not only to
appeal is taken in a civil case an appellee who defendants-appellees Venancia Repaso,
has not himself appealed cannot obtain from Hermogenes Tito and Marcelino Gonzales but
the appellate court any affirmative relief other to all other defendants-appellees herein, by
virtue of the latters priority in time of declaring
than the ones granted in the decision of the
court below. the corresponding portions of the subject
properties in their name and/or their
Rule 51 of the New Rules of Civil Procedure predecessors-in-interest coupled with actual
provides: possession of the same property through their
predecessors-in-interest in the concept of an
Sec. 8. Questions that may be decided. --- No owner. Plaintiffs-appellants who had never
error which does not affect the jurisdiction over produced in court a valid basis by which they
the subject matter or the validity of the are claiming possession or ownership over the
judgment appealed from or the proceedings said property cannot have a better right over
therein will be considered unless stated in the
the subject properties than defendants-
assignment of errors, or closely related to or appellees.[17]
dependent on an assigned error and properly
argued in the brief, save as the court may pass Moreover, petitioners reliance on
upon plain errors and clerical errors. the Madrideo and Medida cases is
misplaced. In the Madrideo case, the
We find untenable petitioners argument that
predecessors-in-interest of the Llorente Group
since no party (whether petitioners or
sold the disputed property to the Alcala
respondents) appealed for the return of the Group, who in turn sold the same to the
properties to respondents other than Repaso,
spouses Maturgo.The RTC adjudged the
Tito and Gonzales, that portion of the RTC spouses Maturgo purchasers in good faith,
decision that awards damages to such other such that they could retain their title to the
respondents is final and may no longer be property, but held that the Lllorente Group was
altered by the Court of Appeals. A reading of unlawfully divested of its ownership of the
the provisions of Section 8, Rule 51, aforecited, property by the Alcala Group. The Alcala
indicates that the Court of Appeals is not
Group appealed this decision to the Court of
limited to reviewing only those errors assigned Appeals, who denied the appeal and ordered
by appellant, but also those that are closely the reinstatement in the records of the Registry
related to or dependent on an assigned of Deeds of the Original Certificates of Title of
error.[16] In other words, the Court of Appeals is the predecessors-in-interest of the Llorente
imbued with sufficient discretion to review Group. In setting aside the decision of the
matters, not otherwise assigned as errors on Court of Appeals, this Court held that no relief
appeal, if it finds that their consideration is may be afforded in favor of the Llorente Group
necessary in arriving at a complete and just to the prejudice of the spouses Maturgo, who -
resolution of the case. In this case, the Court of
-- the Court carefully emphasized --- were third
Appeals ordered the return of the properties to parties to the appeal, being neither appellants
respondents merely as a legal consequence of nor appellees before the Court of Appeals,
the finding that respondents had a better right
and whose title to the disputed property was
confirmed by the RTC. The application of the of the property --- considering that the alleged
ruling in Madrideo to the instant case bears no titles of Cepoc from which TCT Nos. T-103 and
justification because it is clear that petitioners, T-104 were supposed to have derived title were
in appealing the RTC decision, impleaded all not produced, and the deed of sale between
the herein respondents. Cepoc and Durano & Co. was unregistrable.

Meanwhile, in the Medida case, petitioners The records clearly bear out respondents prior
(who were the appellees before the Court of and actual possession; more exactly, the
Appeals) sought the reversal of a finding of the records indicate that respondents possession
RTC before the Supreme Court. The Court has ripened into ownership by acquisitive
explained that since petitioners failed to prescription.
appeal from the RTC decision, they --- as
appellees before the Court of Appeals --- Ordinary acquisitive prescription, in the case of
could only argue for the purpose of sustaining immovable property, requires possession of the
the judgment in their favor, and could not ask thing in good faith and with just title,[18] for a
for any affirmative relief other than that period of ten years.[19] A possessor is deemed
granted by the court below. The factual milieu to be in good faith when he is not aware of
in Medida is different from that of the instant any flaw in his title or mode of acquisition of
case, where the return of the properties to the property.[20] On the other hand, there is just
title when the adverse claimant came into
respondents was not an affirmative relief
sought by respondents but an independent possession of the property through one of the
modes for acquiring ownership recognized by
determination of the Court of Appeals
law, but the grantor was not the owner or
proceeding from its findings that respondents
were long-standing possessors in the concept could not transmit any right.[21] The claimant by
prescription may compute the ten-year period
of owner while petitioners were builders in bad
faith. Certainly, under such circumstances, the by tacking his possession to that of his grantor
Court of Appeals is not precluded from or predecessor-in-interest.[22]
modifying the decision of the RTC in order to The evidence shows that respondents
accord complete relief to respondents. successfully complied with all the requirements
Moving now to the other errors assigned in the for acquisitive prescription to set in. The
petition, the return of the properties to properties were conveyed to respondents by
respondents Repaso, Tito and Gonzales was purchase or inheritance, and in each case the
premised upon the factual finding that these respondents were in actual, continuous, open
and adverse possession of the properties. They
lands were outside the properties claimed by
petitioners under TCT Nos. T-103 and T- exercised rights of ownership over the lands,
104. Such factual finding of the RTC, sustained including the regular payment of taxes and
by the Court of Appeals, is now final and introduction of plantings and
binding upon this Court. improvements. They were unaware of anyone
claiming to be the owner of these lands other
In respect of the properties supposedly than themselves until the notices of demolition
covered by TCT Nos. T-103 and T-104, the Court in 1970 --- and at the time each of them had
of Appeals basically affirmed the findings of already completed the ten-year prescriptive
the RTC that respondents have shown prior period either by their own possession or by
and actual possession thereof in the concept obtaining from the possession of their
of owner, whereas petitioners failed to predecessors-in-interest. Contrary to the
substantiate a valid and legitimate acquisition allegation of petitioners that the claims of all
twenty-two (22) respondents were lumped sale between Cepoc and Durano & Co. was
together and indiscriminately sustained, the unnotarized and thus, unregistrable.
lower courts (especially the RTC) took careful
It is true that fraud in the issuance of a
consideration of the claims individually, taking
note of the respective modes and dates of certificate of title may be raised only in an
acquisition. Whether respondents action expressly instituted for that
predecessors-in-interest in fact had title to purpose,[25]and not collaterally as in the instant
convey is irrelevant under the concept of just case which is an action for reconveyance and
title and for purposes of prescription. damages. While we cannot sustain the Court
of Appeals finding of fraud because of this
Thus, respondents counterclaim for jurisdictional impediment, we observe that the
reconveyance and damages before the RTC above-enumerated circumstances indicate
was premised upon a claim of ownership as none too clearly the weakness of petitioners
indicated by the following allegations: evidence on their claim of ownership. For
instance, the non-production of the alleged
(Y)our defendants are owners and occupants reconstituted titles of Cepoc despite demand
of different parcels of land located in Barrio therefor gives rise to a presumption
Cahumayhumayan, your defendants having (unrebutted by petitioners) that such
occupied these parcels of land for various evidence, if produced, would be adverse to
periods by themselves or through their
petitioners.[26] Also, the unregistrability of the
predecessors-in-interest, some for over fifty deed of sale is a serious defect that should
years, and some with titles issued under the
affect the validity of the certificates of
Land Registration Act; xxxxx [23]
title. Notarization of the deed of sale is essential
Respondents claim of ownership by acquisitive to its registrability,[27] and the action of the
prescription (in respect of the properties Register of Deeds in allowing the registration of
covered by TCT Nos. T-103 and T-104) having the unacknowledged deed of sale was
been duly alleged and proven, the Court unauthorized and did not render validity to the
deems it only proper that such claim be registration of the document.[28]
categorically upheld. Thus, the decision of the Furthermore, a purchaser of a parcel of land
Court of Appeals insofar as it merely declares cannot close his eyes to facts which should put
those respondents possessors in the concept of a reasonable man upon his guard, such as
owner is modified to reflect the evidence on when the property subject of the purchase is in
record which indicates that such possession the possession of persons other than the
had been converted to ownership by ordinary
seller.[29] A buyer who could not have failed to
prescription. know or discover that the land sold to him was
Turning now to petitioners claim to ownership in the adverse possession of another is a buyer
and title, it is uncontested that their claim in bad faith.[30] In the herein case, respondents
hinges largely on TCT Nos. T-103 and T-104, were in open possession and occupancy of
issued in the name of petitioner Ramon Durano the properties when Durano & Co. supposedly
III. However, the validity of these certificates of purchased the same from Cepoc. Petitioners
title was put to serious doubt by the following: made no attempt to investigate the nature of
(1) the certificates reveal the lack of registered respondents possession before they ordered
title of Cepoc to the properties;[24] (2) the demolition in August 1970.
alleged reconstituted titles of Cepoc were not In the same manner, the purchase of the
produced in evidence; and (3) the deed of property by petitioner Ramon Durano III from
Durano & Co. could not be said to have been Since petitioners knew fully well the defect in
in good faith. It is not disputed that Durano III their titles, they were correctly held by the
acquired the property with full knowledge of Court of Appeals to be builders in bad faith.
respondents occupancy thereon.There even
appears to be undue haste in the conveyance The Civil Code provides:
of the property to Durano III, as the bulldozing Art. 449. He who builds, plants or sows in bad
operations by Durano & Co. were still faith on the land of another, loses what is built,
underway when the deed of sale to Durano III planted or sown without right of indemnity.
was executed on September 15, 1970. There is
not even an indication that Durano & Co. Art. 450. The owner of the land on which
attempted to transfer registration of the anything has been built, planted or sown in
property in its name before it conveyed the bad faith may demand the demolition of the
same to Durano III. work, or that the planting or sowing be
removed, in order to replace things in their
In the light of these circumstances, petitioners former condition at the expense of the person
could not justifiably invoke the defense of who built, planted or sowed; or he may
indefeasibility of title to defeat respondents compel the builder or planter to pay the price
claim of ownership by prescription. The rule on of the land, and the sower the proper rent.
indefeasibility of title, i.e., that Torrens titles can
be attacked for fraud only within one year Art. 451. In the cases of the two preceding
from the date of issuance of the decree of articles, the landowner is entitled to damages
registration, does not altogether deprive an from the builder, planter or sower.
aggrieved party of a remedy at law. As
Based on these provisions, the owner of the
clarified by the Court in Javier vs. Court of
land has three alternative rights: (1) to
Appeals[31] ---
appropriate what has been built without any
The decree (of registration) becomes obligation to pay indemnity therefor, or (2) to
incontrovertible and can no longer be demand that the builder remove what he had
reviewed after one (1) year from the date of built, or (3) to compel the builder to pay the
the decree so that the only remedy of the value of the land.[32] In any case, the
landowner whose property has been landowner is entitled to damages under Article
wrongfully or erroneously registered in anothers 451, abovecited.
name is to bring an ordinary action in court for
We sustain the return of the properties to
reconveyance, which is an action in
respondents and the payment of indemnity as
personam and is always available as long as
being in accord with the reliefs under the Civil
the property has not passed to an innocent
Code.
third party for value. If the property has passed
into the hands of an innocent purchaser for On petitioners fifth assignment of error that
value, the remedy is an action for damages. respondents had not proved the existence of
improvements on the property by
In the instant case, respondents action for
preponderance of evidence, and that the
reconveyance will prosper, it being clear that
damages awarded by the lower courts were
the property, wrongfully registered in the name
excessive and not actually proved, the Court
of petitioner Durano III, has not passed to an
notes that the issue is essentially
innocent purchaser for value.
factual. Petitioners, however, invoke Article
2199 of the Civil Code which requires actual
damages to be duly proved. Passing upon this
matter, the Court of Appeals cited with The right of the owner of the land to recover
approval the decision of the RTC which stated: damages from a builder in bad faith is clearly
provided for in Article 451 of the Civil
The counter claimants made a detail of the
Code. Although said Article 451 does not
improvements that were damaged. Then the elaborate on the basis for damages, the Court
query, how accurate were the listings, perceives that it should reasonably correspond
supposedly representing damaged with the value of the properties lost or
improvements. The Court notes, some of the destroyed as a result of the occupation in bad
counter claimants improvements in the tax faith, as well as the fruits (natural, industrial or
declarations did not tally with the listings as
civil) from those properties that the owner of
mentioned in their individual affidavits. Also, the land reasonably expected to obtain. We
others did not submit tax declarations sustain the view of the lower courts that the
supporting identity of the properties they disparity between respondents affidavits and
possessed. The disparity with respect to the
their tax declarations on the amount of
former and absence of tax declarations with damages claimed should not preclude or
respect to the latter, should not be a defeat respondents right to damages, which is
justification for defeating right of
guaranteed by Article 451. Moreover, under
reimbursement. As a matter of fact, no Article 2224 of the Civil Code:
controverting evidence was presented by the
plaintiffs that the improvements being Temperate or moderate damages, which are
mentioned individually in the affidavits did not more than nominal but less than
reflect the actual improvements that were compensatory damages, may be recovered
overran by the bulldozing operation. Aside when the court finds that some pecuniary loss
from that, the City Assessor, or any member of has been suffered but its amount cannot, from
his staff, were not presented as witnesses. Had the nature of the case, be proved with
they been presented by the plaintiffs, the least certainty.
that can be expected is that they would have
We also uphold the award of litigation
enlightened the Court the extent of their
individual holdings being developed in terms expenses and attorneys fees, it being clear
that petitioners acts compelled respondents to
of existing improvements.This, the plaintiffs
litigate and incur expenses to regain rightful
defaulted. It might be true that there were tax
declarations, then presented as supporting possession and ownership over the disputed
documents by the counter claimants, but then property.[34]
mentioning improvements but in variance with The last issue presented for our resolution is
the listings in the individual affidavits. This whether petitioners could justifiably invoke the
disparity similarly cannot be accepted as a doctrine of separate corporate personality to
basis for the setting aside of the listing of evade liability for damages. The Court of
improvements being adverted to by the Appeals applied the well-recognized principle
counter claimants in their affidavits. This Court of piercing the corporate veil, i.e., the law will
is not foreclosing the possibility that the tax regard the act of the corporation as the act of
declarations on record were either table its individual stockholders when it is shown that
computations by the Assessor or his deputy, or the corporation was used merely as an alter
tax declarations whose entries were merely ego by those persons in the commission of
copied from the old tax declarations during fraud or other illegal acts.
the period of revision. (RTC Decision, p. 36,
Records, p. 862)[33]
The test in determining the applicability of the prescription to the extent of their respective
doctrine of piercing the veil of corporate claims. In all other respects, the decision of the
fiction is as follows: Court of Appeals is AFFIRMED. Costs against
petitioners.
1. Control, not mere majority or complete stock
control, but complete domination, not only of SO ORDERED.
finances but of policy and business practice in
respect to the transaction attacked so that the [G.R. No. 159121. February 3, 2005]
corporate entity as to this transaction had at PAMPLONA PLANTATION COMPANY, INC.
the time no separate mind, will or existence of and/or JOSE LUIS BONDOC, petitioners, vs.
its own; RODEL TINGHIL, MARYGLENN SABIHON,
2. Such control must have been used by the ESTANISLAO BOBON, CARLITO TINGHIL,
BONIFACIO TINGHIL, NOLI TINGHIL, EDGAR
defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other TINGHIL, ERNESTO ESTOMANTE, SALLY TOROY,
BENIGNO TINGHIL JR., ROSE ANN NAPAO,
positive legal duty, or dishonest and unjust acts
DIOSDADO TINGHIL, ALBERTO TINGHIL, ANALIE
in contravention of plaintiffs legal rights; and
TINGHIL, and ANTONIO
3. The aforesaid control and breach of duty ESTOMANTE, respondents.
must proximately cause the injury or unjust loss
complained of. DECISION

PANGANIBAN, J.:
The absence of any one of these elements
prevents piercing the corporate veil. In To protect the rights of labor, two corporations
applying the instrumentality or alter ego with identical directors, management, office
doctrine, the courts are concerned with reality and payroll should be treated as one entity
and not form, with how the corporation only. A suit by the employees against one
operated and the individual defendants corporation should be deemed as a suit
relationship to that operation.[35] against the other. Also, the rights and claims of
The question of whether a corporation is a workers should not be prejudiced by the acts
of the employer that tend to confuse them
mere alter ego is purely one of fact.[36] The
about its corporate identity. The corporate
Court sees no reason to reverse the finding of
the Court of Appeals. The facts show that fiction must yield to truth and justice.
shortly after the purported sale by Cepco to The Case
Durano & Co., the latter sold the property to
petitioner Ramon Durano III, who immediately Before us is a Petition for Review[1] under Rule
procured the registration of the property in his 45 of the Rules of Court, seeking to annul the
name. Obviously, Durano & Co. was used by January 31, 2003 Decision[2] and the June 17,
petitioners merely as an instrumentality to 2003 Resolution[3] of the Court of Appeals (CA)
appropriate the disputed property for in CA-GR SP No. 62813. The assailed Decision
themselves. disposed as follows:

WHEREFORE, the instant petition is DENIED. The WHEREFORE, in view of the foregoing, the
decision of the Court of Appeals is MODIFIED to petition is GRANTED. The assailed decision of
declare respondents with claims to the public respondent NLRC dated 19 July 2000
properties covered by Transfer Certificate of [is] REVERSED and SET ASIDE and a new one
Title Nos. T-103 and T-104 owners by acquisitive entered DIRECTING private respondents to
reinstate petitioners, except Rufino Bacubac, engaging in the business of operating tourist
Felix Torres and Antonio Canolas, to their resorts, hotels, and inns, with complementary
former positions without loss of seniority rights facilities, such as restaurants, bars, boutiques,
plus payment of full backwages. However, if service shops, entertainment, golf courses,
reinstatement is no longer feasible, a one- tennis courts, and other land and aquatic
month salary for every year of service shall be sports and leisure facilities.
paid the petitioners as ordered by the Labor
Arbiter in his decision dated 31 August 1998 On 15 December 1996, the Pamplona
plus payment of full backwages computed Plantation Labor Independent Union (PAPLIU)
conducted an organizational meeting wherein
from date of illegal dismissal to the finality of
this decision.[4] several [respondents] who are either union
members or officers participated in said
The Decision[5] of the National Labor Relations meeting.
Commission (NLRC),[6] reversed by the CA,
disposed as follows: Upon learning that some of the [respondents]
attended the said meeting, [Petitioner] Jose
WHEREFORE, premises considered, the decision Luis Bondoc, manager of the company, did
appealed from is hereby REVERSED, and not allow [respondents] to work anymore in the
another one entered DISMISSING the plantation.
complaint.[7]
Thereafter, on various dates, [respondents]
The June 17, 2003 Resolution denied petitioners filed their respective complaints with the NLRC,
Motion for Reconsideration. Sub-Regional Arbitration Branch No. VII,
Dumaguete City against [petitioners] for unfair
The Facts labor practice, illegal dismissal, underpayment,
The CA summarized the antecedents as overtime pay, premium pay for rest day and
follows: holidays, service incentive leave pay,
damages, attorneys fees and 13th month pay.
Sometime in 1993, [Petitioner] Pamplona
Plantations Company, Inc. (company for On 09 October 1997, [respondent] Carlito
brevity) was organized for the purpose of Tinghil amended his complaint to implead
taking over the operations of the coconut and Pamplona Plantation Leisure Corporation x x x.
sugar plantation of Hacienda Pamplona On 31 August 1998, Labor Arbiter Jose G.
located in Pamplona, Negros Oriental. It Gutierrez rendered a decision finding
appears that Hacienda Pamplona was [respondents], except Rufino Bacubac,
formerly owned by a certain Mr. Bower who Antonio Caolas and Felix Torres who were
had in his employ several agricultural workers. complainants in another case, to be entitled to
When the company took over the operation of separation pay.
Hacienda Pamplona in 1993, it did not absorb xxxxxxxxx
all the workers of Hacienda Pamplona. Some,
however, were hired by the company during [Petitioners] appealed the Labor Arbiters
harvest season as coconut hookers or sakador, decision to [the] NLRC. In the assailed decision
coconut filers, coconut haulers, coconut dated 19 July 2000, the NLRCs Fourth Division
scoopers or lugiteros, and charcoal makers. reversed the Labor Arbiter, ruling that
[respondents], except Carlito Tinghil, failed to
Sometime in 1995, Pamplona Plantation Leisure implead Pamplona Plantation Leisure
Corporation was established for the purpose of
Corporation, an indispensable party and that
there exist no employer-employee relation Issues
between the parties.
In their Memorandum, petitioners submit the
xxxxxxxxx following issues for our consideration:

[Respondents] filed a motion for 1. Whether or not the finding of the Court of
reconsideration which was denied by [the] Appeals that herein respondents are
NLRC in a Resolution dated 06 December employees of Petitioner Pamplona Plantation
2000.[8] Company, Inc. is contrary to the admissions of
the respondents themselves.
Respondents elevated the case to the CA via
a Petition for Certiorari under Rule 65 of the 2. Whether or not the Court of Appeals has
Rules of Court. decided in a way not in accord with law and
jurisprudence, and with grave abuse of
Ruling of the Court of Appeals
discretion, in not dismissing the respondents
Guided by the fourfold test for determining the complaint for failure to implead Pamplona
existence of an employer-employee Plantation Leisure Corp., which is an
relationship, the CA held that respondents indispensable party to this case.
were employees of petitioner-company. 3. Whether or not the Court of Appeals has
Finding there was a power to hire, the decided in a way not in accord with law and
appellate court considered the admission of jurisprudence, and with grave abuse of
petitioners in their Comment that they had
discretion in ordering reinstatement or
hired respondents as coconut filers, coconut payment of separation pay and backwages to
scoopers, charcoal makers, or as
the respondents, considering the lack of
pieceworkers. The fact that respondents were
employer-employee relationship between
paid by piecework did not mean that they
petitioner and respondents.[10]
were not employees of the company. Further,
the CA ruled that petitioners necessarily The main issue raised is whether the case
exercised control over the work they should be dismissed for the non-joinder of the
performed, since the latter were working within Pamplona Plantation Leisure Corporation. The
the premises of the plantation. According to other issues will be taken up in the discussion of
the CA, the mere existence -- not necessarily the main question.
the actual exercise -- of the right to control the
manner of doing work sufficed to meet the The Courts Ruling
fourth element of an employer-employee The Petition lacks merit.
relation.
Preliminary Issue:
The appellate court also held that respondents
were regular employees, because the tasks Factual Matters
they performed were necessary and
Section 1 of Rule 45 of the Rules of Court states
indispensable to the operation of the
that only questions of law are entertained in
company. Since there was no compliance with
appeals by certiorari to the Supreme Court.
the twin requirements of a valid and/or
However, jurisprudence has recognized several
authorized cause and of procedural due
exceptions in which factual issues may be
process, their dismissal was illegal.
resolved by this Court:[11] (1) the legal
Hence, this Petition.[9] conclusions made by the lower tribunal are
speculative;[12] (2) its inferences are manifestly
mistaken,[13] absurd, or impossible; (3) the lower recreational facilities of the leisure corporation.
court committed grave abuse of discretion; (4) Hence, petitioners claim that, as a sugar and
the judgment is based on a misapprehension coconut plantation company separate and
of facts;[14] (5) the findings of fact of the lower distinct from the Pamplona Plantation Leisure
tribunals are conflicting;[15] (6) the CA went Corporation, the petitioner-company is not the
beyond the issues; (7) the CAs findings are real party in interest.
contrary to the admissions of the parties;[16] (8)
the CA manifestly overlooked facts not We are not persuaded.
disputed which, if considered, would justify a An examination of the facts reveals that, for
different conclusion; (9) the findings of fact are both the coconut plantation and the golf
conclusions without citation of the specific course, there is only one management which
evidence on which they are based; and (10) the laborers deal with regarding their
when the findings of fact of the CA are work.[20] A portion of the plantation (also called
premised on the absence of evidence but Hacienda Pamplona) had actually been
such findings are contradicted by the converted into a golf course and other
evidence on record.[17] recreational facilities. The weekly payrolls
The very same reason that constrained the issued by petitioner-company bore the name
appellate court to review the factual findings Pamplona Plantation Co., Inc.[21] It is also a fact
that respondents all received their pay from
of the NLRC impels this Court to take its own
look at the facts. Normally, the Supreme Court the same person, Petitioner Bondoc -- the
managing director of the company. Since the
is not a trier of facts.[18] However, since the
workers were working for a firm known as
findings of the CA and the NLRC on this point
were conflicting, we waded through the Pamplona Plantation Co., Inc., the reason they
sued their employer through that name was
records to find out if there was basis for the
formers reversal of the NLRCs Decision. We shall natural and understandable.
discuss our factual findings together with our True, the Petitioner Pamplona Plantation Co.,
review of the main issue. Inc., and the Pamplona Plantation Leisure
Main Issue: Corporation appear to be separate corporate
entities. But it is settled that this fiction of law
Piercing the Corporate Veil cannot be invoked to further an end
subversive of justice.[22]
Petitioners contend that the CA should have
dismissed the case for the failure of The principle requiring the piercing of the
respondents (except Carlito Tinghil) to implead corporate veil mandates courts to see through
the Pamplona Plantation Leisure Corporation, the protective shroud that distinguishes one
an indispensable party, for being the true and corporation from a seemingly separate
real employer. Allegedly, respondents one.[23] The corporate mask may be removed
admitted in their Affidavits dated February 3, and the corporate veil pierced when a
1998,[19] that they had been employed by the corporation is the mere alter ego of
leisure corporation and/or engaged to another.[24] Where badges of fraud exist, where
perform activities that pertained to its business. public convenience is defeated, where a
wrong is sought to be justified thereby, or
Further, as the NLRC allegedly noted in their where a separate corporate identity is used to
individual Complaints, respondents specifically evade financial obligations to employees or to
averred that they had worked in the golf third parties,[25] the notion of separate legal
course and performed related jobs in the
entity should be set aside[26] and the factual Respondent posits that it is engaged in
truth upheld. When that happens, the operating and maintaining sugar and coconut
corporate character is not necessarily plantation. The positions of complainants could
abrogated.[27] It continues for other legitimate only be determined through their individual
objectives. However, it may be pierced in any complaints. Yet all complainants alleged in
of the instances cited in order to promote their affidavits x x x that they were working at
substantial justice. the golf course. Worthy to note that only
Carlito Tinghil amended his complaint to
In the present case, the corporations have include Pamplona Leisure Corporation, which
basically the same incorporators and directors
respondents maintain is a separate
and are headed by the same official. Both use corporation established in 1995. Thus, xxx
only one office and one payroll and are under Pamplona Plantation Co., Inc. and Pamplona
one management. In their individual Affidavits, Leisure Corporation are two separate and
respondents allege that they worked under the
distinct corporations. Except for Carlito Tinghil
supervision and control of Petitioner Bondoc -- the complainants have the wrong party
the common managing director of both the respondent. Pamplona Leisure Corporation is
petitioner-company and the leisure
an indispensable party without which there
corporation. Some of the laborers of the could be no final determination of the case.[32]
plantation also work in the golf course.[28] Thus,
the attempt to make the two corporations Indeed, it was only after this NLRC Decision was
appear as two separate entities, insofar as the issued that the petitioners harped on the
workers are concerned, should be viewed as a separate personality of the Pamplona
devious but obvious means to defeat the ends Plantation Co., Inc., vis--vis the Pamplona
of the law. Such a ploy should not be Plantation Leisure Corporation.
permitted to cloud the truth and perpetrate an
injustice. As cited above, the NLRC dismissed the
Complaints because of the alleged admission
We note that this defense of separate of respondents in their Affidavits that they had
corporate identity was not raised during the been working at the golf course. However, it
proceedings before the labor arbiter. The main failed to appreciate the rest of their
argument therein raised by petitioners was averments. Just because they worked at the
their alleged lack of employer-employee golf course did not necessarily mean that they
relationship with, and power of control over, were not employed to do other tasks,
the means and methods of work of especially since the golf course was merely a
respondents because of the seasonal nature portion of the coconut plantation. Even
of the latters work.[29] petitioners admitted that respondents had
been hired as coconut filers, coconut scoopers
Neither was the issue of non-joinder of or charcoal makers.[33] Consequently, NLRCs
indispensable parties raised in petitioners conclusion derived from the Affidavits of
appeal before the NLRC.[30] Nevertheless, in its respondents stating that they were employees
Decision[31] dated July 19, 2000, the of the Pamplona Plantation Leisure
Commission concluded that the plantation Corporation alone was the result of an
company and the leisure corporation were improper selective appreciation of the entire
two separate and distinct corporations, and
evidence.
that the latter was an indispensable party that
should have been impleaded. We quote Furthermore, we note that, contrary to the
below pertinent portions of that Decision: NLRCs findings, some respondents indicated
that their employer was the Pamplona corporation and petitioner-company are one
Plantation Leisure Corporation, while others and the same entity. Salvador v. Court of
said that it was the Pamplona Plantation Co., Appeals[37] has held that this Court has full
Inc. But in all these Affidavits, both the leisure powers, apart from that power and authority
corporation and petitioner-company were which is inherent, to amend the processes,
identified or described as entities engaged in pleadings, proceedings and decisions by
the development and operation of sugar and substituting as party-plaintiff the real party-in-
coconut plantations, as well as recreational interest.
facilities such as a golf course. These
In Alonso v. Villamor,[38] we had the occasion
allegations reveal that petitioner successfully
confused the workers as to who their true and to state thus:
real employer was. All things considered, their There is nothing sacred about processes or
faulty belief that the plantation company and pleadings, their forms or contents. Their sole
the leisure corporation were one and the same purpose is to facilitate the application of
can be attributed solely to petitioners. It would justice to the rival claims of contending parties.
certainly be unjust to prejudice the claims of They were created, not to hinder and delay,
the workers because of the misleading actions but to facilitate and promote, the
of their employer. administration of justice. They do not constitute
Non-Joinder of Parties the thing itself, which courts are always striving
to secure to litigants. They are designed as the
Granting for the sake of argument that the means best adapted to obtain that thing. In
Pamplona Plantation Leisure Corporation is an other words, they are a means to an end.
indispensable party that should be impleaded, When they lose the character of the one and
NLRCs outright dismissal of the Complaints was become the other, the administration of justice
still erroneous. is at fault and courts are correspondingly remiss
in the performance of their obvious duty.
The non-joinder of indispensable parties is not a
ground for the dismissal of an action.[34] At any The controlling principle in the interpretation of
stage of a judicial proceeding and/or at such procedural rules is liberality, so that they may
times as are just, parties may be added on the promote their object and assist the parties in
motion of a party or on the initiative of the obtaining just, speedy and inexpensive
tribunal concerned.[35] If the plaintiff refuses to determination of every action and
implead an indispensable party despite the proceeding.[39] When the rules are applied to
order of the court, that court may dismiss the labor cases, this liberal interpretation must be
complaint for the plaintiffs failure to comply upheld with even greater vigor.[40] Without in
with the order. The remedy is to implead the any way depriving the employer of its legal
non-party claimed to be indispensable.[36] In rights, the thrust of statutes and rules governing
this case, the NLRC did not require respondents labor cases has been to benefit workers and
to implead the Pamplona Plantation Leisure avoid subjecting them to great delays and
Corporation as respondent; instead, the hardships. This intent holds especially in this
Commission summarily dismissed the case, in which the plaintiffs are poor laborers.
Complaints.
Employer-Employee Relationship
In any event, there is no need to implead the
leisure corporation because, insofar as Petitioners insist that respondents are not their
respondents are concerned, the leisure employees, because the former exercised no
control over the latters work hours and method
of performing tasks. Thus, petitioners contend and other recreational facilities. Clearly,
that under the control test, the workers were respondents performed usual, regular and
independent contractors. necessary services for petitioners business.

We disagree. As shown by the evidence on WHEREFORE, the Petition is DENIED, and the
record, petitioners hired respondents, who assailed Decision AFFIRMED. Costs against the
performed tasks assigned by their respective petitioners.
officers-in-charge, who in turn were all under
SO ORDERED.
the direct supervision and control of Petitioner
Bondoc. These allegations are contained in the [G.R. No. 142435. April 30, 2003]
workers Affidavits, which were never disputed
by petitioners. Also uncontroverted are the ESTELITA BURGOS LIPAT and ALFREDO
payrolls bearing the name of the plantation LIPAT, petitioners, vs. PACIFIC BANKING
company and signed by Petitioner Bondoc. CORPORATION, REGISTER OF DEEDS, RTC EX-
Some of these payrolls include the time records OFFICIO SHERIFF OF QUEZON CITY and the Heirs
of the employees. These documents prove of EUGENIO D. TRINIDAD, respondents.
that petitioner-company exercised control and
DECISION
supervision over them.
QUISUMBING, J.:
To operate against the employer, the power of
control need not have been actually This petition for review on certiorari seeks the
exercised. Proof of the existence of such power reversal of the Decision[1] dated October 21,
is enough.[41] Certainly, petitioners wielded that 1999 of the Court of Appeals in CA-G.R. CV No.
power to hire or dismiss, as well as to check on 41536 which dismissed herein petitioners
the progress and the quality of work of the appeal from the Decision[2] dated February 10,
laborers. 1993 of the Regional Trial Court (RTC) of
Quezon City, Branch 84, in Civil Case No. Q-89-
Jurisprudence provides other equally important
4152. The trial court had dismissed petitioners
considerations[42] that support the conclusion
complaint for annulment of real estate
that respondents were not independent
mortgage and the extra-judicial foreclosure
contractors. First, they cannot be said to have
thereof. Likewise brought for our review is the
carried on an independent business or
Resolution[3]dated February 23, 2000 of the
occupation.[43] They are not engaged in the
Court of Appeals which denied petitioners
business of filing, scooping and hauling
motion for reconsideration.
coconuts and/or operating and maintaining a
plantation and a golf course. Second, they do The facts, as culled from records, are as
not have substantial capital or investment in follows:
the form of tools, equipment, machinery, work
premises, and other implements needed to Petitioners, the spouses Alfredo Lipat and
perform the job, work or service under their Estelita Burgos Lipat, owned Belas Export
own account or responsibility.[44] Third, they Trading (BET), a single proprietorship with
have been working exclusively for petitioners principal office at No. 814 Aurora Boulevard,
for several years. Fourth, there is no dispute Cubao, Quezon City. BET was engaged in the
that petitioners are in the business of growing manufacture of garments for domestic and
coconut trees for commercial purposes. There foreign consumption. The Lipats also owned
is no question, either, that a portion of the the Mystical Fashions in the United States,
plantation was converted into a golf course which sells goods imported from the Philippines
through BET. Mrs. Lipat designated her Corporation (BEC) in order to facilitate the
daughter, Teresita B. Lipat, to manage BET in management of the business. BEC was
the Philippines while she was managing engaged in the business of manufacturing and
Mystical Fashions in the United States. exportation of all kinds of garments of
whatever kind and description[5] and utilized
In order to facilitate the convenient operation the same machineries and equipment
of BET, Estelita Lipat executed on December previously used by BET. Its incorporators and
14, 1978, a special power of attorney directors included the Lipat spouses who
appointing Teresita Lipat as her attorney-in- owned a combined 300 shares out of the 420
fact to obtain loans and other credit
shares subscribed, Teresita Lipat who owned 20
accommodations from respondent Pacific shares, and other close relatives and friends of
Banking Corporation (Pacific Bank). She the Lipats.[6] Estelita Lipat was named president
likewise authorized Teresita to execute of BEC, while Teresita became the vice-
mortgage contracts on properties owned or
president and general manager.
co-owned by her as security for the obligations
to be extended by Pacific Bank including any Eventually, the loan was later restructured in
extension or renewal thereof. the name of BEC and subsequent loans were
obtained by BEC with the corresponding
Sometime in April 1979, Teresita, by virtue of the promissory notes duly executed by Teresita on
special power of attorney, was able to secure
behalf of the corporation. A letter of credit was
for and in behalf of her mother, Mrs. Lipat and also opened by Pacific Bank in favor of A. O.
BET, a loan from Pacific Bank amounting
Knitting Manufacturing Co., Inc., upon the
to P583,854.00 to buy fabrics to be
request of BEC after BEC executed the
manufactured by BET and exported to Mystical corresponding trust receipt therefor. Export bills
Fashions in the United States. As security
were also executed in favor of Pacific Bank for
therefor, the Lipat spouses, as represented by additional finances. These transactions were all
Teresita, executed a Real Estate Mortgage secured by the real estate mortgage over the
over their property located at No. 814 Aurora
Lipats property.
Blvd., Cubao, Quezon City. Said property was
likewise made to secure other additional or The promissory notes, export bills, and trust
new loans, discounting lines, overdrafts and receipt eventually became due and
credit accommodations, of whatever amount, demandable. Unfortunately, BEC defaulted in
which the Mortgagor and/or Debtor may its payments. After receipt of Pacific Banks
subsequently obtain from the Mortgagee as demand letters, Estelita Lipat went to the office
well as any renewal or extension by the of the banks liquidator and asked for
Mortgagor and/or Debtor of the whole or part additional time to enable her to personally
of said original, additional or new loans, settle BECs obligations. The bank acceded to
discounting lines, overdrafts and other credit her request but Estelita failed to fulfill her
accommodations, including interest and promise.
expenses or other obligations of the Mortgagor
and/or Debtor owing to the Mortgagee, Consequently, the real estate mortgage was
whether directly, or indirectly, principal or foreclosed and after compliance with the
secondary, as appears in the accounts, books requirements of the law the mortgaged
property was sold at public auction. On
and records of the Mortgagee.[4]
January 31, 1989, a certificate of sale was
On September 5, 1979, BET was incorporated issued to respondent Eugenio D. Trinidad as the
into a family corporation named Belas Export highest bidder.
On November 28, 1989, the spouses Lipat filed The counterclaims and cross-claim are likewise
before the Quezon City RTC a complaint for dismissed for lack of legal and factual basis.
annulment of the real estate mortgage,
No costs.
extrajudicial foreclosure and the certificate of
sale issued over the property against Pacific IT IS SO ORDERED.[7]
Bank and Eugenio D. Trinidad.The complaint,
which was docketed as Civil Case No. Q-89- The trial court ruled that there was convincing
4152, alleged, among others, that the and conclusive evidence proving that BEC
promissory notes, trust receipt, and export bills was a family corporation of the Lipats.As such,
were all ultra vires acts of Teresita as they were it was a mere extension of petitioners
executed without the requisite board resolution personality and business and a mere alter
of the Board of Directors of BEC. The Lipats also ego or business conduit of the Lipats
averred that assuming said acts were valid established for their own benefit. Hence, to
and binding on BEC, the same were the allow petitioners to invoke the theory of
corporations sole obligation, it having a separate corporate personality would sanction
personality distinct and separate from spouses its use as a shield to further an end subversive
Lipat. It was likewise pointed out that Teresitas of justice.[8] Thus, the trial court pierced the veil
authority to secure a loan from Pacific Bank of corporate fiction and held that Belas Export
was specifically limited to Mrs. Lipats sole use Corporation and petitioners (Lipats) are one
and benefit and that the real estate mortgage and the same. Pacific Bank had transacted
was executed to secure the Lipats and business with both BET and BEC on the
BETs P583,854.00 loan only. supposition that both are one and the
same. Hence, the Lipats were estopped from
In their respective answers, Pacific Bank and disclaiming any obligations on the theory of
Trinidad alleged in common that petitioners separate personality of corporations, which is
Lipat cannot evade payments of the value of contrary to principles of reason and good faith.
the promissory notes, trust receipt, and export
bills with their property because they and the The Lipats timely appealed the RTC decision to
BEC are one and the same, the latter being a the Court of Appeals in CA-G.R. CV No.
family corporation. Respondent Trinidad further 41536. Said appeal, however, was dismissed by
claimed that he was a buyer in good faith and the appellate court for lack of merit. The Court
for value and that petitioners are estopped of Appeals found that there was ample
from denying BECs existence after holding evidence on record to support the application
themselves out as a corporation. of the doctrine of piercing the veil of corporate
fiction. In affirming the findings of the RTC, the
After trial on the merits, the RTC dismissed the appellate court noted that Mrs. Lipat had full
complaint, thus: control over the activities of the corporation
WHEREFORE, this Court holds that in view of the and used the same to further her business
facts contained in the record, the complaint interests.[9] In fact, she had benefited from the
loans obtained by the corporation to finance
filed in this case must be, as is hereby,
dismissed.Plaintiffs however has five (5) months her business. It also found unnecessary a board
resolution authorizing Teresita Lipat to secure
and seventeen (17) days reckoned from the
finality of this decision within which to exercise loans from Pacific Bank on behalf of BEC
their right of redemption. The writ of injunction because the corporations by-laws allowed
issued is automatically dissolved if no such conduct even without a board
redemption is effected within that period. resolution. Finally, the Court of Appeals ruled
that the mortgage property was not only liable In sum, the following are the relevant issues for
for the original loan of P583,854.00 but likewise our resolution:
for the value of the promissory notes, trust
1. Whether or not the doctrine of piercing the
receipt, and export bills as the mortgage
contract equally applies to additional or new veil of corporate fiction is applicable in this
loans, discounting lines, overdrafts, and credit case;
accommodations which petitioners 2. Whether or not petitioners' property under
subsequently obtained from Pacific Bank. the real estate mortgage is liable not only for
The Lipats then moved for reconsideration, but the amount of P583,854.00 but also for the
this was denied by the appellate court in its value of the promissory notes, trust receipt, and
Resolution of February 23, 2000.[10] export bills subsequently incurred by BEC; and

3. Whether or not petitioners are liable to pay


Hence, this petition, with petitioners submitting
that the court a quo erred the 15% attorneys fees stipulated in the deed
of real estate mortgage.
1) .IN HOLDING THAT THE DOCTRINE OF
PIERCING THE VEIL OF CORPORATE FICTION On the first issue, petitioners contend that both
APPLIES IN THIS CASE. the appellate and trial courts erred in holding
them liable for the obligations incurred by BEC
2) .IN HOLDING THAT PETITIONERS PROPERTY through the application of the doctrine of
CAN BE HELD LIABLE UNDER THE REAL ESTATE piercing the veil of corporate fiction absent
MORTGAGE NOT ONLY FOR THE AMOUNT any clear showing of fraud on their part.
OF P583,854.00 BUT ALSO FOR THE FULL VALUE
Respondents counter that there is clear and
OF PROMISSORY NOTES, TRUST RECEIPTS AND
convincing evidence to show fraud on part of
EXPORT BILLS OF BELAS EXPORT CORPORATION.
petitioners given the findings of the trial court,
3) .IN HOLDING THAT THE IMPOSITION OF 15% as affirmed by the Court of Appeals, that BEC
ATTORNEYS FEES IN THE EXTRA-JUDICIAL was organized as a business conduit for the
FORECLOSURE IS BEYOND THIS COURTS benefit of petitioners.
JURISDICTION FOR IT IS BEING RAISED FOR THE
Petitioners contentions fail to persuade this
FIRST TIME IN THIS APPEAL.
Court. A careful reading of the judgment of
4) .IN HOLDING PETITIONER ALFREDO LIPAT the RTC and the resolution of the appellate
LIABLE TO PAY THE DISPUTED PROMISSORY court show that in finding petitioners
NOTES, THE DOLLAR ACCOMMODATIONS AND mortgaged property liable for the obligations
TRUST RECEIPTS DESPITE THE EVIDENT FACT THAT of BEC, both courts below relied upon the alter
THEY WERE NOT SIGNED BY HIM AND ego doctrine or instrumentality rule, rather than
THEREFORE ARE NOT VALID OR ARE NOT fraud in piercing the veil of corporate
BINDING TO HIM. fiction. When the corporation is the mere alter
ego or business conduit of a person, the
5) .IN DENYING PETITIONERS MOTION FOR separate personality of the corporation may
RECONSIDERATION AND IN HOLDING THAT SAID be disregarded.[12] This is commonly referred to
MOTION FOR RECONSIDERATION IS AN as the instrumentality rule or the alter
UNAUTHORIZED MOTION, A MERE SCRAP OF ego doctrine, which the courts have applied in
PAPER WHICH CAN NEITHER BIND NOR BE OF
disregarding the separate juridical personality
ANY CONSEQUENCE TO APPELLANTS.[11] of corporations. As held in one case,
Where one corporation is so organized and and decided business matters of the
controlled and its affairs are conducted so that corporation;[22] and that (10) Estelita Lipat had
it is, in fact, a mere instrumentality or adjunct of benefited from the loans secured from Pacific
the other, the fiction of the corporate entity of Bank to finance her business abroad[23] and
the instrumentality may be disregarded. The from the export bills secured by BEC for the
control necessary to invoke the rule is not account of Mystical Fashion.[24] It could not
majority or even complete stock control but have been coincidental that BET and BEC are
such domination of finances, policies and so intertwined with each other in terms of
practices that the controlled corporation has, ownership, business purpose, and
so to speak, no separate mind, will or existence management. Apparently, BET and BEC are
of its own, and is but a conduit for its principal. one and the same and the latter is a conduit
xxx[13] of and merely succeeded the
former. Petitioners attempt to isolate
We find that the evidence on record
themselves from and hide behind the
demolishes, rather than buttresses, petitioners corporate personality of BEC so as to evade
contention that BET and BEC are separate their liabilities to Pacific Bank is precisely what
business entities. Note that Estelita Lipat
the classical doctrine of piercing the veil of
admitted that she and her husband, Alfredo, corporate entity seeks to prevent and
were the owners of BET[14] and were two of the remedy. In our view, BEC is a mere
incorporators and majority stockholders of continuation and successor of BET, and
BEC.[15] It is also undisputed that Estelita Lipat
petitioners cannot evade their obligations in
executed a special power of attorney in favor the mortgage contract secured under the
of her daughter, Teresita, to obtain loans and name of BEC on the pretext that it was signed
credit lines from Pacific Bank on her
for the benefit and under the name of BET. We
behalf.[16] Incidentally, Teresita was designated
are thus constrained to rule that the Court of
as executive-vice president and general Appeals did not err when it applied the
manager of both BET and BEC, instrumentality doctrine in piercing the
respectively.[17] We note further that: (1) Estelita corporate veil of BEC.
and Alfredo Lipat are the owners and majority
shareholders of BET and BEC, On the second issue, petitioners contend that
respectively;[18] (2) both firms were managed their mortgaged property should not be made
by their daughter, Teresita;[19] (3) both firms liable for the subsequent credit lines and loans
were engaged in the garment business, incurred by BEC because, first, it was not
supplying products to Mystical Fashion, a U.S. covered by the mortgage contract of BET
firm established by Estelita Lipat; (4) both firms which only covered the loan of P583,854.00
held office in the same building owned by the and which allegedly had already been paid;
Lipats;[20] (5) BEC is a family corporation with and, second, it was secured by Teresita Lipat
the Lipats as its majority stockholders; (6) the without any authorization or board resolution
business operations of the BEC were so merged of BEC.
with those of Mrs. Lipat such that they were
practically indistinguishable; (7) the corporate We find petitioners contention untenable. As
funds were held by Estelita Lipat and the found by the Court of Appeals, the mortgaged
corporation itself had no visible assets; (8) the property is not limited to answer for the loan
board of directors of BEC was composed of of P583,854.00. Thus:
the Burgos and Lipat family members;[21] (9) Finally, the extent to which the Lipats property
Estelita had full control over the activities of can be held liable under the real estate
mortgage is not limited to P583,854.00. It can Pacific Bank for the required documents
be held liable for the value of the promissory evidencing receipt and payment of the loans
notes, trust receipt and export bills as well. For and, as owners of the mortgaged property,
the mortgage was executed not only for the would have immediately asked for the
purpose of securing the Belas Export Tradings cancellation of the mortgage in the ordinary
original loan of P583,854.00, but also for other course of things. However, the records are
additional or new loans, discounting lines, bereft of any evidence contradicting or
overdrafts and credit accommodations, of overcoming said disputable presumptions.
whatever amount, which the Mortgagor
Petitioners contend further that the mortgaged
and/or Debtor may subsequently obtain from
the mortgagee as well as any renewal or property should not bind the loans and credit
extension by the Mortgagor and/or Debtor of lines obtained by BEC as they were secured
the whole or part of said original, additional or without any proper authorization or board
resolution. They also blame the bank for its
new loans, discounting lines, overdrafts and
other credit accommodations, including laxity and complacency in not requiring a
interest and expenses or other obligations of board resolution as a requisite for approving
the loans.
the Mortgagor and/or Debtor owing to the
Mortgagee, whether directly, or indirectly Such contentions deserve scant consideration.
principal or secondary, as appears in the
accounts, books and records of the Firstly, it could not have been possible for BEC
mortgagee.[25] to release a board resolution since per
admissions by both petitioner Estelita Lipat and
As a general rule, findings of fact of the Court Alice Burgos, petitioners rebuttal witness, no
of Appeals are final and conclusive, and business or stockholders meetings were
cannot be reviewed on appeal by the conducted nor were there election of officers
Supreme Court, provided they are borne out held since its incorporation. In fact, not a single
by the record or based on substantial board resolution was passed by the corporate
evidence.[26] As noted earlier, BEC merely board[29] and it was Estelita Lipat and/or
succeeded BET as petitioners alter ego; hence, Teresita Lipat who decided business matters.[30]
petitioners mortgaged property must be held
liable for the subsequent loans and credit lines Secondly, the principle of estoppel precludes
of BEC. petitioners from denying the validity of the
transactions entered into by Teresita Lipat with
Further, petitioners contention that the original Pacific Bank, who in good faith, relied on the
loan had already been paid, hence, the authority of the former as manager to act on
mortgaged property should not be made behalf of petitioner Estelita Lipat and both BET
liable to the loans of BEC, is unsupported by and BEC. While the power and responsibility to
any substantial evidence other than Estelita decide whether the corporation should enter
Lipats self-serving testimony. Two disputable into a contract that will bind the corporation is
presumptions under the rules on evidence lodged in its board of directors, subject to the
weigh against petitioners, namely: (a) that a articles of incorporation, by-laws, or relevant
person takes ordinary care of his provisions of law, yet, just as a natural person
concerns;[27] and (b) that things have may authorize another to do certain acts for
happened according to the ordinary course of and on his behalf, the board of directors may
nature and the ordinary habits of life.[28] Here, if validly delegate some of its functions and
the original loan had indeed been paid, then powers to officers, committees, or agents. The
logically, petitioners would have asked from
authority of such individuals to bind the contract since it is, by its very terms, a
corporation is generally derived from law, continuing mortgage contract.
corporate by-laws, or authorization from the
On the third and final issue, petitioners assail
board, either expressly or impliedly by habit,
custom, or acquiescence in the general the decision of the Court of Appeals for not
course of business.[31] Apparent authority, is taking cognizance of the issue on attorneys
derived not merely from practice. Its existence fees on the ground that it was raised for the first
may be ascertained through (1) the general time on appeal. We find the conclusion of the
manner in which the corporation holds out an Court of Appeals to be in accord with settled
jurisprudence. Basic is the rule that matters not
officer or agent as having the power to act or,
in other words, the apparent authority to act in raised in the complaint cannot be raised for
general, with which it clothes him; or (2) the the first time on appeal.[35] A close perusal of
acquiescence in his acts of a particular nature, the complaint yields no allegations disputing
the attorneys fees imposed under the real
with actual or constructive knowledge thereof,
whether within or beyond the scope of his estate mortgage and petitioners cannot now
ordinary powers.[32] allege that they have impliedly disputed the
same when they sought the annulment of the
In this case, Teresita Lipat had dealt with contract.
Pacific Bank on the mortgage contract by
In sum, we find no reversible error of law
virtue of a special power of attorney executed
by Estelita Lipat. Recall that Teresita Lipat committed by the Court of Appeals in
rendering the decision and resolution herein
acted as the manager of both BEC and BET
assailed by petitioners.
and had been deciding business matters in the
absence of Estelita Lipat. Further, the export WHEREFORE, the petition is DENIED. The
bills secured by BEC were for the benefit of Decision dated October 21, 1999 and the
Mystical Fashion owned by Estelita Resolution dated February 23, 2000 of the
Lipat.[33] Hence, Pacific Bank cannot be Court of Appeals in CA-G.R. CV No. 41536 are
faulted for relying on the same authority AFFIRMED. Costs against petitioners.
granted to Teresita Lipat by Estelita Lipat by
virtue of a special power of attorney. It is a SO ORDERED.
familiar doctrine that if a corporation
FIRST DIVISION
knowingly permits one of its officers or any
other agent to act within the scope of an
apparent authority, it holds him out to the
public as possessing the power to do those [G.R. No. 112661. May 30, 2001]
acts; thus, the corporation will, as against
anyone who has in good faith dealt with it
through such agent, be estopped from SIMEON DE LEON, EFREN ABAD, JAIME ABAD,
denying the agents authority.[34] JESSIE ABAY-ABAY, ROLANDO ABIOLA,
ALICIO ABISO, CELEDONIO ABSALON,
We find no necessity to extensively deal with JEREMIAS ADO, VICENTE ADO, VICENTE
the liability of Alfredo Lipat for the subsequent AGGABAO, EFRAIN AGUIRRE,
credit lines of BEC. Suffice it to state that ALEXANDER ALATA, ERNESTO ALCALDE,
LORENZO ALCOY, ALMARIO ALICIO,
Alfredo Lipat never disputed the validity of the
CESAR AMADOR, JOSE AMANTE,
real estate mortgage of the original loan; ESTELITO AMBROSIO, VICENTE ANAPI,
hence, he cannot now dispute the subsequent ARNEL ANCHETA, ROGELIO ANCHETA,
loans obtained using the same mortgage WILFREDO ANONUEVO, DOMINGO
ANTIGRO, MARGARITO ANTIGRO, SANTOS LOPEZ, RUBEN LORENZO, NILO
ROGELIO ANZANO, ANTONIO APOSTOL, LUGANA, CANCIO MAATUBANG,
ORLANDO AQUINO, JUAN ARCALAS, ANTONIO MACASIO, ROBERTO
BONIFACIO ARIOLA, EDGAR ARIOLA, MACATUNGGAL, VIRGILIO MACALINAO,
BONIFACIO ARMASA, FERNANDO RAMON MACOY, JOSE MAGALONA,
BACCAY, MARIO BACUD, RUPERTO ALEJO MANAGUELOD, DOMINGO
BACUDAN, NILO BALAG, ARGEL MANALO, EMILIANO MANALO, SULPICIO
BALTAZAR, DEMETRIO BARAYOGA, FELIX MANTALABA, EDITO MANUEL, ROMULO
BARNEDO, FLORENTINO BARTE, SARRI MANUEL, FELINO MARANA, CARLITO
BASIRUL, MARCELO BATANES, RECTO MARGAJA, ROMARES MARIANO,
BAYONA, VICTORIO BERMUNDO, ISMAEL CERMELO MARTINEZ, MODESTO MASULIT,
BERNAL, LERIO BERSABE, FIDEL BOSE, ALMA MATUSALEM, FLAVIANO MEDEL,
MARIANO BOTACION, DANILO BRAZIL, DOLCIANO MEDINA, DOLOROSA
REYNALDO BRUNIO, MARIO MEDINA, NORLINDO MEJARITO, PEDRITO
BUENAVENTURA, ARSENIO BULATAO, MENDOZA, GUARDITO MERANO,
FRANCISCO BULATAO, CARLOS CAJARA, ALBERTO DE MESA, CHARLIE MINANO,
ROSENDO CAMACHO, RUBEN JOSE MONTEROSO, ROSENDO MORALES,
CAMACHO, NESTOR CAPILOS, CESAR NARDA, DOMINADOR NAGAL,
DOMINGO CASTRO, MAXIMIANO DE EDEMIO NARISMA, DINISIO NAVASCA,
CASTO, EDINO CASTUERA, ZALDY REGINO NEPICON, JR., JESSIE CRIS NILO,
CERDON, ANTONIO DERUJANO, VICTOR JERWYN ORARIO, EUGENIO ORBEGOZO,
CIPRIANO, JUANITO CORPUZ, ALFREDO IRENEO ORGANISTA, CATALINO
CRUZ, FERNANDO DELA CRUZ, MARIO OJENDRAS, WILLIAM OLIVARES, JUANITO
CUSTOPAY, ROSAURO CUSTODIO, ORIO, WILLIAM ORTIZO, ROQUE PAL-
FRANKLIN CUSTODIO, ALFREDO PALLATOC, ROGELIO PAEL, LORENZO
DAPROZA, RENATO DAVAG, NOEL PAMINTUAN, VIRGILIO PANTALEON,
DEMINGOY, GENE DIESTRO, ESTEBAN ANTONIO PAPA, EMMANUEL PASCUAL,
DIONSON, RAMON DIZA, JEREMIAS FRANCISCO PECUNDO, RUFINO PELICER,
DOROMAL, MANUEL EDATO, FERNANDO LEONARDO PEPITO, PABLITO PERALTA,
EDORA, CONRADO ENRIQUEZ, EDILBERTO PEREZ, LOLITO PEREZ, PELAGIO
NICOMEDEZ ENRIQUEZ, ROLITO ESPIEL, PEREZ, JR., FERNANDO PINEDA, CARMEN
LAURO ESPANOL, NONITO ESPLANA, PIO, ALEJANDRO QUIAMCO, VIRGILIO
ELPIDIO ESPANOL, DIOLITO ESTOPEREZ, QUILALANG, JEREMEAS QUINES, ZENAIDA
ODILON EUSTE, HENRY FACTOR, VIRGILIO RAQUINE, DOMINGO RANOLA, SABINO
FAVORITO, ARISTOTLE FERNANDEZ, RANULO, EDDIE RAZONABE, ALBERTO
RODOFLO FORMALEJO, JUNE FULAY, RUIS REBAULA, BENIGNO REGIS, PERFECTO
FUTOL, JESUS GABA, RODRIGO GABAT, REBOYO, VITALIANO REYES, ZOSIMO
ROSALIA GABAT, CLEMENTE GASPAR, REYES, EDWIN ROBERTS, ROBERT ROJO,
RODRIGO GAVIOLA, ELLEN GODELOSON, GODOFREDO ROLIO, ANATALIA
SALVADOR GUELA, EDUARDO GUZMAN, ROSANTO, DOMINADOR ROSANTO,
BALTAZAR DE GUZMAN, ZOSIMO DE RAMON ROSANTO, SR., RODRIGO
GUZMAN, REYANLDO HAGUIRING, ROSANTO, JULIO RUBIO, DANTE RUZOL,
CARLOS GINDAP, BERNARDINO GIPIT, VENUS RUZOL, ROMULO SABINO,
WILFREDO HERNANDEZ, IMMANUEL CIPRIANO SACUILLES, SR., PRIMO
IBRING, PEPITO IMPERIO, MAGTANGGOL SALAZAR, GASPAR SAMUYA, ANTONIO
INSORIO, RODELYN JACUNTO, MARIO SANCHEZ, CLAUDIO SANCHEZ, YOLANDA
JARAPAN, MAXIMO JIMENEZ, SAN LUIS, ROBERTO SANTOS, BENITO
ALEJANDRO JUDLOMAN, JUAN SEGUDIENTE, EDGAR SIBAL, GREGORIO
LAOAGAN, DANTE LARIOSA, ELINO SIBAL, VALENTINO SIBAL, SONNY SINGH,
LASAGA, JOSEPH LEGASPINA, ZOSIMO ROMEO SOMERA, EDGAR TABAQUE,
LEPALAM, BENJAMIN LIBAN, EFREN LIGUE, BENITO TACATA, MATILDE TACATA,
CLETO LINGA, ROMEO LLAGAS, LUCIO ANDRESITO TALAM, ANTOLIN TALISIC,
LLARENA, ALFREDO LOPEZ, FELIX LOPEZ, PABLO TAMAYO, JULIE TAMIEZA,
ROGELIO TAYO, CELSO TE, ENRIQUE was likewise adopted and approved by the
TRIPULCA, ARMANDO TUIBEO, NICANOR Securities and Exchange Commission on June
TUMAMAO, EDUARDO TUMBALE, RAMON 4, 1993.
TURIRIT, LONGENIO UMACAM,
On October 15, 1991, FTC terminated the
TOLENTINO UNDAUNDO, DIOLITO
contract for security services which resulted in
VALENCIA, ERNESTO VARGAS, BILLY
the displacement of some five hundred eighty
VASQUEZ, TOMAS VELINA, MARCOS DE
two (582) security guards assigned by FISI/MISI
VERA, IRENEO VILELA, NICANDRO
to FTC, including the petitioners in this
VILLAFRANCA, DANNY VILLANUEVA,
case. FTC engaged the services of two (2)
LOLITA VITALICO, ALIPIO YGOT, AGOSTO
other security agencies, Asian Security Agency
YROMA, FELIX ZAMBALES, and
and Ligalig Security Services, whose security
GUILLERMO ZIPANGAN, petioners,
guards were posted on October 15, 1991 to
vs. NATIONAL LABOR RELATIONS
replace FISI's security guards.
COMMISSION (NLRC), and FORTUNE
TOBACCO CORPORATION and/or Sometime in October 1991, the Fortune
MAGNUM INTEGRATED SERVICES, INC. Tobacco Labor Union, an affiliate of the
(formerly FORTUNE INTEGRATED National Federation of Labor Unions (NAFLU),
SERVICES, INC.), respondents. and claiming to be the bargaining agent of
the security guards, sent a Notice of Strike to
DECISION FISI/MISI. On November 14, 1991, the members
of the union which include petitioners picketed
PUNO, J.:
the premises of FTC. The Regional Trial Court of
Pasig, however, issued a writ of injunction to
This case stemmed from a complaint for enjoin the picket.
illegal dismissal, unfair labor practice and
refund of cash bond filed by petitioners against On November 29, 1991, Simeon de Leon,
respondents before the Arbitration Branch of together with sixteen (16) other complainants
the National Labor Relations Commission instituted the instant case before the
(NLRC). The petition at bar seeks the Arbitration Branch of the NLRC. The complaint
annulment of the resolution of the NLRC dated was later amended to allow the inclusion of
July 5, 1993 reversing the decision of the Labor other complainants.
Arbiter finding respondents liable for the
The parties submitted the following issues
charges, and its resolution dated August 10,
for resolution:
1993 denying petitioners' motion for
reconsideration. (1) Whether petitioners were illegally
dismissed;
The undisputed facts are as follows:
(2) Whether respondents are guilty of
On August 23, 1980, Fortune Tobacco
unfair labor practice; and
Corporation (FTC) and Fortune Integrated
Services, Inc. (FISI) entered into a contract for (3) Whether petitioners are entitled to
security services where the latter undertook to the refund of their cash bond
provide security guards for the protection and deposited with respondent FISI.
security of the former. The petitioners were
Petitioners alleged that they were regular
among those engaged as security guards
employees of FTC which was also using the
pursuant to the contract.
corporate names Fortune Integrated Services,
On February 1, 1991, the incorporators and Inc. and Magnum Integrated Services,
stockholders of FISI sold out lock, stock and Inc. They were assigned to work as security
barrel to a group of new stockholders by guards at the company's main factory plant, its
executing for the purpose a "Deed of Sale of tobacco redrying plant and warehouse. They
Shares of Stock". On the same date, the averred that they performed their duties under
Articles of Incorporation of FISI was amended the control and supervision of FTC's security
changing its corporate name to Magnum supervisors. Their services, however, were
Integrated Services, Inc. (MISI). A new by-laws severed in October 1991 without valid cause
and without due process. Petitioners claimed On appeal, the NLRC reversed and set
that their dismissal was part of respondents' aside the decision of the Labor Arbiter. First, it
design to bust their newly-organized union held that the Labor Arbiter erred in applying
which sought to enforce their rights under the the "single employer" principle and concluding
Labor Standards law.[1] that there was an employer-employee
relationship between FTC and FISI on one
Respondent FTC, on the other hand,
hand, and petitioners on the other hand. It
maintained that there was no employer-
found that at the time of the termination of the
employee relationship between FTC and
contract of security services on October 15,
petitioners. It said that at the time of the
1991, FISI which, at that time, had been
termination of their services, petitioners were
renamed Magnum Integrated Services, Inc.
the employees of MISI which was a separate
had a different set of stockholders and officers
and distinct corporation from FTC.Hence,
from that of FTC. They also had separate
petitioners had no cause of action against
offices. The NLRC held that the principle of
FTC.[2]
"single employer" and the doctrine of piercing
Respondent FISI, meanwhile, denied the the corporate veil could not apply under the
charge of illegal dismissal and unfair labor circumstances. It further ruled that the
practice. It argued that petitioners were not proximate cause for the displacement of
dismissed from service but were merely placed petitioners was the termination of the contract
on floating status pending re-assignment to for security services by FTC on October 15,
other posts. It alleged that the temporary 1991. FISI could not be faulted for the
displacement of petitioners was not due to its severance of petitioners' assignment at the
fault but was the result of the pretermination premises of FTC.Consequently, the NLRC held
by FTC of the contract for security services.[3] that the charge of illegal dismissal had no
basis. As regards the charge of unfair labor
The Labor Arbiter found respondents liable practice, the NLRC found that petitioners who
for the charges. Rejecting FTC's argument that had the burden of proof failed to adduce any
there was no employer-employee relationship evidence to support their charge of unfair
between FTC and petitioners, he ruled that FISI labor practice against respondents.Hence, it
and FTC should be considered as a single ordered the dismissal of petitioners'
employer. He observed that the two complaint.[5]
corporations have common stockholders and
they share the same business address. In The petitioners filed a motion for
addition, FISI had no client other than FTC and reconsideration of the resolution of the NLRC
other corporations belonging to the group of but the same was denied.[6] Hence, this
companies owned by Lucio Tan. The Labor petition.
Arbiter thus found respondents guilty of union
We gave due course to the petition on
busting and illegal dismissal. He observed that
May 15, 1995. Thus, the ruling in St. Martin
not long after the stockholders of FISI sold all
Funeral Home vs. NLRC[7] remanding all
their stocks to a new set of stockholders, FTC
petitions for certiorari from the decision of the
terminated the contract of security services
NLRC to the Court of Appeals does not apply
and engaged the services of two other
to the case at bar.
security agencies. FTC did not give any reason
for the termination of the contract. The Labor The petition is impressed with merit.
Arbiter gave credence to petitioners' theory
An examination of the facts of this case
that respondents' precipitate termination of
reveals that there is sufficient ground to
their employment was intended to bust their
conclude that respondents were guilty of
union.Consequently, the Labor Arbiter ordered
interfering with the right of petitioners to self-
respondents to pay petitioners their
organization which constitutes unfair labor
backwages and separation pay, to refund
practice under Article 248 of the Labor
their cash bond deposit, and to pay attorney's
Code.[8] Petitioners have been employed with
fees.[4]
FISI since the 1980s and have since been
posted at the premises of FTC -- its main factory
plant, its tobacco redrying plant and We are not persuaded by the argument of
warehouse. It appears from the records that respondent FTC denying the presence of an
FISI, while having its own corporate identity, employer-employee relationship. We find that
was a mere instrumentality of FTC, tasked to the Labor Arbiter correctly applied the
provide protection and security in the doctrine of piercing the corporate veil to hold
company premises. The records show that the all respondents liable for unfair labor practice
two corporations had identical stockholders and illegal termination of petitioners'
and the same business address. FISI also had employment. It is a fundamental principle in
no other clients except FTC and other corporation law that a corporation is an entity
companies belonging to the Lucio Tan group separate and distinct from its stockholders and
of companies. Moreover, the early payslips of from other corporations to which it is
petitioners show that their salaries were initially connected. However, when the concept of
paid by FTC.[9] To enforce their rightful benefits separate legal entity is used to defeat public
under the laws on Labor Standards, petitioners convenience, justify wrong, protect fraud or
formed a union which was later certified as defend crime, the law will regard the
bargaining agent of all the security guards. On corporation as an association of persons, or in
February 1, 1991, the stockholders of FISI sold all case of two corporations, merge them into
their participations in the corporation to a new one. The separate juridical personality of a
set of stockholders which renamed the corporation may also be disregarded when
corporation Magnum Integrated Services, such corporation is a mere alter ego or
Inc. On October 15, 1991, FTC, without any business conduit of another person.[12] In the
reason, preterminated its contract of security case at bar, it was shown that FISI was a mere
services with MISI and contracted two other adjunct of FTC. FISI, by virtue of a contract for
agencies to provide security services for its security services, provided FTC with security
premises. This resulted in the displacement of guards to safeguard its premises. However,
petitioners. As MISI had no other clients, it failed records show that FISI and FTC have the same
to give new assignments to owners and business address, and FISI provided
petitioners. Petitioners have remained security services only to FTC and other
unemployed since then. All these facts companies belonging to the Lucio Tan group
indicate a concerted effort on the part of of companies. The purported sale of the shares
respondents to remove petitioners from the of the former stockholders to a new set of
company and thus abate the growth of the stockholders who changed the name of the
union and block its actions to enforce their corporation to Magnum Integrated Services,
demands in accordance with the Labor Inc. appears to be part of a scheme to
Standards laws. The Court held in Insular Life terminate the services of FISI's security guards
Assurance Co., Ltd., Employees Association- posted at the premises of FTC and bust their
NATU vs. Insular Life Assurance Co., Ltd.:[10] newly-organized union which was then
beginning to become active in demanding
The test of whether an employer has interfered the company's compliance with Labor
with and coerced employees within the Standards laws. Under these circumstances,
meaning of section (a) (1) is whether the the Court cannot allow FTC to use its separate
employer has engaged in conduct which it corporate personality to shield itself from
may reasonably be said tends to interfere with liability for illegal acts committed against its
the free exercise of employees' rights under employees.
section 3 of the Act, and it is not necessary
Thus, we find that the termination of
that there be direct evidence that any
petitioners' services was without basis and
employee was in fact intimidated or coerced
therefore illegal. Under Article 279 of the Labor
by statements of threats of the employer if
Code, an employee who is unjustly dismissed
there is a reasonable inference that anti-union
from work is entitled to reinstatement without
conduct of the employer does have an
loss of seniority rights and other privileges, and
adverse effect on self-organization and
to his full backwages, inclusive of allowances,
collective bargaining.[11]
and to his other benefits or their monetary
equivalent computed from the time his RESOLVED, as it is hereby resolved that
compensation was witheld from him up to the payment for professional fees and services
time of his actual reinstatement. However, if rendered by x x x Rovels Enterprises x x x be
reinstatement is no longer possible, the
made in cash if funds are available, or its
employer has the alternative of paying the
employee his separation pay in lieu of equivalent number of shares of stock of the
reinstatement.[13] corporation at par value, and should said
creditors elect the latter mode of payment, it is
IN VIEW WHEREOF, the petition is
further resolved that the President and/or his
GRANTED. The assailed resolutions of the NLRC
are SET ASIDE. Respondents are hereby Secretary be authorized as they are hereby
ordered to pay petitioners their full authorized, to issue the corresponding
backwages, and to reinstate them to their unissued shares of stock of the
former position without loss of seniority rights corporation.[3] (emphasis added)
and privileges, or to award them separation
pay in case reinstatement is no longer feasible. The Resolution was signed by three of TTTDCs
SO ORDERED. directors, namely, Victoriano Leviste,
Bienvenido Cruz, Jr., and Roberto
[G.R. No. 136821. October 17, 2002] Roxas.Roberto Roxas is the President of TTTDC
ROVELS ENTERPRISES, and stockholder of Rovels at the same
INC., petitioner, vs. EMMANUEL B. OCAMPO, time. Noticeably, the signatures of the other
JOSE M. SILVA, SR., THE HEIRS OF EXPEDITO two (2) TTTDC directors Jose Silva, Jr. and
LEVISTE, SR.,* CONRADO CALALANG, and Emmanuel Ocampo do not appear in the
FRANCISCO CARREON, SR., respondents. subject Resolution despite their presence in the
December 29, 1975 Board meeting.[4]
DECISION
On February 23, 1976, Eduardo Santos,
SANDOVAL-GUTIERREZ, J.: President of Rovels, on behalf of TTTDC, filed
with the SEC an application for exemption
Assailed in this petition for review
from registration of TTTDCs unissued shares of
on certiorari[1] is the Decision of the Court of
stock transferred to it (Rovels) as payment for
Appeals dated June 5, 1998[2] in CA-G.R. SP
its services worth One Hundred Eight Thousand
No. 43260, affirming the Decision of the
Pesos (P108,000.00). This was done because
Securities and Exchange Commission (SEC) in
under Section 4 (a) of the Revised Securities
SEC Case No. 09-95-5135 dismissing the petition
Act, no shares of stocks shall be transferred
to be declared the majority stockholder of
unless first registered with the SEC or permitted
Tagaytay Taal Tourist Development
to be sold.[5]
Corporation (TTTDC). The petition was filed by
Rovels Enterprises, Inc. (Rovels), herein On May 7, 1976, the SEC, in its Resolution No.
petitioner. Rovels is a domestic corporation 260,[6] granted Eduardo Santos application.
engaged in construction work. Its President is
Eduardo Santos. TTTDC was among Rovels On March 1, 1976, the TTTDC Board of Directors
clients. passed another Resolution[7] repealing its
Resolution of December 29, 1975, thus:
In payment for the services rendered by
Rovels, the Board of Directors of TTTDC passed RESOLVED, as it is hereby resolved, that the
a Resolution on December 29, 1975 providing Resolution of December 29, 1975 authorizing
as follows: the payment of creditors with unissued shares
of the corporation be as it is hereby repealed:
Resolved further that the matter as well as the
amount of the creditors claims be given xxxxxxxxx
adequate study and consideration by the
Board. (emphasis added) WHEREFORE, premises considered, this
Commission finds and so holds that the
In view of the December 29, 1975 TTTDC Board purported board resolution of December 29,
Resolution transferring to Rovels the said shares 1975, not having been properly passed upon at
of stock as construction fee, TTTDC Directors a duly constituted board meeting, cannot be
Jose Silva, Jr. and Emmanuel Ocampo filed a recognized as valid and hence, without legal
complaint with the SEC against Roberto Roxas, force and effect. Consequently, the issuance of
TTTDC President, and Eduardo Santos, Rovels shares of stock to corporate creditors of the
President, docketed as SEC Case No. 1322. In Tagaytay Taal Tourist Development
their complaint, Silva and Ocampo alleged Corporation is null and void. In view thereof,
that there was no meeting of the TTTDCs Board the shares in question are still considered
of Directors on December 29, 1975; that they unissued and remain part of the authorized
did not authorize the transfer of TTTDCs shares capital stocks of the Tagaytay Taal Tourist
of stock to Rovels; that they never signed the Development Corporation. This is without
alleged minutes of the meeting; and that the prejudice to the rights of said corporate
signatures of the other two (2) Directors, creditors as against Tagaytay Taal Tourist
Victoriano Leviste and Bienvenido Cruz, Jr., as Development Corporation for the latters
well as that of TTTDCs Secretary Francisco contractual obligations. (emphasis added)
Carreon, Jr., were obtained through fraud and
On appeal by Roberto Roxas and Eduardo
misrepresentation. They also alleged that the
Santos, the SEC en banc, in its Decision dated
TTTDC Board Resolution dated December 29,
1975 was repealed by the March 1, 1976 September 2, 1982 in SEC-AC No.
049,[9] affirmed the Decision of the SEC Hearing
Resolution. They thus prayed that the transfer
of TTTDCs shares of stock to Rovels pursuant to Officer. This Court, in its Decision of June 20,
Resolution dated December 29, 1975 be 1983 in G.R. No. 61863,[10] likewise affirmed the
Decision of the SEC en banc. The Decision of
annulled.
this Court became final and executory on
On March 17, 1979, SEC Hearing Officer September 2, 1983.[11]
Eugenio E. Reyes issued a Decision[8] in favor of
Silva and Ocampo, the dispositive portion of Subsequently, TTTDC, Jose Silva, Emmanuel
which reads: Ocampo, Victoriano Leviste, Francisco
Carreon, Jr., and Expedito Leviste, Sr., another
Considering that the (December 29, 1975) stockholder of TTTDC, (the SILVA GROUP, now
board resolution which authorizes the respondents), filed with the SEC a petition
corporation to pay its creditors with its unissued against Eduardo Santos, Sylvia S. Veloso,
shares of stock x x x had been expressly Josefina Carballo, Augusto del Rosario,
revoked or repealed on March 1, 1976 as Reynaldo Alcantara and Lauro Sandoval (the
earlier pointed out, Commission Resolution No. SANTOS GROUP), docketed as SEC Case No.
260 (granting Santos application for exemption 3806. (The SANTOS GROUP were nominees of
from registration of the unissued shares), when Rovels who, by virtue of the shares of stock
issued on May 7, 1976 x x x had lost its legal issued pursuant to the December 29, 1975
basis. Consequently, the corresponding Resolution, proceeded to act as directors and
issuance of shares was without authority of the officers of TTTDC). In their petition, the SILVA
board of directors. GROUP prayed that they be declared the true
and lawful stockholders and incumbent respondents Ocampo, Silva, Leviste, Sr.,
directors and officers of TTTDC. Calalang and Carreon (belonging to the SILVA
GROUP). The material allegations of the
On July 6, 1993, SEC Hearing Officer Alberto P.
petition state that: (1) TTTDC passed a
Atas rendered a Decision[12] in favor of the Resolution dated December 29, 1975
SILVA GROUP, thus: authorizing the transfer of its unissued shares to
WHEREFORE, judgment is hereby rendered in Rovels as the latters construction fee;[15] (2)
favor of the petitioners (SILVA GROUP) and Pursuant to that Resolution, TTTDC shares of
against the respondents (SANTOS GROUP), as stock worth P692,000.00 were transferred to
follows: Rovels;[16] (3) While TTTDC, in its March 1, 1976
Resolution, repealed the December 29, 1975
a. Declaring petitioners as the lawful Resolution, such repeal does not bind Rovels
stockholders, directors and officers of Tagaytay for lack of notice;[17](4) Several interrelated
Taal Tourist Development Corporation; cases (SEC Case Nos. 1322 and 3806) were
filed with the SEC involving the SILVA and
b. Declaring respondents, to
SANTOS GROUPS;[18] (5) Rovels is not bound by
be not stockholders of Tagaytay Taal Tourist
the SEC Decisions since it was not impleaded
Development Corporation;
as a party in said cases.[19]
c. Declaring respondents to be not directors or
Forthwith, the SILVA GROUP filed a motion to
officers of Tagaytay Taal Tourist Development
dismiss[20] the petition on the following grounds:
Corporation;
(1) Rovels has no cause of action since TTTDCs
d. The writ of preliminary injunction issued on December 29, 1975 Board Resolution was
November 6, 1990 is hereby made permanent; repealed by its March 1, 1976 Resolution;[21] (2)
and the petition is barred by the prior SEC Decisions
in SEC Case No. 1322 declaring that the
e. Ordering the Records Division of this issuance of TTTDCs shares of stock to Rovels is
Commission to purge the records of Tagaytay valid, and the SEC Decision in 3806 declaring
Taal Tourist Development Corporation of all the SILVA GROUP as the lawful stockholders of
papers and documents filed by respondents TTTDC;[22] and (3) the petition is barred by
purportedly in behalf of Tagaytay Taal Tourist estoppel, prescription and laches since it was
Development Corporation. (emphasis and filed long after Rovels was notified of the
words in parentheses added) repeal of the December 29, 1975 TTTDC
Resolution.[23]
The above Decision became final and
executory on September 1, 1994[13] as no In an Order dated April 22, 1996[24] in SEC Case
appeal was interposed by either the SILVA No. 09-95-5135, SEC Hearing Officer Manuel P.
GROUP or the SANTOS GROUP. Perea dismissed Rovels petition on the grounds
of lack of cause of action, res judicata,
However, Rovels, to whom the TTTDC shares of
estoppel, laches and prescription. This Order
stock (worth P108,000.00) were transferred,
was affirmed by the SEC en banc in its Decision
claimed that it became aware of the July 6,
dated January 20, 1997[25] in SEC AC No. 560.
1993 SEC Decision only in June of 1995. So on
September 6, 1995, it filed a petition with the Upon a petition for review, docketed as CA-
SEC,[14] docketed as SEC Case No. 09-95-5135, G.R. SP. No. 43260, the Court of Appeals, in its
praying that it be declared the majority Decision dated June 5, 1998,[26]affirmed the
stockholder of TTTDC as against January 20, 1997 SEC en banc Decision. Rovels
motion for reconsideration was likewise Board of Directors resolved that TTTDC pay its
denied.[27] creditors through a debt-to-equity swap;

Hence, the instant petition for review xxxxxxxxx


on certiorari,[28] alleging that the Court of
Appeals erred: 9. x x x the relation between the Silva
faction and the Santos faction became
I adversarial. The Silva faction attempted to
form an alleged new board of directors
IN HOLDING THAT PETITIONER ROVELS HAS NO and repealed the Board Resolution dated
CAUSE OF ACTION AGAINST PRIVATE December 29, 1975 Resolution regarding the
RESPONDENTS; and debt to equity swap. Thus, it resolved:
II RESOLVED, as it is hereby resolved, that the
IN HOLDING THAT THE PETITION IN SEC CASE Resolution of December 29, 1975 authorizing
NO. 09-95-5135 IS BARRED BY PRIOR JUDGMENT the payment of creditors with unissued shares
(RES JUDICATA), LACHES, PRESCRIPTION AND of the corporation be as it is hereby repealed:
ESTOPPEL.[29] Resolved further that the matter as well as the
amount of the creditors claims be given
The petition is unmeritorious. adequate study and consideration by the
Board. x x x
On the first assigned error, we find that the
Court of Appeals is correct in affirming the 10. That what is clear from the above
dismissal of Rovels petition in SEC Case No. 09- Resolution of March 1, 1976 is the admission
955135 for lack of cause of action. that indeed TTTDC owes certain amount of
money from its creditors. The creditors became
A cause of action is defined as the delict or
stockholders of record as a result of shares of
wrongful act or omission committed by a
stock issued in implementation of the debt to
person in violation of the right of another.[30]A
equity conversion.Corresponding shares of
cause of action exists if the following elements
stock were issued and signed by then
are present: (1) a right in favor of the plaintiff,
president of the corporation Roberto Roxas
(2) the correlative obligation of the defendant
and then corporate secretary Francisco N.
to respect such right, and (3) the act or
Carreon, Jr.
omission of the defendant in violation of
plaintiffs right.[31] The test is whether the Copy of said Certificate of Stocks are hereto
material allegations of the complaint, attached and marked as Annexes D to P and
assuming them to be true, state ultimate facts made an integral part hereof.
which constitute plaintiffs cause of action, such
that plaintiff is entitled to a favorable judgment xxxxxxxxx
as a matter of law.[32] 12. That several interrelated cases were filed
The pertinent portions of Rovels petition filed by Eduardo L. Santos (SEC Case No. 1322), on
with the SEC read: one hand, and Expedito M. Leviste, Francisco
Carreon, Felicisimo Ocampo and Jose M. Silva
xxxxxxxxx (SEC Case No. 3806) and vice versa on the
other. Petitioner, Rovels Enterprises, Inc.
5. x x x. On December 29, 1975, TTTDC in a
was never made a party in any of these
Resolution signed by majority members of the
cases and its nominees in the Board of
Directors of TTTDC continued to exercise its A reading of the above petition (paragraph 5)
function from 1976. shows that Rovels prayer to be declared the
majority stockholder of TTTDC is anchored on
xxxxxxxxx
the December 29, 1975 TTTDC Board Resolution
19. That to implement the decision in SEC CASE transferring its shares of stock to Rovels as
3806, which declared the Silva Group as the construction fee. This Resolution could have
duly authorized directors and officers, without vested in Rovels a right to be declared a
looking deeply into the records of the stockholder of TTTDC. However, the same
case, i.e. the sub-poened authentic Stock and petition (paragraphs 9 and 10) concedes that
Transfer Book of TTTDC and the earlier decision the December 29, 1975 Resolution was
in PED Case No. 89-0644, will constitute repealed by the March 1, 1976 Resolution. The
irreparable damage to the petitioner. Specially petition likewise alleges (paragraphs 12 and
so, Silva executed an affidavit showing 5 19) that there were prior interrelated cases
Directors of TTTDC but the stock certificates filed with the SEC between the SILVA and
were not signed by the corporate secretary SANTOS GROUPS, namely: (1) SEC Case No.
who died in 1982. 1322 (wherein the SEC en banc in its Decision
dated September 2, 1982 nullified the TTTDC
xxxxxxxxx Board Resolution dated December 29, 1975,
which Decision was affirmed with finality by this
21. That petitioner which became duly
Court in G.R. No. 61863) and (2) SEC Case No.
registered majority stockholder thru debt to
3806 (wherein the SEC declared the SILVA
equity swap had been an innocent party to
GROUP as the legitimate stockholders of TTTDC,
such controversy between the aforesaid 2
not Rovels nominees [the SANTOS
ruling thereof, hence, petitioner remains as is
GROUP]). Clearly, on the face of its petition,
on a status quo basis as majority stockholder of
Rovels cannot claim to be the majority
TTTDC.
stockholder of TTTDC.
xxxxxxxxx
Relative to the second assigned error, Rovels
PRAYER contends that it is not bound by the SEC
Decision in SEC Case Nos. 1322 and 3806 and
WHEREFORE, premises considered, petitioner in G.R. No. 61863 as it was never a party in any
prays that this Honorable Commission render of these cases. This contention brings us to the
judgment in favor of petitioner and against issue of res judicata.
respondents (SILVA GROUP):
The requisites of res judicata,[34] also known as
xxxxxxxxx the rule on bar by prior judgment, are:

2. After due notice and hearing, re-declaring 1) the former judgment must be final;
petitioner lawful registered majority stockholder
of TTTDC x x x; 2) the court which rendered it had jurisdiction
over the subject matter and the parties;
3. Ordering respondents to desist from sitting in
the Board of Directors of TTTDC as they are not 3) the judgment must be on the merits; and
lawful registered stockholders in the books of
4) there must be between the first and the
the said corporation.
second actions, identity of parties, subject
x x x x x x x x x[33] matter and causes of action.
The first three (3) requisites of res judicata are 3806. The legal fiction of separate corporate
present in this case. This is not disputed by the existence is not at all times invincible and the
parties and is, in fact, established by the same may be pierced when employed as a
record. The controversy arises as to whether means to perpetrate a fraud, confuse
there is identity of the parties in the present SEC legitimate issues, or used as a vehicle to
Case No. 09-95-5135, on the one hand, and in promote unfair objectives or to shield an
prior SEC Case Nos. 1322 and 3806, on the otherwise blatant violation of the prohibition
other. against forum-shopping. While it is settled that
the piercing of the corporate veil has to be
Contrary to its claim, Rovels is bound by the
done with caution, this corporate fiction may
previous SEC Decisions. It must be noted that be disregarded when necessary in the interest
Eduardo Santos, President of Rovels, was one of justice.[37]
of the respondents in both SEC Case Nos. 1322
and 3806. Clearly, Rovels and Eduardo Santos, The doctrine of res judicata states that a final
being its President, share an identity of judgment on the merits rendered by a court of
interests sufficient to make them privies-in-law, competent jurisdiction is conclusive as to the
as correctly found by the Court of Appeals in rights of the parties and their privies, and
its assailed Decision, thus: constitutes an absolute bar to subsequent
actions involving the same claim, demand or
In the case at bench, there can be no
cause of action.[38] This is founded on public
question that the rights claimed by petitioner policy and necessity, which makes it to the
and its stockholders/directors/officers who
interest of the State that there should be an
were parties in SEC Case Nos. 1322 and 3806
end to litigations, and on the principle that an
are identical in that they are both based on individual should not be vexed twice for the
the December 29, 1975 Resolution. Stated
same cause.[39]
differently, they shared an identity of interest
from which flowed an identity of relief sought, Just recently, we emphatically declared in In
namely, to be declared owners of the stocks of Re: Petition Seeking for Clarification as to the
TTTDC, premised on the same December 29, Validity and Forceful Effect of Two (2) Final and
1975 Resolution. x x x. This identity of interest is Executory but Conflicting Decisions of the
sufficient to make them privies-in-law, one to Honorable Supreme Court:[40] Every litigation
the other, and meets the requisite of substantial must come to an end once a judgment
identity of parties.[35] becomes final, executory and
unappealable. This is a fundamental and
It bears stressing that absolute identity of
immutable legal principle. For (j)ust as a losing
parties is not required for the principle of res party has the right to file an appeal within the
judicata, or the rule on bar by prior judgment, prescribed period, the winning party also has
to apply. Mere substantial identity of parties, or the correlative right to enjoy the finality of the
a community of interests between a party in resolution of his case by the execution and
the first case and a party in the subsequent satisfaction of the judgment, which is the life of
case even if the latter was not impleaded in the law. Any attempt to thwart this rigid rule
the first case, is sufficient.[36] and deny the prevailing litigant his right to
Rovels cannot take refuge in the argument savour the fruit of his victory, must immediately
that, as a corporation, it is imbued with be struck down.
personality separate and distinct from that of Finally, this Court sustains the Appellate Courts
the respondents in SEC Case Nos. 1322 and finding that the filing of Rovels petition in the
instant SEC Case No. 09-95-5135 is barred by 1998 and its Resolution dated December 21,
estoppel, prescription and laches. There is no 1998 in CA-G.R. SP. No. 43260, are AFFIRMED.
merit to Rovels claim that it was only in June of
SO ORDERED.
1995[41] when it became aware of the repeal
of the December 29, 1975 TTTDC Resolution [G.R. No. 140923. September 16, 2005]
and of the consequent nullification of the
transfer of its shares of stock. MANUEL M. MENDOZA and EDGARDO A.
YOTOKO, petitioners, vs. BANCO REAL
It is undisputed that Eduardo Santos was DEVELOPMENT BANK (now LBC Development
present in the March 1, 1976 TTTDC Board Bank), respondent.
meeting wherein the December 29, 1975
Resolution was repealed. We hold that DECISION
Eduardo Santos, being the President of Rovels,
SANDOVAL-GUTIERREZ, J.:
is considered as its (Rovels) agent. As such, his
knowledge of the repeal of the December 29, Before us is a petition for review on certiorari[1],
1975 Resolution, under the theory of imputed assailing the Decision[2] of the Court of Appeals
knowledge, is ascribed to his principal (Rovels). dated September 21, 1998 in CA-G.R. No.
41544, entitled BANCO REAL DEVELOPMENT
It was only on September 6, 1995, or almost
BANK, plaintiff, versus, TECHNICA VIDEO INC.,
twenty (20) years from the time Eduardo Santos
ET. AL., MANUEL M. MENDOZA, ET. AL.,
learned of the March 1, 1976 Resolution, that
defendants and Resolution dated December 3,
Rovels filed its petition in SEC Case No. 09-95-
1999.
5135. Within that long period of time, Rovels did
nothing to contest the March 1, 1976 TTTDC The petition alleges inter alia that on August 7,
Resolution to protect its rights, if any. Obviously, 1985, the Board of Directors of Technical Video,
such inaction constitutes estoppel, prescription Inc. (TVI) passed a Resolution authorizing its
and laches. As stated by Rovels itself, Article President, Eduardo A. Yotoko, petitioner, or its
1149 of the New Civil Code limits the filing of General Manager-Secretary-Treasurer, Manuel
actions, whose periods are not fixed therein or M. Mendoza, also a petitioner, to apply for and
in any other laws, to only five (5) years. In secure a loan from the Pasay City Banco Real
addition, the principle of laches or stale Development Bank (now LBC Development
demands provides that the failure or neglect, Bank), herein respondent.
for an unreasonable and unexplained length
of time, to do that which by exercising due On September 11, 1985, respondent bank
diligence could or should have been done extended a loan of P500,000.00 to TVI. In his
earlier, or the negligence or omission to assert capacity as General Manager, petitioner
a right within a reasonable time, warrants a Mendoza executed a promissory note and
presumption that the party entitled to assert it chattel mortgage over 195 units of Beta video
either has abandoned it or declined to assert machines and their equipment and
it.[42] accessories belonging to TVI in favor of
respondent bank.
In sum, this Court finds that the Court of
Appeals did not commit any reversible error in On October 3, 1986, TVI and two other video
its challenged Decision. firms, Fox Video and Galactica Video,
organized a new corporation named FGT
WHEREFORE, the petition is DENIED. The assailed Video Network Inc. (FGT). It was registered with
Decision of the Court of Appeals dated June 5, the Securities and Exchange
Commission.[3] Petitioner Mendoza was the confiscated at the offices of FGT 638 machines
concurrent President of FGT and Operating and equipment including the 195 Beta
General Manager of TVI. Thus, the office of TVI machines mortgaged with respondent bank.
had to be transferred to the building of FGT for
easier monitoring of the distribution and On May 29, 1987, upon motion of FGT and
marketing aspects of the business. herein petitioners, the same court issued
another Order directing the NBI to release and
For TVIs failure to pay its loan upon maturity, return the said machines to them.
respondent bank, on January 26, 1987, filed
with the Office of the Clerk of Court of the However, Columbia Pictures Inc., Orion
Regional Trial Court (RTC), Pasay City, a Pictures Corp., Paramount Pictures Corp.,
petition for Extra Judicial Foreclosure and Sale Universal City Studios Inc., The Walt Disney
of Chattel Mortgage. Company and Warner Bros. filed with this Court
a petition for certiorari[6] assailing the Order of
However, the Sheriffs Report/Return[4] dated the lower court.
January 27, 1987 shows that TVI is no longer
On June 18, 1987, this Court issued a temporary
doing business at its given address; that its
General Manager, Mr. Manuel M. Mendoza, is restraining order enjoining the RTC from
enforcing its assailed order. The machines and
presently employed at FGT Video Network with
offices at the Philcemcor Bldg., No. 4 Edsa cor. equipment were left in the custody of the NBI
until the petition for certiorari shall have been
Connecticut St., Greenhills, San Juan, Metro
Manila; that when asked about the resolved with finality.
whereabouts of the video machines, in the On July 13, 1990, respondent bank filed with
presence of the representative of respondent the RTC, Branch 110, Pasig City,[7] a complaint
bank and its counsel, Mr. Mendoza denied any for collection of a sum of money[8] against TVI,
knowledge of their whereabouts; and that FGT and petitioners. Only petitioners filed their
action on respondents petition is indefinitely joint answer to the complaint.
postponed until further notice from the bank.
In their joint answer, petitioners specifically
Respondent then wrote TVI demanding the denied the allegations in the complaint, raising
surrender of the video machines. In his letter the defense that the loan is purely a corporate
dated February 19, 1987, petitioner Mendoza indebtedness of TVI.
requested the bank to give him additional time
to enable us to pay our total obligations and On April 29, 1991, the trial court rendered a
proposed a repayment scheme to start not Decision, holding that:
later than March 10, 1987.[5] Still, no payment
As by these considerations, the Court finds that
was received by the bank. TVI simply refused
TVI was the mere alter ego or business conduit
and ignored the demand and kept silent as to
of Yotoko and Mendoza, and additionally
the whereabouts of the video machines.
considering 1) that Mendoza disclaimed
Meanwhile, in a case entitled Republic of the knowledge of the whereabouts of the TVI
Philippines, plaintiff vs. FGT Video Network Inc., mortgaged property at the time plaintiffs
Manuel Mendoza, Alfredo C. Ongyangco, Eric petition for extrajudicial foreclosure was being
Apolonio, Susan Yang ang Eduardo A. Yotoko, effected, and 2) that Mendoza and Yotoko
defendants, the RTC, Branch 167, Pasig City transferred the mortgaged property to FGT
issued a search warrant. The agents of the without first securing plaintiffs consent despite
National Bureau of Investigation (NBI) their awareness that under the chattel
mortgage, such consent was necessary, the
doctrine of corporate entity must be pierced from FGT glaringly shows that petitioners
and the two must be held personally liable for transferred the same from TVI. More
TVIs obligation to plaintiff for said doctrine importantly, a comparison of the list of video
cannot be used to defeat public convenience, machines in the Chattel Mortgage Contract
justify wrong, protect fraud or avoid a legal and the list of video machines seized by the
obligation. NBI from FGT shows that they have the same
serial numbers.
The dispositive portion of the trial courts
Decision reads: The courts below also found that TVI is
petitioners mere alter ego or business conduit.
WHEREFORE, judgment is hereby rendered in They control the affairs of TVI. Among its
favor of plaintiff and against stockholders or directors, they were the only
defendants TECHNICA VIDEO, INC., Mendoza ones who became incorporators of FGT. They
and Yotoko, ordering them, transferred the assets of TVI to FGT.
1) to pay plaintiff the sum of P500,000.00 plus
The general rule is that obligations incurred by
interests, charges and penalties as agreed
a corporation, acting through its directors,
upon in the promissory note of September 11, officers or employees, are its sole liabilities.
1985, until the same is fully paid;
However, the veil with which the law covers
2) to pay plaintiff the sum equivalent to ten and isolates the corporation from its directors,
(10%) of the total unpaid obligation as and for officers or employees will be lifted when the
attorneys fees, and corporation is used by any of them as a cloak
or cover for fraud or illegality or
3) to pay the costs. injustice.[9] Here, the fraud was committed by
petitioners to the prejudice of respondent
SO ORDERED.
bank. It bears emphasis that as reported by the
Upon appeal by herein petitioners, the Court of sheriff, TVI is no longer doing business at its
Appeals rendered its Decision dated given address and its whereabouts cannot be
September 21, 1998, affirming in toto the established as yet.
Decision of the trial court. Petitioners motion for
Both the trial court and the Court of Appeals
reconsideration was denied in its Resolution
thus concluded that petitioners succeeded to
dated December 3, 1999.
hide the chattels, preventing the sheriff to
Hence, the instant petition. foreclose the mortgage. Obviously, they acted
in bad faith to defraud respondent bank.
The basic issue for our resolution is whether
herein petitioners are personally liable for TVIs In fine, we hold that the Appellate Court, in
indebtedness of P500,000.00 with respondent affirming the Decision of the trial court,
bank. correctly ruled that petitioners, not TVI, are the
ones personally liable to respondent bank for
Both the trial court and the Appellate Court the payment of the loan.
found that the petitioners transferred the Beta
video machines from TVI to FGT without the WHEREFORE, the petition is DENIED. Costs
consent of respondent bank. Also, upon inquiry against petitioners.
of the sheriff, petitioner Mendoza declined
SO ORDERED.
knowledge of the whereabouts of the
mortgaged video machines. Moreover, the
fact that the NBI seized the video machines
[G.R. Nos. 116124-25. November 22, 2000] CCC-QC, together with two seats in the latters
Board of Directors.
Under the new set-up, several officials of
BIBIANO O. REYNOSO, IV, petitioner, vs. HON. Commercial Credit Corporation, including
COURT OF APPEALS and GENERAL petitioner Reynoso, became employees of
CREDIT CORPORATION, respondents. CCC-Equity. While petitioner continued to be
the Resident Manager of CCC-QC, he drew his
DECISION salaries and allowances from CCC-
Equity.Furthermore, although an employee of
YNARES-SANTIAGO, J.: CCC-Equity, petitioner, as well as all
employees of CCC-QC, became qualified
Assailed in this petition for review is the members of the Commercial Credit
consolidated decision of the Court of Appeals Corporation Employees Pension Plan.
dated July 7, 1994, which reversed the
separate decisions of the Regional Trial Court As Resident Manager of CCC-QC,
of Pasig City and the Regional Trial Court of petitioner oversaw the operations of CCC-QC
Quezon City in two cases between petitioner and supervised its employees. The business
Reynoso and respondent General Credit activities of CCC-QC pertain to the
Corporation (GCC). acceptance of funds from depositors who are
issued interest-bearing promissory notes. The
Sometime in the early 1960s, the amounts deposited are then loaned out to
Commercial Credit Corporation (hereinafter, various borrowers. Petitioner, in order to boost
CCC), a financing and investment firm, the business activities of CCC-QC, deposited
decided to organize franchise companies in his personal funds in the company. In return,
different parts of the country, wherein it shall CCC-QC issued to him its interest-bearing
hold thirty percent (30%) equity. Employees of promissory notes.
the CCC were designated as resident
managers of the franchise On August 15, 1980, a complaint for sum of
companies. Petitioner Bibiano O. Reynoso, IV money with preliminary
was designated as the resident manager of attachment, docketed as Civil Case No. Q-
[1]

the franchise company in Quezon City, known 30583, was instituted in the then Court of First
as the Commercial Credit Corporation of Instance of Rizal by CCC-QC against
Quezon City (hereinafter, CCC-QC). petitioner, who had in the meantime been
dismissed from his employment by CCC-
CCC-QC entered into an exclusive Equity. The complaint was subsequently
management contract with CCC whereby the amended in order to include Hidelita Nuval,
latter was granted the management and full petitioners wife, as a party defendant.[2] The
control of the business activities of the complaint alleged that petitioner embezzled
former. Under the contract, CCC-QC shall sell, the funds of CCC-QC amounting to
discount and/or assign its receivables to P1,300,593.11. Out of this amount, at least
CCC. Subsequently, however, this discounting P630,000.00 was used for the purchase of a
arrangement was discontinued pursuant to the house and lot located at No. 12 Macopa
so-called DOSRI Rule, prohibiting the lending of Street, Valle Verde I, Pasig City. The property
funds by corporations to its directors, officers, was mortgaged to CCC, and was later
stockholders and other persons with related foreclosed.
interests therein.
In his amended Answer, petitioner denied
On account of the new restrictions having unlawfully used funds of CCC-QC and
imposed by the Central Bank policy by virtue asserted that the sum of P1,300,593.11
of the DOSRI Rule, CCC decided to form CCC represented his money placements in CCC-
Equity Corporation, (hereinafter, CCC-Equity), QC, as shown by twenty-three (23) checks
a wholly-owned subsidiary, to which CCC which he issued to the said company.[3]
transferred its thirty (30%) percent equity in
The case was subsequently transferred to Hence, the decision became final and,
the Regional Trial Court of Quezon City, Branch accordingly, a Writ of Execution was issued on
86, pursuant to the Judiciary Reorganization July 24, 1989.[4] However, the judgment
Act of 1980. remained unsatisfied,[5] prompting petitioner to
file a Motion for Alias Writ of Execution,
On January 14, 1985, the trial court
Examination of Judgment Debtor, and to Bring
rendered its decision, the decretal portion of
Financial Records for Examination to
which states:
Court. CCC-QC filed an Opposition to
petitioners motion,[6] alleging that the
Premises considered, the Court finds the
possession of its premises and records had
complaint without merit. Accordingly, said
been taken over by CCC.
complaint is hereby DISMISSED.
Meanwhile, in 1983, CCC became known
By reason of said complaint, defendant as the General Credit Corporation.
Bibiano Reynoso IV suffered degradation,
On November 22, 1991, the Regional Trial
humiliation and mental anguish.
Court of Quezon City issued an Order directing
General Credit Corporation to file its comment
On the counterclaim, which the Court finds to
on petitioners motion for alias writ of
be meritorious, plaintiff corporation is hereby
execution.[7] General Credit Corporation filed a
ordered:
Special Appearance and Opposition on
December 2, 1991,[8] alleging that it was not a
a) to pay defendant the sum of P185,000.00 party to the case, and therefore petitioner
plus 14% interest per annum from October 2, should direct his claim against CCC-QC and
1980 until fully paid; not General Credit Corporation. Petitioner filed
his reply,[9] stating that the CCC-QC is an
b) to pay defendant P3,639,470.82 plus interest adjunct instrumentality, conduit and agency of
thereon at the rate of 14% per annum from CCC.Furthermore, petitioner invoked the
June 24, 1981, the date of filing of Amended decision of the Securities and Exchange
Answer, until fully paid; from this amount may Commission in SEC Case No. 2581,
be deducted the remaining obligation of entitled, Avelina G. Ramoso, et al., Petitioner
defendant under the promissory note of versus General Credit Corp., et al.,
October 24, 1977, in the sum of P9,738.00 plus Respondents, where it was declared that
penalty at the rate of 1% per month from General Credit Corporation, CCC-Equity and
December 24, 1977 until fully paid; other franchised companies including CCC-
QC were declared as one corporation.
c) to pay defendants P200,000.00 as moral
damages; On December 9, 1991, the Regional Trial
Court of Quezon City ordered the issuance of
d) to pay defendants P100,000.00 as an alias writ of execution.[10] On December 20,
exemplary damages; 1991, General Credit Corporation filed an
Omnibus Motion,[11] alleging that SEC Case No.
e) to pay defendants P25,000.00 as and for 2581 was still pending appeal, and maintaining
attorney's fees; plus costs of the suit. that the levy on properties of the General
Credit Corporation by the deputy sheriff of the
SO ORDERED. court was erroneous.
In his Opposition to the Omnibus Motion,
Both parties appealed to the then petitioner insisted that General Credit
Intermediate Appellate Court. The appeal of Corporation is just the new name of
Commercial Credit Corporation of Quezon Commercial Credit Corporation; hence,
City was dismissed for failure to pay docket General Credit Corporation and Commercial
fees. Petitioner, on the other hand, withdrew Credit Corporation should be treated as one
his appeal. and the same entity.
On February 13, 1992, the Regional Trial order or process through which the petitioner is
Court of Quezon City denied the Omnibus made liable under the judgment in said Civil
Motion.[12] On March 5, 1992, it issued an Order Case No. Q-30583.
directing the issuance of an alias writ of
execution.[13] No damages and no costs.
Previously, on February 21, 1992, General
SO ORDERED.[16]
Credit Corporation instituted a complaint
before the Regional Trial Court of Pasig against
Hence, this petition for review anchored
Bibiano Reynoso IV and Edgardo C. Tanangco,
on the following arguments:
in his capacity as Deputy Sheriff of Quezon
City,[14] docketed as Civil Case No. 61777,
praying that the levy on its parcel of land 1. THE HONORABLE COURT OF APPEALS ERRED
located in Pasig, Metro Manila and covered IN CA-G.R. SP NO. 27683 WHEN IT NULLIFIED
by Transfer Certificate of Title No. 29940 be AND SET ASIDE THE 13 FEBRUARY 1992 ORDER
declared null and void, and that defendant AND OTHER ORDERS OR PROCESS OF BRANCH
sheriff be enjoined from consolidating 86 OF THE REGIONAL TRIAL COURT OF QUEZON
ownership over the land and from further CITY THROUGH WHICH GENERAL CREDIT
levying on other properties of General Credit CORPORATION IS MADE LIABLE UNDER THE
Corporation to answer for any liability under JUDGMENT THAT WAS RENDERED IN CIVIL CASE
the decision in Civil Case No. Q-30583. NO. Q-30583.

The Regional Trial Court of Pasig, Branch 2. THE HONORABLE COURT OF APPEALS ERRED
167, did not issue a temporary restraining IN CA-G.R. SP NO. 27518 WHEN IT ENJOINED
order. Thus, General Credit Corporation THE AUCTION SALE ON EXECUTION OF THE
instituted two (2) petitions for certiorari with the PROPERTIES OF GENERAL CREDIT
Court of Appeals, docketed as CA-G.R. SP No. CORPORATION AS WELL AS INITIATING SIMILAR
27518[15] and CA-G.R. SP No. 27683. These ACTS OF LEVYING UPON AND SELLING ON
cases were later consolidated. EXECUTION OF OTHER PROPERTIES OF GENERAL
CREDIT CORPORATION.
On July 7, 1994, the Court of Appeals
rendered a decision in the two consolidated
cases, the dispositive portion of which reads: 3. THE HONORABLE COURT OF APPEALS ERRED
IN HOLDING THAT GENERAL CREDIT
CORPORATION IS A STRANGER TO CIVIL CASE
WHEREFORE, in SP No. 27518 we declare the
issue of the respondent court's refusal to issue a NO. Q-30583, INSTEAD OF, DECLARING THAT
restraining order as having been rendered COMMERCIAL CREDIT CORPORATION OF
QUEZON CITY IS THE ALTER EGO,
moot by our Resolution of 7 April 1992 which,
by way of injunctive relief, provided that "the INSTRUMENTALITY, CONDUIT OR ADJUNCT OF
COMMERCIAL CREDIT CORPORATION AND ITS
respondents and their representatives are
SUCCESSOR GENERAL CREDIT CORPORATION.
hereby enjoined from conducting an auction
sale (on execution) of petitioner's properties as
well as initiating similar acts of levying (upon) At the outset, it must be stressed that there
and selling on execution other properties of is no longer any controversy over petitioners
said petitioner". The injunction thus granted, as claims against his former employer, CCC-QC,
modified by the words in parenthesis, shall inasmuch as the decision in Civil Case No. Q-
remain in force until Civil Case No. 61777 shall 30583 of the Regional Trial Court of Quezon
have been finally terminated. City has long become final and executory. The
only issue, therefore, to be resolved in the
In SP No. 27683, we grant the petition for instant petition is whether or not the judgment
certiorari and accordingly NULLIFY and SET in favor of petitioner may be executed against
ASIDE, for having been issued in excess of respondent General Credit Corporation. The
latter contends that it is a corporation
jurisdiction, the Order of 13 February 1992 in
Civil Case No. Q-30583 as well as any other separate and distinct from CCC-QC and,
therefore, its properties may not be levied
upon to satisfy the monetary judgment in favor the corporation from the members or
of petitioner. In short, respondent raises stockholders who compose it will be lifted to
corporate fiction as its defense. Hence, we are allow for its consideration merely as an
necessarily called upon to apply the doctrine aggregation of individuals.
of piercing the veil of corporate entity in order
to determine if General Credit Corporation, Also in the above-cited case, we stated
formerly CCC, may be held liable for the that this Court has pierced the veil of
obligations of CCC-QC. corporate fiction in numerous cases where it
was used, among others, to avoid a judgment
The petition is impressed with merit.
credit;[20] to avoid inclusion of corporate assets
A corporation is an artificial being created as part of the estate of a decedent;[21] to
by operation of law, having the right of avoid liability arising from debt;[22] when made
succession and the powers, attributes, and use of as a shield to perpetrate fraud and/or
properties expressly authorized by law or confuse legitimate issues;[23] or to promote
incident to its existence.[17] It is an artificial unfair objectives or otherwise to shield them.[24]
being invested by law with a personality
In the appealed judgment, the Court of
separate and distinct from those of the persons
Appeals sustained respondents arguments of
composing it as well as from that of any other
separateness and its character as a different
legal entity to which it may be related.[18] It was
corporation which is a non-party or stranger to
evolved to make possible the aggregation
this case.
and assembling of huge amounts of capital
upon which big business depends. It also has The defense of separateness will be
the advantage of non-dependence on the disregarded where the business affairs of a
lives of those who compose it even as it enjoys subsidiary corporation are so controlled by the
certain rights and conducts activities of natural mother corporation to the extent that it
persons. becomes an instrument or agent of its
parent. But even when there is dominance
Precisely because the corporation is such
over the affairs of the subsidiary, the doctrine
a prevalent and dominating factor in the
of piercing the veil of corporate fiction applies
business life of the country, the law has to look
only when such fiction is used to defeat public
carefully into the exercise of powers by these
convenience, justify wrong, protect fraud or
artificial persons it has created.
defend crime.[25]
Any piercing of the corporate veil has to
We stated in Tomas Lao Construction v.
be done with caution. However, the Court will
National Labor Relations Commission,[26] that
not hesitate to use its supervisory and
the legal fiction of a corporation being a
adjudicative powers where the corporate
judicial entity with a distinct and separate
fiction is used as an unfair device to achieve
personality was envisaged for convenience
an inequitable result, defraud creditors, evade
and to serve justice. Therefore, it should not be
contracts and obligations, or to shield it from
used as a subterfuge to commit injustice and
the effects of a court decision. The corporate
circumvent the law.
fiction has to be disregarded when necessary
in the interest of justice. Precisely for the above reasons, we grant
the instant petition.
In First Philippine International Bank v. Court
of Appeals, et al.,[19] we held: It is obvious that the use by CCC-QC of the
same name of Commercial Credit Corporation
When the fiction is urged as a means of was intended to publicly identify it as a
perpetrating a fraud or an illegal act or as a component of the CCC group of companies
vehicle for the evasion of an existing engaged in one and the same business, i.e.,
obligation, the circumvention of statutes, the investment and financing. Aside from CCC-
achievement or perfection of a monopoly or Quezon City, other franchise companies were
generally the perpetration of knavery or crime, organized such as CCC-North Manila and
the veil with which the law covers and isolates CCC-Cagayan Valley. The organization of
subsidiary corporations as what was done here business involving a single transaction
is usually resorted to for the aggrupation of process. Under their discounting arrangements,
capital, the ability to cover more territory and CCC financed the operations of CCC-QC. The
population, the decentralization of activities subsidiary sold, discounted, or assigned its
best decentralized, and the securing of other accounts receivables to CCC.
legitimate advantages. But when the mother
The testimony of Joselito D. Liwanag,
corporation and its subsidiary cease to act in
accountant and auditor of CCC since 1971,
good faith and honest business judgment,
shows the pervasive and intensive auditing
when the corporate device is used by the
function of CCC over CCC-QC.[27] The two
parent to avoid its liability for legitimate
corporations also shared the same office
obligations of the subsidiary, and when the
space. CCC-QC had no office of its own.
corporate fiction is used to perpetrate fraud or
promote injustice, the law steps in to remedy The complaint in Civil Case No. Q-30583,
the problem. When that happens, the instituted by CCC-QC, was even verified by
corporate character is not necessarily the director-representative of CCC. The
abrogated. It continues for legitimate lawyers who filed the complaint and amended
objectives. However, it is pierced in order to complaint were all in-house lawyers of CCC.
remedy injustice, such as that inflicted in this
case. The challenged decision of the Court of
Appeals states that CCC, now General Credit
Factually and legally, the CCC had Corporation, is not a formal party in the
dominant control of the business operations of case. The reason for this is that the complaint
CCC-QC. The exclusive management contract was filed by CCC-QC against petitioner. The
insured that CCC-QC would be managed and choice of parties was with CCC-QC. The
controlled by CCC and would not deviate judgment award in this case arose from the
from the commands of the mother counterclaim which petitioner set up against
corporation. In addition to the exclusive CCC-QC.
management contract, CCC appointed its
own employee, petitioner, as the resident The circumstances which led to the filing of
manager of CCC-QC. the aforesaid complaint are quite revealing. As
narrated above, the discounting agreements
Petitioners designation as resident through which CCC controlled the finances of
manager implies that he was placed in CCC- its subordinates became unlawful when
QC by a superior authority. In fact, even after Central Bank adopted the DOSRI
his assignment to the subsidiary corporation, prohibitions. Under this rule the directors,
petitioner continued to receive his salaries, officers, and stockholders are prohibited from
allowances, and benefits from CCC, which borrowing from their company. Instead of
later became respondent General Credit adhering to the letter and spirit of the
Corporation. Not only that. Petitioner and the regulations by avoiding DOSRI loans
other permanent employees of CCC-QC were altogether, CCC used the corporate device to
qualified members and participants of the continue the prohibited practice. CCC
Employees Pension Plan of CCC. organized still another corporation, the CCC-
Equity Corporation. However, as a wholly
There are other indications in the record
owned subsidiary, CCC-Equity was in fact only
which attest to the applicability of the identity
another name for CCC. Key officials of CCC,
rule in this case, namely: the unity of interests,
including the resident managers of subsidiary
management, and control; the transfer of
corporations, were appointed to positions in
funds to suit their individual corporate
CCC-Equity.
conveniences; and the dominance of policy
and practice by the mother corporation insure In order to circumvent the Central Banks
that CCC-QC was an instrumentality or disapproval of CCC-QCs mode of reducing its
agency of CCC. DOSRI lender accounts and its directive to
follow Central Bank requirements, resident
As petitioner stresses, both CCC and CCC-
managers, including petitioner, were told to
QC were engaged in the same principal line of
observe a pseudo-compliance with the decision raised to us for review is an invitation
phasing out orders. For his unwillingness to to multiplicity of litigation. As we stated
satisfactorily conform to these directives and in Islamic Directorate vs. Court of
his reluctance to resort to illegal practices, Appeals,[30] the ends of justice are not served if
petitioner earned the ire of his further litigation is encouraged when the issue
employers. Eventually, his services were is determinable based on the records.
terminated, and criminal and civil cases were
A court judgment becomes useless and
filed against him.
ineffective if the employer, in this case CCC as
Petitioner issued twenty-three checks as a mother corporation, is placed beyond the
money placements with CCC-QC because of legal reach of the judgment creditor who,
difficulties faced by the firm in implementing after protracted litigation, has been found
the required phase-out program. Funds from entitled to positive relief. Courts have been
his current account in the Far East Bank and organized to put an end to controversy. This
Trust Company were transferred to CCC- purpose should not be negated by an
QC. These monies were alleged in the criminal inapplicable and wrong use of the fiction of
complaints against him as having been the corporate veil.
stolen. Complaints for qualified theft and
WHEREFORE, the decision of the Court of
estafa were brought by CCC-QC against
Appeals is hereby REVERSED and ASIDE. The
petitioner. These criminal cases were later
injunction against the holding of an auction
dismissed. Similarly, the civil complaint which
sale for the execution of the decision in Civil
was filed with the Court of First Instance of
Case No. Q-30583 of properties of General
Pasig and later transferred to the Regional Trial
Credit Corporation, and the levying upon and
Court of Quezon City was dismissed, but his
selling on execution of other properties of
counterclaims were granted.
General Credit Corporation, is LIFTED.
Faced with the financial obligations which
SO ORDERED.
CCC-QC had to satisfy, the mother firm closed
CCC-QC, in obvious fraud of its creditors.CCC-
QC, instead of opposing its closure,
cooperated in its own demise. Conveniently,
CCC-QC stated in its opposition to the motion
for alias writ of execution that all its properties
and assets had been transferred and taken
over by CCC.
Under the foregoing circumstances, the
contention of respondent General Credit
Corporation, the new name of CCC, that the
corporate fiction should be appreciated in its
favor is without merit.
Paraphrasing the ruling in Claparols v.
Court of Industrial Relations,[28] reiterated
in Concept Builders Inc. v. National Labor
Relations,[29]it is very obvious that respondent
seeks the protective shield of a corporate
fiction whose veil the present case could, and
should, be pierced as it was deliberately and
maliciously designed to evade its financial
obligation of its employees.
If the corporate fiction is sustained, it
becomes a handy deception to avoid a
judgment debt and work an injustice. The