[G.R. No. 155214.
February 13, 2004] [Latag] got sick in January 1995 and was
R & E TRANSPORT, INC., and HONORIO
ENRIQUEZ, petitioners, vs. AVELINA P. LATAG,
representing her deceased husband, PEDRO M.
LATAG, respondents.
DECISION
PANGANIBAN, J.:
Factual issues may be reviewed by the Court
of Appeals (CA) when the findings of fact of
the National Labor Relations Commission
(NLRC) conflict with those of the labor arbiter.
By the same token, this Court may review
factual conclusions of the CA when they are
contrary to those of the NLRC or of the labor
arbiter.
The Case
Before us is a Petition for Review[1] under Rule
45 of the Rules of Court, seeking to nullify the
June 3, 2002 Decision[2] and the August 28,
2002 Resolution[3] of the Court of Appeals in
CA-GR SP No. 67998. The appellate court
disposed as follows:
WHEREFORE, premises considered, the petition
is hereby GRANTED. The assailed Order of
public respondent NLRC is SET ASIDE. The
March 14, 2001[4] [D]ecision of the Labor
Arbiter a quo is REINSTATED.[5]
The challenged Resolution denied petitioners
Motion for Reconsideration.
The Factual Antecedents
The antecedents of the case are narrated by
the CA as follows:
Pedro Latag was a regular employee x x x of
La Mallorca Taxi since March 1, 1961. When La
Mallorca ceased from business operations,
[Latag] x x x transferred to [petitioner] R & E
Transport, Inc. x x x. He was receiving an
average daily salary of five hundred pesos
(P500.00) as a taxi driver.
forced to apply for partial disability with the
SSS, which was granted. When he recovered,
he reported for work in September 1998 but
was no longer allowed to continue working on
account of his old age.
Latag thus asked Felix Fabros, the
administrative officer of [petitioners], for his
retirement pay pursuant to Republic Act 7641
but he was ignored. Thus, on December 21,
1998, [Latag] filed a case for payment of his
retirement pay before the NLRC.
Latag however died on April 30, 1999.
Subsequently, his wife, Avelina Latag,
substituted him. On January 10, 2000, the Labor
Arbiter rendered a decision in favor of [Latag],
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered
ordering x x x LA MALLORCA TAXI, R & E
TRANSPORT, INC. and their owner/chief
executive officer HONORIO ENRIQUEZ to jointly
and severally pay MRS. AVELINA P. LATAG the
sum of P277,500.00 by way of retirement pay
for her deceased husband, PEDRO M. LATAG.
SO ORDERED.
On January 21, 2000, [Respondent Avelina
Latag,] with her then counsel[,] was invited to
the office of [petitioners] counsel and was
offered the amount of P38,500.00[,] which she
accepted. [Respondent] was also asked to
sign an already prepared quitclaim and
release and a joint motion to dismiss the case.
After a day or two, [respondent] received a
copy of the January 10, 2000 [D]ecision of the
Labor Arbiter.
On January 24, 2000, [petitioners] filed the
quitclaim and motion to dismiss. Thereafter, on
May 23, 2000, the Labor Arbiter issued an order,
the relevant portion of which states:
WHEREFORE, the decision stands and the Labor
Arbitration Associate of this Office is directed
to prepare the Writ of Execution in due course.
SO ORDERED.
On January 21, 2000, [petitioners] interposed
an appeal before the NLRC. On March 14,
2001, the latter handed down a [D]ecision[,]
the decretal portion of which provides:
WHEREFORE, in view of the foregoing,
respondents Appeal is hereby DISMISSED for
failure to post a cash or surety bond, as
mandated by law.
SO ORDERED.
On April 10, 2001, [petitioners] filed a motion for
reconsideration of the above resolution. On
September 28, 2001, the NLRC came out with
the assailed [D]ecision, which gave due course
to the motion for reconsideration.[6] (Citations
omitted)
Respondent appealed to the CA, contending
that under Article 223 of the Labor Code and
Section 3, Rule VI of the New Rules of
Procedure of the NLRC, an employers appeal
of a decision involving monetary awards may
be perfected only upon the posting of an
adequate cash or surety bond.
Ruling of the Court of Appeals
The CA held that the labor arbiters May 23,
2000 Order had referred to the earlier January
10, 2000 Decision awarding
respondent P277,500 as retirement benefit.
According to the appellate court, because
petitioners appeal before the NLRC was not
accompanied by an appropriate cash or
surety bond, such appeal was not perfected.
The CA thus ruled that the labor arbiters
January 10, 2000 Decision and May 23, 2000
Order had already become final and
executory.
Hence, this Petition.[7]
Issues
Petitioners submit the following issues for our
consideration:
I
Whether or not the Court should respect the
findings of fact [of] the NLRC as against [those]
of the labor arbiter.
II
Whether or not, in rendering judgment in favor
of petitioners, the NLRC committed grave
abuse of discretion.
III
Whether or not private respondent violated the
rule on forum-shopping.
IV
Whether or not the appeal of petitioners from
the Order of the labor arbiter to the NLRC
involves [a] monetary award.[8]
In short, petitioners raise these issues: (1)
whether the CA acted properly when it
overturned the NLRCs factual findings; (2)
whether the rule on forum shopping was
violated; and (3) whether the labor arbiters
Order of May 23, 2000 involved a monetary
award.
The Courts Ruling
The Petition is partly meritorious.
First Issue:
Factual Findings of the NLRC
Petitioners maintain that the CA erred in
disregarding the factual findings of the NLRC
and in deciding to affirm those of the labor
arbiter. Allegedly, the NLRC findings were
based on substantial evidence, while those of
the labor arbiter were groundless. Petitioners
add that the appellate court should have
refrained from tackling issues of fact and,
instead, limited itself to those of jurisdiction or
grave abuse of discretion on the part of the
NLRC.
The power of the CA to review NLRC decisions
via a Rule 65 petition is now a settled issue. As
early as St. Martin Funeral Homes v. NLRC,[9] we
have definitively ruled that the proper remedy
to ask for the review of a decision of the NLRC
is a special civil action for certiorari under Rule
65 of the Rules of Court,[10] and that such
petition should be filed with the CA in strict
observance of the doctrine on the hierarchy of
courts.[11] Moreover, it has already been
explained that under Section 9 of Batas
Pambansa (BP) 129, as amended by Republic
Act 7902,[12] the CA -- pursuant to the exercise
of its original jurisdiction over petitions
for certiorari -- was specifically given the power
to pass upon the evidence, if and when
necessary, to resolve factual issues.[13]
Likewise settled is the rule that when supported
by substantial evidence,[14] factual findings
made by quasi-judicial and administrative
bodies are accorded great respect and even
finality by the courts. These findings are not
infallible, though; when there is a showing that
they were arrived at arbitrarily or in disregard of
the evidence on record, they may be
examined by the courts.[15] Hence, when
factual findings of the NLRC are contrary to
those of the labor arbiter, the evidentiary facts
may be reviewed by the appellate
court.[16] Such is the situation in the present
case; thus, the doors to a review are open.[17]
The very same reason that behooved the CA
to review the factual findings of the NLRC
impels this Court to take its own look at the
findings of fact. Normally, the Supreme Court is
not a trier of facts.[18] However, since the
findings of fact in the present case are
conflicting,[19] it waded through the records to
find out if there was enough basis for the
appellate courts reversal of the NLRC Decision.
Number of Creditable Years
of Service for Retirement Benefits
Petitioners do not dispute the fact that the late
Pedro M. Latag is entitled to retirement
benefits. Rather, the bone of contention is the
number of years that he should be credited
with in computing those benefits. On the one
hand, we have the findings of the labor
arbiter,[20] which the CA affirmed. According to
those findings, the 23 years of employment of
Pedro with La Mallorca Taxi must be added to
his 14 years with R & E Transport, Inc., for a total
of 37 years. On the other, we also have the
findings of the NLRC[21] that Pedro must be
credited only with his service to R & E Transport,
Inc., because the evidence shows that the
aforementioned companies are two different
entities.
After a careful and painstaking review of the
evidence on record, we support the NLRCs
findings. The labor arbiters conclusion -- that
Mallorca Taxi and R & E Transport, Inc., are one
and the same entity -- is negated by the
documentary evidence presented by
petitioners. Their evidence[22] sufficiently shows
the following facts: 1) R & E Transport, Inc., was
established only in 1978; 2) Honorio Enriquez, its
president, was not a stockholder of La
Mallorca Taxi; and 3) none of the stockholders
of the latter company hold stocks in the
former. In the face of such evidence, which
the NLRC appreciated in its Decision, it seems
that mere surmises and self-serving assertions of
Respondent Avelina Latag formed the bases
for the labor arbiters conclusions as follows:
While [Pedro M. Latag] claims that he worked
as taxi driver since March 1961 since the days
of the La Mallorca Taxi, which was later
renamed R & E Transport, Inc., [petitioners] limit
the employment period to 14 years.
Resolving this matter, we note [respondents] ID
(Annex A, [Latag] position paper), which
appears to bear the signature of Miguel
Enriquez on the front portion and the date
February 27, 1961 when [x x x Latag] started
with the company. We also note an SSS
document (Annex C) which shows that the
date of initial coverage of Pedro Latag, with
SSS No. 03-0772155, is February 1961.
Viewed against [petitioners] non-disclaimer
[sic] that La Mallorca preceded R & E Taxi,
Inc.[;] x x x that both entities were/are owned
by the Enriquez family, with [petitioner] Honorio
[Enriquez] as the latters President[; and] x x x
that La Mallorca was a different entity (page 2,
[petitioners] position paper), we are of the
conclusion that [Latags] stint with the Enriquez
family dated back since February 1961 and
thus, he should be entitled to retirement
benefits for 37 years, as of the date of the filing
of this case on December 12, 1998.[23]
Furthermore, basic is the rule that the
corporate veil may be pierced only if it
becomes a shield for fraud, illegality or inequity
committed against a third person.[24] We have
thus cautioned against the inordinate
application of this doctrine. In Philippine
National Bank v. Andrada Electric &
Engineering Company,[25] we said:
x x x [A]ny application of the doctrine of
piercing the corporate veil should be done
with caution. A court should be mindful of the
milieu where it is to be applied. It must be
certain that the corporate fiction was misused
to such an extent that injustice, fraud, or crime
was committed against another, in disregard
of its rights. The wrongdoing must be clearly
and convincingly established; it cannot be
presumed. Otherwise, an injustice that was
never unintended may result from an
erroneous application.
xxxxxxxxx
The question of whether a corporation is a
mere alter ego is one of fact. Piercing the veil
of corporate fiction may be allowed only if the
following elements concur: (1) control -- not
mere stock control, but complete domination -
- not only of finances, but of policy and
business practice in respect to the transaction
attacked, must have been such that the
corporate entity as to this transaction had at
the time no separate mind, will or existence of
its own; (2) such control must have been used
by the defendant to commit a fraud or a
wrong to perpetuate the violation of a
statutory or other positive legal duty, or a
dishonest and an unjust act in contravention of
plaintiffs legal right; and (3) the said control
and breach of duty must have proximately
caused the injury or unjust loss complained
of.[26]
Respondent has not shown by competent
evidence that one taxi company had stock
control and complete domination over the
other or vice versa. In fact, no evidence was
presented to show the alleged renaming of La
Mallorca Taxi to R & E Transport, Inc. The seven-
year gap between the time the former closed
shop and the date when the latter came into
being also casts doubt on any alleged
intention of petitioners to commit a wrong or to
violate a statutory duty. This lacuna in the
evidence compels us to reverse the Decision of
the CA affirming the labor arbiters finding of
fact that the basis for computing Pedros
retirement pay should be 37 years, instead of
only 14 years.
Validity of the Quitclaim
and Waiver
As to the Quitclaim and Waiver signed by
Respondent Avelina Latag, the appellate
court committed no error when it ruled that the
document was invalid and could not bar her
from demanding the benefits legally due her
husband. This is not say that all quitclaims are
invalid per se. Courts, however, are wary of
schemes that frustrate workers rights and
benefits, and look with disfavor upon
quitclaims and waivers that bargain these
away.
Courts have stepped in to annul questionable
transactions, especially where there is clear
proof that a waiver, for instance, was wangled
from an unsuspecting or a gullible person; or
where the agreement or settlement was
unconscionable on its face.[27] A quitclaim is
ineffective in barring recovery of the full
measure of a workers rights, and the
acceptance of benefits therefrom does not
amount to estoppel.[28] Moreover, a quitclaim
in which the consideration is scandalously low
and inequitable cannot be an obstacle to the
pursuit of a workers legitimate claim.[29]
Undisputably, Pedro M. Latag was credited
with 14 years of service with R & E Transport,
Inc. Article 287 of the Labor Code, as
amended by Republic Act No.
7641,[30] provides:
Art. 287. Retirement. - x x x
xxxxxxxxx
In the absence of a retirement plan or
agreement providing for retirement benefits of
employees in the establishment, an employee
upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years
which is hereby declared the compulsory
retirement age, who has served at least five (5)
years in said establishment, may retire and shall
be entitled to retirement pay equivalent to at
least one-half (1/2) month salary for every year
of service, a fraction of at least six (6) months
being considered as one whole year.
Unless the parties provide for broader
inclusions, the term one half-month salary shall
mean fifteen (15) days plus one-twelfth (1/12)
of the 13thmonth pay and the cash equivalent
of not more than five (5) days of service
incentive leaves.
x x x x x x x x x (Italics supplied)
The rules implementing the New Retirement
Law similarly provide the above-mentioned
formula for computing the one-half month
salary.[31] Since Pedro was paid according to
the boundary system, he is not entitled to the
13th month[32] and the service incentive
pay;[33] hence, his retirement pay should be
computed on the sole basis of his salary.
It is accepted that taxi drivers do not receive
fixed wages, but retain only those sums in
excess of the boundary or fee they pay to the
owners or operators of their vehicles.[34] Thus,
the basis for computing their benefits should
be the average daily income. In this case, the
CA found that Pedro was earning an
average of five hundred pesos (P500) per day.
We thus compute his retirement pay as
follows: P500 x 15 days x 14 years of service
equals P105,000. Compared with this amount,
the P38,850 he received, which represented
just over one third of what was legally due him,
was unconscionable.
Second Issue:
Was There Forum Shopping?
Also assailed are the twin appeals that two
different lawyers filed for respondent before
the CA. Petitioners argue that instead of
accepting her explanation, the appellate
court should have dismissed the appeals
outright for violating the rule on forum
shopping.
Forum shopping is the institution of two or more
actions or proceedings grounded on the same
cause, on the supposition that one or the other
court would render a favorable
disposition.[35] Such act is present when there is
an identity of parties, rights or causes of action,
and reliefs sought in two or more pending
cases.[36] It is usually resorted to by a party
against whom an adverse judgment or order
has been issued in one forum, in an attempt to
seek and possibly to get a favorable opinion in
another forum, other than by an appeal or a
special civil action for certiorari.[37]
We find, as the CA[38] did, that respondent has
adequately explained why she had filed two
appeals before the appellate court. In the
August 5, 2002 Affidavit[39] that she attached as
Annex A to her Compliance to Show Cause
Order with Comment on petitioners Motion for
Reconsideration,[40] she averred that she had
sought the services of another counsel to file
her Petition for certiorari before the CA. She
did so after her original counsel had asked for
an extension of time to file the Petition
because of time constraints and a tremendous
workload, only to discover later that the
original counsel had filed a similar Petition.
We cannot fault respondent for her tenacity.
Besides, to disallow her appeal would not be in
keeping with the policy of labor laws[41] to shun
highly technical procedural laws in the higher
interest of justice.
Third Issue:
Monetary Award
Petitioners contention is that the labor arbiters
January 10, 2000 Decision was supplanted by
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
Amicable Settlement on January 21, 2000; that
based on that settlement, respondent filed a
Motion to Dismiss on January 24, 2000, before
the labor arbiter who officially released on the
same day his Decision dated January 10, 2000;
that upon receipt of a copy thereof,
respondent filed a Manifestation and Motion to
Set Aside the Motion to Dismiss; and that the
labor arbiter subsequently calendared the
case for conference, held hearings thereon,
and required the parties to exchange positions
-- by way of comments, replies and rejoinders -
- after which he handed down his May 23,
2000 Order.
Under the circumstances, the case was in
effect reopened by the proceedings held after
respondent had filed her Manifestation and
Motion to Set Aside the Motion to Dismiss. This
ruling is in accordance with the fourth
paragraph of Section 2, Rule V of the New
Rules of Procedure of the NLRC,[44] which
therefore correctly held as follows:
x x x Thus, the further hearings conducted
thereafter, to determine the validity of
complainants manifestation and motion are
but mute confirmation that indeed the 10
January 2000 decision in this case has not as
yet attained finality. Finally, the appealed
order of 23 May 2000 itself declaring [that] the
decision stands and the Labor Arbitration
Associate of this office is directed to prepare
the Writ of Execution in due course, obviously,
is a conclusion that the decision in this case
has been supplanted and rendered functus
officio by the herein parties acts. Thus, when
the Labor Arbiter a quo found in his appealed
order that the amount of P38,850.00 is
unconscionable viewed against the amount
awarded in the decision, the same became
appealable independently of the 10 January
2000 decision, which has not attained finality,
in the first place.[45]
We cannot concur, however, in petitioners
other contention that the May 23, 2000 Order
did not involve a monetary award. If the
amicable settlement between the parties had
rendered the January 10, 2000 Decision functus
oficio, then it follows that the monetary award
stated therein was reinstated -- by reference --
by the aforementioned Order. The appeal
from the latter should perforce have followed
the procedural requirements under Article 223
of the Labor Code.
As amended, this provision explicitly provides
that an appeal from the labor arbiters
decision, award or order must be made within
ten (10) calendar days from receipt of a copy
thereof by the party intending to appeal it;
and, if the judgment involves a monetary
award, an appeal by the employer may be
perfected only upon the posting of a cash or
surety bond. Such cash or bond must have
been issued by a reputable bonding company
duly accredited by the NLRC in the amount
equivalent to the monetary award stated in
the judgment. Sections 1, 3 and 6 of Rule VI of
the New Rules of Procedure of the NLRC
implement this Article.
Indeed, this Court has repeatedly ruled that
the perfection of an appeal in the manner and
within the period prescribed by law is not only
mandatory but jurisdictional, and the failure to
perfect an appeal has the effect of rendering
the judgment final and
executory.[46] Nonetheless, procedural lapses
may be disregarded because of fundamental
considerations of substantial justice;[47]or
because of the special circumstances of the
case combined with its legal merits or the
amount and the issue involved.[48]
The requirement to post a bond to perfect an
appeal has also been relaxed in cases when
the amount of the award has not been
included in the decision of the labor
arbiter.[49] Besides, substantial justice will be
better served in the present case by allowing
petitioners appeal to be threshed out on the
merits,[50] especially because of serious errors in
the factual conclusions of the labor arbiter as
to the award of retirement benefits.
WHEREFORE, this Petition is partly GRANTED. The
Decision of the Court of Appeals
is MODIFIED by crediting Pedro M. Latag with
14 years of service. Consequently, he is entitled
to retirement pay, which is hereby computed
at P105,000 less the P38,850 which has already
been received by respondent, plus six (6)
percent interest thereon from December 21,
1998 until its full payment. No costs.
SO ORDERED.
THIRD DIVISION
[G.R. No. 136456. October 24, 2000]
HEIRS OF RAMON DURANO, SR., RAMON
DURANO III, AND ELIZABETHHOTCHKISS
DURANO, petitioners, vs. SPOUSES ANGELES
SEPULVEDA UY AND EMIGDIO BING SING UY,
SPOUSES FAUSTINO ALATAN AND VALERIANA
GARRO, AURELIA MATA, SILVESTRE RAMOS,
HERMOGENES TITO, TEOTIMO GONZALES,
PRIMITIVA GARRO, JULIAN GARRO, ISMAEL
GARRO, BIENVENIDO CASTRO, GLICERIO
BARRIGA, BEATRIZ CALZADA, ANDREA MATA DE
BATULAN, TEOFISTA ALCALA, FILEMON
LAVADOR, CANDELARIO LUMANTAO, GAVINO
QUIMBO, JUSTINO TITO, MARCELINO GONZALES,
SALVADOR DAYDAY, VENANCIA REPASO,
LEODEGARIO GONZALES, and RESTITUTA
GONZALES, respondents.
DECISION
GONZAGA-REYES, J.:
Petitioners seek the reversal of the decision of
the First Division of the Court of Appeals dated
November 14, 1997 in CA-G.R. CV No. 27220,
entitled Heirs of Ramon Durano, Sr., et. al.
versus Spouses Angeles Supelveda Uy, et. al.,
and the resolution of the Court of Appeals
dated October 29, 1998 which denied
petitioners motion for reconsideration.
The antecedents of this case may be traced as
far back as August 1970; it involves a 128-
hectare parcel of land located in the barrios of
Dunga and Cahumayhumayan, Danao
City. On December 27, 1973, the late
Congressman Ramon Durano, Sr., together
with his son Ramon Durano III, and the latters
wife, Elizabeth Hotchkiss Durano (petitioners in
the herein case), instituted an action for
damages against spouses Angeles Supelveda
Uy and Emigdio Bing Sing Uy, spouses Faustino
Alatan and Valeriana Garro, spouses Rufino
Lavador and Aurelia Mata, Silvestre Ramos,
Hermogenes Tito, Teotimo Gonzales, Primitiva
Garro, Julian Garro, Ismael Garro, Bienvenido
Castro, Glicerio Barriga, Beatriz Calzada,
Andrea Mata de Batulan, Teofista Alcala,
Filemon Lavador, Candelario Lumantao,
Gavino Quimbo, Justino Tito, Marcelino
Gonzales, Salvador Dayday, Venancia
Repaso, Leodegario Gonzales, Jose de la
Calzada, Restituta Gonzales, and Cosme
Ramos (herein respondents[1]) before Branch
XVII of the then Court of First Instance of Cebu,
Danao City.
In that case, docketed as Civil Case No. DC-
56, petitioners accused respondents of
officiating a hate campaign against them by
lodging complaints in the Police Department
of Danao City in August 1970, over petitioners
so-called invasion of respondents alleged
properties in Cahumayhumayan, Danao
City. This was followed by another complaint
sent by respondents to the President of the
Philippines in February 1971, which depicted
petitioners as oppressors, landgrabbers and
usurpers of respondents alleged rights. Upon
the direction of the President, the Department
of Justice through City Fiscal Jesus Navarro
and the Philippine Constabulary of Cebu
simultaneously conducted investigations on
the matter. Respondents complaints were
dismissed as baseless, and they appealed the
same to the Secretary of Justice, who called
for another investigation to be jointly
conducted by the Special Prosecutor and the
Office of the City Fiscal of Danao City. During
the course of said joint investigation,
respondents Hermogenes Tito and Salvador
Dayday again lodged a complaint with the
Office of the President, airing the same
charges of landgrabbing. The investigations on
this new complaint, jointly conducted by the
3rd Philippine Constabulary Zone and the
Citizens Legal Assistance Office resulted in the
finding that (petitioners) should not be held
answerable therefor.[2]
Petitioners further alleged in their complaint
before the CFI that during the course of the
above investigations, respondents kept
spreading false rumors and damaging tales
which put petitioners into public contempt and
ridicule.[3]
In their Answer, respondents lodged their
affirmative defenses, demanded the return of
their respective properties, and made
counterclaims for actual, moral and exemplary
damages. Respondents stated that sometime
in the early part of August 1970 and months
thereafter they received mimeographed
notices dated August 2, 1970 and signed by
the late Ramon Durano, Sr., informing them
that the lands which they are tilling and
residing in, formerly owned by the Cebu
Portland Cement Company (hereafter,
Cepoc), had been purchased by Durano &
Co., Inc. The notices also declared that the
lands were needed by Durano & Co. for
planting to sugar and for roads or residences,
and directed respondents to immediately turn
over the said lands to the representatives of
the company. Simultaneously, tall bamboo
poles with pennants at the tops thereof were
planted in some areas of the lands and metal
sheets bearing the initials RMD were nailed to
posts.
As early as the first week of August 1970, and
even before many of the respondents
received notices to vacate, men who
identified themselves as employees of Durano
& Co. proceeded to bulldoze the lands
occupied by various respondents, destroying in
their wake the plantings and improvements
made by the respondents therein. On some
occasions, respondents alleged, these men
fired shots in the air, purportedly acting upon
the instructions of petitioner Ramon Durano III
and/or Ramon Durano, Jr. On at least one
instance, petitioners Ramon Durano III and
Elizabeth Hotchkiss Durano were seen on the
site of the bulldozing operations.
On September 15, 1970, Durano & Co. sold the
disputed property to petitioner Ramon Durano
III, who procured the registration of these lands
in his name under TCT No. T-103 and TCT No. T-
104.
Respondents contended that the display of
force and the known power and prestige of
petitioners and their family restrained them
from directly resisting this wanton depredation
upon their property. During that time, the
mayor of Danao City was Mrs. Beatriz Durano,
wife of Ramon Durano, Sr. and mother of
petitioner Ramon Durano III. Finding no relief
from the local police, who respondents said
merely laughed at them for daring to
complain against the Duranos, they organized
themselves and sent a letter to then President
Ferdinand Marcos reporting dispossession of
their properties and seeking a determination of
the ownership of the land. This notwithstanding,
the bulldozing operations continued until the
City Fiscal was requested by the Department
of Justice to conduct an investigation on the
matter. When, on July 27, 1971, the City Fiscal
announced that he would be unable to
conduct a preliminary investigation,
respondents urged the Department of Justice
to conduct the preliminary investigation. This
was granted, and the investigations which
spanned the period March 1972 to April 1973
led to the conclusion that respondents
complaint was untenable.[4]
In their counterclaim, respondents alleged that
petitioners acts deprived most of them of their
independent source of income and have
made destitutes of some of them. Also,
petitioners have done serious violence to
respondents spirit, as citizens and human
beings, to the extent that one of them had
been widowed by the emotional shock that
the damage and dispossession has
caused.[5] Thus, in addition to the dismissal of
the complaint, respondents demanded actual
damages for the cost of the improvements
they made on the land, together with the
damage arising from the dispossession itself;
moral damages for the anguish they
underwent as a result of the high-handed
display of power by petitioners in depriving
them of their possession and property; as well
as exemplary damages, attorneys fees and
expenses of litigation.
Respondents respective counterclaims ---
referring to the improvements destroyed, their
values, and the approximate areas of the
properties they owned and occupied --- are as
follows:
a) TEOFISTA ALCALA - Tax Declaration No.
00223; .2400 ha.; bulldozed on August, 10,
1970. Improvements destroyed consist of 47
trees, 10 bundles beatilis firewood and 2 sacks
of cassava, all valued at P5,437.00. (Exh. B,
including submarkings)
b) FAUSTINO ALATAN and VALERIANA GARRO -
Tax Declaration No. 30758; .2480 ha.; Tax
Declaration No. 32974; .8944 ha.; Tax
Declaration No. 38908; .8000 ha.; Bulldozed on
September 9, 1970; Improvements destroyed
consist of 682 trees, a cornfield with one cavan
per harvest 3 times a year, valued at
P71,770.00; Bulldozed on March 13, 1971; 753
trees, 1,000 bundles beatilis firewood every
year, valued at P29,100.00; Cut down in the
later part of March, 1971 - 22 trees, 1,000
bundles beatilis firewood every year, 6 cavans
corn harvest per year, valued at P1,940.00 or a
total value of P102,810.00. (Exh. C, including
submarkings)
c) ANDREA MATA DE BATULAN - Tax
Declaration No. 33033; .4259 has.; bulldozed on
September 11, 1970. Improvements destroyed
consist of 512 trees and 15 sacks cassava all
valued at P79,425.00. (Exh. D, including
submarkings)
d) GLICERIO BARRIGA - Tax Declaration No.
32290; .4000 ha.; bulldozed on September 10,
1990. Improvements destroyed consist of 354
trees, cassava field if planted with corn good
for one liter, 30 cavans harvest a year of corn,
and one resthouse, all valued at
P35,500.00. (Exh. E, including submarkings)
e) BEATRIZ CALZADA - Tax Declaration No.
03449; .900 ha.; Bulldozed on June 16,
1971. Improvements destroyed consist of 2,864
trees, 1,600 bundles of beatilis firewood, 12
kerosene cans cassava every year and 48
cavans harvest a year of corn all valued at
P34,800.00. (Exh. F, including submarkings)
f) BIENVENIDO CASTRO - Tax Declaration No.
04883; .6000 ha.; bulldozed on September 10,
1970. Improvements destroyed consist of 170
trees, 10 sacks cassava every year, 500
bundles beatilis firewood every year, 60
cavans corn harvest per year, all valued at
(5,550.00. (Exh. G, including submarkings)
g) ISMAEL GARRO - Tax Declaration No. 7185; 2
has. Bulldozed in August, 1970. Improvements
destroyed consist of 6 coconut trees valued at
P1,800.00. Bulldozed on February 3, 1971 -
improvements destroyed consist of 607 trees, a
corn field of 5 cavans produce per harvest
thrice a year, all valued at P67,890.00. (Exh. H,
including submarkings)
h) JULIAN GARRO - Tax Declaration No. 28653;
1 ha.; Bulldozed in the latter week of August,
1970. Improvements destroyed consist of 365
trees, 1 bamboo grove, 1 tisa, 1,000 bundles of
beatilis firewood, 24 cavans harvest a year of
corn, all valued at P46,060.00.(Exh. I, including
submarkings)
i) PRIMITIVA GARRO - Tax Declaration No.
28651; .3000 ha.; Bulldozed on September 7,
1970. Improvements destroyed consist of 183
trees, 10 pineapples, a cassava field, area if
planted with corn good for liter, sweet potato,
area if planted with corn good for liter all
valued at P10,410.00. (Exh. J, including
submarkings)
j) TEOTIMO GONZALES - Tax Declaration No.
38159; .8644 ha.; Tax Declaration No. 38158;
.8000 ha.; Bulldozed on September 10, 1970 -
improvements destroyed consist of 460 trees
valued at P20,000.00. Bulldozed on December
10, 1970 - Improvements destroyed consist of
254 trees valued at P65,600.00 - or a total value
of P85,600.00. (Exh. K, including submarkings)
k) LEODEGARIO GONZALES - Tax Declaration
No. 36884; Bulldozed on February 24,
1971. Improvements destroyed consist of 946
trees, 40 ubi, 15 cavans harvest a year of corn,
all valued at P72,270.00. (Exh. L, including
submarkings)
l) FILEMON LAVADOR - Tax Declaration No.
14036; 1 ha.; Bulldozed on February 5,
1971. Improvements destroyed consist of 675
trees and 9 cavans harvest a year of corn all
valued at P63,935.00. (Exh. M, including
submarkings)
m) CANDELARIO LUMANTAO - Tax Declaration
No. 18791; 1.660 ha. Bulldozed on the second
week of August, 1970 - Improvements
destroyed consist of 1,377 trees, a cornfield
with 3 cavans per harvest thrice a year and a
copra dryer all valued at P193,960.00.Bulldozed
on February 26, 1971 - Improvements
destroyed consist of 44 trees, one pig pen and
the fence thereof and the chicken roost all
valued at P12,650.00. Tax Declaration No.
33159; 3.500 has. Bulldozed in the last week of
March, 1971 - Improvements destroyed consist
of 13 trees valued at P1,550.00. Bulldozed in the
latter part consist of 6 Bamboo groves and Ipil-
Ipil trees valued at P700.00 with total value of
P208,860.00. (Exh. N, including submarkings)
n) AURELIA MATA - Tax Declaration No. 38071;
.3333 ha.; Bulldozed sometime in the first
week of March, 1971 - Improvements
destroyed consist of 344 trees and 45 cavans
corn harvest per year valued at
P30,965.00. (Exh. Q, including submarkings)
o) GAVINO QUIMBO - Tax Declaration No.
33231; 2.0978 has.; Tax Declaration No. 24377;
.4960 ha. (.2480 ha. Belonging to your
defendant) Bulldozed on September 12, 1970 -
Improvements destroyed consist of 200
coconut trees and 500 banana fruit trees
valued at P68,500.00. Bulldozed on consist of 59
trees, 20 sacks cassava and 60 cavans harvest
a year of corn valued at P9,660.00 or a total
value of P78,160.00. (Exh. R, including
submarkings)
p) SILVESTRE RAMOS - Tax Declaration No.
24288; 1.5568 has.; Bulldozed on February 23,
1971. - Improvements destroyed consist of 737
trees, a cornfield with 3 cavans per harvest 3
times a year and 50 bundles of beatilis
firewood, all valued at P118,170.00.(Exh. S,
including submarkings)
q) MARCELINO GONZALES - Tax Declaration
No. 34057; .4049 ha. Bulldozed on March 20,
1972 - Improvements destroyed consist of 5
coconut trees and 9 cavans harvest a year of
corn valued at P1,860.00. Bulldozed on July 4,
1972 - destroying 19 coconut trees valued at
P5,700.00 or a total value of P7,560.00. (Exh. U,
including submarkings)
r) JUSTINO TITO -Tax Declaration No. 38072;
.2000 has.; Bulldozed on February 25, 1971 -
Improvements destroyed consist of 338 trees
and 5 kamongay all valued at P29,650.00. (Exh.
T, including submarkings)
s) EMIGDIO BING SING UY and ANGELES
SEPULVEDA UY - Transfer Certificate of Title No.
T-35 (Register of Deeds of Danao City);
140.4395 has.; Area bulldozed- 20.000
has. Bulldozed on August 5, 6 and 7, 1970 -
destroying 565 coconut trees, 2-1/2 yrs. old,
65,422 banana groves with 3,600 mango trees,
3 years old, grafted and about to bear fruit
valued at P212,260.00. Bulldozed on November
24, 1970 and on February 16, 1971 - destroying
8,520 madri-cacao trees and 24 cylindrical
cement posts boundaries valued at
P18,540.00. Bulldozed on November 24, 1970 -
destroying 90 coconut trees, 3 years old
cornfield at 40 cavans per harvest and at 3
harvests a year (120 cavans) valued at
P31,800.00. Bulldozed on February 16, 1971 -
destroying 25,727 trees and sugarcane field
value P856,725.00 or a total value of
P1,123,825.00. (Exh. V, including submarkings)
t) SALVADOR DAYDAY - Tax Declaration No.
(unnumbered) dated September 14, 1967;
4.000 has. Bulldozed on May 6, 1971 -
destroying 576 trees, 9 cavans yearly of corn,
30 kerosene cans of cassava yearly valued at
P4,795.00. Bulldozed from March 26, 1973 to
the first week of April, 1973 - destroying 108
trees and cornland, 6 cavans harvest per year
valued at P53,900.00 or a total value of
P58,695.00. (Exh. A, including submarkings)
u) VENANCIA REPASO - Tax Declaration No.
18867; 1.1667 has. Bulldozed on April 15, 1971 -
Improvements destroyed were 775 trees, 500
abaca, about to be reaped, and being
reaped 3 times a year 2 bamboo groves all
valued at P47,700.00. (Exh. O,
including submarkings)
v) HERMOGENES TITO - Tax Declaration No.
38009; over one (1) ha. Bulldozed in the latter
part of September, 1970 - destroying 1 coconut
tree, 18 sacks of corn per year valued at
P1,020.00. Bulldozed on March 15, 1973 -
destroying 2 coconut trees, 5 buri trees, 1
bamboo grove valued at P1,400.00. Bulldozed
on March 26, 1974 - destroying 3 coconut trees
valued at P1,500.00 with a total value of
P3,920.00. (Exh. P, including submarkings).[6]
On April 22, 1975, petitioners moved to dismiss
their complaint with the trial court. The trial
court granted the motion to dismiss, without
prejudice to respondents right to proceed with
their counterclaim.
Hence, the trial proceeded only on the
counterclaim.
On September 23, 1980, this Court issued a
resolution in Administrative Matter No. 6290
changing the venue of trial in Civil Case No.
DC-56 to the Regional Trial Court of Cebu
City. The change was mainly in line with the
transfer of Judge Bernardo Ll. Salas, who
presided over the case in Danao City, to Cebu
City.
The parties agreed to dispense with pre-trial,
and for the evidence-in-chief to be submitted
by way of affidavits together with a schedule
of documentary exhibits, subject to additional
direct examination, cross examination and
presentation of rebuttal evidence by the
parties.
The trial court and later, the Court of Appeals,
took note of the following portions of affidavits
submitted by petitioners:
xxx City Fiscal Jesus Navarro said that in
August, 1967, he issued subpoenas to several
tenants in Cahumayhumayan upon
representation by Cepoc, the latter protesting
failure by the tenants to continue giving
Cepoc its share of the corn produce. He
learned from the tenants that the reason why
they were reluctant and as a matter of fact
some defaulted in giving Cepoc its share, was
that Uy Bing Sepulveda made similar demands
to them for his share in the produce, and that
they did not know to whom the shares should
be given.
xxx xxx xxx
Jesus Capitan said that he is familiar with the
place Cahumayhumayan and that the
properties in said locality were acquired by
Durano and Company and Ramon Durano III,
but formerly owned by Cepoc.
When the properties of Ramonito Durano were
cultivated, the owners of the plants requested
him that they be given something for their
effort even if the properties do not belong to
them but to Cepoc, and that he was directed
by Ramonito Durano to do a listing of the
improvements as well as the owners. After he
made a listing, this was given to Ramonito who
directed Benedicto Ramos to do payment.
When he was preparing the list, they did not
object to the removal of the plants because
the counterclaimants understood that the
lands did not belong to them, but later and
because of politics a complaint was filed, and
finally that when he was doing the listing, the
improvements were even pointed to him by
the counterclaimants themselves. (Exh. 48,
Records, p. 385-386).
xxx xxx xxx
Ruperto Rom said that he had an occasion to
work at Cepoc from 1947 to 1950 together with
Benedicto and Tomas Ramos, the latter
a capataz of the Durano Sugar Mills. Owner of
the properties, subject of the complaint, was
Cepoc.
The persons who eventually tilled the Cepoc
properties were merely allowed to do
cultivation if planted to corn, and for Cepoc to
be given a share, which condition was
complied with by all including the
counterclaimants. He even possessed one
parcel which he planted to coconuts, jackfruit
trees and other plants. (Exh. 51, Records, pp.
383-384)
xxx xxx xxx
Co-defendant Ramon Durano III said that he
agreed with the dismissal of the complaint
because his fathers wish was reconciliation
with the defendants following the death of
Pedro Sepulveda, father of Angeles Sepulveda
Uy, but inspite of the dismissal of the complaint,
the defendants still prosecuted their
counterclaim.
The disputed properties were owned formerly
by Cepoc, and then of the latter selling the
properties to Durano and Company and then
by the latter to him as of September 15,
1970. As a matter of fact, TCT T-103 and T-104
were issued to him and that from that time on,
he paid the taxes.
At the time he purchased the properties, they
were not occupied by the defendants. The first
time he learned about the alleged bulldozing
of the improvements was when the
defendants filed the complaint of land
grabbing against their family with the Office of
the President and the attendant
publicity. Precisely his family filed the complaint
against them. (Exh. 57, Records, pp. 723-730)
xxx xxx xxx
Congressman Ramon Durano said he is familiar
with the properties, being owned originally by
Cepoc. Thereafter they were purchased by
Durano and Company and then sold to
Ramon Durano III, the latter now the owner. He
filed a motion to dismiss the case against
Angeles Sepulveda et al. as a gesture of
respect to the deceased Pedro Sepulveda,
father of Angeles Sepulveda, and as a
Christian, said Pedro Sepulveda being the
former Mayor of Danao, if only to stop all
misunderstanding between their families.
xxx xxx xxx
He was the one who did the discovery of the
properties that belonged to Cepoc, which
happened when he was doing mining work
near Cahumayhumayan and without his
knowledge extended his operation within the
area belonging to Cepoc. After Cepoc
learned of the substantial coal deposits, the
property was claimed by Cepoc and then a
survey was made to relocate the muniments.
Eventually he desisted doing mining work and
limited himself within the confines of his
property that was adjacent to Cepocs
property. All the claimants except Sepulveda
Uy were occupants of the Cepoc
properties. Durano and Company purchased
the property adjacent to Cepoc, developed
the area, mined the coal and had the
surveyed area planted with sugar cane, and
finally the notices to the occupants because of
their intention to plant sugar cane and other
crops (T.S. N. December 4, 1985, pp. 31-32, 44-
54, RTC Decision, pp. 16-19, Records, pp. 842-
845).[7]
Petitioners also presented Court Commissioner,
Engineer Leonidas Gicain, who was directed
by the trial court to conduct a field survey of
the disputed property. Gicain conducted
surveys on the areas subjected to bulldozing,
including those outside the Cepoc
properties. The survey --- which was based on
TCT No. T-103 and TCT No. T-104, titled in the
name of Ramon Durano III, and TCT No. 35, in
the name of respondent Emigdio Bing Sing Uy -
-- was paid for by petitioners.[8]
Respondents, for their part, also presented their
affidavits and supporting documentary
evidence, including tax declarations covering
such portions of the property as they formerly
inhabited and cultivated.
On March 8, 1990, the RTC issued a decision
upholding respondents counterclaim. The
dispositive portion of said decision reads:
THE FOREGOING CONSIDERED, judgment is
hereby rendered in favor of the counter
claimants and against the plaintiffs directing
the latter to pay the former:
a) With respect to Salvador Dayday P 14,400.00
b) With respect to Teofista Alcala 4,400.00
c) With respect to Faustino Alatan 118,400.00
d) With respect to Andrea Mata de
Batulan 115,050.00
e) With respect to Glicerio Barriga 35,500.00
f) With respect to Beatriz Galzada 70,300.00
g) With respect to Bienvenido Castro 5,000.00
h) With respect to Ismael Garro 66,060.00
i) With respect to Julian Garro 48,600.00
j) With respect to Primitiva Garro 13,000.00
k) With respect to Teotimo Gonzales 63,200.00
l) With respect to Leodegario
Gonzales 85,300.00
m) With respect to Filemon Lavador 70,860.00
n) With respect to Venancia Repaso 101,700.00
o) With respect to Candelario
Lumantao 192,550.00
p) With respect to Hermogenes Tito 1,200.00
q) With respect to Aurelia Mata 28,560.00
r) With respect to Gavino Quimbo 81,500.00
s) With respect to Silvestre Ramos 101,700.00
t) With respect to Justino Tito 27,800.00
u) With respect to Marcelino Gonzales 2,360.00
v) With respect to Angeles
Supelveda 902,840.00
P120,000.00 should be the figure in terms of
litigation expenses and a separate amount
of P100,000.00 as attorneys fees.
Return of the properties to Venancia Repaso,
Hermogenes Tito and Marcelino Gonzales is
hereby directed.
With respect to counter claimant Angeles
Sepulveda Uy, return of the property to her
should be with respect to the areas outside of
the Cepoc property, as mentioned in the
sketch, Exhibit 56-A.
Finally with costs against the plaintiffs.
SO ORDERED. [9]
The RTC found that the case preponderated in
favor of respondents, who all possessed their
respective portions of the property covered by
TCT Nos. T-103 and T-104 thinking that they
were the absolute owners thereof. A number of
these respondents alleged that they inherited
these properties from their parents, who in turn
inherited them from their own parents. Some
others came into the properties by purchase
from the former occupants thereof. They and
their predecessors were responsible for the
plantings and improvements on the
property. They were the ones who sought for
the properties to be tax-declared in their
respective names, and they continually paid
the taxes thereto. Respondents maintained
that they were unaware of anyone claiming
adverse possession or ownership of these lands
until the bulldozing operations in 1970.
As for Venancia Repaso, Hermogenes Tito and
Marcelino Gonzales, the Court found that the
properties they laid claim to were not part of
the land that was purchased by Durano & Co.
from Cepoc. Thus, it found the bulldozing of
these lands by petitioners totally unjustified and
ordered not only the total reimbursement of
useful and necessary expenses on the
properties but also the return of these
properties to Repaso, Tito and Gonzales,
respectively. As for all the other respondents,
the RTC found their possession of the properties
to be in the concept of owner and adjudged
them to be builders in good faith. Considering
that petitioners in the instant case
appropriated the improvements on the areas
overran by the bulldozers, the RTC ruled that
(t)he right of retention to the improvements
necessarily should be secured (in favor of
respondents) until reimbursed not only of the
necessary but also useful expenses.[10]
On the matter of litigation expenses and
attorneys fees, the RTC observed that the trial
period alone consisted of forty (40) trial dates
spread over a period of sixteen (16) years. At
the time, respondents were represented by
counsel based in Manila, and the trial court
took into consideration the travel,
accommodation and miscellaneous expenses
of their lawyer that respondents must have
shouldered during the trial of the case.
Dissatisfied, petitioners appealed the RTC
decision to the Court of Appeals, which, in
turn, affirmed the said decision and ordered
the return of the property to all the
respondents-claimants, in effect modifying the
RTC decision which allowed return only in favor
of respondents Repaso, Tito and Gonzales.
In its decision, the Court of Appeals upheld the
factual findings and conclusions of the RTC,
including the awards for actual damages,
attorneys fees and litigation expenses, and
found additionally that the issuance of TCT
Nos. T-103 and T-104 in the name of Ramon
Durano III was attended by fraud. Evaluating
the evidence before it, the Court of Appeals
observed that the alleged reconstituted titles
of Cepoc over the property, namely, TCT No.
(RT-38) (T-14457) -4 and TCT No. (RT-39) (T-
14456) -3 (Exhibits 19 and 20 of this case),
which were claimed to be the derivative titles
of TCT Nos. T-103 and T-104, were not submitted
in evidence before the RTC. Thus, in an Order
dated June 15, 1988, the RTC ordered Exhibits
19 and 20 deleted from petitioners Offer of
Exhibits. The Court of Appeals further noted
that even among the exhibits subsequently
produced by petitioners before the RTC, said
Exhibits 19 and 20 were still not
submitted.[11] Moreover, Cepoc had no
registered title over the disputed property as
indicated in TCT Nos. T-103 and T-104. Thus:
TRANSFER CERTIFICATE OF TITLE
NO. - 103 -
xxx xxx
IT IS FURTHER CERTIFIED that said land was
originally registered on the N.A. day of N.A., in
the year nineteen hundred and N.A. in
Registration Book No. N.A. page N.A. of the
Office of the Register of Deeds of N.A., as
Original Certificate of Title No. N.A., pursuant to
a N.A. patent granted by the President of the
Philippines, on the N.A. day of N.A., in the year
nineteen hundred and N.A., under Act
No. N.A.
This certificate is a transfer
from Transfer Certificate of Title No. (RT-39) (T-
14456) -3 which is cancelled by virtue hereof in
so far as the above described land is
concerned.
xxx xxx
TRANSFER CERTIFICATE OF TITLE
NO. T - 104 -
xxx xxx
IT IS FURTHER CERTIFIED that said land was
originally registered on the N.A. day of N.A., in
the year nineteen hundred and N.A. in
Registration Book No. N.A. page N.A. of the
Office of the Register of Deeds of N.A., as
Original Certificate of Title No. N.A., pursuant to
a N.A. patent granted by the President of the
Philippines, on the N.A. day of N.A., in the year
nineteen hundred and N.A., under Act
No. N.A.
This certificate is a transfer
from Transfer Certificate of Title No. (RT-38) (T-
14457) -4 which is cancelled by virtue hereof in
so far as the above described land is
concerned.[12]
From the foregoing, the Court of Appeals
concluded that the issuance of the TCT Nos. T-
103 and T-104 in favor of petitioner Ramon
Durano III was attended by fraud; hence,
petitioners could not invoke the principle of
indefeasibility of title. Additionally, the Court of
Appeals found that the alleged Deed of
Absolute Sale, undated, between Cepoc
Industries, Inc. and Durano & Co. was not
notarized and thus, unregistrable.
The Court of Appeals went on to state that
while, on the one hand, no valid issuance of
title may be imputed in favor of petitioners
from the private Deed of Sale and the alleged
reconstituted titles of Cepoc that were not
presented in evidence, respondents, in
contrast --- who although admittedly had no
registered titles in their names --- were able to
demonstrate possession that was public,
continuous and adverse --- or possession in the
concept of owner, and which was much prior
(one or two generations back for many of
respondents) to the claim of ownership of
petitioners.
Thus, the Court of Appeals ordered the return
of the properties covered by TCT Nos. T-103
and T-104 to all respondents who made
respective claims thereto. Corollarily, it
declared that petitioners were possessors in
bad faith, and were not entitled to
reimbursement for useful expenses incurred in
the conversion of the property into sugarcane
lands. It also gave no merit to petitioners
allegation that the actual damages awarded
by the trial court were excessive, or to
petitioners argument that they should not have
been held personally liable for any damages
imputable to Durano & Co.
Following is the dispositive portion of the
decision of the Court of Appeals:
WHEREFORE, the appealed decision of the
lower court in Civil Case No. DC-56 is hereby
AFFIRMED with MODIFICATION ordering the
return of the respective subject properties to all
the defendants-appellees, without indemnity
to the plaintiffs-appellants as regards whatever
improvements made therein by the latter. In all
other respects, said decision in affirmed.
Costs against plaintiffs-appellants.
SO ORDERED.[13]
On October 29, 1998, the Court of Appeals
denied petitioners motion for reconsideration
for lack of merit. Hence, this petition.
Petitioners assign the following errors from the
CA decision:
1. The Court of Appeals erred in granting relief
to the respondents who did not appeal the
decision of the lower court.
2. The Court of Appeals erred in collaterally
attacking the validity of the title of petitioner
Ramon Durano III.
3. The respondents should not have been
adjudged builders in good faith.
4. The petitioners should not be held personally
liable for damages because of the doctrine of
separate corporate personality.
5. It was an error to hold that the respondents
had proved the existence of improvements on
the land by preponderance of evidence, and
in awarding excessive damages therefor.
6. It was error to direct the return of the
properties to respondents Venancia Repaso,
Hermogenes Tito and Marcelino Gonzales.
7. The award of litigation expenses and
attorneys fees was erroneous.
8. The petitioners are not possessors in bad
faith.
On their first assignment of error, petitioners
contend that before the Court of Appeals,
they only questioned that portion of the RTC
decision which directed the return of the
properties to respondents Repaso, Tito and
Gonzales. They argued that the return of the
properties to all the other respondents by the
Court of Appeals was erroneous because it
was not among the errors assigned or argued
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
already become final by operation of law. To
support its argument, petitioners cited the
cases of Madrideo vs. Court of
Appeals[14] and Medida vs. Court of
Appeals[15], which held that whenever an
appeal is taken in a civil case an appellee who
has not himself appealed cannot obtain from
the appellate court any affirmative relief other
than the ones granted in the decision of the
court below.
Rule 51 of the New Rules of Civil Procedure
provides:
Sec. 8. Questions that may be decided. --- No
error which does not affect the jurisdiction over
the subject matter or the validity of the
judgment appealed from or the proceedings
therein will be considered unless stated in the
assignment of errors, or closely related to or
dependent on an assigned error and properly
argued in the brief, save as the court may pass
upon plain errors and clerical errors.
We find untenable petitioners argument that
since no party (whether petitioners or
respondents) appealed for the return of the
properties to respondents other than Repaso,
Tito and Gonzales, that portion of the RTC
decision that awards damages to such other
respondents is final and may no longer be
altered by the Court of Appeals. A reading of
the provisions of Section 8, Rule 51, aforecited,
indicates that the Court of Appeals is not
limited to reviewing only those errors assigned
by appellant, but also those that are closely
related to or dependent on an assigned
error.[16] In other words, the Court of Appeals is
imbued with sufficient discretion to review
matters, not otherwise assigned as errors on
appeal, if it finds that their consideration is
necessary in arriving at a complete and just
resolution of the case. In this case, the Court of
Appeals ordered the return of the properties to
respondents merely as a legal consequence of
the finding that respondents had a better right
of possession than petitioners over the disputed
properties, the former being possessors in the
concept of owner. Thus, it held ---
Plaintiffs-appellants have to return possession
of the subject property, not only to
defendants-appellees Venancia Repaso,
Hermogenes Tito and Marcelino Gonzales but
to all other defendants-appellees herein, by
virtue of the latters priority in time of declaring
the corresponding portions of the subject
properties in their name and/or their
predecessors-in-interest coupled with actual
possession of the same property through their
predecessors-in-interest in the concept of an
owner. Plaintiffs-appellants who had never
produced in court a valid basis by which they
are claiming possession or ownership over the
said property cannot have a better right over
the subject properties than defendants-
appellees.[17]
Moreover, petitioners reliance on
the Madrideo and Medida cases is
misplaced. In the Madrideo case, the
predecessors-in-interest of the Llorente Group
sold the disputed property to the Alcala
Group, who in turn sold the same to the
spouses Maturgo.The RTC adjudged the
spouses Maturgo purchasers in good faith,
such that they could retain their title to the
property, but held that the Lllorente Group was
unlawfully divested of its ownership of the
property by the Alcala Group. The Alcala
Group appealed this decision to the Court of
Appeals, who denied the appeal and ordered
the reinstatement in the records of the Registry
of Deeds of the Original Certificates of Title of
the predecessors-in-interest of the Llorente
Group. In setting aside the decision of the
Court of Appeals, this Court held that no relief
may be afforded in favor of the Llorente Group
to the prejudice of the spouses Maturgo, who -
-- the Court carefully emphasized --- were third
parties to the appeal, being neither appellants
nor appellees before the Court of Appeals,
and whose title to the disputed property was
confirmed by the RTC. The application of the
ruling in Madrideo to the instant case bears no
justification because it is clear that petitioners,
in appealing the RTC decision, impleaded all
the herein respondents.
Meanwhile, in the Medida case, petitioners
(who were the appellees before the Court of
Appeals) sought the reversal of a finding of the
RTC before the Supreme Court. The Court
explained that since petitioners failed to
appeal from the RTC decision, they --- as
appellees before the Court of Appeals ---
could only argue for the purpose of sustaining
the judgment in their favor, and could not ask
for any affirmative relief other than that
granted by the court below. The factual milieu
in Medida is different from that of the instant
case, where the return of the properties to
respondents was not an affirmative relief
sought by respondents but an independent
determination of the Court of Appeals
proceeding from its findings that respondents
were long-standing possessors in the concept
of owner while petitioners were builders in bad
faith. Certainly, under such circumstances, the
Court of Appeals is not precluded from
modifying the decision of the RTC in order to
accord complete relief to respondents.
Moving now to the other errors assigned in the
petition, the return of the properties to
respondents Repaso, Tito and Gonzales was
premised upon the factual finding that these
lands were outside the properties claimed by
petitioners under TCT Nos. T-103 and T-
104. Such factual finding of the RTC, sustained
by the Court of Appeals, is now final and
binding upon this Court.
In respect of the properties supposedly
covered by TCT Nos. T-103 and T-104, the Court
of Appeals basically affirmed the findings of
the RTC that respondents have shown prior
and actual possession thereof in the concept
of owner, whereas petitioners failed to
substantiate a valid and legitimate acquisition
of the property --- considering that the alleged
titles of Cepoc from which TCT Nos. T-103 and
T-104 were supposed to have derived title were
not produced, and the deed of sale between
Cepoc and Durano & Co. was unregistrable.
The records clearly bear out respondents prior
and actual possession; more exactly, the
records indicate that respondents possession
has ripened into ownership by acquisitive
prescription.
Ordinary acquisitive prescription, in the case of
immovable property, requires possession of the
thing in good faith and with just title,[18] for a
period of ten years.[19] A possessor is deemed
to be in good faith when he is not aware of
any flaw in his title or mode of acquisition of
the property.[20] On the other hand, there is just
title when the adverse claimant came into
possession of the property through one of the
modes for acquiring ownership recognized by
law, but the grantor was not the owner or
could not transmit any right.[21] The claimant by
prescription may compute the ten-year period
by tacking his possession to that of his grantor
or predecessor-in-interest.[22]
The evidence shows that respondents
successfully complied with all the requirements
for acquisitive prescription to set in. The
properties were conveyed to respondents by
purchase or inheritance, and in each case the
respondents were in actual, continuous, open
and adverse possession of the properties. They
exercised rights of ownership over the lands,
including the regular payment of taxes and
introduction of plantings and
improvements. They were unaware of anyone
claiming to be the owner of these lands other
than themselves until the notices of demolition
in 1970 --- and at the time each of them had
already completed the ten-year prescriptive
period either by their own possession or by
obtaining from the possession of their
predecessors-in-interest. Contrary to the
allegation of petitioners that the claims of all
twenty-two (22) respondents were lumped
together and indiscriminately sustained, the
lower courts (especially the RTC) took careful
consideration of the claims individually, taking
note of the respective modes and dates of
acquisition. Whether respondents
predecessors-in-interest in fact had title to
convey is irrelevant under the concept of just
title and for purposes of prescription.
Thus, respondents counterclaim for
reconveyance and damages before the RTC
was premised upon a claim of ownership as
indicated by the following allegations:
(Y)our defendants are owners and occupants
of different parcels of land located in Barrio
Cahumayhumayan, your defendants having
occupied these parcels of land for various
periods by themselves or through their
predecessors-in-interest, some for over fifty
years, and some with titles issued under the
Land Registration Act; xxxxx [23]
Respondents claim of ownership by acquisitive
prescription (in respect of the properties
covered by TCT Nos. T-103 and T-104) having
been duly alleged and proven, the Court
deems it only proper that such claim be
categorically upheld. Thus, the decision of the
Court of Appeals insofar as it merely declares
those respondents possessors in the concept of
owner is modified to reflect the evidence on
record which indicates that such possession
had been converted to ownership by ordinary
prescription.
Turning now to petitioners claim to ownership
and title, it is uncontested that their claim
hinges largely on TCT Nos. T-103 and T-104,
issued in the name of petitioner Ramon Durano
III. However, the validity of these certificates of
title was put to serious doubt by the following:
(1) the certificates reveal the lack of registered
title of Cepoc to the properties;[24] (2) the
alleged reconstituted titles of Cepoc were not
produced in evidence; and (3) the deed of
sale between Cepoc and Durano & Co. was
unnotarized and thus, unregistrable.
It is true that fraud in the issuance of a
certificate of title may be raised only in an
action expressly instituted for that
purpose,[25]and not collaterally as in the instant
case which is an action for reconveyance and
damages. While we cannot sustain the Court
of Appeals finding of fraud because of this
jurisdictional impediment, we observe that the
above-enumerated circumstances indicate
none too clearly the weakness of petitioners
evidence on their claim of ownership. For
instance, the non-production of the alleged
reconstituted titles of Cepoc despite demand
therefor gives rise to a presumption
(unrebutted by petitioners) that such
evidence, if produced, would be adverse to
petitioners.[26] Also, the unregistrability of the
deed of sale is a serious defect that should
affect the validity of the certificates of
title. Notarization of the deed of sale is essential
to its registrability,[27] and the action of the
Register of Deeds in allowing the registration of
the unacknowledged deed of sale was
unauthorized and did not render validity to the
registration of the document.[28]
Furthermore, a purchaser of a parcel of land
cannot close his eyes to facts which should put
a reasonable man upon his guard, such as
when the property subject of the purchase is in
the possession of persons other than the
seller.[29] A buyer who could not have failed to
know or discover that the land sold to him was
in the adverse possession of another is a buyer
in bad faith.[30] In the herein case, respondents
were in open possession and occupancy of
the properties when Durano & Co. supposedly
purchased the same from Cepoc. Petitioners
made no attempt to investigate the nature of
respondents possession before they ordered
demolition in August 1970.
In the same manner, the purchase of the
property by petitioner Ramon Durano III from
Durano & Co. could not be said to have been
in good faith. It is not disputed that Durano III
acquired the property with full knowledge of
respondents occupancy thereon.There even
appears to be undue haste in the conveyance
of the property to Durano III, as the bulldozing
operations by Durano & Co. were still
underway when the deed of sale to Durano III
was executed on September 15, 1970. There is
not even an indication that Durano & Co.
attempted to transfer registration of the
property in its name before it conveyed the
same to Durano III.
In the light of these circumstances, petitioners
could not justifiably invoke the defense of
indefeasibility of title to defeat respondents
claim of ownership by prescription. The rule on
indefeasibility of title, i.e., that Torrens titles can
be attacked for fraud only within one year
from the date of issuance of the decree of
registration, does not altogether deprive an
aggrieved party of a remedy at law. As
clarified by the Court in Javier vs. Court of
Appeals[31] ---
The decree (of registration) becomes
incontrovertible and can no longer be
reviewed after one (1) year from the date of
the decree so that the only remedy of the
landowner whose property has been
wrongfully or erroneously registered in anothers
name is to bring an ordinary action in court for
reconveyance, which is an action in
personam and is always available as long as
the property has not passed to an innocent
third party for value. If the property has passed
into the hands of an innocent purchaser for
value, the remedy is an action for damages.
In the instant case, respondents action for
reconveyance will prosper, it being clear that
the property, wrongfully registered in the name
of petitioner Durano III, has not passed to an
innocent purchaser for value.
Since petitioners knew fully well the defect in
their titles, they were correctly held by the
Court of Appeals to be builders in bad faith.
The Civil Code provides:
Art. 449. He who builds, plants or sows in bad
faith on the land of another, loses what is built,
planted or sown without right of indemnity.
Art. 450. The owner of the land on which
anything has been built, planted or sown in
bad faith may demand the demolition of the
work, or that the planting or sowing be
removed, in order to replace things in their
former condition at the expense of the person
who built, planted or sowed; or he may
compel the builder or planter to pay the price
of the land, and the sower the proper rent.
Art. 451. In the cases of the two preceding
articles, the landowner is entitled to damages
from the builder, planter or sower.
Based on these provisions, the owner of the
land has three alternative rights: (1) to
appropriate what has been built without any
obligation to pay indemnity therefor, or (2) to
demand that the builder remove what he had
built, or (3) to compel the builder to pay the
value of the land.[32] In any case, the
landowner is entitled to damages under Article
451, abovecited.
We sustain the return of the properties to
respondents and the payment of indemnity as
being in accord with the reliefs under the Civil
Code.
On petitioners fifth assignment of error that
respondents had not proved the existence of
improvements on the property by
preponderance of evidence, and that the
damages awarded by the lower courts were
excessive and not actually proved, the Court
notes that the issue is essentially
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
approval the decision of the RTC which stated:
The counter claimants made a detail of the
improvements that were damaged. Then the
query, how accurate were the listings,
supposedly representing damaged
improvements. The Court notes, some of the
counter claimants improvements in the tax
declarations did not tally with the listings as
mentioned in their individual affidavits. Also,
others did not submit tax declarations
supporting identity of the properties they
possessed. The disparity with respect to the
former and absence of tax declarations with
respect to the latter, should not be a
justification for defeating right of
reimbursement. As a matter of fact, no
controverting evidence was presented by the
plaintiffs that the improvements being
mentioned individually in the affidavits did not
reflect the actual improvements that were
overran by the bulldozing operation. Aside
from that, the City Assessor, or any member of
his staff, were not presented as witnesses. Had
they been presented by the plaintiffs, the least
that can be expected is that they would have
enlightened the Court the extent of their
individual holdings being developed in terms
of existing improvements.This, the plaintiffs
defaulted. It might be true that there were tax
declarations, then presented as supporting
documents by the counter claimants, but then
mentioning improvements but in variance with
the listings in the individual affidavits. This
disparity similarly cannot be accepted as a
basis for the setting aside of the listing of
improvements being adverted to by the
counter claimants in their affidavits. This Court
is not foreclosing the possibility that the tax
declarations on record were either table
computations by the Assessor or his deputy, or
tax declarations whose entries were merely
copied from the old tax declarations during
the period of revision. (RTC Decision, p. 36,
Records, p. 862)[33]
The right of the owner of the land to recover
damages from a builder in bad faith is clearly
provided for in Article 451 of the Civil
Code. Although said Article 451 does not
elaborate on the basis for damages, the Court
perceives that it should reasonably correspond
with the value of the properties lost or
destroyed as a result of the occupation in bad
faith, as well as the fruits (natural, industrial or
civil) from those properties that the owner of
the land reasonably expected to obtain. We
sustain the view of the lower courts that the
disparity between respondents affidavits and
their tax declarations on the amount of
damages claimed should not preclude or
defeat respondents right to damages, which is
guaranteed by Article 451. Moreover, under
Article 2224 of the Civil Code:
Temperate or moderate damages, which are
more than nominal but less than
compensatory damages, may be recovered
when the court finds that some pecuniary loss
has been suffered but its amount cannot, from
the nature of the case, be proved with
certainty.
We also uphold the award of litigation
expenses and attorneys fees, it being clear
that petitioners acts compelled respondents to
litigate and incur expenses to regain rightful
possession and ownership over the disputed
property.[34]
The last issue presented for our resolution is
whether petitioners could justifiably invoke the
doctrine of separate corporate personality to
evade liability for damages. The Court of
Appeals applied the well-recognized principle
of piercing the corporate veil, i.e., the law will
regard the act of the corporation as the act of
its individual stockholders when it is shown that
the corporation was used merely as an alter
ego by those persons in the commission of
fraud or other illegal acts.
The test in determining the applicability of the
doctrine of piercing the veil of corporate
fiction is as follows:
1. Control, not mere majority or complete stock
control, but complete domination, not only of
finances but of policy and business practice in
respect to the transaction attacked so that the
corporate entity as to this transaction had at
the time no separate mind, will or existence of
its own;
2. Such control must have been used by the
defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other
positive legal duty, or dishonest and unjust acts
in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty
must proximately cause the injury or unjust loss
complained of.
The absence of any one of these elements
prevents piercing the corporate veil. In
applying the instrumentality or alter ego
doctrine, the courts are concerned with reality
and not form, with how the corporation
operated and the individual defendants
relationship to that operation.[35]
The question of whether a corporation is a
mere alter ego is purely one of fact.[36] The
Court sees no reason to reverse the finding of
the Court of Appeals. The facts show that
shortly after the purported sale by Cepco to
Durano & Co., the latter sold the property to
petitioner Ramon Durano III, who immediately
procured the registration of the property in his
name. Obviously, Durano & Co. was used by
petitioners merely as an instrumentality to
appropriate the disputed property for
themselves.
WHEREFORE, the instant petition is DENIED. The
decision of the Court of Appeals is MODIFIED to
declare respondents with claims to the
properties covered by Transfer Certificate of
Title Nos. T-103 and T-104 owners by acquisitive
prescription to the extent of their respective
claims. In all other respects, the decision of the
Court of Appeals is AFFIRMED. Costs against
petitioners.
SO ORDERED.
[G.R. No. 159121. February 3, 2005]
PAMPLONA PLANTATION COMPANY, INC.
and/or JOSE LUIS BONDOC, petitioners, vs.
RODEL TINGHIL, MARYGLENN SABIHON,
ESTANISLAO BOBON, CARLITO TINGHIL,
BONIFACIO TINGHIL, NOLI TINGHIL, EDGAR
TINGHIL, ERNESTO ESTOMANTE, SALLY TOROY,
BENIGNO TINGHIL JR., ROSE ANN NAPAO,
DIOSDADO TINGHIL, ALBERTO TINGHIL, ANALIE
TINGHIL, and ANTONIO
ESTOMANTE, respondents.
DECISION
PANGANIBAN, J.:
To protect the rights of labor, two corporations
with identical directors, management, office
and payroll should be treated as one entity
only. A suit by the employees against one
corporation should be deemed as a suit
against the other. Also, the rights and claims of
workers should not be prejudiced by the acts
of the employer that tend to confuse them
about its corporate identity. The corporate
fiction must yield to truth and justice.
The Case
Before us is a Petition for Review[1] under Rule
45 of the Rules of Court, seeking to annul the
January 31, 2003 Decision[2] and the June 17,
2003 Resolution[3] of the Court of Appeals (CA)
in CA-GR SP No. 62813. The assailed Decision
disposed as follows:
WHEREFORE, in view of the foregoing, the
petition is GRANTED. The assailed decision of
public respondent NLRC dated 19 July 2000
[is] REVERSED and SET ASIDE and a new one
entered DIRECTING private respondents to
reinstate petitioners, except Rufino Bacubac,
Felix Torres and Antonio Canolas, to their
former positions without loss of seniority rights
plus payment of full backwages. However, if
reinstatement is no longer feasible, a one-
month salary for every year of service shall be
paid the petitioners as ordered by the Labor
Arbiter in his decision dated 31 August 1998
plus payment of full backwages computed
from date of illegal dismissal to the finality of
this decision.[4]
The Decision[5] of the National Labor Relations
Commission (NLRC),[6] reversed by the CA,
disposed as follows:
WHEREFORE, premises considered, the decision
appealed from is hereby REVERSED, and
another one entered DISMISSING the
complaint.[7]
The June 17, 2003 Resolution denied petitioners
Motion for Reconsideration.
The Facts
The CA summarized the antecedents as
follows:
Sometime in 1993, [Petitioner] Pamplona
Plantations Company, Inc. (company for
brevity) was organized for the purpose of
taking over the operations of the coconut and
sugar plantation of Hacienda Pamplona
located in Pamplona, Negros Oriental. It
appears that Hacienda Pamplona was
formerly owned by a certain Mr. Bower who
had in his employ several agricultural workers.
When the company took over the operation of
Hacienda Pamplona in 1993, it did not absorb
all the workers of Hacienda Pamplona. Some,
however, were hired by the company during
harvest season as coconut hookers or sakador,
coconut filers, coconut haulers, coconut
scoopers or lugiteros, and charcoal makers.
Sometime in 1995, Pamplona Plantation Leisure
Corporation was established for the purpose of
engaging in the business of operating tourist
resorts, hotels, and inns, with complementary
facilities, such as restaurants, bars, boutiques,
service shops, entertainment, golf courses,
tennis courts, and other land and aquatic
sports and leisure facilities.
On 15 December 1996, the Pamplona
Plantation Labor Independent Union (PAPLIU)
conducted an organizational meeting wherein
several [respondents] who are either union
members or officers participated in said
meeting.
Upon learning that some of the [respondents]
attended the said meeting, [Petitioner] Jose
Luis Bondoc, manager of the company, did
not allow [respondents] to work anymore in the
plantation.
Thereafter, on various dates, [respondents]
filed their respective complaints with the NLRC,
Sub-Regional Arbitration Branch No. VII,
Dumaguete City against [petitioners] for unfair
labor practice, illegal dismissal, underpayment,
overtime pay, premium pay for rest day and
holidays, service incentive leave pay,
damages, attorneys fees and 13th month pay.
On 09 October 1997, [respondent] Carlito
Tinghil amended his complaint to implead
Pamplona Plantation Leisure Corporation x x x.
On 31 August 1998, Labor Arbiter Jose G.
Gutierrez rendered a decision finding
[respondents], except Rufino Bacubac,
Antonio Caolas and Felix Torres who were
complainants in another case, to be entitled to
separation pay.
xxxxxxxxx
[Petitioners] appealed the Labor Arbiters
decision to [the] NLRC. In the assailed decision
dated 19 July 2000, the NLRCs Fourth Division
reversed the Labor Arbiter, ruling that
[respondents], except Carlito Tinghil, failed to
implead Pamplona Plantation Leisure
Corporation, an indispensable party and that
there exist no employer-employee relation
between the parties.
xxxxxxxxx
[Respondents] filed a motion for
reconsideration which was denied by [the]
NLRC in a Resolution dated 06 December
2000.[8]
Respondents elevated the case to the CA via
a Petition for Certiorari under Rule 65 of the
Rules of Court.
Ruling of the Court of Appeals
Guided by the fourfold test for determining the
existence of an employer-employee
relationship, the CA held that respondents
were employees of petitioner-company.
Finding there was a power to hire, the
appellate court considered the admission of
petitioners in their Comment that they had
hired respondents as coconut filers, coconut
scoopers, charcoal makers, or as
pieceworkers. The fact that respondents were
paid by piecework did not mean that they
were not employees of the company. Further,
the CA ruled that petitioners necessarily
exercised control over the work they
performed, since the latter were working within
the premises of the plantation. According to
the CA, the mere existence -- not necessarily
the actual exercise -- of the right to control the
manner of doing work sufficed to meet the
fourth element of an employer-employee
relation.
The appellate court also held that respondents
were regular employees, because the tasks
they performed were necessary and
indispensable to the operation of the
company. Since there was no compliance with
the twin requirements of a valid and/or
authorized cause and of procedural due
process, their dismissal was illegal.
Hence, this Petition.[9]
Issues
In their Memorandum, petitioners submit the
following issues for our consideration:
1. Whether or not the finding of the Court of
Appeals that herein respondents are
employees of Petitioner Pamplona Plantation
Company, Inc. is contrary to the admissions of
the respondents themselves.
2. Whether or not the Court of Appeals has
decided in a way not in accord with law and
jurisprudence, and with grave abuse of
discretion, in not dismissing the respondents
complaint for failure to implead Pamplona
Plantation Leisure Corp., which is an
indispensable party to this case.
3. Whether or not the Court of Appeals has
decided in a way not in accord with law and
jurisprudence, and with grave abuse of
discretion in ordering reinstatement or
payment of separation pay and backwages to
the respondents, considering the lack of
employer-employee relationship between
petitioner and respondents.[10]
The main issue raised is whether the case
should be dismissed for the non-joinder of the
Pamplona Plantation Leisure Corporation. The
other issues will be taken up in the discussion of
the main question.
The Courts Ruling
The Petition lacks merit.
Preliminary Issue:
Factual Matters
Section 1 of Rule 45 of the Rules of Court states
that only questions of law are entertained in
appeals by certiorari to the Supreme Court.
However, jurisprudence has recognized several
exceptions in which factual issues may be
resolved by this Court:[11] (1) the legal
conclusions made by the lower tribunal are
speculative;[12] (2) its inferences are manifestly
mistaken,[13] absurd, or impossible; (3) the lower
court committed grave abuse of discretion; (4)
the judgment is based on a misapprehension
of facts;[14] (5) the findings of fact of the lower
tribunals are conflicting;[15] (6) the CA went
beyond the issues; (7) the CAs findings are
contrary to the admissions of the parties;[16] (8)
the CA manifestly overlooked facts not
disputed which, if considered, would justify a
different conclusion; (9) the findings of fact are
conclusions without citation of the specific
evidence on which they are based; and (10)
when the findings of fact of the CA are
premised on the absence of evidence but
such findings are contradicted by the
evidence on record.[17]
The very same reason that constrained the
appellate court to review the factual findings
of the NLRC impels this Court to take its own
look at the facts. Normally, the Supreme Court
is not a trier of facts.[18] However, since the
findings of the CA and the NLRC on this point
were conflicting, we waded through the
records to find out if there was basis for the
formers reversal of the NLRCs Decision. We shall
discuss our factual findings together with our
review of the main issue.
Main Issue:
Piercing the Corporate Veil
Petitioners contend that the CA should have
dismissed the case for the failure of
respondents (except Carlito Tinghil) to implead
the Pamplona Plantation Leisure Corporation,
an indispensable party, for being the true and
real employer. Allegedly, respondents
admitted in their Affidavits dated February 3,
1998,[19] that they had been employed by the
leisure corporation and/or engaged to
perform activities that pertained to its business.
Further, as the NLRC allegedly noted in their
individual Complaints, respondents specifically
averred that they had worked in the golf
course and performed related jobs in the
recreational facilities of the leisure corporation.
Hence, petitioners claim that, as a sugar and
coconut plantation company separate and
distinct from the Pamplona Plantation Leisure
Corporation, the petitioner-company is not the
real party in interest.
We are not persuaded.
An examination of the facts reveals that, for
both the coconut plantation and the golf
course, there is only one management which
the laborers deal with regarding their
work.[20] A portion of the plantation (also called
Hacienda Pamplona) had actually been
converted into a golf course and other
recreational facilities. The weekly payrolls
issued by petitioner-company bore the name
Pamplona Plantation Co., Inc.[21] It is also a fact
that respondents all received their pay from
the same person, Petitioner Bondoc -- the
managing director of the company. Since the
workers were working for a firm known as
Pamplona Plantation Co., Inc., the reason they
sued their employer through that name was
natural and understandable.
True, the Petitioner Pamplona Plantation Co.,
Inc., and the Pamplona Plantation Leisure
Corporation appear to be separate corporate
entities. But it is settled that this fiction of law
cannot be invoked to further an end
subversive of justice.[22]
The principle requiring the piercing of the
corporate veil mandates courts to see through
the protective shroud that distinguishes one
corporation from a seemingly separate
one.[23] The corporate mask may be removed
and the corporate veil pierced when a
corporation is the mere alter ego of
another.[24] Where badges of fraud exist, where
public convenience is defeated, where a
wrong is sought to be justified thereby, or
where a separate corporate identity is used to
evade financial obligations to employees or to
third parties,[25] the notion of separate legal
entity should be set aside[26] and the factual
truth upheld. When that happens, the
corporate character is not necessarily
abrogated.[27] It continues for other legitimate
objectives. However, it may be pierced in any
of the instances cited in order to promote
substantial justice.
In the present case, the corporations have
basically the same incorporators and directors
and are headed by the same official. Both use
only one office and one payroll and are under
one management. In their individual Affidavits,
respondents allege that they worked under the
supervision and control of Petitioner Bondoc --
the common managing director of both the
petitioner-company and the leisure
corporation. Some of the laborers of the
plantation also work in the golf course.[28] Thus,
the attempt to make the two corporations
appear as two separate entities, insofar as the
workers are concerned, should be viewed as a
devious but obvious means to defeat the ends
of the law. Such a ploy should not be
permitted to cloud the truth and perpetrate an
injustice.
We note that this defense of separate
corporate identity was not raised during the
proceedings before the labor arbiter. The main
argument therein raised by petitioners was
their alleged lack of employer-employee
relationship with, and power of control over,
the means and methods of work of
respondents because of the seasonal nature
of the latters work.[29]
Neither was the issue of non-joinder of
indispensable parties raised in petitioners
appeal before the NLRC.[30] Nevertheless, in its
Decision[31] dated July 19, 2000, the
Commission concluded that the plantation
company and the leisure corporation were
two separate and distinct corporations, and
that the latter was an indispensable party that
should have been impleaded. We quote
below pertinent portions of that Decision:
Respondent posits that it is engaged in
operating and maintaining sugar and coconut
plantation. The positions of complainants could
only be determined through their individual
complaints. Yet all complainants alleged in
their affidavits x x x that they were working at
the golf course. Worthy to note that only
Carlito Tinghil amended his complaint to
include Pamplona Leisure Corporation, which
respondents maintain is a separate
corporation established in 1995. Thus, xxx
Pamplona Plantation Co., Inc. and Pamplona
Leisure Corporation are two separate and
distinct corporations. Except for Carlito Tinghil
the complainants have the wrong party
respondent. Pamplona Leisure Corporation is
an indispensable party without which there
could be no final determination of the case.[32]
Indeed, it was only after this NLRC Decision was
issued that the petitioners harped on the
separate personality of the Pamplona
Plantation Co., Inc., vis--vis the Pamplona
Plantation Leisure Corporation.
As cited above, the NLRC dismissed the
Complaints because of the alleged admission
of respondents in their Affidavits that they had
been working at the golf course. However, it
failed to appreciate the rest of their
averments. Just because they worked at the
golf course did not necessarily mean that they
were not employed to do other tasks,
especially since the golf course was merely a
portion of the coconut plantation. Even
petitioners admitted that respondents had
been hired as coconut filers, coconut scoopers
or charcoal makers.[33] Consequently, NLRCs
conclusion derived from the Affidavits of
respondents stating that they were employees
of the Pamplona Plantation Leisure
Corporation alone was the result of an
improper selective appreciation of the entire
evidence.
Furthermore, we note that, contrary to the
NLRCs findings, some respondents indicated
that their employer was the Pamplona
Plantation Leisure Corporation, while others
said that it was the Pamplona Plantation Co.,
Inc. But in all these Affidavits, both the leisure
corporation and petitioner-company were
identified or described as entities engaged in
the development and operation of sugar and
coconut plantations, as well as recreational
facilities such as a golf course. These
allegations reveal that petitioner successfully
confused the workers as to who their true and
real employer was. All things considered, their
faulty belief that the plantation company and
the leisure corporation were one and the same
can be attributed solely to petitioners. It would
certainly be unjust to prejudice the claims of
the workers because of the misleading actions
of their employer.
Non-Joinder of Parties
Granting for the sake of argument that the
Pamplona Plantation Leisure Corporation is an
indispensable party that should be impleaded,
NLRCs outright dismissal of the Complaints was
still erroneous.
The non-joinder of indispensable parties is not a
ground for the dismissal of an action.[34] At any
stage of a judicial proceeding and/or at such
times as are just, parties may be added on the
motion of a party or on the initiative of the
tribunal concerned.[35] If the plaintiff refuses to
implead an indispensable party despite the
order of the court, that court may dismiss the
complaint for the plaintiffs failure to comply
with the order. The remedy is to implead the
non-party claimed to be indispensable.[36] In
this case, the NLRC did not require respondents
to implead the Pamplona Plantation Leisure
Corporation as respondent; instead, the
Commission summarily dismissed the
Complaints.
In any event, there is no need to implead the
leisure corporation because, insofar as
respondents are concerned, the leisure
corporation and petitioner-company are one
and the same entity. Salvador v. Court of
Appeals[37] has held that this Court has full
powers, apart from that power and authority
which is inherent, to amend the processes,
pleadings, proceedings and decisions by
substituting as party-plaintiff the real party-in-
interest.
In Alonso v. Villamor,[38] we had the occasion
to state thus:
There is nothing sacred about processes or
pleadings, their forms or contents. Their sole
purpose is to facilitate the application of
justice to the rival claims of contending parties.
They were created, not to hinder and delay,
but to facilitate and promote, the
administration of justice. They do not constitute
the thing itself, which courts are always striving
to secure to litigants. They are designed as the
means best adapted to obtain that thing. In
other words, they are a means to an end.
When they lose the character of the one and
become the other, the administration of justice
is at fault and courts are correspondingly remiss
in the performance of their obvious duty.
The controlling principle in the interpretation of
procedural rules is liberality, so that they may
promote their object and assist the parties in
obtaining just, speedy and inexpensive
determination of every action and
proceeding.[39] When the rules are applied to
labor cases, this liberal interpretation must be
upheld with even greater vigor.[40] Without in
any way depriving the employer of its legal
rights, the thrust of statutes and rules governing
labor cases has been to benefit workers and
avoid subjecting them to great delays and
hardships. This intent holds especially in this
case, in which the plaintiffs are poor laborers.
Employer-Employee Relationship
Petitioners insist that respondents are not their
employees, because the former exercised no
control over the latters work hours and method
of performing tasks. Thus, petitioners contend
that under the control test, the workers were
independent contractors.
We disagree. As shown by the evidence on
record, petitioners hired respondents, who
performed tasks assigned by their respective
officers-in-charge, who in turn were all under
the direct supervision and control of Petitioner
Bondoc. These allegations are contained in the
workers Affidavits, which were never disputed
by petitioners. Also uncontroverted are the
payrolls bearing the name of the plantation
company and signed by Petitioner Bondoc.
Some of these payrolls include the time records
of the employees. These documents prove
that petitioner-company exercised control and
supervision over them.
To operate against the employer, the power of
control need not have been actually
exercised. Proof of the existence of such power
is enough.[41] Certainly, petitioners wielded that
power to hire or dismiss, as well as to check on
the progress and the quality of work of the
laborers.
Jurisprudence provides other equally important
considerations[42] that support the conclusion
that respondents were not independent
contractors. First, they cannot be said to have
carried on an independent business or
occupation.[43] They are not engaged in the
business of filing, scooping and hauling
coconuts and/or operating and maintaining a
plantation and a golf course. Second, they do
not have substantial capital or investment in
the form of tools, equipment, machinery, work
premises, and other implements needed to
perform the job, work or service under their
own account or responsibility.[44] Third, they
have been working exclusively for petitioners
for several years. Fourth, there is no dispute
that petitioners are in the business of growing
coconut trees for commercial purposes. There
is no question, either, that a portion of the
plantation was converted into a golf course
and other recreational facilities. Clearly,
respondents performed usual, regular and
necessary services for petitioners business.
WHEREFORE, the Petition is DENIED, and the
assailed Decision AFFIRMED. Costs against the
petitioners.
SO ORDERED.
[G.R. No. 142435. April 30, 2003]
ESTELITA BURGOS LIPAT and ALFREDO
LIPAT, petitioners, vs. PACIFIC BANKING
CORPORATION, REGISTER OF DEEDS, RTC EX-
OFFICIO SHERIFF OF QUEZON CITY and the Heirs
of EUGENIO D. TRINIDAD, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks the
reversal of the Decision[1] dated October 21,
1999 of the Court of Appeals in CA-G.R. CV No.
41536 which dismissed herein petitioners
appeal from the Decision[2] dated February 10,
1993 of the Regional Trial Court (RTC) of
Quezon City, Branch 84, in Civil Case No. Q-89-
4152. The trial court had dismissed petitioners
complaint for annulment of real estate
mortgage and the extra-judicial foreclosure
thereof. Likewise brought for our review is the
Resolution[3]dated February 23, 2000 of the
Court of Appeals which denied petitioners
motion for reconsideration.
The facts, as culled from records, are as
follows:
Petitioners, the spouses Alfredo Lipat and
Estelita Burgos Lipat, owned Belas Export
Trading (BET), a single proprietorship with
principal office at No. 814 Aurora Boulevard,
Cubao, Quezon City. BET was engaged in the
manufacture of garments for domestic and
foreign consumption. The Lipats also owned
the Mystical Fashions in the United States,
which sells goods imported from the Philippines
through BET. Mrs. Lipat designated her
daughter, Teresita B. Lipat, to manage BET in
the Philippines while she was managing
Mystical Fashions in the United States.
In order to facilitate the convenient operation
of BET, Estelita Lipat executed on December
14, 1978, a special power of attorney
appointing Teresita Lipat as her attorney-in-
fact to obtain loans and other credit
accommodations from respondent Pacific
Banking Corporation (Pacific Bank). She
likewise authorized Teresita to execute
mortgage contracts on properties owned or
co-owned by her as security for the obligations
to be extended by Pacific Bank including any
extension or renewal thereof.
Sometime in April 1979, Teresita, by virtue of the
special power of attorney, was able to secure
for and in behalf of her mother, Mrs. Lipat and
BET, a loan from Pacific Bank amounting
to P583,854.00 to buy fabrics to be
manufactured by BET and exported to Mystical
Fashions in the United States. As security
therefor, the Lipat spouses, as represented by
Teresita, executed a Real Estate Mortgage
over their property located at No. 814 Aurora
Blvd., Cubao, Quezon City. Said property was
likewise made to secure other additional or
new loans, discounting lines, overdrafts and
credit accommodations, of whatever amount,
which the Mortgagor and/or Debtor may
subsequently obtain from the Mortgagee as
well as any renewal or extension by the
Mortgagor and/or Debtor of the whole or part
of said original, additional or new loans,
discounting lines, overdrafts and other credit
accommodations, including interest and
expenses or other obligations of the Mortgagor
and/or Debtor owing to the Mortgagee,
whether directly, or indirectly, principal or
secondary, as appears in the accounts, books
and records of the Mortgagee.[4]
On September 5, 1979, BET was incorporated
into a family corporation named Belas Export
Corporation (BEC) in order to facilitate the
management of the business. BEC was
engaged in the business of manufacturing and
exportation of all kinds of garments of
whatever kind and description[5] and utilized
the same machineries and equipment
previously used by BET. Its incorporators and
directors included the Lipat spouses who
owned a combined 300 shares out of the 420
shares subscribed, Teresita Lipat who owned 20
shares, and other close relatives and friends of
the Lipats.[6] Estelita Lipat was named president
of BEC, while Teresita became the vice-
president and general manager.
Eventually, the loan was later restructured in
the name of BEC and subsequent loans were
obtained by BEC with the corresponding
promissory notes duly executed by Teresita on
behalf of the corporation. A letter of credit was
also opened by Pacific Bank in favor of A. O.
Knitting Manufacturing Co., Inc., upon the
request of BEC after BEC executed the
corresponding trust receipt therefor. Export bills
were also executed in favor of Pacific Bank for
additional finances. These transactions were all
secured by the real estate mortgage over the
Lipats property.
The promissory notes, export bills, and trust
receipt eventually became due and
demandable. Unfortunately, BEC defaulted in
its payments. After receipt of Pacific Banks
demand letters, Estelita Lipat went to the office
of the banks liquidator and asked for
additional time to enable her to personally
settle BECs obligations. The bank acceded to
her request but Estelita failed to fulfill her
promise.
Consequently, the real estate mortgage was
foreclosed and after compliance with the
requirements of the law the mortgaged
property was sold at public auction. On
January 31, 1989, a certificate of sale was
issued to respondent Eugenio D. Trinidad as the
highest bidder.
On November 28, 1989, the spouses Lipat filed
before the Quezon City RTC a complaint for
annulment of the real estate mortgage,
extrajudicial foreclosure and the certificate of
sale issued over the property against Pacific
Bank and Eugenio D. Trinidad.The complaint,
which was docketed as Civil Case No. Q-89-
4152, alleged, among others, that the
promissory notes, trust receipt, and export bills
were all ultra vires acts of Teresita as they were
executed without the requisite board resolution
of the Board of Directors of BEC. The Lipats also
averred that assuming said acts were valid
and binding on BEC, the same were the
corporations sole obligation, it having a
personality distinct and separate from spouses
Lipat. It was likewise pointed out that Teresitas
authority to secure a loan from Pacific Bank
was specifically limited to Mrs. Lipats sole use
and benefit and that the real estate mortgage
was executed to secure the Lipats and
BETs P583,854.00 loan only.
In their respective answers, Pacific Bank and
Trinidad alleged in common that petitioners
Lipat cannot evade payments of the value of
the promissory notes, trust receipt, and export
bills with their property because they and the
BEC are one and the same, the latter being a
family corporation. Respondent Trinidad further
claimed that he was a buyer in good faith and
for value and that petitioners are estopped
from denying BECs existence after holding
themselves out as a corporation.
After trial on the merits, the RTC dismissed the
complaint, thus:
WHEREFORE, this Court holds that in view of the
facts contained in the record, the complaint
filed in this case must be, as is hereby,
dismissed.Plaintiffs however has five (5) months
and seventeen (17) days reckoned from the
finality of this decision within which to exercise
their right of redemption. The writ of injunction
issued is automatically dissolved if no
redemption is effected within that period.
The counterclaims and cross-claim are likewise
dismissed for lack of legal and factual basis.
No costs.
IT IS SO ORDERED.[7]
The trial court ruled that there was convincing
and conclusive evidence proving that BEC
was a family corporation of the Lipats.As such,
it was a mere extension of petitioners
personality and business and a mere alter
ego or business conduit of the Lipats
established for their own benefit. Hence, to
allow petitioners to invoke the theory of
separate corporate personality would sanction
its use as a shield to further an end subversive
of justice.[8] Thus, the trial court pierced the veil
of corporate fiction and held that Belas Export
Corporation and petitioners (Lipats) are one
and the same. Pacific Bank had transacted
business with both BET and BEC on the
supposition that both are one and the
same. Hence, the Lipats were estopped from
disclaiming any obligations on the theory of
separate personality of corporations, which is
contrary to principles of reason and good faith.
The Lipats timely appealed the RTC decision to
the Court of Appeals in CA-G.R. CV No.
41536. Said appeal, however, was dismissed by
the appellate court for lack of merit. The Court
of Appeals found that there was ample
evidence on record to support the application
of the doctrine of piercing the veil of corporate
fiction. In affirming the findings of the RTC, the
appellate court noted that Mrs. Lipat had full
control over the activities of the corporation
and used the same to further her business
interests.[9] In fact, she had benefited from the
loans obtained by the corporation to finance
her business. It also found unnecessary a board
resolution authorizing Teresita Lipat to secure
loans from Pacific Bank on behalf of BEC
because the corporations by-laws allowed
such conduct even without a board
resolution. Finally, the Court of Appeals ruled
that the mortgage property was not only liable
for the original loan of P583,854.00 but likewise
for the value of the promissory notes, trust
receipt, and export bills as the mortgage
contract equally applies to additional or new
loans, discounting lines, overdrafts, and credit
accommodations which petitioners
subsequently obtained from Pacific Bank.
The Lipats then moved for reconsideration, but
this was denied by the appellate court in its
Resolution of February 23, 2000.[10]
Hence, this petition, with petitioners submitting
that the court a quo erred
1) .IN HOLDING THAT THE DOCTRINE OF
PIERCING THE VEIL OF CORPORATE FICTION
APPLIES IN THIS CASE.
2) .IN HOLDING THAT PETITIONERS PROPERTY
CAN BE HELD LIABLE UNDER THE REAL ESTATE
MORTGAGE NOT ONLY FOR THE AMOUNT
OF P583,854.00 BUT ALSO FOR THE FULL VALUE
OF PROMISSORY NOTES, TRUST RECEIPTS AND
EXPORT BILLS OF BELAS EXPORT CORPORATION.
3) .IN HOLDING THAT THE IMPOSITION OF 15%
ATTORNEYS FEES IN THE EXTRA-JUDICIAL
FORECLOSURE IS BEYOND THIS COURTS
JURISDICTION FOR IT IS BEING RAISED FOR THE
FIRST TIME IN THIS APPEAL.
4) .IN HOLDING PETITIONER ALFREDO LIPAT
LIABLE TO PAY THE DISPUTED PROMISSORY
NOTES, THE DOLLAR ACCOMMODATIONS AND
TRUST RECEIPTS DESPITE THE EVIDENT FACT THAT
THEY WERE NOT SIGNED BY HIM AND
THEREFORE ARE NOT VALID OR ARE NOT
BINDING TO HIM.
5) .IN DENYING PETITIONERS MOTION FOR
RECONSIDERATION AND IN HOLDING THAT SAID
MOTION FOR RECONSIDERATION IS AN
UNAUTHORIZED MOTION, A MERE SCRAP OF
PAPER WHICH CAN NEITHER BIND NOR BE OF
ANY CONSEQUENCE TO APPELLANTS.[11]
In sum, the following are the relevant issues for
our resolution:
1. Whether or not the doctrine of piercing the
veil of corporate fiction is applicable in this
case;
2. Whether or not petitioners' property under
the real estate mortgage is liable not only for
the amount of P583,854.00 but also for the
value of the promissory notes, trust receipt, and
export bills subsequently incurred by BEC; and
3. Whether or not petitioners are liable to pay
the 15% attorneys fees stipulated in the deed
of real estate mortgage.
On the first issue, petitioners contend that both
the appellate and trial courts erred in holding
them liable for the obligations incurred by BEC
through the application of the doctrine of
piercing the veil of corporate fiction absent
any clear showing of fraud on their part.
Respondents counter that there is clear and
convincing evidence to show fraud on part of
petitioners given the findings of the trial court,
as affirmed by the Court of Appeals, that BEC
was organized as a business conduit for the
benefit of petitioners.
Petitioners contentions fail to persuade this
Court. A careful reading of the judgment of
the RTC and the resolution of the appellate
court show that in finding petitioners
mortgaged property liable for the obligations
of BEC, both courts below relied upon the alter
ego doctrine or instrumentality rule, rather than
fraud in piercing the veil of corporate
fiction. When the corporation is the mere alter
ego or business conduit of a person, the
separate personality of the corporation may
be disregarded.[12] This is commonly referred to
as the instrumentality rule or the alter
ego doctrine, which the courts have applied in
disregarding the separate juridical personality
of corporations. As held in one case,
Where one corporation is so organized and
controlled and its affairs are conducted so that
it is, in fact, a mere instrumentality or adjunct of
the other, the fiction of the corporate entity of
the instrumentality may be disregarded. The
control necessary to invoke the rule is not
majority or even complete stock control but
such domination of finances, policies and
practices that the controlled corporation has,
so to speak, no separate mind, will or existence
of its own, and is but a conduit for its principal.
xxx[13]
We find that the evidence on record
demolishes, rather than buttresses, petitioners
contention that BET and BEC are separate
business entities. Note that Estelita Lipat
admitted that she and her husband, Alfredo,
were the owners of BET[14] and were two of the
incorporators and majority stockholders of
BEC.[15] It is also undisputed that Estelita Lipat
executed a special power of attorney in favor
of her daughter, Teresita, to obtain loans and
credit lines from Pacific Bank on her
behalf.[16] Incidentally, Teresita was designated
as executive-vice president and general
manager of both BET and BEC,
respectively.[17] We note further that: (1) Estelita
and Alfredo Lipat are the owners and majority
shareholders of BET and BEC,
respectively;[18] (2) both firms were managed
by their daughter, Teresita;[19] (3) both firms
were engaged in the garment business,
supplying products to Mystical Fashion, a U.S.
firm established by Estelita Lipat; (4) both firms
held office in the same building owned by the
Lipats;[20] (5) BEC is a family corporation with
the Lipats as its majority stockholders; (6) the
business operations of the BEC were so merged
with those of Mrs. Lipat such that they were
practically indistinguishable; (7) the corporate
funds were held by Estelita Lipat and the
corporation itself had no visible assets; (8) the
board of directors of BEC was composed of
the Burgos and Lipat family members;[21] (9)
Estelita had full control over the activities of
and decided business matters of the
corporation;[22] and that (10) Estelita Lipat had
benefited from the loans secured from Pacific
Bank to finance her business abroad[23] and
from the export bills secured by BEC for the
account of Mystical Fashion.[24] It could not
have been coincidental that BET and BEC are
so intertwined with each other in terms of
ownership, business purpose, and
management. Apparently, BET and BEC are
one and the same and the latter is a conduit
of and merely succeeded the
former. Petitioners attempt to isolate
themselves from and hide behind the
corporate personality of BEC so as to evade
their liabilities to Pacific Bank is precisely what
the classical doctrine of piercing the veil of
corporate entity seeks to prevent and
remedy. In our view, BEC is a mere
continuation and successor of BET, and
petitioners cannot evade their obligations in
the mortgage contract secured under the
name of BEC on the pretext that it was signed
for the benefit and under the name of BET. We
are thus constrained to rule that the Court of
Appeals did not err when it applied the
instrumentality doctrine in piercing the
corporate veil of BEC.
On the second issue, petitioners contend that
their mortgaged property should not be made
liable for the subsequent credit lines and loans
incurred by BEC because, first, it was not
covered by the mortgage contract of BET
which only covered the loan of P583,854.00
and which allegedly had already been paid;
and, second, it was secured by Teresita Lipat
without any authorization or board resolution
of BEC.
We find petitioners contention untenable. As
found by the Court of Appeals, the mortgaged
property is not limited to answer for the loan
of P583,854.00. Thus:
Finally, the extent to which the Lipats property
can be held liable under the real estate
mortgage is not limited to P583,854.00. It can
be held liable for the value of the promissory
notes, trust receipt and export bills as well. For
the mortgage was executed not only for the
purpose of securing the Belas Export Tradings
original loan of P583,854.00, but also for other
additional or new loans, discounting lines,
overdrafts and credit accommodations, of
whatever amount, which the Mortgagor
and/or Debtor may subsequently obtain from
the mortgagee as well as any renewal or
extension by the Mortgagor and/or Debtor of
the whole or part of said original, additional or
new loans, discounting lines, overdrafts and
other credit accommodations, including
interest and expenses or other obligations of
the Mortgagor and/or Debtor owing to the
Mortgagee, whether directly, or indirectly
principal or secondary, as appears in the
accounts, books and records of the
mortgagee.[25]
As a general rule, findings of fact of the Court
of Appeals are final and conclusive, and
cannot be reviewed on appeal by the
Supreme Court, provided they are borne out
by the record or based on substantial
evidence.[26] As noted earlier, BEC merely
succeeded BET as petitioners alter ego; hence,
petitioners mortgaged property must be held
liable for the subsequent loans and credit lines
of BEC.
Further, petitioners contention that the original
loan had already been paid, hence, the
mortgaged property should not be made
liable to the loans of BEC, is unsupported by
any substantial evidence other than Estelita
Lipats self-serving testimony. Two disputable
presumptions under the rules on evidence
weigh against petitioners, namely: (a) that a
person takes ordinary care of his
concerns;[27] and (b) that things have
happened according to the ordinary course of
nature and the ordinary habits of life.[28] Here, if
the original loan had indeed been paid, then
logically, petitioners would have asked from
Pacific Bank for the required documents
evidencing receipt and payment of the loans
and, as owners of the mortgaged property,
would have immediately asked for the
cancellation of the mortgage in the ordinary
course of things. However, the records are
bereft of any evidence contradicting or
overcoming said disputable presumptions.
Petitioners contend further that the mortgaged
property should not bind the loans and credit
lines obtained by BEC as they were secured
without any proper authorization or board
resolution. They also blame the bank for its
laxity and complacency in not requiring a
board resolution as a requisite for approving
the loans.
Such contentions deserve scant consideration.
Firstly, it could not have been possible for BEC
to release a board resolution since per
admissions by both petitioner Estelita Lipat and
Alice Burgos, petitioners rebuttal witness, no
business or stockholders meetings were
conducted nor were there election of officers
held since its incorporation. In fact, not a single
board resolution was passed by the corporate
board[29] and it was Estelita Lipat and/or
Teresita Lipat who decided business matters.[30]
Secondly, the principle of estoppel precludes
petitioners from denying the validity of the
transactions entered into by Teresita Lipat with
Pacific Bank, who in good faith, relied on the
authority of the former as manager to act on
behalf of petitioner Estelita Lipat and both BET
and BEC. While the power and responsibility to
decide whether the corporation should enter
into a contract that will bind the corporation is
lodged in its board of directors, subject to the
articles of incorporation, by-laws, or relevant
provisions of law, yet, just as a natural person
may authorize another to do certain acts for
and on his behalf, the board of directors may
validly delegate some of its functions and
powers to officers, committees, or agents. The
authority of such individuals to bind the
corporation is generally derived from law,
corporate by-laws, or authorization from the
board, either expressly or impliedly by habit,
custom, or acquiescence in the general
course of business.[31] Apparent authority, is
derived not merely from practice. Its existence
may be ascertained through (1) the general
manner in which the corporation holds out an
officer or agent as having the power to act or,
in other words, the apparent authority to act in
general, with which it clothes him; or (2) the
acquiescence in his acts of a particular nature,
with actual or constructive knowledge thereof,
whether within or beyond the scope of his
ordinary powers.[32]
In this case, Teresita Lipat had dealt with
Pacific Bank on the mortgage contract by
virtue of a special power of attorney executed
by Estelita Lipat. Recall that Teresita Lipat
acted as the manager of both BEC and BET
and had been deciding business matters in the
absence of Estelita Lipat. Further, the export
bills secured by BEC were for the benefit of
Mystical Fashion owned by Estelita
Lipat.[33] Hence, Pacific Bank cannot be
faulted for relying on the same authority
granted to Teresita Lipat by Estelita Lipat by
virtue of a special power of attorney. It is a
familiar doctrine that if a corporation
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
acts; thus, the corporation will, as against
anyone who has in good faith dealt with it
through such agent, be estopped from
denying the agents authority.[34]
We find no necessity to extensively deal with
the liability of Alfredo Lipat for the subsequent
credit lines of BEC. Suffice it to state that
Alfredo Lipat never disputed the validity of the
real estate mortgage of the original loan;
hence, he cannot now dispute the subsequent
loans obtained using the same mortgage
contract since it is, by its very terms, a
continuing mortgage contract.
On the third and final issue, petitioners assail
the decision of the Court of Appeals for not
taking cognizance of the issue on attorneys
fees on the ground that it was raised for the first
time on appeal. We find the conclusion of the
Court of Appeals to be in accord with settled
jurisprudence. Basic is the rule that matters not
raised in the complaint cannot be raised for
the first time on appeal.[35] A close perusal of
the complaint yields no allegations disputing
the attorneys fees imposed under the real
estate mortgage and petitioners cannot now
allege that they have impliedly disputed the
same when they sought the annulment of the
contract.
In sum, we find no reversible error of law
committed by the Court of Appeals in
rendering the decision and resolution herein
assailed by petitioners.
WHEREFORE, the petition is DENIED. The
Decision dated October 21, 1999 and the
Resolution dated February 23, 2000 of the
Court of Appeals in CA-G.R. CV No. 41536 are
AFFIRMED. Costs against petitioners.
SO ORDERED.
FIRST DIVISION
[G.R. No. 112661. May 30, 2001]
SIMEON DE LEON, EFREN ABAD, JAIME ABAD,
JESSIE ABAY-ABAY, ROLANDO ABIOLA,
ALICIO ABISO, CELEDONIO ABSALON,
JEREMIAS ADO, VICENTE ADO, VICENTE
AGGABAO, EFRAIN AGUIRRE,
ALEXANDER ALATA, ERNESTO ALCALDE,
LORENZO ALCOY, ALMARIO ALICIO,
CESAR AMADOR, JOSE AMANTE,
ESTELITO AMBROSIO, VICENTE ANAPI,
ARNEL ANCHETA, ROGELIO ANCHETA,
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
TRIPULCA, ARMANDO TUIBEO, NICANOR
TUMAMAO, EDUARDO TUMBALE, RAMON
TURIRIT, LONGENIO UMACAM,
TOLENTINO UNDAUNDO, DIOLITO
VALENCIA, ERNESTO VARGAS, BILLY
VASQUEZ, TOMAS VELINA, MARCOS DE
VERA, IRENEO VILELA, NICANDRO
VILLAFRANCA, DANNY VILLANUEVA,
LOLITA VITALICO, ALIPIO YGOT, AGOSTO
YROMA, FELIX ZAMBALES, and
GUILLERMO ZIPANGAN, petioners,
vs. NATIONAL LABOR RELATIONS
COMMISSION (NLRC), and FORTUNE
TOBACCO CORPORATION and/or
MAGNUM INTEGRATED SERVICES, INC.
(formerly FORTUNE INTEGRATED
SERVICES, INC.), respondents.
DECISION
PUNO, J.:
This case stemmed from a complaint for
illegal dismissal, unfair labor practice and
refund of cash bond filed by petitioners against
respondents before the Arbitration Branch of
the National Labor Relations Commission
(NLRC). The petition at bar seeks the
annulment of the resolution of the NLRC dated
July 5, 1993 reversing the decision of the Labor
Arbiter finding respondents liable for the
charges, and its resolution dated August 10,
1993 denying petitioners' motion for
reconsideration.
The undisputed facts are as follows:
On August 23, 1980, Fortune Tobacco
Corporation (FTC) and Fortune Integrated
Services, Inc. (FISI) entered into a contract for
security services where the latter undertook to
provide security guards for the protection and
security of the former. The petitioners were
among those engaged as security guards
pursuant to the contract.
On February 1, 1991, the incorporators and
stockholders of FISI sold out lock, stock and
barrel to a group of new stockholders by
executing for the purpose a "Deed of Sale of
Shares of Stock". On the same date, the
Articles of Incorporation of FISI was amended
changing its corporate name to Magnum
Integrated Services, Inc. (MISI). A new by-laws
was likewise adopted and approved by the
Securities and Exchange Commission on June
4, 1993.
On October 15, 1991, FTC terminated the
contract for security services which resulted in
the displacement of some five hundred eighty
two (582) security guards assigned by FISI/MISI
to FTC, including the petitioners in this
case. FTC engaged the services of two (2)
other security agencies, Asian Security Agency
and Ligalig Security Services, whose security
guards were posted on October 15, 1991 to
replace FISI's security guards.
Sometime in October 1991, the Fortune
Tobacco Labor Union, an affiliate of the
National Federation of Labor Unions (NAFLU),
and claiming to be the bargaining agent of
the security guards, sent a Notice of Strike to
FISI/MISI. On November 14, 1991, the members
of the union which include petitioners picketed
the premises of FTC. The Regional Trial Court of
Pasig, however, issued a writ of injunction to
enjoin the picket.
On November 29, 1991, Simeon de Leon,
together with sixteen (16) other complainants
instituted the instant case before the
Arbitration Branch of the NLRC. The complaint
was later amended to allow the inclusion of
other complainants.
The parties submitted the following issues
for resolution:
(1) Whether petitioners were illegally
dismissed;
(2) Whether respondents are guilty of
unfair labor practice; and
(3) Whether petitioners are entitled to
the refund of their cash bond
deposited with respondent FISI.
Petitioners alleged that they were regular
employees of FTC which was also using the
corporate names Fortune Integrated Services,
Inc. and Magnum Integrated Services,
Inc. They were assigned to work as security
guards at the company's main factory plant, its
tobacco redrying plant and warehouse. They
averred that they performed their duties under
the control and supervision of FTC's security
supervisors. Their services, however, were
severed in October 1991 without valid cause
and without due process. Petitioners claimed
that their dismissal was part of respondents'
design to bust their newly-organized union
which sought to enforce their rights under the
Labor Standards law.[1]
Respondent FTC, on the other hand,
maintained that there was no employer-
employee relationship between FTC and
petitioners. It said that at the time of the
termination of their services, petitioners were
the employees of MISI which was a separate
and distinct corporation from FTC.Hence,
petitioners had no cause of action against
FTC.[2]
Respondent FISI, meanwhile, denied the
charge of illegal dismissal and unfair labor
practice. It argued that petitioners were not
dismissed from service but were merely placed
on floating status pending re-assignment to
other posts. It alleged that the temporary
displacement of petitioners was not due to its
fault but was the result of the pretermination
by FTC of the contract for security services.[3]
The Labor Arbiter found respondents liable
for the charges. Rejecting FTC's argument that
there was no employer-employee relationship
between FTC and petitioners, he ruled that FISI
and FTC should be considered as a single
employer. He observed that the two
corporations have common stockholders and
they share the same business address. In
addition, FISI had no client other than FTC and
other corporations belonging to the group of
companies owned by Lucio Tan. The Labor
Arbiter thus found respondents guilty of union
busting and illegal dismissal. He observed that
not long after the stockholders of FISI sold all
their stocks to a new set of stockholders, FTC
terminated the contract of security services
and engaged the services of two other
security agencies. FTC did not give any reason
for the termination of the contract. The Labor
Arbiter gave credence to petitioners' theory
that respondents' precipitate termination of
their employment was intended to bust their
union.Consequently, the Labor Arbiter ordered
respondents to pay petitioners their
backwages and separation pay, to refund
their cash bond deposit, and to pay attorney's
fees.[4]
On appeal, the NLRC reversed and set
aside the decision of the Labor Arbiter. First, it
held that the Labor Arbiter erred in applying
the "single employer" principle and concluding
that there was an employer-employee
relationship between FTC and FISI on one
hand, and petitioners on the other hand. It
found that at the time of the termination of the
contract of security services on October 15,
1991, FISI which, at that time, had been
renamed Magnum Integrated Services, Inc.
had a different set of stockholders and officers
from that of FTC. They also had separate
offices. The NLRC held that the principle of
"single employer" and the doctrine of piercing
the corporate veil could not apply under the
circumstances. It further ruled that the
proximate cause for the displacement of
petitioners was the termination of the contract
for security services by FTC on October 15,
1991. FISI could not be faulted for the
severance of petitioners' assignment at the
premises of FTC.Consequently, the NLRC held
that the charge of illegal dismissal had no
basis. As regards the charge of unfair labor
practice, the NLRC found that petitioners who
had the burden of proof failed to adduce any
evidence to support their charge of unfair
labor practice against respondents.Hence, it
ordered the dismissal of petitioners'
complaint.[5]
The petitioners filed a motion for
reconsideration of the resolution of the NLRC
but the same was denied.[6] Hence, this
petition.
We gave due course to the petition on
May 15, 1995. Thus, the ruling in St. Martin
Funeral Home vs. NLRC[7] remanding all
petitions for certiorari from the decision of the
NLRC to the Court of Appeals does not apply
to the case at bar.
The petition is impressed with merit.
An examination of the facts of this case
reveals that there is sufficient ground to
conclude that respondents were guilty of
interfering with the right of petitioners to self-
organization which constitutes unfair labor
practice under Article 248 of the Labor
Code.[8] Petitioners have been employed with
FISI since the 1980s and have since been
posted at the premises of FTC -- its main factory
plant, its tobacco redrying plant and
warehouse. It appears from the records that
FISI, while having its own corporate identity,
was a mere instrumentality of FTC, tasked to
provide protection and security in the
company premises. The records show that the
two corporations had identical stockholders
and the same business address. FISI also had
no other clients except FTC and other
companies belonging to the Lucio Tan group
of companies. Moreover, the early payslips of
petitioners show that their salaries were initially
paid by FTC.[9] To enforce their rightful benefits
under the laws on Labor Standards, petitioners
formed a union which was later certified as
bargaining agent of all the security guards. On
February 1, 1991, the stockholders of FISI sold all
their participations in the corporation to a new
set of stockholders which renamed the
corporation Magnum Integrated Services,
Inc. On October 15, 1991, FTC, without any
reason, preterminated its contract of security
services with MISI and contracted two other
agencies to provide security services for its
premises. This resulted in the displacement of
petitioners. As MISI had no other clients, it failed
to give new assignments to
petitioners. Petitioners have remained
unemployed since then. All these facts
indicate a concerted effort on the part of
respondents to remove petitioners from the
company and thus abate the growth of the
union and block its actions to enforce their
demands in accordance with the Labor
Standards laws. The Court held in Insular Life
Assurance Co., Ltd., Employees Association-
NATU vs. Insular Life Assurance Co., Ltd.:[10]
The test of whether an employer has interfered
with and coerced employees within the
meaning of section (a) (1) is whether the
employer has engaged in conduct which it
may reasonably be said tends to interfere with
the free exercise of employees' rights under
section 3 of the Act, and it is not necessary
that there be direct evidence that any
employee was in fact intimidated or coerced
by statements of threats of the employer if
there is a reasonable inference that anti-union
conduct of the employer does have an
adverse effect on self-organization and
collective bargaining.[11]
We are not persuaded by the argument of
respondent FTC denying the presence of an
employer-employee relationship. We find that
the Labor Arbiter correctly applied the
doctrine of piercing the corporate veil to hold
all respondents liable for unfair labor practice
and illegal termination of petitioners'
employment. It is a fundamental principle in
corporation law that a corporation is an entity
separate and distinct from its stockholders and
from other corporations to which it is
connected. However, when the concept of
separate legal entity is used to defeat public
convenience, justify wrong, protect fraud or
defend crime, the law will regard the
corporation as an association of persons, or in
case of two corporations, merge them into
one. The separate juridical personality of a
corporation may also be disregarded when
such corporation is a mere alter ego or
business conduit of another person.[12] In the
case at bar, it was shown that FISI was a mere
adjunct of FTC. FISI, by virtue of a contract for
security services, provided FTC with security
guards to safeguard its premises. However,
records show that FISI and FTC have the same
owners and business address, and FISI provided
security services only to FTC and other
companies belonging to the Lucio Tan group
of companies. The purported sale of the shares
of the former stockholders to a new set of
stockholders who changed the name of the
corporation to Magnum Integrated Services,
Inc. appears to be part of a scheme to
terminate the services of FISI's security guards
posted at the premises of FTC and bust their
newly-organized union which was then
beginning to become active in demanding
the company's compliance with Labor
Standards laws. Under these circumstances,
the Court cannot allow FTC to use its separate
corporate personality to shield itself from
liability for illegal acts committed against its
employees.
Thus, we find that the termination of
petitioners' services was without basis and
therefore illegal. Under Article 279 of the Labor
Code, an employee who is unjustly dismissed
from work is entitled to reinstatement without
loss of seniority rights and other privileges, and
to his full backwages, inclusive of allowances,
and to his other benefits or their monetary
equivalent computed from the time his
compensation was witheld from him up to the
time of his actual reinstatement. However, if
reinstatement is no longer possible, the
employer has the alternative of paying the
employee his separation pay in lieu of
reinstatement.[13]
IN VIEW WHEREOF, the petition is
GRANTED. The assailed resolutions of the NLRC
are SET ASIDE. Respondents are hereby
ordered to pay petitioners their full
backwages, and to reinstate them to their
former position without loss of seniority rights
and privileges, or to award them separation
pay in case reinstatement is no longer feasible.
SO ORDERED.
[G.R. No. 136821. October 17, 2002]
ROVELS ENTERPRISES,
INC., petitioner, vs. EMMANUEL B. OCAMPO,
JOSE M. SILVA, SR., THE HEIRS OF EXPEDITO
LEVISTE, SR.,* CONRADO CALALANG, and
FRANCISCO CARREON, SR., respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Assailed in this petition for review
on certiorari[1] is the Decision of the Court of
Appeals dated June 5, 1998[2] in CA-G.R. SP
No. 43260, affirming the Decision of the
Securities and Exchange Commission (SEC) in
SEC Case No. 09-95-5135 dismissing the petition
to be declared the majority stockholder of
Tagaytay Taal Tourist Development
Corporation (TTTDC). The petition was filed by
Rovels Enterprises, Inc. (Rovels), herein
petitioner. Rovels is a domestic corporation
engaged in construction work. Its President is
Eduardo Santos. TTTDC was among Rovels
clients.
In payment for the services rendered by
Rovels, the Board of Directors of TTTDC passed
a Resolution on December 29, 1975 providing
as follows:
RESOLVED, as it is hereby resolved that
payment for professional fees and services
rendered by x x x Rovels Enterprises x x x be
made in cash if funds are available, or its
equivalent number of shares of stock of the
corporation at par value, and should said
creditors elect the latter mode of payment, it is
further resolved that the President and/or his
Secretary be authorized as they are hereby
authorized, to issue the corresponding
unissued shares of stock of the
corporation.[3] (emphasis added)
The Resolution was signed by three of TTTDCs
directors, namely, Victoriano Leviste,
Bienvenido Cruz, Jr., and Roberto
Roxas.Roberto Roxas is the President of TTTDC
and stockholder of Rovels at the same
time. Noticeably, the signatures of the other
two (2) TTTDC directors Jose Silva, Jr. and
Emmanuel Ocampo do not appear in the
subject Resolution despite their presence in the
December 29, 1975 Board meeting.[4]
On February 23, 1976, Eduardo Santos,
President of Rovels, on behalf of TTTDC, filed
with the SEC an application for exemption
from registration of TTTDCs unissued shares of
stock transferred to it (Rovels) as payment for
its services worth One Hundred Eight Thousand
Pesos (P108,000.00). This was done because
under Section 4 (a) of the Revised Securities
Act, no shares of stocks shall be transferred
unless first registered with the SEC or permitted
to be sold.[5]
On May 7, 1976, the SEC, in its Resolution No.
260,[6] granted Eduardo Santos application.
On March 1, 1976, the TTTDC Board of Directors
passed another Resolution[7] repealing its
Resolution of December 29, 1975, thus:
RESOLVED, as it is hereby resolved, that the
Resolution of December 29, 1975 authorizing
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
adequate study and consideration by the
Board. (emphasis added)
In view of the December 29, 1975 TTTDC Board
Resolution transferring to Rovels the said shares
of stock as construction fee, TTTDC Directors
Jose Silva, Jr. and Emmanuel Ocampo filed a
complaint with the SEC against Roberto Roxas,
TTTDC President, and Eduardo Santos, Rovels
President, docketed as SEC Case No. 1322. In
their complaint, Silva and Ocampo alleged
that there was no meeting of the TTTDCs Board
of Directors on December 29, 1975; that they
did not authorize the transfer of TTTDCs shares
of stock to Rovels; that they never signed the
alleged minutes of the meeting; and that the
signatures of the other two (2) Directors,
Victoriano Leviste and Bienvenido Cruz, Jr., as
well as that of TTTDCs Secretary Francisco
Carreon, Jr., were obtained through fraud and
misrepresentation. They also alleged that the
TTTDC Board Resolution dated December 29,
1975 was repealed by the March 1, 1976
Resolution. They thus prayed that the transfer
of TTTDCs shares of stock to Rovels pursuant to
Resolution dated December 29, 1975 be
annulled.
On March 17, 1979, SEC Hearing Officer
Eugenio E. Reyes issued a Decision[8] in favor of
Silva and Ocampo, the dispositive portion of
which reads:
Considering that the (December 29, 1975)
board resolution which authorizes the
corporation to pay its creditors with its unissued
shares of stock x x x had been expressly
revoked or repealed on March 1, 1976 as
earlier pointed out, Commission Resolution No.
260 (granting Santos application for exemption
from registration of the unissued shares), when
issued on May 7, 1976 x x x had lost its legal
basis. Consequently, the corresponding
issuance of shares was without authority of the
board of directors.
xxxxxxxxx
WHEREFORE, premises considered, this
Commission finds and so holds that the
purported board resolution of December 29,
1975, not having been properly passed upon at
a duly constituted board meeting, cannot be
recognized as valid and hence, without legal
force and effect. Consequently, the issuance of
shares of stock to corporate creditors of the
Tagaytay Taal Tourist Development
Corporation is null and void. In view thereof,
the shares in question are still considered
unissued and remain part of the authorized
capital stocks of the Tagaytay Taal Tourist
Development Corporation. This is without
prejudice to the rights of said corporate
creditors as against Tagaytay Taal Tourist
Development Corporation for the latters
contractual obligations. (emphasis added)
On appeal by Roberto Roxas and Eduardo
Santos, the SEC en banc, in its Decision dated
September 2, 1982 in SEC-AC No.
049,[9] affirmed the Decision of the SEC Hearing
Officer. This Court, in its Decision of June 20,
1983 in G.R. No. 61863,[10] likewise affirmed the
Decision of the SEC en banc. The Decision of
this Court became final and executory on
September 2, 1983.[11]
Subsequently, TTTDC, Jose Silva, Emmanuel
Ocampo, Victoriano Leviste, Francisco
Carreon, Jr., and Expedito Leviste, Sr., another
stockholder of TTTDC, (the SILVA GROUP, now
respondents), filed with the SEC a petition
against Eduardo Santos, Sylvia S. Veloso,
Josefina Carballo, Augusto del Rosario,
Reynaldo Alcantara and Lauro Sandoval (the
SANTOS GROUP), docketed as SEC Case No.
3806. (The SANTOS GROUP were nominees of
Rovels who, by virtue of the shares of stock
issued pursuant to the December 29, 1975
Resolution, proceeded to act as directors and
officers of TTTDC). In their petition, the SILVA
GROUP prayed that they be declared the true
and lawful stockholders and incumbent
directors and officers of TTTDC.
On July 6, 1993, SEC Hearing Officer Alberto P.
Atas rendered a Decision[12] in favor of the
SILVA GROUP, thus:
WHEREFORE, judgment is hereby rendered in
favor of the petitioners (SILVA GROUP) and
against the respondents (SANTOS GROUP), as
follows:
a. Declaring petitioners as the lawful
stockholders, directors and officers of Tagaytay
Taal Tourist Development Corporation;
b. Declaring respondents, to
be not stockholders of Tagaytay Taal Tourist
Development Corporation;
c. Declaring respondents to be not directors or
officers of Tagaytay Taal Tourist Development
Corporation;
d. The writ of preliminary injunction issued on
November 6, 1990 is hereby made permanent;
and
e. Ordering the Records Division of this
Commission to purge the records of Tagaytay
Taal Tourist Development Corporation of all
papers and documents filed by respondents
purportedly in behalf of Tagaytay Taal Tourist
Development Corporation. (emphasis and
words in parentheses added)
The above Decision became final and
executory on September 1, 1994[13] as no
appeal was interposed by either the SILVA
GROUP or the SANTOS GROUP.
However, Rovels, to whom the TTTDC shares of
stock (worth P108,000.00) were transferred,
claimed that it became aware of the July 6,
1993 SEC Decision only in June of 1995. So on
September 6, 1995, it filed a petition with the
SEC,[14] docketed as SEC Case No. 09-95-5135,
praying that it be declared the majority
stockholder of TTTDC as against
respondents Ocampo, Silva, Leviste, Sr.,
Calalang and Carreon (belonging to the SILVA
GROUP). The material allegations of the
petition state that: (1) TTTDC passed a
Resolution dated December 29, 1975
authorizing the transfer of its unissued shares to
Rovels as the latters construction fee;[15] (2)
Pursuant to that Resolution, TTTDC shares of
stock worth P692,000.00 were transferred to
Rovels;[16] (3) While TTTDC, in its March 1, 1976
Resolution, repealed the December 29, 1975
Resolution, such repeal does not bind Rovels
for lack of notice;[17](4) Several interrelated
cases (SEC Case Nos. 1322 and 3806) were
filed with the SEC involving the SILVA and
SANTOS GROUPS;[18] (5) Rovels is not bound by
the SEC Decisions since it was not impleaded
as a party in said cases.[19]
Forthwith, the SILVA GROUP filed a motion to
dismiss[20] the petition on the following grounds:
(1) Rovels has no cause of action since TTTDCs
December 29, 1975 Board Resolution was
repealed by its March 1, 1976 Resolution;[21] (2)
the petition is barred by the prior SEC Decisions
in SEC Case No. 1322 declaring that the
issuance of TTTDCs shares of stock to Rovels is
valid, and the SEC Decision in 3806 declaring
the SILVA GROUP as the lawful stockholders of
TTTDC;[22] and (3) the petition is barred by
estoppel, prescription and laches since it was
filed long after Rovels was notified of the
repeal of the December 29, 1975 TTTDC
Resolution.[23]
In an Order dated April 22, 1996[24] in SEC Case
No. 09-95-5135, SEC Hearing Officer Manuel P.
Perea dismissed Rovels petition on the grounds
of lack of cause of action, res judicata,
estoppel, laches and prescription. This Order
was affirmed by the SEC en banc in its Decision
dated January 20, 1997[25] in SEC AC No. 560.
Upon a petition for review, docketed as CA-
G.R. SP. No. 43260, the Court of Appeals, in its
Decision dated June 5, 1998,[26]affirmed the
January 20, 1997 SEC en banc Decision. Rovels
motion for reconsideration was likewise
denied.[27]
Hence, the instant petition for review
on certiorari,[28] alleging that the Court of
Appeals erred:
I adversarial. The Silva faction attempted to
IN HOLDING THAT PETITIONER ROVELS HAS NO
CAUSE OF ACTION AGAINST PRIVATE
RESPONDENTS; and
II
IN HOLDING THAT THE PETITION IN SEC CASE
NO. 09-95-5135 IS BARRED BY PRIOR JUDGMENT
(RES JUDICATA), LACHES, PRESCRIPTION AND
ESTOPPEL.[29]
The petition is unmeritorious.
On the first assigned error, we find that the
Court of Appeals is correct in affirming the
dismissal of Rovels petition in SEC Case No. 09-
955135 for lack of cause of action.
A cause of action is defined as the delict or
wrongful act or omission committed by a
person in violation of the right of another.[30]A
cause of action exists if the following elements
are present: (1) a right in favor of the plaintiff,
(2) the correlative obligation of the defendant
to respect such right, and (3) the act or
omission of the defendant in violation of
plaintiffs right.[31] The test is whether the
material allegations of the complaint,
assuming them to be true, state ultimate facts
which constitute plaintiffs cause of action, such
that plaintiff is entitled to a favorable judgment
as a matter of law.[32]
The pertinent portions of Rovels petition filed
with the SEC read:
xxxxxxxxx
5. x x x. On December 29, 1975, TTTDC in a
Resolution signed by majority members of the
Board of Directors resolved that TTTDC pay its
creditors through a debt-to-equity swap;
xxxxxxxxx
9. x x x the relation between the Silva
faction and the Santos faction became
form an alleged new board of directors
and repealed the Board Resolution dated
December 29, 1975 Resolution regarding the
debt to equity swap. Thus, it resolved:
RESOLVED, as it is hereby resolved, that the
Resolution of December 29, 1975 authorizing
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
adequate study and consideration by the
Board. x x x
10. That what is clear from the above
Resolution of March 1, 1976 is the admission
that indeed TTTDC owes certain amount of
money from its creditors. The creditors became
stockholders of record as a result of shares of
stock issued in implementation of the debt to
equity conversion.Corresponding shares of
stock were issued and signed by then
president of the corporation Roberto Roxas
and then corporate secretary Francisco N.
Carreon, Jr.
Copy of said Certificate of Stocks are hereto
attached and marked as Annexes D to P and
made an integral part hereof.
xxxxxxxxx
12. That several interrelated cases were filed
by Eduardo L. Santos (SEC Case No. 1322), on
one hand, and Expedito M. Leviste, Francisco
Carreon, Felicisimo Ocampo and Jose M. Silva
(SEC Case No. 3806) and vice versa on the
other. Petitioner, Rovels Enterprises, Inc.
was never made a party in any of these
cases and its nominees in the Board of
Directors of TTTDC continued to exercise its
function from 1976.
xxxxxxxxx
19. That to implement the decision in SEC CASE
3806, which declared the Silva Group as the
duly authorized directors and officers, without
looking deeply into the records of the
case, i.e. the sub-poened authentic Stock and
Transfer Book of TTTDC and the earlier decision
in PED Case No. 89-0644, will constitute
irreparable damage to the petitioner. Specially
so, Silva executed an affidavit showing 5
Directors of TTTDC but the stock certificates
were not signed by the corporate secretary
who died in 1982.
xxxxxxxxx
21. That petitioner which became duly
registered majority stockholder thru debt to
equity swap had been an innocent party to
such controversy between the aforesaid 2
ruling thereof, hence, petitioner remains as is
on a status quo basis as majority stockholder of
TTTDC.
xxxxxxxxx
PRAYER
WHEREFORE, premises considered, petitioner
prays that this Honorable Commission render
judgment in favor of petitioner and against
respondents (SILVA GROUP):
xxxxxxxxx
2. After due notice and hearing, re-declaring
petitioner lawful registered majority stockholder
of TTTDC x x x;
3. Ordering respondents to desist from sitting in
the Board of Directors of TTTDC as they are not
lawful registered stockholders in the books of
the said corporation.
x x x x x x x x x[33]
A reading of the above petition (paragraph 5)
shows that Rovels prayer to be declared the
majority stockholder of TTTDC is anchored on
the December 29, 1975 TTTDC Board Resolution
transferring its shares of stock to Rovels as
construction fee. This Resolution could have
vested in Rovels a right to be declared a
stockholder of TTTDC. However, the same
petition (paragraphs 9 and 10) concedes that
the December 29, 1975 Resolution was
repealed by the March 1, 1976 Resolution. The
petition likewise alleges (paragraphs 12 and
19) that there were prior interrelated cases
filed with the SEC between the SILVA and
SANTOS GROUPS, namely: (1) SEC Case No.
1322 (wherein the SEC en banc in its Decision
dated September 2, 1982 nullified the TTTDC
Board Resolution dated December 29, 1975,
which Decision was affirmed with finality by this
Court in G.R. No. 61863) and (2) SEC Case No.
3806 (wherein the SEC declared the SILVA
GROUP as the legitimate stockholders of TTTDC,
not Rovels nominees [the SANTOS
GROUP]). Clearly, on the face of its petition,
Rovels cannot claim to be the majority
stockholder of TTTDC.
Relative to the second assigned error, Rovels
contends that it is not bound by the SEC
Decision in SEC Case Nos. 1322 and 3806 and
in G.R. No. 61863 as it was never a party in any
of these cases. This contention brings us to the
issue of res judicata.
The requisites of res judicata,[34] also known as
the rule on bar by prior judgment, are:
1) the former judgment must be final;
2) the court which rendered it had jurisdiction
over the subject matter and the parties;
3) the judgment must be on the merits; and
4) there must be between the first and the
second actions, identity of parties, subject
matter and causes of action.
The first three (3) requisites of res judicata are
present in this case. This is not disputed by the
parties and is, in fact, established by the
record. The controversy arises as to whether
there is identity of the parties in the present SEC
Case No. 09-95-5135, on the one hand, and in
prior SEC Case Nos. 1322 and 3806, on the
other.
Contrary to its claim, Rovels is bound by the
previous SEC Decisions. It must be noted that
Eduardo Santos, President of Rovels, was one
of the respondents in both SEC Case Nos. 1322
and 3806. Clearly, Rovels and Eduardo Santos,
being its President, share an identity of
interests sufficient to make them privies-in-law,
as correctly found by the Court of Appeals in
its assailed Decision, thus:
In the case at bench, there can be no
question that the rights claimed by petitioner
and its stockholders/directors/officers who
were parties in SEC Case Nos. 1322 and 3806
are identical in that they are both based on
the December 29, 1975 Resolution. Stated
differently, they shared an identity of interest
from which flowed an identity of relief sought,
namely, to be declared owners of the stocks of
TTTDC, premised on the same December 29,
1975 Resolution. x x x. This identity of interest is
sufficient to make them privies-in-law, one to
the other, and meets the requisite of substantial
identity of parties.[35]
It bears stressing that absolute identity of
parties is not required for the principle of res
judicata, or the rule on bar by prior judgment,
to apply. Mere substantial identity of parties, or
a community of interests between a party in
the first case and a party in the subsequent
case even if the latter was not impleaded in
the first case, is sufficient.[36]
Rovels cannot take refuge in the argument
that, as a corporation, it is imbued with
personality separate and distinct from that of
the respondents in SEC Case Nos. 1322 and
3806. The legal fiction of separate corporate
existence is not at all times invincible and the
same may be pierced when employed as a
means to perpetrate a fraud, confuse
legitimate issues, or used as a vehicle to
promote unfair objectives or to shield an
otherwise blatant violation of the prohibition
against forum-shopping. While it is settled that
the piercing of the corporate veil has to be
done with caution, this corporate fiction may
be disregarded when necessary in the interest
of justice.[37]
The doctrine of res judicata states that a final
judgment on the merits rendered by a court of
competent jurisdiction is conclusive as to the
rights of the parties and their privies, and
constitutes an absolute bar to subsequent
actions involving the same claim, demand or
cause of action.[38] This is founded on public
policy and necessity, which makes it to the
interest of the State that there should be an
end to litigations, and on the principle that an
individual should not be vexed twice for the
same cause.[39]
Just recently, we emphatically declared in In
Re: Petition Seeking for Clarification as to the
Validity and Forceful Effect of Two (2) Final and
Executory but Conflicting Decisions of the
Honorable Supreme Court:[40] Every litigation
must come to an end once a judgment
becomes final, executory and
unappealable. This is a fundamental and
immutable legal principle. For (j)ust as a losing
party has the right to file an appeal within the
prescribed period, the winning party also has
the correlative right to enjoy the finality of the
resolution of his case by the execution and
satisfaction of the judgment, which is the life of
the law. Any attempt to thwart this rigid rule
and deny the prevailing litigant his right to
savour the fruit of his victory, must immediately
be struck down.
Finally, this Court sustains the Appellate Courts
finding that the filing of Rovels petition in the
instant SEC Case No. 09-95-5135 is barred by
estoppel, prescription and laches. There is no
merit to Rovels claim that it was only in June of
1995[41] when it became aware of the repeal
of the December 29, 1975 TTTDC Resolution
and of the consequent nullification of the
transfer of its shares of stock.
It is undisputed that Eduardo Santos was
present in the March 1, 1976 TTTDC Board
meeting wherein the December 29, 1975
Resolution was repealed. We hold that
Eduardo Santos, being the President of Rovels,
is considered as its (Rovels) agent. As such, his
knowledge of the repeal of the December 29,
1975 Resolution, under the theory of imputed
knowledge, is ascribed to his principal (Rovels).
It was only on September 6, 1995, or almost
twenty (20) years from the time Eduardo Santos
learned of the March 1, 1976 Resolution, that
Rovels filed its petition in SEC Case No. 09-95-
5135. Within that long period of time, Rovels did
nothing to contest the March 1, 1976 TTTDC
Resolution to protect its rights, if any. Obviously,
such inaction constitutes estoppel, prescription
and laches. As stated by Rovels itself, Article
1149 of the New Civil Code limits the filing of
actions, whose periods are not fixed therein or
in any other laws, to only five (5) years. In
addition, the principle of laches or stale
demands provides that the failure or neglect,
for an unreasonable and unexplained length
of time, to do that which by exercising due
diligence could or should have been done
earlier, or the negligence or omission to assert
a right within a reasonable time, warrants a
presumption that the party entitled to assert it
either has abandoned it or declined to assert
it.[42]
In sum, this Court finds that the Court of
Appeals did not commit any reversible error in
its challenged Decision.
WHEREFORE, the petition is DENIED. The assailed
Decision of the Court of Appeals dated June 5,
1998 and its Resolution dated December 21,
1998 in CA-G.R. SP. No. 43260, are AFFIRMED.
SO ORDERED.
[G.R. No. 140923. September 16, 2005]
MANUEL M. MENDOZA and EDGARDO A.
YOTOKO, petitioners, vs. BANCO REAL
DEVELOPMENT BANK (now LBC Development
Bank), respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari[1],
assailing the Decision[2] of the Court of Appeals
dated September 21, 1998 in CA-G.R. No.
41544, entitled BANCO REAL DEVELOPMENT
BANK, plaintiff, versus, TECHNICA VIDEO INC.,
ET. AL., MANUEL M. MENDOZA, ET. AL.,
defendants and Resolution dated December 3,
1999.
The petition alleges inter alia that on August 7,
1985, the Board of Directors of Technical Video,
Inc. (TVI) passed a Resolution authorizing its
President, Eduardo A. Yotoko, petitioner, or its
General Manager-Secretary-Treasurer, Manuel
M. Mendoza, also a petitioner, to apply for and
secure a loan from the Pasay City Banco Real
Development Bank (now LBC Development
Bank), herein respondent.
On September 11, 1985, respondent bank
extended a loan of P500,000.00 to TVI. In his
capacity as General Manager, petitioner
Mendoza executed a promissory note and
chattel mortgage over 195 units of Beta video
machines and their equipment and
accessories belonging to TVI in favor of
respondent bank.
On October 3, 1986, TVI and two other video
firms, Fox Video and Galactica Video,
organized a new corporation named FGT
Video Network Inc. (FGT). It was registered with
the Securities and Exchange
Commission.[3] Petitioner Mendoza was the
concurrent President of FGT and Operating
General Manager of TVI. Thus, the office of TVI
had to be transferred to the building of FGT for
easier monitoring of the distribution and
marketing aspects of the business.
For TVIs failure to pay its loan upon maturity,
respondent bank, on January 26, 1987, filed
with the Office of the Clerk of Court of the
Regional Trial Court (RTC), Pasay City, a
petition for Extra Judicial Foreclosure and Sale
of Chattel Mortgage.
However, the Sheriffs Report/Return[4] dated
January 27, 1987 shows that TVI is no longer
doing business at its given address; that its
General Manager, Mr. Manuel M. Mendoza, is
presently employed at FGT Video Network with
offices at the Philcemcor Bldg., No. 4 Edsa cor.
Connecticut St., Greenhills, San Juan, Metro
Manila; that when asked about the
whereabouts of the video machines, in the
presence of the representative of respondent
bank and its counsel, Mr. Mendoza denied any
knowledge of their whereabouts; and that
action on respondents petition is indefinitely
postponed until further notice from the bank.
Respondent then wrote TVI demanding the
surrender of the video machines. In his letter
dated February 19, 1987, petitioner Mendoza
requested the bank to give him additional time
to enable us to pay our total obligations and
proposed a repayment scheme to start not
later than March 10, 1987.[5] Still, no payment
was received by the bank. TVI simply refused
and ignored the demand and kept silent as to
the whereabouts of the video machines.
Meanwhile, in a case entitled Republic of the
Philippines, plaintiff vs. FGT Video Network Inc.,
Manuel Mendoza, Alfredo C. Ongyangco, Eric
Apolonio, Susan Yang ang Eduardo A. Yotoko,
defendants, the RTC, Branch 167, Pasig City
issued a search warrant. The agents of the
National Bureau of Investigation (NBI)
confiscated at the offices of FGT 638 machines
and equipment including the 195 Beta
machines mortgaged with respondent bank.
On May 29, 1987, upon motion of FGT and
herein petitioners, the same court issued
another Order directing the NBI to release and
return the said machines to them.
However, Columbia Pictures Inc., Orion
Pictures Corp., Paramount Pictures Corp.,
Universal City Studios Inc., The Walt Disney
Company and Warner Bros. filed with this Court
a petition for certiorari[6] assailing the Order of
the lower court.
On June 18, 1987, this Court issued a temporary
restraining order enjoining the RTC from
enforcing its assailed order. The machines and
equipment were left in the custody of the NBI
until the petition for certiorari shall have been
resolved with finality.
On July 13, 1990, respondent bank filed with
the RTC, Branch 110, Pasig City,[7] a complaint
for collection of a sum of money[8] against TVI,
FGT and petitioners. Only petitioners filed their
joint answer to the complaint.
In their joint answer, petitioners specifically
denied the allegations in the complaint, raising
the defense that the loan is purely a corporate
indebtedness of TVI.
On April 29, 1991, the trial court rendered a
Decision, holding that:
As by these considerations, the Court finds that
TVI was the mere alter ego or business conduit
of Yotoko and Mendoza, and additionally
considering 1) that Mendoza disclaimed
knowledge of the whereabouts of the TVI
mortgaged property at the time plaintiffs
petition for extrajudicial foreclosure was being
effected, and 2) that Mendoza and Yotoko
transferred the mortgaged property to FGT
without first securing plaintiffs consent despite
their awareness that under the chattel
mortgage, such consent was necessary, the
doctrine of corporate entity must be pierced
and the two must be held personally liable for
TVIs obligation to plaintiff for said doctrine
cannot be used to defeat public convenience,
justify wrong, protect fraud or avoid a legal
obligation.
The dispositive portion of the trial courts
Decision reads:
WHEREFORE, judgment is hereby rendered in
favor of plaintiff and against
defendants TECHNICA VIDEO, INC., Mendoza
and Yotoko, ordering them,
1) to pay plaintiff the sum of P500,000.00 plus
interests, charges and penalties as agreed
upon in the promissory note of September 11,
1985, until the same is fully paid;
2) to pay plaintiff the sum equivalent to ten
(10%) of the total unpaid obligation as and for
attorneys fees, and
3) to pay the costs.
SO ORDERED.
Upon appeal by herein petitioners, the Court of
Appeals rendered its Decision dated
September 21, 1998, affirming in toto the
Decision of the trial court. Petitioners motion for
reconsideration was denied in its Resolution
dated December 3, 1999.
Hence, the instant petition.
The basic issue for our resolution is whether
herein petitioners are personally liable for TVIs
indebtedness of P500,000.00 with respondent
bank.
Both the trial court and the Appellate Court
found that the petitioners transferred the Beta
video machines from TVI to FGT without the
consent of respondent bank. Also, upon inquiry
of the sheriff, petitioner Mendoza declined
knowledge of the whereabouts of the
mortgaged video machines. Moreover, the
fact that the NBI seized the video machines
from FGT glaringly shows that petitioners
transferred the same from TVI. More
importantly, a comparison of the list of video
machines in the Chattel Mortgage Contract
and the list of video machines seized by the
NBI from FGT shows that they have the same
serial numbers.
The courts below also found that TVI is
petitioners mere alter ego or business conduit.
They control the affairs of TVI. Among its
stockholders or directors, they were the only
ones who became incorporators of FGT. They
transferred the assets of TVI to FGT.
The general rule is that obligations incurred by
a corporation, acting through its directors,
officers or employees, are its sole liabilities.
However, the veil with which the law covers
and isolates the corporation from its directors,
officers or employees will be lifted when the
corporation is used by any of them as a cloak
or cover for fraud or illegality or
injustice.[9] Here, the fraud was committed by
petitioners to the prejudice of respondent
bank. It bears emphasis that as reported by the
sheriff, TVI is no longer doing business at its
given address and its whereabouts cannot be
established as yet.
Both the trial court and the Court of Appeals
thus concluded that petitioners succeeded to
hide the chattels, preventing the sheriff to
foreclose the mortgage. Obviously, they acted
in bad faith to defraud respondent bank.
In fine, we hold that the Appellate Court, in
affirming the Decision of the trial court,
correctly ruled that petitioners, not TVI, are the
ones personally liable to respondent bank for
the payment of the loan.
WHEREFORE, the petition is DENIED. Costs
against petitioners.
SO ORDERED.
 [G.R. Nos. 116124-25. November 22, 2000]
BIBIANO O. REYNOSO, IV, petitioner, vs. HON.
COURT OF APPEALS and GENERAL
CREDIT CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the
consolidated decision of the Court of Appeals
dated July 7, 1994, which reversed the
separate decisions of the Regional Trial Court
of Pasig City and the Regional Trial Court of
Quezon City in two cases between petitioner
Reynoso and respondent General Credit
Corporation (GCC).
Sometime in the early 1960s, the
Commercial Credit Corporation (hereinafter,
CCC), a financing and investment firm,
decided to organize franchise companies in
different parts of the country, wherein it shall
hold thirty percent (30%) equity. Employees of
the CCC were designated as resident
managers of the franchise
companies. Petitioner Bibiano O. Reynoso, IV
was designated as the resident manager of
the franchise company in Quezon City, known
as the Commercial Credit Corporation of
Quezon City (hereinafter, CCC-QC).
CCC-QC entered into an exclusive
management contract with CCC whereby the
latter was granted the management and full
control of the business activities of the
former. Under the contract, CCC-QC shall sell,
discount and/or assign its receivables to
CCC. Subsequently, however, this discounting
arrangement was discontinued pursuant to the
so-called DOSRI Rule, prohibiting the lending of
funds by corporations to its directors, officers,
stockholders and other persons with related
interests therein.
On account of the new restrictions
imposed by the Central Bank policy by virtue
of the DOSRI Rule, CCC decided to form CCC
Equity Corporation, (hereinafter, CCC-Equity),
a wholly-owned subsidiary, to which CCC
transferred its thirty (30%) percent equity in
CCC-QC, together with two seats in the latters
Board of Directors.
Under the new set-up, several officials of
Commercial Credit Corporation, including
petitioner Reynoso, became employees of
CCC-Equity. While petitioner continued to be
the Resident Manager of CCC-QC, he drew his
salaries and allowances from CCC-
Equity.Furthermore, although an employee of
CCC-Equity, petitioner, as well as all
employees of CCC-QC, became qualified
members of the Commercial Credit
Corporation Employees Pension Plan.
As Resident Manager of CCC-QC,
petitioner oversaw the operations of CCC-QC
and supervised its employees. The business
activities of CCC-QC pertain to the
acceptance of funds from depositors who are
issued interest-bearing promissory notes. The
amounts deposited are then loaned out to
various borrowers. Petitioner, in order to boost
the business activities of CCC-QC, deposited
his personal funds in the company. In return,
CCC-QC issued to him its interest-bearing
promissory notes.
On August 15, 1980, a complaint for sum of
money with preliminary
attachment, docketed as Civil Case No. Q-
[1]
30583, was instituted in the then Court of First
Instance of Rizal by CCC-QC against
petitioner, who had in the meantime been
dismissed from his employment by CCC-
Equity. The complaint was subsequently
amended in order to include Hidelita Nuval,
petitioners wife, as a party defendant.[2] The
complaint alleged that petitioner embezzled
the funds of CCC-QC amounting to
P1,300,593.11. Out of this amount, at least
P630,000.00 was used for the purchase of a
house and lot located at No. 12 Macopa
Street, Valle Verde I, Pasig City. The property
was mortgaged to CCC, and was later
foreclosed.
In his amended Answer, petitioner denied
having unlawfully used funds of CCC-QC and
asserted that the sum of P1,300,593.11
represented his money placements in CCC-
QC, as shown by twenty-three (23) checks
which he issued to the said company.[3]
 The case was subsequently transferred to
the Regional Trial Court of Quezon City, Branch
86, pursuant to the Judiciary Reorganization
Act of 1980.
On January 14, 1985, the trial court
rendered its decision, the decretal portion of
which states:
Premises considered, the Court finds the
complaint without merit. Accordingly, said
complaint is hereby DISMISSED.
By reason of said complaint, defendant
Bibiano Reynoso IV suffered degradation,
humiliation and mental anguish.
On the counterclaim, which the Court finds to
be meritorious, plaintiff corporation is hereby
ordered:
a) to pay defendant the sum of P185,000.00
plus 14% interest per annum from October 2,
1980 until fully paid;
b) to pay defendant P3,639,470.82 plus interest
thereon at the rate of 14% per annum from
June 24, 1981, the date of filing of Amended
Answer, until fully paid; from this amount may
be deducted the remaining obligation of
defendant under the promissory note of
October 24, 1977, in the sum of P9,738.00 plus
penalty at the rate of 1% per month from
December 24, 1977 until fully paid;
c) to pay defendants P200,000.00 as moral
damages;
d) to pay defendants P100,000.00 as
exemplary damages;
e) to pay defendants P25,000.00 as and for
attorney's fees; plus costs of the suit.
SO ORDERED.
Both parties appealed to the then
Intermediate Appellate Court. The appeal of
Commercial Credit Corporation of Quezon
City was dismissed for failure to pay docket
fees. Petitioner, on the other hand, withdrew
his appeal.
Hence, the decision became final and,
accordingly, a Writ of Execution was issued on
July 24, 1989.[4] However, the judgment
remained unsatisfied,[5] prompting petitioner to
file a Motion for Alias Writ of Execution,
Examination of Judgment Debtor, and to Bring
Financial Records for Examination to
Court. CCC-QC filed an Opposition to
petitioners motion,[6] alleging that the
possession of its premises and records had
been taken over by CCC.
Meanwhile, in 1983, CCC became known
as the General Credit Corporation.
On November 22, 1991, the Regional Trial
Court of Quezon City issued an Order directing
General Credit Corporation to file its comment
on petitioners motion for alias writ of
execution.[7] General Credit Corporation filed a
Special Appearance and Opposition on
December 2, 1991,[8] alleging that it was not a
party to the case, and therefore petitioner
should direct his claim against CCC-QC and
not General Credit Corporation. Petitioner filed
his reply,[9] stating that the CCC-QC is an
adjunct instrumentality, conduit and agency of
CCC.Furthermore, petitioner invoked the
decision of the Securities and Exchange
Commission in SEC Case No. 2581,
entitled, Avelina G. Ramoso, et al., Petitioner
versus General Credit Corp., et al.,
Respondents, where it was declared that
General Credit Corporation, CCC-Equity and
other franchised companies including CCC-
QC were declared as one corporation.
On December 9, 1991, the Regional Trial
Court of Quezon City ordered the issuance of
an alias writ of execution.[10] On December 20,
1991, General Credit Corporation filed an
Omnibus Motion,[11] alleging that SEC Case No.
2581 was still pending appeal, and maintaining
that the levy on properties of the General
Credit Corporation by the deputy sheriff of the
court was erroneous.
In his Opposition to the Omnibus Motion,
petitioner insisted that General Credit
Corporation is just the new name of
Commercial Credit Corporation; hence,
General Credit Corporation and Commercial
Credit Corporation should be treated as one
and the same entity.
 On February 13, 1992, the Regional Trial
Court of Quezon City denied the Omnibus
Motion.[12] On March 5, 1992, it issued an Order
directing the issuance of an alias writ of
execution.[13]
Previously, on February 21, 1992, General
Credit Corporation instituted a complaint
before the Regional Trial Court of Pasig against
Bibiano Reynoso IV and Edgardo C. Tanangco,
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
located in Pasig, Metro Manila and covered
by Transfer Certificate of Title No. 29940 be
declared null and void, and that defendant
sheriff be enjoined from consolidating
ownership over the land and from further
levying on other properties of General Credit
Corporation to answer for any liability under
the decision in Civil Case No. Q-30583.
The Regional Trial Court of Pasig, Branch
167, did not issue a temporary restraining
order. Thus, General Credit Corporation
instituted two (2) petitions for certiorari with the
Court of Appeals, docketed as CA-G.R. SP No.
27518[15] and CA-G.R. SP No. 27683. These
cases were later consolidated.
On July 7, 1994, the Court of Appeals
rendered a decision in the two consolidated
cases, the dispositive portion of which reads:
WHEREFORE, in SP No. 27518 we declare the
issue of the respondent court's refusal to issue a
restraining order as having been rendered
moot by our Resolution of 7 April 1992 which,
by way of injunctive relief, provided that "the
respondents and their representatives are
hereby enjoined from conducting an auction
sale (on execution) of petitioner's properties as
well as initiating similar acts of levying (upon)
and selling on execution other properties of
said petitioner". The injunction thus granted, as
modified by the words in parenthesis, shall
remain in force until Civil Case No. 61777 shall
have been finally terminated.
In SP No. 27683, we grant the petition for
certiorari and accordingly NULLIFY and SET
ASIDE, for having been issued in excess of
jurisdiction, the Order of 13 February 1992 in
Civil Case No. Q-30583 as well as any other
order or process through which the petitioner is
made liable under the judgment in said Civil
Case No. Q-30583.
No damages and no costs.
SO ORDERED.[16]
Hence, this petition for review anchored
on the following arguments:
1. THE HONORABLE COURT OF APPEALS ERRED
IN CA-G.R. SP NO. 27683 WHEN IT NULLIFIED
AND SET ASIDE THE 13 FEBRUARY 1992 ORDER
AND OTHER ORDERS OR PROCESS OF BRANCH
86 OF THE REGIONAL TRIAL COURT OF QUEZON
CITY THROUGH WHICH GENERAL CREDIT
CORPORATION IS MADE LIABLE UNDER THE
JUDGMENT THAT WAS RENDERED IN CIVIL CASE
NO. Q-30583.
2. THE HONORABLE COURT OF APPEALS ERRED
IN CA-G.R. SP NO. 27518 WHEN IT ENJOINED
THE AUCTION SALE ON EXECUTION OF THE
PROPERTIES OF GENERAL CREDIT
CORPORATION AS WELL AS INITIATING SIMILAR
ACTS OF LEVYING UPON AND SELLING ON
EXECUTION OF OTHER PROPERTIES OF GENERAL
CREDIT CORPORATION.
3. THE HONORABLE COURT OF APPEALS ERRED
IN HOLDING THAT GENERAL CREDIT
CORPORATION IS A STRANGER TO CIVIL CASE
NO. Q-30583, INSTEAD OF, DECLARING THAT
COMMERCIAL CREDIT CORPORATION OF
QUEZON CITY IS THE ALTER EGO,
INSTRUMENTALITY, CONDUIT OR ADJUNCT OF
COMMERCIAL CREDIT CORPORATION AND ITS
SUCCESSOR GENERAL CREDIT CORPORATION.
At the outset, it must be stressed that there
is no longer any controversy over petitioners
claims against his former employer, CCC-QC,
inasmuch as the decision in Civil Case No. Q-
30583 of the Regional Trial Court of Quezon
City has long become final and executory. The
only issue, therefore, to be resolved in the
instant petition is whether or not the judgment
in favor of petitioner may be executed against
respondent General Credit Corporation. The
latter contends that it is a corporation
separate and distinct from CCC-QC and,
therefore, its properties may not be levied
upon to satisfy the monetary judgment in favor
of petitioner. In short, respondent raises
corporate fiction as its defense. Hence, we are
necessarily called upon to apply the doctrine
of piercing the veil of corporate entity in order
to determine if General Credit Corporation,
formerly CCC, may be held liable for the
obligations of CCC-QC.
The petition is impressed with merit.
A corporation is an artificial being created
by operation of law, having the right of
succession and the powers, attributes, and
properties expressly authorized by law or
incident to its existence.[17] It is an artificial
being invested by law with a personality
separate and distinct from those of the persons
composing it as well as from that of any other
legal entity to which it may be related.[18] It was
evolved to make possible the aggregation
and assembling of huge amounts of capital
upon which big business depends. It also has
the advantage of non-dependence on the
lives of those who compose it even as it enjoys
certain rights and conducts activities of natural
persons.
Precisely because the corporation is such
a prevalent and dominating factor in the
business life of the country, the law has to look
carefully into the exercise of powers by these
artificial persons it has created.
Any piercing of the corporate veil has to
be done with caution. However, the Court will
not hesitate to use its supervisory and
adjudicative powers where the corporate
fiction is used as an unfair device to achieve
an inequitable result, defraud creditors, evade
contracts and obligations, or to shield it from
the effects of a court decision. The corporate
fiction has to be disregarded when necessary
in the interest of justice.
In First Philippine International Bank v. Court
of Appeals, et al.,[19] we held:
When the fiction is urged as a means of
perpetrating a fraud or an illegal act or as a
vehicle for the evasion of an existing
obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or
generally the perpetration of knavery or crime,
the veil with which the law covers and isolates
the corporation from the members or
stockholders who compose it will be lifted to
allow for its consideration merely as an
aggregation of individuals.
Also in the above-cited case, we stated
that this Court has pierced the veil of
corporate fiction in numerous cases where it
was used, among others, to avoid a judgment
credit;[20] to avoid inclusion of corporate assets
as part of the estate of a decedent;[21] to
avoid liability arising from debt;[22] when made
use of as a shield to perpetrate fraud and/or
confuse legitimate issues;[23] or to promote
unfair objectives or otherwise to shield them.[24]
In the appealed judgment, the Court of
Appeals sustained respondents arguments of
separateness and its character as a different
corporation which is a non-party or stranger to
this case.
The defense of separateness will be
disregarded where the business affairs of a
subsidiary corporation are so controlled by the
mother corporation to the extent that it
becomes an instrument or agent of its
parent. But even when there is dominance
over the affairs of the subsidiary, the doctrine
of piercing the veil of corporate fiction applies
only when such fiction is used to defeat public
convenience, justify wrong, protect fraud or
defend crime.[25]
We stated in Tomas Lao Construction v.
National Labor Relations Commission,[26] that
the legal fiction of a corporation being a
judicial entity with a distinct and separate
personality was envisaged for convenience
and to serve justice. Therefore, it should not be
used as a subterfuge to commit injustice and
circumvent the law.
Precisely for the above reasons, we grant
the instant petition.
It is obvious that the use by CCC-QC of the
same name of Commercial Credit Corporation
was intended to publicly identify it as a
component of the CCC group of companies
engaged in one and the same business, i.e.,
investment and financing. Aside from CCC-
Quezon City, other franchise companies were
organized such as CCC-North Manila and
CCC-Cagayan Valley. The organization of
subsidiary corporations as what was done here
is usually resorted to for the aggrupation of
capital, the ability to cover more territory and
population, the decentralization of activities
best decentralized, and the securing of other
legitimate advantages. But when the mother
corporation and its subsidiary cease to act in
good faith and honest business judgment,
when the corporate device is used by the
parent to avoid its liability for legitimate
obligations of the subsidiary, and when the
corporate fiction is used to perpetrate fraud or
promote injustice, the law steps in to remedy
the problem. When that happens, the
corporate character is not necessarily
abrogated. It continues for legitimate
objectives. However, it is pierced in order to
remedy injustice, such as that inflicted in this
case.
Factually and legally, the CCC had
dominant control of the business operations of
CCC-QC. The exclusive management contract
insured that CCC-QC would be managed and
controlled by CCC and would not deviate
from the commands of the mother
corporation. In addition to the exclusive
management contract, CCC appointed its
own employee, petitioner, as the resident
manager of CCC-QC.
Petitioners designation as resident
manager implies that he was placed in CCC-
QC by a superior authority. In fact, even after
his assignment to the subsidiary corporation,
petitioner continued to receive his salaries,
allowances, and benefits from CCC, which
later became respondent General Credit
Corporation. Not only that. Petitioner and the
other permanent employees of CCC-QC were
qualified members and participants of the
Employees Pension Plan of CCC.
There are other indications in the record
which attest to the applicability of the identity
rule in this case, namely: the unity of interests,
management, and control; the transfer of
funds to suit their individual corporate
conveniences; and the dominance of policy
and practice by the mother corporation insure
that CCC-QC was an instrumentality or
agency of CCC.
As petitioner stresses, both CCC and CCC-
QC were engaged in the same principal line of
business involving a single transaction
process. Under their discounting arrangements,
CCC financed the operations of CCC-QC. The
subsidiary sold, discounted, or assigned its
accounts receivables to CCC.
The testimony of Joselito D. Liwanag,
accountant and auditor of CCC since 1971,
shows the pervasive and intensive auditing
function of CCC over CCC-QC.[27] The two
corporations also shared the same office
space. CCC-QC had no office of its own.
The complaint in Civil Case No. Q-30583,
instituted by CCC-QC, was even verified by
the director-representative of CCC. The
lawyers who filed the complaint and amended
complaint were all in-house lawyers of CCC.
The challenged decision of the Court of
Appeals states that CCC, now General Credit
Corporation, is not a formal party in the
case. The reason for this is that the complaint
was filed by CCC-QC against petitioner. The
choice of parties was with CCC-QC. The
judgment award in this case arose from the
counterclaim which petitioner set up against
CCC-QC.
The circumstances which led to the filing of
the aforesaid complaint are quite revealing. As
narrated above, the discounting agreements
through which CCC controlled the finances of
its subordinates became unlawful when
Central Bank adopted the DOSRI
prohibitions. Under this rule the directors,
officers, and stockholders are prohibited from
borrowing from their company. Instead of
adhering to the letter and spirit of the
regulations by avoiding DOSRI loans
altogether, CCC used the corporate device to
continue the prohibited practice. CCC
organized still another corporation, the CCC-
Equity Corporation. However, as a wholly
owned subsidiary, CCC-Equity was in fact only
another name for CCC. Key officials of CCC,
including the resident managers of subsidiary
corporations, were appointed to positions in
CCC-Equity.
In order to circumvent the Central Banks
disapproval of CCC-QCs mode of reducing its
DOSRI lender accounts and its directive to
follow Central Bank requirements, resident
managers, including petitioner, were told to
observe a pseudo-compliance with the 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