1. RAYMUNDO ODANI SECOSA v.
HEIRS OF ERWIN The presumption, however, may be rebutted by a clear
SUAREZ FRANCISCO, GR No. 160039, 2004-06-29
Facts:
Traveling behind the motorcycle driven by Francisco was a
sand and gravel truck, which in turn was being tailed by the
Isuzu truck driven by Secosa.
The three vehicles were traversing the southbound lane at a
fairly high speed. When Secosa overtook the sand and gravel
truck, he... bumped the motorcycle causing Francisco to fall.
The rear wheels of the Isuzu truck then ran over Francisco,
which resulted in his instantaneous death. Fearing for his life,
petitioner Secosa left his truck and fled the scene of the
collision.
Issues:
Hence the present petition, based on the following arguments:
I. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT
AFFIRMED THE DECISION OF THE TRIAL COURT THAT
PETITIONER DASSAD DID NOT EXERCISE THE
DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE
SELECTION AND SUPERVISION OF ITS EMPLOYEES
WHICH IS NOT IN ACCORDANCE WITH ARTICLE 2180 OF
THE NEW CIVIL CODE AND RELATED JURISPRUDENCE
ON THE MATTER.
Ruling:
Based on the foregoing provisions, when an injury is caused
by the negligence of an employee, there instantly arises a
presumption that there was negligence on the part of the
employer either in the selection of his employee or in the
supervision over him after such selection.
showing on the part of the employer that it exercised the care
and diligence of a good father of a family in the selection and
supervision of his employee. Hence, to evade solidary liability
for quasi-delict committed by an... employee, the employer
must adduce sufficient proof that it exercised such degree of
care.[6]
In the selection of prospective employees, employers are
required to examine them as to their qualifications, experience,
and service records.[13]
On the other hand, with respect to the supervision of
employees, employers should formulate... standard operating
procedures, monitor their implementation, and impose
disciplinary measures for breaches thereof. To establish these
factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary
evidence.
Principles:
Article 2176 of the Civil Code provides:
Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict
and is governed by... the provisions of this Chapter.
On the other hand, Article 2180, in pertinent part, states:
The obligation imposed by article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons
for whom one is responsible x x x.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged
in any business or industry x x x.
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The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
Petitioner's attempt to prove its "deligentissimi patris familias"
in the selection and supervision of employees through oral
evidence must fail as it was unable to buttress... the same with
any other evidence, object or documentary, which might
obviate the apparent biased nature of the testimony.[10]...
employers must submit concrete proof, including documentary
evidence.
2. PHILIPPINE NATIONAL BANK v. MERELO B. AZNAR,
GR No. 171805, 2011-05-30
Facts:
In 1958, RISCO ceased operation due to business reverses. In
plaintiffs' desire to rehabilitate RISCO, they contributed a total
amount of P212,720.00 which was used in the purchase of the
three (3) parcels of land described as follows
: rights, interest and... participation of the defendant Iluminada
A parcel of land (Lot No. 3597 of the Talisay-Minglanilla
Estate, G.L.R.O. Record No. 3732)
)
) situated in the Municipality of Talisay, Province of Cebu,
Island of Cebu. xxx containing an area of SEVENTY[-]
A parcel of land (Lot 7380 of the Talisay Minglanilla Estate,
G.L.R.O. Record No. 3732
A parcel of land (Lot 1323 of the subdivision plan Psd-No.
5988
After the purchase of the above lots, titles were issued in the
name of RISCO. The amount contributed by plaintiffs
constituted as liens and encumbrances on the aforementioned
properties as annotated in the titles of said lots. Such
annotation was made pursuant to the Minutes... of the Special
Meeting of the Board of Directors of RISCO
(hereinafter referred to as the "Minutes") on March 14, 1961,...
. The President then explained that in a special meeting of the
stockholders previously called for the purpose of putting up
certain amount of P212,720.00 for the rehabilitation of the
Company
Thereafter, various subsequent annotations were made on the
same titles, including the Notice of Attachment and Writ of
Execution both dated August 3, 1962 in favor of herein
defendant PNB, to w
On TCT No. 8921 for Lot 3597:
Entry No. 7416-V-4-D.B. - Notice of Attachment - By the
Provincial Sheriff of Cebu, Civil Case No. 47725, Court of First
Instance of Manila, entitled "Philippine National Bank, Plaintiff,
versus Iluminada Gonzales, et al., Defendants", attaching all
Gonzales and Rural Insurance & Surety Co., Inc. of the two
parcels of land covered by T.C.T. Nos. 8921, Attachment No.
330 and 185.
Entry No. 7416-V-4-D.B. - Notice of Attachment - By the
Provincial Sheriff of Cebu, Civil Case No. 47725, Court of First
Instance of Manila, entitled "Philippine National Bank, Plaintiff,
versus Iluminada Gonzales, et al., Defendants", attaching all
rights, interest and... participation of the defendant Iluminada
Gonzales and Rural Insurance & Surety Co., Inc. of the two
parcels of land covered by T.C.T. Nos. 8921, Attachment No.
330 and 185... ntry No. 7416-V-4-D.B. - Notice of Attachment -
By the Provincial Sheriff of Cebu, Civil Case No. 47725, Court
2
of First Instance of Manila, entitled "Philippine National Bank,
Plaintiff, versus Iluminada Gonzales, et al., Defendants",
attaching all rights, interest and... participation of the
defendant Iluminada Gonzales and Rural Insurance & Surety
Co., Inc. of the two parcels of land covered by T.C.T. Nos.
8921, Attachment No. 330 and 185.
Entry No. 7417-V-4-D.B.
Entry No. 7512-V-4-D.B.
Entry No. 7513-V-4-D.B.
O otherwise established by the evidence.[
On TCT No. 8922 for Lot 7380:
(Same as the annotations on TCT 8921)
On TCT No. 24576 for Lot 1328
Entry No. 1660-V-7-D.B.
Entry No. 1661-V-7-D.B.
Entry No. 1861-V-7-D.B.
Entry No. 1862-V-7-D.B
 Writ of Execution - by the Municipal Court of Manila,
commanding the Provincial Sheriff of Cebu, of
As a result, a Certificate of Sale was issued in favor of
Philippine National Bank, being the lone and highest bidder of
the three (3) parcels of land known as Lot Nos. 3597 and
7380, covered by T.C.T. Nos. 8921 and 8922, respectively,
both situated at Talisay, Cebu, and Lot No.
1328-C covered by T.C.T. No. 24576 situated at Cebu City, for
the amount of Thirty-One Thousand Four Hundred Thirty
Pesos (P31,430.00). Thereafter, a Final Deed of Sale dated
May 27, 1991 in favor of the Philippine National Bank was also
issued and Transfer Certificate of Title
No. 24576 for Lot 1328-C (corrected to 1323-C) was cancelled
and a new certificate of title, TCT 119848 was issued in the
name of PNB on August 26, 1991.
Issues:
What is essential only, to repeat, is that the facts
demonstrating the lapse of the prescriptive period, be
otherwise sufficiently and satisfactorily apparent on the record;
either in the averments of the plaintiffs complaint, or...
Ruling:
Coming now to the question of prescription raised by
defendant Lepanto, it is contended by the latter that the period
to be considered for the prescription of the claim regarding
participation in the profits is only four years, because the
modification of the sharing... embodied in the management
contract is merely verbal, no written document to that effect
having been presented. This contention is untenable. The
modification appears in the minutes of the special meeting of
the Board of Directors of Lepanto held on August 21, 1940, it
having... been made upon the authority of its President, and in
said minutes the terms of modification had been specified.
This is sufficient to have the agreement considered, for the
purpose of applying the statute of limitations, as a written
contract even if the minutes were not signed... by the parties
(3 A.L.R., 2d, p. 831). It has been held that a writing containing
the terms of a contract if adopted by two persons may
constitute a contract in writing even if the same is not signed
by either of the parties (3 A.L.R., 2d, pp. 812-813). Another
authority says... that an unsigned agreement the terms of
which are embodied in a document unconditionally accepted
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by both parties is a written contract (Corbin on Contracts, Vol.
I, p. 85).[31]
Applied to the case at bar, the Minutes which was approved on
March 14, 1961 is considered as a written contract between
Aznar, et al., and RISCO for the reimbursement of the
contributions of the former. As such, the former had a period
of ten (10) years from 1961... within which to enforce the said
written contract. However, it does not appear that Aznar, et
al., filed any action for reimbursement or refund of their
contributions against RISCO or even against PNB. Instead
the suit that Aznar, et al., brought before... the trial court only
on January 28, 1998 was one to quiet title over the properties
purchased by RISCO with their contributions. It is
unmistakable that their right of action to claim for refund or
payment of their contributions had long prescribed. Thus, it
was... reversible error for the Court of Appeals to order PNB to
pay Aznar, et al., the amount of their liens based on the
Minutes with legal interests from the time of PNB's acquisition
of the subject properties.
In view of the foregoing, it is unnecessary for the Court to pass
upon the other issues raised by the parties.
WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021
is DENIED for lack of merit.
3. Gamboa v. Teves etal., GR No. 176579, October 9, 2012
Facts:
The issue started when petitioner Gamboa questioned the
indirect sale of shares involving almost 12 million shares of the
Philippine Long Distance Telephone Company (PLDT) owned
by PTIC to First Pacific. Thus, First Pacific’s common
shareholdings in PLDT increased from 30.7 percent to 37
percent, thereby increasing the total common shareholdings of
foreigners in PLDT to about 81.47%. The petitioner contends
that it violates the Constitutional provision on filipinazation of
public utility, stated in Section 11, Article XII of the 1987
Philippine Constitution, which limits foreign ownership of the
capital of a public utility to not more than 40%. Then, in 2011,
the court ruled the case in favor of the petitioner, hence this
new case, resolving the motion for reconsideration for the
2011 decision filed by the respondents.
Issue: Whether or not the Court made an erroneous
interpretation of the term ‘capital’ in its 2011 decision?
Held/Reason: The Court said that the Constitution is clear in
expressing its State policy of developing an
economy ‘effectively controlled’ by Filipinos. Asserting the
ideals that our Constitution’s Preamble want to achieve, that is
– to conserve and develop our patrimony , hence, the State
should fortify a Filipino-controlled economy. In the 2011
decision, the Court finds no wrong in the construction of the
term ‘capital’ which refers to the ‘shares with voting rights, as
well as with full beneficial ownership’ (Art. 12, sec. 10) which
implies that the right to vote in the election of directors,
coupled with benefits, is tantamount to an effective
control. Therefore, the Court’s interpretation of the term
‘capital’ was not erroneous. Thus, the motion for
reconsideration is denied.
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4. Narra Nickel Mining and Dev’t Corp., et al. v. Redmont
Consolidated Mines Corp., G.R. No. 195580, 21 April 2014
FACTS:
Redmont Consolidated Mines, Inc. (Redmont) filed before the
Panel of Arbitrators (POA) of the DENR separate petitions for
denial of McArthur Mining, Inc. (McArthur), Tesoro and Mining
and Development, Inc. (Tesoro), and Narra Nickel Mining and
Development Corporation (Narra) applications Mineral
Production Sharing Agreement (MPSA) on the ground that
they are not “qualified persons” and thus disqualified from
engaging in mining activities through MPSAs reserved only for
Filipino citizens.
McArthur Mining, Inc., is composed, among others, by
Madridejos Mining Corporation (Filipino) owning 5,997 out of
10,000 shares, and MBMI Resources, Inc. (Canadian) owning
3,998 out of 10,000 shares; MBMI also owns 3,331 out of
10,000 shares of Madridejos Mining Corporation;
Tesoro and Mining and Development, Inc., is composed,
among others, by Sara Marie Mining, Inc. (Filipino) owning
5,997 out of 10,000 shares, and MBMI Resources, Inc.
(Canadian) owning 3,998 out of 10,000 shares; MBMI also
owns 3,331 out of 10,000 shares of Sara Marie Mining, Inc.;
Narra Nickel Mining and Development Corporation, is
composed, among others, by Patricia Louise Mining &
Development Corporation (Filipino) owning 5,997 out of
10,000 shares, and MBMI Resources, Inc. (Canadian) owning
3,998 out of 10,000 shares; MBMI also owns 3,396 out of
10,000 shares of Patricia Louise Mining & Development
Corporation;
ISSUES
(1) Is the Grandfather Rule applicable?
(2) Whether McArthur, Tesoro and Narra are Filipino nationals.
RULINGS
(1) YES.
The instant case presents a situation which exhibits a scheme
employed by stockholders to circumvent the law, creating a
cloud of doubt in the Court’s mind. To determine, therefore,
the actual participation, direct or indirect, of MBMI, the
grandfather rule must be used.
The Strict Rule or the Grandfather Rule pertains to the portion
in Paragraph 7 of the 1967 SEC Rules which states, “but if the
percentage of Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares
corresponding to such percentage shall be counted as of
Philippine nationality.” Under the Strict Rule or Grandfather
Rule Proper, the combined totals in the Investing Corporation
and the Investee Corporation must be traced (i.e.,
“grandfathered”) to determine the total percentage of Filipino
ownership.
(2) NO.
[P]etitioners McArthur, Tesoro and Narra are not Filipino since
MBMI, a 100% Canadian corporation, owns 60% or more of
their equity interests. Such conclusion is derived from
grandfathering petitioners’ corporate owners. xxx Noticeably,
the ownership of the “layered” corporations boils down to xxx
group wherein MBMI has joint venture agreements with,
practically exercising majority control over the corporations
mentioned. In effect, whether looking at the capital structure or
the underlying relationships between and among the
corporations, petitioners are NOT Filipino nationals and must
be considered foreign since 60% or more of their capital
stocks or equity interests are owned by MBMI.
5
5. Bache & Co Inc vs. Ruiz GR L-32409, 27 February 1971
Facts:
On 24 February 1970, Misael P. Vera, Commissioner of
Internal Revenue, wrote a letter addressed to Judge Vivencio
M. Ruiz requesting the issuance of a search warrant against
Bache & Co. (Phil.), Inc. and Frederick E. Seggerman for
violation of Section 46(a) of the National Internal Revenue
Code (NIRC), in relation to all other pertinent provisions
thereof, particularly Sections 53, 72, 73, 208 and 209, and
authorizing Revenue Examiner Rodolfo de Leon to make and
file the application for search warrant which was attached to
the letter.
In the afternoon of the following day, De Leon and his witness,
Arturo Logronio, went to the Court of First Instance (CFI) of
Rizal. They brought with them the following papers: Vera’s
letter-request; an application for search warrant already filled
up but still unsigned by De Leon; an affidavit of Logronio
subscribed before De Leon; a deposition in printed form of
Logronio already accomplished and signed by him but not yet
subscribed; and a search warrant already accomplished but
still unsigned by Judge. At that time the Judge was hearing a
certain case; so, by means of a note, he instructed his Deputy
Clerk of Court to take the depositions of De Leon and
Logronio.
After the session had adjourned, the Judge was informed that
the depositions had already been taken. The stenographer,
upon request of the Judge, read to him her stenographic
notes; and thereafter, the Judge asked Logronio to take the
oath and warned him that if his deposition was found to be
false and without legal basis, he could be charged for perjury.
The Judge signed de Leon’s application for search warrant
and Logronio’s deposition. Search Warrant 2-M-70 was then
signed by Judge and accordingly issued. 3 days later (a
Saturday), the BIR agents served the search warrant to the
corporation and Seggerman at the offices of the corporation on
Ayala Avenue, Makati, Rizal.
The corporation’s lawyers protested the search on the ground
that no formal complaint or transcript of testimony was
attached to the warrant. The agents nevertheless proceeded
with their search which yielded 6 boxes of documents.
On 3 March 1970, the corporation and Seggerman filed a
petition with the Court of First Instance (CFI) of Rizal praying
that the search warrant be quashed, dissolved or recalled, that
preliminary prohibitory and mandatory writs of injunction be
issued, that the search warrant be declared null and void, and
that Vera, Logronio, de Leon, et. al., be ordered to pay the
corporation and Seggerman, jointly and severally, damages
and attorney’s fees.
After hearing and on 29 July 1970, the court issued an order
dismissing the petition for dissolution of the search warrant. In
the meantime, or on 16 April 1970, the Bureau of Internal
Revenue made tax assessments on the corporation in the total
sum of P2,594,729.97, partly, if not entirely, based on the
documents thus seized.
The corporation and Seggerman filed an action for certiorari,
prohibition, and mandamus.
6
Issue:
Whether the corporation has the right to contest the legality of
the seizure of documents from its office.
Held:
The legality of a seizure can be contested only by the party
whose rights have been impaired thereby, and that the
objection to an unlawful search and seizure is purely personal
and cannot be availed of by third parties. In Stonehill, et al. vs.
Diokno, et al. (GR L-19550, 19 June 1967; 20 SCRA 383) the
Supreme Court impliedly recognized the right of a corporation
to object against unreasonable searches and seizures; holding
that the corporations have their respective personalities,
separate and distinct from the personality of the corporate
officers, regardless of the amount of shares of stock or the
interest of each of them in said corporations, whatever, the
offices they hold therein may be; and that the corporate
officers therefore may not validly object to the use in evidence
against them of the documents, papers and things seized from
the offices and premises of the corporations, since the right to
object to the admission of said papers in evidence belongs
exclusively to the corporations, to whom the seized effects
belong, and may not be invoked by the corporate officers in
proceedings against them in their individual capacity.
The distinction between the Stonehill case and the present
case is that: in the former case, only the officers of the various
corporations in whose offices documents, papers and effects
were searched and seized were the petitioners; while in the
latter, the corporation to whom the seized documents belong,
and whose rights have thereby been impaired, is itself a
petitioner.
On that score, the corporation herein stands on a different
footing from the corporations in Stonehill. Moreover, herein,
the search warrant was void inasmuch as First, there was no
personal examination conducted by the Judge of the
complainant (De Leon) and his witness (Logronio).
The Judge did not ask either of the two any question the
answer to which could possibly be the basis for determining
whether or not there was probable cause against Bache & Co.
and Seggerman. The participation of the Judge in the
proceedings which led to the issuance of Search Warrant 2-M-
70 was thus limited to listening to the stenographer’s readings
of her notes, to a few words of warning against the
commission of perjury, and to administering the oath to the
complainant and his witness. This cannot be consider a
personal examination.
Second, the search warrant was issued for more than one
specific offense. The search warrant was issued for at least 4
distinct offenses under the Tax Code. The first is the violation
of Section 46(a), Section 72 and Section 73 (the filing of
income tax returns), which are interrelated. The second is the
violation of Section 53 (withholding of income taxes at source).
The third is the violation of Section 208 (unlawful pursuit of
business or occupation); and the fourth is the violation of
Section 209 (failure to make a return of receipts, sales,
business or gross value of output actually removed or to pay
the tax due thereon). Even in their classification the 6
provisions are embraced in 2 different titles: Sections 46(a),
7
53, 72 and 73 are under Title II (Income Tax); while Sections
208 and 209 are under Title V (Privilege Tax on Business and
Occupation).
Lastly, the search warrant does not particularly describe the
things to be seized. Search Warrant No. 2-M-70 tends to
defeat the major objective of the Bill of Rights, i.e., the
elimination of general warrants, for the language used therein
is so all-embracing as to include all conceivable records of the
corporation, which, if seized, could possibly render its
business inoperative. Thus, Search Warrant 2-M-70 is null and
void.
6. Smith Bell & Co v. Natividad
Smith, Bell & Co. was a corporation in Philippine Islands in the
1900s. Majority of its stockholders were British subjects. It
owned a motor vessel known as Bato which was built for it in
the Philippine Islands in 1916 with more than fifteen tons
gross. The Bato was brought to Cebu to transport Smith, Bell
& Company's merchandise between ports in the Islands. It
applied for a certificate of Philippine Registry in Cebu, the
home port of the vessel, and filed it before the Collector of
Customs. The Collector refused to issue the certificate, giving
as his reason that all the stockholders of Smith, Bell & Co. Ltd.
were not citizens either of the United States or of the
Philippine Islands.
Smith, Bell & Co. aggrieved of the action of the Collector of
Customs, it then filed a writ of mandamus against Joaquin
Natividad, the Collector of Customs of the Port of Cebu, to
compel him to issue a certificate of Philippine Registry to their
motor vessel, BATO. Smith, Bell & Co. invoked the provisions
of the Jones Law (Philippine Autonomy of 1916) saying:
"Sec. 3. That no law shall be enacted in said Islands which
shall deprive any person of life, liberty or property without due
process of law, or deny to any person therein the equal
protection of the laws."
At that time, the Philippine Legislature enacted Act No. 2751
(the House of Senate was already organized, given birth in
1916, as from 1906 to 11916, the Philippine Legislature was
unicameral). The first section of this law amended Section
1172 of the then Administrative Code which reads:
"SEC. 1172, Certificate of Philippine register. – Upon
registration of a vessel of domestic ownership, and of more
than fifteen tons gross, a certificate of Philippine register shall
be issued for it, if the vessel is of domestic ownership and of
fifteen gross or less, the taking of the certificate of Philippine
register shall be optional with the owner."
What then is Domestic Ownership? The law at that time said
that it would mean ownership vested in some one or more of
the following classes of persons: "(a) Citizens or native
inhabitants of the Philippine Islands, (b) Citizens of the United
States residing in the Philippine Islands, (c) Any corporation or
company composed wholly of citizens of the Philippine Islands
or the United States or of both, created under the laws of the
United States, or of any State thereof, or the managing agent
or master of the vessel resides in the Philippine Islands."
Interestingly it was the Pro-Filipino and anti-alien sentiment
that was the cause of the enactment of the law. In an earlier
case resolved the Philippine Supreme Court it frankly stated:
"Without any subterfuge, the apparent purpose of the
Philippine Legislature is seen to be to enact an anti-alien
shipping act. The ultimate purpose of the Legislature is to
encourage Philippine ship-building. This, without doubt, has,
8
likewise, been the intention of the United States Congress in
passing navigation or tariff laws on different occasions. The
object of such law, the United States Supreme Court once
said, was to encourage American trade, navigation, and ship-
building by giving American ship-owners exclusive privileges."
The Supreme Court through the American Associate Justice
Malcolm wrote the decision on September 17, 1919 (at that
time, the Philippine Supreme Court was composed mostly of
Americans but the Chief Justice was always a Filipino) said:
"With full consciousness of the importance of the question, we
nevertheless are clearly of the opinion that the limitation of
domestic ownership for purposes of obtaining a certificate of
Philippine registry in the coastwise trade to citizens of the
Philippine Islands, and to citizens of the United States, does
not violate the provisions of paragraph 1 of section 3 of theAct
of Congress of August 29, 1916."
7.Stonehill v Diokno
Facts:
Forty-two (42) search warrants were issued at different dates
against petitioners and the corporations of which they were
officers. Peace officers were directed to search the persons of
the petitioners and/or their premises of their offices,
warehouses and/or residences. Books of accounts, financial
records, vouchers, correspondence, receipts, ledgers,
journals, portfolios, credit journals, typewriters, and other
documents and/or papers showing all business transactions
including disbursements receipts, balance sheets, and profit
and loss statements and Bobbins were to be seized.
Petitioner contends that the issued search warrants were null
and void as having contravened the Constitution and the Rules
of Court for, among others, it did not describe the documents,
books and things to be seized PARTICULARLY.
Issue:
Whether or not the search warrant has been validly issued.
Whether or not the seized articles may be admitted in court.
Held:
The authority of the warrants in question may be split in two
major groups: (a) those found and seized in the offices of the
corporations; and (b) those found and seized in the residences
of the petitioners.
The petitioners have no cause of action against the contested
warrants on the first major group. This is because corporations
have their respective personalities, separate and distinct from
the personality of their officers, directors and stockholders.
The legality of a seizure can be contested only by the party
whose rights have been impaired, the objection to an unlawful
search and seizure purely being personal cannot be availed by
third parties.
As to the second major group, two important questions need
be settled: (1) whether the search warrants in question, and
the searches and seizures made under authority thereof, are
valid or not; and (2) if the answer is no, whether said
documents, papers and things may be used in evidence
against petitioners.
The Constitution protects the rights of the people from
unreasonable searches and seizure. Two points must be
stressed in connection to this constitutional mandate: (1) no
warrant shall be issued except if based upon probable cause
determined personally by the judge by the manner set in the
provision; and (2) the warrant shall describe the things to be
seized with particularly.
In the present case, no specific offense has been alleged in
the warrant’s application. The averments of the offenses
committed were abstract and therefore, would make it
impossible for judges to determine the existence of probable
cause. Such impossibility of such determination naturally
hinders the issuance of a valid search warrant.
9
The Constitution also requires the things to be seized
described with particularity. This is to eliminate general
warrants.
The Court held that the warrants issued for the search of three
residences of petitioners are null and void.
8. BATAAN SHIPYARD & ENGINEERING CO., INC. vs.
PCGG
FACTS
Challenged in this special civil action of certiorari and
prohibition by a private corporation known as the Bataan
Shipyard and Engineering Co., Inc. are: (1) Executive Orders
Numbered 1 and 2, promulgated by President Corazon C.
Aquino on February 28, 1986 and March 12, 1986,
respectively, and (2) the sequestration, takeover, and other
orders issued, and acts done, in accordance with said
executive orders by the Presidential Commission on Good
Government and/or its Commissioners and agents, affecting
said corporation.
The sequestration order which, in the view of the petitioner
corporation, initiated all its misery was issued on April 14,
1986 by Commissioner Mary Concepcion Bautista.
On the strength of the above sequestration order, Mr. Jose M.
Balde, acting for the PCGG, addressed a letter dated April 18,
1986 to the President and other officers of petitioner firm,
reiterating an earlier request for the production of certain
documents such as Stock Transfer Book and other Legal
documents (Articles of Incorporation, By-Laws, etc.)
Orders were also issued in connection with the sequestration
and takeover, such as termination of Contract for Security
Services and abortion of contract for Improvement of Wharf at
Engineer Island; Change of Mode of Payment of Entry
Charges; Operation of Sesiman Rock Quarry, Mariveles,
Bataa; disposal of scrap, etc.; and the provisional takeover by
the PCGG of BASECO, “the Philippine Dockyard Corporation
and all their affiliated companies.”
While BASECO concedes that “sequestration without resorting
to judicial action, might be made within the context of
Executive Orders Nos. 1 and 2 before March 25, 1986 when
the Freedom Constitution was promulgated, under the
principle that the law promulgated by the ruler under a
revolutionary regime is the law of the land, it ceased to be
acceptable when the same ruler opted to promulgate the
Freedom Constitution on March 25, 1986 wherein under
Section I of the same,y Article IV (Bill of Rights) of the 1973
Constitution was adopted providing, among others, that “No
person shall be deprived of life, liberty and property without
due process of law.” (Const., Art. I V, Sec. 1).”
It declares that its objection to the constitutionality of the
Executive Orders “as well as the Sequestration Order * * and
Takeover Order * * issued purportedly under the authority of
said Executive Orders, rests on four fundamental
considerations: First, no notice and hearing was accorded * *
(it) before its properties and business were taken over;
Second, the PCGG is not a court, but a purely investigative
agency and therefore not competent to act as prosecutor and
judge in the same cause; Third, there is nothing in the
issuances which envisions any proceeding, process or remedy
by which petitioner may expeditiously challenge the validity of
the takeover after the same has been effected; and Fourthly,
being directed against specified persons, and in disregard of
the constitutional presumption of innocence and general rules
and procedures, they constitute a Bill of Attainder.”
10

It argues that the order to produce corporate records from
1973 to 1986, which it has apparently already complied with,
was issued without court authority and infringed its
constitutional right against self-incrimination, and
unreasonable search and seizure. 14 BASECO further
contends that the PCGG had unduly interfered with its right of
dominion and management of its business affairs.
ISSUE
Whether or not the sequestration order dated April 14, 1986,
and all other orders subsequently issued and acts done on the
basis thereof, inclusive of the takeover order of July 14, 1986
and the termination of the services of the BASECO executives
are valid;
DECISION
Yes. The petition cannot succeed. The writs of certiorari and
prohibition prayed for will not be issued. Other evidence
submitted to the Court by the Solicitor General proves that
President Marcos not only exercised control over BASECO,
but also that he actually owns well nigh one hundred percent
of its outstanding stock.
Executive Orders Not a Bill of Attainder – In the first place,
nothing in the executive orders can be reasonably construed
as a determination or declaration of guilt. On the contrary, the
executive orders, inclusive of Executive Order No. 14, make it
perfectly clear that any judgment of guilt in the amassing or
acquisition of “ill-gotten wealth” is to be handed down by a
judicial tribunal, in this case, the Sandiganbayan, upon
complaint filed and prosecuted by the PCGG. In the second
place, no punishment is inflicted by the executive orders, as
the merest glance at their provisions will immediately make
apparent. In no sense, therefore, may the executive orders be
regarded as a bill of attainder.
No Violation of Right against Self-Incrimination and
Unreasonable Searches and Seizures – It is elementary that
the right against self-incrimination has no application to
juridical persons. While an individual may lawfully refuse to
answer incriminating questions unless protected by an
immunity statute, it does not follow that a corporation, vested
with special privileges and franchises, may refuse to show its
hand when charged with an abuse ofsuchprivileges * *
Scope and Extent of Powers of the PCGG – PCGG cannot
exercise acts of dominion over property sequestered, frozen or
provisionally taken over. AS already earlier stressed with no
little insistence, the act of sequestration; freezing or provisional
takeover of property does not import or bring about a
divestment of title over said property; does not make the
PCGG the owner thereof.
The PCGG may thus exercise only powers of administration
over the property or business sequestered or provisionally
taken over, much like a court-appointed receiver, such as to
bring and defend actions in its own name; receive rents;
collect debts due; pay outstanding debts; and generally do
such other acts and things as may be necessary to fulfill its
mission as conservator and administrator.
Powers over Business Enterprises Taken Over by Marcos or
Entities or Persons Close to him; Limitations Thereon – Now,
in the special instance of a business enterprise shown by
evidence to have been “taken over by the government of the
Marcos Administration or by entities or persons close to former
President Marcos,” the PCGG is given power and authority, as
already adverted to, to “provisionally take (it) over in the public
11
interest or to prevent * * (its) disposal or dissipation;” and since
the term is obviously employed in reference to going concerns,
or business enterprises in operation, something more than
mere physical custody is connoted; the PCGG may in this
case exercise some measure of control in the operation,
running, or management of the business itself. But even in this
special situation, the intrusion into management should be
restricted to the minimum degree necessary to accomplish the
legislative will, which is “to prevent the disposal or dissipation”
of the business enterprise.
Voting of Sequestered Stock; Conditions Therefor – So, too, it
is within the parameters of these conditions and circumstances
that the PCGG may properly exercise the prerogative to vote
sequestered stock of corporations, granted to it by the
President of the Philippines through a Memorandum dated
June 26, 1986. In the case at bar, there was adequate
justification to vote the incumbent directors out of office and
elect others in their stead because the evidence showed prima
facie that the former were just tools of President Marcos and
were no longer owners of any stock in the firm, if they ever
were at all.
No Sufficient Showing of Other Irregularities -As to the other
irregularities complained of by BASECO, i.e., the cancellation
or revision, and the execution of certain contracts, inclusive of
the termination of the employment of some of its executives,
this Court cannot, in the present state of the evidence on
record, pass upon them. It is not necessary to do so. The
issues arising therefrom may and will be left for initial
determination in the appropriate action.
WHEREFORE, the petition is dismissed. The temporary
restraining order issued on October 14, 1986 is lifted.
9. PNB v. CA
G.R. No. L-27155 May 18, 1978
Lessons Applicable: Liability for Torts (Corporate Law)
FACTS:
 PNB executed its bond w/ Rita Gueco Tapnio as principal,
in favor of the PNB to guarantee the payment of Tapnio's
account with PNB.
 Indemnity Agreement w/ 12% int. and 15% atty. fees
 Sept 18 1957: PNB sent a letter of demand for Tapnio to
pay the reduced amount of 2,379.91
 PNB demanded both oral and written but to no avail
 Tapnio mortgaged to the bank her lease agreement w/
Jacobo Tuazon for her unused export sugar quota at
P2.80 per picular or a total of P2,800 which was more than
the value of the bond
 PNB insisted on raising it to P3.00 per picular so Tuazon
rejected the offer
ISSUE: W/N PNB should be liable for tort
HELD: YES. affirmed.
 While Tapnio had the ultimate authority of approving or
disapproving the proposed lease since the quota was
mortgaged to the bank, it certainly CANNOT escape its
responsibility of observing, for the protection of the interest
of Tapnio and Tuazon, that the degree of care, precaution
and vigilance which the circumstances justly demand in
approving or disapproving the lease of said sugar quota
 Art. 21 of the Civil Code: any person who wilfully causes
loss or injury to another in a manner that is contrary to
12
 morals, good customs or public policy shall compensate
the latter for the damage.
10. Professional Services, Inc. v. CA
G.R. No. 126297 February 2, 2010
Lessons Applicable: Liability for Torts (Corporate Law)
FACTS:
 Enrique Agana told his wife Natividad Agana to go look for
their neighbor, Dr. Ampil, a surgeon staff member of
Medical City, a prominent and known hospital
 Natividad suffered from injury due to 2 gauges left inside
her body so they sued Professional Inc. (PSI)
 Despite, the report of 2 missing gauzes after the operation
PSI did NOT initiate an investigation
ISSUE: W/N PSI should be liable for tort.
HELD: YES. 15M + 12% int. until full satisfaction.
 While PSI had no power to control the means/method by
which Dr. Ampil conducted the surgery on Natividad, they
had the power to review or cause the review
 PSI had the duty to tread on as captain of the ship for the
purpose of ensuing the safety of the patients availing
themselves of its services and facilities
 PSI defined its standards of corporate conduct:
1. Even after her operation to ensure her safety as a
patient
2. NOT limited to record the 2 missing gauzes
3. Extended to determining Dr. Ampils role in it,
bringing the matter to his attention and correcting
his negligence
 Admission bars itself from arguing that its corp. resp. is
NOT yet in existence at the time Natividad underwent
treatment
 Dr. Ampil - medial negligence
 PSI - Corporate Negligence
 NOTE:
 Liability unique to this case because of implied agency and
admitted corporate duty
 26 years already and Dr. Ampil's status could no longer be
ascertained
11. CHILD LEARNING CENTER, INC. and SPOUSES
EDGARDO L. LIMON and SYLVIA S. LIMON, vs. TIMOTHY
TAGARIO,
FACTS: Timothy Tagoria was a grade IV student at
Marymount School, an academic institution operated and
maintained by Child Learning Center, Inc. (CLC). One
afternoon, he found himself locked inside the boy’s comfort
room in Marymount. He started to panic so he banged and
kicked the door and yelled for help. No help arrived. He then
decided to open the window to call for help. As he opened the
window, Timothy went right through and fell down three
stories. Timothy was hospitalized and given medical treatment
for serious multiple physical injuries. He, assisted by his
parents, filed a civil action against the CLC, the members of its
Board of Directors which includes the Spouses Limon. They
claim that the school was negligent for not installing iron grills
at the window of the boy’s comfort room. CLC, in its defense,
maintained that there was nothing defective about the locking
mechanism of the door and that the fall of Timothy was not
due to its fault or negligence. CLC further maintained that it
had exercised the due care and diligence of a good father of a
13
family to ensure the safety, well-being and convenience of its
students. The trial court ruled in favor of the respondents. The
respondents proceeded their appeal to the Court of Appeals
who affirmed the trial court’s ruling in toto.
ISSUE: Whether or not the school was negligent for the boy’s
accidental fall.
RULING: YES. In every tort case filed under Article 2176 of
the Civil Code, plaintiff has to prove by a preponderance of
evidence: (1) the damages suffered by the plaintiff; (2) the fault
or negligence of the defendant or some other person for
whose act he must respond; and (3) the connection of cause
and effect between the fault or negligence and the damages
incurred. In this tort case, respondents contend that CLC failed
to provide precautionary measures to avoid harm and injury to
its students in two instances: (1) failure to fix a defective door
knob despite having been notified of the problem; and (2)
failure to install safety grills on the window where Timothy fell
from. During trial, it was found that the lock was defective. The
architect witness testified that he did not verify if the doorknob
at the comfort room was actually put in place. Further, the fact
that Timothy fell out through the window shows that the door
could not be opened from the inside.
That sufficiently points to the fact that something was wrong
with the door, if not the door knob, under the principle of res
ipsa loquitor. The doctrine of res ipsa loquitor applies where
(1) the accident was of such character as to warrant an
inference that it would not have happened except for the
defendant’s negligence; (2) the accident must have been
caused by an agency or instrumentality within the exclusive
management or control of the person charged with the
negligence complained of; and (3) the accident must not have
been due to any voluntary action or contribution on the part of
the person injured. Petitioners are clearly answerable for
failure to see to it that the doors of their school toilets are at all
times in working condition. The fact that a student had to go
through the window, instead of the door, shows that something
was wrong with the door. As to the absence of grills on the
window, petitioners contend that there was no such
requirement under the Building Code. Nevertheless, the fact is
that such window, as petitioners themselves point out, was
approximately 1.5 meters from the floor, so that it was within
reach of a student who finds the regular exit, the door, not
functioning. Petitioners, with the due diligence of a good father
of the family, should have anticipated that a student, locked in
the toilet by a non-working door, would attempt to use the
window to call for help or even to get out. Considering all the
circumstances, therefore, there is sufficient basis to sustain a
finding of liability on petitioners’ part. Petitioners’ argument that
CLC exercised the due diligence of a good father of a family in
the selection and supervision of its employees is not decisive.
Due diligence in the selection and supervision of employees is
applicable where the employer is being held responsible for
the acts or omissions of others under Article 2180 of the Civil
Code. In this case, CLC’s liability is under Article 2176 of the
Civil Code, premised on the fact of its own negligence in not
ensuring that all its doors are properly maintained. The Court’s
pronouncement that Timothy climbed out of the window
because he could not get out using the door, negates
petitioners’ other contention that the proximate cause of the
accident was Timothy’s own negligence. The injuries he
sustained from the fall were the product of a natural and
14
continuous sequence, unbroken by any intervening cause, that
originated from CLC’s own negligence. PETITION DENIED.
12.Sia v. People
G.R. No. L-30896. April 28, 1983.
Lessons Applicable: Corporate Criminal Liability (Criminal
Procedure)
FACTS:
 Sia was the President and General Manager of the Metal
Manufacturing of the Philippines Inc. (MEMAP)
 He obtained 150 M/T Cold Rolled Sheets consigned to
Continental Bank and converted it into personal used
instead of selling it and turning over the proceeds
 It resulted to a damage of 46,819 php, interest of
28,736.47 php and forfeited deposit of 71,023.60 php
ISSUE: W/N Sia can be criminally charged.
HELD: NO. Acquit.
 Sia did not act for and on behalf of MEMAP
 For crimes committed by corp. officers criminally charged,
existence of criminal liability for which the petition is being
prosecuted must be clear and certain, here it may not be
said to be beyond reasonable doubt
 Allegation v. evidence = strictly in harmony
 The merchandise was manufactured before sold but
although the bank was aware of this, it was not in the trust
agreement
13. Espiritu v. Petron
G.R. No. 170891, 24 November 2009, 625 SCRA 245
Topic:Criminal liability; civil liability for tort
Facts:
1. Petron Corporation (PETRON) sold and distributed
liquefied petroleum gas (LPG) in cylinder tanks that carried its
trademark Gasul.
2. Carmen J. Doloiras owned and operated Kristina
Patricia Enterprises (KPE), the exclusive distributor of Gasul
LPGs in the whole of Sorsogon, managed by Jose Nelson
Doloiras (JOSE).
3. Bicol Gas Refilling Plant Corporation (BICOL GAS),
also in the business of selling and distributing LPGs in
Sorsogon, their tanks carry the trademark Bicol Savers Gas,
managed by Audie Llona (LLONA).
4. Due to trade and competition, any distributor of LPGs
at times acquired possession of LPG cylinder tanks belonging
to other distributors operating in the same area (a.k.a.
captured cylinders).
5. JOSE: April 2001 Bicol Gas agreed with KPE for the
swapping of captured cylinders(one distributor could not refill
captured cylinders with its own brand of LPG).
6. In the course of implementing this arrangement, JOSE
visited the BICOL GAS refilling plant --- he noticed several
Gasul tanks in Bicol Gas’ possession.
15
7. They agreed to have a swap (after LLONA was given
permission for the swap) involving around 30 Gasul tanks held
by Bicol Gas in exchange for assorted tanks held by KPE.
8. JOSE noticed that Bicol Gas still had a number of
Gasul tanks in its yard --- offered to make a swap for these but
LLONA declined --- Bicol Gas owners wanted to send those
tanks to Batangas.
9. JOSE observed on almost a daily basis that Bicol Gas
trucks carried a load of Gasul tanks (he noted that KPEs
volume of sales dropped significantly from June to July 2001).
10. August 4, 2001 - JOSE saw a Bicol Gas truck on the
Maharlika Highway --- it had on it one unsealed 50-kg Gasul
tank and one 50-kg Shellane tank.
11. JOSE followed the truck and when it stopped at a
store, he asked the driver, Jun Leorena, and the Bicol Gas
sales representative, Jerome Misal, about the Gasul tank in
their truck (JOSE found that it wasn’t empty) --- Misal and
Leorena then admitted that the Gasul and Shellane tanks on
their truck belonged to a customer who had them filled up by
Bicol Gas.
12. Because of the incident, KPE filed a complaintfor
violations of R.A. 623 (illegally filling up registered cylinder
tanks), as amended, and Sections 155 (infringement of trade
marks) and 169.1 (unfair competition) of the Intellectual
Property Code (R.A. 8293).
Provincial Prosecutor – Probable Cause only for violation of
R.A. 623, only Mirabena, Misal, Leorena, and petitioner Llona,
could be charged.
Office of the Regional State Prosecutor, Region V (Pet. For
Review) - ordered the filing of additional informations against
the four employees of Bicol Gas for unfair competition, no
case for trademark infringement was present.
Secretary of Justice- denied appeal of Petron and KPE and
their motion for reconsideration.
CA(certiorari)- reversed the Secretary of Justices ruling.
ISSUE: WON the corporation can be sued due to its
owner’s/employee’s/stockholder’s criminal act/violation
RATIO:
• Bicol Gas is a corporation. As such, it is an entity
separate and distinct from the persons of its officers, directors,
and stockholders. It has been held, however, that corporate
officers or employees, through whose act, default or omission
the corporation commits a crime, may themselves be
individually held answerable for the crime.
• The owners of a corporate organization are its
stockholders and they are to be distinguished from its directors
and officers. The petitioners here, with the exception of Audie
Llona, are being charged in their capacities as stockholders of
Bicol Gas. But the Court of Appeals forgets that in a
corporation, the management of its business is generally
vested in its board of directors, not its
stockholders.Stockholders are basically investors in a
16
corporation. They do not have a hand in running the day-to-
day business operations of the corporation unless they are at
the same time directors or officers of the corporation. Before a
stockholder may be held criminally liable for acts committed by
the corporation, therefore, it must be shown that he had
knowledge of the criminal act committed in the name of the
corporation and that he took part in the same or gave his
consent to its commission, whether by action or inaction.
• The finding of the Court of Appeals that the employees
could not have committed the crimes without the consent,
[abetment], permission, or participation of the owners of Bicol
Gas is a sweeping speculation especially since, as
demonstrated above, what was involved was just one Petron
Gasul tank found in a truck filled with Bicol Gas tanks.
Although the KPE manager heard petitioner LLONA say that
he was going to consult the owners of Bicol Gas regarding the
offer to swap additional captured cylinders, no indication was
given as to which Bicol Gas stockholders LLONA consulted. It
would be unfair to charge all the stockholders involved, some
of whom were proved to be minors. No evidence was
presented establishing the names of the stockholders who
were charged with running the operations of Bicol Gas. The
complaint even failed to allege who among the stockholders
sat in the board of directors of the company or served as its
officers.
14. Gosiaco v. Ching
 Jaime Gosiaco, as an investmednt, granted a loan to
ASB Holdings for a period of 48 days with a 10.5%
interest or 112,000
 ASB issued 2 checks to cover the loan and the interest
drawn against DBS Bank Makati
 Gosiaco went to DBS San Juan branch to deposit the
checks upon maturity but they were DISHONORED
due to a STOP PAYMENT ORDER and
INSUFFICIENCY OF FUNDS
 Gosiaco informed ASB 2x about the dishonor and
DEMANDED REPLACEMENT CHECKS or RETURN
OF THE MONEY but to no avail
- hence a complaint for violation of BP 22 was
filed with MTC San Juan
 Ching was arraigned but Casta remained at large
 Ching:
- denied liability, mere employee of ASB
- no knowledge how much money ASB had in the
banks
- responsibility to check how much was with
other dept
 Gosiaco moved to implead ASB and its President
Roxas but was denied because case had already been
submitted for final decision
 MTC: Ching ACQUITTED of criminal liability but NOT
ABSOLVED from civil liability
- as a corporate officer of ASB, she is CIVILLY
LIABLE SINCE SHE WAS A SIGNATORY TO
THE CHECKS
 both parties appealed ot the RTC
- Gosiaco: MTC failed to hold ASB and Roxas
jointly or severally liable with Ching
- Ching: no civil liability because they were
contractual obligations of ASB
17
 RTC: CHING NO CIVIL LIABILITY (obligation fell
squarely on ASB), but still DENIED the motion to
implead ASB and Roxas
 Gosiaco appeal to CA: RTC ERRED IN ABSOLVING
CHING and upholding to not implead ASB and Roxas
and in refusing to pierce the corporate veil of ASB and
hold Roxas liable
 CA: RTC DECISION AFFIRMED
- amount to be recovered was a loan to ASB
AND NOT TO CHING
- Roxas testimony: checks issued by Ching were
for and in behalf of ASB
- -ASB CANNOT BE IMPLEADED IN A BP 22
CASE SINCE IT'S NOT A NATURAL PERSON
- -Roxas under PI
- -no need to pierce corp veil since no requisites
were present
 -appeal to SC via rule 45
- -WON a corporate officer who signed a
bouncing check is civilly liable under BP 22
- -WON ASB can be impleaded in a BP 22 case
- -WON there's a basis to pierce the corporate
veil of ASB
 Held: DENIED, without prejudice to the right of
petitioner Jaime U. Gosiaco to pursue an independent
civil action against ASB Holdings Inc. for the amount of
the subject checks
 -BP 22, Section 1 says:
- -Where the check is drawn by a corporation,
company or entity, the person or persons, who
actually signed the check in behalf of such
drawer shall be liable under this Act.
 -punishes the act of making and issuing bouncing
checks. It is the act itself of issuing the checks which is
considered malumprohibitum, covers all types of
checks.
 -a corporate officer who issues a worthless check in
the corporate name he may be held personally liable
and he cannot shield himself from liability from his own
acts on the ground that it was a corporate act and not
his personal act
 -HOWEVER, THE GENERAL RULE IS: a corporate
officer who issues a bouncing corporate check can only
be held civilly liable when he is convicted
 -Bautista v. Auto Plus Traders Inc: civil liability of a
corporate officer in a B.P. Blg. 22 case is extinguished
with the criminal liability
 -hence, by principle of stare decisis, we follow this
precedent and AFFIRM THE DISCHARGE OF CHING
OF ANY CIVIL LIABILITY ARISING FROM THE BP 22
CASE FILED AGAINST HER, ON ACCOUNT OF HER
ACQUITTAL IN THE CRIMINAL CHARGE
 -however, records clearly show that ASB is civilly
obligated to petitioner
 -Gosiaco has been proceeding from the premise that
he is unable to file a separate civil action against ASB
to recover amounts- which is why he's been trying to
implead ASB as a defendant in the BP 22 case, even if
the case is criminal in nature
- -anchored on Rule 111, Section 1—Institution
of criminal and civil action
 -
 (b) The criminal action for violation of Batas
PambansaBlg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such
civil action separately shall be allowed.
18
 Upon filing of the aforesaid joint criminal and civil
actions, the offended party shall pay in full the filing
fees based on the amount of the check involved, which
shall be considered as the actual damages claimed.
Where the complainant or information also seeks to
recover liquidated, moral, nominal, temperate or
exemplary damages, the offended party shall pay the
filing fees based on the amounts alleged therein. If the
amounts are not so alleged but any of these damages
are subsequently awarded by the court, the filing fees
based on the amount awarded shall constitute a first
lien on the judgment.
 -COURT DISAGREES. Nowhere in B.P. Blg. 22 is it
provided that a juridical person may be impleaded as
an accused or defendant in the prosecution for
violations of that law, even in the litigation of the civil
aspect thereof
- -statutory construction: penal laws strictly
construed in favor of the accused
 -HOWEVER, Gosiaco can't be prevented from
recovering amounts due and demandable to him.
 -rules of procedure can't defeat a substantive right
 -but technically, nothing in Section 1(b) of Rule 111
prohibits the RESERVATION OF A SEPARATE CIVIL
ACTION AGAINST THE JURIDICAL PERSON ON
WHOSE BEHALF THE CHECK WAS ISSUED
 -WHAT THE RULES PROHIBIT IS THE
RESERVATION OF A SEPARATE CIVIL ACTION
AGAINST THE NATURAL PERSON CHARGED WITH
THE BP 22 VIOLATION, including such corporate
officer who had signed the bounced check
 -B.P. Blg. 22 imposes a distinct civil liability on the
signatory of the check which is distinct from the civil
liability of the corporation for the amount represented
from the check.
- -The civil liability attaching to the signatory
arises from the wrongful act of signing the
check despite the insufficiency of funds in the
account, while the civil liability attaching to the
corporation is itself the very obligation covered
by the check or the consideration for its
execution.
- -Yet these civil liabilities are mistaken to be
indistinct. The confusion is traceable to the
singularity of the amount of each.
 -BP 22 itself fused this criminal liability of the signer of
the check in behalf of the corp with the corresponding
civil liability of the corp itself BY ALLOWING THE
COMPLAINANT TO RECOVER SUCH CIVIL
LIABILITY NOT FROM THE CORP BUT FROM THE
PERSON WHO SIGNED THE CHECK
 -the civil action that is impliedly instituted in the B.P.
Blg. 22 action is only the civil liability of the signatory,
and not that of the corporation itself, the distinctness of
the cause of action against the signatory and that
against the corporation is rendered beyond dispute
 -prior to the ROC amendments: it was permissible to
pursue criminal liability against the signatory while
going after the corporation itself for the civil liability
 -In the B.P. Blg. 22 case: what the trial court should
determine whether or not the signatory had signed the
check with knowledge of the insufficiency of funds or
credit in the bank account,
 -in the civil case: The trial court should ascertain
whether or not the obligation itself
 is valid and demandable.
19
 -The litigation of both questions could, in theory,
proceed independently and simultaneously without
being ultimately conclusive on one or the other.
 -also, if the employee has no sufficient funds to cover
the debt, the corporation can't be held subsidiarily
liable
- -the Revised Penal Code imposes subsidiary
civil liability to corporations for criminal acts
engaged in by their employees in the discharge
of their duties, said subsidiary liability applies
only to felonies, and not to crimes penalized by
special laws such as B.P. Blg. 22
- -nothing in B.P. Blg. 22 imposes such
subsidiary liability to the corporation in whose
name the check is actually issued
 -Clearly then, should the check signatory be unable to
pay the obligation incurred by the corporation, the
complainant would be bereft of remedy unless the right
of action to collect on the liability of the corporation is
recognized
 -concerns:
- -double recovery: BP 22 case sa the employee
and civil case sacorp
 -best we refer the matter to the
Committee on Rules for the formulation
of proper guidelines to prevent that
possibility
- -payment of filing fees in both the B.P. Blg. 22
case and the civil action against the corporation
 -we see no evil or cause for distress if
the plaintiff were made to pay filing fees
based on the amount of the check in
both the B.P. Blg. 22 case and the civil
action
 -the plaintiff therein made the deliberate
option to file two separate cases, even if
the recovery of the amounts of the
check against the corporation could
evidently be pursued through the civil
action alone.
 -but in this case, CONSIDERING THE
PREVIOUS LEGAL CONFUSION ON
WON HE WAS AUTHORIZED TO
FILED THE CIVIL CASE AGAINST
ASB, GOSIACO SHOULD BE
EXEMPTED FROM PAYING THE
FILING FEES BASED ON THE
AMOUNT OF THE CHECKS IF HE
FILES A CASE AGAINST ASB
 -he shouldn't be barred by prescription
either-- to run from the date of finality of
this decision
 -Let a copy of this Decision be REFERRED to the
Committee on Revision of the Rules for the formulation
of the formal rules of procedure to govern the civil
action for the recovery of the amount covered by the
check against the juridical person which issued it.
15. Ching v The Secretary of Justice G. R. No. 164317
February 6, 2006
MARCH 16, 2014LEAVE A COMMENT
The failure of person to turn over the proceeds of the sale of
the goods covered by the trust receipt to the entruster or to
return said goods, if not sold, is a public nuisance to be abated
by the imposition of penal sanctions
20
Facts: Ching was the Senior Vice-President of Philippine
Blooming Mills, Inc. (PBMI). Sometime in September to
October 1980, PBMI, through petitioner, applied with the Rizal
Commercial Banking Corporation (respondent bank) for the
issuance of commercial letters of credit to finance its
importation of assorted goods. Under the receipts, petitioner
agreed to hold the goods in trust for the said bank, with
authority to sell but not by way of conditional sale, pledge or
otherwise; and in case such goods were sold, to turn over the
proceeds thereof as soon as received, to apply against the
relative acceptances and payment of other indebtedness to
respondent bank. In case the goods remained unsold within
the specified period, the goods were to be returned to
respondent bank without any need of demand. Thus, said
“goods, manufactured products or proceeds thereof, whether
in the form of money or bills, receivables, or accounts separate
and capable of identification” were respondent bank’s
property. When the trust receipts matured, petitioner failed to
return the goods to respondent bank, or to return their value
amounting to P6,940,280.66 despite demands. Thus, the bank
filed a criminal complaint for estafa6 against petitioner in the
Office of the City Prosecutor of Manila.
Issue: Whether or not Ching is liable for Estafa
Held: In the case at bar, the transaction between petitioner
and respondent bank falls under the trust receipt transactions
envisaged in P.D. No. 115. Respondent bank imported the
goods and entrusted the same to PBMI under the trust
receipts signed by petitioner, as entrustee, with the bank as
entruster. The failure of person to turn over the proceeds of
the sale of the goods covered by the trust receipt to the
entruster or to return said goods, if not sold, is a public
nuisance to be abated by the imposition of penal sanctions.—It
must be stressed that P.D. No. 115 is a declaration by
legislative authority that, as a matter of public policy, the failure
of person to turn over the proceeds of the sale of the goods
covered by a trust receipt or to return said goods, if not sold, is
a public nuisance to be abated by the imposition of penal
sanctions.
Failure of the entrustee to turn over the proceeds of the sale of
the goods covered by the trust receipts to the entruster or to
return said goods if they were not disposed of in accordance
with the terms of the trust receipt is a crime under P.D. No.
115, without need of proving intent to defraud.—In Colinares v.
Court of Appeals, the Court declared that there are two
possible situations in a trust receipt transaction. The first is
covered by the provision which refers to money received under
the obligation involving the duty to deliver it (entregarla) to the
owner of the merchandise sold. The second is covered by the
provision which refers to merchandise received under the
obligation to return it (devolvera) to the owner. Thus, failure of
the entrustee to turn over the proceeds of the sale of the
goods cov- ered by the trust receipts to the entruster or to
return said goods if they were not disposed of in accordance
with the terms of the trust receipt is a crime under P.D. No.
115, without need of proving intent to defraud. The law
punishes dishonesty and abuse of confidence in the handling
of money or goods to the prejudice of the entruster, regardless
of whether the latter is the owner or not. A mere failure to
deliver the proceeds of the sale of the goods, if not sold,
constitutes a criminal offense that causes prejudice, not only to
another, but more to the public interest.
P.D. No. 115 is malum prohibitum but is classified as estafa
under paragraph 1(b), Article 315 of the Revised Penal Code,
or estafa with abuse of confidence.—The crime defined in P.D.
No. 115 is malum prohibitum but is classified as estafa under
paragraph 1(b), Article 315 of the Revised Penal Code, or
estafa with abuse of confidence. It may be committed by a
corporation or other juridical entity or by natural persons.
21
However, the penalty for the crime is imprisonment for the accounts separate and capable of identification - RCBC’s
periods provided in said Article 315. property
 When the trust receipts matured, Ching failed to return the
goods to RCBC, or to return their value amounting
toP6,940,280.66 despite demands.
 RCBC filed a criminal complaint for estafa against
164317 February 6, 2006
petitioner in the Office of the City Prosecutor of Manila.
Lessons Applicable: Corp. Officers or employees, through
 December 8, 1995: no probable cause to charge petitioner
whose act, default or omission the corp. commits a crime, are
with violating P.D. No. 115, as petitioner’s liability was only
themselves individually guilty of the crime (Corporate Law)
civil, not criminal, having signed the trust receipts as surety
 RCBC appealed the resolution to the Department of
FACTS:
Justice (DOJ) via petition for review
 On July 13, 1999: reversed the assailed resolution of the
City Prosecutor
 Sept-Oct 1980: PBMI, through Ching, Senior VP of
 execution of said receipts is enough to indict the Ching as
Philippine Blooming Mills, Inc. (PBMI), applied with the
the official responsible for violation of P.D. No. 115
Rizal Commercial Banking Corporation (RCBC) for the
 April 22, 2004: CA dismissed the petition for lack of merit
issuance of commercial letters of credit to finance its
and on procedural grounds
importation of assorted goods
 Ching filed a petition for certiorari, prohibition and
 RCBC approved the application, and irrevocable letters of
mandamus with the CA
credit were issued in favor of Ching.
ISSUE: W/N Ching should be held criminally liable.
 The goods were purchased and delivered in trust to PBMI.

 Ching signed 13 trust receipts as surety, acknowledging

HELD: YES. DENIED for lack of merit
delivery of the goods
 There is no dispute that it was the Ching executed the 13
 Under the receipts, Ching agreed to hold the goods in trust
trust receipts.
for RCBC, with authority to sell but not by way of
 law points to him as the official responsible for the offense
conditional sale, pledge or otherwise
 Since a corporation CANNOT be proceeded against
 In case such goods were sold, to turn over the proceeds
criminally because it CANNOT commit crime in which
thereof as soon as received, to apply against the relative
personal violence or malicious intent is required, criminal
acceptances and payment of other indebtedness to
action is limited to the corporate agents guilty of an act
respondent bank.
amounting to a crime and never against the corporation
 In case the goods remained unsold within the specified
itself
period, the goods were to be returned to RCBC without
 execution by Ching of receipts is enough to indict him as
any need of demand.
the official responsible for violation of PD 115
 goods, manufactured products or proceeds thereof,
whether in the form of money or bills, receivables, or

22
 RCBC is estopped to still contend that PD 115 covers only
goods which are ultimately destined for sale and not
goods, like those imported by PBM, for use in
manufacture.
 Moreover, PD 115 explicitly allows the prosecution of
corporate officers ‘without prejudice to the civil liabilities
arising from the criminal offense’ thus, the civil liability
imposed on respondent in RCBC vs. Court of Appeals
case is clearly separate and distinct from his criminal
liability under PD 115
 Ching’s being a Senior Vice-President of the Philippine
Blooming Mills does not exculpate him from any liability
 The crime defined in P.D. No. 115 is malum prohibitum but
is classified as estafa under paragraph 1(b), Article 315 of
the Revised Penal Code, or estafa with abuse of
confidence. It may be committed by a corporation or other
juridical entity or by natural persons. However, the penalty
for the crime is imprisonment for the periods provided in
said Article 315.
 law specifically makes the officers, employees or other
officers or persons responsible for the offense, without
prejudice to the civil liabilities of such corporation and/or
board of directors, officers, or other officials or employees
responsible for the offense
 rationale: officers or employees are vested with the
authority and responsibility to devise means necessary to
ensure compliance with the law and, if they fail to do so,
are held criminally accountable; thus, they have a
responsible share in the violations of the law
 If the crime is committed by a corporation or other juridical
entity, the directors, officers, employees or other officers
thereof responsible for the offense shall be charged and
penalized for the crime, precisely because of the nature of
the crime and the penalty therefor. A corporation cannot
be arrested and imprisoned; hence, cannot be penalized
for a crime punishable by imprisonment. However, a
corporation may be charged and prosecuted for a crime if
the imposable penalty is fine. Even if the statute prescribes
both fine and imprisonment as penalty, a corporation may
be prosecuted and, if found guilty, may be fined
 When a criminal statute designates an act of a corporation
or a crime and prescribes punishment therefor, it creates a
criminal offense which, otherwise, would not exist and
such can be committed only by the corporation. But when
a penal statute does not expressly apply to corporations, it
does not create an offense for which a corporation may be
punished. On the other hand, if the State, by statute,
defines a crime that may be committed by a corporation
but prescribes the penalty therefor to be suffered by the
officers, directors, or employees of such corporation or
other persons responsible for the offense, only such
individuals will suffer such penalty. Corporate officers or
employees, through whose act, default or omission the
corporation commits a crime, are themselves individually
guilty of the crime. The principle applies whether or not
the crime requires the consciousness of wrongdoing. It
applies to those corporate agents who themselves commit
the crime and to those, who, by virtue of their managerial
positions or other similar relation to the corporation, could
be deemed responsible for its commission, if by virtue of
their relationship to the corporation, they had the power to
prevent the act. Benefit is not an operative fact
16. ABS-CBN BROADCASTING CORP. v. CA
(301 SCRA 589)
Facts:
In 1990, ABS-CBN and VIVA executed a Film
Exhibition Agreement whereby VIVA gave ABS-CBN an
exclusive right to exhibit some VIVA films. According to the
agreement, ABS-CBN shall have the right of first refusal to the
next 24 VIVA films for TV telecast under such terms as may be
23
agreed upon by the parties, however, such right shall be
exercised by ABS-CBN from the actual offer in writing.
Sometime in December 1991, VIVA, through Vicente
Del Rosario (Executive Producer), offered ABS-CBN through
VP Charo Santos-Concio, a list of 3 film packages from which
ABS-CBN may exercise its right of first refusal. ABS-CBN,
however through Mrs. Concio, tick off only 10 titles they can
purchase among which is the film “Maging Sino Ka Man”
which is one of the subjects of the present case, therefore, it
did not accept the said list as per the rejection letter authored
by Mrs. Concio sent to Del Rosario.
Subsequently, Del Rosario approached Mrs. Concio
with another list consisting of 52 original movie titles and 104
re-runs, proposing to sell to ABS-CBN airing rights for P60M
(P30M in cash and P30M worth of television spots). Del
Rosario and ABS-CBN’s General Manager, Eugenio Lopez III,
met at the Tamarind Grill Restaurant in QC to discuss the
package proposal but to no avail.
Four days later, Del Rosario and Mr. Graciano Gozon,
Senior VP of Finance of Republic Broadcasting Corporation
(RBS/Channel 7) discussed the terms and conditions of
VIVA’s offer. A day after that, Mrs. Concio sent the draft of the
contract between ABS-CBN and VIVA which contained a
counter-proposal covering 53 films for P35M. VIVA’s Board of
Directors rejected the counter-proposal as it would not sell
anything less than the package of 104 films for P60M. After
said rejection, ABS-CBN closed a deal with RBS including the
14 films previously ticked off by ABS-CBN.
Consequently, ABS-CBN filed a complaint for specific
performance with prayer for a writ of preliminary injunction
and/or TRO against RBS, VIVA and Del Rosario. RTC then
enjoined the latter from airing the subject films. RBS posted a
P30M counterbond to dissolve the injunction. Later on, the trial
court as well as the CA dismissed the complaint holding that
there was no meeting of minds between ABS-CBN and VIVA,
hence, there was no basis for ABS-CBN’s demand,
furthermore, the right of first refusal had previously been
exercised.
Hence, the present petition, ABS-CBN argued that an
agreement was made during the meeting of Mr. Lopez and Del
Rosario jotted down on a “napkin” (this was never produced in
court). Moreover, it had yet to fully exercise its right of first
refusal since only 10 titles were chosen from the first list. As to
actual, moral and exemplary damages, there was no clear
basis in awarding the same.
Issue: WON a contract was perfected between ABS-CBN and
VIVA and WON moral damages may be awarded to a
corporation
Held: Both NO.
Ratio:
Contracts that are consensual in nature are perfected
upon mere meeting of the minds. Once there is concurrence
between the offer and the acceptance upon the subject matter,
consideration, and terms of payment a contract is
produced. The offer must be certain. To convert the offer into
a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the
proposal. A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and is a rejection of the
original offer. Consequently, when something is desired which
is not exactly what is proposed in the offer, such acceptance is
not sufficient to generate consent because any modification or
variation from the terms of the offer annuls the offer.
24

After Mr. Del Rosario of Viva met Mr. Lopez of ABS-
CBN to discuss the package of films, ABS-CBN, sent through
Ms. Concio, counter-proposal in the form a draft contract. This
counter-proposal could be nothing less than the counter-offer
of Mr. Lopez during his conference with Del Rosario. Clearly,
there was no acceptance of VIVA’s offer, for it was met by a
counter-offer which substantially varied the terms of the offer.
In the case at bar, VIVA through its Board of Directors,
rejected such counter-offer. Even if it be
conceded arguendo that Del Rosario had accepted the
counter-offer, the acceptance did not bind VIVA, as there was
no proof whatsoever that Del Rosario had the specific
authority to do so.
Under the Corporation Code, unless otherwise
provided by said Code, corporate powers, such as the power
to enter into contracts, are exercised by the Board of
Directors. However, the Board may delegate such powers to
either an executive committee or officials or contracted
managers. The delegation, except for the executive
committee, must be for specific purposes. Delegation to
officers makes the latter agents of the corporation;
accordingly, the general rules of agency as to the binding
effects of their acts would apply. For such officers to be
deemed fully clothed by the corporation to exercise a power of
the Board, the latter must specially authorize them to do
so. That Del Rosario did not have the authority to accept ABS-
CBN’s counter-offer was best evidenced by his submission of
the draft contract to VIVA’s Board of Directors for the latter’s
approval. In any event, there was between Del Rosario and
Lopez III no meeting of minds.
The testimony of Mr. Lopez and the allegations in the
complaint are clear admissions that what was supposed to
have been agreed upon at the Tamarind Grill between Mr.
Lopez and Del Rosario was not a binding agreement. It is as it
should be because corporate power to enter into a contract is
lodged in the Board of Directors. (Sec. 23, Corporation
Code). Without such board approval by the Viva board,
whatever agreement Lopez and Del Rosario arrived at could
not ripen into a valid contact binding upon Viva.
However, the Court find for ABS-CBN on the issue of
damages. Moral damages are in the category of an award
designed to compensate the claimant for actual injury suffered
and not to impose a penalty on the wrongdoer. The award of
moral damages cannot be granted in favor of a corporation
because, being an artificial person and having existence only
in legal contemplation, it has no feelings, no emotions, no
senses. It cannot, therefore, experience physical suffering and
mental anguish, which can be experienced only by one having
a nervous system. The statement that a corporation may
recover moral damages if it “has a good reputation that is
debased, resulting in social humiliation” is an obiter
dictum. On this score alone the award for damages must be
set aside, since RBS is a corporation.
Filipinas Broadcasting vs. Ago Medical Center
GRN 141994 January 17, 2005
FACTS:
25
Rima & Alegre were host of FBNI radio program “Expose”.
Respondent Ago was the owner of the Medical & Educational
center, subject of the radio program “Expose”. AMEC claimed
that the broadcasts were defamatory and owner Ago and
school AMEC claimed for damages. The complaint further
alleged that AMEC is a reputable learning institution. With the
supposed expose, FBNI, Rima and Alegre “transmitted
malicious imputations and as such, destroyed plaintiff’s
reputation. FBNI was included as defendant for allegedly
failing to exercise due diligence in the selection and
supervision of its employees. The trial court found Rima’s
statements to be within the bounds of freedom of speech and
ruled that the broadcast was libelous. It ordered the
defendants Alegre and FBNI to pay AMEC 300k for moral
damages.”
ISSUE:
Whether or not AMEC is entitled to moral damages.
RULING:
A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience
physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock. Nevertheless,
AMEC’s claim, or moral damages fall under item 7 of Art –
2219 of the NCC.
This provision expressly authorizes the recovery of moral
damages in cases of libel, slander or any other form of
defamation. Art 2219 (7) does not qualify whether the plaintiff
is a natural or juridical person. Therefore, a juridical person
such as a corporation can validly complain for libel or any
other form of defamation and claim for moral damages.
Moreover, where the broadcast is libelous per se, the law
implied damages. In such a case, evidence of an honest
mistake or the want of character or reputation of the party
libeled goes only in mitigation of damages. In this case, the
broadcasts are libelous per se. thus, AMEC is entitled to moral
damages. However, we find the award P500,000 moral
damages unreasonable. The record shows that even though
the broadcasts were libelous, per se, AMEC has not suffered
any substantial or material damage to its reputation.
Therefore, we reduce the award of moral damages to P150k.
v JOINT TORT FEASORS are all the persons who command,
instigate, promote, encourage, advice countenance, cooperate
in, aid or abet the commission of a tort, as who approve of it
after it is done, for its benefit.
18. MERALCO vs.TEC ET AL
G.R. No. 131723 December 13, 2007
FACTS:
Respondent T.E.A.M. Electronics Corporation (TEC) is wholly
owned by respondent Technology Electronics Assembly and
Management Pacific Corporation (TPC). On the other hand,
petitioner Manila Electric Company (Meralco) is a utility
company supplying electricity in the Metro Manila area.
MERALCO alleges that TEC tampered the electric meters in
its buildings and should thus be liable for differential
billings. For failure of TEC to pay such differential billing,
petitioner disconnected the electricity supply to said buildings.
TEC and TPC filed a complaint for damages against
MERALCO before the RTC Pasig. The RTC ruled in favor of
TEC-TPC and ordered MERALCO to pay the former AD, MD,
26
ED and AF. The court found the evidence of petitioner
insufficient to prove that TEC was guilty of tampering the
meter installations. The CA affirmed the RTC decision with
modifications, hence this petition for review on certiorari under
Rule 45.
ISSUE: is the award of MD proper?
HELD: NO We, however, deem it proper to delete the award
of moral damages. TEC’s claim was premised allegedly on the
damage to its goodwill and reputation. As a rule, a corporation
is not entitled to moral damages because, not being a natural
person, it cannot experience physical suffering or sentiments
like wounded feelings, serious anxiety, mental anguish and
moral shock.
The only exception to this rule is when the corporation has a
reputation that is debased, resulting in its humiliation in the
business realm. But in such a case, it is imperative for the
claimant to present proof to justify the award. It is essential to
prove the existence of the factual basis of the damage and its
causal relation to petitioner’s acts. In the present case, the
records are bereft of any evidence that the name or reputation
of TEC/TPC has been debased as a result of petitioner’s acts
19. CRYSTAL vs. BANK OF THE PHILIPPINE ISLANDS
G.R. No. 172428 November 28, 2008
Facts: On 28 March 1978, spouses Crystal obtained a P300,
000.00 loan in behalf of the Cebu Contractors Consortium Co.
(CCCC) from the BPI-Butuan. The loan was secured by a
chattel mortgage on heavy equipment and machinery of
CCCC. On the same date, the spouses executed in favor of
BPI-Butuan a Continuing Suretyship where they bound
themselves as surety of CCCC in the aggregate principal sum
of not exceeding P300, 000.00. Thereafter, or on 29 March
1979, Raymundo Crystal executed a promissory note for the
amount of P300, 000.00, also in favor of BPI-Butuan.
Sometime in August 1979, CCCC renewed a previous loan,
this time from BPI, Cebu City branch (BPI-Cebu City).
However, CCCC had no real property to offer as security for
the loan; hence, the spouses executed a real estate mortgage
over their own real property. They executed another real
estate mortgage over the same lot in favor of BPI-Cebu City,
to secure an additional loan of P20,000.00 of CCCC. CCCC
failed to pay its loans to both BPI-Butuan and BPI-Cebu City
when they became due. CCCC, as well as the spouses, failed
to pay their obligations despite demands. Thus, BPI resorted
to the foreclosure of the chattel mortgage and the real estate
mortgage. The foreclosure sale on the chattel mortgage was
initially stalled and done. BPI filed a complaint for sum of
money against CCCC and the spouses before the Regional
Trial Court, seeking to recover the deficiency of the loan of
CCCC and the spouses with BPI-Butuan Before the Court,
petitioners who are the heirs of the spouses argue that the
failure of the spouses to pay the BPI-Cebu City loan of
P120,000.00 was due to BPI’s illegal refusal to accept
payment for the loan unless the P300,000.00 loan from BPI-
Butuan would also be paid. Consequently, in view of BPI’s
unjust refusal to accept payment of the BPI-Cebu City loan,
the loan obligation of the spouses was extinguished,
petitioners contend.
Issues: Whether or not the obligation of the spouses is
extinguished
Whether or not BPI is entitled to moral damages
27
Held:No, the obligation is not yet extinguished. Under Art.
1236 of the Civil Code, the creditor is not bound to accept
payment or performance by a third person who has no interest
in the fulfillment of the obligation, unless there is a stipulation
to the contrary. The Court sees no stipulation in the
promissory note which states that a third person may fulfill the
spouses’ obligation. Thus, it is clear that the spouses alone
bear responsibility for the same. A solidary obligation is one in
which each of the debtors is liable for the entire obligation, and
each of the creditors is entitled to demand the satisfaction of
the whole obligation from any or all of the debtors. A liability is
solidary "only when the obligation expressly so states, when
the law so provides or when the nature of the obligation so
requires."24 Thus, when the obligor undertakes to be "jointly
and severally" liable, it means that the obligation is solidary.
More importantly, the promissory note, wherein the spouses
undertook to be solidarily liable for the principal loan, partakes
the nature of a suretyship and therefore is an additional
security for the loan.
No, they are not entitled to moral damages. BPI is not entitled
to moral damages. A juridical person is generally not entitled
to moral damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded
feelings, serious anxiety, mental anguish or moral shock. The
Court of Appeals found BPI as "being famous and having
gained its familiarity and respect not only in the Philippines but
also in the whole world because of its good will and good
reputation must protect and defend the same against any
unwarranted suit such as the case at bench. Obviously, an
artificial person like herein appellant corporation cannot
experience physical sufferings, mental anguish, fright, serious
anxiety, wounded feelings, moral shock or social humiliation
which are basis of moral damages. A corporation may have
good reputation which, if besmirched may also be a ground for
the award of moral damages. Indeed, while the Court may
allow the grant of moral damages to corporations, it is not
automatically granted; there must still be proof of the existence
of the factual basis of the damage and its causal relation to the
defendant’s acts. This is so because moral damages, though
incapable of pecuniary estimation, are in the category of an
award designed to compensate the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer.
20. UP v Dizon
FACTS: University of the Philippines (UP) entered into a
General Construction Agreement with respondent Stern
Builders Corporation (Stern Builders) for the construction and
renovation of the buildings in the campus of the UP in
Los Bas. UP was able to pay its first and second billing.
However, the third billing worth P273,729.47 was not paid due
to its disallowance by the Commission on Audit (COA). Thus,
Stern Builders sued the UP to collect the unpaid balance.
On November 28, 2001, the RTC rendered its decision
ordering UP to pay Stern Builders. Then on January 16, 2002,
the UP filed its motion for reconsideration. The RTC denied
the motion. The denial of the said motion was served upon
Atty. Felimon Nolasco (Atty.Nolasco) of the UPLB Legal Office
on May 17, 2002. Notably, Atty. Nolasco was not the counsel
of record of the UP but the OLS inDiliman, Quezon City.
Thereafter, the UP filed a notice of appeal on June 3, 2002.
However, the RTC denied due course to the notice of appeal
for having been filed out of time. On October 4, 2002, upon
motion of Stern Builders, the RTC issued the writ of execution.
28
On appeal, both the CA and the High Court denied UPs
petition. The denial became final and executory. Hence, Stern
Builders filed in the RTC its motion for execution despite their
previous motion having already been granted and despite the
writ of execution having already issued. On June 11, 2003, the
RTC granted another motion for execution filed on May 9,
2003 (although the RTC had already issued the writ of
execution on October 4, 2002). Consequently, the sheriff
served notices of garnishment to the UPs depositary banks
and the RTC ordered the release of the funds.
Aggrieved, UP elevated the matter to the CA. The CA
sustained the RTC. Hence, this petition.
ISSUES:
I. Was UP's funds validly garnished?
II. Has the UP's appeal dated June 3, 2002 been filed out of
time?
HELD: UP's funds, being government funds, are not subject to
garnishment. (Garnishment of public funds; suability vs.
liability of the State)
Despite its establishment as a body corporate, the UP remains
to be a "chartered institution" performing a legitimate
government function. Irrefragably, the UP is a government
instrumentality, performing the States constitutional mandate
of promoting quality and accessible education. As a
government instrumentality, the UP administers special funds
sourced from the fees and income enumerated under Act No.
1870 and Section 1 of Executive Order No. 714, and from the
yearly appropriations, to achieve the purposes laid down by
Section 2 of Act 1870, as expanded in Republic Act No. 9500.
All the funds going into the possession of the UP, including
any interest accruing from the deposit of such funds in any
banking institution, constitute a "special trust fund," the
disbursement of which should always be aligned with the UPs
mission and purpose, and should always be subject to auditing
by the COA. The funds of the UP are government funds that
are public in character. They include the income accruing from
the use of real property ceded to the UP that may be spent
only for the attainment of its institutional objectives.
A marked distinction exists between suability of the State and
its liability. As the Court succinctly stated in Municipality of San
Fernando, La Union v. Firme: A distinction should first be
made between suability and liability. "Suability depends on the
consent of the state to be sued, liability on the applicable law
and the established facts. The circumstance that a state is
suable does not necessarily mean that it is liable; on the other
hand, it can never be held liable if it does not first consent to
be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive
its sovereign immunity, it is only giving the plaintiff the chance
to prove, if it can, that the defendant is liable.
The Constitution strictly mandated that "no money shall be
paid out of the Treasury except in pursuance of an
appropriation made by law." The execution of the monetary
judgment against the UP was within the primary jurisdiction of
the COA. It was of no moment that a final and executory
decision already validated the claim against the UP.
HELD: The period of appeal did not start without effective
service of decision upon counsel of record. (The doctrine of
immutability of a final judgment; service of judgments; fresh-
period rule; computation of time)
At stake in the UPs plea for equity was the return of the
amount of P16,370,191.74 illegally garnished from its trust
funds. Obstructing the plea is the finality of the judgment
29
based on the supposed tardiness of UPs appeal, which the
RTC declared on September 26, 2002. It is true that a decision
that has attained finality becomes immutable and unalterable,
and cannot be modified in any respect, even if the modification
is meant to correct erroneous conclusions of fact and law, and
whether the modification is made by the court that rendered it
or by this Court as the highest court of the land. But the
doctrine of immutability of a final judgment has not been
absolute, and has admitted several exceptions, among them:
(a) the correction of clerical errors; (b) the so-called nunc pro
tunc entries that cause no prejudice to any party; (c) void
judgments; and (d) whenever circumstances transpire after the
finality of the decision that render its execution unjust and
inequitable. We rule that the UPs plea for equity warrants the
Courts exercise of the exceptional power to disregard the
declaration of finality of the judgment of the RTC for being in
clear violation of the UPs right to due process.
21. SAMAHAN NG OPTOMETRISTS VS. ACEBEDO
INTERNATIONAL CORPORATION
FACTS
On February 22, 1991, Acebedo filed an application with the
Office of the Mayor of Candon, Ilocos Sur, for the issuance of
a permit for the opening and operation of a branch of the
Acebedo Optical in that municipality.
The application was opposed by the Samahan ng
Optometrists sa Pilipinas (SOP) which contended that
Acebedo is a juridical entity not qualified to practice optometry.
On March 6, 1991, Acebedo filed its answer, arguing it is not
the corporation, but the optometrists employed by it, who
would be practicing optometry.
On April 17, 1991, the Mayor of Candon created a committee,
composed of "public respondents Eduardo Ma. Guirnalda,
Dante G. Pacquing and Octavio de Peralta, to pass on
Acebedo’s application.
On September 26, 1991 the committee rendered a decision
denying Acebedo application for a mayor's permit to operate a
branch in Candon and ordering Acebedo to close its
establishment within fifteen (15) days from receipt of the
decision. Acebedo moved for reconsideration but its motion
was denied on November 14, 1991. Acebedo was ordered to
close its establishment within ten (10) days from receipt of the
order.
On December 9, 1991, Acebedo filed with the Court of
Appeals a petition for certiorari (CA G.R SP No. 26782),
questioning the decision of respondent committee. Its petition,
however, was referred to the court a quo, which on December
16, 1992, dismissed Acebedo's petition. Hence, the appeal.
ISSUES
Whether or not the honorable court of appeals erred in
declaring that private respondent acebedo international
corporation does not violate the optometry law (R. A. no. 1998)
when it employs optometrists to engage in the practice of
optometry under its name and for its behalf.
RULINGS
Private respondent does not deny that it employs
optometrists whose role in the operations of its optical shops is
30
to administer the proper eye examination in order to determine
the correct type and grade of lenses to prescribe to persons
purchasing the same from private respondent's optical shops.
Petitioners vehemently insist that in so employing said
optometrists, private respondent is in effect itself practicing
optometry. Such practice, petitioners conclude, is in violation
of RA. No. 1998, which, it must be noted at this juncture, has
been repealed and superseded by RA. 8050.
Petitioners' contentions are, however, untenable. The fact
that private respondent hires optometrists who practice their
profession in the course of their employment in private
respondent's optical shops, does not translate into a practice
of optometry by private respondent itself. Private respondent is
a corporation created and organized for the purpose of
conducting the business of selling optical lenses or
eyeglasses, among others. The clientele of private respondent
understably, would largely be composed of persons with
defective vision and thus need the proper lenses to correct the
same and enable them to gain normal vision. The
determination of the proper lenses to sell to private
respondent's clientele entails the employment of optometrists
who have been precisely trained for that purpose. Private
respondent's business is not the determination itself of the
proper lenses needed by persons with defective vision. Private
respondent's business, rather, is the buying and importing of
eyeglasses and lenses and other similar or allied instruments
from suppliers thereof and selling the same to consumers.
For petitioners' argument to hold water, there need be
clear showing that RA. No. 1998 prohibits a corporation from
hiring optometrists, for only then would it be undeniably
evident that the intention of the legislature is to preclude the
formation of the so-called optometry corporations because
such is tantamount to the practice of the profession of
optometry which is legally exercisable only by natural persons
and professional partnerships. We have carefully reviewed
RA. No. 1998 however, and we find nothing therein that
supports petitioner's insistent claims.
All told, there is no law that prohibits the hiring by
corporations of optometrists or considers the hiring by
corporations of optometrists as a practice by the corporation
itself of the profession of optometry.
Wherefore, the instant petition is hereby dismissed. Costs
against the petitioners.
22. Alfafara v. Aacebedo
Facts: Petitioners were duly licensed optometrists and were all
members of the Samahan ng Optometrists ng Pilipinas (SOP)-
Cebu Chapter. The SOPCebu Chapter was a chapter of SOP
Incorporated, a national organization which had a program
called ―Sight Saving Month.‖ This program is implemented
nationwide which provided free consultations. Respondent
was a corporation with several outlets in Cebu, selling optical
products and ―ready-to-wear‖ eyeglasses of limited grades,
advertising its services and products. Respondent hired
optometrists who conducted eye examinations, prescribed
ophthalmic lenses, and rendered other optometry services.
While the hired optometrists received their salary from
respondent, they are not precluded from seeking other
sources of income. Petitioners brought an injunctive suit in the
Regional Trial Court to enjoin respondent Acebedo from
practicing optometry in the province of Cebu on the main
ground of violation of the Code of Ethics for Optometrists. In
addition, petitioners contend that respondent is engaged in the
practice of optometry by its act of employing licensed agents.
Thus, an optometrist who is employed by a corporation, such
as Acebedo, is not acting on his own capacity but as an
31
employee or agent of the corporation. They contend that, as a
mere employee or agent, such optometrist cannot be held
personally liable for his acts done in the course of his
employment as an optometrist under the provisions of the Civil
Code. Respondent denies being engaged in the practice of
optometry and argues that incidental to its business of selling
optical products, it hired duly licensed optometrists who
conducted eye examination, prescribed ophthalmic lenses,
and rendered other services; that it exercised neither control
nor supervision over the optometrists under its employ; and
that the hired optometrists exercised neither control nor
supervision in the sale of optical products and accessories by
respondent. The trial court at first dismissed the suit but, on
motion of petitioners, reinstated the action and granted their
prayer for a writ of preliminary injunction and/or restraining
order. After hearing, judgment was rendered in favor of
petitioners. The Court of Appeals reversed the trial court
holding that respondent was illegally engaged in the practice
of Optometry.
Issue: Whether or not respondent corporation Acebedo was
engaged in the practice of optometry and is thus liable for the
acts of its optometrist employees.
Held: An optometrist is a person who has been certified by the
Board of Optometry and registered with the Professional
Regulation Commission as qualified to practice optometry in
the Philippines. Thus, only natural persons can engage in the
practice of optometry and not corporations. Respondent, which
is not a natural person, cannot take the licensure examinations
for optometrist and, therefore, it cannot be registered as an
optometrist under R.A. No. 1998. There is no reason to
deviate from the ruling that a duly licensed optometrist is not
prohibited from being employed by respondent and that
respondent cannot be said to be exercising the optometry
profession by reason of such employment. While the
optometrists are employees of respondent, their practice of
optometry is separate and distinct from the business of
respondent of selling optical products. They are personally
liable for acts done in the
course of their practice in the same way that if respondent is
sued in court in connection with its business of selling optical
products, the optometrists need not be impleaded as party
defendants. In that regard, the Board of Optometry and the
Professional Regulation Commission regulate their practice
and have exclusive original jurisdiction over them.
Concept Builders, Inc. v. National Labor Relations
Commission (NLRC), et al.
FACTS:
Petitioner Concept Builders, Inc., a domestic corporation, while
private respondents were employed by said company as
laborers, carpenters and riggers.
On November, 1981, private respondents were served
individual written notices of termination of employment by
petitioner, stating that their contracts of employment had
expired and the project in which they were hired had been
completed.
32
Public respondent found however, that at the time of said
termination, the project in which they were hired had not yet
been finished and completed. In fact, petitioner had to engage
the services of sub-contractors whose workers performed the
functions of private respondents.
Aggrieved, private respondents filed a complaint for illegal
dismissal, unfair labor practice and non-payment of their legal
holiday pay, overtime pay and thirteenth-month pay against
petitioner with the Labor Arbiter (LA).
Labor Arbiter: ruled against petitioner and order the latter to
reinstate private respondents and to pay them back wages.
NLRC: Petitioner moved for reconsideration with the National
Labor Relations Commission (NLRC) but it dismissed the
motion on the ground that the said decision had already
become final and executory.
A writ of execution directing the sheriff to execute the
Decision, which was partially satisfied through garnishment of
sums from petitioner’s debtor, the Metropolitan Waterworks
and Sewerage Authority. Thereafter, an Alias Writ of Execution
was issued by the Labor Arbiter directing the sheriff to collect
from herein petitioner representing the balance of the
judgment award, and to reinstate private respondents to their
former positions.
The alias Writ of Execution cannot be enforced by the sheriff
because all the employees inside petitioner’s premises in
Valenzuela claimed that they were employees of Hydro Pipes
Philippines, Inc. (HPPI) and not by petitioner. Thus, NLRC
issued a break-open order against Concept Builders and
HPPI.
Hence, this present case. Petitioner alleges that the NLRC
committed grave abuse of discretion when it ordered the
execution of its decision despite a third-party claim on the
levied property. Petitioner further contends, that the doctrine of
piercing the corporate veil should not have been applied, in
this case, in the absence of any showing that it created HPPI
in order to evade its liability to private respondents.
ISSUE: Whether or not the doctrine of piercing the corporate
veil should apply in this case?
RULING: YES.
It is a fundamental principle of corporation law that a
corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be
connected. But, this separate and distinct personality of a
corporation is merely a fiction created by law for convenience
and to promote justice. So, when the notion of separate
juridical personality is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or is used as a
device to defeat the labor laws, this separate personality of the
corporation may be disregarded or the veil of corporate fiction
pierced. This is true likewise when the corporation is merely an
adjunct, a business conduit or an alter ego of another
corporation.
There is no hard and fast rule but there are some probative
factors of identity that will justify the application of the doctrine
of piercing the corporate veil, to wit:
33
 1. Stock ownership by one or common ownership of both
corporations.
2. Identity of directors and officers.
3. The manner of keeping corporate books and records.
4. Methods of conducting the business.
Likewise, the Court laid down 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 act 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.
In this case, the NLRC noted that, while petitioner claimed that
it ceased its business operations on April 29, 1986, it filed an
Information Sheet with the Securities and Exchange
Commission on May 15, 1987, stating that its office address is
at 355 Maysan Road, Valenzuela, Metro Manila. On the other
hand, HPPI, the third-party claimant, submitted on the same
day, a similar information sheet stating that its office address is
at 355 Maysan Road, Valenzuela, Metro Manila.
Clearly, petitioner ceased its business operations in order to
evade the payment to private respondents of backwages and
to bar their reinstatement to their former positions. HPPI is
obviously a business conduit of petitioner corporation and its
emergence was skillfully orchestrated to avoid the financial
liability that already attached to petitioner corporation.
Also, in view of the failure of the sheriff, in the case at bar, to
effect a levy upon the property subject of the execution, private
respondents had no other recourse but to apply for a break-
open order after the third-party claim of HPPI was dismissed
for lack of merit by the NLRC.
Hence, the NLRC did not commit any grave abuse of
discretion when it affirmed the break-open order issued by the
Labor Arbiter.
WHEREFORE, the petition is DISMISSED and the assailed
resolutions of the NLRC, dated April 23, 1992 and December
3, 1992, are AFFIRMED.
ENRIQUEZ SECURITY SERVICES, INC., vs. VICTOR A.
CABOTAJE
34
Facts: Sometime in January 1979, respondent Victor A.
Cabotaje was employed as a security guard by Enriquez
Security and Investigation Agency (ESIA). On November 13,
1985, petitioner Enriquez Security Services, Inc. (ESSI) was
incorporated. Respondent continued to work as security guard
in petitioners agency.On reaching the age of 60 in July 1997,
respondent applied for retirement.Petitioner acknowledged
that respondent was entitled to retirement benefits but
opposed his claim that the computation of such benefits must
be reckoned from January 1979 when he started working for
ESIA. It claimed that the benefits must be computed only from
November 13, 1985 when ESSI was incorporated.
Respondent consequently filed a complaint in the National
Labor Relations Commission (NLRC) seeking the payment of
retirement benefits under Republic Act No. (RA) 7641,
otherwise known as the Retirement Pay Law.2On January 15,
1999, labor arbiter Eduardo Carpio decided in respondents
favor: Complainant is entitled to retirement pay. This
entitlement was not denied by respondents. xxx The
computation of this benefits shall cover the entire period of his
employment from January 1979 up to July 16, 1997 based on
his latest monthly salary of P5,383.15 per the payroll sheet
submitted by respondents. While respondents claim that
respondent corporation was merely registered with the DOTC
on November 13, 1985, they did not deny however that
complainant was an employee of the then Enriquez Security
and Investigation Agency, and that complainants services with
the said security agency up to the present respondent
corporation was uninterrupted. The obligation of the new
company involves not only to absorb the workers of the
dissolved company, but also to include the length of service
earned by the absorbed employee with their former employer
as well. To rule otherwise would be manifestly less than fair,
certainly less than just and equitable. On appeal, the NLRC
set aside the labor arbiters award of one-month salary for
every year of service for being excessive. It ruled that under
RA 7641, respondent Cabotaje was entitled to retirement pay
equivalent only to one-half month salary for every year of
service. Thus:On March 15, 2000, the NLRC denied
petitioners motion for reconsideration.On May 25, 2000,
petitioner filed a special civil action for certiorari with the Court
of Appeals.On September 26, 2000, the appellate court
affirmed the NLRC decision. It also denied the motion for
reconsideration on May 8, 2001.
Issues:
1. Whether or not the Retirement [Pay] Law has retroactive
effect.
2. Whether the whole 5 days service incentive leave or just a
portion thereof equivalent to 1/12 should be included in the
month salary for purposes of computing the retirement pay.
3. Whether or not the length of service of a retired employee in
a dissolved company (his former employer) should be included
in his length of service with his last employer for purposes of
computing the retirement pay.
Held: We find no merit in the petition.First. Petitioners
contention that RA 7641 cannot be applied retroactively has
long been settled in the Guidelines for Effective
Implementation of RA 7641 issued on October 24, 1996 by the
Department of Labor and Employment. Paragraph B of the
guidelines provides:In reckoning the length of service, the
35
period of employment with the same employer before the
effectivity date of the law on January 7, 1993 should be
included.Thus, in Rufina Patis Factory v. Lucas, Sr.,11 we
held:RA 7641 is undoubtedly a social legislation. The law has
been enacted as a labor protection measure and as a curative
statute that absent a retirement plan devised by, an agreement
with, or a voluntary grant from, an employer can respond, in
part at least, to the financial well-being of workers during their
twilight years soon following their life of labor. There should be
little doubt about the fact that the law can apply to labor
contracts still existing at the time the statute has taken effect,
and that its benefits can be reckoned not only from the date of
the laws enactment but retroactively to the time said
employment contracts have started. (emphasis ours)Second.
Petitioners insistence that only 1/12 of the service incentive
leave (SIL) should be included in the computation of the
retirement benefit has no basis. Section 1, RA 7641 provides:x
x x Unless the parties provide for broader inclusions, the term
one-half (1/2) month salary shall mean fifteen (15) days plus
one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive
leave. x x xSection 5.2, Rule II of the Implementing Rules of
Book VI of the Labor Code further clarifies what comprises the
"1/2 month salary" due a retiring employee:5.2 Components of
One-half (1/2) Month Salary. For the purpose of determining
the minimum retirement pay due an employee under this Rule,
the term "one-half month salary" shall include all the
following:a. Fifteen (15) days salary of the employee based on
his latest salary rate. x x x;b. The cash equivalent of not more
than five (5) days of service incentive leave;c. One-twelfth of
the 13th month pay due an employee;d. All other benefits that
the employer and employee may agree upon that should be
included in the computation of the employees retirement
pay.The foregoing rules are clear that the whole 5 days of SIL
are included in the computation of a retiring employees
pay.Third. It is a well-entrenched doctrine that the Supreme
Court does not pass upon questions of fact in an appeal by
certiorari under Rule 45.12 It is not our function to assess and
evaluate the evidence all over again13 where the findings of
the quasi-judicial agency and the appellate court on the matter
coincide.The consistent rulings of the labor arbiter, the NLRC
and the appellate court should be respected and petitioners
veil of corporate fiction should likewise be pierced. These are
based on the following uncontroverted facts: (1) respondent
worked with ESIA and petitioner ESSI; (2) his employment
with both security agencies was continuous and uninterrupted;
(3) both agencies were owned by the Enriquez family and (4)
petitioner ESSI maintained its office in the same place where
ESIA previously held office.14The attempt to make the
security agencies appear as two separate entities, when in
reality they were but one, was a devise to defeat the law and
should not be permitted. Although respect for corporate
personality is the general rule, there are exceptions. In
appropriate cases, the veil of corporate fiction may be pierced
as when it is used as a means to perpetrate a social injustice
or as a vehicle to evade obligations. Petitioner was thus
correctly ordered to pay respondents retirement under RA
7641, computed from January 1979 up to the time he applied
for retirement in July 1997.WHEREFORE, the petition is
hereby DENIED. Theassailed decision and resolution of the
Court of Appeals are AFFIRMED.
36
25. THE HEIRS OF THE LATE PAJARILLO v CA
FACTS
Panfilo V. Pajarillo (Panfilo) was the owner and operator of
several buses plying certain routes in Metro Manila. He used
the name "PVP Liner" in his buses. Private respondents were
employed as drivers, conductors and conductresses by
Panfilo.
Private respondents worked at least four times a week or for
an average of fifteen working days per month. They were
required to observe a work schedule starting from 4:00 in the
morning up to 10:00 in the evening on a straight time basis.
Private respondent drivers were paid a daily commission of
10%, while private respondent conductors and conductresses
received a daily commission of 7%. In sum, each of the private
respondents earned an average daily commission of about
P150.00 a day. They were not given emergency cost of living
allowance (ECOLA), 13th month pay, legal holiday pay and
service incentive leave pay. 5
The following were deducted from the private respondents'
daily commissions: (a) costs of washing the assigned buses;
(b) terminal fees; (c) fees for sweeping the assigned buses; (d)
fees paid to the barangay tanod at bus terminals; and (e)
rental fees for the use of stereo in the assigned buses. Any
employee who refused such deductions were either barred
from working or dismissed from work. 6
Private respondents and several co-employees formed a union
called "SAMAHAN NG MGA MANGGAGAWA NG PANFILO
V. PAJARILLO". Upon learning of the formation of respondent
union, Panfilo and his children ordered some of the private
respondents to sign a document affirming their trust and
confidence in Panfilo and denying any irregularities on his part.
Other private respondents were directed to sign a blank
document which turned out to be a resignation letter. Private
respondents refused to sign the said documents, hence, they
were barred from working or were dismissed without hearing
and notice. Panfilo and his children and relatives also formed a
company union where they acted as its directors and officers.
Respondent union and several employees filed a Complaint
for unfair labor practice and illegal deduction before the Labor
Arbiter with "Panfilo V. Pajarillo Liner" as party-respondent.
The respondent union filed an Amended Complaint alleging
this time not only unfair labor practice and illegal deduction but
also illegal dismissal.
Respondent union and several employees filed another
Complaint for violation of labor standard laws claiming non-
payment of (1) ECOLA, (2) 13th month pay, (3) overtime pay,
(4) legal holiday pay, (5) premium pay, and (6) service
incentive leave.
Panfilo denied the charges in the complaints. He maintained
that private respondents were not dismissed from work on
account of their union activities; that private respondents and
several of their co-employees either resigned or were
separated from work, or simply abandoned their employment
long before the respondent union was organized and
registered with the DOLE; that the private respondents are not
entitled to ECOLA and 13th month pay because they received
wages above the minimum provided by law; that the private
respondents are not entitled to overtime and legal holiday pay
37
because these are already included in their daily commissions;
that the private respondents are not entitled to five days
incentive leave pay because they work only four days a week;
that no deductions were made in the daily commissions of the
private respondents; that the private respondents voluntarily
and directly paid certain individuals for barangay protection
and for the cleaning of the assigned buses; that he had no
participation in these activities/arrangements; that the private
respondents were not dismissed from work; and that the
private respondents either abandoned their jobs or voluntarily
resigned from work.
On 29 January 1991, Panfilo died.
Labor Arbiter Manuel P. Asuncion rendered a Decision
dismissing the consolidated complaints for lack of merit.
Respondent union appealed to the NLRC which reversed the
decision of Arbiter Asuncion and ordered the reinstatement of,
and payment of backwages, ECOLA, 13th month pay, legal
holiday pay and service incentive leave pay to, private
respondents.
Respondent union filed a motion for reconsideration but this
was denied by the NLRC
Court of Appeals rendered a Decision granting the respondent
union's petition and nullifying the Orders of the NLRC.
Panfilo's counsel filed a motion for reconsideration but this was
denied by the appellate court.
ISSUE
W/N petitioners is correct that no unfair labor practice was
committed, and that private respondents were not illegally
dismissed from work.
HELD
NLRC made an exhaustive discussion of the allegations and
evidence of both parties as regards unfair labor practice and
illegal dismissal. It concluded that private respondents, officers
and members of respondent union were dismissed by reason
of their union activities and that there was no compliance with
substantial and procedural due process in terminating their
services. It also held that the private respondents who were
not members of the respondent union were also dismissed
without just or valid cause, and that they were denied due
process. These factual findings and conclusions were
supported by substantial evidence comprised of affidavits,
sworn statements, testimonies of witnesses during hearings
before Arbiter Asuncion, and other documentary evidence.
These findings were sustained by the Court of Appeals.
The rule is that findings of fact of quasi-judicial agencies like
the NLRC are accorded by this Court not only respect but
even finality if they are supported by substantial evidence, or
that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. We find no
compelling reason to deviate from such findings of the NLRC
as affirmed by the Court of Appeals.
Consequently, the private respondents are entitled to
reinstatement, backwages and other privileges and benefits
under Article 279 of the Labor Code. Separation pay may be
given in lieu of reinstatement if the employee concerned
38
occupies a position of trust and confidence. The private
respondents, as former bus drivers, conductors and
conductresses of petitioners, do not hold the position of trust
and confidence.
Nonetheless, it appears from the records that some of the
private respondents, had executed a Quitclaim/Release
discharging petitioners " from any and all claims by way of
unpaid wages, separation pay, overtime pay, differential pay,
ECOLA, 13th month pay, holiday pay, service incentive leave
pay or otherwise."
Generally, deeds of release, waivers, or quitclaims cannot bar
employees from demanding benefits to which they are legally
entitled or from contesting the legality of their dismissal, since
quitclaims are looked upon with disfavor and are frowned upon
as contrary to public policy. Where, however, the person
making the waiver has done so voluntarily, with a full
understanding thereof, and the consideration for the quitclaim
is credible and reasonable, the transaction must be recognized
as being a valid and binding undertaking.
There is no showing that the executions of these quitclaims
were tainted with deceit or coercion. On the contrary, each of
the private respondents' Sinumpaang Salaysay, which
accompanied the quitclaims, evinces voluntariness and full
understanding of the execution and consequence of the
quitclaim. In their said Sinumpaang Salaysay, the private
respondents stated that their lawyer had extensively explained
to them the computation and the actual amount of
consideration they would receive; that they were not forced or
tricked by their lawyer in accepting the same; and that they
already received the amount of consideration.
Further, the considerations received by the private
respondents were credible and reasonable because they were
not grossly disproportionate to the computation by the NLRC
of the amount of backwages and other money claims.
The quitclaims should be considered as binding on the private
respondents who executed them. It is settled that a legitimate
waiver which represents a voluntary and reasonable
settlement of a worker's claim should be respected as the law
between the parties. Accordingly, the private respondents who
made such quitclaims are already precluded from claiming
reinstatement, backwages, ECOLA, 13TH month pay, legal
holiday pay, service incentive leave pay, and other monetary
claims.
With regard to the other private respondents who did not
execute such quitclaims, they are entitled to reinstatement,
backwages, ECOLA, 13TH month pay, legal holiday pay and
service incentive leave pay in accordance with the
computation of the NLRC.
26. Tomas Lao Construction v NLRC
FACTS:
Petitioners were hired for various periods as construction
workers in different capacities. Within those periods, they
alternately worked for petitioner TLC, T&J and LVM
Construction Corporation, altogether informally referred to as
the “Lao Group of Companies”, the three entities comprising a
business conglomerate exclusively controlled and managed by
members of the Lao Family.
39
TLC, T&J and LVM are engaged in the construction of public
roads and bridges. They entered joint ventures among each
other and lease tools and equipment of one another. Each one
also allows the utilization of their employees by the other two.
In 1989, petitioners were dismissed due to non-compliance
with a memorandum which they believe is a scheme to
downgrade their status from regular to contractual employee.
Petitioners filed a case in NLRC for illegal dismissal which is
granted and ordered the 3 corporations solidary liable for back
wages and separation pay of petitioners.
ISSUE:
Whether corporate veil may be pierced to held the 3
corporations solidary liable to petitioner employees.
RULING:
YES. The records disclose that the 3 corporations were in fact
substantially owned and controlled by members of the Lao
family. A majority of the outstanding shares of stock in LVM
and T&J is owned by the Lao Family. T&J is 100% owned by
the Lao’s as reflected in its Articles of Incorporation. The Lao
Group of Companies therefore is a closed corporation where
the incorporators and directors belong to a single family.
The corporations were also engaged in the same line of
business under one management and use the same
equipment including manpower services. Where it appears
that business enterprises are owned, conducted and controlled
by the same parties, both law and equity will, when necessary
to protect the right of third persons, disregard the legal fiction
that the corporations are distinct entities, and treat them as
identical.
It is held that the liability of petitioner corporation extends to
the responsible officers acting in the interest of the
corporations.
27. General Credit Corp v. Alsons Dev. and Investment
Corp
FACTS: Petitioner General Credit Corporation (GCC), then
known as Commercial Credit Corporation (CCC), established
CCC franchise companies in different urban centers of the
country. In furtherance of its business, GCC was able to
secure license from Central Bank (CB) and SEC to engage
also in quasi-banking activities. On the other hand, respondent
CCC Equity Corporation (EQUITY) was organized in by GCC
for the purpose of, among other things, taking over the
operations and management of the various franchise
companies. At a time material hereto, respondent Alsons
Development and Investment Corporation (ALSONS) and the
Alcantara family, each owned, just like GCC, shares in the
aforesaid GCC franchise companies, e.g., CCC Davao and
CCC Cebu.
ALSONS and the Alcantara family, for a consideration of P2M,
sold their shareholdings (101,953 shares), in the CCC
franchise companies to EQUITY. EQUITY issued ALSONS et
al., a "bearer" promissory note for P2M with a one-year
maturity date.
4 years later, the Alcantara family assigned its rights and
interests over the bearer note to ALSONS which became the
holder thereof. But even before the execution of the
assignment deal aforestated, letters of demand for interest
payment were already sent to EQUITY. EQUITY no longer
40
then having assets or property to settle its obligation nor being
extended financial support by GCC, pleaded inability to pay.
ALSONS, having failed to collect on the bearer note
aforementioned, filed a complaint for a sum of money8 against
EQUITY and GCC. GCC is being impleaded as party-
defendant for any judgment ALSONS might secure against
EQUITY and, under the doctrine of piercing the veil of
corporate fiction, against GCC, EQUITY having been
organized as a tool and mere conduit of GCC.
According to EQUITY (cross-claim against GCC): it acted
merely as intermediary or bridge for loan transactions and
other dealings of GCC to its franchises and the investing
public; and is solely dependent upon GCC for its funding
requirements. Hence, GCC is solely and directly liable to
ALSONS, the former having failed to provide …EQUITY the
necessary funds to meet its obligations to ALSONS.
GCC filed its ANSWER to Cross-claim, stressing that it is a
distinct and separate entity from EQUITY.
RTC, finding that EQUITY was but an instrumentality or
adjunct of GCC and considering the legal consequences and
implications of such relationship, rendered judgment for Alson.
CA affirmed.
ISSUE: WON the doctrine of "Piercing the Veil of Corporate
Fiction" should be applied in the case at bar.
HELD: YES.
The notion of separate personality, however, may be
disregarded under the doctrine – "piercing the veil of corporate
fiction" – as in fact the court will often look at the corporation
as a mere collection of individuals or an aggregation of
persons undertaking business as a group, disregarding the
separate juridical personality of the corporation unifying the
group. Another formulation of this doctrine is that when two (2)
business enterprises are owned, conducted and controlled by
the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that
two corporations are distinct entities and treat them as
identical or one and the same.
Authorities are agreed on at least three (3) basic areas where
piercing the veil, with which the law covers and isolates the
corporation from any other legal entity to which it may be
related, is allowed. These are: 1) defeat of public convenience,
as when the corporate fiction is used as vehicle for the evasion
of an existing obligation; 2) fraud cases or when the corporate
entity is used to justify a wrong, protect fraud, or defend a
crime; or 3) alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of a
person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely
an instrumentality, agency, conduit or adjunct of another
corporation.
The Court agrees with the disposition of the CA on the
application of the piercing doctrine to the transaction subject of
this case. Per the Court’s count, the trial court enumerated no
less than 20 documented circumstances and transactions,
which, taken as a package, indeed strongly supported the
conclusion that respondent EQUITY was but an adjunct, an
instrumentality or business conduit of petitioner GCC. This
relation, in turn, provides a justifying ground to pierce
petitioner’s corporate existence as to ALSONS’ claim in
question. Foremost of what the trial court referred to as
"certain circumstances" are the commonality of directors,
officers and stockholders and even sharing of office between
petitioner GCC and respondent EQUITY; certain financing and
management arrangements between the two, allowing the
petitioner to handle the funds of the latter; the virtual
domination if not control wielded by the petitioner over the
finances, business policies and practices of respondent
EQUITY; and the establishment of respondent EQUITY by the
petitioner to circumvent CB rules.
Verily, indeed, as the relationships binding herein [respondent
EQUITY and petitioner GCC] have been that of "parent-
41
subsidiary corporations" the foregoing principles and doctrines
find suitable applicability in the case at bar; and, it having been
satisfactorily and indubitably shown that the said relationships
had been used to perform certain functions not characterized
with legitimacy, this Court … feels amply justified to "pierce the
veil of corporate entity" and disregard the separate existence
of the parent and subsidiary the latter having been so
controlled by the parent that its separate identity is hardly
discernible thus becoming a mere instrumentality or alter ego
of the former.
28. TELEPHONE ENGINEERING AND SERVICE CO INC
(TESCO) v. WORKMEN’S COMPENSATION COMMISSION
(WCC)
Topic: Piercing the veil of corporate fiction in compensation
cases
FACTS:
TESCO is a domestic corporation engaged in telephone
manufacturing, with sister company, Utilities Management
Corporation (UMACOR). Both companies are under the
management of Jose Louis Santiago, as Exec VP and General
Manager.
UMACOR employed PacificoGatus as Purchasing Agent in
1964. He was assigned in TESCO for 2.5 months, and
reported back to UMACOR. In 1967, he contracted an illness
and died eventuall of “liver cirrhosis with malignant
degeneration”.
Pacifico’s widowed wife, LeonilaGatus, filed a Notice and
Claim for Compensation with the Workmen’s Compensation
Section alleging the employment of Pacifico under TESCO
and his death of liver cirrhosis. The Notice and Claim was
transmitted to TESCO, to which TESCO responded with an
Employer’s Report of Accident or Sickness, signed by
Santiago, stating that UMACOR was Pacifico’s employer, and
that employer UMACOR would not controvert the claim for
compensation, and admitted that the deceased employee
contracted illness “in regular occupation”. Thus, the Acting
Referee awarded death benefits (5,759) and burial expenses
(200) in favor of Pacifico’s heirs.
TESCO filed a Motion for Reconsideration and Petition to Set
Aside Award alleging that the admission in the Employer’s
Report was due to honest mistake and excusable negligence,
and that the illness for which compensation is sought is not an
occupational disease, hence, not compensable under the law.
The MR was denied.
The Provincial Sheriff levied on and attached the properties of
TESCO and scheduled the sale of such at public auction.
Hence, this petition seeking to annul the award and to enjoin
the Sheriff from levying and selling its properties at public
auction.
In its Petition, TESCO asserts that there is no employer-
employee relationship between it and PacificoGatus.
ISSUE:
Whether TESCO is liable for the compensation claim of
Pacifico’s heirs when it claims that it is not the employer of
Pacifico.
HELD/RATIO.
42
YES, the assertion of lack employer-employee relationship
cannot be admitted at the point of the petition before the
Supreme Court anymore; the difference between the corporate
personality of TESCO and UMACOR cannot be admitted
anymore to confuse the legitimate issues in this case.
In TESCO’s pertinent documents – letter to Acting Referee,
Motion for Reconsideration and Petition to Set Aside Award,
and Urgent Motion to Compel the Referee to Elevate Records
to Commission for Review – it represented and defended itself
as the employer of the deceased. Nowhere in the said
documents did it allege that it was not the employer. TESCO
even admitted that it and UMACOR are sister companies
operating under one single management and housed in the
same building. Although respect for the corporate personality
as such, is the general rule, there are exceptions. In
appropriate cases, the veil of corporate fiction may be pierced
as when the same is made as a shield to confuse the
legitimate issues.
29. Francisco Motors Corporation v. Court of Appeals
FACTS:
Francisco Motors filed a complaint against Spouses Gregorio
and Librada Manuel to collect the balance of the jeep body
purchased by the Manuels from petitioner, and the unpaid
balance for the cost of repair of the vehicle.
Respondent interpose a counterclaim of an unpaid legal
services by Gregorio which was not paid by the incorporators,
directors and officers of petitioner corporation. He alleged as
an affirmative defense that, while he was petitioners Assistant
Legal Officer, he represented members of the Francisco family
in the intestate estate proceedings of the late Benita Trinidad.
However, even after the termination of the proceedings, his
services were not paid. Said family members, he said, were
also incorporators, directors and officers of petitioner. Hence
to counter petitioner’s collection suit, he filed a permissive
counterclaim for the unpaid attorneys’ fees.
As to the issue of attorney’s fees, corporation argued that
being a corporation, it should not be held liable for the fees
owned by its incorporators, directors and officers in their
personal capacity as heirs of Benita Trinidad. The personality
of corporation is separate and distinct from its officers.
ISSUE: Whether there is valid ground to pierce the veil of the
corporate fiction
HELD:
No. Piercing the veil of corporate fiction has no application in
this case. In the present case, it appeared that the corporation
is being held liable for the responsibilities of individuals or
persons. It is the petitioner as a corporation which is being
ordered to answer for the personal liability of certain individual
directors, officers and incorporators concerned. Hence, it
appears to us that the doctrine has been turned upside down
because of its erroneous invocation. Note that according to
private respondent Gregorio Manuel his services were
solicited as counsel for members of the Francisco family to
43
represent them in the intestate proceedings over Benita
Trinidads estate. These estate proceedings did not involve any
business of petitioner.
Manuels’ move to recover unpaid legal fees through a
counterclaim against Francisco Motors Corporation, to offset
the unpaid balance of the purchase and repair of a jeep body
could only result from an obvious misapprehension that
petitioners corporate assets could be used to answer for the
liabilities of its individual directors, officers, and incorporators.
Such result if permitted could easily prejudice the corporation,
its own creditors, and even other stockholders; hence, clearly
inequitous to petitioner.
Furthermore, considering the nature of the legal services
involved, whatever obligation said incorporators, directors and
officers of the corporation had incurred, it was incurred in their
personal capacity. When directors and officers of a corporation
are unable to compensate a party for a personal obligation, it
is far-fetched to allege that the corporation is perpetuating
fraud or promoting injustice, and be thereby held liable therefor
by piercing its corporate veil.
30. SARONA v. NLRC
(Topic: Doctrine of Piercing the Veil of Corporate Fiction)
FACTS:
On June 20, 2003, the petitioner, who was hired by Sceptre as
a security guard sometime in April 1976, was asked by Karen
Therese Tan (Karen), Sceptre’s Operation Manager, to submit
a resignation letter as the same was supposedly required for
applying for a position at Royale. The petitioner was also
asked to fill up Royale’s employment application form, which
was handed to him by Royale’s General Manager, respondent
Cesar Antonio Tan II (Cesar).
After several weeks of being in floating status, Royale’s
Security Officer, Martin Gono (Martin), assigned the petitioner
at Highlight Metal Craft, Inc. (Highlight Metal) from July 29,
2003 to August 8, 2003. Thereafter, the petitioner was
transferred and assigned to Wide Wide World Express, Inc.
(WWWE, Inc.).
On September 17, 2003, the petitioner was informed that his
assignment at WWWE, Inc. had been withdrawn because
Royale had allegedly been replaced by another security
agency. The petitioner, however, shortly discovered thereafter
that Royale was never replaced as WWWE, Inc.’s security
agency. When he placed a call at WWWE, Inc., he learned
that his fellow security guard was not relieved from his post.
On September 21, 2003, the petitioner was once again
assigned at Highlight Metal, albeit for a short period from
September 22, 2003 to September 30, 2003. Subsequently,
when the petitioner reported at Royale’s office on October 1,
2003, Martin informed him that he would no longer be given
any assignment per the instructions of Aida Sabalones-Tan
(Aida), general manager of Sceptre. This prompted him to file
a complaint for illegal dismissal on October 4, 2003.
ISSUE:
Whether or not Royale’s corporate fiction should be pierced for
the purpose of compelling it to recognize the petitioner’s length
of service with Sceptre and for holding it liable for the benefits
that have accrued to him arising from his employment with
Sceptre?
44
RULING:Yes.
The doctrine of piercing the corporate veil applies in alter ego
cases, where a corporation is merely a farce since it is a mere
alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are
so conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation.
The respondents’ scheme reeks of bad faith and fraud and
compassionate justice dictates that Royale and Sceptre be
merged as a single entity, compelling Royale to credit and
recognize the petitioner’s length of service with Sceptre. The
respondents cannot use the legal fiction of a separate
corporate personality for ends subversive of the policy and
purpose behind its creation53 or which could not have been
intended by law to which it owed its being.
Also, Sceptre and Royale have the same principal place of
business. As early as October 14, 1994, Aida and Wilfredo
became the owners of the property used by Sceptre as its
principal place of business by virtue of a Deed of Absolute
Sale they executed with Roso.57 Royale, shortly after its
incorporation, started to hold office in the same property.
These, the respondents failed to dispute.
Royale also claimed a right to the cash bond which the
petitioner posted when he was still with Sceptre. If Sceptre and
Royale are indeed separate entities, Sceptre should have
released the petitioner’s cash bond when he resigned and
Royale would have required the petitioner to post a new cash
bond in its favor.
However, the manner by which the petitioner was made to
resign from Sceptre and how he became an employee of
Royale suggest the perverted use of the legal fiction of the
separate corporate personality.
Royale is a continuation or successor of Sceptre.
31. WENSHA SPA CENTER, INC. AND/OR XU ZHI JIE, VS.
LORETA T. YUNG [G.R. No. 185122 : August 16, 2010]
This is a petition for review on certiorari under Rule 45 of the
Rules of Court filed by an employer who was charged before
the National Labor Relations Commission (NLRC) for
dismissing an employee upon the advice of a Feng Shui
master.
Facts:
Wensha Spa Center, Inc. in Quezon City is in the business of
sauna bath and massage services. is its president,[3]
respondent Loreta T. Yung (Loreta) was its administrative
manager at the time of her termination from employment.
In her position paper, Loreta stated that she used to be
employed by Manmen where Xu was a client. Xu was
apparently impressed by Loreta's performance. Xu convinced
Loreta to transfer and work at Wensha. Loreta introduced
positive changes to Wensha which resulted in increased
business. This pleased Xu so that on May 18, 2004, she was
promoted to the position of Administrative Manager.
Loreta recounted that on August 10, 2004, she was asked to
leave her office because Xu and a Feng Shui master were
45
exploring the premises. Later that day, Xu asked Loreta to go
on leave with pay for one month. She did so and returned on
September 10, 2004. Upon her return, Xu and his wife asked
her to resign from Wensha because, according to the Feng
Shui master, her aura did not match that of Xu. That same
afternoon, Loreta went to the NLRC and filed a case for illegal
dismissal against Xu and Wensha.
Wensha and Xu denied illegally terminating Loreta's
employment. They claimed that two months after Loreta was
hired, they received various complaints against her from the
employees so that on August 10, 2004, they advised her to
take a leave of absence for one month while they conducted
an investigation on the matter.
The Labor Arbiter (LA) Francisco Robles dismissed Loreta's
complaint for lack of merit. He found it more probable that
Loreta was dismissed from her employment due to Wensha's
loss of trust and confidence in her.
This ruling was affirmed by the NLRC in its December 29,
2006 Resolution
Loreta moved for a reconsideration of the NLRC's ruling but
her motion was denied. Loreta then went to the CA on a
petition for certiorari. The CA reversed the ruling of the NLRC
on the ground that it gravely abused its discretion in
appreciating the factual bases that led to Loreta's dismissal.
The CA noted that there were irregularities and
inconsistencies in Wensha's position.
CA decision reads:
WHEREFORE, the instant petition is GRANTED. Wensha Spa
Center, Inc. and Xu Zhi Jie are ORDERED to, jointly and
severally, pay Loreta T. Yung her full backwages, other
privileges, and benefits, or their monetary equivalent,
corresponding to the period of her dismissal from September
1, 2004 up to the finality of this decision, and damages in the
amounts of fifty thousand pesos (Php50,000.00) as moral
damages, twenty five thousand pesos (Php25,000.00) as
exemplary damages, and twenty thousand pesos
(Php20,000.00) as attorney's fees. No costs.
Labor Issue: WON there is Illegal Dismissal.
Corp Issue: WON XU ZHI JIE is solidarily liable with
WENSHA, assuming that respondent was illegally dismissed.
Labor Issue Ruling: Yes, there is illegal dismissal. Loreta's
security of tenure is guaranteed by the Constitution and the
Labor Code. Under the security of tenure guarantee, a worker
can only be terminated from his employment for cause and
after due process. For a valid termination by the employer: (1)
the dismissal must be for a valid cause as provided in Article
282, or for any of the authorized causes under Articles 283
and 284 of the Labor Code; and (2) the employee must be
afforded an opportunity to be heard and to defend himself. A
just and valid cause for an employee's dismissal must be
supported by substantial evidence, and before the employee
can be dismissed, he must be given notice and an adequate
opportunity to be heard.
As correctly found by the CA, the cause of Loreta's dismissal
is questionable. Loss of trust and confidence to be a valid
ground for dismissal must have basis and must be founded on
46
clearly established facts. It is the employer who bears the
burden of proving that its dismissal of the employee is for a
valid or authorized cause supported by substantial evidence.
The Court finds Loreta's complaint credible. There is
consistency in her pleadings and evidence. The records are
bereft of evidence that Loreta was duly informed of the
charges against her and that she was given the opportunity to
respond to those charges prior to her dismissal. If there were
indeed charges against Loreta that Wensha had to investigate,
then it should have informed her of those charges and
required her to explain her side. The law requires that two
notices be given to an employee prior to a valid termination.
Under the law and jurisprudence, an illegally dismissed
employee is entitled to two reliefs - backwages and
reinstatement, which are separate and distinct. Under the
doctrine of strained relations, the payment of separation pay
has been considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or
viable.
Corp Issue Ruling: No, Xu is not solidarily liable with
Wensha. Elementary is the rule that a corporation is invested
by law with a personality separate and distinct from those of
the persons composing it and from that of any other legal
entity to which it may be related. "Mere ownership by a single
stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself sufficient ground
for disregarding the separate corporate personality.
In labor cases, corporate directors and officers may be held
solidarily liable with the corporation for the termination of
employment only if done with malice or in bad faith. Bad faith
does not connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious
doing of wrong; it means breach of a known duty through
some motive or interest or ill will; it partakes of the nature of
fraud.
The Supreme Court has read the decision in its entirety but
simply failed to come across any finding of bad faith or malice
on the part of Xu therefore Xu is not solidarily liable with
Wensha. To sustain such a finding, there should be an
evidence on record that an officer or director acted maliciously
or in bad faith in terminating the services of an employee.
Moreover, the finding or indication that the dismissal was
effected with malice or bad faith should be stated in the
decision itself.
32. HI-CEMENT CORP. v. INSULAR BANK OF ASIA
DOCTRINE:
Section 52:
A holder in due course is a holder who has taken the
instrument under the following conditions:
(a) it is complete and regular on its face;
(b) he became the holder of it before it was overdue, and
without notice that it has previously been dishonored, if such
was the fact;
(c) he took it in good faith and for value and
(d) at the time it was negotiated to him, he had no notice of
any infirmity in the instrument or defect in the title of the
person negotiating it.
47
Absent any of the elements set forth in Section 52, the
holder is not a holder in due course. In the case at bar, the
last two requirements were not met.
FACTS:
 Petitioners Spouses Tan were controlling stockholders
of E.T. Henry & Co., a company that is engaged in the
business of processing and distributing bunker fuel
 Hi-Cement was among the customers of Petitioner
Spouses
 Hi-Cement issued post-dated checks for their
purchases from E.T. Henry & Co
 In 1979, respondent bank, Insular Bank of Asia and
America granted E.T. Henry & Co. a credit facility
which enables the latter to encash, with pre-deducted
interest, the post-dated checks of their clients
 Because of this agreement, the petitioner E.T. Henry &
Co. was able to re-discount its client’s checks
 For every transaction, respondent required E.T. Henry
to execute a promissory note and a deed of
assignment bearing the conformity of the client to the
re-discounting.
 However, in February 1981, 20 checks of Hi-Cement
were dishonored, so with the other customers of E.T.
Henry & Co.
 Respondent bank filed a complaint for sum of money
against E.T. Henry & Co., Sps. Tan, Hi-Cement, and
the other customers
 According to respondent, the dishonored checks made
them suffer actual damages
 Hi-Cement argued that (1) its general manager and
treasurer were not authorized to issue the post-dated
crossed checks in E.T. Henry's favor; (2) the deed of
assignment purportedly executed by Hi-Cement
assigning them to respondent only bore the conformity
of its treasurer and (3) respondent was not a holder
in due course as it should not have discounted
them for being "crossed checks."
ISSUE: Whether or not the respondent bank is a holder in due
course
HELD:
 No
 Respondent bank failed to meet the requisites of a
holder in due course, specifically (c) of Section 52 of
the Negotiable Instruments Law
 It did not show good faith when respondent bank
accepted and discounted Hi-Cement’s post-dated
crossed checks from E.T. Henry & Co.
 Good faith herein is negated by gross negligent
conduct in dealing with the subjected checks
 Respondent bank was well aware that the said checks
were crossed and therefore bore restrictions that they
were for deposit to the payee’s account only
 In addition, records show that respondent bank
completely disregarded a telling sign of irregularity in
the re-discounting of the checks when the general
manager did not acquiesce or consent to it. Only the
treasurer’s signature appeared on the deed of
assignment
 Banks are expected to observe extraordinary
diligence in ever transaction
CASE REMANDED TO THE TRIAL COURT FOR
COMPUTATION OF PETITIONERS’ LIABILITIES
48
33. SAME AS CASE 24
34. SME Bank v. De Guzman – G.R. No. 184517
FACTS: In June 2001, SME Bank experienced financial
difficulties. To remedy the situation, the bank officials
proposed its sale to Abelardo Samson (Samson). After a
formal offer was made, Samson, through his attorney-
infact, sent formal letters (Letter Agreements) to Agustin
and De Guzman (who were originally the principal
shareholders and corporate directors of the bank),
demanding (1) peaceful turnover of all assets as well as
the peaceful transition of management of the bank and
termination/retirement of the employees mutually agreed
upon, upon transfer of shares in favor of our group’s
nominees, and (2) that all retirement benefits, if any of the
above officers/stockholders/board of directors are hereby
waived upon consummation of the above sale. The
retirement benefits of the rank and file employees including
the managers shall be honored by the new management.
Such terms and conditions were accepted. Simeon Espiritu
(Espiritu), then the general manager of SME Bank,
persuaded the respondent employees to tender their
resignations with the promise that they would be rehired
upon reapplication. Respondent employees agreed and
tendered their resignation letters. Agustin and De Guzman
then signified their conformity to the Letter Agreements
and sold 86.365% of the shares of stock of SME Bank to
spouses Abelardo and Olga Samson. Spouses Samson
then became the principal shareholders of SME Bank.
Afterwards however, the respondent employees, except
one of them, Simeon, Jr., were not rehired. After a month
in service, Simeon, Jr. again resigned.
ISSUES:
1. W/N respondent employees were illegally dismissed
2. W/N SME Bank is liable for the claims of the employees
and the reliefs that may be awarded to the latter
HELD:
1. YES. Respondent employees were illegally dismissed.
The Court held that resignations must be made voluntarily
and with the intention of relinquishing the office, coupled
with an act of relinquishment. Records show that
respondent employees Elicerio, Ricardo, Fidel, and
Liberato only tendered resignation letters because they
were led to believe that, upon reapplication, they would be
reemployed by the new management. Their reliance on the
representation that they would be reemployed gives
credence to their argument that they merely submitted
courtesy resignation letters because it was demanded of
them, and that they had no real intention of leaving.
Because of this, they did not voluntarily resign from their
work; rather, they were terminated from their employment.
As for respondent employee Simeon, Jr., who although
was rehired, was likewise illegally dismissed. Facts show
that when the latter was rehired, he was not reinstated to
his former position or to a substantially equivalent one.
Rather, he even suffered a reduction in benefits and a
demotion in rank. These led to his submission of another
resignation letter. In other words, he was constructively
dismissed. Moreover, this case involves a stock sale,
whereby the transferee acquires the controlling shares of
stock of the corporation, and following the rule in stock
sales, respondent employees may not be dismissed except
49
for just or authorized causes under the Labor Code. The
transfer only involved a change in the equity composition
of the corporation. The employees are not transferred to a
new employer, but remain with the original corporate
employer. This being so, the employment status of the
employees should not have been affected by the stock
sale. It is within the employer’s legitimate sphere of
management control of the business to adopt economic
policies. As in the exercise of such management
prerogative, the employer may merge or consolidate its
business with another, or sell or dispose all or substantially
all of its assets and properties which may bring about the
dismissal or termination of its employees in the process.
Such dismissal or termination should not however be
interpreted in such a manner as to permit the employer to
escape payment of termination pay. For such a situation is
not envisioned in the law. It strikes at the very concept of
social justice.
2. YES. None of the parties dispute that SME Bank was
the employer of respondent employees. An equity transfer
affects neither the existence nor the liabilities of a
corporation. Thus, SME Bank continued to be the
employer of respondent employees. Therefore, the Court
held that, as the employer of the illegally dismissed
employees before and after the equity transfer, petitioner
SME Bank is liable for the satisfaction of their claims.
However, the Court found Agustin and De Guzman to have
acted in bad faith with regard to the change in
management. Because of this, the Court held that they be
solidarily liable with SME Bank for the satisfaction of the
employees’ lawful claims.

50