Professional Documents
Culture Documents
Corpo Cases 1
Corpo Cases 1
DECISION
PERALTA, J : p
DECISION
BRION, J : p
22, 2014])
On April 21, 2008, the petitioner entered into a Contract of Janitorial
Service 8 (service contract) with Robinsons Land Corporation (Robinsons).
Both agreed that the petitioner shall supply janitorial, manpower and sanitation
services to Robinsons Place Ermita Mall for a period of one year — from
January 1, 2008 to December 31, 2008. 9 Pursuant to this, the respondents were
deployed to Robinsons.
Halfway through the service contract, the petitioner asked the respondents to
execute individual contracts which stipulated that their respective employments
shall end on December 31, 2008, unless earlier terminated. 10
The petitioner and Robinsons no longer extended their contract of janitorial
services. Consequently, the petitioner dismissed the respondents as they were
project employees whose duration of employment was dependent on the
petitioner's service contract with Robinsons. SCcHIE
Also, the respondents had already been working for the petitioner as early as
1998. Even before the service contract with Robinsons, the respondents
were already under the petitioner's employ. 26 They had been doing the
same type of work and occupying the same positions from the time they
were hired and until they were dismissed in January 2009. The petitioner did
not present any evidence to refute the respondents' claim that from the time of
their hiring until the time of their dismissal, there was no gap in between the
projects where they were assigned to. The petitioner continuously availed of
their services by constantly deploying them to its clients.
Lastly, under Department Order (DO) 18-02, 27 the applicable labor issuance to
the petitioner's case, the contractor or subcontractor is considered as the
employer of the contractual employee for purposes of enforcing the provisions
of the Labor Code and other social legislation. 28
DO 18-02 grants contractual employees all the rights and privileges due
a regular employee, including the following: (a) safe and healthful working
conditions; (b) labor standards such as service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay and separation pay; (c) social
security and welfare benefits; (d) self-organization, collective bargaining and
peaceful concerted action; and (e) security of tenure. 29
In this light, we thus conclude that although the respondents were assigned as
contractual employees to the petitioner's various clients, under the law, they
remain to be the petitioner's regular employees, who are entitled to all the rights
and benefits of regular employment.
The respondents' employment
contracts, which were belatedly
signed, are voidable.
The records show that at the time of the respondents' dismissal, they had already
been continuously working for the petitioner for more than a year. Despite this,
they never signed any employment contracts with the petitioner, except the
contracts they belatedly signed when the petitioner's own contract of janitorial
services with Robinsons neared expiration.
As already discussed, for an employee to be validly categorized as a project
employee, it is necessary that the specific project or undertaking had been
identified and its period and completion date determined and made known
to the employee at the time of his engagement. This provision ensures that the
employee is completely apprised of the terms of his hiring and the corresponding
rights and obligations arising from his undertaking. Notably, the petitioner's
service contract with Robinsons was from January 1 to December 31, 2008. The
respondents were only asked to sign their employment contracts for their
deployment with Robinsons halfway through 2008, when the petitioner's service
contract was about to expire.
We find the timing of the execution of the respondents' respective employment
contracts to be indicative of the petitioner's calculated plan to evade the
respondents' right to security of tenure, to ensure their easy dismissal as soon as
the Robinsons' contract expired. The attendant circumstances cannot but raise
doubts as to the petitioner's good faith.
If the petitioner really intended the respondents to be project employees,
then the contracts should have been executed right from the time of hiring,
or when the respondents were first assigned to Robinsons, not when the
petitioner's service contract was winding up. The terms and conditions of the
respondents' engagement should have been disclosed and explained to them
from the commencement of their employment. The petitioner's failure to do so
supports the conclusion that it had been in bad faith in evading the respondents'
right to security of tenure.
In Glory Philippines, Inc. v. Vergara, 30 the Court rejected the validity of a fixed
term contract belatedly executed, and ruled that its belated signing was a
deliberate employer ploy to evade the employees' right to security of tenure. As
the Court explained:
To us, the private respondent's illegal intention became clearer from
such acts. Its making the petitioners sign written employment
contracts a few days before the purported end of their employment
periods (as stated in such contracts) was a diaphanous ploy to set
periods with a view for their possible severance from employment
should the private respondent so willed it. If the term of the
employment was truly determined at the beginning of the
employment, why was there delay in the signing of the ready-made
contracts that were entirely prepared by the employer? Also, the
changes in the positions supposedly held by the petitioners in the
company belied the private respondent's adamant contention that the
petitioners were hired solely for the purpose of manning PIS during its
alleged dry run period that ended on October 20, 1998. We view such
situation as a very obvious ploy of the private respondent to evade the
petitioner's eventual regularization. 31 [Emphasis ours]
Moreover, under Article 1390 of the Civil Code,contracts where the consent of a
party was vitiated by mistake, violence, intimidation, undue influence or
fraud, are voidable or annullable. The petitioner's threat of non-payment of the
respondents' salaries clearly amounted to intimidation. Under this situation, and
the suspect timing when these contracts were executed, we rule that these
employment contracts were voidable and were effectively questioned when the
respondents filed their illegal dismissal complaint. TaEIcS
A director or officer shall only be personally liable for the obligations of the
corporation, if the following conditions concur: (1) the complainant alleged in
the complaint that the director or officer assented to patently unlawful acts of the
corporation, or that the officer was guilty of gross negligence or bad faith; and (2)
the complainant clearly and convincingly proved such unlawful acts, negligence
or bad faith. 40
In the present case, the respondents failed to show the existence of the first
requisite. They did not specifically allege in their complaint that Rana and
Burgos willfully and knowingly assented to the petitioner's patently unlawful act
of forcing the respondents to sign the dubious employment contracts in exchange
for their salaries. The respondents also failed to prove that Rana and Burgos had
been guilty of gross negligence or bad faith in directing the affairs of the
corporation.
To hold an officer personally liable for the debts of the corporation, and thus
pierce the veil of corporate fiction, it is necessary to clearly and convincingly
establish the bad faith or wrongdoing of such officer, since bad faith is never
presumed. 41 Because the respondents were not able to clearly show the definite
participation of Burgos and Rana in their illegal dismissal, we uphold the general
rule that corporate officers are not personally liable for the money claims of the
discharged employees, unless they acted with evident malice and bad faith in
terminating their employment. 42
WHEREFORE, in light of these considerations, we hereby DENY the petition.
We AFFIRM with MODIFICATION the Court of Appeals' decision dated
December 22, 2011 and resolution dated March 2, 2012 in CA-G.R. SP No.
120991, which also AFFIRMEDthe National Labor Relation Commission's
decision dated April 28, 2011 and resolution dated June 16, 2011. Petitioners
Fulgencio V. Rana and Monina R. Burgos are hereby absolved from paying the
respondents' monetary awards in their personal capacity. No costs.
SO ORDERED.
(FVR Skills and Services Exponents, Inc. v. Seva, G.R. No. 200857, [October
|||
22, 2014])
DECISION
LEONEN, J : p
Petitioners filed a petition for certiorari with the Court of Appeals, alleging
grave abuse of discretion in the issuance of orders compelling them to submit to
arbitration proceedings despite being third parties to the contract between
Shangri-La and BFCorporation. 28
In its May 11, 2006 decision, 29 the Court of Appeals dismissed petitioners'
petition for certiorari. The Court of Appeals ruled that Shangri-La's directors
were necessary parties in the arbitration proceedings. 30 According to the Court
of Appeals:
[They were] deemed not third-parties to the contract as they [were]
sued for their acts in representation of the party to the contract
pursuant to Art. 31 of the Corporation Code, and that as directors of
the defendant corporation, [they], in accordance with Art. 1217 of
the Civil Code,stand to be benefited or injured by the result of the
arbitration proceedings, hence, being necessary parties, they must be
joined in order to have complete adjudication of the controversy.
Consequently, if [they were] excluded as parties in the arbitration
proceedings and an arbitral award is rendered, holding [Shangri-La]
and its board of directors jointly and solidarily liable to private
respondent BF Corporation, a problem will arise, i.e., whether
petitioners will be bound by such arbitral award, and this will prevent
complete determination of the issues and resolution of the
controversy. 31
The Court of Appeals further ruled that "excluding petitioners in the arbitration
proceedings . . . would be contrary to the policy against multiplicity of suits." 32
The dispositive portion of the Court of Appeals' decision reads:
WHEREFORE, the petition is DISMISSED. The assailed orders
dated July 28, 2003 and January 19, 2005 of public respondent RTC,
Branch 157, Pasig City, in Civil Case No. 63400, are AFFIRMED. 33
This principle was repeated in subsequent cases when this court deemed it
proper to clarify important matters for guidance. 68
Thus, we rule that petitioners may be compelled to submit to the arbitration
proceedings in accordance with Shangri-La and BFCorporation's agreement, in
order to determine if the distinction between Shangri-La's personality and their
personalities should be disregarded.
This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the
parties to avoid litigation and settle disputes amicably and more expeditiously by
themselves and through their choice of arbitrators.
The policy in favor of arbitration has been affirmed in our Civil Code,69 which
was approved as early as 1949. It was later institutionalized by the approval
of Republic Act No. 876, 70 which expressly authorized, made valid,
enforceable, and irrevocable parties' decision to submit their controversies,
including incidental issues, to arbitration. This court recognized this policy
in Eastboard Navigation, Ltd. v. Ysmael and Company, Inc.: 71
As a corollary to the question regarding the existence of an arbitration
agreement, defendant raises the issue that, even if it be granted that it
agreed to submit its dispute with plaintiff to arbitration, said
agreement is void and without effect for it amounts to removing said
dispute from the jurisdiction of the courts in which the parties are
domiciled or where the dispute occurred. It is true that there are
authorities which hold that "a clause in a contract providing that all
matters in dispute between the parties shall be referred to arbitrators
and to them alone, is contrary to public policy and cannot oust the
courts of jurisdiction" (Manila Electric Co. vs. Pasay Transportation
Co., 57 Phil., 600, 603), however, there are authorities which favor
"the more intelligent view that arbitration, as an inexpensive,
speedy and amicable method of settling disputes, and as a means
of avoiding litigation, should receive every encouragement from
the courts which may be extended without contravening sound
public policy or settled law" (3 Am. Jur., p. 835). Congress has
officially adopted the modern view when it reproduced in the new
Civil Code the provisions of the old Code on Arbitration. And
only recently it approved Republic Act No. 876 expressly
authorizing arbitration of future disputes. 72 (Emphasis supplied)
10. To establish pension, retirement, and other plans for the benefit of
its directors, trustees, officers and employees; and
In that case, complainants have no choice but to institute only one proceeding
against the parties. Under the Rules of Court,filing of multiple suits for a single
cause of action is prohibited. Institution of more than one suit for the same cause
of action constitutes splitting the cause of action, which is a ground for the
dismissal of the others. Thus, in Rule 2:
Section 3. One suit for a single cause of action. — A party may not
institute more than one suit for a single cause of action. (3a)
612-641)
DECISION
BRION, J : p
The absence of any of these elements prevents piercing the corporate veil. 12
In the present case, the attendant circumstances do not establish that WPM is a
mere alter ego of Manlapaz.
Aside from the fact that Manlapaz was the principal stockholder of WPM,
records do not show that WPM was organized and controlled, and its affairs
conducted in a manner that made it merely an instrumentality, agency, conduit or
adjunct of Manlapaz. As held in Martinez v. Court of Appeals, 13 the mere
ownership by a single stockholder of even all or nearly all of the capital stocks of
a corporation is not by itself a sufficient ground to disregard the separate
corporate personality. To disregard the separate juridical personality of a
corporation, the wrongdoing must be clearly and convincingly established. 14
Likewise, the records of the case do not support the lower courts' finding that
Manlapaz had control or domination over WPM or its finances. That Manlapaz
concurrently held the positions of president, chairman and treasurer, or that the
Manlapaz's residence is the registered principal office of WPM, are insufficient
considerations to prove that he had exercised absolute control over WPM.
In this connection, we stress that the control necessary to invoke the
instrumentality or alter ego rule is not majority or even complete stock control
but such domination of finances, policies and practices that the controlled
corporation has, so to speak, no separate mind, will or existence of its own, and is
but a conduit for its principal. The control must be shown to have been exercised
at the time the acts complained of took place. Moreover, the control and breach
of duty must proximately cause the injury or unjust loss for which the complaint
is made.
Here, the respondent failed to prove that Manlapaz, acting as president, had
absolute control over WPM. Even granting that he exercised a certain degree of
control over the finances, policies and practices of WPM, in view of his position
as president, chairman and treasurer of the corporation, such control does not
necessarily warrant piercing the veil of corporate fiction since there was not a
single proof that WPM was formed to defraud CLN or the respondent, or that
Manlapaz was guilty of bad faith or fraud.
On the contrary, the evidence establishes that CLN and the respondent knew and
acted on the knowledge that they were dealing with WPM for the renovation of
the latter's restaurant, and not with Manlapaz. That WPM later reneged on its
monetary obligation to CLN, resulting to the filing of a civil case for sum of
money against the respondent, does not automatically indicate fraud, in the
absence of any proof to support it.
This Court also observed that the CA failed to demonstrate how the separate and
distinct personality of WPM was used by Manlapaz to defeat the respondent's
right for reimbursement. Neither was there any showing that WPM attempted to
avoid liability or had no property against which to proceed.
Since no harm could be said to have been proximately caused by Manlapaz for
which the latter could be held solidarily liable with WPM, and considering that
there was no proof that WPM had insufficient funds, there was no sufficient
justification for the RTC and the CA to have ruled that Manlapaz should be held
jointly and severally liable to the respondent for the amount she paid to CLN.
Hence, only WPM is liable to indemnify the respondent.
Finally, we emphasize that the piercing of the veil of corporate fiction is frowned
upon and thus, must be done with caution. 15 It can only be done if it has been
clearly established that the separate and distinct personality of the corporation is
used to justify a wrong, protect fraud, or perpetrate a deception. The court must
be certain that the corporate fiction was misused to such an extent that injustice,
fraud, or crime was committed against another, in disregard of its rights; it
cannot be presumed.
On the Award of Moral Damages
On the award of moral damages, we find the same in order in view of WPM's
unjustified refusal to pay a just debt. Under Article 2220 of the New Civil
Code, 16 moral damages may be awarded in cases of a breach of contract where
the defendant acted fraudulently or in bad faith or was guilty of gross negligence
amounting to bad faith.
In the present case, when payment for the balance of the renovation cost was
demanded, WPM, instead of complying with its obligation, denied having
authorized the respondent to contract in its behalf and accordingly refused to pay.
Such cold refusal to pay a just debt amounts to a breach of contract in bad faith,
as contemplated by Article 2220. Hence, the CA's order to pay moral damages
was in order. DSTCIa
2014])
DECISION
BRION, J : p
We resolve in this petition for certiorari 1 under Rule 65 the challenge to the
July 6, 2005 decision 2 and the January 3, 2006 resolution 3 (assailed CA rulings)
of the Court of Appeals (CA) in CA-G.R. SP No. 80947.
These assailed CA rulings annulled and set aside: a) the July 29, 2003 order 4 of
the Regional Trial Court of Olongapo, Br. 75 (RTC Olongapo), which directed
the issuance of a writ of execution in Civil Case No. 582-0-90, against
respondent Subic Water and Sewerage Co., Inc. (Subic Water); b) the July 31,
2003 writ of execution 5 subsequently issued by the same court; and c) the
October 7, 2003 order 6 of RTC Olongapo, denying Subic Water's special
appearance with motion to reconsider order dated July 29, 2003 and to quash
writ of execution dated July 31, 2003. 7
Factual Antecedents
On May 25, 1973, Presidential Decree No. 198 8 (PD 198) took effect. This law
authorized the creation of local water districts which may acquire, install,
maintain and operate water supply and distribution systems for domestic,
industrial, municipal and agricultural uses. 9
Pursuant to PD 198, petitioner Olongapo City (petitioner) passed Resolution No.
161, which transferred all its existing waterfacilities and assets under
the Olongapo City Public Utilities Department Waterworks Division, to the
jurisdiction and ownership of the Olongapo City Water District (OCWD). 10
PD 198, as amended, 11 allows local water districts (LWDs) which have
acquired an existing water system of a local government unit (LGU) to enter into
a contract to pay the concerned LGU. In lieu of the LGU's share in the
acquired water utility plant, it shall be paid by the LWD an amount not
exceeding three percent (3%) of the LWD's gross receipts from water sales in
any year. 12
On October 24, 1990, petitioner filed a complaint for sum of money and
damages against OCWD. Among others, petitioner alleged that OCWD failed to
pay its electricity bills to petitioner and remit its payment under the contract to
pay, pursuant to OCWD's acquisition of petitioner's water system. In its
complaint, petitioner prayed for the following reliefs:
"WHEREOF, it is respectfully prayed of this Honorable Court that
after due hearing and notice, judgment be rendered in favor of plaintiff
ordering the defendant to:
On November 24, 1996, Subic Water was granted the franchise to operate and to
carry on the business of providing water and sewerage services in the Subic Bay
Free Port Zone, as well as in Olongapo City. 18 Hence, Subic Water took over
OCWD's wateroperations in Olongapo City. 19 IDCScA
To finally settle their money claims against each other, petitioner and OCWD
entered into a compromise agreement 20 on June 4, 1997. In this agreement,
petitioner and OCWD offset their respective claims and counterclaims. OCWD
also undertook to pay to petitioner its net obligation amounting to
P135,909,467.09, to be amortized for a period of not exceeding twenty-five (25)
years at twenty-four percent (24%) per annum. 21
The compromise agreement also contained a provision regarding the
parties' request that Subic Water, Philippines, which took over the operations of
the defendant Olongapo City Water District be made the co-maker for OCWD's
obligations. Mr. Noli Aldip, then chairman of Subic Water, acted as its
representative and signed the agreement on behalf of Subic Water.
Subsequently, the parties submitted the compromise agreement to
RTC Olongapo for approval. In its decision dated June 13, 1997, 22 the trial
court approved the compromise agreement and adopted it as its judgment in
Civil Case No. 580-0-90.
Pursuant to the compromise agreement and in payment of OCWD's obligations
to petitioner, petitioner and OCWD executed a Deed of Assignment on
November 24, 1997. 23 OCWD assigned all of its rights in the JVA in favor of
the petitioner, including but not limited to the assignment of its shares, lease
payments, regulatory assistance fees and other receivables arising out of or
related to the Joint Venture Agreement and the Lease Agreement. 24 On
December 15, 1998, OCWD was judicially dissolved. 25
On May 7, 1999, to enforce the compromise agreement, the petitioner filed a
motion for the issuance of a writ of execution 26with the trial court. In its July 23,
1999 order, 27 the trial court granted the motion, but did not issue the
corresponding writ of execution.
Almost four years later, on May 30, 2003, the petitioner, through its new counsel,
filed a notice of appearance with urgent motion/manifestation 28 and prayed
again for the issuance of a writ of execution against OCWD. A certain Atty.
Segundo Mangohig, claiming to be OCWD's former counsel, filed a
manifestation alleging that OCWD had already been dissolved and
that Subic Water is now the former OCWD. 29
Because of this assertion, Subic Water also filed a manifestation informing the
trial court that as borne out by the articles of incorporation and general
information sheet of Subic Water . . . defendant OCWD is
not Subic Water. 30 The manifestation also indicated that OCWD was only a ten
percent (10%) shareholder of Subic Water; and that its 10% share was already in
the process of being transferred to petitioner pursuant to the Deed of Assignment
dated November 24, 1997. 31
The trial court granted the motion for execution and directed its issuance against
OCWD and/or Subic Water. Because of this unfavorable
order, Subic Water filed a special appearance with motion to: (1) reconsider
order dated July 29, 2003; and (2) quash writ of execution dated July 31, 2003. 32
The trial court denied Subic Water's special appearance, motion for
reconsideration, and its motion to quash. Subic Water then filed a petition
for certiorari 33 with the CA, imputing grave abuse of discretion amounting to
lack or excess of jurisdiction to RTC Olongapo for issuing its July 29, 2003 and
October 7, 2003 orders as well as the writ of execution dated July 31, 2003.
The CA's Ruling
In its decision dated July 6, 2005, 34 the CA granted Subic Water's petition
for certiorari and reversed the trial court's rulings.
The CA found that the writ of execution dated July 31, 2003 35 did not comply
with Section 6, Rule 39 of the Rules of Court,to wit:
Section 6. Execution by motion or by independent action. — A final
and executory judgment or order may be executed on motion
within five (5) years from the date of its entry. After the lapse of
such time, and before it is barred by the statute of limitations, a
judgment may be enforced by action. The revived judgment may
also be enforced by motion within five (5) years from the date of its
entry and thereafter by action before it is barred by the statute of
limitations. (6a) [emphasis ours]
The petitioner received the CA's assailed resolution denying its motion for
reconsideration on January 9, 2006. Following Rule 45, Section 2 of the Rules of
Court,48 the petitioner had until January 24, 2006 to file its petition for review. It
could have even filed a motion for a 30-day extension of time, a motion that this
Court grants for justifiable reasons. 49 But all of these, it failed to do. Thus, the
assailed CA rulings became final and executory and could no longer be the
subject of an appeal.
Apparently, to revive its lost appeal, petitioner filed the present petition
for certiorari that — under Rule 65 — may be filed within sixty days from the
promulgation of the assailed CA resolution (on January 3, 2006). A Rule 65
petition for certiorari, however, cannot be a substitute for a lost appeal. With the
lapse of the prescribed period for appeal without an action from the petitioner,
the present petition for certiorari — a mere replacement — must be dismissed.
But even without the procedural infirmity, the present recourse to us has no basis
on the merits and must be denied.
Execution by motion is only
available within the five-year
period from entry of judgment.
Under Rule 39, Section 6, 50 a judgment creditor has two modes in enforcing the
court's judgment. Execution may be either through motion or an independent
action.
These two modes of execution are available depending on the timing when the
judgment creditor invoked its right to enforce the court's judgment. Execution
by motion is only available if the enforcement of the judgment was sought
within five (5) years from the date of its entry. On the other hand, execution
by independent action is mandatory if the five-year prescriptive period for
execution by motion had already elapsed. 51 However, for execution by
independent action to prosper — the Rules impose another limitation — the
action must be filed before it is barred by the statute of limitations which, under
the Civil Code,is ten (10) years from the finality of the judgment. 52
On May 7, 1999, within the five-year period from the trial court's judgment,
petitioner filed its motion for the issuance of a writ of execution. However,
despite the grant of the motion, the court did not issue an actual writ. It was only
on May 30, 2003 that petitioner filed a second motion to ask again for the writ's
issuance. By this time, the allowed five-year period for execution by motion had
already lapsed.
As will be discussed below, since the second motion was filed beyond the
five-year prescriptive period set by the Rules, then the writ of execution issued
by the trial court on July 31, 2003 was null and void for having been issued by a
court already ousted of its jurisdiction.
In Arambulo v. Court of First Instance of Laguna, 53 we explained the rule that
the jurisdiction of a court to issue a writ of execution by motion is only effective
within the five-year period from the entry of judgment. Outside this five-year
period, any writ of execution issued pursuant to a motion filed by the judgment
creditor, is null and void. If no writ of execution was issued by the court within
the five-year period, even a motion filed within such prescriptive period would
not suffice. A writ issued by the court after the lapse of the five-year period is
already null and void. 54 The judgment creditor's only recourse then is to file an
independent action, which must also be within the prescriptive period set by law
for the enforcement of judgments.
This Court subsequently reiterated its Arambulo ruling in Ramos v.
Garciano, 55 where we said:
There seems to be no serious dispute that the 4th alias writ of
execution was issued eight (8) days after the lapse of the five (5)
year period from the date of the entry of judgment in Civil Case No.
367. As a general rule, after the lapse of such period a judgment
may be enforced only by ordinary action, not by mere
motion (Section 6, Rule 39, Rules of Court).
In the present case, the compromise agreement, although signed by Mr. Noli
Aldip, did not carry the express conformity of SubicWater. Mr. Aldip was never
given any authorization to conform to or bind Subic Water in the compromise
agreement. Also, the agreement merely labeled Subic Water as a co-maker. It
did not contain any provision where Subic Water acknowledged its solidary
liability with OCWD.
Lastly, Subic Water did not voluntarily submit to the court's jurisdiction. In fact,
the motion it filed was only made as a special appearance, precisely to avoid the
court's acquisition of jurisdiction over its person. Without any participation in
the proceedings below, it cannot be made liable on the writ of execution issued
by the court a quo.
B. Substantive Law Aspect
Solidary liability must be expressly stated.
The petitioner also argued that Subic Water could be held solidarily liable under
the writ of execution since it was identified as OCWD's co-maker in the
compromise agreement. The petitioner's basis for this is the following provision
of the agreement:
4. Both parties also request that Subic Water, Philippines which
took over the operations of the
defendant OlongapoCity Water District be made as co-maker for
the obligation herein above-cited. 59 [emphasis supplied]
As the rule stands, Solidary liability is not presumed. This stems from Art. 1207
of the Civil Code,which provides:
Art. 1207. . . There is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation
requires solidarity. [emphasis supplied]
In Palmares v. Court of Appeals, 60 the Court did not hesitate to rule that
although a party to a promissory note was only labeled as a co-maker, his
liability was that of a surety, since the instrument expressly provided for his
joint and several liability with the principal.
In the present case, the joint and several liability of Subic Water and OCWD was
nowhere clear in the agreement. The agreement simply and plainly stated that
petitioner and OCWD were only requesting Subic Water to be a co-maker, in
view of its assumption of OCWD's water operations. No evidence was presented
to show that such request was ever approved by SubicWater's board of directors.
Under these circumstances, petitioner cannot proceed after Subic Water for
OCWD's unpaid obligations. The law explicitly states that solidary liability is
not presumed and must be expressly provided for. Not being a
surety, Subic Water is not an insurer of OCWD's obligations under the
compromise agreement. At best, Subic Water was merely a guarantor against
whom petitioner can claim, provided it was first shown that: a) petitioner had
already proceeded after the properties of OCWD, the principal debtor; b) and
despite this, the obligation under the compromise agreement, remains to be not
fully satisfied. 61 But as will be discussed next, Subic Water could not also be
recognized as a guarantor of OCWD's obligations.
An officer's actions can only bind
the corporation if he had been
authorized to do so.
An examination of the compromise agreement reveals that it was not
accompanied by any document showing a grant of authority to Mr. Noli Aldip to
sign on behalf of Subic Water.
Subic Water is a corporation. A corporation, as a juridical entity, primarily acts
through its board of directors, which exercises its corporate powers. In this
capacity, the general rule is that, in the absence of authority from the board of
directors, no person, not even its officers, can validly bind a
corporation. 62 Section 23 of the Corporation Code provides:
Section 23. The board of directors or trustees. — Unless otherwise
provided in this Code, the corporate powers of all corporations
formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and
held by the board of directors or trustees to be elected from
among the holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for one (1)
year until their successors are elected and qualified. (28a) [emphasis
supplied]
Under this corporate reality, Subic Water cannot be held liable for OCWD's
corporate obligations in the same manner that OCWD cannot be held liable for
the obligations incurred by Subic Water as a separate entity. The corporate veil
should not and cannot be pierced unless it is clearly established that the separate
and distinct personality of the corporation was used to justify a wrong, protect
fraud, or perpetrate a deception. 66
In Concept Builders, Inc. v. NLRC, 67 the Court enumerated the possible
probative factors of identity which could justify the application of the doctrine of
piercing the corporate veil. These are:
(1) Stock ownership by one or common ownership of both
corporations;
The burden of proving the presence of any of these probative factors lies with the
one alleging it. Unfortunately, petitioner simply claimed that Subic Water took
over OCWD's water operations in Olongapo City. Apart from this allegation,
petitioner failed to demonstrate any link to justify the construction
that Subic Water and OCWD are one and the same.
Under this evidentiary situation, our duty is to respect the separate and distinct
personalities of these two juridical entities.
We thus deny the present petition. The writ of execution issued by
RTC Olongapo, Br. 75, in favor of Olongapo City, is hereby confirmed to be
null and void. Accordingly, respondent Subic Water cannot be made liable
under this writ.
WHEREFORE, premises considered, we hereby DISMISS the petition. The
Court of Appeals' decision dated July 6, 2005 and resolution dated January 3,
2006, annulling and setting aside the orders of the Regional Trial Court
of Olongapo, Branch 75 dated July 29, 2003 and October 7, 2003, and the writ of
execution dated July 31, 2003, are hereby AFFIRMED. Costs against the City
of Olongapo.
SO ORDERED.
(Olongapo City v. Subic Water and Sewerage Co., Inc., G.R. No. 171626,
|||
[August 6, 2014])
DECISION
PERALTA, J : p
For resolution before the Court are the consolidated cases of G.R. No. 173082
and G.R. No. 195795. In G.R. No. 173082, PalmAvenue Holding Co., Inc.
and Palm Avenue Realty and Development Corporation (the Palm Companies),
through a Petition for Certiorari under Rule 65 of the Rules of Court, seek to
annul the Resolutions of the Sandiganbayan (Fifth Division), promulgated on
January 10, 2003 1 and June 14, 2006 2 in Civil Case No. 0035, entitled Republic
of the Philippines v. Benjamin "Kokoy" Romualdez [in which intervention by
Trans Middle East (Phil.) Equities, Inc. was allowed]. On the other hand, the
Republic of the Philippines (the Republic), in G.R. No. 195795, via a Petition
for Certiorari and Prohibition, with application for temporary restraining order
and/or writ of preliminary-injunction, prays for the nullification of
the Sandiganbayan Resolutions dated October 21, 2010 3 and January 11,
2011 4 rendered in the same case.
The factual and procedural antecedents are as follows:
Through a writ of sequestration dated October 27, 1986, the Presidential
Commission on Good Government (PCGG) sequestered all the assets, properties,
records, and documents of the Palm Companies. Said sequestered assets
included 16,237,339 Benguet Corporation shares of stock, registered in the name
of the Palm Companies. The PCGG had relied on a letter from
the PalmCompanies' Attorney-in-Fact, Jose S. Sandejas, specifically identifying
Benjamin "Kokoy" Romualdez, a known crony of former President Ferdinand E.
Marcos, as the beneficial owner of the Benguet Corporation shares in
the Palm Companies' name.
The Republic, represented by the PCGG, filed a complaint with
the Sandiganbayan docketed as Civil Case No. 0035 but did not initially implead
the Palm Companies as defendants. However, the Sandiganbayan issued a
Resolution dated June 16, 1989 where it ordered said companies to be impleaded.
The Court subsequently affirmed this order to implead in G.R. No. 90667 5 on
November 5, 1991. Pursuant to said order, the Republic filed an amended
complaint dated January 17, 1997 and named therein the Palm Companies as
defendants. The graft court admitted the amended complaint on October 15,
2001.
In the meantime, on February 11, 1997, the Palm Companies filed an Urgent
Motion to Lift the Writ of Sequestration, but was denied on January 10, 2003.
The dispositive portion of the Sandiganbayan Resolution reads:
WHEREFORE, in view of the foregoing:
SO ORDERED. 6
They filed a Motion for Reconsideration, but the same was likewise denied on
June 14, 2006. Hence, the Palm Companies filed the petition in G.R. No.
173082.
On September 22, 2006, the Palm Companies filed a Motion to Release
Sequestered Funds with the Sandiganbayan. In a Resolution dated January 18,
2007, the Sandiganbayan granted said motion and ordered the release of the
sequestered funds for the purchase of additional shares in Benguet Corporation,
and appointed a comptroller for this purpose. On May 29, 2007, the companies
filed a Motion for Bill of Particulars to direct the Republic to submit a bill of
particulars regarding matters in the amended complaint which were not alleged
with certainty or particularity. On December 21, 2007, the Republic submitted
its bill of particulars. Thereafter, the Palm Companies filed a motion to dismiss
the Republic's complaint. They argued that the bill of particulars did not
satisfactorily comply with the requested details. EHcaDT
SO ORDERED. 8
Upon denial of the Republic's motion for reconsideration, it filed the petition in
G.R. No. 195795.
In G.R. No. 173082, the Palm Companies present this lone issue to be resolved
by the Court:
[WHETHER OR NOT] RESPONDENT COURT ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DENYING PETITIONERS' MOTION TO
LIFT THE WRIT OF SEQUESTRATION NOTWITHSTANDING
THE FACT [THAT] SAID WRIT SHOULD BE DEEMED
AUTOMATICALLY LIFTED PURSUANT TO SECTION 26,
ARTICLE XVIII OF THE 1987 CONSTITUTION FOR FAILURE
TO IMPLEAD PETITIONERS WITHIN THE PERIOD OF SIX (6)
MONTHS PRESCRIBED IN THE SAID CONSTITUTION. 9
The Palm Companies pray for the lifting of the Writ of Sequestration against
their assets, since they were not impleaded as parties-defendants in Civil Case
No. 0035 within the period prescribed by the Constitution.
On the other hand, the Republic, through the PCGG, contends in G.R. No.
195795 that:
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OF JURISDICTION
IN GRANTING THE PALM COMPANIES' MOTION TO
RELEASE ALL SHARES OF STOCK AND FUNDS IN THE
CUSTODY OF THE PCGG. 10
Pursuant to said order, the Republic filed an amended complaint which named
the Palm Companies as defendants. Thereafter, the companies filed a Motion for
Bill of Particulars for the Republic to clarify certain matters in its amended
complaint. Upon submission of the bill of particulars, the Palm Companies filed
a motion to dismiss the Republic's complaint. Later, the Sandiganbayan,
sustained by the Court in G.R. No. 189771, granted said motion to dismiss.
The Sandiganbayan thus pronounced:
xxx xxx xxx
Clearly, as in the previously discussed paragraphs, the above answers
set forth by the plaintiff in its Bill of Particulars are indefinite and
deficient inasmuch as the question of what are the alleged illegally
acquired funds or properties of the PalmAvenue Companies which
they are liable to return, remains unanswered, a product of uncertainty.
Simple justice demands that the Palm Companies must know what the complaint
against them is all about. The law requires no less. In the similar case of Virata v.
Sandiganbayan, 19 petitioner Virata filed a motion for a bill of particulars,
asserting that the allegations against him are vague and are not averred with
sufficient definiteness as to enable him to effectively prepare his responsive
pleading. The Court held therein that a complaint must contain the ultimate facts
constituting plaintiff s cause of action. A cause of action has the following
elements: (1) a right in favor of the plaintiff; (2) an obligation on the part of the
named defendant to respect such right; and (3) an act or omission on the part of
such defendant violative of the right of the plaintiff or constituting a breach of
the obligation of the defendant to the plaintiff. As long as the complaint contains
these three elements, a cause of action exists. Although the allegations therein
may be vague, dismissal of the action is not the proper remedy because the
defendant may ask for more particulars. As such, a party may move for a more
definite statement or for a bill of particulars of any matter which is not averred
with sufficient definiteness or particularity. This is to enable him to properly
prepare his responsive pleading or to prepare for trial. 20 The Court in said case
found that there were certain matters in the allegations which lacked in
substantial particularity. They were broad and definitely vague which required
specifications in order that Virata could properly define the issues and formulate
his defenses. The two bills of particulars filed by the Republic were ruled to have
failed in properly amplifying the charges leveled against Virata because, not
only are they mere reiteration or repetition of the allegations set forth in the
expanded Second Amended Complaint, but, to the large extent, they contain
vague, immaterial and generalized assertions which are inadmissible under our
procedural rules. As such, for failure of the Republic to obey the Court's
directive and the Sandiganbayan's order to file the proper bill of particulars
which would completely amplify the charges against Virata, the Court deemed it
just and proper to order the dismissal of the expanded Second Amended
Complaint, insofar as the charges against Virata are concerned. The Court relied
on Section 3, Rule 17 of the Rules of Court,which provides that:
Sec. 3. Failure to prosecute. — If plaintiff fails to appear at the time
of the trial, or to prosecute his action for an unreasonable length of
time, or to comply with these rules or any order of the court, the
action may be dismissed upon motion of the defendant or upon
the court's own motion. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise provided by court. 21
Similarly, the Republic in the case at bar failed to file a proper bill of particulars
which would completely clarify and amplify the charges against
the Palm Companies. For said failure to comply with the graft court's order to
file the required bill of particulars that would completely and fully inform
the Palm Companies of the charges against them, the amended complaint
impleading said companies necessarily failed to state a cause of action,
warranting the dismissal of the case as to them. By the dismissal of the case as
against the Palm Companies, there is ipso facto no more writ of sequestration to
speak of.
The Republic cannot simply rely on the presumption that the PCGG has acted
pursuant to law and based on prima facie evidence, for the same will undermine
the basic constitutional principle that public officers and employees must at all
times be accountable to the people. Indeed, sequestration is an extraordinary and
harsh remedy. As such, it should be confined to its lawful parameters and
exercised with due regard to the requirements of fairness, due process, and
justice. 22 While the Court acknowledges the Government's admirable efforts to
recover ill-gotten wealth allegedly taken by the corporations, it cannot, however,
choose to turn a blind eye to the demands of the law, justice, and fairness. 23
WHEREFORE, in view of the foregoing, the petition in G.R. No. 173082
is GRANTED. The Resolutions of the Sandiganbayan (Fifth Division)
promulgated on January 10, 2003 and June 14, 2006 in Civil Case No. 0035
are REVERSED AND SET ASIDE, and the writ of sequestration against the
assets and properties of Palm Avenue Holding Co., Inc.
and Palm Avenue Realty and Development Corporation is
consequently LIFTED. The petition in G.R. No. 195795 is DISMISSED for
lack of merit. The SandiganbayanResolutions dated October 21, 2010 and
January 11, 2011 are hereby AFFIRMED. aTIAES
SO ORDERED.
(Palm Avenue Holding Co., Inc. v. Sandiganbayan, G.R. Nos. 173082, 195795,
|||
[August 6, 2014])
DECISION
When another employee is soon after appointed to a position which the employer claims
has been abolished, while the employee who had to vacate the same is transferred
against her will to a position which does not e:x.ist in the corporate structure, there is
evidently a case of illegal constructive dismissal.
Before us is a Petition for Review on Certiorari questioning the October 27, 2008
1
Decision of the Court of Appeals (CA) which dismissed the petition in CA-G.R. SP No.
2
104437, entitled "Girly G. Jco, Petitioner, versus National Labor Relations Commission
(First Division), Systems Technology Institute, Inc., Monico V. Jacob and Peter K
Femandez, Respondents."
Factual Antecedents
Petitioner Girly G. Ico,a masteral degree holder with doctorate units earned, was hired as
4
Faculty Member bySTI College Makati (Inc.), which operates STI College-Makati
(STI-Makati). STI College Makati (Inc.) is a wholly-owned subsidiary of STI.
5
At STI, petitioner servedunder contract from June1997 to March 1998. In April 1998, she
was recalled to STI’s Makati Central Office orHeadquarters (STIHQ) and promoted to the
position of Dean of STI College-Parañaque (STIParañaque). In November1999, she was
again recalled to STI-HQ and STI appointed her as Full-Time Assistant Professor I
reporting directly to STI’s Academic Services Division (ASD).
In June 2000, petitioner was promoted to the position of Dean under ASD, and assigned
to STI College-Guadalupe (STI-Guadalupe), where she served as Dean from June 5,
2000 up to October 28, 2002. 6
Meanwhile, petitioner’s position as Deanwas reclassified from "Job Grade 4" to "Job
Grade Manager B"with a monthly salary of ₱37,483.58 effective April 1, 2002, up from the
7
After petitioner’s stint as Dean of STI-Guadalupe, she was promoted to the position of
Chief Operating Officer (COO) of STI-Makati, under the same position classification and
salary level of "Job Grade Manager B". She concurrently served as STI-Makati School
Administrator.8
Sometime in July 2003,or during petitioner’s stint as COO and School Administrator of
STI-Makati, a Plan of Merger was executed between STI and STI College Makati (Inc.),
9
whereby the latter would be absorbed by STI. The merger was approved by the Securities
and Exchange Commission on November 12, 2003. STI College Makati (Inc.) thus ceased
to exist, and STI-Makati was placed under STI’s Education Management Division (EMD). 10
In a March 12, 2004 Memorandum, STI – "[i]n line with the recently approved
11
COO, "Job Grade Manager B" witha gross monthly salary of ₱37,483.58. She was
re-appointed as COO of STI-Makati, under the supervision of the AcademicServices
Group of the EMD and reporting directly to the Head thereof, herein respondent
Fernandez. However,petitioner was not given the salary commensurate to her position as
COO, which by this time appeared to be pegged at ₱120,000.00. It likewise appears that
13
she was not given benefits and privileges which holdersof equivalent positions were
entitled to, such as a car plan. 14
Yolanda Briones (Briones), signed and approved by STI Senior Vice-President for
Corporate Services Division Jeanette B. Fabul (Fabul), and noted by respondent Jacob –
a) Cancelling, effective May 20, 2004, petitioner’s COO assignment at STI-Makati, citing
management’s decision to undertake an "organizational restructuring" in line with the
merger of STI and STI-Makati;
b) Ordering petitioner to report to STI-HQ on May 20, 2004 and to turn over her work to
one Victoria Luz (Luz), who shall function as STI-Makati’s School Administrator; and
c) Appointing petitioner, effective May 20, 2004, as STI’s Compliance Manager with the
same "Job Grade Manager B" rank and salarylevel, reporting directly to
SchoolCompliance Group Head Armand Paraiso (Paraiso).
On May 18, 2004, Fernandez summoned petitioner to his office, where the following
conversation – which appears to have been recorded by petitioner with the knowledge
and consent of Fernandez – took place:
F: (Fernandez) I’m sure you know already why you are here.
P: Sir? What have I done? May I know what is the reason of (sic) an immediate transfer
and a short period of turn-over?
F: I don’t trust you anymore. I’ve beenhearing too many things from [sic] you and as your
CEO, you don’t submit to me FSP monthly. Me high school student ka na inenroll para
lang makasali sa basketball.
F: Would you like me to call Liezel? ([H]e stood up and called Ms. Liezel Diego)
P: Yes, sir.
F: Liezel, how many times did STI College-Makati submitted [sic] to you the FSP?
P: Sir, can I have one minute to call STI College-Makati to fax the data of the receiving
copies of the FSP?
P: Sir, you will please put that in writing[. It] is a very strong accusation you are making
and I think I should defend myself.
F: No way! You cannot get anything from me. Why? Sothat when I will provide such then
you will go toLabor? (in a shouting manner)
P: Sir, what is this all about? Please tell me the real score. I am honest to you and I
believe I am performing well. Is this what I deserve?
F: Don’t talk to me about honesty (again said in a shouting manner and fuming mad). Girly,
don’t push me to the limit! Don’t let me do things that you will regret later. Don’t be like
Chito (Salazar, the former STI President) who have [sic] left STI without proving to
everybody whether [sic] he have [sic] done wrong or not. I don’t want that to happen to
you!
P: Sir, can I have one minute to go outside. I can no longer bear this?
(begging with both hands [together] as a sign of surrender)
F: No! (still shouting) I don’t have time. Here’s the letter from HR[.] I want you to sign this.
P: Sir, I’m sorry but I will not sign. I think it should be HR who will give this to me.
F: You want me to call HR? You wantme to call Atty. Pascua? You want me to call people
outside [to] witness that you refused to sign? (still shouting) I don’t care if you have a tape
recorder there with you. After all, that will not be a [sic] valid evidence in court.
xxxx
F: Ok. Don’t make me loose [sic] my temper again (with a soft voice already). You just
sign this (giving to me the [May 18, 2004 Memorandum]). Don’t go to Bohol anymore. If
ever you will win in the Winners’ Circle, you can get the tripjust like what happened to
Redger (Agudo, the former COO of STI College-Makati).
F: I will file a case against you. What do you call this? (pausing for a little while then
uttered the word) Disobedience!
P: Ok, sir, but please I want to know what exactly my violation is (while signing the paper).
Now that we will be parting ways, I am still hoping that you can tell [sic] the violationsthat I
made, if there is any.
F: You can have it after 2-3 weeks time. Besides, we are not parting ways (with a sarcastic
smile). I am still your boss in Audit. Audit and Compliance is still under my supervision.
P: Thank you, sir. (I went out in [sic] his room still trembling) 17
Incidentally, by this time, petitioner had garnered the following awards and distinctions:
1) Silver Awardee, 2004 STI Winners’ Circle Awards, 17thSTI Leaders’ Convention;
2) STI Academic Winners’ Circle Award as Dean of STI-Guadalupe given at the 2002 STI
Leaders’ Convention;
On May 20, 2004, petitioner reported toher new office at STI’s School Compliance Group,
only to find out that all members ofthe department had gone to Baguio City for a planning
session. Petitioner, who was not apprised of the official trip, was thus left behind. That
same day, an official communication was disseminated throughout STI, announcing
19
Jacob’s appointment as the new STI President and CEO, Fernandez as the new COO of
STI-Makati,and Luz as the new STI-Makati School Administrator; however, petitioner’s
appointment as Compliance Manager was left out.
In a May 24, 2004 letter to Jacob, petitioner took exception to the incidents of May 18
20
and 20, 2004, claiming that she became the victim of a series of discriminatory acts and
objecting to the manner by which she was transferred, asserting that she was illegally
demoted and that her name was tarnished as a result of the demotion and transfer. Jacob
replied through a June 7, 2004 letter advising petitioner that her letter was forwarded to
21
Prior to that, on May 25, 2004, during the 17th STI Leaders Convention held in Panglao,
Bohol, petitioner’s achievement as a Silver Awardee for the 2004 STI Winners’ Circle
Awards was announced, but she did notattend, claiming that she was too embarrassed to
attend owing to the events leading to her transfer, which to her was a demotion. STI 22
withheld petitioner’s prize – a South Korea trip termed "Travel Incentive Award" for the
Winners’ Circle for STI fiscal year 2003-2004 – "pending the final result of the
investigations being conducted" by STI relative to irregularities and violations of company
policies allegedly committed by petitioner. 23
It appears that from May 28, 2004 up to June 10, 2004, STI’s Corporate Auditor/Audit
Advisory Group conducted anaudit of STI-Makati covering the whole period of petitioner’s
stint as COO/School Administrator therein. In a report (Audit Report) later submitted to
Fernandez, the auditors claim to have discovered irregularities, specifically –
1. Appointment papers of STI-Makati employees did not have the written approval of
Fernandez inhis capacity as CEO;
2. There were instances where employees became regular after only an abbreviated
probationary period, and in some cases,the employees did not undergo probation;
3. Petitioner failed to fully liquidate cash advances amounting to ₱60,000.00, relative tothe
purchase of books;
4. There was a lack of internal controlsin regard to cost of planning sessions, liquidation
reports, journal entries, use of petty cash fund, and inventory; and
5. Petitioner and other employees falsified school records in order to enable high school
players to play for STI-Makati’s volleyball team. 24
In a June 17, 2004 Memorandum to Jacob, Fernandez cited the above Audit Report and
25
her entry to any of STI’s premiseseffective June 22, 2004 up to July 16, 2004, citing "(an)
Audit investigation being conducted relative to the offenses" for which petitioner was
charged, namely:
I. FACULTY MANUAL
a) Making malicious, obscene or libelous statements about the person of any member of
the academic community.
A. Class 3 –
2. Causing intrigues tending to cast insult, dishonor and discredit to another employee.
[B] Class 4 –
[C] Class 5 –
1. Falsifying timekeeping reports and records, drawing salary/allowance, in any form, or
money by virtue of falsified timekeeping report of records, vouchers, receipts and the like.
4. All acts of dishonesty, which cause [sic] tend to cause prejudice to the company. 27
On June 24, 2004, petitioner received another Memorandum from Briones dated June 23,
28
2004, this time stating that charges havealready been filed against her allegedly "based
on the Audit Findings", yet makingreference to the June 21, 2004 Memorandum and
without informing petitioner of the particulars of the charges or the results of the audit. Nor
was a copy of the said audit findings attached to the memorandum.
In a June 28, 2004 demand letter addressed to Jacob,petitioner protested anew her
29
In a June 30, 2004 letter, petitioner was notified of a hearing scheduled for July 2, 2004
and required to submit her written explanation to the charges. It appears, however, that
petitioner did not receive the said letter. On even date, petitioner filed with the National
30
Labor Relations Commission (NLRC) a labor case against herein respondents, Fabul and
Briones. Docketed as NLRC NCR Case No. 00-06-07767-04, the Complaint alleged 31
illegal constructive dismissal and illegal suspension, withclaims for regularization as well
as for underpayment of salaries, holiday pay, service incentive leave, 13th -month pay,
moral and exemplary damages, and attorney’s fees.
In a July 12, 2004 Memorandum to petitioner, STI lifted petitioner’s suspension and
32
ordered her to return towork on July 13, 2004, with full salary from the time of her
suspension.
In a July 13, 2004 electronic mail message sent by STI’s Reuel Virtucio (Virtucio) to
33
petitioner, the latter was invited to a July 19, 2004 "meeting with the committee formed to
act on the complaint filed against (petitioner) by (Fernandez)." The committee was
34
On July 19, 2004, during the supposed scheduled meeting with the committee, petitioner
was furnished with several documents; however, no copy of the formal complaint or
written chargewas given to her.The meeting was adjourned without the committee setting
another meeting for the submission of petitioner’s answer; nor was a hearing set for the
presentation of the parties’ evidence. 35
Thereafter, petitioner wenton sanctioned leave of absence. After the lapse of her
approved leave, she reported for workseveral times. After August 9, 2004, however, she
no longer reported for work.
On August 17, 2004, STI issued another Memorandum to petitioner, informing her that
36
her South Korea travelincentive award was being withheld, as the investigation covering
her alleged involvement in irregularities and violations of company policies was still
pending.
In a January 13, 2005 letter cumnotice of termination signed by Jacob, petitioner was
dismissed from STI effective January 11, 2005. 37
In her Position Paper, petitioner claimed that during her stint as COO of STI-Makati and
38
1. To reinstate complainant to her former position as COO without loss to [sic] her
seniority rights with backwages and other benefits, such the [sic] monthly ₱8,500.00
honorarium, among others, to be paid until fully reinstated with the necessary adjustments
to equal the salary and benefits now being received by her replacement, respondent Peter
K. Fernandez.
2. To pay complainant the unpaid salaryand benefits differential due her as COO
computed from November 5, 2002 to equal the salary and benefits of respondent Peter K.
Fernandez, plus the legal rate of interest thereon from the same date until fully paid.
3. To pay the money equivalent, plus the legal rate [sic] interest thereon until fully paid, of
complainant’s awards as a Silver Awardee in its STI 17th Winners’ Circle, consisting of
the tripto Panglao, Bohol from May 25 to 27, 2004 and Korea from September 21 to 24,
2004.
4. To pay complainant the unpaid Holiday Pay duly adjusted as above [sic] and with legal
interest thereon until fully paid.
5. To pay complainant the proportionate 13th [-]month pay for the current year with legal
interestthereon until fully paid.
6. To pay complainant moral damages in [sic] sum of ₱3 Million and exemplary damages
in the amount of ₱2 Million, including attorney’s fees, and expenses of litigation.
Complainant prays for such other reliefs just and equitable in the premises. 39
In their Position Paper, the respondents in NLRC NCR Case No. 00-06-07767-04
40
recognized prerogative of management which may not be interfered with absent malice or
bad faith, and more so when done pursuant to a valid corporate restructuring; the abolition
of the CEO, COO, Treasurer, Corporate Secretary, and Director positions in STI-Makati
was pursued as a matterof course because with the merger, STI-Makati ceased to exist
as it was absorbed by STI, and consequently these positions became unnecessary.
Petitioner’s transfer was justified as an exercise of STI’s prerogative and right to transfer
its employees when called for, and was done reasonably, without malice or bad faith, and
without unnecessarily inconveniencing petitioner.
Respondents added that petitioner’s suspension was vital for the protection of sensitive
data and to ensure the smooth conduct of the investigation, and in order that she may not
gain access to sensitive information which, if divulged to government agenciessuch as the
Commission on Higher Education (CHED), would result in the denial/withholding of
permits to STI. On petitioner’s claim for regularization, respondents claimed that this was
42
In her Reply to respondents’ Position Paper, petitioner noted that while STI and STI
43
College Makati (Inc.) merged, there was in fact no restructuring that took place which
required her transfer and demotion; onthe contrary, the merger created 29 additional
vacant positions in STI. Petitioner added that no prior announcement of the restructuring
of STI-Makati was made, which thus renders such reorganization of questionable integrity;
instead, the merger was utilized as a tool to ease her out, through the bogus
reorganization. She contended that Fernandez had prejudged her case even before an
investigation into the alleged anomalies could be conducted. Petitioner likewise notedthat
even her appointment as Compliance Manager was a sham, because no such vacant
position existed within the School Compliance Group, as the only two Compliance
Manager positions were then occupied by Eddie Musico (Musico) and Reynaldo Gozum
(Gozum); the only other vacant positions in that department were those for lower level
44
Finally, petitioner maintained that the multiple charges lodged against her were without
basis, and respondents failed to prove them byadequate evidence.
On the other hand, respondents maintained in their Reply (to Complainant’s Position
Paper) that as to salary and benefits, petitioner was not discriminated against, and was
45
merely given a compensation package commensurate to her rank as "Job Grade Manager
B", taking into consideration her length of service at STI.Her salary was thus at par with
those of other STI employees of equivalent rank and similar durations ofemployment.
They added that honoraria are not given to its employees,as well as to those who are
deployed to company-owned schools such as STI-Makati. Respondents asserted further
that the reorganization was not a ruse to ease petitioner out; it was necessary as a means
toward streamlining STI’s operations. Fernandez characterized petitioner’s account of
their conversation as inaccurate. Respondents likewise debunked petitioner’s claims that
46
she was discriminated against while she held the position of Compliance Manager, saying
that this claim was specious and exaggerated. They added that even though Fernandez
was later appointed COO of STI-Makati after petitioner was appointed Compliance
Manager, his work assuch STI-Makati COO was limited to performance of oversight
functions, which functions he already performs as SeniorVice-President of the Education
Management Division of STI. With regard to the July 19, 2004 meeting, respondents
argued that nothing was achieved during said meeting owing to petitioner’s and her
counsel’s "quarrelsome attitude" and insistence thatshe be furnished the written charges
against her as well as the supporting evidenceor documents, which would have been
unnecessary if she only cooperated during said meeting and answered the charges
against her. They underscored the fact that during said meeting, petitioner was furnished
with a copy of the charges against her, including all other documents, particularlythe Audit
Findings.
1) To reinstate her to her former position, without loss of seniority rights and benefits,
allowances, which reinstatement aspect, actual or in the payroll, is immediately executory,
even pending appeal.
2) To pay complainant’s full back wages, which should legally start from date of her illegal
constructive dismissal/illegal demotion on 05/18/2004, but reckoned from date of the
illegal suspension when she was physically prevented/ barred from working on
06/22/2004, based on her gross monthly salary ₱37,483.58, 15 days Vacation
Leave/yearand 15 days Sick Leave/year, 13th [-] month pay, and other benefits accruingto
her in her regular position as COO until actually reinstated, which as of date amounts to:
3) To pay her moral and exemplary damages in the combined amount of ₱1,000,000.00.
4) To pay her the monetary equivalentof the awards due her as her being proclaimed as a
Silver Awardee of US$630.00 for the Korean travel from 09/21-24/2004, and the round trip
ticket US$350.00, hotel accommodation and expenses to be paid, viz. 1. PhilippineTravel
Tax ₱1,620.00, NAIA Terminal Fee ₱550.00, Visa Processing Fee ₱500.00, War Risk Tax
US$12.00, Seoul Tax US$15.00, Ticket Insurance US$3.00, Travel Insurance ₱420.00,
Tour Guide and Driver’s Tip US$4.00/day.
5) To pay her 10% of the entire computable award herein as attorney’s fees.
SO ORDERED. 48
The Labor Arbiter found that petitioner was illegally dismissed, and respondents were
guilty of malice and bad faith in the handling of her case. He held that petitioner’s transfer
– which STI claimed was the result of STI’s restructuring – was irregular, because at the
time of such transfer, the reorganization and restructuring of STI-Makati had already been
effected; STI’s March 12, 2004 Memorandum topetitioner – which confirmed and renewed
her appointment as STI-Makati COO – was precisely issued as a consequence of the
merger and reorganization,which took place as early as November 2003. STI’s claim that
petitioner’s lateral transferwas necessary is thus contrived.
In addition, the Labor Arbiter declared that even as petitioner was appointed to the
position of Compliance Manager, such position did not actually exist in STI’s new
corporate structure; under the Compliance Group, which was headed by Paraiso, there
were only two Compliance Manager positions which were at the time occupied by Musico
and Gozum, and the only other vacant positions in the Compliance Group were for
Compliance Officers. In effect, petitioner was appointed to the position of a mere
Compliance Officer, which was lower in rank.
The Labor Arbiter held further that during the process of her illegal transfer, petitioner was
harassed, humiliated, and oppressed, thus:
1. On May 18, 2004, she was subjected to threats and intimidation by Fernandez, the
latter bullying and forcing her toreceive the May 18, 2004 Memorandum while petitioner
was inside his office;
2. On the day she reported to her new position as Compliance Manager, the whole
ComplianceGroup team left for a three-day out-of-town planning session, without
respondents informing her or including her in the official event as she should be;
3. On May 20, 2004, an official written announcement was made regarding Jacob’s
appointment as new STI President and CEO, Fernandez as new STI-Makati COO, and
Luz as new STI-Makati School Administrator. Adding insult to injury, petitioner’s
appointment as Compliance Manager was intentionally left out;
4. Petitioner, given her illustrious career in STI – having risen from the ranks as a faculty
member, to full-time professor, to Dean, and finally to the position of STI-Makati COO, and
having achieved multiple awards and distinctions – was thereafter treated "as a
non-entity" by respondents.
The Labor Arbiter added that the purported audit and investigation of petitioner’s alleged
irregularities was a sham, as the same was conducted without official sanction from STI
and without petitioner’s knowledge; it was founded on hearsay evidence and based on
charges known only to Fernandez; it was conducted merely to conceal respondents’
shabby treatment of petitioner, and without apprising petitioner of the writtenformal
charges against her.
Finally, respondents wereadjudged guilty of malice, bad faith, acts oppressive to labor and
contrary to morals, good customs and public policy, which caused upon petitioner
suffering and humiliation which entitles her to an award of moral and exemplary damages,
as well as attorney’s fees.
Respondents interposed an appeal with the NLRC, docketed as NLRC NCR Case No.
050756-06.In an October 31, 2007 Decision, the NLRC decreed, thus:
49
WHEREFORE, the [D]ecision appealed from is VACATED and SET ASIDE and a new
one entered dismissingthe complaint for lack of merit.
SO ORDERED. 50
In reversing the Labor Arbiter’s Decision and finding that there was no illegal constructive
dismissal,the NLRC held that any action taken by STI after the merger can be reasonably
concluded as one of the valid consequences thereof; the regulation of manpower is a
management prerogative enjoyed by STI, and it was free to regulate according to its own
discretion and judgment all aspects of petitioner’s employment. Inthis light, and since no
concrete evidence was presented by petitioner to show that respondents acted with
maliceor bad faith, the NLRC held that it may not be said that the abolition of the position
of STI-Makati COO was done to unduly ease her out of STI.
The NLRC added that while it may be conceded that a heated argument between
petitioner and Fernandez took place during their May 18, 2004 meeting, the charged
emotional outbreaks were nonetheless occasioned by extraneous matters injected during
such meeting, and consequently, Fernandez may not be faulted for insisting that petitioner
receive the May 18, 2004 Memorandum ordering petitioner’s transfer.
Moreover, the NLRC declared that petitioner’s preventive suspension was not done
irregularly, as it was based on charges leveled against her and made pursuant to an
administrativeinvestigation then being conducted; likewise, it held that the pending
investigation justified the withholding ofpetitioner’s Korea travel incentive award.
Finally, the NLRC noted that petitioner’s failure to report for work after August 9, 2004
should betaken against her, and on this note it would be unfair to hold respondents liable
for illegal constructive dismissal.
Petitioner moved for reconsideration,but in a March 28, 2008 Resolution, the NLRC51
Petitioner went up to the CA via certiorari. On October 27, 2008, the CA issued the
assailedDecision, decreeing as follows:
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs
against petitioner.
SO ORDERED. 52
According to the CA, the NLRC was correct in finding that as a result of the November
2003 merger of STI and STI-Makati, petitioner’s transfer to her new position as
Compliance Manager became necessary, as the position of STIMakati COO – which
petitioner then held– was abolished as a result of a reorganization that was implemented
pursuant to the merger. It noted further that the March 12, 2004 confirmation of 53
The appellate court did not give credence to petitioner’s allegations of discrimination and
harassmenteither, as it found them to be self-serving and unsubstantiated. Regarding her
suspension, the CA affirmed the NLRC’s view that the same was not irregularly imposed;
the withholding of her travel award was justified as well.
Issues
Petitioner now submits the following issues for the Court’s resolution:
II
Petitioner’s Arguments
In a nutshell, petitioner argues in her Petition and Reply that her appointment as
55
Compliance Manager is illegal, because the abolition of the STIMakati COO position and
the creation of the position of Compliance Manager were contrived and fabricated. She
adds that her appointment to the position of Compliance Manager was in fact a demotion:
she was relegated to a position where she did not have any staff to supervise; her work
became merely mechanical in nature; she became a mere Compliance Officer reporting to
the Compliance Group Head; and her work was severely limited.
Petitioner adds that contrary to the CA’s pronouncement, she was subjected to
harassment and discrimination, humiliated and became the victim of STI’s fraudulent
scheme to illegally oust her from her position as STI-Makati COO. She cites: 1) the May
18, 2004 incident, noting the treatment accorded her by Fernandez and the manner by
which she was allegedly forced to receive the Memorandum of even date; 2)the
investigation into alleged irregularities, which she characterized as sham; 3) her
preventive suspension, which she claims was illegal for being based on non-existent
charges; and 4) the withholding of her travel award.
Petitioner insists that her suspension was illegal, as her new employment as Compliance
Manager did not put her in a position where she would have access to sensitive STI
records;thus, she was never a serious threat to such extent that respondents believed she
was. Besides, the investigation into allegations of irregularities committed by her, which
was the cause for her suspension as well, was a sham for violating her rightsto a hearing
and due process. Respondents’ Arguments
In their Comment, respondents maintain that the merger of STI and STIMakati required
56
the abolition of the Chairman, President/CEO, COO, Treasurer and Corporate Secretary
positions in STI-Makati; likewise, it became necessary to effect a reorganization of STI’s
corporate structure inorder to streamline its operations. Petitioner’s transfer was in line
with such merger and reorganization; no bad faith may thus be inferred from their actions,
which were carried out legally and pursuant to STI’s rights, prerogatives, and needs at the
time.
Respondents argue further that petitioner’s transfer did not amount to a demotion in rank,
as the positions of COO and Compliance Manager are of equal importance; in fact, the
functions of Compliance Manager are much broader in scope as they involve the conduct
of operations and academic audits of allof STI’s schools, and not just STI-Makati. As to
salaryand benefits, petitioner as Compliance Manager is given the same salary and
benefits which she received at the time she was STI-Makati COO.
Respondents add that, ascorrectly held by the NLRC and CA, petitioner was never
subjected to harassment and humiliation, thus:
1. Petitioner was not excluded from the Compliance Group’s planning session held in
Baguio City. At the timeof petitioner’s transfer, Briones was not aware of the scheduled
Baguio trip, and thus petitioner was not duly informed thereof. Thus, her inability to attend
the official event may not be blamed on respondents;
2. Petitioner was assigned ample work at the Compliance Group, contrary to her claims
that she virtually did nothing in her new position;
3. It is not true that petitioner was not given her own room as Compliance Manager in
order to humiliate her. She could not begiven a room simply on account of office space
constraints.
On petitioner’s suspension, respondents reiterate that petitioner’s threats to divulge
sensitive information and jeopardize STI’s then pending permit applications justified the
taking of drastic measures to insure that company records are kept intact and free from
access; the preventive suspension of petitioner thus became necessary. Moreover, an
audit investigation was then being conducted on alleged irregularities committed by
petitioner; preventive suspension as a preliminary step in the investigation is thus
authorized.
Our Ruling
As a rule, this Court is not a trier of facts, and thus the findings of fact of the NLRC and CA
are final and conclusive and will not be reviewed on appeal. However, there are
well-recognized exceptions to the rule, such as when its judgment is based on a
misapprehension of facts or relevant facts not disputed by the parties were overlooked
which, if properly considered, would justify a different conclusion. Petitioner’s case falls
under these exceptions.
Both the NLRC and CA found thatpetitioner was not constructively dismissed, for the
following reasons:
3. The reorganization of STI was done in good faith and in the exercise of the
management prerogative. In the same manner, petitioner’s transfer was a) made in the
exercise of the management prerogative to transfer employees when necessary; b) done
in good faith; and c)not unreasonable, inconvenient or prejudicial to her interests.
It appears, however, that the position of STI-Makati COO was actually never abolished.
As a matter of fact, soon after petitioner was removed from the position, Fernandez was
appointed to take her place as STI-Makati COO; his appointment was even publicly
announced via an official communication disseminated company-wide. This thus belies
respondents’ claim thatthe position of STI-Makati COO became unnecessary and was
thus abolished. Respondents may argue, as they did in their Reply to petitioner’s
57
resigned. Nor could petitioner have been appointed head ofthe department, as Paraiso
was very much in charge thereof, as its ComplianceGroup Head. The only positionswithin
the department that were at the time vacant were those of Compliance Officers, which are
of lower rank. In other words,petitioner could not have been validly appointed as
Compliance Manager, a position within STI that was then very much occupied; if ever,
petitioner took the position of a mereCompliance Officer, the only vacant position within
the department.
Thirdly, even though it isclaimed that from May 28, 2004 up to June 10, 2004, STI’s
Corporate Auditor/Audit Advisory Group conducted an audit of STIMakati covering the
whole period of petitioner’s stint as COO/School Administrator, it appears that even prior
to such audit, petitioner’s superior – Fernandez – had already prejudged her case. The
May 18, 2004 conversation between petitioner and Fernandez inside the latter’s office is
quite revealing.
The May 18 conversation between petitioner and Fernandez, taken in conjunction with the
Court’s findings that the position of STI-Makati COO was never abolished and that
petitioner’s appointment as Compliance Manager was contrived, confirms the view that
petitioner was not transferred to the School Compliance Group as a matter of necessity,
but as punishment for her perceived irregularities. In effect, petitioner was demoted and
relegated to a position of insignificance within STI, there to suffer for what her employer
alleged were transgressions committed by her. To all intents and purposes, petitioner was
punished even before she could be tried.
Fernandez’s declarations during the May 18 conversation undoubtedly provide the true
motive behind petitioner’s removal as STI-Makati COO:
a. After "hearing too many things" about petitioner, Fernandez simply lost confidence in
her – meaning that Fernandez had made up his mind about petitioner after hearing
rumors about her; b. Fernandez accused petitioner of specific violations, without the
benefit of accurate information and without giving her the opportunity to refute the
accusations;
e. Fernandez has prejudged petitioner, and intimated to her that she was dishonest, even
before she could be heard; and
f. Fernandez threatened petitioner, that if she pushed him further, she would suffer the
fate of a former employee who was separated fromSTI without the benefit of clearing his
name. In other words, she could find herself without a job at STI even before her
innocence or guilt could be established.
From the May 18 conversation alone, it can be seen that petitioner’s fate in STI was a
foregone conclusion. She was threatened to accept her fate or else she would find herself
without work, either through dismissal or forced resignation. Evidently, she became the
subject of an illegal constructive dismissal in the guise of a transfer.
The supposed audit conducted from May 28, 2004 up to June 10, 2004 by STI’s
Corporate Auditor/Audit Advisory Group was a mere afterthought, as it was apparent that
as early as May 18, 2004, petitioner has been found guilty of whatever transgressions she
was being charged with, founded or unfounded. The same is true with respect to her
preventive suspension; it was imposed with malice and bad faith, and calculated to harass
her further, if not trick her into believing that respondents were properly addressing her
case. Needless to say, all proceedings and actions taken in regard to petitioner’s
employment and case, beginning on May 18, 2004, were all but a farce, done or carried
out in bad faith, with the objective of harassing and humiliating her, all in the fervent hope
that she would fold up and quit.
There is no doubt that petitioner was subjected to indignities and humiliated by the
respondents. As correctly observed by the Labor Arbiter, she was bullied, threatened,
shouted at, and treated insolently by Fernandez on May 18, 2004 inside the latter’s own
office. She was shamedwhen, on her very first day at the School Compliance Group, all of
the employees of the department have gone on an official out-of-town event without her
and, as a result,she was left alone at the office for several days. Respondents did not
even have the courtesy to offer her the opportunity to catch up with the group sothat she
could makeit to the event, even if belatedly. Then again, on May 20, 2004, STI made an
official companywide announcement of Jacob’s appointment as new STI President and
CEO, Fernandez as new STI-Makati COO, and Luz asnew STI-Makati School
Administrator, but petitioner’s appointment as new Compliance Manager was
inconsiderately excluded. Respondents made her go through the rigors of a contrived
investigation, causing her to incur unnecessary legal expenses as a result of her hiring the
services of counsel. Her well-deserved awards and distinctions were unduly withheld in
the guise of continuing investigation – which obviously was taking too long to conclude;
investigation began formally on May 28, 2004 (start of audit), yet by August 17 (date of
memorandum informing petitioner of the withholding of Korea travel award), the
investigation was still allegedly ongoing. She was deprived of the privilege to attend
company events where she would have received her well-deserved awards with pride and
honor, and her colleagues would have been inspired by her in return. Certainly,
respondents made sure that petitioner suffered a humiliating fate and consigned to
oblivion.
Indeed, petitioner could not be faulted for taking an indefinite leave of absence, and for
altogether failing to report for work after August 9, 2004. Human nature dictates that
petitioner should refuse to subject herself to further embarrassment and indignitiesfrom
the respondents and her colleagues. All told, petitioner was deemed constructively
dismissed as of May 18, 2004. Finally, since the position of STI-Makati COO was never
abolished, it follows that petitioner should bereinstated to the very same position, and
there to receive exactly what Fernandez gets by way of salaries, benefits, privileges and
emoluments, without diminution in amount and extent. Petitioner, multi-awarded,
deserving and loyal, is entitled to what Fernandez receives, and is deemed merely to take
over the office from him; moreover, the position of Chief Operations Officer is not merely
an ordinary managerial position, asit is a senior managerial office. In turn, Fernandez – or
anyone who currently occupies the position of STIMakati COO – must vacatethe office
and hand over the same to petitioner.
It is correct for petitioner to have included among the reliefs prayed for in her Complaint
that she be paid the salary, benefits and privileges being enjoyed by Fernandez currently.
The Court, in granting said relief, deems it only fair that she should be entitled to what
Fernandez is receiving. Not only that the position requires greater expertise in many
areas,or that it involves great responsibility, or that petitioner deserves it from the point of
view of her qualifications and experience; but it would be to prevent another form of
oppressive practice, where an employee is appointed toa senior management position,
there to enjoy only the prestige or title, but not the benefitscommensurate with the work
and responsibility assumed. It would likewise prevent a situation where, as in this case, an
employer – obliged by law or the courts to reinstate an "unwanted" employee holding a
senior management position – is given an opportunity to retaliate by limiting the
employee’s salary, privileges and benefits to a certain level – low or high, so long as it is
within the managerial range– that is however 1) not commensurate with the work and
responsibility assumed by the employee, or 2) discriminatory, or 3) indicative of a
tendency to favor only one or some employees.
Nonetheless, the Court failsto discern any bad faithor negligence on the part of
respondent Jacob. The principal character that figures prominently in this case is
Fernandez; he alone relentlessly caused petitioner’s hardships and suffering. He alone is
guilty of persecuting petitioner. Indeed, some of his actions were without sanction of STI
itself, and were committedoutside of the authority given to him by the school; they
bordered on the personal, rather than official. His superior, Jacob, may have been, for the
most part, clueless of what Fernandez was doing to petitioner. After all, Fernandez was
the Head of the Academic Services Group of the EMD, and petitioner directly reported to
him at the time; his position enabled him to pursue a course of action with petitioner that
Jacob was largely unaware of.
A corporation, as a juridical entity, may act only through its directors, officers and
employees. Obligations incurred as a result of the directors’ and officers’ acts as corporate
agents, are nottheir personal liability but the direct responsibility of the corporation they
represent. As a rule, they are only solidarily liable with the corporation for the illegal
termination of servicesof employees if they acted with malice or bad faith.
To hold a director or officer personally liable for corporate obligations, two requisites must
concur: (1) it must be alleged in the complaint that the director or officer assented to
patently unlawful acts of the corporation or that the officer was guilty of gross negligence
or bad faith; and (2) there must be proof that the officer acted in bad faith. 60
WHEREFORE, the Petition is GRANTED. The October 27, 2008 Decision of the Court of
Appeals in CA-G.R. SP No. 104437 is ANNULLED andSET ASIDE. The March 31, 2006
Decision ofLabor Arbiter Renaldo O. Hernandez in NLRCCase No. 00-06-07767-04 is
hereby REINSTATED, WITH MODIFICATIONS, in that:
4. The award of backwages shall earn LEGAL INTERESTat the rate of six per cent(6%)
per annumfrom the date of the petitioner’s illegal dismissal until fully paid; 61
SO ORDERED.
DECISION
LEONEN, J : p
On the same day, Arco Pulp and Paper and a certain Eric Sy executed a
memorandum of agreement 10 where Arco Pulp and Paper bound themselves to
deliver their finished products to Megapack Container Corporation, owned by
Eric Sy, for his account. According to the memorandum, the raw materials
would be supplied by Dan T. Lim, through his company, Quality Paper and
Plastic Products. The memorandum of agreement reads as follows:
Per meeting held at ARCO, April 18, 2007, it has been mutually
agreed between Mrs. Candida A. Santos and Mr. Eric Sy that ARCO
will deliver 600 tons Test Liner 150/175 GSM, full width 76 inches at
the price of P18.50 per kg. to Megapack Container for Mr. Eric Sy's
account. Schedule of deliveries are as follows: cDCaTH
It has been agreed further that the Local OCC materials to be used for
the production of the above Test Liners will be supplied by Quality
Paper & Plastic Products Ent., total of 600 Metric Tons at P6.50 per kg.
(price subject to change per advance notice). Quantity of Local OCC
delivery will be based on the quantity of Test Liner delivered to
Megapack Container Corp. based on the above production
schedule. 11
On May 5, 2007, Dan T. Lim sent a letter 12 to Arco Pulp and Paper demanding
payment of the amount of PhP7,220,968.31, but no payment was made to him. 13
Dan T. Lim filed a complaint 14 for collection of sum of money with prayer for
attachment with the Regional Trial Court, Branch 171, Valenzuela City, on May
28, 2007. Arco Pulp and Paper filed its answer 15 but failed to have its
representatives attend the pre-trial hearing. Hence, the trial court allowed Dan T.
Lim to present his evidence ex parte. 16
On September 19, 2008, the trial court rendered a judgment in favor of Arco
Pulp and Paper and dismissed the complaint, holding that when Arco Pulp and
Paper and Eric Sy entered into the memorandum of agreement, novation took
place, which extinguished Arco Pulp and Paper's obligation to Dan T. Lim. 17
Dan T. Lim appealed 18 the judgment with the Court of Appeals. According to
him, novation did not take place since the memorandum of agreement between
Arco Pulp and Paper and Eric Sy was an exclusive and private agreement
between them. He argued that if his name was mentioned in the contract, it was
only for supplying the parties their required scrap papers, where his conformity
through a separate contract was indispensable. 19
On January 11, 2013, the Court of Appeals 20 rendered a decision 21 reversing
and setting aside the judgment dated September 19, 2008 and ordering Arco Pulp
and Paper to jointly and severally pay Dan T. Lim the amount of
PhP7,220,968.31 with interest at 12% per annum from the time of demand;
PhP50,000.00 moral damages; PhP50,000.00 exemplary damages; and
PhP50,000.00 attorney's fees. 22 TIEHSA
The appellate court ruled that the facts and circumstances in this case clearly
showed the existence of an alternative obligation. 23It also ruled that Dan T. Lim
was entitled to damages and attorney's fees due to the bad faith exhibited by
Arco Pulp and Paper in not honoring its undertaking. 24
Its motion for reconsideration 25 having been denied, 26 Arco Pulp and Paper
and its President and Chief Executive Officer, Candida A. Santos, bring this
petition for review on certiorari.
On one hand, petitioners argue that the execution of the memorandum of
agreement constituted a novation of the original obligation since Eric Sy became
the new debtor of respondent. They also argue that there is no legal basis to hold
petitioner Candida A. Santos personally liable for the transaction that petitioner
corporation entered into with respondent. The Court of Appeals, they allege, also
erred in awarding moral and exemplary damages and attorney's fees to
respondent who did not show proof that he was entitled to damages. 27
Respondent, on the other hand, argues that the Court of Appeals was correct in
ruling that there was no proper novation in this case. He argues that the Court of
Appeals was correct in ordering the payment of PhP7,220,968.31 with damages
since the debt of petitioners remains unpaid. 28 He also argues that the Court of
Appeals was correct in holding petitioners solidarily liable since petitioner
Candida A. Santos was "the prime mover for such outstanding corporate
liability." 29
In their reply, petitioners reiterate that novation took place since there was
nothing in the memorandum of agreement showing that the obligation was
alternative. They also argue that when respondent allowed them to deliver the
finished products to Eric Sy, the original obligation was novated. 30
A rejoinder was submitted by respondent, but it was noted without action in view
of A.M. No. 99-2-04-SC dated November 21, 2000. 31 aDTSHc
The issues to be resolved by this court are as follows:
1. Whether the obligation between the parties was
extinguished by novation
2. Whether Candida A. Santos was solidarily liable with
Arco Pulp and Paper Co., Inc.
3. Whether moral damages, exemplary damages, and
attorney's fees can be awarded
The petition is denied.
The obligation between the
parties was an alternative
obligation
The rule on alternative obligations is governed by Article 1199 of the Civil
Code,which states:
Article 1199. A person alternatively bound by different prestations
shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the
other undertaking.
"In an alternative obligation, there is more than one object, and the fulfillment of
one is sufficient, determined by the choice of the debtor who generally has the
right of election." 32 The right of election is extinguished when the party who
may exercise that option categorically and unequivocally makes his or her
choice known. 33 The choice of the debtor must also be communicated to the
creditor who must receive notice of it since:
The object of this notice is to give the creditor . . . opportunity to
express his consent, or to impugn the election made by the debtor, and
only after said notice shall the election take legal effect when
consented by the creditor, or if impugned by the latter, when declared
proper by a competent court. 34
According to the factual findings of the trial court and the appellate court, the
original contract between the parties was for respondent to deliver scrap papers
worth PhP7,220,968.31 to petitioner Arco Pulp and Paper. The payment for this
delivery became petitioner Arco Pulp and Paper's obligation. By agreement,
petitioner Arco Pulp and Paper, as the debtor, had the option to either (1) pay the
price or (2) deliver the finished products of equivalent value to respondent. 35
The appellate court, therefore, correctly identified the obligation between the
parties as an alternative obligation, whereby petitioner Arco Pulp and Paper,
after receiving the raw materials from respondent, would either pay him the price
of the raw materials or, in the alternative, deliver to him the finished products of
equivalent value.
When petitioner Arco Pulp and Paper tendered a check to respondent in partial
payment for the scrap papers, they exercised their option to pay the price.
Respondent's receipt of the check and his subsequent act of depositing it
constituted his notice of petitioner Arco Pulp and Paper's option to pay.
This choice was also shown by the terms of the memorandum of agreement,
which was executed on the same day. The memorandum declared in clear terms
that the delivery of petitioner Arco Pulp and Paper's finished products would be
to a third person, thereby extinguishing the option to deliver the finished
products of equivalent value to respondent.
The memorandum of
agreement did not constitute
a novation of the original
contract
The trial court erroneously ruled that the execution of the memorandum of
agreement constituted a novation of the contract between the parties. When
petitioner Arco Pulp and Paper opted instead to deliver the finished products to a
third person, it did not novate the original obligation between the parties.
The rules on novation are outlined in the Civil Code,thus: STECDc
In general, there are two modes of substituting the person of the debtor:
(1) expromision and (2) delegacion. In expromision, the initiative for
the change does not come from — and may even be made without the
knowledge of — the debtor, since it consists of a third person's
assumption of the obligation. As such, it logically requires the consent
of the third person and the creditor. In delegacion, the debtor offers,
and the creditor accepts, a third person who consents to the
substitution and assumes the obligation; thus, the consent of these
three persons are necessary. Both modes of substitution by the
debtor require the consent of the creditor. IHTASa
There is nothing in the memorandum of agreement that states that with its
execution, the obligation of petitioner Arco Pulp and Paper to respondent would
be extinguished. It also does not state that Eric Sy somehow substituted
petitioner Arco Pulp and Paper as respondent's debtor. It merely shows that
petitioner Arco Pulp and Paper opted to deliver the finished products to a third
person instead.
The consent of the creditor must also be secured for the novation to be valid:
Novation must be expressly consented to. Moreover, the conflicting
intention and acts of the parties underscore the absence of any express
disclosure or circumstances with which to deduce a clear and
unequivocal intent by the parties to novate the old
agreement. 40 (Emphasis supplied)
In this case, respondent was not privy to the memorandum of agreement, thus,
his conformity to the contract need not be secured. This is clear from the first line
of the memorandum, which states: HCISED
Per meeting held at ARCO, April 18, 2007, it has been mutually
agreed between Mrs. Candida A. Santos and Mr. Eric Sy. . . . 41
Moral damages are not awarded as a matter of right but only after the party
claiming it proved that the breach was due to fraud or bad faith. As this court
stated:
Moral damages are not recoverable simply because a contract has
been breached. They are recoverable only if the party from whom it is
claimed acted fraudulently or in bad faith or in wanton disregard of his
contractual obligations. The breach must be wanton, reckless,
malicious or in bad faith, and oppressive or abusive. 42
Further, the following requisites must be proven for the recovery of moral
damages:
An award of moral damages would require certain conditions to be
met, to wit: (1) first, there must be an injury, whether physical, mental
or psychological, clearly sustained by the claimant; (2) second, there
must be culpable act or omission factually established; (3) third, the
wrongful act or omission of the defendant is the proximate cause of
the injury sustained by the claimant; and (4) fourth, the award of
damages is predicated on any of the cases stated in Article 2219 of the
Civil Code.43
Here, the injury suffered by respondent is the loss of PhP7,220,968.31 from his
business. This has remained unpaid since 2007. This injury undoubtedly was
caused by petitioner Arco Pulp and Paper's act of refusing to pay its obligations.
When the obligation became due and demandable, petitioner Arco Pulp and
Paper not only issued an unfunded check but also entered into a contract with a
third person in an effort to evade its liability. This proves the third
requirement. THaAEC
As to the fourth requisite, Article 2219 of the Civil Code provides that moral
damages may be awarded in the following instances:
Article 2219. Moral damages may be recovered in the following and
analogous cases:
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32,
34, and 35.
Breaches of contract done in bad faith, however, are not specified within this
enumeration. When a party breaches a contract, he or she goes against Article 19
of the Civil Code,which states:
Article 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith. SHacCD
Persons who have the right to enter into contractual relations must exercise that
right with honesty and good faith. Failure to do so results in an abuse of that right,
which may become the basis of an action for damages. Article 19, however,
cannot be its sole basis:
Article 19 is the general rule which governs the conduct of human
relations. By itself, it is not the basis of an actionable tort. Article 19
describes the degree of care required so that an actionable tort may
arise when it is alleged together with Article 20 or Article 21. 44
Article 21. Any person who wilfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy
shall compensate the latter for the damage.
Article 21, on the other hand, concerns injuries that may be caused by
acts which are not necessarily proscribed by law. This article requires
that the act be willful, that is, that there was an intention to do the act
and a desire to achieve the outcome. In cases under Article 21, the
legal issues revolve around whether such outcome should be
considered a legal injury on the part of the plaintiff or whether the
commission of the act was done in violation of the standards of care
required in Article 19. 45 CSaITD
When parties act in bad faith and do not faithfully comply with their obligations
under contract, they run the risk of violating Article 1159 of the Civil Code:
Article 1159. Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good
faith.
Article 2219, therefore, is not an exhaustive list of the instances where moral
damages may be recovered since it only specifies, among others, Article 21.
When a party reneges on his or her obligations arising from contracts in bad faith,
the act is not only contrary to morals, good customs, and public policy; it is also
a violation of Article 1159. Breaches of contract become the basis of moral
damages, not only under Article 2220, but also under Articles 19 and 20 in
relation to Article 1159.
Moral damages, however, are not recoverable on the mere breach of the contract.
Article 2220 requires that the breach be done fraudulently or in bad faith.
In Adriano v. Lasala: 46
To recover moral damages in an action for breach of contract, the
breach must be palpably wanton, reckless and malicious, in bad faith,
oppressive, or abusive. Hence, the person claiming bad faith must
prove its existence by clear and convincing evidence for the law
always presumes good faith.
Since a finding of bad faith is generally premised on the intent of the doer, it
requires an examination of the circumstances in each case.
When petitioner Arco Pulp and Paper issued a check in partial payment of its
obligation to respondent, it was presumably with the knowledge that it was being
drawn against a closed account. Worse, it attempted to shift their obligations to a
third person without the consent of respondent.
Petitioner Arco Pulp and Paper's actions clearly show "a dishonest purpose or
some moral obliquity and conscious doing of a wrong, a breach of known duty
through some motive or interest or ill will that partakes of the nature of
fraud." 48 Moral damages may, therefore, be awarded.
Exemplary damages may also be awarded. Under the Civil Code,exemplary
damages are due in the following circumstances: DSEIcT
According to the Court of Appeals, petitioner Santos was solidarily liable with
petitioner Arco Pulp and Paper, stating that: aEIADT
In the present case, We find bad faith on the part of the
[petitioners] when they unjustifiably refused to honor their
undertaking in favor of the [respondent]. After the check in
the amount of PhP1,487,766.68 issued by [petitioner] Santos
was dishonored for being drawn against a closed account,
[petitioner] corporation denied any privity with [respondent].
These acts prompted the [respondent] to avail of the
remedies provided by law in order to protect his rights. 57
We agree with the Court of Appeals. Petitioner Santos cannot be allowed to hide
behind the corporate veil. When petitioner Arco Pulp and Paper's obligation to
respondent became due and demandable, she not only issued an unfunded check
but also contracted with a third party in an effort to shift petitioner Arco Pulp and
Paper's liability. She unjustifiably refused to honor petitioner corporation's
obligations to respondent. These acts clearly amount to bad faith. In this instance,
the corporate veil may be pierced, and petitioner Santos may be held solidarily
liable with petitioner Arco Pulp and Paper.
The rate of interest due on
the obligation must be
reduced in view of Nacar v.
Gallery Frames 58
In view, however, of the promulgation by this court of the decision dated August
13, 2013 in Nacar v. Gallery Frames, 59 the rate of interest due on the obligation
must be modified from 12% per annum to 6% per annum from the time of
demand.
Nacar effectively amended the guidelines stated in Eastern Shipping v. Court of
Appeals, 60 and we have laid down the following guidelines with regard to the
rate of legal interest:
To recapitulate and for future guidance, the guidelines laid down
in the case of Eastern Shipping Lines are accordingly modified to
embody BSP-MB Circular No. 799, as follows:
And, in addition to the above, judgments that have become final and
executory prior to July 1, 2013, shall not be disturbed and shall
continue to be implemented applying the rate of interest fixed
therein. 61 (Emphasis supplied; citations omitted.)
PHIL 133-159)
DECISION
REYES, J : p
On the scales of justice precariously lie the right of a prevailing party to his
victor's cup, no more, no less; and the right of a separate entity from being
dragged by the ball and chain of the vanquished party.
The facts of this case as garnered from the Decision 1 dated April 26, 2012 of the
Court of Appeals (CA) in CA-G.R. SP No. 120979 are as follows:
We trace the roots of this case to a complaint instituted with the
Makati City Regional Trial Court (RTC), Branch 66, against EIB
Securities, Inc. (E-Securities) for unauthorized sale of 32,180,000
DMCI shares of private respondents Pacific Rehouse Corporation,
Pacific Concorde Corporation, Mizpah Holdings, Inc., Forum
Holdings Corporation, and East Asia Oil Company, Inc. In its October
18, 2005 Resolution, the RTC rendered judgment on the pleadings.
The fallo reads:
SO ORDERED. . . .
WHEREFORE, . . .,
Let an Alias Writ of Execution be issued relative to the
above-entitled case and pursuant to the RESOLUTION dated
October 18, 2005 and to this Order directing defendant EIB
Securities, Inc., and/or Export and Industry Bank, Inc., to
fully comply therewith.
SO ORDERED. . . .
Pursuant to Rule 39, Section 10 (a) of the Rules of Court, the Branch
Clerk of Court or the Branch Sheriff of this Court is hereby directed to
acquire 32,180,000 DMCI shares of stock from the Philippine Stock
Exchange at the cost of EIB Securities, Inc. and Export and Industry
Bank[,] Inc. and to deliver the same to the plaintiffs pursuant to this
Court's Resolution dated October 18, 2005.
SO ORDERED. 7
SO ORDERED. 11
SO ORDERED. 24
The CA explained that the alter ego theory cannot be sustained because
ownership of a subsidiary by the parent company is not enough justification to
pierce the veil of corporate fiction. There must be proof, apart from mere
ownership, that Export Bank exploited or misused the corporate fiction of
E-Securities. The existence of interlocking incorporators, directors and officers
between the two corporations is not a conclusive indication that they are one and
the same. 25 The records also do not show that Export Bank has complete control
over the business policies, affairs and/or transactions of E-Securities. It was
solely E-Securities that contracted the obligation in furtherance of its legitimate
corporate purpose; thus, any fall out must be confined within its limited
liability. 26
The petitioners, without filing a motion for reconsideration, filed a Petition for
Review 27 under Rule 45 docketed as G.R. No. 201537, impugning the Decision
dated April 26, 2012 of the CA.
Considering that G.R. Nos. 199687 and 201537 originated from the same set of
facts, involved the same parties and raised intertwined issues, the cases were
then consolidated. 28
Issues
In précis, the issues for resolution of this Court are the following:
In G.R. No. 199687,
I.
WHETHER THE CA COMMITTED A REVERSIBLE ERROR IN
RULING THAT EXPORT BANK MAY NOT BE HELD LIABLE
FOR A FINAL AND EXECUTORY JUDGMENT AGAINST
E-SECURITIES IN AN ALIAS WRIT OF EXECUTION BY
PIERCING ITS VEIL OF CORPORATE FICTION; and
II.
From the preceding, it is therefore correct to say that the court must first and
foremost acquire jurisdiction over the parties; and only then would the parties be
allowed to present evidence for and/or against piercing the veil of corporate
fiction. If the court has no jurisdiction over the corporation, it follows that the
court has no business in piercing its veil of corporate fiction because such action
offends the corporation's right to due process.
"Jurisdiction over the defendant is acquired either upon a valid service of
summons or the defendant's voluntary appearance in court. When the defendant
does not voluntarily submit to the court's jurisdiction or when there is no valid
service of summons, 'any judgment of the court which has no jurisdiction over
the person of the defendant is null and void.'" 51 "The defendant must be
properly apprised of a pending action against him and assured of the opportunity
to present his defenses to the suit. Proper service of summons is used to protect
one's right to due process." 52 DCcTHa
As Export Bank was neither served with summons, nor has it voluntarily
appeared before the court, the judgment sought to be enforced against
E-Securities cannot be made against its parent company, Export Bank. Export
Bank has consistently disputed the RTC jurisdiction, commencing from its filing
of an Omnibus Motion 53 by way of special appearance during the execution
stage until the filing of its Comment 54 before the Court wherein it was pleaded
that "RTC [of] Makati[, Branch] 66 never acquired jurisdiction over Export
[B]ank. Export [B]ank was not pleaded as a party in this case. It was never
served with summons by nor did it voluntarily appear before RTC [of] Makati[,
Branch] 66 so as to be subjected to the latter's jurisdiction." 55
In dispensing with the requirement of service of summons or voluntary
appearance of Export Bank, the RTC applied the cases of Violago and Arcilla.
The RTC concluded that in these cases, the Court decided that the doctrine of
piercing the veil of corporate personality can be applied even when one of the
affected parties has not been brought to the Court as a party. 56
A closer perusal on the rulings of this Court in Violago and Arcilla, however,
reveals that the RTC misinterpreted the doctrines on these cases. We agree with
the CA that these cases are not congruent to the case at bar. In Violago, Spouses
Pedro and Florencia Violago (Spouses Violago) filed a third party complaint
against their cousin Avelino Violago (Avelino), who is also the president of
Violago Motor Sales Corporation (VMSC), for selling them a vehicle which was
already sold to someone else. VMSC was not impleaded as a third party
defendant. Avelino contended that he was not a party to the transaction
personally, but VMSC. The Court ruled that "[t]he fact that VMSC was not
included as defendant in [Spouses Violago's] third party complaint does not
preclude recovery by Spouses Violago from Avelino; neither would such
non-inclusion constitute a bar to the application of the
piercing-of-the-corporate-veil doctrine." 57 It should be pointed out that
although VMSC was not made a third party defendant, the person who was
found liable in Violago, Avelino, was properly made a third party defendant in
the first instance. The present case could not be any more poles apart
from Violago, because Export Bank, the parent company which was sought to be
accountable for the judgment against E-Securities, is not a party to the main
case.
In Arcilla, meanwhile, Calvin Arcilla (Arcilla) obtained a loan in the name of
Csar Marine Resources, Inc. (CMRI) from Emilio Rodulfo. A complaint was
then filed against Arcilla for non-payment of the loan. CMRI was not impleaded
as a defendant. The trial court eventually ordered Arcilla to pay the judgment
creditor for such loan. Arcilla argued that he is not personally liable for the
adjudged award because the same constitutes a corporate liability which cannot
even bind the corporation as the latter is not a party to the collection suit. The
Court made the succeeding observations:
[B]y no stretch of even the most fertile imagination may one be able
to conclude that the challenged Amended Decision directed Csar
Marine Resources, Inc. to pay the amounts adjudged. By its clear
and unequivocal language, it is the petitioner who was declared
liable therefor and consequently made to pay. . . ., even if We are to
assume arguendo that the obligation was incurred in the name of the
corporation, the petitioner would still be personally liable therefor
because for all legal intents and purposes, he and the corporation are
one and the same. Csar Marine Resources, Inc. is nothing more than
his business conduit and alter ego. The fiction of a separate juridical
personality conferred upon such corporation by law should be
disregarded. . . . . 58 (Citation omitted)
It is important to bear in mind that although CMRI was not a party to the suit, it
was Arcilla, the defendant himself who was found ultimately liable for the
judgment award. CMRI and its properties were left untouched from the main
case, not only because of the application of the alter ego doctrine, but also
because it was never made a party to that case. AScTaD
The disparity between the instant case and those of Violago and Arcilla is that in
said cases, although the corporations were not impleaded as defendant, the
persons made liable in the end were already parties thereto since the inception of
the main case. Consequently, it cannot be said that the Court had, in the absence
of fraud and/or bad faith, applied the doctrine of piercing the veil of corporate
fiction to make a non-party liable. In short, liabilities attached only to those who
are parties. None of the non-party corporations (VMSC and CMRI) were made
liable for the judgment award against Avelino and Arcilla.
The Alter Ego Doctrine is not
applicable
"The question of whether one corporation is merely an alter ego of another is
purely one of fact. So is the question of whether a corporation is a paper
company, a sham or subterfuge or whether petitioner adduced the requisite
quantum of evidence warranting the piercing of the veil of respondent's
corporate entity." 59
As a rule, the parties may raise only questions of law under Rule 45, because the
Supreme Court is not a trier of facts. Generally, we are not duty-bound to
analyze again and weigh the evidence introduced in and considered by the
tribunals below. 60 However, justice for all is of primordial importance that the
Court will not think twice of reviewing the facts, more so because the RTC and
the CA arrived in contradicting conclusions.
"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." 61
"Where one corporation is so organized and controlled and its affairs are
conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the
fiction of the corporate entity of the "instrumentality" may be disregarded. The
control necessary to invoke the rule is not majority or even complete stock
control but such domination of finances, policies and practices that the
controlled corporation has, so to speak, no separate mind, will or existence of its
own, and is but a conduit for its principal. It must be kept in mind that the control
must be shown to have been exercised at the time the acts complained of took
place. Moreover, the control and breach of duty must proximately cause the
injury or unjust loss for which the complaint is made." 62
The Court has laid down a three-pronged control test to establish when the alter
ego doctrine should be operative:
(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
plaintiff's legal right; and
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
defendant's relationship to that operation. 64 Hence, all three elements should
concur for the alter ego doctrine to be applicable. DCcAIS
In its decision, the RTC maintained that the subsequently enumerated factors
betray the true nature of E-Securities as a mere alter ego of Export Bank:
1. Defendant EIB Securities, a subsidiary corporation 100% totally
owned by Export and Industry Bank, Inc., was only re-activated by the
latter in 2002-2003 and the continuance of its operations was geared
for no other reason tha[n] to serve as the securities brokerage arm
of said parent corporation bank;
2. It was the parent corporation bank that provided and infused the
fresh working cash capital needed by defendant EIB Securities which
prior thereto was non-operating and severely cash-strapped. [This was
so attested by the then Corporate Secretary of both corporations, Atty.
Ramon Aviado, Jr., in his submitted Sworn Statement which is
deemed allowable "evidence on motion", under Sec. 7, Rule 133,
Rules on Evidence; Bravo vs. Borja, 134 SCRA 438];
7. Finally[,] and this is very significant, the control and sway that the
bank parent corporation held over defendant EIB Securities was
prevailing in June 2004 when the very act complained of in plaintiff's
Complaint took place, namely the unauthorized disposal of the
32,180,000 DMCI shares of stock. Being then under the direction and
control of the bank parent corporation, the unauthorized disposal of
those shares by defendant EIB Securities is attributable to, and the
responsibility of the former. 65
All the foregoing circumstances, with the exception of the admitted stock
ownership, were however not properly pleaded and proved in accordance with
the Rules of Court. 66 These were merely raised by the petitioners for the first
time in their Motion for Issuance of an Alias Writ of Execution 67 and
Reply, 68 which the Court cannot consider. "Whether the separate personality of
the corporation should be pierced hinges on obtaining facts appropriately
pleaded or proved." 69 DIETcH
Albeit the RTC bore emphasis on the alleged control exercised by Export Bank
upon its subsidiary E-Securities, "[c]ontrol, by itself, does not mean that the
controlled corporation is a mere instrumentality or a business conduit of the
mother company. Even control over the financial and operational concerns of a
subsidiary company does not by itself call for disregarding its corporate fiction.
There must be a perpetuation of fraud behind the control or at least a fraudulent
or illegal purpose behind the control in order to justify piercing the veil of
corporate fiction. Such fraudulent intent is lacking in this case." 70
Moreover, there was nothing on record demonstrative of Export Bank's wrongful
intent in setting up a subsidiary, E-Securities. If used to perform legitimate
functions, a subsidiary's separate existence shall be respected, and the liability of
the parent corporation as well as the subsidiary will be confined to those arising
in their respective business. 71 To justify treating the sole stockholder or holding
company as responsible, it is not enough that the subsidiary is so organized and
controlled as to make it "merely an instrumentality, conduit or adjunct" of its
stockholders. It must further appear that to recognize their separate entities
would aid in the consummation of a wrong. 72
As established in the main case 73 and reiterated by the CA, the subject
32,180,000 DMCI shares which E-Securities is obliged to return to the
petitioners were originally bought at an average price of P0.38 per share and
were sold for an average price of P0.24 per share. The proceeds were then used
to buy back 61,100,000 KPP shares earlier sold by E-Securities. Quite
unexpectedly however, the total amount of these DMCI shares ballooned to
P1,465,799,000.00. 74 It must be taken into account that this unexpected
turnabout did not inure to the benefit of E-Securities, much less Export Bank.
Furthermore, ownership by Export Bank of a great majority or all of stocks of
E-Securities and the existence of interlocking directorates may serve as badges
of control, but ownership of another corporation, per se, without proof of
actuality of the other conditions are insufficient to establish an alter ego
relationship or connection between the two corporations, which will justify the
setting aside of the cover of corporate fiction. The Court has declared that "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." The Court has likewise ruled
that the "existence of interlocking directors, corporate officers and shareholders
is not enough justification to pierce the veil of corporate fiction in the absence of
fraud or other public policy considerations." 75
While the courts have been granted the colossal authority to wield the sword
which pierces through the veil of corporate fiction, concomitant to the exercise
of this power, is the responsibility to uphold the doctrine of separate entity, when
rightly so; as it has for so long encouraged businessmen to enter into economic
endeavors fraught with risks and where only a few dared to venture.
Hence, any application of the doctrine of piercing the corporate veil should be
done with caution. A court should be mindful of the milieu where it is to be
applied. It must be certain that the corporate fiction was misused to such an
extent that injustice, fraud, or crime was committed against another, in disregard
of its rights. The wrongdoing must be clearly and convincingly established; it
cannot be presumed. Otherwise, an injustice that was never unintended may
result from an erroneous application. 76
In closing, we understand that the petitioners are disgruntled at the turnout of this
case — that they cannot enforce the award due them on its entirety; however, the
Court cannot supplant a remedy which is not sanctioned by our laws and
prescribed rules.
WHEREFORE, the petition in G.R. No. 199687 is hereby DISMISSED for
having been rendered moot and academic. The petition in G.R. No. 201537,
meanwhile, is hereby DENIED for lack of merit. Consequently, the Decision
dated April 26, 2012 of the Court of Appeals in CA-G.R. SP No. 120979
is AFFIRMED.
SO ORDERED.
(Pacific Rehouse Corp. v. Court of Appeals, G.R. No. 199687, 201537, [March
|||
DECISION
BRION, J : p
We resolve this petition for review on certiorari 1 assailing the decision 2 dated
August 18, 2006 and the resolution 3 dated March 29, 2007 of the Court of
Appeals (CA) in CA-G.R. SP No. 94461.
The Antecedents
In December 2001, petitioner Eric Godfrey Stanley Livesey filed a complaint for
illegal dismissal with money claims 4 against CBB Philippines Strategic
Property Services, Inc. (CBB) and Paul Dwyer. CBB was a domestic corporation
engaged in real estate brokerage and Dwyer was its President.
Livesey alleged that on April 12, 2001, CBB hired him as Director and Head of
Business Space Development, with a monthly salary of US$5,000.00;
shareholdings in CBB's offshore parent company; and other benefits. In August
2001, he was appointed as Managing Director and his salary was increased to
US$16,000.00 a month. Allegedly, despite the several deals for CBB he drew up,
CBB failed to pay him a significant portion of his salary. For this reason, he was
compelled to resign on December 18, 2001. He claimed CBB owed him
US$23,000.00 in unpaid salaries. DECSIT
CBB paid Livesey the initial amount of US$13,000.00, but not the next two
installments as the company ceased operations. In reaction, Livesey moved for
the issuance of a writ of execution. LA Eduardo G. Magno granted the writ, 9 but
it was not enforced. Livesey then filed a motion for the issuance of an alias writ
of execution, 10 alleging that in the process of serving respondents the writ, he
learned "that respondents, in a clear and willful attempt to avoid their liabilities
to complainant . . . have organized another corporation, [Binswanger]
Philippines, Inc." 11 He claimed that there was evidence showing that CBB and
Binswanger Philippines, Inc. (Binswanger) are one and the same corporation,
pointing out that CBB stands for Chesterton Blumenauer
Binswanger. 12 Invoking the doctrine of piercing the veil of corporate fiction,
Livesey prayed that an alias writ of execution be issued against respondents
Binswanger and Keith Elliot, CBB's former President, and now Binswanger's
President and Chief Executive Officer (CEO).
The Compulsory Arbitration Rulings
In an order 13 dated March 22, 2004, LA Catalino R. Laderas denied Livesey's
motion for an alias writ of execution, holding that the doctrine of piercing the
corporate veil was inapplicable in the case. He explained that the stockholders of
the two corporations were not the same. Further, LA Laderas stressed that LA
Reyno's decision had already become final and could no longer be altered or
modified to include additional respondents. EHCDSI
On the merits of the case, the CA disagreed with the NLRC finding that the
respondents are jointly and severally liable with CBB in the case. It emphasized
that the mere fact that Binswanger and CBB have the same President is not in
itself sufficient to pierce the veil of corporate fiction of the two entities, and that
although Elliot was formerly CBB's President, this circumstance alone does not
make him answerable for CBB's liabilities, there being no proof that he was
motivated by malice or bad faith when he signed the compromise agreement in
CBB's behalf; neither was there proof that Binswanger was formed, or that it was
operated, for the purpose of shielding fraudulent or illegal activities of its
officers or stockholders or that the corporate veil was used to conceal fraud,
illegality or inequity at the expense of third persons like Livesey.
Livesey moved for reconsideration, but the CA denied the motion in its
resolution dated March 29, 2007. 21 Hence, the present petition.
The Petition
Livesey prays for a reversal of the CA rulings on the basis of the following
arguments:
1. The CA erred in not denying the respondents' petition for certiorari dated
May 12, 2006 for being filed out of time. SEIcAD
With the above citation, Livesey points out, the CA opined that a copy of the
NLRC resolution denying the respondents' motion for reconsideration should
have been served on Atty. Jacosalem and no longer on the counsel of record, so
that the sixty (60)-day period for the filing of the petition should be reckoned
from March 17, 2006 when Atty. Jacosalem secured a copy of the resolution
from the NLRC (the petition was filed by a Jeffrey Jacosalem on May 15,
2006). 24 Livesey submits that the CA's reliance on Rinconada was misplaced.
He argues that notwithstanding the signing by Atty. Jacosalem of the motion for
reconsideration, it was only proper that the NLRC served a copy of the
resolution on the Corporate Counsels Philippines, Law Offices as it was still the
respondents' counsel at the time. 25 He adds that Atty. Jacosalem never
participated in the NLRC proceedings because he did not enter his appearance as
the respondents' counsel before the labor agency; further, he did not even
indicate his office address on the motion for reconsideration he signed.
2. The CA erred in not applying the doctrine of piercing the veil of corporate
fiction to the case.
Livesey bewails the CA's refusal to pierce Binswanger's corporate veil in his bid
to make the company and Elliot liable, together with CBB, for the judgment
award to him. He insists that CBB and Binswanger are one and the same
corporation as shown by the "overwhelming evidence" he presented to the LA,
the NLRC and the CA, as follows: ITCcAD
3. The CA erred in not holding Elliot liable for the judgment award.
Livesey questions the CA's reliance on Laperal Development Corporation v.
Court of Appeals, 34 Sunio, et al. v. NLRC, et al., 35 andPalay, Inc., et al. v. Clave,
etc., et al., 36 in support of its ruling that Elliot is not liable to him for the LA's
award. He argues that in these cases, the Court upheld the separate personalities
of the corporations and their officers/employees because there was no evidence
that the individuals sought to be held liable were in bad faith or that there were
badges of fraud in their actions against the aggrieved party or parties in said
cases. He reiterates his submission to the CA that the circumstances of the
present case are different from those of the cited cases. He posits that the closure
of CBB and its immediate replacement by Binswanger could not have been
possible without Elliot's guiding hand, such that when CBB ceased operations,
Elliot (CBB's President and CEO) moved to Binswanger in the same position.
More importantly, Livesey points out, as signatory for CBB in the compromise
agreement between him (Livesey) and CBB, Elliot knew that it had not been and
would never be fully satisfied.
Livesey thus laments Elliot's devious scheme of leaving him an unsatisfied
award, stressing that Elliot was the chief orchestrator of CBB and Binswanger's
fraudulent act of evading the full satisfaction of the compromise agreement. In
this light, he submits that the Court's ruling in A.C. Ransom Labor Union-CCLU
v. NLRC, 37 which deals with the issue of who is liable for the worker's
backwages when a corporation ceases operations, should apply to his situation.
The Respondents' Position
Through their comment 38 and memorandum, 39 the respondents pray that the
petition be denied for the following reasons:
1. The NLRC had no jurisdiction over the dispute between Livesey and
CBB/Dwyer as it involved an intra-corporate controversy; under Republic Act
No. 8799, the Regional Trial Court exercises jurisdiction over the case.
As shown by the records, Livesey was appointed as CBB's Managing Director
during the relevant period and was also a shareholder, making him a corporate
officer.
2. There was no employer-employee relationship between Livesey and
Binswanger. Under Article 217 of the Labor Code, the labor arbiters and the
NLRC have jurisdiction only over disputes where there is an
employer-employee relationship between the parties. ICcaST
3. The NLRC erred in applying the doctrine of piercing the veil of corporate
fiction to the case based only on mere assumptions. Point by point, they take
exception to Livesey's submissions as follows:
a. The e-mail statement in reply to an online query of
Young (CBB's Web Editor) that CBB is known as
Chesterton Blumenauer Binswanger or Chesterton Petty.
Ltd. to establish a connection between CBB and
Binswanger is inconclusive as there was no mention in
the statement of Binswanger Philippines, Inc.
b. The affidavit of De Guzman, former CBB Associate
Director, who also resigned from the company like
Livesey, has no probative value as it was self-serving and
contained only misrepresentation of facts, conjectures and
surmises.
c. When Binswanger was organized and incorporated,
CBB had already been abandoned by its Board of
Directors and no longer subsidized by CBB-Hongkong; it
had no business operations to work with.
d. The mere transfer of Elliot and Catral from CBB to
Binswanger is not a ground to pierce the corporate veil in
the present case absent a clear evidence supporting the
application of the doctrine. The NLRC applied the
doctrine on the basis only of LA Guerrero's decision in
the De Guzman case.
e. The respondents' petition for certiorari was filed on
time. Atty. Jacosalem, who was presumed to have been
engaged as the respondents' counsel, was deemed to have
received a copy of the NLRC resolution (denying the
motion for reconsideration) on March 17, 2006 when he
requested and secured a copy from the NLRC. The
petition was filed on May 15, 2006 or fifty-nine (59) days
from March 17, 2006. Atty. Jacosalem may have failed to
indicate his address on the motion for reconsideration he
filed but that is not a reason for him to be deprived of the
notices and processes of the case.
The Court's Ruling
The procedural question
The respondents' petition for certiorari before the CA was filed out of time. The
sixty (60)-day filing period under Rule 65 of the Rules of Court should have
been counted from January 19, 2006, the date of receipt of a copy of the NLRC
resolution denying the respondents' motion for reconsideration by the Corporate
Counsels Philippines, Law Offices which was the respondents' counsel of record
at the time. The respondents cannot insist that Atty. Jacosalem's receipt of a copy
of the resolution on March 17, 2006 as the reckoning date for the filing of the
petition as we shall discuss below. AScHCD
The CA chided the NLRC for serving a copy of the resolution on the Corporate
Counsels Philippines, Law Offices, instead of on Atty. Jacosalem as it believed
that the labor tribunal impliedly recognized Atty. Jacosalem as the respondents'
counsel when it acted on the motion for reconsideration that he signed. As we see
it, the fault was not on the NLRC but on Atty. Jacosalem himself as he left no
forwarding address with the NLRC, a serious lapse that even he admitted. 40 This
is a matter that cannot just be taken for granted as it betrays a careless legal
representation that can cause adverse consequences to the other party.
To our mind, Atty. Jacosalem's non-observance of a simple, but basic
requirement in the practice of law lends credence to Livesey's claim that the
lawyer did not formally enter his appearance before the NLRC as the
respondents' new counsel; if it had been otherwise, he would have supplied his
office address to the NLRC. Also, had he exercised due diligence in the
performance of his duty as counsel, he could have inquired earlier with the
NLRC and should not have waited as late as March 17, 2006 about the outcome
of the respondents' motion for reconsideration which was filed as early as
October 28, 2005.
To reiterate, the filing of the respondents' petition for certiorari should have
been reckoned from January 19, 2006 when a copy of the subject NLRC
resolution was received by the Corporate Counsels Philippines, Law Offices,
which, as of that date, had not been discharged or had withdrawn and therefore
remained to be the respondents' counsel of record. Clearly, the petition
for certiorariwas filed out of time. Section 6 (a), Rule III of the NLRC Revised
Rules of Procedure provides that "[f]or purposes of appeal, the period shall be
counted from receipt of such decisions, resolutions, or orders by the counsel or
representative of record." cTCaEA
We now come to the issue of whether the NLRC had jurisdiction over the
controversy between Livesey and CBB/Dwyer on the ground that it involved an
intra-corporate dispute.
Based on the facts of the case, we find this issue to have been rendered academic
by the compromise agreement between Livesey and CBB and approved by LA
Reyno. 41 That CBB reneged in the fulfillment of its obligation under the
agreement is no reason to revive the issue and further frustrate the full settlement
of the obligation as agreed upon.
The substantive aspect of the case
Even if we rule that the respondents' appeal before the CA had been filed on time,
we believe and so hold that the appellate court committed a reversible error of
judgment in its challenged decision. DAEICc
PHIL 99-119)
DECISION
BRION, J : p
The RTC, moreover, concluded that the interest rates stipulated in the MOA
were not usurious and that the respondent is entitled to attorney's fees on account
of the petitioners' willful breach of the loan obligation. Thus, principally relying
on the submitted Breakdown of Account, the RTC ordered the petitioners,
jointly and severally, to pay the balance of P460,505.86, at 12% interest, and
attorney's fees equivalent to 25% of the total amount due.
The CA Ruling
The petitioners appealed the RTC ruling to the CA. There, they argued that in
view of the lack of proper accounting and the respondent's failure to substantiate
his claims, the exact amount of their indebtedness had not been proven. Nuccio
also argued that by virtue of NSI's separate and distinct personality, he cannot be
made solidarily liable with NSI.
On October 27, 2008, the CA rendered a decision 7 declaring the petitioners
jointly and severally liable for the amount that the respondent sought. The
appellate court likewise held that since the petitioners neither questioned the
delivery of the machineries nor their valuation, their obligation to pay the
amount of P460,505.86 under the Breakdown of Account remained unrefuted.
The CA also affirmed the RTC ruling that petitioners are one and the same for
the following reasons: (1) Nuccio owned forty percent (40%) of NSI; (2) Nuccio
personally entered into the loan contract with the respondent because there was
no board resolution from NSI; (3) the petitioners were represented by the same
counsel; (4) the failure of NSI to object to Nuccio's acts shows the latter's control
over the corporation; and (5) Nuccio's control over NSI was used to commit a
wrong or fraud. It further adopted the RTC's findings of bad faith and willful
breach of obligation on the petitioners' part, and affirmed its award of attorney's
fees.
The Petition
The petitioners submit that the CA gravely erred in ruling that a proper
accounting was not necessary. They argue that the Breakdown of Account —
which the RTC used as a basis in awarding the claim, as affirmed by the CA — is
hearsay since the person who prepared it, Ramoncito P. Puyat, was not presented
in court to authenticate it. They also point to the absence of the award's
computation in the RTC ruling, arguing that assuming they are still indebted to
the respondent, the specific amount of their indebtedness remains undetermined,
thus the need for an accounting to determine their exact liability.
They further question the CA's findings of solidary liability. They submit that in
the absence of any showing that corporate fiction was used to defeat public
convenience, justify a wrong, protect fraud or defend a crime, or where the
corporation is a mere alter ego or business conduit of a person, Nuccio's mere
ownership of forty percent (40%) does not justify the piercing of the separate and
distinct personality of NSI. CADacT
We note in this regard that the RTC, in awarding the amount of P460,505.86 in
favor of the respondent, principally relied on the Breakdown of Account. Under
this document, numerous entries, including the cash loan, were enumerated and
identified with their corresponding amounts. It included the items of expenses
allegedly chargeable to the petitioners, the value of the machineries, the amount
credited as paid, and the interest and penalty allegedly incurred.
A careful perusal of the records, however, reveals that the entries in the
Breakdown of Account and their corresponding amounts are not supported by
the respondent's presented evidence. The itemized expenses, as repeatedly
pointed out by the petitioners, were not proven, and the remaining indebtedness,
after the partial payment of P600,000.00, was merely derived by the RTC from
the Breakdown of Account.
Significantly, the RTC ruling neither showed how the award was computed nor
how the interest and penalty were calculated. In fact, it merely declared the
petitioners liable for the amount claimed by the respondent and adopted the
breakdown of liability in the Breakdown of Account. This irregularity is even
aggravated by the RTC's explicit refusal to explain why the payment of
P600,000.00 did not extinguish the debt. While it may be true that the petitioners'
indebtedness, aside from the cash loan of P300,000.00, undoubtedly covered the
value of the machineries, the RTC decision was far from clear and instructive on
the actual remaining indebtedness (inclusive of the machineries' value, penalties
and interests) after the partial payment was made and how these were all
computed.
We, thus, find it unacceptable for the RTC to simply come up with a conclusion
that the payment of P600,000.00 did not extinguish the debt, or, assuming it
really did not, that the remaining amount of indebtedness amounts exactly to
P460,505.86, without any showing of how this balance was arrived at. To our
mind, the RTC's ruling, in so far as the determination of the actual indebtedness
is concerned, is incomplete. CAScIH
What happened at the RTC likewise transpired at the CA when the latter
affirmed the appealed decision; the CA merely glossed over the contention of the
petitioners, and adopted the RTC's findings without giving any enlightenment.
To reiterate, nowhere in the decisions of the RTC and the CA did they specify
how the award, including the penalty and interest, was determined. The
petitioners were left in the dark as to how their indebtedness of P300,000.00,
after making a payment of P600,000.00, ballooned to P460,505.86. Worse,
unsubstantiated expenses, appearing in the Breakdown of Account, were
charged to them.
We, therefore, hold it inescapable that the prayer for proper accounting to
determine the petitioners' actual remaining indebtedness should be granted. As
this requires presentation of additional evidence, a remand of the case is only
proper and in order.
Piercing the veil of corporate fiction
is not justified. The petitioners are
not one and the same.
At the outset, we note that the question of whether NSI is an alter ego of Nuccio
is a factual one. This is also true with respect to the question of whether the
totality of the evidence adduced by the respondent warrants the application of
the piercing the veil of corporate fiction doctrine. As we did in the issue of
accounting, we hold that the Court may properly wade into the piercing the veil
issue although purely factual questions are involved.
After a careful study of the records and the findings of both the RTC and the CA,
we hold that their conclusions, based on the given findings, are not supported by
the evidence on record.
The rule is settled that a corporation is vested by law with a personality separate
and distinct from the persons composing it. Following this principle, a
stockholder, generally, is not answerable for the acts or liabilities of the
corporation, and vice versa. The obligations incurred by the corporate officers,
or other persons acting as corporate agents, are the direct accountabilities of the
corporation they represent, and not theirs. A director, officer or employee of a
corporation is generally not held personally liable for obligations incurred by the
corporation 9 and while there may be instances where solidary liabilities may
arise, these circumstances are exceptional. 10
Incidentally, we have ruled that mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stocks of the corporation is
not, by itself, a sufficient ground for disregarding the separate corporate
personality. Other than mere ownership of capital stocks, circumstances
showing that the corporation is being used to commit fraud or proof of existence
of absolute control over the corporation have to be proven. In short, before the
corporate fiction can be disregarded, alter-ego elements must first be sufficiently
established. DISaEA
Considering that the basis for holding Nuccio liable for the payment of the loan
has been proven to be insufficient, we find no justification for the RTC to hold
him jointly and solidarily liable for NSI's unpaid loan. Similarly, we find that the
CA ruling is wanting in sufficient explanation to justify the doctrine's application
and affirmation of the RTC's ruling. With these points firmly in mind, we hold
that NSI's liability should not attach to Nuccio.
On the final issue of the award of attorney's fees, Article 1229 of the New Civil
Code provides:
Article 1229. The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by
the debtor. Even if there has been no performance, the penalty may
also be reduced by the courts if it is iniquitous or unconscionable.
DECISION
PERLAS-BERNABE, J : p
Assailed in this petition for review on certiorari 1 are the Decision 2 dated
December 10, 2009 and Resolution 3 dated June 9, 2010 of the Court of Appeals
(CA) in CA-G.R. SP No. 101045 which pronounced that the National Labor
Relations Commission (NLRC) did not gravely abuse its discretion when it ruled
that respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally dismissed from
her employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused
the publication in a major broadsheet newspaper of its need for a Medical and
Regulatory Affairs Manager (Regulatory Affairs Manager) who would: (a) be
responsible for drug safety surveillance operations, staffing, and budget; (b) lead
the development and implementation of standard operating procedures/policies
for drug safety surveillance and vigilance; and (c) act as the primary interface
with internal and external customers regarding safety operations and
queries. 4 Alcaraz — who was then a Regulatory Affairs and Information
Manager at Aventis Pasteur Philippines, Incorporated (another pharmaceutical
company like Abbott) — showed interest and submitted her application on
October 4, 2004. 5
On December 7, 2004, Abbott formally offered Alcaraz the above-mentioned
position which was an item under the company's Hospira Affiliate Local
Surveillance Unit (ALSU) department. 6 In Abbott's offer sheet, 7 it was stated
that Alcaraz was to be employed on a probationary basis. 8 Later that day, she
accepted the said offer and received an electronic mail (e-mail) from Abbott's
Recruitment Officer, petitioner Teresita C. Bernardo (Bernardo), confirming the
same. Attached to Bernardo's e-mail were Abbott's organizational chart and a job
description of Alcaraz's work. 9 IDSaEA
Dear Pearl,
Department : Hospira
Welcome to Abbott!
CONFORME:
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible
where she was informed that she failed to meet the regularization standards for
the position of Regulatory Affairs Manager. 18 Thereafter, Walsh and Terrible
requested Alcaraz to tender her resignation, else they be forced to terminate her
services. She was also told that, regardless of her choice, she should no longer
report for work and was asked to surrender her office identification cards. She
requested to be given one week to decide on the same, but to no avail. 19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales
(Gonzales), that she would be on leave for that day. However, Gonzales told her
that Walsh and Terrible already announced to the whole Hospira ALSU staff that
Alcaraz already resigned due to health reasons. 20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz
a letter stating that her services had been terminated effective May 19,
2005. 21 The letter detailed the reasons for Alcaraz's termination — particularly,
that Alcaraz: (a) did not manage her time effectively; (b) failed to gain the trust
of her staff and to build an effective rapport with them; (c) failed to train her staff
effectively; and (d) was not able to obtain the knowledge and ability to make
sound judgments on case processing and article review which were necessary for
the proper performance of her duties. 22 On May 27, 2005, Alcaraz received
another copy of the said termination letter via registered mail. 23 ECTSDa
Alcaraz felt that she was unjustly terminated from her employment and thus,
filed a complaint for illegal dismissal and damages against Abbott and its
officers, namely, Misa, Bernardo, Almazar, Walsh, Terrible, and Feist. 24 She
claimed that she should have already been considered as a regular and not a
probationary employee given Abbott's failure to inform her of the reasonable
standards for her regularization upon her engagement as required under Article
295 25 of the Labor Code.In this relation, she contended that while her
employment contract stated that she was to be engaged on a probationary status,
the same did not indicate the standards on which her regularization would be
based. 26 She further averred that the individual petitioners maliciously connived
to illegally dismiss her when: (a) they threatened her with termination; (b) she
was ordered not to enter company premises even if she was still an employee
thereof; and (c) they publicly announced that she already resigned in order to
humiliate her. 27
On the contrary, petitioners maintained that Alcaraz was validly terminated from
her probationary employment given her failure to satisfy the prescribed
standards for her regularization which were made known to her at the time of her
engagement. 28
The LA Ruling
In a Decision dated March 30, 2006, 29 the LA dismissed Alcaraz's complaint for
lack of merit.
The LA rejected Alcaraz's argument that she was not informed of the reasonable
standards to qualify as a regular employee considering her admissions that she
was briefed by Almazar on her work during her pre-employment orientation
meeting 30 and that she received copies of Abbott's Code of Conduct and
Performance Modules which were used for evaluating all types of Abbott
employees. 31 As Alcaraz was unable to meet the standards set by Abbott as per
her performance evaluation, the LA ruled that the termination of her
probationary employment was justified. 32 Lastly, the LA found that there was
no evidence to conclude that Abbott's officers and employees acted in bad faith
in terminating Alcaraz's employment. 33
Displeased with the LA's ruling, Alcaraz filed an appeal with the National Labor
Relations Commission (NLRC). DTcACa
————————
TOTAL PhP1,760,000.00
==========
The NLRC reversed the findings of the LA and ruled that there was no evidence
showing that Alcaraz had been apprised of her probationary status and the
requirements which she should have complied with in order to be a regular
employee. 36 It held that Alcaraz's receipt of her job description and Abbott's
Code of Conduct and Performance Modules was not equivalent to her being
actually informed of the performance standards upon which she should have
been evaluated on. 37 It further observed that Abbott did not comply with its own
standard operating procedure in evaluating probationary employees. 38 The
NLRC was also not convinced that Alcaraz was terminated for a valid cause
given that petitioners' allegation of Alcaraz's "poor performance" remained
unsubstantiated. 39
Petitioners filed a motion for reconsideration which was denied by the NLRC in
a Resolution dated July 31, 2007. 40 CHEIcS
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for
Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction, docketed as CA G.R. SP No. 101045 (First CA Petition), alleging
grave abuse of discretion on the part of NLRC when it ruled that Alcaraz was
illegally dismissed. 41
Pending resolution of the First CA Petition, Alcaraz moved for the execution of
the NLRC's Decision before the LA, which petitioners strongly opposed. The
LA denied the said motion in an Order dated July 8, 2008 which was, however,
eventually reversed on appeal by the NLRC. 42 Due to the foregoing, petitioners
filed another Petition for Certiorari with the CA, docketed as CA G.R. SP No.
111318 (Second CA Petition), assailing the propriety of the execution of the
NLRC decision. 43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision 44 dated December 10,
2009, affirmed the ruling of the NLRC and held that the latter did not commit
any grave abuse of discretion in finding that Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the
reasonable standards under which she could qualify as a regular
employee. 45 This was based on its examination of the employment contract
which showed that the same did not contain any standard of performance or any
stipulation that Alcaraz shall undergo a performance evaluation before she could
qualify as a regular employee. 46 It also found that Abbott was unable to prove
that there was any reasonable ground to terminate Alcaraz's
employment. 47 Abbott moved for the reconsideration of the aforementioned
ruling which was, however, denied by the CA in a Resolution 48 dated June 9,
2010.
The CA likewise denied the Second CA Petition in a Resolution dated May 18,
2010 (May 18, 2010 Resolution) and ruled that the NLRC was correct in
upholding the execution of the NLRC Decision. 49 Thus, petitioners filed a
motion for reconsideration. SHADEC
While the petitioners' motion for reconsideration of the CA's May 18, 2010
Resolution was pending, Alcaraz again moved for the issuance of a writ of
execution before the LA. On June 7, 2010, petitioners received the LA's order
granting Alcaraz's motion for execution which they in turn appealed to the
NLRC — through a Memorandum of Appeal dated June 16, 2010 (June 16, 2010
Memorandum of Appeal) — on the ground that the implementation of the LA's
order would render its motion for reconsideration moot and academic. 50
Meanwhile, petitioners' motion for reconsideration of the CA's May 18, 2010
Resolution in the Second CA Petition was denied via a Resolution dated October
4, 2010. 51 This attained finality on January 10, 2011 for petitioners' failure to
timely appeal the same. 52 Hence, as it stands, only the issues in the First CA
petition are left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges
that petitioners were guilty of forum shopping when they filed the Second CA
Petition pending the resolution of their motion for reconsideration of the CA's
December 10, 2009 Decision i.e., the decision in the First CA Petition. 53 She
also contends that petitioners have not complied with the certification
requirement under Section 5, Rule 7 of the Rules of Court when they failed to
disclose in the instant petition the filing of the June 16, 2010 Memorandum of
Appeal filed before the NLRC. 54
The Issues Before the Court
The following issues have been raised for the Court's resolution: (a) whether or
not petitioners are guilty of forum shopping and have violated the certification
requirement under Section 5, Rule 7 of the Rules of Court; (b) whether or not
Alcaraz was sufficiently informed of the reasonable standards to qualify her as a
regular employee; (c) whether or not Alcaraz was validly terminated from her
employment; and (d) whether or not the individual petitioners herein are
liable.
CTcSAE
As to the first, forum shopping takes place when a litigant files multiple suits
involving the same parties, either simultaneously or successively, to secure a
favorable judgment. It exists where the elements of litis pendentia are present,
namely: (a) identity of parties, or at least such parties who represent the same
interests in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity with respect to the
two preceding particulars in the two (2) cases is such that any judgment that may
be rendered in the pending case, regardless of which party is successful, would
amount to res judicata in the other case. 57 HSATIC
In this case, records show that, except for the element of identity of parties, the
elements of forum shopping do not exist. Evidently, the First CA Petition was
instituted to question the ruling of the NLRC that Alcaraz was illegally
dismissed. On the other hand, the Second CA Petition pertains to the propriety of
the enforcement of the judgment award pending the resolution of the First CA
Petition and the finality of the decision in the labor dispute between Alcaraz and
the petitioners. Based on the foregoing, a judgment in the Second CA Petition
will not constitute res judicata insofar as the First CA Petition is concerned.
Thus, considering that the two petitions clearly cover different subject matters
and causes of action, there exists no forum shopping.
As to the second, Alcaraz further imputes that the petitioners violated the
certification requirement under Section 5, Rule 7 of the Rules of Court 58 by not
disclosing the fact that it filed the June 16, 2010 Memorandum of Appeal before
the NLRC in the instant petition.
In this regard, Section 5 (b), Rule 7 of the Rules of Court requires that a plaintiff
who files a case should provide a complete statement of the present status of any
pending case if the latter involves the same issues as the one that was filed. If
there is no such similar pending case, Section 5 (a) of the same rule provides that
the plaintiff is obliged to declare under oath that to the best of his knowledge, no
such other action or claim is pending.
Records show that the issues raised in the instant petition and those in the June
16, 2010 Memorandum of Appeal filed with the NLRC likewise cover different
subject matters and causes of action. In this case, the validity of Alcaraz's
dismissal is at issue whereas in the said Memorandum of Appeal, the propriety
of the issuance of a writ of execution was in question. Thus, given the dissimilar
issues, petitioners did not have to disclose in the present petition the filing of
their June 16, 2010 Memorandum of Appeal with the NLRC. In any event,
considering that the issue on the propriety of the issuance of a writ of execution
had been resolved in the Second CA Petition — which in fact had already
attained finality — the matter of disclosing the June 16, 2010 Memorandum of
Appeal is now moot and academic. HCacDE
Having settled the foregoing procedural matter, the Court now proceeds to
resolve the substantive issues.
B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys security of tenure.
However, in cases of probationary employment, aside from just or authorized
causes of termination, an additional ground is provided under Article 295 of the
Labor Code,i.e., the probationary employee may also be terminated for failure to
qualify as a regular employee in accordance with the reasonable standards made
known by the employer to the employee at the time of the engagement. 59 Thus,
the services of an employee who has been engaged on probationary basis may be
terminated for any of the following: (a) a just or (b) an authorized cause;
and (c) when he fails to qualify as a regular employee in accordance with
reasonable standards prescribed by the employer. 60
Corollary thereto, Section 6 (d), Rule I, Book VI of the Implementing Rules of
the Labor Code provides that if the employer fails to inform the probationary
employee of the reasonable standards upon which the regularization would be
based on at the time of the engagement, then the said employee shall be deemed
a regular employee, viz.:
(d)In all cases of probationary employment, the employer shall
make known to the employee the standards under which he will
qualify as a regular employee at the time of his engagement. Where
no standards are made known to the employee at that time, he shall
be deemed a regular employee. caEIDA
In other words, the employer is made to comply with two (2) requirements when
dealing with a probationary employee: first, the employer must communicate
the regularization standards to the probationary employee; and second, the
employer must make such communication at the time of the probationary
employee's engagement. If the employer fails to comply with either, the
employee is deemed as a regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made known the
standards that would qualify a probationary employee to be a regular employee
when it has exerted reasonable efforts to apprise the employee of what he is
expected to do or accomplish during the trial period of probation. This goes
without saying that the employee is sufficiently made aware of his probationary
status as well as the length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in nature, for
instance, in the case of maids, cooks, drivers, or messengers. 61 Also,
in Aberdeen Court, Inc. v. Agustin, 62 it has been held that the rule on notifying a
probationary employee of the standards of regularization should not be used to
exculpate an employee who acts in a manner contrary to basic knowledge and
common sense in regard to which there is no need to spell out a policy or
standard to be met. In the same light, an employee's failure to perform the duties
and responsibilities which have been clearly made known to him constitutes a
justifiable basis for a probationary employee's non-regularization.
In this case, petitioners contend that Alcaraz was terminated because she failed
to qualify as a regular employee according to Abbott's standards which were
made known to her at the time of her engagement. Contrarily, Alcaraz claims
that Abbott never apprised her of these standards and thus, maintains that she is a
regular and not a mere probationary employee.
The Court finds petitioners' assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed
complied with the above-stated requirements. This conclusion is largely
impelled by the fact that Abbott clearly conveyed to Alcaraz her duties and
responsibilities as Regulatory Affairs Manager prior to, during the time of her
engagement, and the incipient stages of her employment. On this score, the
Court finds it apt to detail not only the incidents which point out to the efforts
made by Abbott but also those circumstances which would show that Alcaraz
was well-apprised of her employer's expectations that would, in turn, determine
her regularization:DTCSHA
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet
newspaper of its need for a Regulatory Affairs Manager, indicating therein the
job description for as well as the duties and responsibilities attendant to the
aforesaid position; this prompted Alcaraz to submit her application to Abbott on
October 4, 2004;
(b) In Abbott's December 7, 2004 offer sheet, it was stated that Alcaraz was to
be employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which
specifically stated, inter alia, that she was to be placed on probation for a period
of six (6) months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott's employment offer, Bernardo sent her
copies of Abbott's organizational structure and her job description through
e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar
informed her that she had to implement Abbott's Code of Conduct and office
policies on human resources and finance and that she would be reporting directly
to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her
orientation;
(g) Alcaraz received copies of Abbott's Code of Conduct and Performance
Modules from Misa who explained to her the procedure for evaluating the
performance of probationary employees; she was further notified that Abbott
had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical
company and had admitted to have an "extensive training and background" to
acquire the necessary skills for her job. 63DIcSHE
As the records show, Alcaraz's dismissal was effected through a letter dated May
19, 2005 which she received on May 23, 2005 and again on May 27, 2005. Stated
therein were the reasons for her termination, i.e., that after proper evaluation,
Abbott determined that she failed to meet the reasonable standards for her
regularization considering her lack of time and people management and
decision-making skills, which are necessary in the performance of her functions
as Regulatory Affairs Manager. 66 Undeniably, this written notice sufficiently
meets the criteria set forth above, thereby legitimizing the cause and manner of
Alcaraz's dismissal as a probationary employee under the parameters set by the
Labor Code. 67
D. Employer's violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to terminate Alcaraz's
employment and Abbott's compliance with the Labor Code termination
procedure, it is readily apparent that Abbott breached its contractual obligation
to Alcaraz when it failed to abide by its own procedure in evaluating the
performance of a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract
between the employer and employee. In Parts Depot, Inc. v. Beiswenger, 68 it
has been held that:EHaCTA
E. Liability of individual
petitioners as corporate
officers.
It is hornbook principle that personal liability of corporate directors, trustees or
officers attaches only when: (a) they assent to a patently unlawful act of the
corporation, or when they are guilty of bad faith or gross negligence in directing
its affairs, or when there is a conflict of interest resulting in damages to the
corporation, its stockholders or other persons; (b) they consent to the issuance of
watered down stocks or when, having knowledge of such issuance, do not
forthwith file with the corporate secretary their written objection; (c) they agree
to hold themselves personally and solidarily liable with the corporation;
or (d) they are made by specific provision of law personally answerable for their
corporate action. 80
In this case, Alcaraz alleges that the individual petitioners acted in bad faith with
regard to the supposed crude manner by which her probationary employment
was terminated and thus, should be held liable together with Abbott. In the same
vein, she further attributes the loss of some of her remaining belongings to
them. 81
Alcaraz's contention fails to persuade.
A judicious perusal of the records show that other than her unfounded assertions
on the matter, there is no evidence to support the fact that the individual
petitioners herein, in their capacity as Abbott's officers and employees, acted in
bad faith or were motivated by ill will in terminating Alcaraz's services. The fact
that Alcaraz was made to resign and not allowed to enter the workplace does not
necessarily indicate bad faith on Abbott's part since a sufficient ground existed
for the latter to actually proceed with her termination. On the alleged loss of her
personal belongings, records are bereft of any showing that the same could be
attributed to Abbott or any of its officers. It is a well-settled rule that bad faith
cannot be presumed and he who alleges bad faith has the onus of proving it. All
told, since Alcaraz failed to prove any malicious act on the part of Abbott or any
of its officers, the Court finds the award of moral or exemplary damages
unwarranted. CHDaAE
PHIL 510-574)
[G.R. No. 167530. March 13, 2013.]
PHILIPPINE NATIONAL BANK, petitioner, vs. HYDRO
RESOURCES CONTRACTORS
CORPORATION, respondent.
DECISION
LEONARDO-DE CASTRO, J : p
These petitions for review on certiorari 1 assail the Decision 2 dated November
30, 2004 and the Resolution 3 dated March 22, 2005 of the Court of Appeals in
CA-G.R. CV No. 57553. The said Decision affirmed the Decision 4 dated
November 6, 1995 of the Regional Trial Court (RTC) of Makati City, Branch 62,
granting a judgment award of P8,370,934.74, plus legal interest, in favor of
respondent Hydro Resources Contractors Corporation (HRCC) with the
modification that the Privatization and Management Office (PMO), successor of
petitioner Asset Privatization Trust (APT), 5 has been held solidarily liable with
Nonoc Mining and Industrial Corporation (NMIC) 6 and petitioners Philippine
National Bank (PNB) and Development Bank of the Philippines (DBP), while
the Resolution denied reconsideration separately prayed for by PNB, DBP, and
APT.
Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages
made on the properties of Marinduque Mining and Industrial Corporation
(MMIC). As a result of the foreclosure, DBP and PNB acquired substantially all
the assets of MMIC and resumed the business operations of the defunct MMIC
by organizing NMIC. 7 DBP and PNB owned 57% and 43% of the shares of
NMIC, respectively, except for five qualifying shares. 8 As of September 1984,
the members of the Board of Directors of NMIC, namely, Jose Tengco, Jr.,
Rolando Zosa, Ruben Ancheta, Geraldo Agulto, and Faustino Agbada, were
either from DBP or PNB. 9
Subsequently, NMIC engaged the services of Hercon, Inc., for NMIC's Mine
Stripping and Road Construction Program in 1985 for a total contract price of
P35,770,120. After computing the payments already made by NMIC under the
program and crediting the NMIC's receivables from Hercon, Inc., the latter
found that NMIC still has an unpaid balance of P8,370,934.74. 10 Hercon, Inc.
made several demands on NMIC, including a letter of final demand dated
August 12, 1986, and when these were not heeded, a complaint for sum of
money was filed in the RTC of Makati, Branch 136 seeking to hold petitioners
NMIC, DBP, and PNB solidarily liable for the amount owing Hercon,
Inc. 11 The case was docketed as Civil Case No. 15375. EHScCA
Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in
a merger. This prompted the amendment of the complaint to substitute HRCC
for Hercon, Inc. 12
Thereafter, on December 8, 1986, then President Corazon C. Aquino
issued Proclamation No. 50 creating the APT for the expeditious disposition and
privatization of certain government corporations and/or the assets thereof.
Pursuant to the said Proclamation, on February 27, 1987, DBP and PNB
executed their respective deeds of transfer in favor of the National Government
assigning, transferring and conveying certain assets and liabilities, including
their respective stakes in NMIC. 13 In turn and on even date, the National
Government transferred the said assets and liabilities to the APT as trustee under
a Trust Agreement. 14 Thus, the complaint was amended for the second time to
implead and include the APT as a defendant.
In its answer, 15 NMIC claimed that HRCC had no cause of action. It also
asserted that its contract with HRCC was entered into by its then President
without any authority. Moreover, the said contract allegedly failed to comply
with laws, rules and regulations concerning government contracts. NMIC further
claimed that the contract amount was manifestly excessive and grossly
disadvantageous to the government. NMIC made counterclaims for the amounts
already paid to Hercon, Inc. and attorney's fees, as well as payment for
equipment rental for four trucks, replacement of parts and other services, and
damage to some of NMIC's properties. 16
For its part, DBP's answer 17 raised the defense that HRCC had no cause of
action against it because DBP was not privy to HRCC's contract with NMIC.
Moreover, NMIC's juridical personality is separate from that of DBP. DBP
further interposed a counterclaim for attorney's fees. 18
PNB's answer 19 also invoked lack of cause of action against it. It also raised
estoppel on HRCC's part and laches as defenses, claiming that the inclusion of
PNB in the complaint was the first time a demand for payment was made on it by
HRCC. PNB also invoked the separate juridical personality of NMIC and made
counterclaims for moral damages and attorney's fees. 20
APT set up the following defenses in its answer: 21 lack of cause of action
against it, lack of privity between Hercon, Inc. and APT, and the National
Government's preferred lien over the assets of NMIC. 22
After trial, the RTC of Makati rendered a Decision dated November 6, 1995 in
favor of HRCC. It pierced the corporate veil of NMIC and held DBP and PNB
solidarily liable with NMIC: IaHSCc
The business of [NMIC] was then also being conducted and controlled
by both DBP and PNB. In fact, it was Rolando M. Zosa, then
Governor of DBP, who was signing and entering into contracts with
third persons, on behalf of [NMIC].
DBP and PNB filed their respective appeals in the Court of Appeals. Both
insisted that it was wrong for the RTC to pierce the veil of NMIC's corporate
personality and hold DBP and PNB solidarily liable with NMIC. 25
The Court of Appeals rendered the Decision dated November 30, 2004, affirmed
the piercing of the veil of the corporate personality of NMIC and held DBP, PNB,
and APT solidarily liable with NMIC. In particular, the Court of Appeals made
the following findings:
In the case before Us, it is indubitable that [NMIC] was owned by
appellants DBP and PNB to the extent of 57% and 43% respectively;
that said two (2) appellants are the only stockholders, with the
qualifying stockholders of five (5) consisting of its own officers and
included in its charter merely to comply with the requirement of the
law as to number of incorporators; and that the directorates of DBP,
PNB and [NMIC] are interlocked.
We find it therefore correct for the lower court to have ruled that:
The dispositive portion of the Decision of the Court of Appeals reads: CDcaSA
The respective motions for reconsideration of DBP, PNB, and APT were
denied. 29
Hence, these consolidated petitions. 30
All three petitioners assert that NMIC is a corporate entity with a juridical
personality separate and distinct from both PNB and DBP. They insist that the
majority ownership by DBP and PNB of NMIC is not a sufficient ground for
disregarding the separate corporate personality of NMIC because NMIC was not
a mere adjunct, business conduit or alter ego of DBP and PNB. According to
them, the application of the doctrine of piercing the corporate veil is unwarranted
as nothing in the records would show that the ownership and control of the
shareholdings of NMIC by DBP and PNB were used to commit fraud, illegality
or injustice. In the absence of evidence that the stock control by DBP and PNB
over NMIC was used to commit some fraud or a wrong and that said control was
the proximate cause of the injury sustained by HRCC, resort to the doctrine of
"piercing the veil of corporate entity" is misplaced. 31
DBP and PNB further argue that, assuming they may be held solidarily liable
with NMIC to pay NMIC's exclusive and separate corporate indebtedness to
HRCC, such liability of the two banks was transferred to and assumed by the
National Government through the APT, now the PMO, under the respective
deeds of transfer both dated February 27, 1997 executed by DBP and PNB
pursuant to Proclamation No. 50 dated December 8, 1986 and Administrative
Order No. 14 dated February 3, 1987. 32
For its part, the APT contends that, in the absence of an unqualified assumption
by the National Government of all liabilities incurred by NMIC, the National
Government through the APT could not be held liable for NMIC's contractual
liability. The APT asserts that HRCC had not sufficiently shown that the APT is
the successor-in-interest of all the liabilities of NMIC, or of DBP and PNB as
transferors, and that the adjudged liability is included among the liabilities
assigned and transferred by DBP and PNB in favor of the National
Government. 33
HRCC counters that both the RTC and the CA correctly applied the doctrine of
"piercing the veil of corporate fiction." It claims that NMIC was the alter ego of
DBP and PNB which owned, conducted and controlled the business of NMIC as
shown by the following circumstances: NMIC was owned by DBP and PNB, the
officers of DBP and PNB were also the officers of NMIC, and DBP and PNB
financed the operations of NMIC. HRCC further argues that a parent corporation
may be held liable for the contracts or obligations of its subsidiary corporation
where the latter is a mere agency, instrumentality or adjunct of the parent
corporation. 34
ICcaST
Moreover, HRCC asserts that the APT was properly held solidarily liable with
DBP, PNB, and NMIC because the APT assumed the obligations of DBP and
PNB as the successor-in-interest of the said banks with respect to the assets and
liabilities of NMIC. 35 As trustee of the Republic of the Philippines, the APT
also assumed the responsibility of the Republic pursuant to the following
provision of Section 2.02 of the respective deeds of transfer executed by DBP
and PNB in favor of the Republic:
SECTION 2. TRANSFER OF BANK'S LIABILITIES. —
2.02 With respect to the Bank's liabilities which are contingent and
those liabilities where the Bank's creditors consent to the transfer
thereof is not obtained, said liabilities shall remain in the books of
the BANK with the GOVERNMENT funding the payment
thereof. 36
After a careful review of the case, this Court finds the petitions impressed with
merit.
A corporation is an artificial entity created by operation of law. It possesses the
right of succession and such powers, attributes, and properties expressly
authorized by law or incident to its existence. 37 It has a personality separate and
distinct from that of its stockholders and from that of other corporations to which
it may be connected. 38 As a consequence of its status as a distinct legal entity
and as a result of a conscious policy decision to promote capital formation, 39 a
corporation incurs its own liabilities and is legally responsible for payment of its
obligations. 40 In other words, by virtue of the separate juridical personality of a
corporation, the corporate debt or credit is not the debt or credit of the
stockholder. 41 This protection from liability for shareholders is the principle of
limited liability. 42
Equally well-settled is the principle that the corporate mask may be removed or
the corporate veil pierced when the corporation is just an alter ego of a person or
of another corporation. For reasons of public policy and in the interest of justice,
the corporate veil will justifiably be impaled only when it becomes a shield for
fraud, illegality or inequity committed against third persons. 43
However, the rule is that a court should be careful in assessing the milieu where
the doctrine of the corporate veil may be applied. Otherwise an injustice,
although unintended, may result from its erroneous application. 44 Thus, cutting
through the corporate cover requires an approach characterized by due care and
caution: CAcIES
Here, HRCC has alleged from the inception of this case that DBP and PNB (and
the APT as assignee of DBP and PNB) should be held solidarily liable for using
NMIC as alter ego. 47 The RTC sustained the allegation of HRCC and pierced
the corporate veil of NMIC pursuant to the alter ego theory when it concluded
that NMIC "is a mere adjunct, business conduit or alter ego of both DBP and
PNB." 48 The Court of Appeals upheld such conclusion of the trial court. 49 In
other words, both the trial and appellate courts relied on the alter ego theory
when they disregarded the separate corporate personality of NMIC.
In this connection, case law lays down a three-pronged test to determine the
application of the alter ego theory, which is also known as the instrumentality
theory, namely:
(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;aASEcH
(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
plaintiff's legal right; and
(3) The aforesaid control and breach of duty must have proximately
caused the injury or unjust loss complained of. 50(Emphases
omitted.)
The first prong is the "instrumentality" or "control" test. This test requires that
the subsidiary be completely under the control and domination of the parent. 51 It
examines the parent corporation's relationship with the subsidiary. 52 It inquires
whether a subsidiary corporation is so organized and controlled and its affairs
are so conducted as to make it a mere instrumentality or agent of the parent
corporation such that its separate existence as a distinct corporate entity will be
ignored. 53 It seeks to establish whether the subsidiary corporation has no
autonomy and the parent corporation, though acting through the subsidiary in
form and appearance, "is operating the business directly for itself." 54
The second prong is the "fraud" test. This test requires that the parent
corporation's conduct in using the subsidiary corporation be unjust, fraudulent or
wrongful. 55 It examines the relationship of the plaintiff to the corporation. 56 It
recognizes that piercing is appropriate only if the parent corporation uses the
subsidiary in a way that harms the plaintiff creditor. 57 As such, it requires a
showing of "an element of injustice or fundamental unfairness." 58
The third prong is the "harm" test. This test requires the plaintiff to show that the
defendant's control, exerted in a fraudulent, illegal or otherwise unfair manner
toward it, caused the harm suffered. 59 A causal connection between the
fraudulent conduct committed through the instrumentality of the subsidiary and
the injury suffered or the damage incurred by the plaintiff should be established.
The plaintiff must prove that, unless the corporate veil is pierced, it will have
been treated unjustly by the defendant's exercise of control and improper use of
the corporate form and, thereby, suffer damages. 60
To summarize, piercing the corporate veil based on the alter ego theory requires
the concurrence of three elements: control of the corporation by the stockholder
or parent corporation, fraud or fundamental unfairness imposed on the plaintiff,
and harm or damage caused to the plaintiff by the fraudulent or unfair act of the
corporation. The absence of any of these elements prevents piercing the
corporate veil. 61
This Court finds that none of the tests has been satisfactorily met in this case. aCHDST
In applying the alter ego doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual defendant's
relationship to that operation. 62 With respect to the control element, it refers not
to paper or formal control by majority or even complete stock control but actual
control which amounts to "such domination of finances, policies and practices
that the controlled corporation has, so to speak, no separate mind, will or
existence of its own, and is but a conduit for its principal." 63 In addition, the
control must be shown to have been exercised at the time the acts complained of
took place. 64
Both the RTC and the Court of Appeals applied the alter ego theory and
penetrated the corporate cover of NMIC based on two factors: (1) the ownership
by DBP and PNB of effectively all the stocks of NMIC, and (2) the alleged
interlocking directorates of DBP, PNB and NMIC. 65 Unfortunately, the
conclusion of the trial and appellate courts that the DBP and PNB fit the alter
ego theory with respect to NMIC's transaction with HRCC on the premise of
complete stock ownership and interlocking directorates involved a quantum leap
in logic and law exposing a gap in reason and fact.
While ownership by one corporation of all or a great majority of stocks of
another corporation and their interlocking directorates may serve as indicia of
control, by themselves and without more, however, these circumstances are
insufficient to establish an alter ego relationship or connection between DBP
and PNB on the one hand and NMIC on the other hand, that will justify the
puncturing of the latter's corporate cover. This Court has declared that "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." 66 This Court has likewise ruled
that the "existence of interlocking directors, corporate officers and shareholders
is not enough justification to pierce the veil of corporate fiction in the absence of
fraud or other public policy considerations." 67
True, the findings of fact of the Court of Appeals are conclusive and cannot be
reviewed on appeal to this Court, provided they are borne out of the record or are
based on substantial evidence. 68 It is equally true that the question of whether
one corporation is merely an alter ego of another is purely one of fact. So is the
question of whether a corporation is a paper company, a sham or subterfuge or
whether the requisite quantum of evidence has been adduced warranting the
piercing of the veil of corporate personality. 69 Nevertheless, it has been held
in Sarona v. National Labor Relations Commission 70 that this Court has the
power to resolve a question of fact, such as whether a corporation is a mere alter
ego of another entity or whether the corporate fiction was invoked for fraudulent
or malevolent ends, if the findings in the assailed decision are either not
supported by the evidence on record or based on a misapprehension of facts. aTAEHc
In this case, nothing in the records shows that the corporate finances, policies
and practices of NMIC were dominated by DBP and PNB in such a way that
NMIC could be considered to have no separate mind, will or existence of its own
but a mere conduit for DBP and PNB. On the contrary, the evidence establishes
that HRCC knew and acted on the knowledge that it was dealing with NMIC, not
with NMIC's stockholders. The letter proposal of Hercon, Inc., HRCC's
predecessor-in-interest, regarding the contract for NMIC's mine stripping and
road construction program was addressed to and accepted by NMIC. 71 The
various billing reports, progress reports, statements of accounts and
communications of Hercon, Inc./HRCC regarding NMIC's mine stripping and
road construction program in 1985 concerned NMIC and NMIC's officers,
without any indication of or reference to the control exercised by DBP and/or
PNB over NMIC's affairs, policies and practices. 72
HRCC has presented nothing to show that DBP and PNB had a hand in the act
complained of, the alleged undue disregard by NMIC of the demands of HRCC
to satisfy the unpaid claims for services rendered by HRCC in connection with
NMIC's mine stripping and road construction program in 1985. On the contrary,
the overall picture painted by the evidence offered by HRCC is one where
HRCC was dealing with NMIC as a distinct juridical person acting through its
own corporate officers. 73
Moreover, the finding that the respective boards of directors of NMIC, DBP, and
PNB were interlocking has no basis. HRCC's Exhibit "I-5," 74 the initial General
Information Sheet submitted by NMIC to the Securities and Exchange
Commission, relied upon by the trial court and the Court of Appeals may have
proven that DBP and PNB owned the stocks of NMIC to the extent of 57% and
43%, respectively. However, nothing in it supports a finding that NMIC, DBP,
and PNB had interlocking directors as it only indicates that, of the five members
of NMIC's board of directors, four were nominees of either DBP or PNB and
only one was a nominee of both DBP and PNB. 75 Only two members of the
board of directors of NMIC, Jose Tengco, Jr. and Rolando Zosa, were
established to be members of the board of governors of DBP and none was
proved to be a member of the board of directors of PNB. 76 No director of NMIC
was shown to be also sitting simultaneously in the board of governors/directors
of both DBP and PNB.
In reaching its conclusion of an alter ego relationship between DBP and PNB on
the one hand and NMIC on the other hand, the Court of Appeals invoked Sibagat
Timber Corporation v. Garcia, 77 which it described as "a case under a similar
factual milieu." 78However, in Sibagat Timber Corporation, this Court took care
to enumerate the circumstances which led to the piercing of the corporate veil of
Sibagat Timber Corporation for being the alter ego of Del Rosario & Sons
Logging Enterprises, Inc. Those circumstances were as follows: holding office
in the same building, practical identity of the officers and directors of the two
corporations and assumption of management and control of Sibagat Timber
Corporation by the directors/officers of Del Rosario & Sons Logging Enterprises,
Inc.cCaEDA
Here, DBP and PNB maintain an address different from that of NMIC. 79 As
already discussed, there was insufficient proof of interlocking directorates.
There was not even an allegation of similarity of corporate officers. Instead of
evidence that DBP and PNB assumed and controlled the management of NMIC,
HRCC's evidence shows that NMIC operated as a distinct entity endowed with
its own legal personality. Thus, what obtains in this case is a factual backdrop
different from, not similar to, Sibagat Timber Corporation.
In relation to the second element, to disregard the separate juridical personality
of a corporation, the wrongdoing or unjust act in contravention of a plaintiff's
legal rights must be clearly and convincingly established; it cannot be presumed.
Without a demonstration that any of the evils sought to be prevented by the
doctrine is present, it does not apply. 80
In this case, the Court of Appeals declared:
We are not saying that PNB and DBP are guilty of fraud in forming
[NMIC], nor are we implying that [NMIC] was used to conceal
fraud. . . . . 81
Such a declaration clearly negates the possibility that DBP and PNB exercised
control over NMIC which DBP and PNB used "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 plaintiff's legal rights." It is a recognition that,
even assuming that DBP and PNB exercised control over NMIC, there is no
evidence that the juridical personality of NMIC was used by DBP and PNB to
commit a fraud or to do a wrong against HRCC.
There being a total absence of evidence pointing to a fraudulent, illegal or unfair
act committed against HRCC by DBP and PNB under the guise of NMIC, there
is no basis to hold that NMIC was a mere alter ego of DBP and PNB. As this
Court ruled in Ramoso v. Court of Appeals: 82
As a general rule, a corporation will be looked upon as a legal entity,
unless and until sufficient reason to the contrary appears. When the
notion of legal entity is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, the law will regard the
corporation as an association of persons. Also, the corporate entity
may be disregarded in the interest of justice in such cases as fraud that
may work inequities among members of the corporation internally,
involving no rights of the public or third persons. In both
instances, there must have been fraud, and proof of it. For the
separate juridical personality of a corporation to be disregarded, the
wrongdoing must be clearly and convincingly established. It cannot be
presumed. ScAaHE
As regards the third element, in the absence of both control by DBP and PNB of
NMIC and fraud or fundamental unfairness perpetuated by DBP and PNB
through the corporate cover of NMIC, no harm could be said to have been
proximately caused by DBP and PNB on HRCC for which HRCC could hold
DBP and PNB solidarily liable with NMIC.
Considering that, under the deeds of transfer executed by DBP and PNB, the
liability of the APT as transferee of the rights, titles and interests of DBP and
PNB in NMIC will attach only if DBP and PNB are held liable, the APT incurs
no liability for the judgment indebtedness of NMIC. Even HRCC recognizes that
"as assignee of DBP and PNB's loan receivables," the APT simply "stepped into
the shoes of DBP and PNB with respect to the latter's rights and obligations" in
NMIC. 83 As such assignee, therefore, the APT incurs no liability with respect to
NMIC other than whatever liabilities may be imputable to its assignors, DBP and
PNB.
Even under Section 2.02 of the respective deeds of transfer executed by DBP and
PNB which HRCC invokes, the APT cannot be held liable. The contingent
liability for which the National Government, through the APT, may be held
liable under the said provision refers to contingent liabilities of DBP and PNB.
Since DBP and PNB may not be held solidarily liable with NMIC, no contingent
liability may be imputed to the APT as well. Only NMIC as a distinct and
separate legal entity is liable to pay its corporate obligation to HRCC in the
amount of P8,370,934.74, with legal interest thereon from date of demand.
As trustee of the assets of NMIC, however, the APT should ensure compliance
by NMIC of the judgment against it. The APT itself acknowledges this. 84
WHEREFORE, the petitions are hereby GRANTED.
The complaint as against Development Bank of the Philippines, the Philippine
National Bank, and the Asset Privatization Trust, now the Privatization and
Management Office, is DISMISSED for lack of merit. The Asset Privatization
Trust, now the Privatization and Management Office, as trustee of Nonoc
Mining and Industrial Corporation, now the Philnico Processing Corporation,
is DIRECTED to ensure compliance by the Nonoc Mining and Industrial
Corporation, now the Philnico Processing Corporation, with this Decision. AaIDHS
SO ORDERED.
(Philippine National Bank v. Hydro Resources Contractors Corp., G.R. No.
|||
DECISION
BERSAMIN, J : p
The personality of a corporation is distinct and separate from the personalities of
its stockholders. Hence, its stockholders are not themselves the real parties in
interest to claim and recover compensation for the damages arising from the
wrongful attachment of its assets. Only the corporation is the real party in
interest for that purpose.
The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic
insurance company, assails the decision promulgated on January 31,
2006, 1 whereby the Court of Appeals (CA) in CA-G.R. CV No. 79145 affirmed
the judgment rendered on April 28, 2003 by the Regional Trial Court in
Parañaque City (RTC) holding Stronghold Insurance and respondent Manuel D.
Marañon, Jr. jointly and solidarily liable for damages to respondents Tomas
Cuenca, Marcelina Cuenca, Milagros Cuenca (collectively referred to as
Cuencas), and Bramie Tayactac, upon the latter's claims against the surety bond
issued by Stronghold Insurance for the benefit of Marañon. 2
Antecedents
On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas
for the collection of a sum of money and damages. His complaint, docketed as
Civil Case No. 98-023, included an application for the issuance of a writ of
preliminary attachment. 3 On January 26, 1998, the RTC granted the application
for the issuance of the writ of preliminary attachment conditioned upon the
posting of a bond of P1,000,000.00 executed in favor of the Cuencas. Less than a
month later, Marañon amended the complaint to implead Tayactac as a
defendant. 4 TaEIcS
On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No.
02370 in the amount of P1,000,000.00 issued by Stronghold Insurance. Two
days later, the RTC issued the writ of preliminary attachment. 5 The sheriff
served the writ, the summons and a copy of the complaint on the Cuencas on the
same day. The service of the writ, summons and copy of the complaint were
made on Tayactac on February 16, 1998. 6
Enforcing the writ of preliminary attachment on February 16 and February 17,
1998, the sheriff levied upon the equipment, supplies, materials and various
other personal property belonging to Arc Cuisine, Inc. that were found in the
leased corporate office-cum-commissary or kitchen of the corporation. 7 On
February 19, 1998, the sheriff submitted a report on his proceedings, 8and filed
an ex parte motion seeking the transfer of the levied properties to a safe place.
The RTC granted the ex parte motion on February 23, 1998. 9
On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion
to Dismiss and to Quash Writ of Preliminary Attachment on the grounds that: (1)
the action involved intra-corporate matters that were within the original and
exclusive jurisdiction of the Securities and Exchange Commission (SEC); and (2)
there was another action pending in the SEC as well as a criminal complaint in
the Office of the City Prosecutor of Parañaque City. 10
On March 5, 1998, Marañon opposed the motion. 11
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ
of Preliminary Attachment, stating that the action, being one for the recovery of a
sum of money and damages, was within its jurisdiction. 12
Under date of September 3, 1998, the Cuencas and Tayactac moved for the
reconsideration of the denial of their Motion to Dismiss and to Quash Writ of
Preliminary Attachment, but the RTC denied their motion for reconsideration on
September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA
on certiorari and prohibition to challenge the August 10, 1998 and September
16, 1998 orders of the RTC on the basis of being issued with grave abuse of
discretion amounting to lack or excess of jurisdiction (C.A.-G.R. SP No.
49288). 13
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No.
49288, 14 granting the petition. It annulled and set aside the challenged orders,
and dismissed the amended complaint in Civil Case No. 98-023 for lack of
jurisdiction, to wit:
TCDcSE
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and resolution
of the Cuencas and Tayactac's claim for the damages sustained from the
enforcement of the writ of preliminary attachment. 15
On February 17, 2000, 16 the sheriff reported to the RTC, as follows:
On the scheduled inventory of the properties (February 17, 2000) and
to comply with the Resolution of the Court of Appeals dated
December 24, 1999 ordering the delivery of the attached properties to
the defendants, the proceedings thereon being:
1. With the assistance for (sic) the counsel of Cuencas, Atty.
Pulumbarit, Atty. Ayo, defendant Marcelina Cuenca, and two Court
Personnel, Robertson Catorce and Danilo Abanto, went to the
warehouse where Mr. Marañon recommended for safekeeping the
properties in which he personally assured its safety, at No. 14, Marian
II Street, East Service Road, Parañaque Metro Manila.
3. That there are informations (sic) that the properties are seen at
Conti's Pastry & Bake Shop owned by Mr. Marañon, located at BF
Homes in Parañaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to
Deliver Attached Properties and to Set Case for Hearing, 17 praying that: (1) the
Branch Sheriff be ordered to immediately deliver the attached properties to them;
(2) Stronghold Insurance be directed to pay them the damages being sought in
accordance with its undertaking under the surety bond for P1,000,0000.00; (3)
Marañon be held personally liable to them considering the insufficiency of the
amount of the surety bond; (4) they be paid the total of P1,721,557.20 as actual
damages representing the value of the lost attached properties because they,
being accountable for the properties, would be turning that amount over to Arc
Cuisine, Inc.; and (5) Marañon be made to pay P200,000.00 as moral damages,
P100,000.00 as exemplary damages, and P100,000.00 as attorney's fees. HCacTI
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn,
the Cuencas and Tayactac filed their reply on May 5, 2000.
On May 25, 2000, Marañon filed his own comment/opposition to the Motion to
Require Sheriff to Deliver Attached Properties and to Set Case for Hearing of
the Cuencas and Tayactac, arguing that because the attached properties belonged
to Arc Cuisine, Inc. 50% of the stockholding of which he and his relatives owned,
it should follow that 50% of the value of the missing attached properties
constituted liquidating dividends that should remain with and belong to him.
Accordingly, he prayed that he should be required to return only P100,000.00 to
the Cuencas and Tayactac. 18
On June 5, 2000, the RTC commanded Marañon to surrender all the attached
properties to the RTC through the sheriff within 10 days from notice; and
directed the Cuencas and Tayactac to submit the affidavits of their witnesses in
support of their claim for damages. 19
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and
Compliance. 20
Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding Marañon
and Stronghold Insurance jointly and solidarily liable for damages to the
Cuencas and Tayactac, 21 viz.:
WHEREFORE, premises considered, as the defendants were able to
preponderantly prove their entitlement for damages by reason of the
unlawful and wrongful issuance of the writ of attachment, MANUEL
D. MARAÑON, JR., plaintiff and defendant, Stronghold Insurance
Company, Inc., are found to be jointly and solidarily liable to pay the
defendants the following amount to wit:
SO ORDERED. HSIDTE
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145),
assigning the following errors to the RTC, to wit:
I.
II.
On January 31, 2006, the CA, finding no reversible error, promulgated its
decision affirming the judgment of the RTC. 23
Stronghold Insurance moved for reconsideration, but the CA denied its motion
for reconsideration on June 22, 2006.
Issues
Hence, this appeal by petition for review on certiorari by Stronghold Insurance,
which submits that:
I.
But the real party in interest need not be the person who ultimately will benefit
from the successful prosecution of the action. Hence, to aid itself in the proper
identification of the real party in interest, the court should first ascertain the
nature of the substantive right being asserted, and then must determine whether
the party asserting that right is recognized as the real party in interest under the
rules of procedure. Truly, that a party stands to gain from the litigation is not
necessarily controlling. 39
It is fundamental that the courts are established in order to afford reliefs to
persons whose rights or property interests have been invaded or violated, or are
threatened with invasion by others' conduct or acts, and to give relief only at the
instance of such persons. The jurisdiction of a court of law or equity may not be
invoked by or for an individual whose rights have not been breached. 40
The remedial right or the remedial obligation is the person's interest in the
controversy. The right of the plaintiff or other claimant is alleged to be violated
by the defendant, who has the correlative obligation to respect the right of the
former. Otherwise put, without the right, a person may not become a party
plaintiff; without the obligation, a person may not be sued as a party defendant;
without the violation, there may not be a suit. In such a situation, it is legally
impossible for any person or entity to be both plaintiff and defendant in the same
action, thereby ensuring that the controversy is actual and exists between
adversary parties. Where there are no adversary parties before it, the court would
be without jurisdiction to render a judgment. 41
There is no dispute that the properties subject to the levy on attachment belonged
to Arc Cuisine, Inc. alone, not to the Cuencas and Tayactac in their own right.
They were only stockholders of Arc Cuisine, Inc., which had a personality
distinct and separate from that of any or all of them. 42 The damages occasioned
to the properties by the levy on attachment, wrongful or not, prejudiced Arc
Cuisine, Inc., not them. As such, only Arc Cuisine, Inc. had the right under the
substantive law to claim and recover such damages. This right could not also be
asserted by the Cuencas and Tayactac unless they did so in the name of the
corporation itself. But that did not happen herein, because Arc Cuisine, Inc. was
not even joined in the action either as an original party or as an intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest in the
personal properties coming under the levy on attachment by virtue alone of their
being stockholders in Arc Cuisine, Inc. Their stockholdings represented only
their proportionate or aliquot interest in the properties of the corporation, but did
not vest in them any legal right or title to any specific properties of the
corporation. Without doubt, Arc Cuisine, Inc. remained the owner as a distinct
legal person. 43IATSHE
Given the separate and distinct legal personality of Arc Cuisine, Inc., the
Cuencas and Tayactac lacked the legal personality to claim the damages
sustained from the levy of the former's properties. According to Asset
Privatization Trust v. Court of Appeals, 44 even when the foreclosure on the
assets of the corporation was wrongful and done in bad faith the stockholders
had no standing to recover for themselves moral damages; otherwise, they would
be appropriating and distributing part of the corporation's assets prior to the
dissolution of the corporation and the liquidation of its debts and liabilities.
Moreover, in Evangelista v. Santos, 45 the Court, resolving whether or not the
minority stockholders had the right to bring an action for damages against the
principal officers of the corporation for their own benefit, said:
As to the second question, the complaint shows that the action is for
damages resulting from mismanagement of the affairs and assets of
the corporation by its principal officer, it being alleged that
defendant's maladministration has brought about the ruin of the
corporation and the consequent loss of value of its stocks. The injury
complained of is thus primarily to the corporation, so that the suit
for the damages claimed should be by the corporation rather than
by the stockholders (3 Fletcher, Cyclopedia of Corporation pp.
977-980). The stockholders may not directly claim those damages
for themselves for that would result in the appropriation by, and the
distribution among them of part of the corporate assets before the
dissolution of the corporation and the liquidation of its debts and
liabilities, something which cannot be legally done in view of section
16 of the Corporation Law, which provides:
While plaintiffs ask for remedy to which they are not entitled unless
the requirement of section 16 of the Corporation Law be first
complied with, we note that the action stated in their complaint is
susceptible of being converted into a derivative suit for the benefit of
the corporation by a mere change in the prayer. Such amendment,
however, is not possible now, since the complaint has been filed in the
wrong court, so that the same has to be dismissed. 46
That Marañon knew that Arc Cuisine, Inc. owned the properties levied on
attachment but he still excluded Arc Cuisine, Inc. from his complaint was of no
consequence now. The Cuencas and Tayactac still had no right of action even if
the affected properties were then under their custody at the time of the
attachment, considering that their custody was only incidental to the operation of
the corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine,
Inc. a proper action to recover damages resulting from the attachment. Such
action would be one directly brought in the name of the corporation. Yet, that
was not true here, for, instead, the Cuencas and Tayactac presented the claim in
their own names.
In view of the outcome just reached, the Court deems it unnecessary to give any
extensive consideration to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review;
and REVERSES and SETS ASIDE the decision of the Court of Appeals in
CA-G.R. CV No. 79145 promulgated on January 31, 2006.
No pronouncements on costs of suit.
SO ORDERED.
(Stronghold Insurance Co., Inc. v. Cuenca, G.R. No. 173297, [March 6, 2013],
|||
DECISION
MENDOZA, J : p
Before the Court are two consolidated petitions for review on certiorari under
Rule 45 of the 1997 Revised Rules of Civil Procedure, assailing the August 16,
2004 Decision 1 and the December 2, 2004 Resolution 2 of the Court of
Appeals (CA) in CA-G.R. CV No. 69817 entitled "International Exchange Bank
v. Hammer Garments Corp., et al."
The Facts
On several occasions, from June 23, 1997 to September 3, 1997, respondent
International Exchange Bank (iBank), granted loans to Hammer Garments
Corporation (Hammer), covered by promissory notes and deeds of assignment,
in the following amounts: 3
Date of Promissory Note Amount
Total P24,938,898.08
============
These were made pursuant to the Letter-Agreement, 4 dated March 23, 1996,
between iBank and Hammer, represented by its President and General Manager,
Manuel Chua (Chua) a.k.a. Manuel Chua Uy Po Tiong, granting Hammer a P25
Million-Peso Omnibus Line. 5 The loans were secured by a P9 Million-Peso
Real Estate Mortgage 6 executed on July 1, 1997 by Goldkey Development
Corporation (Goldkey) over several of its properties and a P25 Million-Peso
Surety Agreement 7 signed by Chua and his wife, Fe Tan Uy (Uy), on April 15,
1996. ASHaDT
Simplifying the issues in this case, the Court must resolve the following: (1)
whether Uy can be held liable to iBank for the loan obligation of Hammer as an
officer and stockholder of the said corporation; and (2) whether Goldkey can be
held liable for the obligation of Hammer for being a mere alter ego of the latter.
The Court's Ruling
The petitions are partly meritorious.
Uy is not liable; The piercing of the
veil of corporate fiction is not justified
The heirs of Uy argue that the latter could not be held liable for being merely an
officer of Hammer and Goldkey because it was not shown that she had
committed any actionable wrong 22 or that she had participated in the transaction
between Hammer and iBank. They further claim that she had cut all ties with
Hammer and her husband long before the execution of the loan. 23
The Court finds in favor of Uy.
Basic is the rule in corporation law that a corporation is a juridical entity which is
vested with a legal personality separate and distinct from those acting for and in
its behalf and, in general, from the people comprising it. Following this principle,
obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities. A director, officer or employee of a
corporation is generally not held personally liable for obligations incurred by the
corporation. 24 Nevertheless, this legal fiction may be disregarded if it is used as
a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an
existing obligation, the circumvention of statutes, or to confuse legitimate
issues. 25 This is consistent with the provisions of the Corporation Code of the
Philippines, which states: cAaDCE
Solidary liability will then attach to the directors, officers or employees of the
corporation in certain circumstances, such as:
1. When directors and trustees or, in appropriate cases,
the officers of a corporation: (a) vote for or assent to
patently unlawful acts of the corporation; (b) act in bad
faith or with gross negligence in directing the corporate
affairs; and (c) are guilty of conflict of interest to the
prejudice of the corporation, its stockholders or members,
and other persons;
2. When a director or officer has consented to the
issuance of watered stocks or who, having knowledge
thereof, did not forthwith file with the corporate secretary
his written objection thereto;
3. When a director, trustee or officer has contractually
agreed or stipulated to hold himself personally and
solidarily liable with the corporation; or
4. When a director, trustee or officer is made, by specific
provision of law, personally liable for his corporate
action. 26
Before a director or officer of a corporation can be held personally liable for
corporate obligations, however, the following requisites must concur: (1) the
complainant must allege in the complaint that the director or officer assented to
patently unlawful acts of the corporation, or that the officer was guilty of gross
negligence or bad faith; and (2) the complainant must clearly and convincingly
prove such unlawful acts, negligence or bad faith. 27 CaATDE
It behooves this Court to emphasize that the piercing of the veil of corporate
fiction is frowned upon and can only be done if it has been clearly established
that the separate and distinct personality of the corporation is used to justify a
wrong, protect fraud, or perpetrate a deception. 31 As aptly explained
in Philippine National Bank v. Andrada Electric & Engineering Company: 32
Hence, any application of the doctrine of piercing the corporate veil
should be done with caution. A court should be mindful of the milieu
where it is to be applied. It must be certain that the corporate fiction
was misused to such an extent that injustice, fraud, or crime was
committed against another, in disregard of its rights. The wrongdoing
must be clearly and convincingly established; it cannot be presumed.
Otherwise, an injustice that was never unintended may result from an
erroneous application. 33
To the Court's mind, Goldkey's argument, that iBank is barred from pursuing
Goldkey for the satisfaction of the unpaid obligation of Hammer because it had
already limited its liability to the real estate mortgage, is completely absurd.
Goldkey needs to be reminded that it is being sued not as a consequence of the
real estate mortgage, but rather, because it acted as an alter ego of Hammer.
Accordingly, they must be treated as one and the same entity, making Goldkey
accountable for the debts of Hammer.
In fact, it is Goldkey who is now precluded from denying the validity of the Real
Estate Mortgage. In its Answer with Affirmative Defenses and Compulsory
Counterclaim, dated January 5, 1998, it already admitted that it acted as a
third-party mortgagor to secure the obligation of Hammer to iBank. 38 Thus, it
cannot, at this late stage, question the due execution of the third-party mortgage.
Similarly, Goldkey is undoubtedly mistaken in claiming that iBank is seeking to
enforce an obligation of Chua. The records clearly show that it was Hammer, of
which Chua was the president and a stockholder, which contracted a loan from
iBank. What iBank sought was redress from Goldkey by demanding that the veil
of corporate fiction be lifted so that it could not raise the defense of having a
separate juridical personality to evade liability for the obligations of Hammer.
Under a variation of the doctrine of piercing the veil of corporate fiction, when
two business enterprises are owned, conducted and controlled by the same
parties, both law and equity will, when necessary to protect the rights of third
parties, disregard the legal fiction that two corporations are distinct entities and
treat them as identical or one and the same. 39
While the conditions for the disregard of the juridical entity may vary, the
following are some probative factors of identity that will justify the application
of the doctrine of piercing the corporate veil, as laid down in Concept Builders,
Inc. v. NLRC: 40
(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;
and
(4) Methods of conducting the business. 41
These factors are unquestionably present in the case of Goldkey and Hammer, as
observed by the RTC, as follows: TaDSCA
PERALTA, J : p
Before this Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to set aside the Decision 1 and the Resolution 2 of the
Court of Appeals (CA) in CA-G.R. SP No. 67766. cHSTEA
SO ORDERED. 12
Unsatisfied with the LA's decision, petitioners appealed to the National Labor
Relations Commission (NLRC). On August 31, 1999, the NLRC, First Division,
rendered a Decision 13 remanding the case to the arbitration branch of origin for
further proceedings. 14On August 3, 2000, the LA rendered a new Decision, the
dispositive portion of which reads as follows:
WHEREFORE, premises all considered, respondents (petitioners
herein) are hereby ORDERED, jointly and severally:
a. to reinstate within ten (10) days herein three (3)
complainants to their former positions without loss of seniority
rights with full backwages from actual dismissal to actual
reinstatement; to pay complainant Soriano his unpaid wages
for seven (7) days in the amount of P1,680.00, his five (5) days
incentive leave pay in the amount of P1,200,00 * (P240x5),
unpaid proportionate 13th month pay in the amount of
P4,992.00, plus other benefits;
Discontented with the LA's decision, petitioners again appealed to the NLRC.
On February 1, 2001, the NLRC affirmed the LA's decision and dismissed the
appeal for lack of merit. 17 Petitioners filed a motion for reconsideration, but it
was denied for lack of merit. 18
Undaunted, Park Hotel, Percy, and Harbutt filed a petition for certiorari with the
CA ascribing grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC in holding Park Hotel, Harbutt and Percy
jointly and severally liable to respondents. cSITDa
On January 24, 2005, the CA rendered a Decision 19 dismissing the petition and
affirming with modification the ruling of the NLRC, the dispositive portion of
which states:
WHEREFORE, the instant Petition is DISMISSED for lack of merit
and the assailed Decision dated 1 February 2001 of the 1st Division of
the NLRC is hereby AFFIRMED with MODIFICATION in that the
award of damages is reduced to P100,000.00 in favor of each of the
Private Respondents, including 10% of the total amount of wages to
be received as attorney's fees.
SO ORDERED. 20
II
III
For brevity and clarity, the issues in this case may be re-stated and simplified as
follows: (1) whether the respondents were validly dismissed; and (2) if
petitioners are liable, whether Park Hotel, Percy and Harbutt are jointly and
severally liable with Burgos for the dismissal of respondents.
Park Hotel argued that it is not liable on the ground that respondents were not its
employees. On the other hand, Percy and Harbutt argued that the CA committed
error in piercing the corporate veil between them and respondent corporations,
thereby making them all solidarily liable to the respondents.
To begin with, it is significant to note that the LA, the NLRC and the CA were
unanimous in their findings that respondents were dismissed without just cause
and due process. They were also in agreement that unfair labor practice was
committed against respondents. We reiterate the rule that findings of fact of the
Court of Appeals, particularly where it is in absolute agreement with that of the
NLRC and the LA, as in this case, are accorded not only respect but even finality
and are deemed binding upon this Court so long as they are supported by
substantial evidence. 23 The function of this Court is limited to the review of the
appellate court's alleged errors of law. It is not required to weigh all over again
the factual evidence already considered in the proceedings below. 24 In any event,
we found no compelling reason to disturb the unanimous findings and
conclusions of the CA, the NLRC and the LA with respect to the finding of
illegal dismissal.
The requisites for a valid dismissal are: (a) the employee must be afforded due
process, i.e., he must be given an opportunity to be heard and defend himself;
and (b) the dismissal must be for a valid cause as provided in Article 282 of the
Labor Code, or for any of the authorized causes under Articles 283 and 284 of
the same Code. 25 In the case before us, both elements are completely lacking.
Respondents were dismissed without any just or authorized cause and without
being given the opportunity to be heard and defend themselves. The law
mandates that the burden of proving the validity of the termination of
employment rests with the employer. Failure to discharge this evidentiary
burden would necessarily mean that the dismissal was not justified and, therefore,
illegal. Unsubstantiated suspicions, accusations, and conclusions of employers
do not provide for legal justification for dismissing employees. In case of doubt,
such cases should be resolved in favor of labor, pursuant to the social justice
policy of labor laws and the Constitution. 26
Anent the unfair labor practice, Article 248 (a) of the Labor Code 27 considers it
an unfair labor practice when an employer interferes, restrains or coerces
employees in the exercise of their right to self-organization or the right to form
an association. 28In order to show that the employer committed unfair labor
practice under the Labor Code, substantial evidence is required to support the
claim. Substantial evidence has been defined as such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. 29 In the case
at bar, respondents were indeed unceremoniously dismissed from work by
reason of their intent to form and organize a union. As found by the LA: DEICHc
Having settled that respondents were illegally dismissed and were victims of
unfair labor practice, the question that comes to fore is who are liable for the
illegal dismissal and unfair labor practice?
A perusal of the records would show that Burgos is the respondents' employer at
the time they were dismissed. Notwithstanding, the CA held that despite
Soriano's transfer to Burgos in 1992, he was still an employee of Park Hotel at
the time of his dismissal in 1997. The Court, however, rules that the CA's finding
is clearly contrary to the evidence presented. From the documents presented by
Soriano, it appears that Soriano's payroll passbook 31 contained withdrawals and
deposits, made in 1991, and that Soriano's payslip 32 issued by Park Hotel
covered the period from September to October 1990. Hence, these documents
merely show that Soriano was employed by Park Hotel before he was transferred
to Burgos in 1992. Nowhere in these documents does it state that Soriano
continued to work for Park Hotel in 1992 and onwards. Clearly therefore, Park
Hotel cannot be made liable for illegal dismissal as it no longer had Soriano in its
employ at the time he was dismissed from work.
As to whether Park Hotel may be held solidarily liable with Burgos, the Court
rules that before a corporation can be held accountable for the corporate
liabilities of another, the veil of corporate fiction must first be pierced. 33 Thus,
before Park Hotel can be held answerable for the obligations of Burgos to its
employees, it must be sufficiently established that the two companies are
actually a single corporate entity, such that the liability of one is the liability of
the other. 34
A corporation is an artificial being invested by law with a personality separate
and distinct from that of its stockholders and from that of other corporations to
which it may be connected. 35 While a corporation may exist for any lawful
purpose, the law will regard it as an association of persons or, in case of two
corporations, merge them into one, when its corporate legal entity is used as a
cloak for fraud or illegality. This is the doctrine of piercing the veil of corporate
fiction. The doctrine applies only when such corporate fiction is used to defeat
public convenience, justify wrong, protect fraud, or defend crime, or when it is
made as a shield to confuse the legitimate issues, or where a corporation is the
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. 36 To
disregard the separate juridical personality of a corporation, the wrongdoing
must be established clearly and convincingly. It cannot be presumed. 37
In the case at bar, respondents utterly failed to prove by competent evidence that
Park Hotel was a mere instrumentality, agency, conduit or adjunct of Burgos, or
that its separate corporate veil had been used to cover any fraud or illegality
committed by Burgos against the respondents. Accordingly, Park Hotel and
Burgos cannot be considered as one and the same entity, and Park Hotel cannot
be held solidary liable with Burgos. HScAEC
Nonetheless, although the corporate veil between Park Hotel and Burgos cannot
be pierced, it does not necessarily mean that Percy and Harbutt are exempt from
liability towards respondents. Verily, a corporation, being a juridical entity, may
act only through its directors, officers and employees. Obligations incurred by
them, while acting as corporate agents, are not their personal liability but the
direct accountability of the corporation they represent. 38 However, corporate
officers may be deemed solidarily liable with the corporation for the termination
of employees if they acted with malice or bad faith. 39 In the present case, the
lower tribunals unanimously found that Percy and Harbutt, in their capacity as
corporate officers of Burgos, acted maliciously in terminating the services of
respondents without any valid ground and in order to suppress their right to
self-organization.
Section 31 40 of the Corporation Code makes a director personally liable for
corporate debts if he willfully and knowingly votes for or assents to patently
unlawful acts of the corporation. It also makes a director personally liable if he is
guilty of gross negligence or bad faith in directing the affairs of the corporation.
Thus, Percy and Harbutt, having acted in bad faith in directing the affairs of
Burgos, are jointly and severally liable with the latter for respondents' dismissal.
In cases when an employee is unjustly dismissed from work, he shall be entitled
to reinstatement without loss of seniority rights and other privileges, inclusive of
allowances, and other benefits or their monetary equivalent from the time the
compensation was withheld up to the time of actual reinstatement. 41
In the case at bar, the Court finds that it would be best to award separation pay
instead of reinstatement, in view of the passage of a long period of time since
respondents' dismissal. In St. Luke's Medical Center, Inc. v. Notario, 42 the Court
held that if reinstatement proves impracticable, and hardly in the best interest of
the parties, due to the lapse of time since the employee's dismissal, the latter
should be awarded separation pay in lieu of reinstatement.
In view of the foregoing, respondents are entitled to the payment of full
backwages, inclusive of allowances, and other benefits or their monetary
equivalent, and separation pay in lieu of reinstatement equivalent to one month
salary for every year of service. 43The awards of separation pay and backwages
are not mutually exclusive, and both may be given to respondents. 44
The awards of moral and exemplary damages 45 in favor of respondents are also
in order. Moral damages may be recovered where the dismissal of the employee
was tainted by bad faith or fraud, or where it constituted an act oppressive to
labor, and done in a manner contrary to morals, good customs or public policy,
while exemplary damages are recoverable only if the dismissal was done in a
wanton, oppressive, or malevolent manner. 46 The grant of attorney's fees is
likewise proper. Attorney's fees may likewise be awarded to respondents who
were illegally dismissed in bad faith and were compelled to litigate or incur
expenses to protect their rights by reason of the oppressive acts 47 of petitioners.
The unjustified act of petitioners had obviously compelled respondents to
institute an action primarily to protect their rights and interests which warrants
the granting of the award. IEHScT
471-488)
DECISION
BERSAMIN, J : p
The veil of corporate existence of a corporation is a fiction of law that should not
defeat the ends of justice.
Petitioner seeks to reverse the decision promulgated on October 30, 2002 1 and
the resolution promulgated on June 25, 2003, 2whereby the Court of Appeals
(CA) upheld the orders issued on August 2, 2001 3 and October 22, 2001 4 by the
Regional Trial Court (RTC), Branch 51, in Sorsogon in Civil Case No. 93-5917
entitled Heirs of Concepcion Lacsa, represented by Teodoro Lacsa v. Travel &
Tours Advisers, Inc., et al. authorizing the implementation of the writ of
execution against petitioner despite its protestation of being a separate and
different corporate personality from Travel & Tours Advisers, Inc. (defendant in
Civil Case No. 93-5917).
In the orders assailed in the CA, the RTC declared petitioner and Travel & Tours
Advisers, Inc. to be one and the same entity, and ruled that the levy of petitioner's
property to satisfy the final and executory decision rendered on June 30, 1997
against Travel & Tours Advisers, Inc. in Civil Case No. 93-5917 5 was valid
even if petitioner had not been impleaded as a party.
Antecedents
On August 2, 1993, Ma. Concepcion Lacsa (Concepcion) and her sister, Miriam
Lacsa (Miriam), boarded a Goldline passenger bus with Plate No. NXM-105
owned and operated by Travel & Tours Advisers, Inc. They were enroute from
Sorsogon to Cubao, Quezon City. 6 At the time, Concepcion, having just
obtained her degree of Bachelor of Science in Nursing at the Ago Medical and
Educational Center, was proceeding to Manila to take the nursing licensure
board examination. 7 Upon reaching the highway at Barangay San Agustin in
Pili, Camarines Sur, the Goldline bus, driven by Rene Abania (Abania), collided
with a passenger jeepney with Plate No. EAV-313 coming from the opposite
direction and driven by Alejandro Belbis. 8 As a result, a metal part of the
jeepney was detached and struck Concepcion in the chest, causing her instant
death. 9aITECD
(1) Finding the plaintiffs entitled to damages for the death of Ma.
Concepcion Lacsa in violation of the contract of carriage;
(2) Ordering defendant Travel & Tours Advisers, Inc. (Goldline) to
pay plaintiffs:
h. Costs of suit.
SO ORDERED. 27
The RTC found that a contract of carriage had been forged between Travel &
Tours Advisers, Inc. and Concepcion as soon as she had boarded the Goldline
bus as a paying passenger; that Travel & Tours Advisers, Inc. had then become
duty-bound to safely transport her as its passenger to her destination; that due to
Travel & Tours Advisers, Inc.'s inability to perform its duty, Article 1786 of
the Civil Code created against it the disputable presumption that it had been at
fault or had been negligent in the performance of its obligations towards the
passenger; that Travel & Tours Advisers, Inc. failed to disprove the presumption
of negligence; and that a rigid selection of employees was not sufficient to
exempt Travel & Tours Advisers, Inc. from the obligation of exercising
extraordinary diligence to ensure that its passenger was carried safely to her
destination.
Aggrieved, the defendants appealed to the CA.
On June 11, 1998, 28 the CA dismissed the appeal for failure of the defendants to
pay the docket and other lawful fees within the required period as provided in
Rule 41, Section 4 of the Rules of Court (1997). The dismissal became final, and
entry of judgment was made on July 17, 1998. 29
Thereafter, the plaintiffs moved for the issuance of a writ of execution to
implement the decision dated June 30, 1997. 30 The RTC granted their motion on
January 31, 2000, 31 and issued the writ of execution on February 24, 2000. 32 EHITaS
On May 10, 2000, the sheriff implementing the writ of execution rendered a
Sheriff's Partial Return, 33 certifying that the writ of execution had been
personally served and a copy of it had been duly tendered to Travel & Tours
Advisers, Inc. or William Cheng, through his secretary, Grace Miranda, and that
Cheng had failed to settle the judgment amount despite promising to do so.
Accordingly, a tourist bus bearing Plate No. NWW-883 was levied pursuant to
the writ of execution.
The plaintiffs moved to cite Cheng in contempt of court for failure to obey a
lawful writ of the RTC. 34 Cheng filed his opposition. 35Acting on the motion to
cite Cheng in contempt of court, the RTC directed the plaintiffs to file a verified
petition for indirect contempt on February 19, 2001. 36
On April 20, 2001, petitioner submitted a so-called verified third party
claim, 37 claiming that the tourist bus bearing Plate No. NWW-883 be returned
to petitioner because it was the owner; that petitioner had not been made a party
to Civil Case No. 93-5917; and that petitioner was a corporation entirely
different from Travel & Tours Advisers, Inc., the defendant in Civil Case No.
93-5917.
It is notable that petitioner's Articles of Incorporation was amended on
November 8, 1993, 38 shortly after the filing of Civil Case No. 93-5917 against
Travel & Tours Advisers, Inc.
Respondents opposed petitioner's verified third-party claim on the following
grounds, namely: (a) the third-party claim did not comply with the required
notice of hearing as required by Rule 15, Sections 4 and 5 of the Rules of
Court; (b) Travel & Tours Advisers, Inc. and petitioner were identical entities
and were both operated and managed by the same person, William Cheng;
and (c) petitioner was attempting to defraud its creditors — respondents herein
— hence, the doctrine of piercing the veil of corporate entity was squarely
applicable. 39
On August 2, 2001, the RTC dismissed petitioner's verified third-party claim,
observing that the identity of Travel & Tours Advisers, Inc. could not be
divorced from that of petitioner considering that Cheng had claimed to be the
operator as well as the President/Manager/incorporator of both entities; and that
Travel & Tours Advisers, Inc. had been known in Sorsogon as Goldline. 40
Petitioner moved for reconsideration, 41 but the RTC denied the motion on
October 22, 2001. 42
Thence, petitioner initiated a special civil action for certiorari in the
CA, 43 asserting:IcSEAH
THE RESPONDENT HONORABLE RTC JUDGE HAD ACTED
WITHOUT JURISDICTION OR COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
IN ISSUING THE: (A) ORDER DATED 2 AUGUST 2001, COPY
OF WHICH IS HERETO ATTACHED AS ANNEX A,
DISMISSING HEREIN PETITIONER'S THIRD PARTY CLAIM;
AND (B) ORDER DATED 22 OCTOBER 2001, COPY OF WHICH
IS HERETO ATTACHED AS ANNEX B DENYING SAID
PETITIONER'S MOTION FOR RECONSIDERATION; AND
THAT THERE IS NO APPEAL, OR ANY PLAIN, SPEEDY AND
ADEQUATE REMEDY AVAILABLE TO SAID PETITIONER.
On October 30, 2002, the CA promulgated its decision dismissing the petition
for certiorari, 44 holding as follows:
The petition lacks merit.
Be that as it may, We concur in the trial court's finding that the two
companies are actually one and the same, hence the levy of the bus in
question was proper.
SO ORDERED.
Petitioner filed a motion for reconsideration, 45 which the CA denied on June 25,
2003. 46
Hence, this appeal, in which petitioner faults the CA for holding that the RTC
did not act without jurisdiction or grave abuse of discretion in finding that
petitioner and Travel & Tours Advisers, Inc., the defendant in Civil Case No.
5917, were one and same entity, and for sustaining the propriety of the levy of
the tourist bus with Plate No. NWW-883 in satisfaction of the writ of
execution. 47
In the meantime, respondents filed in the RTC a motion to direct the sheriff to
implement the writ of execution in view of the non-issuance of any restraining
order either by this Court or the CA. 48 On February 23, 2007, the RTC granted
the motion and directed the sheriff to sell the Goldline tourist bus with Plate No.
NWW-883 through a public auction. 49 cHAaEC
Issue
Did the CA rightly find and conclude that the RTC did not gravely abuse its
discretion in denying petitioner's verified third-party claim?
Ruling
We find no reason to reverse the assailed CA decision.
In the order dated August 2, 2001, the RTC rendered its justification for rejecting
the third-party claim of petitioner in the following manner:
xxx xxx xxx
As we see it, the RTC had sufficient factual basis to find that petitioner and
Travel and Tours Advisers, Inc. were one and the same entity, specifically:
— (a) documents submitted by petitioner in the RTC showing that William
Cheng, who claimed to be the operator of Travel and Tours Advisers, Inc., was
also the President/Manager and an incorporator of the petitioner; and (b) Travel
and Tours Advisers, Inc. had been known in Sorsogon as Goldline. On its part,
the CA cogently observed: EcTDCI
Be that as it may, We concur in the trial court's finding that the two
companies are actually one and the same, hence the levy of the bus in
question was proper. 51
The RTC thus rightly ruled that petitioner might not be shielded from liability
under the final judgment through the use of the doctrine of separate corporate
identity. Truly, this fiction of law could not be employed to defeat the ends of
justice.
But petitioner continues to challenge the RTC orders by insisting that the
evidence to establish its identity with Travel and Tours Advisers, Inc. was
insufficient.DacTEH
We cannot agree with petitioner. As already stated, there was sufficient evidence
that petitioner and Travel and Tours Advisers, Inc. were one and the same entity.
Moreover, we remind that a petition for the writ of certiorari neither deals with
errors of judgment nor extends to a mistake in the appreciation of the contending
parties' evidence or in the evaluation of their relative weight. 52 It is timely to
remind that the petitioner in a special civil action for certiorari commenced
against a trial court that has jurisdiction over the proceedings bears the burden to
demonstrate not merely reversible error, but grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the respondent trial court in issuing
the impugned order. 53 The term grave abuse of discretion is defined as a
capricious and whimsical exercise of judgment so patent and gross as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law, as where the power is exercised in an arbitrary and despotic manner because
of passion or hostility. 54 Mere abuse of discretion is not enough; it must be
grave. 55 Yet, here, petitioner did not discharge its burden because it failed to
demonstrate that the CA erred in holding that the RTC had not committed grave
abuse of discretion. A review of the records shows, indeed, that the RTC
correctly rejected petitioner's third-party claim. Hence, the rejection did not
come within the domain of the writ of certiorari's limiting requirement of excess
or lack of jurisdiction. 56
WHEREFORE, the Court DENIES the petition for review on certiorari,
and AFFIRMS the decision promulgated by the Court of Appeals on October 30,
2002. Costs of suit to be paid by petitioner.
SO ORDERED.
(Gold Line Tours, Inc. v. Heirs of Lacsa, G.R. No. 159108, [June 18, 2012],
|||
DECISION
SERENO, J : p
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court, seeking a review of the Court of Appeals (CA) 19
March 2004 and 12 May 2005 Resolutions in CA-G.R. SP No. 82651. The
appellate court had dismissed the Petition for Review on the ground that it lacked
a Verification and Certification against forum shopping.
The pertinent facts are as follows:
On 28 June 2001, respondent Mar Fishing Co., Inc. (Mar Fishing), engaged in
the business of fishing and canning of tuna, sold its principal assets to
co-respondent Miramar Fishing Co., Inc. (Miramar) through public
bidding. 1 The proceeds of the sale were paid to the Trade and Investment
Corporation of the Philippines (TIDCORP) to cover Mar Fishing's outstanding
obligation in the amount of P897,560,041.26. 2 In view of that transfer, Mar
Fishing issued a Memorandum dated 23 October 2001 informing all its workers
that the company would cease to operate by the end of the month. 3 On 29
October 2001 or merely two days prior to the month's end, it notified the
Department of Labor and Employment (DOLE) of the closure of its business
operations. 4
Thereafter, Mar Fishing's labor union, Mar Fishing Workers Union — NFL —
and Miramar entered into a Memorandum of Agreement. 5 The Agreement
provided that the acquiring company, Miramar, shall absorb Mar Fishing's
regular rank and file employees whose performance was satisfactory, without
loss of seniority rights and privileges previously enjoyed. 6
Unfortunately, petitioners, who worked as rank and file employees, were not
hired or given separation pay by Miramar. 7 Thus, petitioners filed Complaints
for illegal dismissal with money claims before the Arbitration Branch of the
National Labor Relations Commission (NLRC).
In its 30 July 2002 Decision, the Labor Arbiter (LA) found that Mar Fishing had
necessarily closed its operations, considering that Miramar had already bought
the tuna canning plant. 8 By reason of the closure, petitioners were legally
dismissed for authorized cause. 9 In addition, even if Mar Fishing reneged on
notifying the DOLE within 30 days prior to its closure, that failure did not make
the dismissals void. Consequently, the LA ordered Mar Fishing to give
separation pay to its workers. 10
The LA held thus: 11 ESCTIA
SO ORDERED.
Aggrieved, petitioners pursued the action before the NLRC, which modified the
LA's Decision. Noting that Mar Fishing notified the DOLE only two days before
the business closed, the labor court considered petitioners' dismissal as
ineffectual. 12 Hence, it awarded, apart from separation pay, full back wages to
petitioners from the time they were terminated on 31 October 2001 until the date
when the LA upheld the validity of their dismissal on 30 July 2002. 13
Additionally, the NLRC pierced the veil of corporate fiction and ruled that Mar
Fishing and Miramar were one and the same entity, since their officers were the
same. 14 Hence, both companies were ordered to solidarily pay the monetary
claims. 15
On reconsideration, the NLRC modified its ruling by imposing liability only on
Mar Fishing. The labor court held that petitioners had no cause of action against
Miramar, since labor contracts cannot be enforced against the transferee of an
enterprise in the absence of a stipulation in the contract that the transferee
assumes the obligation of the transferor. 16 Hence, the dispositive portion
reads: 17
WHEREFORE, foregoing premises considered, the assailed
resolution is MODIFIED in that only Mar Fishing Company, Inc.
through its responsible officers, is ordered to pay complainants their
separation pay, and full backwages from the date they were terminated
from employment until 30 July 2002, subject to computation during
execution stage of proceedings at the appropriate Regional Arbitration
Branch.
SO ORDERED.
Despite the award of separation pay and back wages, petitioners filed a Rule 65
Petition before the CA. This time, they argued that both Mar Fishing and
Miramar should be made liable for their separation pay, and that their back
wages should be up to the time of their actual reinstatement. However, finding
that only 3 of the 228 petitioners 18 signed the Verification and Certification
against forum shopping, the CA instantly dismissed the action
for certiorari against the 225 other petitioners without ruling on the substantive
aspects of the case. 19
cHECAS
Before this Court, 124 petitioners raise the issue of whether the CA gravely erred
in dismissing their Petition for Review on the ground that their pleading lacked a
Verification and Certification against forum shopping. 23
The Rules of Court provide that a petition for certiorari must be verified and
accompanied by a sworn certification of non-forum shopping. 24 Failure to
comply with these mandatory requirements shall be sufficient ground for the
dismissal of the petition. 25Considering that only 3 of the 228 named petitioners
signed the requirement, the CA dismissed the case against them, as they did not
execute a Verification and Certification against forum shopping.
Petitioners invoke substantial compliance with procedural rules when their
Manifestation already contains a Verification and Certification against forum
shopping executed by 161 signatories. They heavily rely on Jaro v. Court of
Appeals, 26 citing Piglas-Kamao v. National Labor Relations
Commission and Cusi-Hernandez v. Diaz, in which we discussed that the
subsequent submission of the missing documentary attachments with the Motion
for Reconsideration amounted to substantial compliance.
However, this very case does not involve a failure to attach the Annexes. Rather,
the procedural infirmity consists of omission — the failure to sign a Verification
and Certification against forum shopping. Addressing this defect squarely, we
have already resolved that because of noncompliance with the requirements
governing the certification of non-forum shopping, no error could be validly
attributed to the CA when it ordered the dismissal of the special civil action
for certiorari. 27 The lack of certification against forum shopping is not curable
by mere amendment of a complaint, but shall be a cause for the dismissal of the
case without prejudice. 28 Indeed, the general rule is that subsequent
compliance with the requirements will not excuse a party's failure to
comply in the first instance. 29 Thus, on procedural aspects, the appellate court
correctly dismissed the case.
However, this Court has recognized that the merit of a case is a special
circumstance or compelling reason that justifies the relaxation of the rule
requiring verification and certification of non-forum shopping. 30 In order to
fully resolve the issue, it is thus necessary to determine whether technical rules
were brushed aside at the expense of substantial justice. 31 This Court will then
delve into the issue on (1) the solidary liability of Mar Fishing and Miramar to
pay petitioners' monetary claims and (2) the reckoning period for the award of
back wages.
For a dismissal based on the closure of business to be valid, three (3)
requirements must be established. Firstly, the cessation of or withdrawal from
business operations must be bona fide in character. Secondly, there must be
payment to the employees of termination pay amounting to at least one-half (1/2)
month pay for each year of service, or one (1) month pay, whichever is higher.
Thirdly, the company must serve a written notice on the employees and on the
DOLE at least one (1) month before the intended termination. 32
In their Petition for Review on Certiorari, petitioners did not dispute the
conclusion of the LA and the NLRC that Mar Fishing had an authorized cause to
dismiss its workers. Neither did petitioners challenge the computation of their
separation pay. aCcEHS
Rather, they questioned the holding that only Mar Fishing was liable for their
monetary claims. 33
Basing their conclusion on the Memorandum of Agreement and Supplemental
Agreement between Miramar and Mar Fishing's labor union, as well as the
General Information Sheets and Company Profiles of the two companies,
petitioners assert that Miramar simply took over the operations of Mar Fishing.
In addition, they assert that these companies are one and the same entity, given
the commonality of their directors and the similarity of their business venture in
tuna canning plant operations. 34
At the fore, the question of whether one corporation is merely an alter ego of
another is purely one of fact generally beyond the jurisdiction of this Court. 35 In
any case, given only these bare reiterations, this Court sustains the ruling of the
LA as affirmed by the NLRC that Miramar and Mar Fishing are separate and
distinct entities, based on the marked differences in their stock
ownership. 36 Also, the fact that Mar Fishing's officers remained as such in
Miramar does not by itself warrant a conclusion that the two companies are one
and the same. As this Court held in Sesbreño v. Court of Appeals, the mere
showing that the corporations had a common director sitting in all the boards
without more does not authorize disregarding their separate juridical
personalities. 37
Neither can the veil of corporate fiction between the two companies be pierced
by the rest of petitioners' submissions, namely, the alleged take-over by Miramar
of Mar Fishing's operations and the evident similarity of their businesses. At this
point, it bears emphasizing that since piercing the veil of corporate fiction is
frowned upon, those who seek to pierce the veil must clearly establish that the
separate and distinct personalities of the corporations are set up to justify a
wrong, protect a fraud, or perpetrate a deception. 38 This, unfortunately,
petitioners have failed to do. In Indophil Textile Mill Workers Union vs. Calica,
we ruled thus: 39
In the case at bar, petitioner seeks to pierce the veil of corporate entity
of Acrylic, alleging that the creation of the corporation is a devi[c]e to
evade the application of the CBA between petitioner Union and
private respondent company. While we do not discount the possibility
of the similarities of the businesses of private respondent and Acrylic,
neither are we inclined to apply the doctrine invoked by petitioner in
granting the relief sought. The fact that the businesses of private
respondent and Acrylic are related, that some of the employees of
the private respondent are the same persons manning and
providing for auxiliary services to the units of Acrylic, and that
the physical plants, offices and facilities are situated in the same
compound, it is our considered opinion that these facts are not
sufficient to justify the piercing of the corporate veil of
Acrylic. (Emphasis supplied.)
Having been found by the trial courts to be a separate entity, Mar Fishing — and
not Miramar — is required to compensate petitioners. Indeed, the back wages
and retirement pay earned from the former employer cannot be filed against the
new owners or operators of an enterprise. 40
Evidently, the assertions of petitioners fail on both procedural and substantive
aspects. Therefore, no special reasons exist to reverse the CA's dismissal of the
case due to their failure to abide by the mandatory procedure for filing a petition
for review on certiorari. Given the correctness of the appellate court's ruling and
the lack of appropriate remedies, this Court will no longer dwell on the exact
computation of petitioners' claims for back wages, which have been sufficiently
threshed out by the LA and the NLRC. Judicial review of labor cases does not go
beyond an evaluation of the sufficiency of the evidence upon which labor
officials' findings rest. 41
ACcaET
While we sympathize with the situation of the workers in this case, we cannot
disregard, absent compelling reasons, the factual determinations and the legal
doctrines that support the findings of the courts a quo. Generally, the findings of
fact and the conclusion of the labor courts are not only accorded great weight and
respect, but are even clothed with finality and deemed binding on this Court, as
long as they are supported by substantial evidence. 42
On a final note, this Court reminds the parties seeking the ultimate relief
of certiorari to observe the rules, since nonobservance thereof cannot be
brushed aside as a "mere technicality." 43 Procedural rules are not to be belittled
or simply disregarded, for these prescribed procedures ensure an orderly and
speedy administration of justice. 44
IN VIEW THEREOF, the assailed 19 March 2004 and 12 May 2005
Resolutions of the Court of Appeals in CA-G.R. SP No. 82651 are AFFIRMED.
Hence, the 04 July 2005 Petition for Review filed by petitioners is
hereby DENIED for lack of merit.
SO ORDERED.
(Ramirez v. Mar Fishing Co., Inc., G.R. No. 168208, [June 13, 2012], 687
|||
PHIL 125-137)
DECISION
REYES, J : p
Section 1 laid down the benefits to which the employee would be entitled, to
wit:DTcHaA
Section 1
Benefits
The petitioners further argued that the quitclaims they signed should not bar
them from claiming their full entitlement under the law. They also claimed that
they were defrauded into signing the same without full knowledge of its legal
implications. 13
On the other hand, Globalbank asserted that the SSP should prevail and the
petitioners were no longer entitled to the additional 50% gratuity pay which was
already paid, the same having been included in the computation of their
separation pay. It maintained further that the waivers executed by the petitioners
should be held binding, since these were executed in good faith and with the
latter's full knowledge and understanding. 14
Meanwhile, Metrobank denied any liability, citing the absence of an
employment relationship with the petitioners. It argued that its acquisition of the
assets and liabilities of Globalbank did not include the latter's obligation to its
employees. Moreover, Metrobank pointed out that the petitioners' employment
with Globalbank had already been severed before it took over the latter's banking
operations. 15
The Labor Arbiter's Decision
On August 30, 2004, the Labor Arbiter (LA) promulgated a
decision 16 dismissing the complaint. 17 The LA ruled that the petitioners were
not entitled to the additional 50% in gratuity pay that they were asking for. 18
DHCSTa
The LA held that the 150% rate used by Globalbank could legally cover both the
separation pay and the gratuity pay of complainants. The LA upheld the right of
the employer to enact a new gratuity plan after finding that its enactment was not
attended by bad faith or any design to defraud complainants. Thus, the New
Gratuity Plan must be deemed to have superseded the Old Plan. 19 The LA also
ruled that the minimum amount due to the petitioners under the New Gratuity
Plan, in relation to Article 283 of the Labor Code was one month's pay for every
year of service. Thus, anything over that amount was discretionary.
As to the validity of the quitclaim, the LA held that the issue has been rendered
moot. Nonetheless, the LA upheld the petitioners' undertaking under their
respective quitclaims, considering the amount involved is not unconscionable,
and that their supposed lack of complete understanding did not mean that they
were coerced or deceived into executing the same. 20
The LA also absolved Metrobank from liability. The LA found that the
petitioners had already been separated from Globalbank when Metrobank took
over the former's banking operations. Moreover, the liabilities that Metrobank
assumed were limited to those arising from banking operations and excluded
those pertaining to Globalbank's employees or to claims of previous
employees. 21
The NLRC's Decision
Aggrieved, the petitioners appealed to the NLRC. In a decision 22 dated August
15, 2007, the NLRC dismissed the appeal and affirmed the LA's decision.
The NLRC held that the petitioners did not acquire a vested right to Philbank's
gratuity plans since, at the outset, it was made clear that these plans would not
perpetuate into eternity. It also noted that, under the SSP, the employee to be
separated due to redundancy would be receiving more than the rate in the old
plan and higher than the legal rate for the separated employees.
The petitioners elevated the case to the CA via a Petition for Certiorari under
Rule 65. HICATc
2.b. In holding that "the bank had abandoned the old plan"
(referring to the old Gratuity Pay Plan) and replaced it with a
Special Separation Program under which [the] petitioners
"would be receiving more than the rate in the old plan and
higher than the legal rate for redundant employees."
The petitioners claim that it was error for the CA to have dismissed their petition
on the sole basis thereof. According to the petitioners, they had opted not to file a
motion for reconsideration as the issues that will be raised therein are those that
the NLRC had already passed upon. The petitioners likewise invoke the liberal
application of procedural rules.
To begin with, the petitioners do not have the discretion or prerogative to
determine the propriety of complying with procedural rules. This Court had
repeatedly emphasized in various cases involving the tedious attempts of
litigants to relieve themselves of the consequences of their neglect to follow a
simple procedural requirement for perfecting a petition for certiorari that he
who seeks a writ of certiorari must apply for it only in the manner and strictly in
accordance with the provisions of the law and the Rules. The petitioners may not
arrogate to themselves the determination of whether a motion for reconsideration
is necessary or not. To dispense with the requirement of filing a motion for
reconsideration, the petitioners must show a concrete, compelling, and valid
reason for doing so. 26
As the CA correctly noted, the petitioners did not bother to explain their
omission and only did so in their motion for reconsideration of the dismissal of
their petition. Aside from the fact that such belated effort will not resurrect their
application for a writ of certiorari, the reason proffered by the petitioners does
not fall under any of the recognized instances when the filing of a motion for
reconsideration may be dispensed with. Whimsical and arbitrary deviations from
the rules cannot be condoned in the guise of a plea for a liberal interpretation
thereof. We cannot respond with alacrity to every claim of injustice and bend the
rules to placate vociferous protestors crying and claiming to be victims of a
wrong. 27
We now rule on the substantive issues.
The petitioners' receipt of separation pay equivalent to their one and a
half months salary for every year of service as provided in the SSP and
the New Gratuity Plan more than sufficiently complies with the Labor
Code, which only requires the payment of separation pay at the rate of
one month salary for every year of service. HCaDET
The petitioners do not question the legality of their separation from the service or
the basis for holding their positions redundant. What they raise is their
entitlement to gratuity pay, as provided in the Old Plan, in addition to what they
received under the SSP. According to the petitioners, they are entitled to
separation pay at a rate of one month salary for every year of service under
the Labor Code and gratuity pay at a rate of one month salary for every year of
service whether under the Old Plan or the New Gratuity Plan. Since what they
received as separation pay was equivalent to only 150% or one and one-half of
their monthly salaries for every year of service, the respondents are still liable to
pay them the deficiency equivalent to one-half of their monthly salary for every
year of service.
We disagree.
The New Gratuity Plan has
repealed the Old Plan.
It is clear from the provisions of Section 8 of the New Gratuity Plan that the Old
Plan has been revoked or superseded. Thus:
SECTION 8
INTEGRATION OF SOCIAL LEGISLATION,
CONTRACTS, ETC.
8.1 This Plan is not intended to duplicate or cause the double payment
of similar or analogous benefits provided for under existing labor and
social security laws. Accordingly, benefits under this Plan shall be
deemed integrated with and in lieu of (i) statutory benefits under the
New Labor Code and Social Security Laws, as now or hereafter
amended[;] and (ii) analogous benefits granted under present or future
collective bargaining agreements, and other employee benefit plans
providing analogous benefits which may be imposed by future
legislations. In the event the benefits due under the Plan are less than
those due and demandable under the provisions of the New Labor
Code and/or present or future Collective Bargaining Agreements
and/or future plans of similar nature imposed by law, the Fund shall
respond for the difference. 28TESICD
Globalbank's right to replace the Old Plan and the New Gratuity Plan is within
legal bounds as the terms thereof are in accordance with the provisions of
the Labor Code and complies with the minimum requirements
thereof. Contrary to the petitioners' claim, they had no vested right over the
benefits under the Old Plan considering that none of the events
contemplated thereunder occurred prior to the repeal thereof by the
adoption of the New Gratuity Plan. Such right accrues only upon their
separation from service for causes contemplated under the Old Plan and the
petitioners can only avail the benefits under the plan that is effective at the time
of their dismissal. In this case, when the merger and the redundancy program
were implemented, what was in effect were the New Gratuity Plan and the SSP;
the petitioners cannot, thus, insist on the provisions of the Old Plan which is no
longer existent.
The SSP did not revoke or supersede the New Gratuity Plan.
On the other hand, the issuance of the SSP did not result to the repeal of the New
Gratuity Plan. As the following provision of the SSP shows, the terms of the
New Gratuity Plan had been expressly incorporated in the SSP and should, thus,
be implemented alongside the SSP:
II. Separation Pay Package
The SSP was not intended to supersede the New Gratuity Plan. On the contrary,
the SSP was issued to make the benefits under the New Gratuity Plan available
to employees whose positions had become redundant because of the merger
between Philbank and Globalbank, subject to compliance with certain
requirements such as age and length of service, and to improve such benefits by
increasing or rounding it up to an amount equivalent to the affected employees'
one and a half monthly salary for every year of service. In other words, the
benefits to which the redundated employees are entitled to, including the
petitioners, are the benefits under the New Gratuity Plan, albeit increased by the
SSP. EaIDAT
Considering that the New Gratuity Plan still stands and has not been revoked by
the SSP, does this mean that the petitioners can claim the benefits thereunder in
addition to or on top of what is required under the Article 283 of the Labor
Code?
For as long as the minimum requirements
of the Labor Code are met, it is within
the management prerogatives of
employers to come up with separation
packages that will be given in lieu of
what is provided under the Labor Code.
A direct reference to the New Gratuity Plan reveals the contrary. The
above-quoted Section 8 of the New Gratuity Plan expressly states that "the
benefits under this Plan shall be deemed integrated with and in lieu of (i)
statutory benefits under the New Labor Code and Social Security Laws, as now
or hereafter amended" and that "[t]his Plan is not intended to duplicate or cause
the double payment of similar or analogous benefits provided for under existing
labor and security laws."
Article 283 of the Labor Code 30 provides only the required minimum amount of
separation pay, which employees dismissed for any of the authorized causes are
entitled to receive. Employers, therefore, have the right to create plans,
providing for separation pay in an amount over and above what is imposed by
Article 283. There is nothing therein that prohibits employers and employees
from contracting on the terms of employment, or from entering into agreements
on employee benefits, so long as they do not violate the Labor Code or any other
law, and are not contrary to morals, good customs, public order, or public
policy. 31 As this Court held in a case:
[E]ntitlement to benefits consequent thereto are not limited to those
provided by said provision of law. Otherwise, the provisions of
collective bargaining agreements, individual employment contracts,
and voluntary retirement plans of companies would be rendered
inutile if we were to limit the award of monetary benefits to an
employee only to those provided by statute. . . . . 32
Previously, the Court adopted the CA's ruling, upholding the validity of a similar
provision in a company's retirement plan: cEAaIS
In sum, the New Gratuity Plan and SSP are valid and must be given effect,
inasmuch as their provisions are not contrary to law; and, indeed, grant benefits
that meet the minimum amount required by the Labor Code. The petitioners
have voluntarily sought such benefits and upon their receipt thereof, executed
quitclaims in Globalbank's favor. The petitioners cannot, upon a mere change of
mind, seek to invalidate such quitclaims and renege on their undertaking
thereunder, which, to begin with, is supported by a substantial consideration and
which they had knowingly assumed and imposed upon themselves.
WHEREFORE, the foregoing premises considered, the petition is DENIED.
The assailed Resolutions dated November 7, 2007 and March 26, 2008,
respectively, of the Court of Appeals in CA-G.R. SP No. 101065
are AFFIRMED.
SO ORDERED.
(Jiao v. National Labor Relations Commission, G.R. No. 182331, [April 18,
|||
DECISION
PERALTA, J : p
The Labor Arbiter ruled that petitioners are not guilty of unfair labor
practice in the absence of evidence to show that they violated respondents'
right to self-organization. The Labor Arbiter also held that Lubas is the
respondents' employer and that it (Lubas) is an entity which is separate,
distinct and independent from PTI. Nonetheless, the Labor Arbiter found that
Lubas is guilty of illegally dismissing respondents from their employment.
Respondents filed a Partial Appeal with the NLRC praying, among
others, that PTI should also be held equally liable as Lubas.
In a Resolution dated May 30, 2003, the NLRC modified the Decision
of the Labor Arbiter and disposed as follows:
WHEREFORE, premises considered, the appeal is
hereby PARTIALLY GRANTED. Accordingly, the Decision
appealed from is SUSTAINED subject to the modification that
Complainant-Appellant Edgardo Belda deserves refund of his
boundary-hulog in the amount of P446,862.00; and that
Complainants-Appellants Danilo Rojo and Danilo Laurel should be
included in the computation of Complainants-Appellants claim as
follows:
Complainants Backwages Separation Pay
SO ORDERED. 7
With respect to the portion ordering the inclusion of Danilo Rojo and
Danilo Laurel in the computation of petitioner's claim for backwages
and with respect to the portion ordering the refund of Edgardo Belda's
boundary-hulog in the amount of P446,862.00, the NLRC decision is
affirmed and maintained.
SO ORDERED. 9
The Court of Appeals shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary to
resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new
trials or further proceedings. . . .
PHIL 296-315)
DECISION
PEREZ, J :p
The controversy of this case arose from the following factual milieu:
Before petitioner corporation was officially
incorporated, 6 respondent has already been engaged by petitioner Lucila, in
her capacity as President of Marc Marketing, Inc., to work as the General
Manager of petitioner corporation. It was formalized through the execution
of a Management Contract 7 dated 16 January 1994 under the letterhead of
Marc Marketing, Inc. 8 as petitioner corporation is yet to be incorporated at
the time of its execution. It was explicitly provided therein that respondent
shall be entitled to 30% of its net income for his work as General Manager.
Respondent will also be granted 30% of its net profit to compensate for the
possible loss of opportunity to work overseas. 9
Pending incorporation of petitioner corporation, respondent was
designated as the General Manager of Marc Marketing, Inc., which was then
in the process of winding up its business. For occupying the said position,
respondent was among its corporate officers by the express provision of
Section 1, Article IV 10 of its by-laws. 11
On 15 August 1994, petitioner corporation was officially incorporated
and registered with the SEC. Accordingly, Marc Marketing, Inc. was made
non-operational. Respondent continued to discharge his duties as General
Manager but this time under petitioner corporation.
Pursuant to Section 1, Article IV 12 of petitioner corporation's
by-laws, 13 its corporate officers are as follows: Chairman, President, one or
more Vice-President(s), Treasurer and Secretary. Its Board of Directors,
however, may, from time to time, appoint such other officers as it may
determine to be necessary or proper.
Per an undated Secretary's Certificate, 14 petitioner corporation's
Board of Directors conducted a meeting on 29 August 1994 where
respondent was appointed as one of its corporate officers with the
designation or title of General Manager to function as a managing director
with other duties and responsibilities that the Board of Directors may provide
and authorized. 15
Nevertheless, on 30 June 1997, petitioner corporation decided to stop
and cease its operations, as evidenced by an Affidavit of
Non-Operation 16 dated 31 August 1998, due to poor sales collection
aggravated by the inefficient management of its affairs. On the same date, it
formally informed respondent of the cessation of its business operation.
Concomitantly, respondent was apprised of the termination of his services as
General Manager since his services as such would no longer be necessary for
the winding up of its affairs. 17
aATHIE
Feeling aggrieved, respondent filed a Complaint for Reinstatement
and Money Claim against petitioners before the Labor Arbiter which was
docketed as NLRC NCR Case No. 00-03-04102-99.
In his complaint, respondent averred that petitioner Lucila dismissed
him from his employment with petitioner corporation due to the feeling of
hatred she harbored towards his family. The same was rooted in the filing by
petitioner Lucila's estranged husband, who happened to be respondent's
brother, of a Petition for Declaration of Nullity of their Marriage. 18
For the parties' failure to settle the case amicably, the Labor Arbiter
required them to submit their respective position papers. Respondent
complied but petitioners opted to file a Motion to Dismiss grounded on the
Labor Arbiter's lack of jurisdiction as the case involved an intra-corporate
controversy, which jurisdiction belongs to the SEC [now with the Regional
Trial Court (RTC)]. 19 Petitioners similarly raised therein the ground of
prescription of respondent's monetary claim.
On 5 September 2000, the Labor Arbiter issued an Order 20 deferring
the resolution of petitioners' Motion to Dismiss until the final determination
of the case. The Labor Arbiter also reiterated his directive for petitioners to
submit position paper. Still, petitioners did not comply. Insisting that the
Labor Arbiter has no jurisdiction over the case, they instead filed an Urgent
Motion to Resolve the Motion to Dismiss and the Motion to Suspend Filing
of Position Paper.
In an Order 21 dated 15 February 2001, the Labor Arbiter denied both
motions and declared final the Order dated 5 September 2000. The Labor
Arbiter then gave petitioners a period of five days from receipt thereof within
which to file position paper, otherwise, their Motion to Dismiss will be
treated as their position paper and the case will be considered submitted for
decision.
Petitioners, through counsel, moved for extension of time to submit
position paper. Despite the requested extension, petitioners still failed to
submit the same. Accordingly, the case was submitted for resolution.
On 1 October 2001, the Labor Arbiter rendered his Decision in favor
of respondent. Its decretal portion reads as follows:SIacTE
II.
III.
IV.
Petitioners fault the Court of Appeals for having sustained the Labor
Arbiter's finding that respondent was not a corporate officer under petitioner
corporation's by-laws. They insist that there is no need to amend the
corporate by-laws to specify who its corporate officers are. The resolution
issued by petitioner corporation's Board of Directors appointing respondent
as General Manager, coupled with his assumption of the said position,
positively made him its corporate officer. More so, respondent's position,
being a creation of petitioner corporation's Board of Directors pursuant to its
by-laws, is a corporate office sanctioned by the Corporation Code and the
doctrines previously laid down by this Court. Thus, respondent's removal as
petitioner corporation's General Manager involved a purely intra-corporate
controversy over which the RTC has jurisdiction.
Petitioners further contend that respondent's claim for 30% of the net
profit of petitioner corporation was anchored on the purported Management
Contract dated 16 January 1994. It should be noted, however, that said
Management Contract was executed at the time petitioner corporation was
still nonexistent and had no juridical personality yet. Such being the case,
respondent cannot invoke any legal right therefrom as it has no legal and
binding effect on petitioner corporation. Moreover, it is clear from the
Articles of Incorporation of petitioner corporation that respondent was its
director and stockholder. Indubitably, respondent's claim for his share in the
profit of petitioner corporation was based on his capacity as such and not by
virtue of any employer-employee relationship.
Petitioners further avow that even if the present case does not pose an
intra-corporate controversy, still, the Labor Arbiter's multi-million peso
awards in favor of respondent were erroneous. The same was merely based
on the latter's self-serving computations without any supporting documents.
Finally, petitioners maintain that petitioner Lucila cannot be held
solidarily liable with petitioner corporation. There was neither allegation nor
iota of evidence presented to show that she acted with malice and bad faith in
her dealings with respondent. Moreover, the Labor Arbiter, in his Decision,
simply concluded that petitioner Lucila was jointly and severally liable with
petitioner corporation without making any findings thereon. It was, therefore,
an error for the Court of Appeals to hold petitioner Lucila solidarily liable
with petitioner corporation.EHIcaT
A different interpretation can easily leave the way open for the
Board of Directors to circumvent the constitutionally guaranteed
security of tenure of the employee by the expedient inclusion in
the [b]y-[l]aws of an enabling clause on the creation of just any
corporate officer position.
(2) The scope of the term "officer' in the phrase "and such
other officers as may be provided for in the by-laws["] (Sec. 25,
par. 1), would naturally depend much on the provisions of the
by-laws of the corporation. (SEC Opinion, [4 December
1991.]) If the by-laws enumerate the officers to be elected by
the board, the provision is conclusive, and the board is
without power to create new offices without amending the
by-laws. (SEC Opinion, [19 October 1971.])
. . . Over the years, this Court has had the opportunity to reexamine the
sanctions imposed upon employers who fail to comply with the
procedural due process requirements in terminating its employees.
In Agabon v. National Labor Relations Commission [citation omitted],
this Court reverted back to the doctrine in Wenphil Corporation v.
National Labor Relations Commission [citation omitted] and held
that where the dismissal is due to a just or authorized cause, but
without observance of the due process requirements, the dismissal
may be upheld but the employer must pay an indemnity to the
employee. The sanctions to be imposed however, must be stiffer than
those imposed in Wenphil to achieve a result fair to both the
employers and the employees.
SO ORDERED.
(Marc II Marketing, Inc. v. Joson, G.R. No. 171993, [December 12, 2011], 678
|||
PHIL 232-265)
DECISION
VELASCO, JR., J : p
The Case
This Petition for Review on Certiorari under Rule 45 seeks to nullify
and reverse the January 23, 2008 Decision 1 and the April 16, 2008
Resolution 2 rendered by the Court of Appeals (CA) in CA-G.R. SP No.
100152. DETcAH
The assailed CA decision affirmed the March 12, 2007 3 and June 7,
2007 4 Orders of the Regional Trial Court (RTC) of Manila, Branch 21, in
Civil Case No. 99-93173, entitled Romeo M. Morales, doing business under
the name and style RM Morales Trophies and Plaques v. Kukan, Inc. In the
said orders, the RTC disregarded the separate corporate identities of Kukan,
Inc. and Kukan International Corporation and declared them to be one and
the same entity. Accordingly, the RTC held Kukan International Corporation,
albeit not impleaded in the underlying complaint of Romeo M. Morales,
liable for the judgment award decreed in a Decision dated November 28,
2002 5 in favor of Morales and against Kukan, Inc.
The Facts
Sometime in March 1998, Kukan, Inc. conducted a bidding for the
supply and installation of signages in a building being constructed in Makati
City. Morales tendered the winning bid and was awarded the PhP5 million
contract. Some of the items in the project award were later excluded resulting
in the corresponding reduction of the contract price to PhP3,388,502. Despite
his compliance with his contractual undertakings, Morales was only paid the
amount of PhP1,976,371.07, leaving a balance of PhP1,412,130.93, which
Kukan, Inc. refused to pay despite demands. Shortchanged, Morales filed a
Complaint 6 with the RTC against Kukan, Inc. for a sum of money, the case
docketed as Civil Case No. 99-93173 and eventually raffled to Branch 17 of
the court.
Following the joinder of issues after Kukan, Inc. filed an answer with
counterclaim, trial ensued. However, starting November 2000, Kukan, Inc.
no longer appeared and participated in the proceedings before the trial court,
prompting the RTC to declare Kukan, Inc. in default and paving the way for
Morales to present his evidence ex parte.
On November 28, 2002, the RTC rendered a Decision finding for
Morales and against Kukan, Inc., disposing as follows:
WHEREFORE, consistent with Section 5, Rule 18 of the 1997 Rules
of Civil Procedure, and by preponderance of evidence, judgment is
hereby rendered in favor of the plaintiff, ordering Kukan, Inc.:
IT IS SO ORDERED. 7
After the above decision became final and executory, Morales moved
for and secured a writ of execution 8 against Kukan, Inc. The sheriff then
levied upon various personal properties found at what was supposed to be
Kukan, Inc.'s office at Unit 2205, 88 Corporate Center, Salcedo Village,
Makati City. Alleging that it owned the properties thus levied and that it was
a different corporation from Kukan, Inc., Kukan International Corporation
(KIC) filed an Affidavit of Third-Party Claim. Notably, KIC was
incorporated in August 2000, or shortly after Kukan, Inc. had stopped
participating in Civil Case No. 99-93173.
In reaction to the third party claim, Morales interposed an Omnibus
Motion dated April 30, 2003. In it, Morales prayed, applying the principle of
piercing the veil of corporate fiction, that an order be issued for the
satisfaction of the judgment debt of Kukan, Inc. with the properties under the
name or in the possession of KIC, it being alleged that both corporations are
but one and the same entity. KIC opposed Morales' motion. By Order of May
29, 2003 9 as reiterated in a subsequent order, the court denied the omnibus
motion.
In a bid to establish the link between KIC and Kukan, Inc., and thus
determine the true relationship between the two, Morales filed a Motion for
Examination of Judgment Debtors dated May 4, 2005. In this motion
Morales sought that subpoena be issued against the primary stockholders of
Kukan, Inc., among them Michael Chan, a.k.a. Chan Kai Kit. This too was
denied by the trial court in an Order dated May 24, 2005. 10
Morales then sought the inhibition of the presiding judge, Eduardo B.
Peralta, Jr., who eventually granted the motion. The case was re-raffled to
Branch 21, presided by public respondent Judge Amor Reyes. AEITDH
Before the Manila RTC, Branch 21, Morales filed a Motion to Pierce
the Veil of Corporate Fiction to declare KIC as having no existence separate
from Kukan, Inc. This time around, the RTC, by Order dated March 12, 2007,
granted the motion, the dispositive portion of which reads:
WHEREFORE, premises considered, the motion is hereby
GRANTED. The Court hereby declares as follows:
SO ORDERED.
From the above order, KIC moved but was denied reconsideration in
another Order dated June 7, 2007.
KIC went to the CA on a petition for certiorari to nullify the aforesaid
March 12 and June 7, 2007 RTC Orders.
On January 23, 2008, the CA rendered the assailed decision, the
dispositive portion of which states:
WHEREFORE, premises considered, the petition is hereby DENIED
and the assailed Orders dated March 12, 2007 and June 7, 2007 of the
court a quo are both AFFIRMED. No costs.
SO ORDERED. 11
In the fairly recent Palma v. Galvez, 24 the Court reiterated its holding
in Orion Security Corporation, stating: "[I]n civil cases, the trial court
acquires jurisdiction over the person of the defendant either by the service of
summons or by the latter's voluntary appearance and submission to the
authority of the former."
The court's jurisdiction over a party-defendant resulting from his
voluntary submission to its authority is provided under Sec. 20, Rule 14 of
the Rules, which states:
Section 20. Voluntary appearance. — The defendant's voluntary
appearance in the actions shall be equivalent to service of summons.
The inclusion in a motion to dismiss of other grounds aside from lack
of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance.
To be sure, the CA's ruling that any form of appearance by the party or
its counsel is deemed as voluntary appearance finds support in the
kindred Republic v. Ker & Co., Ltd. 25 and De Midgely v. Ferandos. 26
Republic and De Midgely, however, have already been modified if not
altogether superseded 27 by La Naval Drug Corporation v. Court of
Appeals, 28 wherein the Court essentially ruled and elucidated on the current
view in our jurisdiction, to wit: "[A] special appearance before the court —
challenging its jurisdiction over the person through a motion to dismiss even
if the movant invokes other grounds — is not tantamount to estoppel or a
waiver by the movant of his objection to jurisdiction over his person; and
such is not constitutive of a voluntary submission to the jurisdiction of the
court." 29
In the instant case, KIC was not made a party-defendant in Civil Case
No. 99-93173. Even if it is conceded that it raised affirmative defenses
through its aforementioned pleadings, KIC never abandoned its challenge,
however implicit, to the RTC's jurisdiction over its person. The challenge
was subsumed in KIC's primary assertion that it was not the same entity as
Kukan, Inc. Pertinently, in its Comment and Opposition to Plaintiff's
Omnibus Motion dated May 20, 2003, KIC entered its "special but not
voluntary appearance" alleging therein that it was a different entity and has
a separate legal personality from Kukan, Inc. And KIC would consistently
reiterate this assertion in all its pleadings, thus effectively resisting all along
the RTC's jurisdiction of its person. It cannot be overemphasized that KIC
could not file before the RTC a motion to dismiss and its attachments in Civil
Case No. 99-93173, precisely because KIC was neither impleaded nor served
with summons. Consequently, KIC could only assert and claim through its
affidavits, comments, and motions filed by special appearance before the
RTC that it is separate and distinct from Kukan, Inc.
Following La Naval Drug Corporation, 30 KIC cannot be deemed to
have waived its objection to the court's lack of jurisdiction over its person. It
would defy logic to say that KIC unequivocally submitted itself to the
jurisdiction of the RTC when it strongly asserted that it and Kukan, Inc. are
different entities. In the scheme of things obtaining, KIC had no other option
but to insist on its separate identity and plead for relief consistent with that
position.
Third Issue: Piercing the
Veil of Corporate Fiction
The third and main issue in this case is whether or not the trial and
appellate courts correctly applied the principle of piercing the veil of
corporate entity — called also as disregarding the fiction of a separate
juridical personality of a corporation — to support a conclusion that Kukan,
Inc. and KIC are but one and the same corporation with respect to the
contract award referred to at the outset. This principle finds its context on the
postulate that a corporation is an artificial being invested with a personality
separate and distinct from those of the stockholders and from other
corporations to which it may be connected or related. 31
In Pantranco Employees Association (PEA-PTGWO) v. National
Labor Relations Commission, 32 the Court revisited the subject principle of
piercing the veil of corporate fiction and wrote:
Under the doctrine of "piercing the veil of corporate fiction," the court
looks 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
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 as
one and the same.
The same principle was the subject and discussed in Rivera v. United
Laboratories, Inc.:
While a corporation may exist for any lawful purpose, the law will
regard it as an association of persons or, in case of two corporations,
merge them into one, when its corporate legal entity is used as a
cloak for fraud or illegality. This is the doctrine of piercing the
veil of corporate fiction. The doctrine applies only when such
corporate fiction is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, or when it is made as a
shield to confuse the legitimate issues, or where a corporation is the
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.
Now, as before the appellate court, petitioner KIC maintains that the
RTC violated its right to due process when, in the execution of its November
28, 2002 Decision, the court authorized the issuance of the writ against KIC
for Kukan, Inc.'s judgment debt, albeit KIC has never been a party to the
underlying suit. As a counterpoint, Morales argues that KIC's specific
concern on due process and on the validity of the writ to execute the RTC's
November 28, 2002 Decision would be mooted if it were established that
KIC and Kukan, Inc. are indeed one and the same corporation. HDCAaS
The bottom line issue of whether Morales can proceed against KIC for
the judgment debt of Kukan, Inc. — assuming hypothetically that he can,
applying the piercing the corporate veil principle — resolves itself into the
question of whether a mere motion is the appropriate vehicle for such
purpose.
Verily, Morales espouses the application of the principle of piercing
the corporate veil to hold KIC liable on theory that Kukan, Inc. was out to
defraud him through the use of the separate and distinct personality of
another corporation, KIC. In net effect, Morales' adverted motion to pierce
the veil of corporate fiction dated January 3, 2007 stated a new cause of
action, i.e., for the liability of judgment debtor Kukan, Inc. to be borne by
KIC on the alleged identity of the two corporations. This new cause of action
should be properly ventilated in another complaint and subsequent trial
where the doctrine of piercing the corporate veil can, if appropriate, be
applied, based on the evidence adduced. Establishing the claim of Morales
and the corresponding liability of KIC for Kukan, Inc.'s indebtedness could
hardly be the subject, under the premises, of a mere motion interposed after
the principal action against Kukan, Inc. alone had peremptorily been
terminated. After all, a complaint is one where the plaintiff alleges causes of
action.TaEIcS
This Court has pierced the corporate veil to ward off a judgment credit,
to avoid inclusion of corporate assets as part of the estate of the
decedent, to escape liability arising from a debt, or to perpetuate fraud
and/or confuse legitimate issues either to promote or to shield unfair
objectives or to cover up an otherwise blatant violation of the
prohibition against forum-shopping. Only in these and similar
instances may the veil be pierced and disregarded. (Emphasis
supplied.)
DECISION
DEL CASTILLO, J : p
5. After the first repair by the defendants, the 160 KW Kiln Drive
Motor was installed for testing on October 3, 1990. On October 4,
1990 the test failed. The plaintiff removed the DC Drive Motor and
replaced it with its old motor. It was only on October 9, 1990 that the
plaintiff resumed operation. The plaintiff lost 1,040 MTD per day
from October 5 to October 9, 1990.
7. The defendants were given a third chance to repair the 160 KW Kiln
DC Drive Motor. On March 13, 1991, the motor was installed and
tested. Again, the test failed. The plaintiff resumed operation on
March 15, 1991. The plaintiff sustained production losses at the rate of
1,040 MTD for two days.
This amount represents only about 25% of the production losses at the rate of P72.00
per bag of cement.
––––––––––––
==========
9. The plaintiff has made several demands on the defendants for the
payment of the above-enumerated damages, but the latter refused to
do so without valid justification.
10. The plaintiff was constrained to file this action and has undertaken
to pay its counsel Twenty Percentum (20%) of the amount sought to
be recovered as attorney's fees. 10cCAIES
SO ORDERED. 18
SO ORDERED. 21
Petitioner moved for reconsideration 22 but the CA denied the same in its
Resolution 23 dated February 16, 2006.
Issues
Hence, the present recourse where petitioner interposes the following issues:
1. Whether . . . the [CA] gravely erred in applying the terms of
the "General Conditions" of Purchase Orders Nos. 17136 and
17137 to exculpate the respondents . . . from liability in this
case.
Petitioner's Arguments
Petitioner reiterates that the General Conditions cannot exculpate respondents
because petitioner never agreed to be bound by it nor did petitioner receive a
copy of it. 25 Petitioner also imputes error on the part of the CA in applying the
concepts of warranty against hidden defects and implied warranty. 26 Petitioner
contends that these concepts are not applicable because the instant case does not
involve a contract of sale. 27 What applies are Articles 1170 and 2201 of the
Civil Code.28 cCAIDS
Respondents' Arguments
Conversely, respondents insist that petitioner is bound by the General
Conditions. 29 By issuing Purchase Order Nos. 17136-37, petitioner in effect
accepted the General Conditions appended to respondent ABB's letter of
offer. 30 Respondents likewise defend the ruling of the CA that there could be no
implied warranty on the repair made by respondent ABB as the warranty of the
fitness of the equipment should be enforced directly against the manufacturer of
the Kiln Drive Motor. 31 Respondents also deny liability for damages claiming
that they performed their obligation in good faith. 32
Our Ruling
The petition has merit.
Petitioner and respondent ABB entered into a contract for the repair of
petitioner's Kiln Drive Motor, evidenced by Purchase Order Nos.
17136-37, 33 with the following terms and conditions:
a) Total Price: P197,450.00
Respondent ABB, however, not only incurred delay in performing its obligation
but likewise failed to repair the Kiln Drive Motor; thus, prompting petitioner to
sue for damages.
Clause 7 of the General Conditions is
not binding on petitioner
Respondents contend that under Clause 7 of the General Conditions their
liability "does not extend to consequential damages either direct or
indirect." 35 This contention, however, is unavailing because respondents failed
to show that petitioner was duly furnished with a copy of said General
Conditions. Hence, it is not binding on petitioner.
Having breached the contract it entered with petitioner, respondent ABB is liable
for damages pursuant to Articles 1167, 1170, and 2201 of the Civil Code, which
state:
Art. 1167. If a person obliged to do something fails to do it, the same
shall be executed at his cost.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall
be responsible for all damages which may be reasonably attributed to
the non-performance of the obligation.
Based on the foregoing, a repairman who fails to perform his obligation is liable
to pay for the cost of the execution of the obligation plus damages. Though
entitled, petitioner in this case is not claiming reimbursement for the repair
allegedly done by Newton Contractor, 36 but is instead asking for damages for
the delay caused by respondent ABB. aHIEcS
SO ORDERED.
(Continental Cement Corp. v. Asea Brown Boveri, Inc., G.R. No. 171660,
|||
MENDOZA, J : p
Petitioners, by way of this petition for review on certiorari under Rule 45, seek
to annul and set aside the December 23, 2008 Decision 1 of the Court of
Appeals (CA) in CA-G.R. SP No. 100015, which reversed and set aside the
December 29, 2006 Resolution 2 of the National Labor Relations
Commission (NLRC). The NLRC Resolution, in turn, reversed and set aside the
June 15, 2006 Decision 3 of the Labor Arbiter (LA). 4
THE FACTS
Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation
organized and existing under the laws of the Republic of the Philippines and
registered with the Philippine Economic Zone Authority. Petitioner Winfried
Hartmannshenn (Hartmannshenn), a German national, is its president, in which
capacity he determines the administration and direction of the day-to-day
business affairs of SHS. Petitioner Hinrich Johann Schumacher (Schumacher),
also a German national, is the treasurer and one of the board directors. As such,
he is authorized to pay all bills, payrolls, and other just debts of SHS of whatever
nature upon maturity. Schumacher is also the Executive Vice-President of the
European Chamber of Commerce of the Philippines (ECCP) which is a separate
entity from SHS. Both entities have an arrangement where ECCP handles the
payroll requirements of SHS to simplify business operations and minimize
operational expenses. Thus, the wages of SHS employees are paid out by ECCP,
through its Accounting Services Department headed by Juliet
Taguiang (Taguiang).
Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for
Business Development on probationary status from July 18, 2005 to January 18,
2006, with a monthly salary of P100,000.00. Respondent's duties,
responsibilities, and work hours were described in the Contract of Probationary
Employment, 5 as reproduced below: ASDCaI
DAILY/GENERAL DUTIES:
(f) Liaise closely with the other commercial and technical staff
of the company;
OTHER RESPONSIBILITIES:
(b) comply with the orders and instructions given from time to
time by the EMPLOYER, INC. through its authorized
representatives;
Respondent, however, denied sending such messages but admitted that he had
reported to the SHS office and plant only eight (8) times from July 18, 2005 to
November 30, 2005.
On November 16, 2005, in preparation for his trip to the Philippines,
Hartmannshenn tried to call respondent on his mobile phone, but the latter failed
to answer. On November 18, 2005, Hartmannshenn arrived in the Philippines
from Germany, and on November 22 and 24, 2005, notified respondent of his
arrival through electronic mail messages and advised him to get in touch with
him. Respondent claimed that he never received the messages.
On November 29, 2005, Hartmannshenn instructed Taguiang not to release
respondent's salary. Later that afternoon, respondent called and inquired about
his salary. Taguiang informed him that it was being withheld and that he had to
immediately communicate with Hartmannshenn. Again, respondent denied
having received such directive.
The next day, on November 30, 2005, respondent served on SHS a demand letter
and a resignation letter. The resignation letter reads:
This is to tender my irrevocable resignation from SHS Perforated
Materials, Inc., Philippines, effective immediately upon receipt of my
due and demandable salary for the period covering November 16 to 30,
2005, which has yet been unpaid and is still currently being
withheld albeit illegally. This covers and amounts to the sum of
Php50,000.00 pesos net of all taxes. As my employment contract
clearly shows I receive a monthly salary of Php100,000.00 net of all
taxes.
In the evening of the same day, November 30, 2005, respondent met with
Hartmannshenn in Alabang. The latter told him that he was extremely
disappointed for the following reasons: his poor work performance; his
unauthorized leave and malingering from November 16 to November 30, 2005;
and failure to immediately meet Hartmannshenn upon his arrival from Germany.
Petitioners averred that respondent was unable to give a proper explanation for
his behavior. Hartmannshenn then accepted respondent's resignation and
informed him that his salary would be released upon explanation of his failure to
report to work, and proof that he did, in fact, work for the period in question. He
demanded that respondent surrender all company property and information in his
possession. Respondent agreed to these "exit" conditions through electronic mail.
Instead of complying with the said conditions, however, respondent sent another
electronic mail message to Hartmannshenn and Schumacher on December 1,
2005, appealing for the release of his salary.
Respondent, on the other hand, claimed that the meeting with Hartmannshenn
took place in the evening of December 1, 2005, at which meeting the latter
insulted him and rudely demanded that he accept P25,000.00 instead of his
accrued wage and stop working for SHS, which demands he refused. Later that
same night, he sent Hartmannshenn and Schumacher an electronic mail message
appealing for the release of his salary. Another demand letter for respondent's
accrued salary for November 16 to November 30, 2005, 13th month pay, moral
and exemplary damages, and attorney's fees was sent on December 2, 2005. SIcCEA
SO ORDERED. 8 IcESaA
The Decision dated June 15, 2006 is hereby REVERSED and SET
ASIDE and a new one is hereby entered:
SO ORDERED. 9 caSDCA
The NLRC explained that the withholding of respondent's salary was a valid
exercise of management prerogative. The act was deemed justified as it was
reasonable to demand an explanation for failure to report to work and to account
for his work accomplishments. The NLRC held that the respondent voluntarily
resigned as evidenced by the language used in his resignation letter and demand
letters. Given his professional and educational background, the letters showed
respondent's resolve to sever the employer-employee relationship, and his
understanding of the import of his words and their consequences. Consequently,
respondent could not have been regularized having voluntarily resigned prior to
the completion of the probationary period. The NLRC further noted that
respondent's 13th month pay was already integrated in his salary in accordance
with his Probationary Contract of Employment and, therefore, no additional
amount should be due him.
On January 25, 2007, respondent filed a motion for reconsideration but the
NLRC subsequently denied it for lack of merit in its May 23, 2007 Resolution.
THE RULING OF THE COURT OF APPEALS
The CA reversed the NLRC resolutions in its December 23, 2008 Decision, the
dispositive portion of said decision reads:
WHEREFORE, premises considered, the herein petition is
GRANTED and the 29 December 2006 Resolution of the NLRC in
NLRC CN RAB-IV-12-21758-05-L, and the 23 May 2007 Resolution
denying petitioner's Motion for Reconsideration, are REVERSED and
SET ASIDE. Accordingly, a new judgment is hereby entered in that
petitioner is hereby awarded separation pay equivalent to at least one
month pay, and his full backwages, other privileges and benefits, or
their monetary equivalent during the period of his dismissal up to his
supposed actual reinstatement by the Labor Arbiter on 15 June 2006.
SO ORDERED. 10
Contrary to the NLRC ruling, the CA held that withholding respondent's salary
was not a valid exercise of management prerogative as there is no such thing as a
management prerogative to withhold wages temporarily. Petitioners' averments
of respondent's failure to report to work were found to be unsubstantiated
allegations not corroborated by any other evidence, insufficient to justify said
withholding and lacking in probative value. The malicious withholding of
respondent's salary made it impossible or unacceptable for respondent to
continue working, thus, compelling him to resign. The respondent's immediate
filing of a complaint for illegal dismissal could only mean that his resignation
was not voluntary. As a probationary employee entitled to security of tenure,
respondent was illegally dismissed. The CA ruled out actual reinstatement,
however, reasoning out that antagonism had caused a severe strain in their
relationship. It was of the view that separation pay equivalent to at least one
month pay would be a more equitable disposition. EISCaD
THE ISSUES
Aggrieved, the petitioners come to this Court praying for the reversal and setting
aside of the subject CA decision presenting the following:
ISSUES
I
THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN NOT AFFIRMING THE DECISION
OF THE NLRC, WHICH WAS BASED ON SUBSTANTIAL
EVIDENCE.
II
III
IV
As correctly pointed out by the LA, "absent a showing that the withholding of
complainant's wages falls under the exceptions provided in Article 113, the
withholding thereof is thus unlawful." 13
Petitioners argue that Article 116 of the Labor Code only applies if it is
established that an employee is entitled to his salary/wages and, hence, does not
apply in cases where there is an issue or uncertainty as to whether an employee
has worked and is entitled to his salary/wages, in consonance with the principle
of "a fair day's wage for a fair day's work." Petitioners contend that in this case
there was precisely an issue as to whether respondent was entitled to his salary
because he failed to report to work and to account for his whereabouts and work
accomplishments during the period in question.
To substantiate their claim, petitioners presented hard copies of the electronic
mail messages 14 sent to respondent on November 22 and 24, 2005, directing the
latter to contact Hartmannshenn; the Affidavit 15 of Taguiang stating that she
advised respondent on or about November 29, 2005 to immediately
communicate with Mr. Hartmannshenn at the SHS office; Hartmannshenn's
Counter-Affidavit 16 stating that he exerted earnest efforts to contact respondent
through mobile phone; Schumacher's Counter-Affidavit 17 stating that
respondent had not filed any request for official leave; and respondent's
admission in his Position Paper 18 that he found it absurd to report to the SHS
plant when only security guards and machinists were present.
Respondent, on the other hand, presented reports 19 prepared by him and
submitted to Hartmannshenn on November 18 and 25, 2005; a receipt 20 issued
to him by Taguiang for a client's payment during the subject period; and eight
notarized letters 21 of prospective clients vouching for meetings they had with
the respondent during the subject period.
The Court finds petitioners' evidence insufficient to prove that respondent did
not work from November 16 to November 30, 2005. As can be gleaned from
respondent's Contract of Probationary Employment and the exchanges of
electronic mail messages 22 between Hartmannshenn and respondent, the latter's
duties as manager for business development entailed cultivating business ties,
connections, and clients in order to make sales. Such duties called for meetings
with prospective clients outside the office rather than reporting for work on a
regular schedule. In other words, the nature of respondent's job did not allow
close supervision and monitoring by petitioners. Neither was there any
prescribed daily monitoring procedure established by petitioners to ensure that
respondent was doing his job. Therefore, granting that respondent failed to
answer Hartmannshenn's mobile calls and to reply to two electronic mail
messages and given the fact that he admittedly failed to report to work at the SHS
plant twice each week during the subject period, such cannot be taken to signify
that he did not work from November 16 to November 30, 2005.
Furthermore, the electronic mail reports sent to Hartmannshenn and the receipt
presented by respondent as evidence of his having worked during the subject
period were not controverted by petitioners. The eight notarized letters of
prospective clients vouching for meetings they had with respondent during the
subject period may also be given credence. Although respondent only presented
such letters in support of his Motion for Reconsideration filed with the NLRC,
they may be considered by this Court in light of Section 10, Rule VII, of the 2005
New Rules of Procedure of the NLRC, which provides in part that "the rules of
procedure and evidence prevailing in courts of law and equity shall not be
controlling and the Commission shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process." While
administrative tribunals exercising quasi-judicial functions are free from the
rigidity of certain procedural requirements, they are bound by law and practice to
observe the fundamental and essential requirements of due process in justiciable
cases presented before them. 23 In this case, due process was afforded petitioners
as respondent filed with the NLRC a Motion to Set Case for Reception of
Additional Evidence as regards the said letters, which petitioners had the
opportunity to, and did, oppose.
Although it cannot be determined with certainty whether respondent worked for
the entire period from November 16 to November 30, 2005, the consistent rule is
that if doubt exists between the evidence presented by the employer and that by
the employee, the scales of justice must be tilted in favor of the latter 24 in line
with the policy mandated by Articles 2 and 3 of the Labor Code to afford
protection to labor and construe doubts in favor of labor. For petitioners' failure
to satisfy their burden of proof, respondent is presumed to have worked during
the period in question and is, accordingly, entitled to his salary. Therefore, the
withholding of respondent's salary by petitioners is contrary to Article 116 of the
Labor Code and, thus, unlawful. CSAaDE
This Court has held that probationary employees who are unjustly dismissed
during the probationary period are entitled to reinstatement and payment of full
backwages and other benefits and privileges from the time they were dismissed
up to their actual reinstatement. 29 Respondent is, thus, entitled to reinstatement
without loss of seniority rights and other privileges as well as to full backwages,
inclusive of allowances, and other benefits or their monetary equivalent
computed from the time his compensation was withheld up to the time of actual
reinstatement. Respondent, however, is not entitled to the additional amount for
13th month pay, as it is clearly provided in respondent's Probationary Contract of
Employment that such is deemed included in his salary. Thus:
EMPLOYEE will be paid a net salary of One Hundred Thousand
(Php100,000.00) Pesos per month payable every 15th day and end of
the month.
Petitioners withheld respondent's salary in the sincere belief that respondent did
not work for the period in question and was, therefore, not entitled to it. There
was no dishonest purpose or ill will involved as they believed there was a
justifiable reason to withhold his salary. Thus, although they unlawfully
withheld respondent's salary, it cannot be concluded that such was made in bad
faith. Accordingly, corporate officers, Hartmannshenn and Schumacher, cannot
be held personally liable for the corporate obligations of SHS.
WHEREFORE, the assailed December 23, 2008 Decision of the Court of
Appeals in CA-G.R. SP No. 100015 is
hereby AFFIRMEDwith MODIFICATION. The additional amount for 13th
month pay is deleted. Petitioners Winfried Hartmannshenn and Hinrich Johann
Schumacher are not solidarily liable with petitioner SHS Perforated Materials,
Inc.
SO ORDERED.
(SHS Perforated Materials, Inc. v. Diaz, G.R. No. 185814, [October 13, 2010],
|||
RESOLUTION
NACHURA, J : p
SO ORDERED. 8
SO ORDERED. 12
Petitioners filed a motion for reconsideration, 13 but the CA denied it
on January 20, 2006. 14
Hence, this recourse by petitioners arguing that:
A.
B.
Petitioners insist that they did not violate the Revised Rules and
Regulations on Commodity Futures Trading. They claim that it has been
QTCI's policy and practice to appoint only licensed traders to trade the
client's account. They denied any participation in the designation of Mendoza
as respondent's attorney-in-fact; taking exception to the findings that they
permitted Mendoza to trade respondent's account. Petitioners also assailed
the weight given by the SEC Hearing Officer and by the CA to respondent's
evidence.
It is evident that the issue raised in this petition is the correctness of
the factual findings of the SEC Hearing Officer, as affirmed by the CA. It is
well-settled that factual findings of administrative agencies are generally
held to be binding and final so long as they are supported by substantial
evidence in the records of the case. It is not the function of this Court to
analyze or weigh all over again the evidence and the credibility of witnesses
presented before the lower court, tribunal, or office, as we are not a trier of
facts. Our jurisdiction is limited to reviewing and revising errors of law
imputed to the lower court, the latter's findings of fact being conclusive and
not reviewable by this Court. 16
We sustain the finding of the SEC Hearing Officer and the CA that
petitioners allowed unlicensed individuals to engage in, solicit or accept
orders in futures contracts, and thus, transgressed the Revised Rules and
Regulations on Commodity Futures Trading. 17
We are not persuaded by petitioners' assertion that they had no hand in
Mendoza's designation as respondent's attorney-in-fact. As pointed out by
the CA, the Special Power of Attorney formed part of respondent's agreement
with QTCI, and under the Customer's Agreement, 18 only a licensed or
registered dealer or investment consultant may be appointed as
attorney-in-fact. Thus:
2. If I so desire, I shall appoint you as my agent pursuant to a Special
Power of Attorney which I shall execute for this purpose and which
form part of this Agreement.
Inexplicably, petitioners did not object to, and in fact recognized, Mendoza's
appointment as respondent's attorney-in-fact. Collado, in behalf of QTCI,
concluded the Customer's Agreement despite the fact that the appointed
attorney-in-fact was not a licensed dealer. Worse, petitioners permitted
Mendoza to handle respondent's account.
Indubitably, petitioners violated the Revised Rules and Regulations on
Commodity Futures Trading prohibiting any unlicensed person to engage in,
solicit or accept orders in futures contract. Consequently, the SEC Hearing
Officer and the CA cannot be faulted for declaring the contract between
QTCI and respondent void.
Batas Pambansa Bilang (B.P. Blg.) 178 or the Revised Securities
Act explicitly provided:
SEC. 53. Validity of Contracts. — . . . .
Clearly, the CA merely adhered to the clear provision of B.P. Blg. 178 and to
the stipulation in the parties' agreement when it declared as void
the Customer's Agreement between QTCI and respondent.
It is settled that a void contract is equivalent to nothing; it produces no
civil effect. It does not create, modify, or extinguish a juridical relation.
Parties to a void agreement cannot expect the aid of the law; the courts leave
them as they are, because they are deemed in pari delicto or in equal
fault. 21 This rule, however, is not absolute. Article 1412 of the Civil Code
provides an exception, and permits the return of that which may have been
given under a void contract. Thus:
Art. 1412. If the act in which the unlawful or forbidden cause consists
does not constitute a criminal offense, the following rules shall be
observed:
The Commission also took into consideration the fact that [petitioner]
Collado, who is not a licensed commodity salesman, himself violated
the aforequoted provisions of the Revised Rules and Regulations on
Commodity Futures Trading when he admitted having participated in
the execution of the customers orders (p. 7, TSN dated January 21,
1999) without giving any exception thereto, which presumably
includes his participation in the execution of customers orders of the
[respondent].
DECISION
MENDOZA, J : p
This ruling was affirmed by the NLRC in its December 29, 2006
Resolution, 9 citing its observation that Wensha was still considering the
proper action to take on the day Loreta left Wensha and filed her complaint.
The NLRC added that this finding was bolstered by Wensha's September 10,
2004 letter to Loreta asking her to come back to personally clarify some
matters, but she declined because she had already filed a case.
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. The CA stated the following:
We, thus, peruse the affidavits and documentary evidence of the
Private Respondents and find the following: First, on the affidavits of
their witnesses, it must be noted that the same were mere photocopies.
It was held that [T]he purpose of the rule in requiring the production
of the best evidence is the prevention of fraud, because if a party is in
possession of such evidence and withholds it, and seeks to substitute
inferior evidence in its place, the presumption naturally arise[s] that
the better evidence is withheld for fraudulent purposes which its
production would expose and defeat. Moreover, the affidavits were
not executed under oath. The rule is that an affiant must sign the
document in the presence of and take his oath before a notary public as
evidence that the affidavit was properly made. Guided by these
principles, the affidavits cannot be assigned any weighty probative
value and are mere scraps of paper the contents of which are
hearsay. Second, on the sales report and order slips, which allegedly
prove that Yung had been charging her food and drinks to Wensha, the
said pieces of evidence do not, however, bear Yung's name thereon or
even her signature. In fact, it does not state anyone's name, except that
of Wensha. Hence, it would simply be capricious to pinpoint, or
impute, on Yung as the author in charging such expenses to Wensha
on the basis of hearsay evidence. Third, while the affidavit of
Wensha's Operations Manager, Princess delos Reyes (delos Reyes),
may have been duly executed under oath, she did not, however,
specify the alleged infractions that Yung committed. If at all, delos
Reyes only made general statements on the alleged complaints against
Yung that were not even substantiated by any other piece of
evidence. Finally, the daily time records (DTRs) of Yung, which
supposedly prove her habitual tardiness, were mere photocopies that
are not even signed by Wensha's authorized representative, thus
suspect, if not violative of the best evidence rule and, therefore,
incompetent evidence. . . . [Emphases appear in the original] HacADE
Finally, after the Private Respondents filed their position paper, they
alleged mistake on the part of their former counsel in stating that Yung
was dismissed on August 31, 2004. Thus, they subsequently moved
for the admission of their rejoinder. Notably, however, the said
rejoinder was dated October 4, 2004, earlier than the date when their
position paper was filed, which was on November 3, 2004. It is also
puzzling that their position paper was dated November 25, 2004,
much later than its date of filing. The irregularities are simply too
glaring to be ignored. Nevertheless, the Private Respondents'
admission of Yung's termination on August 31, 2004 cannot be
retracted. They cannot use the mistake of their counsel as an
excuse considering that the position paper was verified by their
Operations Manager, delos Reyes, who attested to the truth of the
contents therein. 10 [Emphasis supplied]
SO ORDERED. 11
5.1 The following are the reasons and arguments, which are purely
questions of law and some questions of facts, which justify the appeal
by certiorari under Rule 45 of the 1997 Revised Rules of Civil
Procedure, as amended, to this Honorable SUPREME COURT of the
assailed Decision and Resolution, to wit:
The Court finds the LA ruling that states, "[a]bsent any proof
submitted by the complainant, this office finds it more probable that the
complainant was dismissed due to loss of trust and confidence," 20 to be
utterly erroneous as it is contrary to the applicable rules and pertinent
jurisprudence. The onus of proving a valid dismissal rests on the employer,
not on the employee. 21 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. 22
According to the NLRC, "[p]erusal of the entire records show that
complainant left the respondents' premises when she was confronted with the
infractions imputed against her." 23 This information was taken from the
affidavit 24 of Princess Delos Reyes (Delos Reyes) which was dated March
21, 2005, not in Wensha's earlier position paper or pleadings submitted to the
LA. The affidavits 25 of employees attached to Delos Reyes' affidavit were
all dated November 19, 2004 indicating that they were not yet executed when
the complaints against Loreta were supposedly being investigated in August
2004.
It is also noteworthy that Wensha's position paper related that because
of the gossips perpetrated by Loreta, a certain Oliva
Gonzalo (Gonzalo) resigned from Wensha. Because of the incident, Gonzalo,
whose father was a policeman, "reportedly got angry with complainant and
of the management telling her friends at respondent company that she would
retaliate thus creating fear among those concerned." 26 As a result, Loreta
was advised to take a paid leave of absence for one month while Wensha
conducted an investigation.
According to Loreta, however, the reason for her termination was her
aura did not match that of Xu and the work environment at Wensha. Loreta
narrated:
On August 10, 2004 however, complainant was called by respondent
Xu and told her to wait at the lounge area while the latter and a Feng
Shui Master were doing some analysis of the office. After several
hours of waiting, respondent Xu then told complainant that according
to the Feng Shui master her Chinese Zodiac sign is a "mismatch" with
that of the respondents; that complainant should not enter the
administrative office for a month while an altar was to be placed on
the left side where complainant has her table to allegedly correct the
"mismatch" and that it is necessary that offerings and prayers have to
be made and said for about a month to correct the alleged "jinx."
Respondent Xu instructed complainant not to report to the office for a
month with assurance of continued and regular salary. She was
ordered not to seek employment elsewhere and was told to come back
on the 10th of September 2004. 27
Although she was a little confused, Loreta did as she was instructed
and did not report for work for a month. She returned to work on September
10, 2004. This is how Loreta recounted the events of that day:
On September 10, 2004, in the morning, complainant reported to the
office of respondents. As usual, she punched-in her time card and
signed in the logbook of the security guard. When she entered the
administrative office, some of its employees immediately contacted
respondent Xu. Respondent Xu then contacted complainant thru her
mobile phone and told her to leave the administrative office
immediately and instead to wait for him in the dining area.aICHEc
Instead of a termination letter issued, Jiang Xue Qin insisted for the
complainant's resignation. But when complainant stood her ground,
Jian Xue Qin shouted invectives at her and told to leave the office
immediately.
Respondent Xu did not show up but talked to the complainant over the
mobile phone and convinced her likewise to resign from the company
since there is no way to retain her because her aura unbalanced the
area of employment according to the Feng Shui, the Chinese spiritual
art of placement. Hearing this from no less than respondent Xu,
complainant left the office and went straight to this Office and filed
the present case on September 10, 2004. . . . 28
Loreta also alleged that in the afternoon of that day, September 10,
2004, a notice was posted on the Wensha bulletin board that reads:
TO ALL EMPLOYEES OF WENSHA SPA CENTER
More importantly, 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.
Wensha should also have kept records of the investigation conducted while
Loreta was on leave. The law requires that two notices be given to an
employee prior to a valid termination: the first notice is to inform the
employee of the charges against her with a warning that she may be
terminated from her employment and giving her reasonable opportunity
within which to explain her side, and the second notice is the notice to the
employee that upon due consideration of all the circumstances, she is being
terminated from her employment. 30 This is a requirement of due process and
clearly, Loreta did not receive any of those required notices.
We are in accord with the pronouncement of the CA that the
reinstatement of Loreta to her former position is no longer feasible in the
light of the strained relations between the parties. Reinstatement, under the
circumstances, would no longer be practical as it would not be in the interest
of both parties. Under the law and jurisprudence, an illegally dismissed
employee is entitled to two reliefs — backwages and reinstatement, which
are separate and distinct. If reinstatement would only exacerbate the tension
and further ruin the relations of the employer and the employee, or if their
relationship has been unduly strained due to irreconcilable differences,
particularly where the illegally dismissed employee held a managerial or key
position in the company, it would be prudent to order payment of separation
pay instead of reinstatement. 31 In the case of Golden Ace Builders v.
Talde, 32 We wrote:
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. On the one hand, such
payment liberates the employee from what could be a highly
oppressive work environment. On the other, the payment releases the
employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust.
In the case at bench, the CA, upon its own assessment, pronounced
that the relations between petitioners and the respondent have become
strained because of her dismissal anchored on dubious charges. The
respondent has not contested the finding. As she is not insisting on being
reinstated, she should be paid separation pay equivalent to one (1) month
salary for every year of service. 33 The CA, however, failed to decree such
award in the dispositive portion. This should be rectified.
Nevertheless, the Court finds merit in the argument of petitioner Xu
that the CA erred in ruling that he is 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." 34 cEaTHD
PHIL 460-476)
DECISION
BRION, J : p
–––––––––––––
Total P1,240,000.00
=============
To secure the payment of the loan, Pantaleon issued a promissory note 7 that
states:
I, Rogelio S. Pantaleon, hereby acknowledge the receipt of ONE
MILLION TWO HUNDRED FORTY THOUSAND PESOS
(P1,240,000), Philippine Currency, from Mr. Arthur F. Menchavez,
representing a six-month loan payable according to the following
schedule:cACEHI
THE CA RULING
The CA decided the appeal on May 5, 2003. The CA found that the
parties agreed to a 4% monthly interest principally based on the board
resolution that authorized Pantaleon to transact a loan with an approved
interest of not more than 4% per month. The appellate court, however, noted
that the interest of 4% per month, or 48% per annum, was unreasonable and
should be reduced to 12% per annum. The CA affirmed the RTC's finding
that PRISMA was a mere instrumentality of Pantaleon that justified the
piercing of the veil of corporate fiction. Thus, the CA modified the RTC
Decision by imposing a 12% per annum interest, computed from the filing of
the complaint until finality of judgment, and thereafter, 12% from finality
until fully paid. 17
After the CA's denial 18 of their motion for reconsideration, 19 the
petitioners filed the present petition for review on certiorari under Rule 45 of
the Rules of Court.
THE PETITION
The petitioners submit that the CA mistakenly relied on their board
resolution to conclude that the parties agreed to a 4% monthly interest
because the board resolution was not an evidence of a loan or forbearance of
money, but merely an authorization for Pantaleon to perform certain acts,
including the power to enter into a contract of loan. The expressed mandate
of Article 1956 of the Civil Code is that interest due should be stipulated in
writing, and no such stipulation exists. Even assuming that the loan is subject
to 4% monthly interest, the interest covers the six (6)-month period only and
cannot be interpreted to apply beyond it. The petitioners also point out the
glaring inconsistency in the CA Decision, which reduced the interest from 4%
per month or 48% per annum to 12% per annum, but failed to consider that
the amount of P3,526,117.00 that the RTC ordered them to pay includes the
compounded 4% monthly interest.
THE CASE FOR THE RESPONDENT
The respondent counters that the CA correctly ruled that the loan is
subject to a 4% monthly interest because the board resolution is attached to,
and an integral part of, the promissory note based on which the petitioners
obtained the loan. The respondent further contends that the petitioners are
estopped from assailing the 4% monthly interest, since they agreed to pay the
4% monthly interest on the principal amount under the promissory note and
the board resolution.
THE ISSUE
The core issue boils down to whether the parties agreed to the 4%
monthly interest on the loan. If so, does the rate of interest apply to the
6-month payment period only or until full payment of the loan?
OUR RULING
We find the petition meritorious.
Interest due should be
stipulated in writing;
otherwise, 12% per annum
Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith. 20 When the
terms of a contract are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations governs. 21 In such
cases, courts have no authority to alter the contract by construction or to
make a new contract for the parties; a court's duty is confined to the
interpretation of the contract the parties made for themselves without regard
to its wisdom or folly, as the court cannot supply material stipulations or read
into the contract words the contract does not contain. 22 It is only when the
contract is vague and ambiguous that courts are permitted to resort to the
interpretation of its terms to determine the parties' intent. DISEaC
SO ORDERED.
(Prisma Construction & Development Corporation v. Menchavez, G.R. No.
|||
DECISION
CARPIO-MORALES, J : p
Forklift - 1 unit
Drums - 4 units
Regarding the above machines, you may take them out with
you (for your own use and sale) if you want, provided, the value of
such machines is deducted from your and Wako's capital
contributions, which will be paid to you.
Kindly let me know of your comments on all the above,
soonest.
xxx xxx xxx 5 (Emphasis and underscoring supplied)
Respondents cannot now argue that they did not intend for
Yamamoto to rely upon the Letter. That was the purpose of the
Letter to begin with. Petitioner[s] in fact, relied upon said Letter and
such reliance was further strengthened during their meeting at the
Manila Peninsula.
To sanction respondents' attempt to evade their obligation
would be to sanction the perpetration of fraud and injustice against
petitioner. 32 (Underscoring supplied)
It bears noting, however, that the aforementioned paragraph 12 of the
letter is followed by a request for Yamamoto to give his "comments on all the
above, soonest." 33
What was thus proffered to Yamamoto was not a promise, but a mere
offer, subject to his acceptance. Without acceptance, a mere offer produces
no obligation. 34
Thus, under Article 1181 of the Civil Code, "[i]n conditional
obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event which
constitutes the condition." In the case at bar, there is no showing of
compliance with the condition for allowing Yamamoto to take the
machineries and equipment, namely, his agreement to the deduction of their
value from his capital contribution due him in the buy-out of his interests in
NLII. Yamamoto's allegation that he agreed to the condition 35 remained just
that, no proof thereof having been presented.
The machineries and equipment, which comprised Yamamoto's
investment in NLII, 36 thus remained part of the capital property of the
corporation. 37
It is settled that the property of a corporation is not the property of its
stockholders or members. 38 Under the trust fund doctrine, the capital stock,
property, and other assets of a corporation are regarded as equity in trust for
the payment of corporate creditors which are preferred over the stockholders
in the distribution of corporate assets. 39 The distribution of corporate assets
and property cannot be made to depend on the whims and caprices of the
stockholders, officers, or directors of the corporation unless the
indispensable conditions and procedures for the protection of corporate
creditors are followed. 40
WHEREFORE, the petition is DENIED.
Costs against petitioner.
SO ORDERED.
(Yamamoto v. Nishino Leather Industries, Inc., G.R. No. 150283, [April 16,
|||
SYLLABUS
BUENA, J : p
Petitioner disputes before us through the instant petition for review on certiorari,
the decision 1 of the Court of Appeals promulgated on 18 April 1996, in CA-GR
SP No. 38617, which nullified and set aside the orders dated 04 July 1995 2, 12
September 1995 3 and 15 September 1995 4 of the Regional Trial Court of
Quezon City, Branch 93, sitting as a probate court.
Petitioner Rufina Luy Lim is the surviving spouse of the late Pastor Y. Lim
whose estate is the subject of probate proceedings in Special Proceedings
Q-95-23334, entitled, "In Re: Intestate Estate of Pastor Y. Lim Rufina Luy
Lim, represented by George Luy, Petitioner".
Private respondents Auto Truck Corporation, Alliance Marketing Corporation,
Speed Distributing, Inc., Active Distributing, Inc. and Action Company are
corporations formed, organized and existing under Philippine laws and which
owned real properties covered under the Torrens system.
On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner, as surviving
spouse and duly represented by her nephew George Luy, filed on 17 March 1995,
a joint petition 5 for the administration of the estate of Pastor Y. Lim before the
Regional Trial Court of Quezon City.
Private respondent corporations, whose properties were included in the
inventory of the estate of Pastor Y. Lim, then filed a motion 6 for the lifting of lis
pendens and motion 7 for exclusion of certain properties from the estate of the
decedent.
In an order 8 dated 08 June 1995, the Regional Trial Court of Quezon City,
Branch 93, sitting as a probate court, granted the private respondents' twin
motions, in this wise:
"Wherefore, the Register of Deeds of Quezon City is hereby ordered
to lift, expunge or delete the annotation of lis pendenson Transfer
Certificates of Title Nos. 116716, 116717, 116718, 116719 and 5182
and it is hereby further ordered that the properties covered by the same
titles as well as those properties by (sic) Transfer Certificate of Title
Nos. 613494, 363123, 236236 and 263236 are excluded from these
proceedings.
SO ORDERED."
"3. The late Pastor Y. Lim personally owned during his lifetime the
following business entities, to wit:
BF Homes,
Parañaque,
Metro Manila.
xxx xxx xxx
Aguinaldo Highway,
Bacoor, Cavite.
xxx xxx xxx
Quezon City.
xxx xxx xxx
Active Distributors, Inc. Block 3, Lot 6, Dacca BF
Homes, Parañaque,
Metro Manila.
xxx xxx xxx
or
Valenzuela Bulacan.
"3.1 Although the above business entities dealt and engaged in
business with the public as corporations, all their capital, assets and
equity were however, personally owned by the late Pastor Y Lim.
Hence the alleged stockholders and officers appearing in the
respective articles of incorporation of the above business entities were
mere dummies of Pastor Y. Lim, and they were listed therein only for
purposes of registration with the Securities and Exchange
Commission.
"4. Pastor Lim, likewise, had Time, Savings and Current Deposits
with the following banks: (a) Metrobank, Grace Park, Caloocan City
and Quezon Avenue, Quezon City Branches and (b) First Intestate
Bank (formerly Producers Bank), Rizal Commercial Banking
Corporation and in other banks whose identities are yet to be
determined.
"5. That the following real properties, although registered in the name
of the above entities, were actually acquired by Pastor Y. Lim during
his marriage with petitioner, to wit:
Metro Manila
Copies of the above-mentioned Transfer Certificate of Title and/or
Tax Declarations are hereto attached as Annexes "C" to "W".
"7. The aforementioned properties and/or real interests left by the late
Pastor Y. Lim, are all conjugal in nature, having been acquired by him
during the existence of his marriage with petitioner. cda
"8. There are other real and personal properties owned by Pastor Y.
Lim which petitioner could not as yet identify. Petitioner, however
will submit to this Honorable Court the identities thereof and the
necessary documents covering the same as soon as possible."
On 04 July 1995, the Regional Trial Court acting on petitioner's motion issued an
order 10 , thus:
"Wherefore, the order dated 08 June 1995 is hereby set aside and the
Registry of Deeds of Quezon City is hereby directed to reinstate the
annotation of lis pendens in case said annotation had already been
deleted and/or cancelled said TCT Nos. 116716, 116717, 116718,
116719 and 51282.
SO ORDERED."
SO ORDERED."
SO ORDERED."
Private respondent filed a special civil action for certiorari 14 , with an urgent
prayer for a restraining order or writ of preliminary injunction, before the Court
of Appeals questioning the orders of the Regional Trial Court, sitting as a
probate court.
On 18 April 1996, the Court of Appeals, finding in favor of herein private
respondents, rendered the assailed decision 15 , the decretal portion of which
declares:
"Wherefore, premises considered, the instant special civil action
for certiorari is hereby granted, The impugned orders issued by
respondent court on July 4, 1995 and September 12, 1995 are hereby
nullified and set aside. The impugned order issued by respondent on
September 15, 1995 is nullified insofar as petitioner corporations"
bank accounts and records are concerned.
SO ORDERED."
(4) In all matters of probate, both testate and intestate, where the gross
value of the estate exceeds One Hundred Thousand Pesos (P100,000)
or, in probate matters in Metro Manila, where such gross value
exceeds Two Hundred Thousand Pesos (P200,000);
Simply put, the determination of which court exercises jurisdiction over matters
of probate depends upon the gross value of the estate of the decedent.
As to the power and authority of the probate court, petitioner relies heavily on
the principle that a probate court may pass upon title to certain properties, albeit
provisionally, for the purpose of determining whether a certain property should
or should not be included in the inventory.
In a litany of cases, We defined the parameters by which the court may extend its
probing arms in the determination of the question of title in probate proceedings.
This Court, in PASTOR, JR. vs. COURT OF APPEALS, 18 held:
Petitioner, in the present case, argues that the parcels of land covered under the
Torrens system and registered in the name of private respondent corporations
should be included in the inventory of the estate of the decedent Pastor Y. Lim,
alleging that after all the determination by the probate court of whether these
properties should be included or not is merely provisional in nature, thus, not
conclusive and subject to a final determination in a separate action brought for
the purpose of adjudging once and for all the issue of title.
Yet, under the peculiar circumstances, where the parcels of land are registered in
the name of private respondent corporations, the jurisprudence pronounced
in BOLISAY vs. ALCID 24 is of great essence and finds applicability, thus:
"It does not matter that respondent-administratrix has evidence
purporting to support her claim of ownership, for, on the other hand,
petitioners have a Torrens title in their favor, which under the law is
endowed with incontestability until after it has been set aside in the
manner indicated in the law itself, which, of course, does not include,
bringing up the matter as a mere incident in special proceedings for the
settlement of the estate of deceased persons. . . . "
A perusal of the records would reveal that no strong compelling evidence was
ever presented by petitioner to bolster her bare assertions as to the title of the
deceased Pastor Y. Lim over the properties. Even so, P.D. 1529, otherwise
known as, "The Property Registration Decree", proscribes collateral attack on
Torrens Title, hence:
xxx xxx xxx
In CUIZON vs. RAMOLETE, where similarly as in the case at bar, the property
subject of the controversy was duly registered under the Torrens system, We
categorically stated:
". . . Having been apprised of the fact that the property in question was
in the possession of third parties and more important, covered by a
transfer certificate of title issued in the name of such third parties, the
respondent court should have denied the motion of the respondent
administrator and excluded the property in question from the
inventory of the property of the estate. It had no authority to deprive
such third persons of their possession and ownership of the
property. . . . "
cdtai
Inasmuch as the real properties included in the inventory of the estate of the late
Pastor Y. Lim are in the possession of and are registered in the name of private
respondent corporations, which under the law possess a personality separate and
distinct from their stockholders, and in the absence of any cogency to shred the
veil of corporate fiction, the presumption of conclusiveness of said titles in favor
of private respondents should stand undisturbed.
Accordingly, the probate court was remiss in denying private respondents'
motion for exclusion. While it may be true that the Regional Trial Court, acting
in a restricted capacity and exercising limited jurisdiction as a probate court, is
competent to issue orders involving inclusion or exclusion of certain properties
in the inventory of the estate of the decedent, and to adjudge, albeit,
provisionally the question of title over properties, it is no less true that such
authority conferred upon by law and reinforced by jurisprudence, should be
exercised judiciously, with due regard and caution to the peculiar circumstances
of each individual case.
Notwithstanding that the real properties were duly registered under the Torrens
system in the name of private respondents, and as such were to be afforded the
presumptive conclusiveness of title, the probate court obviously opted to shut its
eyes to this gleamy fact and still proceeded to issue the impugned orders.
By its denial of the motion for exclusion, the probate court in effect acted in utter
disregard of the presumption of conclusiveness of title in favor of private
respondents. Certainly, the probate court through such brazen act transgressed
the clear provisions of law and infringed settled jurisprudence on this matter.
Moreover, petitioner urges that not only the properties of private respondent
corporations are properly part of the decedent's estate but also the private
respondent corporations themselves. To rivet such flimsy contention, petitioner
cited that the late Pastor Y. Lim during his lifetime, organized and
wholly-owned the five corporations, which are the private respondents in the
instant case. 25 Petitioner thus attached as Annexes "F" 26 and "G" 27 of the
petition for review affidavits executed by Teresa Lim and Lani Wenceslao which
among others, contained averments that the incorporators of Uniwide
Distributing, Inc. included on the list had no actual participation in the
organization and incorporation of the said corporation. The affiants added that
the persons whose names appeared on the articles of incorporation of Uniwide
Distributing, Inc., as incorporators thereof, are mere dummies since they have
not actually contributed any amount to the capital stock of the corporation and
have been merely asked by the late Pastor Y. Lim to affix their respective
signatures thereon.
It is settled that a corporation is clothed with personality separate and distinct
from that of the persons composing it. It may not generally be held liable for that
of the persons composing it. It may not be held liable for the personal
indebtedness of its stockholders or those of the entities connected with it. 28
Rudimentary is the rule that a corporation is invested by law with a personality
distinct and separate from its stockholders or members. In the same vein, a
corporation by legal fiction and convenience is an entity shielded by a protective
mantle and imbued by law with a character alien to the persons comprising it.
Nonetheless, the shield is not at all times invincible. Thus, in FIRST
PHILIPPINE INTERNATIONAL BANK vs. COURT OF APPEALS 29 , We
enunciated:
". . . When the fiction is urged as a means of perpetrating a fraud or an
illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, the achievement or perfection of a
monopoly or generally the perpetration of knavery or crime, the veil
with which the law covers and isolates the corporation from the
members or stockholders who compose it will be lifted to allow for its
consideration merely as an aggregation of individuals. . . . "
Piercing the veil of corporate entity requires the court to see through the
protective shroud which exempts its stockholders from liabilities that ordinarily,
they could be subject to, or distinguishes one corporation from a seemingly
separate one, were it not for the existing corporate fiction. 30
The corporate mask may be lifted and the corporate veil may be pierced when a
corporation is just but the alter ego of a person or of another corporation. Where
badges of fraud exist, where public convenience is defeated; where a wrong is
sought to be justified thereby, the corporate fiction or the notion of legal entity
should come to naught. 31
Further, 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 right; and (3) The
aforesaid control and breach of duty must proximately cause the injury or unjust
loss complained of. The absence of any of these elements prevent "piercing the
corporate veil." 32
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 a sufficient reason
for disregarding the fiction of separate corporate personalities. 33
Moreover, to disregard the separate juridical personality of a corporation, the
wrong-doing must be clearly and convincingly established. It cannot be
presumed. 34
Granting arguendo that the Regional Trial Court in this case was not merely
acting in a limited capacity as a probate court, petitioner nonetheless failed to
adduce competent evidence that would have justified the court to impale the veil
of corporate fiction. Truly, the reliance reposed by petitioner on the affidavits
executed by Teresa Lim and Lani Wenceslao is unavailing considering that the
aforementioned documents possess no weighty probative value pursuant to the
hearsay rule. Besides it is imperative for us to stress that such affidavits are
inadmissible in evidence inasmuch as the affiants were not at all presented
during the course of the proceedings in the lower court. To put it differently, for
this Court to uphold the admissibility of said documents would be to relegate
from Our duty to apply such basic rule of evidence in a manner consistent with
the law and jurisprudence.
Our pronouncement in PEOPLE BANK AND TRUST COMPANY
vs. LEONIDAS 35 finds pertinence:
"Affidavits are classified as hearsay evidence since they are not
generally prepared by the affiant but by another who uses his own
language in writing the affiant's statements, which may thus be either
omitted or misunderstood by the one writing them. Moreover, the
adverse party is deprived of the opportunity to cross-examine the
affiants. For this reason, affidavits are generally rejected for being
hearsay, unless the affiant themselves are placed on the witness stand
to testify thereon."
prLL
As to the order 36 of the lower court, dated 15 September 1995, the Court of
Appeals correctly observed that the Regional Trial Court, Branch 93 acted
without jurisdiction in issuing said order; The probate court had no authority to
demand the production of bank accounts in the name of the private respondent
corporations.
WHEREFORE, in view of the foregoing disquisitions, the instant petition is
hereby DISMISSED for lack of merit and the decision of the Court of Appeals
which nullified and set aside the orders issued by the Regional Trial Court,
Branch 93, acting as a probate court, dated 04 July 1995 and 12 September 1995
is AFFIRMED.
SO ORDERED.
(Lim v. Court of Appeals, G.R. No. 124715, [January 24, 2000], 380 PHIL
|||
60-78)
Petitioner Aida M. Posadas and her two minor children co-owned a 1.6 hectare
property in Sucat, Muntinlupa, which was occupied by squatters. Petitioner
Posadas entered into negotiations with private respondent Jaime T. Bravo
regarding the development of the said property into a residential subdivision. On
May 3, 1989, she authorized respondent Bravo to negotiate with the squatters to
leave the said property. Seven months later, petitioner Posadas and her two
children assigned the said property to petitioner Luxuria Homes, Inc. wherein
respondent Bravo signed as one of the witnesses to the execution of the Deed of
Assignment. However, sometime in 1992, the relationship of petitioner Posadas
and respondent Bravo turned sour when the former could not accept the
proposed management contracts of the latter to develop the said property into a
residential subdivision. Consequently, in September 1992, private respondents
James Builder Construction and Jaime T. Bravo instituted a complaint for
specific performance before the trial court against petitioners Posadas and
Luxuria Homes, Inc. On September 27, 1993, the trial court declared petitioner
Posadas in default and allowed private respondents to present their evidence
ex-parte. On March 8, 1994, it ordered petitioner Posadas, jointly and in solidum
with Luxuria Homes, Inc. to pay private respondents damages and to execute the
management contract. The Court of Appeals modified the decision of the trial
court by deleting the award of moral damages and reducing the award on
exemplary damages.
Hence, this petition.
The Court ruled that the burden of proof of the damages suffered is on the party
claiming the same. It is his duty to present evidence to support his claim for
actual damages.
On the other hand, since private respondents failed to show that petitioner
Luxuria Homes, Inc., was a party to any of the supposed transactions, not even to
the agreement to negotiate with and relocate the squatters, it cannot be held
liable, nay jointly and in solidum, to pay private respondents.
Further, the parties are bound to fulfill the stipulations in a contract only upon its
perfection. At anytime prior to the perfection of a contract, unaccepted offers
and proposals remain as such and cannot be considered as binding commitments;
hence not demandable.
Petitioner Aida M. Posadas was ordered to pay private respondents the amount
of P435,000.00 as balance for the preparation of the architectural design, site
development plan and survey. All other claims were denied for lack of merit. IEcaHS
SYLLABUS
MARTINEZ, J : p
This petition for review assails the decision of the respondent Court of Appeals
dated March 15, 1996, 1 which affirmed with modification the judgment of
default rendered by the Regional Trial Court of Muntinlupa, Branch 276, in Civil
Case No. 92-2592 granting all the reliefs prayed for in the complaint of private
respondents James Builder Construction and/or Jaime T. Bravo. LLphil
On September 27, 1993, the trial court declared petitioner Posadas in default and
allowed the private respondents to present their evidence ex-parte. On March 8,
1994, it ordered petitioner Posadas, jointly and in solidum with petitioner
Luxuria Homes, Inc., to pay private respondents as follows:
"1. . . . the balance of the payment for the various services performed
by Plaintiff with respect to the land covered by TCT NO. 167895
previously No. 158290 in the total amount of P1,708,489.00.
Petitioners' motion for reconsideration was denied, prompting the filing of this
petition for review before this Court.
On January 15, 1997, the Third Division of this Court denied due course to this
petition for failing to show convincingly any reversible error on the part of the
Court of Appeals. This Court however deleted the grant of exemplary damages
and attorney's fees. The Court also reduced the trial court's award of actual
damages from P1,500,000.00 to P500,000.00 reasoning that the grant should not
exceed the amount prayed for in the complaint. In the prayer in the complaint
respondents asked for actual damages in the amount of P500,000.00 only.
Still feeling aggrieved with the resolution of this Court, petitioners filed a motion
for reconsideration. On March 17, 1997, this Court found merit in the petitioners'
motion for reconsideration and reinstated this petition for review.
From their petition for review and motion for reconsideration before this Court,
we now synthesize the issues as follows:
1. Were private respondents able to present ex-parte sufficient evidence to
substantiate the allegations in their complaint and entitle them to their prayers?
2. Can petitioner Luxuria Homes, Inc., be held liable to private respondents for
the transactions supposedly entered into between petitioner Posadas and private
respondents?
3. Can petitioners be compelled to enter into a management contract with private
respondents?
Petitioners who were declared in default assert that the private respondents who
presented their evidence ex-parte nonetheless utterly failed to substantiate the
allegations in their complaint and as such cannot be entitled to the reliefs prayed
for.LLjur
As regards the contracts for the ejectment of squatters and fencing, we believe
however that respondents failed to show proof that they actually fulfilled their
commitments therein. Aside from the bare testimony of respondent Bravo, no
other evidence was presented to show that all the squatters were ejected from the
property. Respondent Bravo failed to show how many shanties or structures
were actually occupying the property before he entered the same, to serve as
basis for concluding whether the task was finished or not. His testimony alone
that he successfully negotiated for the ejectment of all the squatters from the
property will not suffice.
Likewise, in the case of fencing, there is no proof that it was accomplished as
alleged. Respondent Bravo claims that he finished sixty percent (60%) of the
fencing project but he failed to present evidence showing the area sought to be
fenced and the actual area fenced by him. We therefore have no basis to
determining the veracity respondent's allegations. We cannot assume that the
said services rendered for it will be unfair to require petitioner to pay the full
amount claimed in case the respondents obligations were not completely
fulfilled.
For respondents' failure to show proof of accomplishment of the aforesaid
services, their claims cannot be granted. In P.T . Cerna Corp. v. Court of
Appeals, 10 we ruled that in civil cases, the burden of proof rests upon the party
who, as determined by the pleadings or the nature of the case, asserts the
affirmative of an issue. In this case the burden lies on the complainant, who is
duty bound to prove the allegations in the complaint. As this Court has held, he
who alleges a fact has the burden of proving it and A MERE ALLEGATION IS
NOT EVIDENCE.
And the rules do not change even if the defendant is declared in default. In the
leading case of Lopez v. Mendezona, 11 this Court ruled that after entry of
judgment in default against a defendant who has neither appeared nor answered,
and before final judgment in favor of the plaintiff, the latter must establish by
competent evidence all the material allegations of his complaint upon which he
bases his prayer for relief. In De los Santos v.De la Cruz, 12 this Court declared
that a judgment by default against a defendant does not imply a waiver of rights
except that of being heard and of presenting evidence in his favor. It does not
imply admission by the defendant of the facts and causes of action of the plaintiff,
because the codal section requires the latter to adduce his evidence in support of
his allegations as an indispensable condition before final judgment could be
given in his favor. Nor could it be interpreted as an admission by the defendant
that the plaintiff's causes of action finds support in the law or that the latter is
entitled to the relief prayed for.
We explained the rule in judgments by default in Pascua v. Florendo, 13 where
we said that nowhere is it stated that the complainants are automatically entitled
to the relief prayed for, once the defendants are declared in default. Favorable
relief can be granted only after the court has ascertained that the evidence offered
and the facts proven by the presenting party warrant the grant of the same.
Otherwise it would be meaningless to require presentation of evidence if
everytime the other party is declared in default, a decision would automatically
be rendered in favor of the non-defaulting party and exactly according to the
tenor of his prayer. In Lim Tanhu v. Ramolete 14 we elaborated and said that a
defaulted defendant is not actually thrown out of court. The rules see to it that
any judgment against him must be in accordance with law. The evidence to
support the plaintiff's cause is, of course, presented in his absence, but the court
is not supposed to admit that which is basically incompetent. Although the
defendant would not be in a position to object, elementary justice requires that
only legal evidence should be considered against him. If the evidence presented
should not be sufficient to justify a judgment for the plaintiff, the complaint must
be dismissed. And if an unfavorable judgment should be justifiable, it cannot
exceed the amount or be different in kind from what is prayed for in the
complaint.
The prayer for actual damages in the amount of P500,000.00, supposedly for the
bunkhouse/warehouse, hollow-block factory, lumber, cement, guard, etc., which
the trial court granted and even increased to P1,500,000.00, and which this Court
would have rightly reduced to the amount prayed for in the complaint, was not
established, as shown upon further review of the record. No receipts or vouchers
were presented by private respondents to show that they actually spent the
amount. In Salas v. Court of Appeals, 15 we said that the burden of proof of the
damages suffered is on the party claiming the same. It his duty to present
evidence to support his claim for actual damages. If he failed to do so, he has
only himself to blame if no award for actual damages is handed down.
In fine, as we declared in PNOC Shipping & Transport Corp. v. Court of
Appeals, 16 basic is the rule that to recover actual damages, the amount of loss
must not only be capable of proof but must actually be proven with reasonable
degree of certainty, premised upon competent proof or best evidence obtainable
of the actual amount thereof.
We go to the second issue of whether Luxuria Homes, Inc., was a party to the
transactions entered into by petitioner Posadas and private respondents and thus
could be held jointly and severally with petitioner Posadas. Private respondents
contend that petitioner Posadas surreptitiously formed Luxuria Homes, Inc., and
transferred the subject parcel of land to it to evade payment and defraud creditors,
including private respondents. This allegation does not find support in the
evidence on record.
On the contrary we hold that respondent Court of Appeals committed a
reversible error when it upheld the factual finding of the trial court that
petitioners' liability was aggravated by the fact that Luxuria Homes, Inc., was
formed by petitioner Posadas after demand for payment had been made,
evidently for her to evade payment of her obligation, thereby showing that the
transfer of her property to Luxuria Homes, Inc., was in fraud of creditors.
We easily glean from the record that private respondents sent demand letters on
21 August 1991 and 14 September 1991, or more than a year and a half after the
execution of the Deed of Assignment on 11 December 1989, and the issuance of
the Articles of Incorporation of petitioner Luxuria Homes on 26 January 1990.
And, the transfer was made at the time the relationship between petitioner
Posadas and private respondents was supposedly very pleasant. In fact the Deed
of Assignment dated 11 December 1989 and the Articles of Incorporation of
Luxuria Homes, Inc., issued 26 January 1990 were both signed by respondent
Bravo himself as witness. It cannot be said then that the incorporation of
petitioner Luxuria Homes and the eventual transfer of the subject property to it
were in fraud of private respondents as such were done with the full knowledge
of respondent Bravo himself.
Besides petitioner Posadas is not the majority stockholder of petitioner Luxuria
Homes, Inc., as erroneously stated by the lower court. The Articles of
Incorporation of petitioner Luxuria Homes, Inc., clearly show that petitioner
Posadas owns approximately 33% only of the capital stock. Hence petitioner
Posadas cannot be considered as an alter ego of petitioner Luxuria Homes, Inc.
To disregard the separate juridical personality of a corporation, the wrongdoing
must be clearly and convincingly established. It cannot be presumed. This is
elementary. Thus in Bayer-Roxas v. Court of Appeals, 17 we said that the
separate personality of the corporation may be disregarded only when the
corporation is used as a cloak or cover for fraud or illegality, or to work injustice,
or where necessary for the protection of the creditors. Accordingly in Del
Rosario v. NLRC, 18 where the Philsa International Placement and Services Corp.
was organized and registered with the POEA in 1981, several years before the
complainant was filed a case in 1985, we held that this cannot imply fraud.
Obviously in the instant case, private respondents failed to show proof that
petitioner Posadas acted in bad faith. Consequently since private respondents
failed to show that petitioner Luxuria Homes, Inc., was a party to any of the
supposed transactions, not even to the agreement to negotiate with and relocate
the squatters, it cannot be held liable, nay jointly and in solidum, to pay private
respondents. In this case since it was petitioner Aida M. Posadas who contracted
respondent Bravo to render the subject services, only she is liable to pay the
amounts adjudged herein.
We now resolve the third and final issue. Private respondents urge the court to
compel petitioners to execute a management contract with them on the basis of
the authorization letter dated May 3, 1989. The full text of Exh. "D" reads:
"I hereby certify that we have duly authorized the bearer, Engineer
Bravo to negotiate, in our behalf, the ejectment of squatters from our
property of 1.6 hectares, more or less, in Sucat, Muntinlupa. This
authority is extended to him as the representative of the Managers,
under our agreement for them to undertake the development of said
area and the construction of housing units intended to convert the land
into a first class subdivision."
SO ORDERED.
(Luxuria Homes, Inc. v. Court of Appeals, G.R. No. 125986, [January 28,
|||
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Synthetic Graphite
Electrode
Lance Pipes
Tundish Bricks
1798 11-21-80 02-19-81 P835,526.25 5 cases spare parts for
CCM
Bricks
Equipment 5
B.
THERE IS NO MERIT IN PETITIONER'S
CONTENTION THAT EXCESSIVE DELAY
HAS MARRED THE CONDUCT OF THE
PRELIMINARY INVESTIGATION OF THE
CASE, JUSTIFYING ITS DISMISSAL. TcHCDI
C.
THE PRESENT SPECIAL CIVIL ACTION FOR
CERTIORARI, PROHIBITION AND
MANDAMUS IS NOT THE PROPER MODE
OF REVIEW FROM THE RESOLUTION OF
THE DEPARTMENT OF JUSTICE. THE
PRESENT PETITION MUST THEREFORE BE
DISMISSED. 21
On April 22, 2004, the CA rendered judgment dismissing
the petition for lack of merit, and on procedural grounds.
On the procedural issue, it ruled that (a) the certification of
non-forum shopping executed by petitioner and
incorporated in the petition was defective for failure to
comply with the first two of the three-fold undertakings
prescribed in Rule 7, Section 5 of the Revised Rules of
Civil Procedure; and (b) the petition for certiorari,
prohibition and mandamus was not the proper remedy of
the petitioner.
On the merits of the petition, the CA ruled that the
assailed resolutions of the Secretary of Justice were
correctly issued for the following reasons: (a) petitioner,
being the Senior Vice-President of PBMI and the
signatory to the trust receipts, is criminally liable for
violation of P.D. No. 115; (b) the issue raised by the
petitioner, on whether he violated P.D. No. 115 by his
actuations, had already been resolved and laid to rest
in Allied Bank Corporation v. Ordoñez; 22 and (c)
petitioner was estopped from raising the City Prosecutor's
delay in the final disposition of the preliminary
investigation because he failed to do so in the DOJ.
Thus, petitioner filed the instant petition, alleging that:
I
THE COURT OF APPEALS ERRED WHEN IT
DISMISSED THE PETITION ON THE
GROUND THAT THE CERTIFICATION OF
NON-FORUM SHOPPING INCORPORATED
THEREIN WAS DEFECTIVE.
II
THE COURT OF APPEALS ERRED WHEN IT
RULED THAT NO GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WAS
COMMITTED BY THE SECRETARY OF
JUSTICE IN COMING OUT WITH THE
ASSAILED RESOLUTIONS. 23
The Court will delve into and resolve the issues seriatim.
The petitioner avers that the CA erred in dismissing his
petition on a mere technicality. He claims that the rules of
procedure should be used to promote, not frustrate,
substantial justice. He insists that the Rules of Court
should be construed liberally especially when, as in this
case, his substantial rights are adversely affected; hence,
the deficiency in his certification of non-forum shopping
should not result in the dismissal of his petition.
The Office of the Solicitor General (OSG) takes the
opposite view, and asserts that indubitably, the certificate
of non-forum shopping incorporated in the petition before
the CA is defective because it failed to disclose essential
facts about pending actions concerning similar issues and
parties. It asserts that petitioner's failure to comply with
the Rules of Court is fatal to his petition. The OSG cited
Section 2, Rule 42, as well as the ruling of this Court
in Melo v. Court of Appeals. 24
We agree with the ruling of the CA that the certification of
non-forum shopping petitioner incorporated in his petition
before the appellate court is defective. The certification
reads:
It is further certified that as far as this Petition is
concerned, no action or proceeding in the
Supreme Court, the Court of Appeals or
different divisions thereof, or any tribunal or
agency.
It is finally certified that if the affiant should
learn that a similar action or proceeding has
been filed or is pending before the Supreme
Court, the Court of Appeals, or different
divisions thereof, of any other tribunal or
agency, it hereby undertakes to notify this
Honorable Court within five (5) days from such
notice. 25
Under Section 1, second paragraph of Rule 65 of the
Revised Rules of Court, the petition should be
accompanied by a sworn certification of non-forum
shopping, as provided in the third paragraph of Section 3,
Rule 46 of said Rules. The latter provision reads in part:
SEC. 3.Contents and filing of petition; effect of
non-compliance with requirements. — The
petition shall contain the full names and actual
addresses of all the petitioners and
respondents, a concise statement of the
matters involved, the factual background of the
case and the grounds relied upon for the relief
prayed for.
xxx xxx xxx
The petitioner shall also submit together with
the petition a sworn certification that he has not
theretofore commenced any other action
involving the same issues in the Supreme Court,
the Court of Appeals or different divisions
thereof, or any other tribunal or agency; if there
is such other action or proceeding, he must
state the status of the same; and if he should
thereafter learn that a similar action or
proceeding has been filed or is pending before
the Supreme Court, the Court of Appeals, or
different divisions thereof, or any other tribunal
or agency, he undertakes to promptly inform
the aforesaid courts and other tribunal or
agency thereof within five (5) days
therefrom. . . .
Compliance with the certification against forum shopping
is separate from and independent of the avoidance of
forum shopping itself. The requirement is mandatory. The
failure of the petitioner to comply with the foregoing
requirement shall be sufficient ground for the dismissal of
the petition without prejudice, unless otherwise
provided. 26
Indubitably, the first paragraph of petitioner's certification
is incomplete and unintelligible. Petitioner failed to certify
that he "had not heretofore commenced any other action
involving the same issues in the Supreme Court, the Court
of Appeals or the different divisions thereof or any other
tribunal or agency" as required by paragraph 4, Section 3,
Rule 46 of the Revised Rules of Court.
We agree with petitioner's contention that the certification
is designed to promote and facilitate the orderly
administration of justice, and therefore, should not be
interpreted with absolute literalness. In his works on the
Revised Rules of Civil Procedure, former Supreme Court
Justice Florenz Regalado states that, with respect to the
contents of the certification which the pleader may
prepare, the rule of substantial compliance may be
availed of. 27 However, there must be a special
circumstance or compelling reason which makes the strict
application of the requirement clearly unjustified. The
instant petition has not alleged any such extraneous
circumstance. Moreover, as worded, the certification
cannot even be regarded as substantial compliance with
the procedural requirement. Thus, the CA was not
informed whether, aside from the petition before it,
petitioner had commenced any other action involving the
same issues in other tribunals. DcCIAa
151-178)
Francisco B. Gonzalez and Ligon Solis Ilao Law Firm for petitioner.
The Solicitor General for respondents.
SYLLABUS
CHICO-NAZARIO, J : p
This is a special civil action for certiorari under Rule 65 of the Rules of Court,
with a prayer for preliminary injunction and/or temporary restraining order
assailing the Resolution 1 dated 18 August 2003 of the Third Division of the
Sandiganbayan dismissing the Motion for Re-determination of Existence of
Probable Cause of Gregorio Singian, Jr. in Criminal Cases No. 26297-26314 and
its Order dated 24 October 2003 denying his motion for reconsideration.
The facts giving rise to the present petition are as follows:
Atty. Orlando L. Salvador was Presidential Commission On Good Government
Consultant on detail with the Presidential Ad Hoc Committee on Behest Loans
(Committee). 2 He was also the coordinator of the Technical Working Group
composed of officers and employees of government financing institutions to
examine and study the reports and recommendations of the Asset Privatization
Trust relating to loan accounts in all government financing institutions. 3 Among
the accounts acted upon by the Committee were the loans granted to Integrated
Shoe, Inc. (ISI) by the Philippine National Bank (PNB). 4
It would appear that on 18 January 1972, ISI applied for a five-year confirmed
irrevocable deferred letter of credit amounting to US$2,500,000.00
(P16,287,500.00) to finance its purchase of a complete line of machinery and
equipment. The letter of credit was recommended to the PNB Board of Directors
by then Senior Vice President, Mr. Constantino Bautista.
On 27 January 1972, the PNB approved the loan, subject to certain
stipulations. 5 The said letter of credit was to be secured by the following
collaterals: a) a second mortgage on 10,367-square meter lot under Transfer
Certificate of Title No. 218999 with improvements, machinery and equipment; b)
machinery and equipment to be imported under the subject letter of credit; and c)
assignment of US$0.50 per pair of shoes of ISI's export sales. It was further
subjected to the following pertinent conditions: a) that the letter of credit be
subject to joint and several signatures of Mr. Francisco J. Teodoro, Mrs. Leticia
T. Teodoro, Marfina T. Singian, Tomas Teodoro, and Gregorio Singian, Jr.; b)
that ISI, which has a paid-up capital amounting to P1,098,750.00 as of January
1972, shall increase its authorized capital to P5,000,000.00, and in the event that
cash receipts do not come up to the projections, or as may be required by the
bank, ISI will further increase its capitalization and the present stockholders will
subscribe to their present holdings; and c) that ISI shall submit other collaterals
in case the appraised value of the new machinery and equipment be insufficient.
ISI was further extended the following subsequent loan accommodations:
1. P1,500,000.00 on 10 February 1972 for the purchase of
raw materials;
2. P1,000,000.00 on 18 January 1973 as export advance;
3. P1,500,000.00 on 21 March 1973 as export advance;
4. P600,000.00 on 06 March 1974 as credit line;
5. P2,500,000.00 renewed on 15 December 1976;
6. P5,000,000.00 on 19 November 1978 as export
advance;
7. P1,500,000.00 on 04 August 1980 as export advance;
and
8. P7,000,000.00 on 15 December 1980 also as an export
advance. 6
The Committee found that the loans extended to ISI bore characteristics of
behest loans specifically for not having been secured with sufficient collaterals
and obtained with undue haste. 7
As a result, Atty. Orlando Salvador filed with the Office of the Ombudsman a
sworn complaint dated 20 March 1996, for violation of Section 3, paragraphs (e)
and (g), of Republic Act No. 3019, as amended, against the following: Panfilo
Domingo, former PNB President, Constantino Bautista, former PNB Senior
Vice President, Domingo Ingco, former member of the PNB Board of Directors,
John Does, former members of the PNB Board of Directors, Francisco Teodoro,
President of ISI, Leticia Teodoro, Vice President of ISI, Marfina Singian,
Incorporator of ISI, Tomas Teodoro, General Manager of ISI, and Gregorio
Singian, Jr., Executive Vice President of ISI. The complaint, docketed as
OMB-0-96-0967, was assigned to Graft Investigation Officer I Atty. Edgar R.
Navales (Investigator Navales) of the Evaluation and Preliminary Investigation
Bureau (EPIB) for investigation. IHcTDA
Perusal of the record shows that except for the allegations that the
public respondents herein have illegally entered into a contract with
ISI and that the respondents have given unwarranted benefits to ISI
through manifest partiality, evident bad faith or gross inexcusable
negligence, there is nothing on record that would concretely show that,
indeed, the respondents have acted in such a manner, and that the
transactions entered by the respondent public officers were illegal.
A careful review of the record shows that aside from the aforesaid
collateral, ISI had likewise offered as securities the joint and several
signatures of Mr. and Mrs. Francisco J. Teodoro, private respondents
herein; machinery and equipment to be imported under said L/C; and
assignment of $0.50 per pair of shoes to be exported by ISI (see
Memorandum, dated January 18, 1972, pp. 59-69, Record). These
collaterals were offered by private respondents aside from the fact that
the releases and disbursements of the proceeds of the subject L/C were
subject to the rigid control of the PNB Board of Directors. These,
therefore, belied the contention of the complainant that the subject L/C
was without sufficient security.
It is worth stressing that the public respondents herein were not the
ones who entered the subject transactions with ISI but the members of
the PNB Board of Directors who, incidentally, have in their favor the
presumption of regularity in the performance of their official duties
and functions, of which the complainant herein, as borne by the record,
had failed to overcome or disprove by clear and solid evidence.
II
III
In dealing with cases of this kind, we have invariably refused to interfere with
the discretion of the Ombudsman. The act of the Ombudsman in finding
probable cause to indict petitioner is an exercise of his powers based upon
constitutional mandate and the courts should not interfere with such exercise,
unless clothed with grave abuse of discretion. 11 The rule is based not only upon
respect for the investigatory powers granted by the Constitution to the Office of
the Ombudsman but upon practicality as well. 12 Otherwise, the functions of the
Court will be grievously hampered by innumerable petitions assailing the
findings by the Ombudsman with respect to complaints filed before him. 13
Grave abuse of discretion is the capricious and whimsical exercise of judgment
on the part of the public officer concerned which is equivalent to an excess or
lack of jurisdiction. The abuse of discretion must be so patent and gross as to
amount to an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law as where the power is
exercised in an arbitrary and despotic manner by reason of passion or hostility. 14
In the same manner, we cannot interfere with the discretion of the
Sandiganbayan in finding probable cause against petitioner, absent grave abuse
of discretion.
No grave abuse of discretion, as defined, can be attributed to the Ombudsman as
well as the Sandiganbayan for the following reasons.
First. As to the first ground, it is petitioner's stance that the primary basis of the
prosecution for considering the subject loan transactions as behest loans, which
are the subject matters of Criminal Cases No. 26297 to No. 26314, is the fact that
the incorporators of the borrower ISI are Francisco J. Teodoro and his clan who
are known cronies of the late President Ferdinand E. Marcos. Since his
indictment is being essentially premised on the sole allegation that his
co-accused Francisco J. Teodoro and the latter's clan were known cronies of
President Marcos, which assertion was not substantiated by any evidence by the
prosecution, the charges against him should have been dismissed.
Petitioner is being indicted for nine (9) counts each for violation of Section 3(e)
and (g) of Rep. Act No. 3019. The elements 15 of the offense defined under
Section 3(e) of Rep. Act No. 3019 are the following:
1) that the accused are public officers or private persons
charged in conspiracy with them;
To be indicted of the offense under Section 3(g) of Rep. Act No. 3019, the
following elements 16 must be present:
1) that the accused is a public officer;
Tested against the foregoing elements, it is readily apparent that being a crony of
the late President Marcos is neither an indispensable criterion nor an element for
the indictment and conviction of the said offenses. In fact, the eighteen (18)
Informations subject of the controversy did not allege that petitioner and his
co-accused were cronies. The nine (9) indictments 17for violation of Section
3(e), Rep. Act No. 3019, are similarly worded as follows:
. . . [G]ive unwarranted benefits, advantage and preference to ISI in
the amount of (amount of loan), purportedly for (purpose of loan),
releasing and disbursing the said sum of (amount of loan) to ISI
despite the knowledge that ISI lacked sufficient corporate
capitalization to secure the interest of the Government in case of ISI's
failure to pay, to the damage and prejudice of the government in the
aforestated amount and detriment to public service.
The nine (9) Informations 18 for violation of Section 3(g) which are also
similarly worded read:
. . . [W]illfully, unlawfully and criminally enter, on behalf of the
government, into a transaction with ISI which is manifestly and
grossly disadvantageous to the government, by accommodating and
granting a loan of (amount of loan) in favor of ISI as (purpose of the
loan) despite its failure to put up additional collaterals and raise its
working capital, to secure the interest of the Government in case ISI
failed to pay the said loan, as in fact ISI failed to pay, and thereafter
released and disbursed the said sum of (amount) to ISI to the damage
and prejudice of the government in the aforestated amount and
detriment to public service.
In 1974, when the loan was granted, Apparel's paid up capital was
only P3,859,000.00. Thus, petitioners claimed that Apparel was not
entitled to the loan. The Committee, however, failed to provide the
proper valuation of all the property and therefore committed error in
finding that the loan Apparel obtained did not sufficiently have
collateral and capital.
Besides, petitioner's averment that the loan transaction in question had sufficient
collateral is a matter of defense which should be best ventilated in a full-blown
trial.
Third. Petitioner assails the prosecution's allegation that ISI suffered from a
very low capital ratio of 6.75% as gratuitous and self-serving. Invoking this
Court's ruling in Presidential Ad Hoc Fact-Finding Committee on Behest Loan v.
Desierto, 22 he claims that such allegation is not proven considering that the
prosecution failed to establish the existence of any acceptable banking standard
obtaining at the time the subject loans were evaluated.
Again, the facts obtaining in the case cited by petitioner are different from the
instant case because unlike the former case, petitioner herein is being made
liable for his participation in the loan transactions based on his signature affixed
in the undertaking.
Fourth. Petitioner argues that he cannot be made criminally liable for ISI's
failure to put up the additional capitalization and collaterals required by the
undertaking because it is not his responsibility, but that of the board of directors
of ISI, to comply with the same. As an Executive Vice President of ISI, he has no
power to legally compel and cause it to comply with PNB's conditions stipulated
in the undertaking. He added that implicit in the Sandiganbayan's finding is that
there is no probable cause that has been established against petitioner in
Criminal Cases No. 26297 to No. 26314 since the undertaking he signed covers
specifically the deferred Letter of Credit for US$2,500,000.00 subject of
Criminal Case No. 26297.
True, the powers to increase capitalization and to offer or give collateral to
secure indebtedness are lodged with the corporation's board of directors.
However, this does not mean that the officers of the corporation other than the
board of directors cannot be made criminally liable for their criminal acts if it
can be proven that they participated therein. 23 In the instant case, there is
evidence that petitioner participated in the loan transactions when he signed the
undertaking. As correctly pointed out by the Sandiganbayan: 24
. . . [T]he Court finds that although it is true that accused Gregorio
Singian, Jr. is not a stockholder or director of Integrated Shoe, Inc.
(ISI), the evidence on record, however, shows that aside from the fact
that he was the Executive Vice President of Integrated Shoe, Inc. (ISI)
during the time material to this case, he also executed a "Deed of
Undertaking and Conformity to Bank Conditions" jointly with
Francisco J. Teodoro, President of Integrated Shoe, Inc. and other
officers of the corporation namely: Marfina T. Singian, Leticia T.
Teodoro, Tomas T. Teodoro in connection with the application and
granting by the PNB of a five year confirmed irrevocable, deferred
loan Letter of Credit for US $2,500,000.00 (P16,287,500.00) in favor
of the Integrated Shoe, Inc. (ISI), which loan remained unpaid by ISI.
A careful reading of the resolution of the respondent court reveals that it never
mentioned that the undertaking was the only evidence that led it to its
pronouncement that there exists probable cause against petitioner. In fact, the
circumstances surrounding the granting of the first loan for US$2,500,000.00
which is subject matter of Criminal Case No. 26297 and the subsequent loan
transactions which are the subject matters of Criminal Cases No. 26298 to No.
26314 appear at first blush to be connected with each other and form part of the
whole design to prejudice the government.
Fifth. It is petitioner's view that the prosecution failed to adduce evidence that he
took part in any conspiracy relative to the grant of the loan transactions. Suffice
it to state that the alleged absence of any conspiracy among the accused is
evidentiary in nature and is a matter of defense, the truth of which can be best
passed upon after a full-blown trial on the merits. 25
In sum, the Ombudsman and the Sandiganbayan were far from being abusive of
their discretions. On the contrary, their findings were based on evidence extant
in the records. In finding probable cause against petitioner, there was no grave
abuse of discretion committed so as to call for the exercise of our supervisory
powers over them. This Court is not a trier of facts. 26 As long as there are
substantial evidence in support of the Ombudsman and the Sandiganbayan's
decisions, these decisions will not be overturned. 27
WHEREFORE, premises considered, the instant petition is hereby DISMISSED
for lack of merit. No costs. SHacCD
SO ORDERED.
(Singian Jr. v. Sandiganbayan, G.R. Nos. 160577-94, [December 16, 2005],
|||
DECISION
CALLEJO, SR., J : p
In this petition for review on certiorari, the Executive Secretary of the President
of the Philippines, the Secretary of Justice, the Secretary of Foreign Affairs, the
Secretary of Labor and Employment, the POEA Administrator and the OWWA
Administrator, through the Office of the Solicitor General, assail the
Decision 1 of the Court of Appeals in CA-G.R. SP No. 38815 affirming the
Order 2 of the Regional Trial Court of Quezon City dated August 21, 1995 in
Civil Case No. Q-95-24401, granting the plea of the petitioners therein for a writ
of preliminary injunction and of the writ of preliminary injunction issued by the
trial court on August 24, 1995.
The Antecedents
Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, took effect on July 15, 1995. The Omnibus Rules and
Regulations Implementing the Migrant Workers and Overseas Filipino Act of
1995 was, thereafter, published in the April 7, 1996 issue of the Manila Bulletin.
However, even before the law took effect, the Asian Recruitment Council
Philippine Chapter, Inc. (ARCO-Phil.) filed, on July 17, 1995, a petition for
declaratory relief under Rule 63 of the Rules of Court with the Regional Trial
Court of Quezon City to declare as unconstitutional Section 2, paragraph (g),
Section 6, paragraphs (a) to (j), (l) and (m), Section 7, paragraphs (a) and (b), and
Sections 9 and 10 of the law, with a plea for the issuance of a temporary
restraining order and/or writ of preliminary injunction enjoining the respondents
therein from enforcing the assailed provisions of the law.
In a supplement to its petition, the ARCO-Phil. alleged that Rep. Act No.
8042 was self-executory and that no implementing rules were needed. It prayed
that the court issue a temporary restraining order to enjoin the enforcement of
Section 6, paragraphs (a) to (m) on illegal recruitment, Section 7 on penalties for
illegal recruitment, and Section 9 on venue of criminal actions for illegal
recruitments, viz:
Viewed in the light of the foregoing discussions, there appears to be
urgent an imperative need for this Honorable Court to maintain
the status quo by enjoining the implementation or effectivity of the
questioned provisions of RA 8042, by way of a restraining order
otherwise, the member recruitment agencies of the petitioner will
suffer grave or irreparable damage or injury. With the effectivity
of RA 8042, a great majority of the duly licensed recruitment agencies
have stopped or suspended their operations for fear of being
prosecuted under the provisions of a law that are unjust and
unconstitutional. This Honorable Court may take judicial notice of the
fact that processing of deployment papers of overseas workers for the
past weeks have come to a standstill at the POEA and this has affected
thousands of workers everyday just because of the enactment of RA
8042. Indeed, this has far reaching effects not only to survival of the
overseas manpower supply industry and the active participating
recruitment agencies, the country's economy which has survived
mainly due to the dollar remittances of the overseas workers but more
importantly, to the poor and the needy who are in dire need of
income-generating jobs which can only be obtained from abroad. The
loss or injury that the recruitment agencies will suffer will then be
immeasurable and irreparable. As of now, even foreign employers
have already reduced their manpower requirements from the
Philippines due to their knowledge that RA 8042 prejudiced and
adversely affected the local recruitment agencies. 3
On August 1, 1995, the trial court issued a temporary restraining order effective
for a period of only twenty (20) days therefrom.
After the petitioners filed their comment on the petition, the ARCO-Phil. filed an
amended petition, the amendments consisting in the inclusion in the caption
thereof eleven (11) other corporations which it alleged were its members and
which it represented in the suit, and a plea for a temporary restraining order
enjoining the respondents from enforcing Section 6 subsection (i), Section 6
subsection (k) and paragraphs 15 and 16 thereof, Section 8, Section 10,
paragraphs 1 and 2, and Sections 11 and 40 of Rep. Act No. 8042.
The respondent ARCO-Phil. assailed Section 2(g) and (i), Section 6 subsection
(a) to (m), Section 7(a) to (b), and Section 10 paragraphs (1) and (2), quoted as
follows:
(g) THE STATE RECOGNIZES THAT THE ULTIMATE
PROTECTION TO ALL MIGRANT WORKERS IS THE
POSSESSION OF SKILLS. PURSUANT TO THIS AND AS SOON
AS PRACTICABLE, THE GOVERNMENT SHALL DEPLOY
AND/OR ALLOW THE DEPLOYMENT ONLY OF SKILLED
FILIPINO WORKERS. 4
SEC. 7. Penalties. —
(a) Any person found guilty of illegal recruitment shall suffer the
penalty of imprisonment of not less than six (6) years and one (1) day
but not more than twelve (12) years and a fine of not less than two
hundred thousand pesos (P200,000.00) nor more than five hundred
thousand pesos (P500,000.00).
(b) The penalty of life imprisonment and a fine of not less than five
hundred thousand pesos (P500,000.00) nor more than one million
pesos (P1,000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein.
Sec. 8.
The respondent averred that the aforequoted provisions of Rep. Act No.
8042 violate Section 1, Article III of the Constitution. 5According to the
respondent, Section 6(g) and (i) discriminated against unskilled workers and
their families and, as such, violated the equal protection clause, as well as Article
II, Section 12 6 and Article XV, Sections 1 7 and 3(3) of the Constitution. 8 As
the law encouraged the deployment of skilled Filipino workers, only overseas
skilled workers are granted rights. The respondent stressed that unskilled
workers also have the right to seek employment abroad. According to the
respondent, the right of unskilled workers to due process is violated because they
are prevented from finding employment and earning a living abroad. It cannot be
argued that skilled workers are immune from abuses by employers, while
unskilled workers are merely prone to such abuses. It was pointed out that both
skilled and unskilled workers are subjected to abuses by foreign employers.
Furthermore, the prohibition of the deployment of unskilled workers abroad
would only encourage fly-by-night illegal recruiters.
According to the respondent, the grant of incentives to service contractors and
manning agencies to the exclusion of all other licensed and authorized recruiters
is an invalid classification. Licensed and authorized recruiters are thus deprived
of their right to property and due process and to the "equality of the person." It is
understandable for the law to prohibit illegal recruiters, but to discriminate
against licensed and registered recruiters is unconstitutional.
The respondent, likewise, alleged that Section 6, subsections (a) to (m) is
unconstitutional because licensed and authorized recruitment agencies are
placed on equal footing with illegal recruiters. It contended that while the Labor
Code distinguished between recruiters who are holders of licenses and
non-holders thereof in the imposition of penalties, Rep. Act No. 8042 does not
make any distinction. The penalties in Section 7(a) and (b) being based on an
invalid classification are, therefore, repugnant to the equal protection clause,
besides being excessive; hence, such penalties are violative of Section 19(1),
Article III of the Constitution. 9 It was also pointed out that the penalty for
officers/officials/employees of recruitment agencies who are found guilty of
economic sabotage or large-scale illegal recruitment under Rep. Act No. 8042 is
life imprisonment. Since recruitment agencies usually operate with a manpower
of more than three persons, such agencies are forced to shut down, lest their
officers and/or employees be charged with large scale illegal recruitment or
economic sabotage and sentenced to life imprisonment. Thus, the penalty
imposed by law, being disproportionate to the prohibited acts, discourages the
business of licensed and registered recruitment agencies.
The respondent also posited that Section 6(m) and paragraphs (15) and (16),
Sections 8, 9 and 10, paragraph 2 of the law violate Section 22, Article III of the
Constitution 10 prohibiting ex-post facto laws and bills of attainder. This is
because the provisions presume that a licensed and registered recruitment
agency is guilty of illegal recruitment involving economic sabotage, upon a
finding that it committed any of the prohibited acts under the law. Furthermore,
officials, employees and their relatives are presumed guilty of illegal recruitment
involving economic sabotage upon such finding that they committed any of the
said prohibited acts.
The respondent further argued that the 90-day period in Section 10, paragraph (1)
within which a labor arbiter should decide a money claim is relatively short, and
could deprive licensed and registered recruiters of their right to due process. The
period within which the summons and the complaint would be served on foreign
employees and, thereafter, the filing of the answer to the complaint would take
more than 90 days. This would thereby shift on local licensed and authorized
recruiters the burden of proving the defense of foreign employers. Furthermore,
the respondent asserted, Section 10, paragraph 2 of the law, which provides for
the joint and several liability of the officers and employees, is a bill of attainder
and a violation of the right of the said corporate officers and employees to due
process. Considering that such corporate officers and employees act with prior
approval of the board of directors of such corporation, they should not be liable,
jointly and severally, for such corporate acts.
The respondent asserted that the following provisions of the law are
unconstitutional:
SEC. 9. Venue. — A criminal action arising from illegal recruitment
as defined herein shall be filed with the Regional Trial Court of the
province or city where the offense was committed or where the
offended party actually resides at the time of the commission of the
offense: Provided, That the court where the criminal action is first
filed shall acquire jurisdiction to the exclusion of other
courts: Provided, however, That the aforestated provisions shall also
apply to those criminal actions that have already been filed in court at
the time of the effectivity of this Act.
Sec. 40.
According to the respondent, the said provisions violate Section 5(5). Article
VIII of the Constitution 11 because they impair the power of the Supreme Court
to promulgate rules of procedure.
In their answer to the petition, the petitioners alleged, inter alia, that (a) the
respondent has no cause of action for a declaratory relief; (b) the petition was
premature as the rules implementing Rep. Act No. 8042 not having been
released as yet; (c) the assailed provisions do not violate any provisions of the
Constitution; and, (d) the law was approved by Congress in the exercise of the
police power of the State. In opposition to the respondent's plea for injunctive
relief, the petitioners averred that:
As earlier shown, the amended petition for declaratory relief is devoid
of merit for failure of petitioner to demonstrate convincingly that the
assailed law is unconstitutional, apart from the defect and impropriety
of the petition. One who attacks a statute, alleging unconstitutionality
must prove its invalidity beyond reasonable doubt (Caleon v. Agus
Development Corporation, 207 SCRA 748). All reasonable doubts
should be resolved in favor of the constitutionality of a statute (People
v. Vera, 65 Phil. 56). This presumption of constitutionality is based on
the doctrine of separation of powers which enjoin upon each
department a becoming respect for the acts of the other departments
(Garcia vs. Executive Secretary, 204 SCRA 516 [1991]). Necessarily,
the ancillary remedy of a temporary restraining order and/or a writ of
preliminary injunction prayed for must fall. Besides, an act of
legislature approved by the executive is presumed to be within
constitutional bounds (National Press Club v. Commission on
Elections, 207 SCRA 1). 12
After the respective counsels of the parties were heard on oral arguments, the
trial court issued on August 21, 1995, an order granting the petitioner's plea for a
writ of preliminary injunction upon a bond of P50,000. The petitioner posted the
requisite bond and on August 24, 1995, the trial court issued a writ of
preliminary injunction enjoining the enforcement of the following provisions
of Rep. Act No. 8042 pending the termination of the proceedings:
. . . Section 2, subsections (g) and (i, 2nd par.); Section 6, subsections
(a) to (m), and pars. 15 & 16; Section 7, subsections (a) & (b); Section
8; Section 9; Section 10; pars. 1 & 2; Section 11; and Section 40
of Republic Act No. 8042, otherwise known as the Migrant Workers
and Overseas Filipinos Act of 1995. . . . 13
The petitioners filed a petition for certiorari with the Court of Appeals assailing
the order and the writ of preliminary injunction issued by the trial court on the
following grounds:
1. Respondent ARCO-PHIL. had utterly failed to show its clear right/s
or that of its member-agencies to be protected by the injunctive relief
and/or violation of said rights by the enforcement of the assailed
sections of R.A. 8042;
The petitioners asserted that the respondent is not the real party-in-interest as
petitioner in the trial court. It is inconceivable how the respondent, a non-stock
and non-profit corporation, could sustain direct injury as a result of the
enforcement of the law. They argued that if, at all, any damage would result in
the implementation of the law, it is the licensed and registered recruitment
agencies and/or the unskilled Filipino migrant workers discriminated against
who would sustain the said injury or damage, not the respondent. The respondent,
as petitioner in the trial court, was burdened to adduce preponderant evidence of
such irreparable injury, but failed to do so. The petitioners further insisted that
the petition a quo was premature since the rules and regulations implementing
the law had yet to be promulgated when such petition was filed. Finally, the
petitioners averred that the respondent failed to establish the requisites for the
issuance of a writ of preliminary injunction against the enforcement of the law
and the rules and regulations issued implementing the same.
On December 5, 1997, the appellate court came out with a four-page decision
dismissing the petition and affirming the assailed order and writ of preliminary
injunction issued by the trial court. The appellate court, likewise, denied the
petitioners' motion for reconsideration of the said decision.
The petitioners now come to this Court in a petition for review on certiorari on
the following grounds:
1. Private respondent ARCO-PHIL. had utterly failed to show its clear
right/s or that of its member-agencies to be protected by the injunctive
relief and/or violation of said rights by the enforcement of the assailed
sections of R.A. 8042;
2. The P50,000 injunction bond fixed by the court a quo and sustained
by the Court of Appeals is grossly inadequate to answer for the
damage which petitioners-officials may sustain, should private
respondent ARCO-PHIL. be finally adjudged as not being entitled
thereto. 15
On February 16, 1998, this Court issued a temporary restraining order enjoining
the respondents from enforcing the assailed order and writ of preliminary
injunction.
The Issues
The core issue in this case is whether or not the trial court committed grave abuse
of its discretion amounting to excess or lack of jurisdiction in issuing the assailed
order and the writ of preliminary injunction on a bond of only P50,000 and
whether or not the appellate court erred in affirming the trial court's order and the
writ of preliminary injunction issued by it.
The petitioners contend that the respondent has no locus standi. It is a non-stock,
non-profit organization; hence, not the real party-in-interest as petitioner in the
action. Although the respondent filed the petition in the Regional Trial Court in
behalf of licensed and registered recruitment agencies, it failed to adduce in
evidence a certified copy of its Articles of Incorporation and the resolutions of
the said members authorizing it to represent the said agencies in the proceedings.
Neither is the suit of the respondent a class suit so as to vest in it a personality to
assail Rep. Act No. 8042; the respondent is service-oriented while the
recruitment agencies it purports to represent are profit-oriented. The petitioners
assert that the law is presumed constitutional and, as such, the respondent was
burdened to make a case strong enough to overcome such presumption and
establish a clear right to injunctive relief.
The petitioners bewail the P50,000 bond fixed by the trial court for the issuance
of a writ of preliminary injunction and affirmed by the appellate court. They
assert that the amount is grossly inadequate to answer for any damages that the
general public may suffer by reason of the non-enforcement of the assailed
provisions of the law. The trial court committed a grave abuse of its discretion in
granting the respondent's plea for injunctive relief, and the appellate court erred
in affirming the order and the writ of preliminary injunction issued by the trial
court.
The respondent, for its part, asserts that it has duly established its locus
standi and its right to injunctive relief as gleaned from its pleadings and the
appendages thereto. Under Section 5, Rule 58 of the Rules of Court, it was
incumbent on the petitioners, as respondents in the RTC, to show cause why no
injunction should issue. It avers that the injunction bond posted by the
respondent was more than adequate to answer for any injury or damage the
petitioners may suffer, if any, by reason of the writ of preliminary injunction
issued by the RTC. In any event, the assailed provisions of Rep. Act No.
8042 exposed its members to the immediate and irreparable damage of being
deprived of their right to a livelihood without due process, a property right
protected under the Constitution.
The respondent contends that the commendable purpose of the law to eradicate
illegal recruiters should not be done at the expense and to the prejudice of
licensed and authorized recruitment agencies. The writ of preliminary injunction
was necessitated by the great number of duly licensed recruitment agencies that
had stopped or suspended their business operations for fear that their officers and
employees would be indicted and prosecuted under the assailed oppressive penal
provisions of the law, and meted excessive penalties. The respondent, likewise,
urges that the Court should take judicial notice that the processing of deployment
papers of overseas workers have come to a virtual standstill at the POEA.
The Court's Ruling
The petition is meritorious.
The Respondent Has Locus Standi
To File the Petition in the RTC in
Representation of the Eleven
Licensed and Registered
Recruitment Agencies Impleaded
in the Amended Petition
The modern view is that an association has standing to complain of injuries to its
members. This view fuses the legal identity of an association with that of its
members. 16 An association has standing to file suit for its workers despite its
lack of direct interest if its members are affected by the action. An organization
has standing to assert the concerns of its constituents. 17
In Telecommunications and Broadcast Attorneys of the Philippines
v. Commission on Elections, 18 we held that standing jus tertiiwould be
recognized only if it can be shown that the party suing has some substantial
relation to the third party, or that the right of the third party would be diluted
unless the party in court is allowed to espouse the third party's constitutional
claims.
In this case, the respondent filed the petition for declaratory relief under Rule 64
of the Rules of Court for and in behalf of its eleven (11) licensed and registered
recruitment agencies which are its members, and which approved separate
resolutions expressly authorizing the respondent to file the said suit for and in
their behalf. We note that, under its Articles of Incorporation, the respondent was
organized for the purposes inter alia of promoting and supporting the growth
and development of the manpower recruitment industry, both in the local and
international levels; providing, creating and exploring employment
opportunities for the exclusive benefit of its general membership; enhancing and
promoting the general welfare and protection of Filipino workers; and, to act as
the representative of any individual, company, entity or association on matters
related to the manpower recruitment industry, and to perform other acts and
activities necessary to accomplish the purposes embodied therein. The
respondent is, thus, the appropriate party to assert the rights of its members,
because it and its members are in every practical sense identical. The respondent
asserts that the assailed provisions violate the constitutional rights of its
members and the officers and employees thereof. The respondent is but the
medium through which its individual members seek to make more effective the
expression of their voices and the redress of their grievances. 19
However, the respondent has no locus standi to file the petition for and in behalf
of unskilled workers. We note that it even failed to implead any unskilled
workers in its petition. Furthermore, in failing to implead, as parties-petitioners,
the eleven licensed and registered recruitment agencies it claimed to represent,
the respondent failed to comply with Section 2 of Rule 63 20 of the Rules of
Court. Nevertheless, since the eleven licensed and registered recruitment
agencies for which the respondent filed the suit are specifically named in the
petition, the amended petition is deemed amended to avoid multiplicity of
suits. 21
In any case, where the liberty curtailed affects at most the rights of
property, the permissible scope of regulatory measures is certainly
much wider. To pretend that licensing or accreditation requirements
violates the due process clause is to ignore the settled practice, under
the mantle of the police power, of regulating entry to the practice of
various trades or professions. Professionals leaving for abroad are
required to pass rigid written and practical exams before they are
deemed fit to practice their trade. Seamen are required to take tests
determining their seamanship. Locally, the Professional Regulation
Commission has begun to require previously licensed doctors and
other professionals to furnish documentary proof that they had either
re-trained or had undertaken continuing education courses as a
requirement for renewal of their licenses. It is not claimed that these
requirements pose an unwarranted deprivation of a property right
under the due process clause. So long as professionals and other
workers meet reasonable regulatory standards no such deprivation
exists.
By its rulings, the Court thereby affirmed the validity of the assailed penal and
procedural provisions of Rep. Act No. 8042, including the imposable penalties
therefor. Until the Court, by final judgment, declares that the said provisions are
unconstitutional, the enforcement of the said provisions cannot be enjoined.
The RTC Committed Grave Abuse
of Its Discretion Amounting to
Excess or Lack of Jurisdiction in
Issuing the Assailed Order and the
Writ of Preliminary Injunction
The matter of whether to issue a writ of preliminary injunction or not is
addressed to the sound discretion of the trial court. However, if the court
commits grave abuse of its discretion in issuing the said writ amounting to
excess or lack of jurisdiction, the same may be nullified via a writ
of certiorari and prohibition.
In Social Security Commission v. Judge Bayona, 29 we ruled that a law is
presumed constitutional until otherwise declared by judicial interpretation. The
suspension of the operation of the law is a matter of extreme delicacy because it
is an interference with the official acts not only of the duly elected
representatives of the people but also of the highest magistrate of the land.
In Younger v. Harris, Jr., 30 the Supreme Court of the United States emphasized,
thus:
Federal injunctions against state criminal statutes, either in their
entirety or with respect to their separate and distinct prohibitions, are
not to be granted as a matter of course, even if such statutes are
unconstitutional. No citizen or member of the community is immune
from prosecution, in good faith, for his alleged criminal acts. The
imminence of such a prosecution even though alleged to be
unauthorized and, hence, unlawful is not alone ground for relief in
equity which exerts its extraordinary powers only to prevent
irreparable injury to the plaintiff who seeks its aid. 752 Beal
v. Missouri Pacific Railroad Corp., 312 U.S. 45, 49, 61 S.Ct. 418, 420,
85 L.Ed. 577.
"It does not appear from the record that petitioners have been
threatened with any injury other than that incidental to every criminal
proceeding brought lawfully and in good faith . . ." 319 U.S., at 164,
63 S.Ct., at 881. 31
The possible unconstitutionality of a statute, on its face, does not of itself justify
an injunction against good faith attempts to enforce it, unless there is a showing
of bad faith, harassment, or any other unusual circumstance that would call for
equitable relief. 32 The "on its face" invalidation of statutes has been described as
"manifestly strong medicine," to be employed "sparingly and only as a last
resort," and is generally disfavored. 33
To be entitled to a preliminary injunction to enjoin the enforcement of a law
assailed to be unconstitutional, the party must establish that it will suffer
irreparable harm in the absence of injunctive relief and must demonstrate that it
is likely to succeed on the merits, or that there are sufficiently serious questions
going to the merits and the balance of hardships tips decidedly in its
favor. 34 The higher standard reflects judicial deference toward "legislation or
regulations developed through presumptively reasoned democratic processes."
Moreover, an injunction will alter, rather than maintain, the status quo, or will
provide the movant with substantially all the relief sought and that relief cannot
be undone even if the defendant prevails at a trial on the merits. 35 Considering
that injunction is an exercise of equitable relief and authority, in assessing
whether to issue a preliminary injunction, the courts must sensitively assess all
the equities of the situation, including the public interest. 36 In litigations
between governmental and private parties, courts go much further both to give
and withhold relief in furtherance of public interest than they are accustomed to
go when only private interests are involved. 37 Before the plaintiff may be
entitled to injunction against future enforcement, he is burdened to show some
substantial hardship. 38
The fear or chilling-effect of the assailed penal provisions of the law on the
members of the respondent does not by itself justify prohibiting the State from
enforcing them against those whom the State believes in good faith to be
punishable under the laws:
. . . Just as the incidental "chilling effect" of such statutes does not
automatically render them unconstitutional, so the chilling effect that
admittedly can result from the very existence of certain laws on the
statute books does not in itself justify prohibiting the State from
carrying out the important and necessary task of enforcing these laws
against socially harmful conduct that the State believes in good faith
to be punishable under its laws and the Constitution. 39
By issuing the writ of preliminary injunction against the petitioners sans any
evidence, the trial court frustrated, albeit temporarily, the prosecution of illegal
recruiters and allowed them to continue victimizing hapless and innocent people
desiring to obtain employment abroad as overseas workers, and blocked the
attainment of the salutary policies 52 embedded in Rep. Act No. 8042. It bears
stressing that overseas workers, land-based and sea-based, had been remitting to
the Philippines billions of dollars which over the years had propped the
economy.
In issuing the writ of preliminary injunction, the trial court considered
paramount the interests of the eleven licensed and registered recruitment
agencies represented by the respondent, and capriciously overturned the
presumption of the constitutionality of the assailed provisions on the barefaced
claim of the respondent that the assailed provisions of Rep. Act No. 8042 are
unconstitutional. The trial court committed a grave abuse of its discretion
amounting to excess or lack of jurisdiction in issuing the assailed order and writ
of preliminary injunction. It is for this reason that the Court issued a temporary
restraining order enjoining the enforcement of the writ of preliminary injunction
issued by the trial court.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
assailed decision of the appellate court is REVERSED AND SET ASIDE. The
Order of the Regional Trial Court dated August 21, 1995 in Civil Case No.
Q-95-24401 and the Writ of Preliminary Injunction issued by it in the said case
on August 24, 1995 are NULLIFIED. No costs.
SO ORDERED.
(Executive Secretary v. Court of Appeals, G.R. No. 131719, [May 25, 2004],
|||
Petitioner was convicted of estafa for violation of the Trust Receipts Law by the
Regional Trial Court of Manila. He appealed his conviction to the Court of
Appeals which affirmed the trial court's decision in toto. Petitioner filed a
motion for reconsideration, but the same was denied. The Court of Appeals held
that although petitioner is neither a director nor an officer of ARMAGRI
International Corporation, he certainly comes within the term "employees or
other . . . persons therein responsible for the offense" in Section 13 of the Trust
Receipts Law. Hence, the present petition. Petitioner contended that the Court of
Appeals erred in finding him liable for the default of ARMAGRI, arguing that in
signing the trust receipts, he merely acted as an agent of ARMAGRI. Petitioner
asserted that nowhere in the trust receipts did he assume personal responsibility
for the undertakings of ARMAGRI which was the entrustee.
The Supreme Court affirmed petitioner's conviction. The Court ruled that
petitioner is the person responsible for the offense. First, petitioner is the
signatory to the trust receipts, the loan applications and the letters of credit.
Second, despite being the signatory to the trust receipts and the other documents,
petitioner did not explain or show why he is not responsible for the failure to turn
over the proceeds of the sale or account for the goods covered by the trust
receipts. The Court also held that there is no need to allege in the Informations in
what capacity petitioner participated to hold him responsible for the offense.
Under the Trust Receipts Law, it is sufficient to allege and establish the failure of
ARMAGRI, whom petitioner represented, to remit the proceeds or to return the
goods to the Bank.
SYLLABUS
1. MERCANTILE LAW; TRUST RECEIPTS LAW; WHEN VIOLATED;
PERSONS LIABLE FOR THE OFFENSE. — The Trust Receipts Lawis
violated whenever the entrustee fails to: (1) turn over the proceeds of the sale of
the goods, or (2) return the goods covered by the trust receipts if the goods are
not sold. The mere failure to account or return gives rise to the crime which
is malum prohibitum. There is no requirement to prove intent to defraud.
The Trust Receipts Law recognizes the impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the entrustee is a corporation, the law
makes the officers or employees or other persons responsible for the
offense liable to suffer the penalty of imprisonment. The reason is obvious:
corporations, partnerships, associations and other juridical entities cannot be put
to jail. Hence, the criminal liability falls on the human agent responsible for the
violation of the Trust Receipts Law. cIDHSC
CARPIO, J : p
The Case
Petitioner Edward C. Ong ("petitioner") filed this petition for review
on certiorari 1 to nullify the Decision 2 dated 27 October 1994 of the Court of
Appeals in CA-G.R. C.R. No. 14031, and its Resolution 3 dated 18 April 1995,
denying petitioner's motion for reconsideration. The assailed Decision
affirmed in toto petitioner's conviction 4 by the Regional Trial Court of Manila,
Branch 35, 5on two counts of estafa for violation of the Trust Receipts Law, 6 as
follows:
WHEREFORE, judgment is rendered: (1) pronouncing accused
EDWARD C. ONG guilty beyond reasonable doubt on two counts, as
principal on both counts, of ESTAFA defined under No. 1 (b) of
Article 315 of the Revised Penal Code in relation to Section 13
of Presidential Decree No. 115, and penalized under the 1st paragraph
of the same Article 315, and sentenced said accused in each count to
TEN (10) YEARS of prision mayor, as minimum, to TWENTY (20)
YEARS of reclusion temporal, as maximum;
(4) Ordering Benito Ong to pay, jointly and severally with Edward C.
Ong, the private complainant the legal interest and the penalty of 1%
per month due and accruing on the unpaid amount of P1,449,395.71,
still owing to the private offended under the trust receipt Exhibit C,
computed from July 15, 1991, until the said unpaid obligation is fully
paid;
(5) Ordering accused Edward C. Ong to pay the costs of these two
actions.
SO ORDERED. 7
The Charge
Assistant City Prosecutor Dina P. Teves of the City of Manila charged petitioner
and Benito Ong with two counts of estafa under separate Informations dated 11
October 1991. DCcIaE
In Criminal Case No. 92-101989, the Information indicts petitioner and Benito
Ong of the crime of estafa committed as follows:
That on or about July 23, 1990, in the City of Manila, Philippines, the
said accused, representing ARMAGRI International Corporation,
conspiring and confederating together did then and there willfully,
unlawfully and feloniously defraud the SOLIDBANK Corporation
represented by its Accountant, DEMETRIO LAZARO, a corporation
duly organized and existing under the laws of the Philippines located
at Juan Luna Street, Binondo, this City, in the following manner, to
wit: the said accused received in trust from said SOLIDBANK
Corporation the following, to wit:
10,000 bags of urea
Contrary to law.
Contrary to law.
When the trust receipts became due and demandable, ARMAGRI failed to pay
or deliver the goods to the Bank despite several demand letters. 12 Consequently,
as of 31 May 1991, the unpaid account under the first trust receipt amounted to
P1,527,180.66, 13 while the unpaid account under the second trust receipt
amounted to P1,449,395.71. 14
Version of the Defense
After the prosecution rested its case, petitioner and Benito Ong, through counsel,
manifested in open court that they were waiving their right to present evidence.
The trial court then considered the case submitted for decision. 15
The Ruling of the Court of Appeals
Petitioner appealed his conviction to the Court of Appeals. On 27 October 1994,
the Court of Appeals affirmed the trial court's decision in toto. Petitioner filed a
motion for reconsideration but the same was denied by the Court of Appeals in
the Resolution dated 18 April 1995.
The Court of Appeals held that although petitioner is neither a director nor an
officer of ARMAGRI, he certainly comes within the term "employees or
other . . . persons therein responsible for the offense" in Section 13 of the Trust
Receipts Law. The Court of Appeals explained as follows:
It is not disputed that appellant transacted with the Solid Bank on
behalf of ARMAGRI. This is because the Corporation cannot by itself
transact business or sign documents it being an artificial person. It has
to accomplish these through its agents. A corporation has a personality
distinct and separate from those acting on its behalf. In the fulfillment
of its purpose, the corporation by necessity has to employ persons to
act on its behalf.
Being a mere artificial person, the law (Section 13, P.D. 115)
recognizes the impossibility of imposing the penalty of imprisonment
on the corporation itself. For this reason, it is the officers or employees
or other persons whom the law holds responsible. 16
The Court of Appeals ruled that what made petitioner liable was his failure to
account to the entruster Bank what he undertook to perform under the trust
receipts. The Court of Appeals held that ARMAGRI, which petitioner
represented, could not itself negotiate the execution of the trust receipts, go to the
Bank to receive, return or account for the entrusted goods. Based on the
representations of petitioner, the Bank accepted the trust receipts and,
consequently, expected petitioner to return or account for the goods entrusted. 17
The Court of Appeals also ruled that the prosecution need not prove that
petitioner is occupying a position in ARMAGRI in the nature of an officer or
similar position to hold him the "person(s) therein responsible for the offense."
The Court of Appeals held that petitioner's admission that his participation was
merely incidental still makes him fall within the purview of the law as one of the
corporation's "employees or other officials or persons therein responsible for the
offense." Incidental or not, petitioner was then acting on behalf of ARMAGRI,
carrying out the corporation's decision when he signed the trust receipts.
The Court of Appeals further ruled that the prosecution need not prove that
petitioner personally received and misappropriated the goods subject of the trust
receipts. Evidence of misappropriation is not required under the Trust Receipts
Law. To establish the crime of estafa, it is sufficient to show failure by the
entrustee to turn over the goods or the proceeds of the sale of the goods covered
by a trust receipt. Moreover, the bank is not obliged to determine if the goods
came into the actual possession of the entrustee. Trust receipts are issued to
facilitate the purchase of merchandise. To obligate the bank to examine the fact
of actual possession by the entrustee of the goods subject of every trust receipt
will greatly impede commercial transactions.
The Issues
Petitioner seeks to reverse his conviction by contending that the Court of
Appeals erred:
1. IN RULING THAT, BY THE MERE CIRCUMSTANCE
THAT PETITIONER ACTED AS AGENT AND SIGNED
FOR THE ENTRUSTEE CORPORATION, PETITIONER
WAS NECESSARILY THE ONE RESPONSIBLE FOR THE
OFFENSE; AND
We hold that petitioner is a person responsible for violation of the Trust Receipts
Law.
The relevant penal provision of the Trust Receipts Law reads:
SEC. 13. Penalty Clause. — The failure of the entrustee to turn over
the proceeds of the sale of the goods, documents or instruments
covered by a trust receipt to the extent of the amount owing to the
entruster or as appears in the trust receipt or to return said goods,
documents or instruments if they were not sold or disposed of in
accordance with the terms of the trust receipt shall constitute the crime
of estafa, punishable under the provisions of Article Three Hundred
and Fifteen, Paragraph One (b), of Act Numbered Three Thousand
Eight Hundred and Fifteen, as amended, otherwise known as the
Revised Penal Code. If the violation or offense is committed by a
corporation, partnership, association or other juridical entities, the
penalty provided for in this Decree shall be imposed upon the
directors, officers, employees or other officials or persons therein
responsible for the offense, without prejudice to the civil liabilities
arising from the criminal offense. (Emphasis supplied)
The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over
the proceeds of the sale of the goods, or (2) return the goods covered by the trust
receipts if the goods are not sold. 18 The mere failure to account or return gives
rise to the crime which is malum prohibitum. 19 There is no requirement to prove
intent to defraud. 20
The Trust Receipts Law recognizes the impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the entrustee is a corporation, the law
makes the officers or employees or other persons responsible for the
offense liable to suffer the penalty of imprisonment. The reason is obvious:
corporations, partnerships, associations and other juridical entities cannot be put
to jail. Hence, the criminal liability falls on the human agent responsible for the
violation of the Trust Receipts Law.
In the instant case, the Bank was the entruster while ARMAGRI was the
entrustee. Being the entrustee, ARMAGRI was the one responsible to account
for the goods or its proceeds in case of sale. However, the criminal liability for
violation of the Trust Receipts Law falls on the human agent responsible for the
violation. Petitioner, who admits being the agent of ARMAGRI, is the person
responsible for the offense for two reasons. First, petitioner is the signatory to the
trust receipts, the loan applications and the letters of credit. Second, despite
being the signatory to the trust receipts and the other documents, petitioner did
not explain or show why he is not responsible for the failure to turn over the
proceeds of the sale or account for the goods covered by the trust receipts. HcaATE
The Bank released the goods to ARMAGRI upon execution of the trust receipts
and as part of the loan transactions of ARMAGRI. The Bank had a right to
demand from ARMAGRI payment or at least a return of the goods. ARMAGRI
failed to pay or return the goods despite repeated demands by the Bank.
It is a well-settled doctrine long before the enactment of the Trust Receipts Law,
that the failure to account, upon demand, for funds or property held in trust is
evidence of conversion or misappropriation. 21 Under the law, mere failure by
the entrustee to account for the goods received in trust constitutes estafa.
The Trust Receipts Law punishes dishonesty and abuse of confidence in the
handling of money or goods to the prejudice of public order. 22 The mere failure
to deliver the proceeds of the sale or the goods if not sold constitutes a criminal
offense that causes prejudice not only to the creditor, but also to the public
interest. 23Evidently, the Bank suffered prejudice for neither money nor the
goods were turned over to the Bank.
The Trust Receipts Law expressly makes the corporation's officers or employees
or other persons therein responsible for the offense liable to suffer the penalty of
imprisonment. In the instant case, petitioner signed the two trust receipts on
behalf of ARMAGRI 24 as the latter could only act through its agents. When
petitioner signed the trust receipts, he acknowledged receipt of the goods
covered by the trust receipts. In addition, petitioner was fully aware of the terms
and conditions stated in the trust receipts, including the obligation to turn over
the proceeds of the sale or return the goods to the Bank, to wit:
Received, upon the TRUST hereinafter mentioned from SOLIDBANK
CORPORATION (hereafter referred to as the BANK), the following
goods and merchandise, the property of said BANK specified in the
bill of lading as follows: . . . and in consideration thereof, I/we hereby
agree to hold said goods in Trust for the said BANK and as its
property with liberty to sell the same for its account but without
authority to make any other disposition whatsoever of the said goods
or any part thereof (or the proceeds thereof) either by way of
conditional sale, pledge, or otherwise.
In the instant case, the amount of the fraud in Criminal Case No. 92-101989 is
P1,527,180.66. In Criminal Case No. 92-101990, the amount of the fraud is
P1,449,395.71. Since the amounts of the fraud in each estafa exceeds
P22,000.00, the penalty of prision correccional maximum to prision
mayor minimum should be imposed in its maximum period as prescribed in
Article 315 of the Revised Penal Code. The maximum indeterminate sentence
should be taken from this maximum period which has a duration of 6 years, 8
months and 21 days to 8 years. One year is then added for each additional
P10,000.00, but the total penalty should not exceed 20 years. Thus, the
maximum penalty for each count of estafa in this case should be 20 years.
Under the Indeterminate Sentence Law, the minimum indeterminate sentence
can be anywhere within the range of the penalty next lower in degree to the
penalty prescribed by the Code for the offense. The minimum range of the
penalty is determined without first considering any modifying circumstance
attendant to the commission of the crime and without reference to the periods
into which it may be subdivided. 31 The modifying circumstances are considered
only in the imposition of the maximum term of the indeterminate
sentence. 32 Since the penalty prescribed in Article 315 is prision
correccional maximum to prision mayor minimum, the penalty next lower in
degree would be prision correccional minimum to medium. Thus, the minimum
term of the indeterminate penalty should be anywhere within 6 months and 1 day
to 4 years and 2 months. 33
Accordingly, the Court finds a need to modify in part the penalties imposed by
the trial court. The minimum penalty for each count of estafa should be reduced
to four (4) years and two (2) months of prision correccional.
As for the civil liability arising from the criminal offense, the question is whether
as the signatory for ARMAGRI, petitioner is personally liable pursuant to the
provision of Section 13 of the Trust Receipts Law.
In Prudential Bank v. Intermediate Appellate Court, 34 the Court discussed the
imposition of civil liability for violation of the Trust Receipts Law in this wise:
It is clear that if the violation or offense is committed by a corporation,
partnership, association or other juridical entities, the penalty shall
be imposed upon the directors, officers, employees or other officials
or persons responsible for the offense. The penalty referred to
is imprisonment, the duration of which would depend on the amount
of the fraud as provided for in Article 315 of the Revised Penal Code.
The reason for this is obvious: corporation, partnership, association or
other juridical entities cannot be put in jail. However, it is these
entities which are made liable for the civil liabilities arising from the
criminal offense. This is the import of the clause 'without prejudice to
the civil liabilities arising from the criminal offense.' (Emphasis
supplied)
In Prudential Bank, the Court ruled that the person signing the trust receipt
for the corporation is not solidarily liable with the entrustee-corporation for
the civil liability arising from the criminal offense. He may, however, be
personally liable if he bound himself to pay the debt of the corporation under
a separate contract of surety or guaranty.
In the instant case, petitioner did not sign in his personal capacity the solidary
guarantee clause 35 found on the dorsal portion of the trust receipts. Petitioner
placed his signature after the typewritten words "ARMCO INDUSTRIAL
CORPORATION" found at the end of the solidary guarantee clause. Evidently,
petitioner did not undertake to guaranty personally the payment of the principal
and interest of ARMAGRI's debt under the two trust receipts.
In contrast, petitioner signed the stamped additional undertaking without any
indication he was signing for ARMAGRI. Petitioner merely placed his signature
after the additional undertaking. Clearly, what petitioner signed in his personal
capacity was the stamped additional undertaking to pay a monthly penalty of 1%
of the total obligation in case of ARMAGRI's default.
In the additional undertaking, petitioner bound himself to pay "jointly and
severally" a monthly penalty of 1% in case of ARMAGRI's default. 36 Thus,
petitioner is liable to the Bank for the stipulated monthly penalty of 1% on the
outstanding amount of each trust receipt. The penalty shall be computed from 15
July 1991, when petitioner received the demand letter, 37 until the debt is fully
paid.
WHEREFORE, the assailed Decision is AFFIRMED with MODIFICATION. In
Criminal Case No. 92-101989 and in Criminal Case No. 92-101990, for each
count of estafa, petitioner EDWARD C. ONG is sentenced to an indeterminate
penalty of imprisonment from four (4) years and two (2) months of prision
correctional as MINIMUM, to twenty (20) years of reclusion temporal as
MAXIMUM. Petitioner is ordered to pay SOLIDBANK CORPORATION the
stipulated penalty of 1% per month on the outstanding balance of the two trust
receipts to be computed from 15 July 1991 until the debt is fully paid.
SO ORDERED.
(Ong v. Court of Appeals, G.R. No. 119858, [April 29, 2003], 449 PHIL
|||
691-711)
PANGANIBAN, J : p
Are private respondent-employees of petitioner Clark Field Taxi, Inc., who were
separated from service due to the closure of Clark Air Base, entitled to
separation pay and, if so, in what amount? Are officers of corporations ipso
facto liable jointly and severally with the companies they represent for the
payment of separation pay?
These questions are answered by the Court in resolving this petition for
certiorari under Rule 65 of the Rules of Court assailing the Resolutions of the
National Labor Relations Commission (Third Division) 1 promulgated on
February 28, 1994, 2 and May 31, 1994. 3 The February 28, 1994 Resolution
affirmed with modifications the decision 4 of Labor Arbiter Ariel C. Santos in
NLRC Case No. RAB-III-12-2477-91. The second Resolution denied the
motion for reconsideration of herein petitioners.
The NLRC modified the decision of the labor arbiter by granting
separation pay to herein individual respondents in the increased amount of
US$120.00 for every year of service or its peso equivalent, and holding Sergio
F. Naguiat Enterprises, Inc., Sergio F. Naguiat and Antolin T. Naguiat, jointly
and severally liable with Clark Field Taxi, Inc. ("CFTI").
The Facts
The following facts are derived from the records of the case:
Petitioner CFTI held a concessionaire's contract with the Army Air
Force Exchange Services ("AAFES") for the operation of taxi services within
Clark Air Base. Sergio F. Naguiat was CFTI's president, while Antolin T.
Naguiat was its vice-president. Like Sergio F. Naguiat Enterprises,
Incorporated ("Naguiat Enterprises"), a trading firm, it was a family-owned
corporation.
Individual respondents were previously employed by CFTI as taxicab
drivers. During their employment, they were required to pay a daily "boundary
fee" in the amount of US$26.50 for those working from 1:00 a.m. to 12:00
noon, and US$27.00 for those working from 12:00 noon to 12:00 midnight. All
incidental expenses for the maintenance of the vehicles they were driving were
accounted against them, including gasoline expenses.
The drivers worked at least three to four times a week, depending on the
availability of taxicabs. They earned not less than US$15.00 daily. In excess of
that amount, however, they were required to make cash deposits to the
company, which they could later withdraw every fifteen days.
Due to the phase-out of the US military bases in the Philippines, from
which Clark Air Base was not spared, the AAFES was dissolved, and the
services of individual respondents were officially terminated on November 26,
1991.
The AAFES Taxi Drivers Association ("drivers' union"), through its
local president, Eduardo Castillo, and CFTI held negotiations as regards
separation benefits that should be awarded in favor of the drivers. They arrived
at an agreement that the separated drivers will be given P500.00 for every year
of service as severance pay. Most of the drivers accepted said amount in
December 1991 and January 1992. However, individual respondents herein
refused to accept theirs.
Instead, after disaffiliating themselves from the drivers' union,
individual respondents, through the National Organization of Workingmen
("NOWM"), a labor organization which they subsequently joined, filed a
complaint 5 against "Sergio F. Naguiat doing business under the name and
style Sergio F. Naguiat Enterprises, Inc., Army-Air Force Exchange Services
(AAFES) with Mark Hooper as Area Service Manager, Pacific Region, and
AAFES Taxi Drivers Association with Eduardo Castillo as President," for
payment of separation pay due to termination/phase-out. Said complaint was
later amended 6 to include additional taxi drivers who were similarly situated
as complainants, and CFTI with Antolin T. Naguiat as vice president and
general manager, as party respondent.
In their complaint, herein private respondents alleged that they were
regular employees of Naguiat Enterprises, although their individual
applications for employment were approved by CFTI. They claimed to have
been assigned to Naguiat Enterprises after having been hired by CFTI, and that
the former thence managed, controlled and supervised their employment. They
averred further that they were entitled to separation pay based on their latest
daily earnings of US$15.00 for working sixteen (16) days a month.
The labor arbiter; as affirmed by NLRC, correctly found that petitioners stopped
their taxi business within Clark Air Base because of the phase-out of U.S.
military presence thereat. It was not due to any great financial loss because
petitioners' taxi business was earning profitably at the time of its closure.
With respect to the amount of separation pay that should be granted, Article 283
of the Labor Code provides:
". . . In case of retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (½) month
pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1 ) whole year."
Considering the above, we find that NLRC did not commit grave abuse of
discretion in ruling that individual respondents were entitled to separation
pay 15 in the amount $120.00 (one-half of $240.00 monthly pay) or its peso
equivalent for every year of service.
Second Issue: NOWM's Personality to
Represent Individual Respondents-Employees
On the question of NOWM's authority to represent private respondents, we hold
petitioners in estoppel for not having seasonably raised this issue before the
labor arbiter or the NLRC. NOWM was already a party-litigant as the
organization representing the taxi driver-complainants before the labor arbiter.
But petitioners who were party-respondents in said complaint did not assail the
juridical personality of NOWM and the validity of its representations in behalf
of the complaining taxi drivers before the quasi-judicial bodies. Therefore, they
are now estopped from raising such question before this Court. In any event,
petitioners acknowledged before this Court that the taxi drivers allegedly
represented by NOWM, are themselves parties in this case. 16
Third Issue: Liability of Petitioner-
Corporations and Their Respective Officers
The resolution of this issue involves another factual finding that Naguiat
Enterprises .actually managed, supervised and controlled employment terms of
the taxi drivers, making it their indirect employer. As adverted to earlier, factual
findings of quasi-judicial bodies are binding upon the court in the absence of a
showing of grave abuse of discretion.
Unfortunately, the NLRC did not discuss or give any explanation for
holding Naguiat Enterprises and its officers jointly and severally liable in
discharging CFTI's liability for payment of separation pay. We again remind
those concerned that decisions, however concisely written, must distinctly and
clearly set forth the facts and law upon which they are based. 17 This rule
applies as well to dispositions by quasi-judicial and administrative bodies.
Naguiat Enterprises Not Liable
In impleading Naguiat Enterprises as solidarily liable for the obligations of CFTI,
respondents rely on Articles 106, 18 107 19 and 109 20 of the Labor Code.
Based on factual submissions of the parties, the labor arbiter, however,
found that individual respondents were regular employees of CFTI who
received wages on a boundary or commission basis.
We find no reason to make a contrary finding. Labor-only contracting
exists where: (1) the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machinery,
and work premises, among others; and (2) the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of the employer. 21 Independent contractors, meanwhile, are those
who exercise independent employment, contracting to do a piece of work
according to their own methods without being subject to control of their
employer except as to the result of their work. 22
From the evidence proffered by both parties, there is no substantial
basis to hold that Naguiat Enterprises is an indirect employer of individual
respondents much less a labor only contractor. On the contrary, petitioners
submitted documents such as the drivers' applications for employment with
CFTI, 23 and social security remittances 24 and payroll 25 of Naguiat
Enterprises showing that none of the individual respondents were its
employees. Moreover, in the contract 26 between CFTI and AAFES, the former,
as concessionaire, agreed to purchase from AAFES for a certain amount within
a specified period a fleet of vehicles to be "ke(pt) on the road" by CFTI,
pursuant to their concessionaire's contract. This indicates that CFTI became
the owner of the taxicabs which became the principal investment and asset of
the company.
Private respondents failed to substantiate their claim that Naguiat
Enterprises managed, supervised and controlled their employment. It appears
that they were confused on the personalities of Sergio F. Naguiat as an
individual who was the president of CFTI, and Sergio F. Naguiat Enterprises,
Inc., as a separate corporate entity with a separate business. They presumed
that Sergio F. Naguiat, who was at the same time a stockholder and
director 27 of Sergio F. Naguiat Enterprises, Inc., was managing and
controlling the taxi business on behalf of the latter. A closer scrutiny and
analysis of the records, however, evince the truth of the matter: that Sergio F.
Naguiat, in supervising the-taxi drivers and determining their employment
terms, was rather carrying out his responsibilities as president of CFTI. Hence,
Naguiat Enterprises as a separate corporation does not appear to be involved at
all in the taxi business.
To illustrate further, we refer to the testimony of a driver-claimant on
cross examination.
"Atty. Suarez
Is it not true that you applied not with Sergio F. Naguiat but
with Clark Field Taxi?
Witness
Atty. Suarez
Witness
Atty. Suarez
Witness
Atty. Suarez
Witness
Atty. Suarez
Witness
Witness
Yes. sir.
Atty. Suarez
How about Mr. Antolin Naguiat what is his role in the taxi
services, the operation of the Clark Field Taxi, Incorporated?
Witness
And, although the witness insisted that Naguiat Enterprises was his employer, he
could not deny that he received his salary from the office of CFTI inside the base.
29
Another driver-claimant admitted, upon the prodding of counsel for the
corporations, that Naguiat Enterprises was in the trading business while CFTI
was in taxi services. 30
In addition, the Constitution 31 of CFTI-AAFES Taxi Drivers
Association which, admittedly, was the union of individual respondents while
still working at Clark Air Base, states that members thereof are the employees
of CFTI and "(f)or collective bargaining purposes, the definite employer is
the Clark Field Taxi Inc."
From the foregoing, the ineludible conclusion is that CFTI was the
actual and direct employer of individual respondents, and that Naguiat
Enterprises was neither their indirect employer nor labor-only contractor. It
was not involved at all in the taxi business.
CFTI president
solidarily liable
Petitioner-corporations would likewise want to avoid the solidary liability of
their officers. To bolster their position, Sergio F. Naguiat and Antolin T. Naguiat
specifically aver that they were denied due process since they were not parties to
the complaint below. 32 In the broader interest of justice, we, however, hold that
Sergio F. Naguiat, in his capacity as president of CFTI, cannot be exonerated
from joint and several liability in the payment of separation pay to individual
respondents.
A.C. Ransom Labor Union-CCLU vs. NLRC 33 is the case in point. A.C.
Ransom Corporation was a family corporation, the stockholders of which were
members of the Hernandez family. In 1973, it filed an application for clearance
to close or cease operations, which was duly granted by the Ministry of Labor
and Employment, without prejudice to the right of employees to seek redress
of grievance, if any. Backwages of 22 employees, who engaged in a strike prior
to the closure, were subsequently computed at P164,984.00. Up to September
1976, the union filed about ten (10) motions for execution against the
corporation, but none could be implemented, presumably for failure to find
leviable assets of said corporation. In its last motion for execution, the union
asked that officers and agents of the company be held personally liable for
payment of the backwages. This was granted by the labor arbiter. In the
corporation's appeal to the NLRC, one of the issues raised was: "Is the
judgment against a corporation to reinstate its dismissed employees with
backwages, enforceable against its officer and agents, in their individual,
private and personal capacities, who were not parties in the case where the
judgment was rendered?" The NLRC answered in the negative, on the ground
that officers of a corporation are not liable personally for official acts unless
they exceeded the scope of their authority.
On certiorari, this Court reversed the NLRC and upheld the labor
arbiter. In imposing joint and several liability upon the company president, the
Court, speaking through Mme. Justice Ameurfina Melencio-Herrera,
ratiocinated this wise:
"(b)How can the foregoing (Articles 265 and 273 of the Labor Code)
provisions be implemented when the employer is a corporation? The
answer is found in Article 212(c) of the Labor Code which provides:
Sergio F. Naguiat, admittedly, was the president of CFTI who actively managed
the business. Thus, applying the ruling in A. C. Ransom, he falls within the
meaning of an "employer" as contemplated by the Labor Code, who may be held
jointly and severally liable for the obligations of the corporation to its dismissed
employees.
Moreover, petitioners also conceded that both CFTI and Naguiat
Enterprises were "close family corporations" 34 owned by the Naguiat family.
Section 100, paragraph 5, (under Title XII on Close Corporations) of the
Corporation Code, states:
"(5)To the extent that the stockholders are actively engage(d) in the
management or operation of the business and affairs of a close
corporation, the stockholders shall be held to strict fiduciary duties to
each other and among themselves. Said stockholders shall
be personally liable for corporate torts unless the corporation has
obtained reasonably adequate liability insurance." (emphasis
supplied)
As pointed out earlier, the fifth paragraph of Section 100 of the Corporation
Code specifically imposes personal liability upon the stockholder actively
managing or operating the business and affairs of the close corporation.
In fact, in posting the surety bond required by this Court for the issuance
of a temporary restraining order enjoining the execution of the assailed NLRC
Resolutions, only Sergio F. Naguiat, in his individual and personal capacity,
principally bound himself to comply with the obligation thereunder, i.e., "to
guarantee the payment to private respondents of any damages which they may
incur by reason of the issuance of a temporary restraining order sought, if it
should be finally adjudged that said principals were not entitled thereto." 38
The Court here finds no application to the rule that a corporate officer
cannot be held solidarily liable with a corporation in the absence of evidence
that he had acted in bad faith or with malice. 39 In the present case, Sergio
Naguiat is held solidarily liable for corporate tort because he had actively
engaged in the management and operation of CFTI, a close corporation.
Antolin Naguiat not personally liable
Antolin T. Naguiat was the vice president of the CFTI. Although he carried the
title of "general manager" as well, it had not been shown that he had acted in
such capacity. Furthermore, no evidence on the extent of his participation in the
management or operation of the business was proffered. In this light, he cannot
be held solidarily liable for the obligations of CFTI and Sergio Naguiat to the
private respondents.
Fourth Issue: No Denial of Due Process
Lastly, in petitioners' Supplement to their original petition, they assail the NLRC
Resolution holding Sergio F. Naguiat and Antolin T. Naguiat jointly and
severally liable with petitioner-corporations in the payment of separation pay,
averring denial of due process since the individual Naguiats were not impleaded
as parties to the complaint.
We advert to the case of A.C. Ransom once more. The officers of the
corporation were not parties to the case when the judgment in favor of the
employees was rendered. The corporate officers raised this issue when the
labor arbiter granted the motion of the employees to enforce the judgment
against them. In spite of this, the Court held the corporation president solidarily
liable with the corporation.
Furthermore, Sergio and Antolin Naguiat voluntarily submitted
themselves to the jurisdiction of the labor arbiter when they, in their individual
capacities, filed a position paper 40 together with CFTI, before the arbiter.
They cannot now claim to have been denied due process since they availed of
the opportunity to present their positions.
WHEREFORE, the foregoing premises considered, the petition is
PARTLY GRANTED. The assailed February 28, 1994 Resolution of the
NLRC is hereby MODIFIED as follows:
(1)Petitioner Clark Field Taxi, Incorporated, and Sergio F. Naguiat,
president and co-owner thereof, are ORDERED to pay, jointly and severally,
the individual respondents their separation pay computed at US$120.00 for
every year of service, or its peso equivalent at the time of payment or
satisfaction of the judgment; cdtai
Upon failure of Rita Tapnio to pay her account with the Philippine
National Bank which was secured by a bond of the Philippine American
General Insurance Company, Inc. (PHILAMGEN), the latter paid the same
and then sued Rita Tapnio on their indemnity agreement. Rita Tapnio filed a
third party complaint against petitioner Bank because, earlier, the bank, as
mortgagee of her sugar quota allocation for the year 1956-1957 at a
reasonable lease price and demanded parties to the lease contract to further
raise their consideration, the difference between the lease price offered and
that demanded by the Bank being a measly total of P200.00. As a result
thereof, Rita Tapnio failed to utilize her sugar quota for that particular crop
year and to realize an amount which was more than enough to pay the
balance of her indebtedness to the bank which was secured and subsequently
paid by the bonding company. The trial court ordered the Philippine National
Bank to pay Rita Tapnio the same amounts she was ordered to pay to the
PHILAMGEN. This decision was affirmed by the Court of Appeals.
The Supreme Court found no reasonable basis for the Board of
Directors of petitioner Bank to disapprove the lease contract because of the
measly sum of P200.00 and ruled that although the Bank had the ultimate
authority of approving or disapproving the proposed lease, since the sugar
quota was mortgaged to it, it still had the responsibility of observing, for the
protection and interest of the mortgagor, that degree of care, precaution and
vigilance which the circumstances justly demand in approving or
disapproving the lease of said sugar quota.
SYLLABUS
ANTONIO, J : p
Certiorari to review the decision of the Court of Appeals which affirmed the
judgment of the Court of First Instance of Manila in Civil Case No. 34185,
ordering petitioner, as third-party defendant, to pay respondent Rita Gueco
Tapnio, as third-party plaintiff, the sum of P2,379.71, plus 12% interest per
annum from September 19, 1957 until the same is fully paid, P200.00 attorney's
fees and costs, the same amounts which Rita Gueco Tapnio was ordered to pay
the Philippine American General Insurance Co., Inc., to be paid directly to the
Philippine American General Insurance Co., Inc. in full satisfaction of the
judgment rendered against Rita Gueco Tapnio in favor of the former; plus
P500.00 attorney's fees for Rita Gueco Tapnio and costs. The basic action is the
complaint filed by Philamgen (Philippine American General Insurance Co., Inc.)
as surety against Rita Gueco Tapnio and Cecilio Gueco, for the recovery of the
sum of P2,379.71 paid by Philamgen to the Philippine National Bank on behalf
of respondents Tapnio and Gueco, pursuant to an indemnity agreement.
Petitioner Bank was made third-party defendant by Tapnio and Gueco on the
theory that their failure to pay the debt was due to the fault or negligence of
petitioner.
LibLex
The facts as found by the respondent Court of Appeals, in affirming the decision
of the Court of First Instance of Manila, are quoted hereunder:
"Plaintiff executed its Bond, Exh. A, with defendant Rita Gueco
Tapnio as principal, in favor of the Philippine National Bank Branch
at San Fernando, Pampanga, to guarantee the payment of defendant
Rita Gueco Tapnio's account with said Bank. In turn, to guarantee the
payment of whatever amount the bonding company would pay to the
Philippine National Bank, both defendants executed the indemnity
agreement, Exh. B. Under the terms and conditions of this indemnity
agreement, whatever amount the plaintiff would pay would earn
interest at the rate of 12% per annum, plus attorney's fees in the
amount of 15% of the whole amount due in case of court litigation.
"The original amount of the bond was for P4,000.00; but the amount
was later reduced to P2.000.00.
"It is not disputed that defendant Rita Gueco Tapnio was indebted to
the bank in the sum of P2,000.00, plus accumulated interests unpaid,
which she failed to pay despite demands. The Bank wrote a letter of
demand to plaintiff, as per Exh. C; whereupon, plaintiff paid the bank
on September 18, 1957, the full amount due and owing in the sum of
P2,379.91, for and on account of defendant Rita Gueco's obligation
(Exhs. D and D-1).
"Defendant Rita Gueco Tapnio admitted all the foregoing facts. She
claims, however, when demand was made upon her by plaintiff for her
to pay her debt to the Bank, that she told the plaintiff that she did not
consider herself to be indebted to the Bank at all because she had an
agreement with one Jacobo Tuazon whereby she had leased to the
latter her unused export sugar quota for the 1956-1957 agricultural
year, consisting of 1,000 piculs at the rate of P2.80 per picul, or for a
total of P2,800.00, which was already in excess of her obligation
guaranteed by plaintiff's bond, Exh. A. This lease agreement,
according to her, was with the knowledge of the bank. But the Bank
has placed obstacles to the consummation of the lease, and the delay
caused by said obstacles forced Tuazon to rescind the lease contract.
Thus, Rita Gueco Tapnio filed her third-party complaint against the
Bank to recover from the latter any and all sums of money which may
be adjudged against her and in favor of the plaintiff, plus moral
damages, attorney's fees and costs.
"The parties were notified of the refusal on the part of the board of
directors of the Bank to grant the motion for reconsideration. The
matter stood as it was until February 22, 1957, when Tuazon wrote a
letter (Exh. 10-Bank) informing the Bank that he was no longer
interested to continue the deal referring to the lease of sugar quota
allotment in favor of defendant Rita Gueco Tapnio. The result is that
the latter lost the sum of P2,800.00 which she should have received
from Tuazon and which she could have paid the Bank to cancel off her
indebtedness.
"The court below held, and in this holding we concur, that failure of
the negotiation for the lease of the sugar quota allocation of Rita
Gueco Tapnio to Tuazon was due to the fault of the directors of the
Philippine National Bank. The refusal on the part of the bank to
approve the lease at the rate of P2.80 per picul which, as stated above,
would have enabled Rita Gueco Tapnio to realize the amount of
P2,800.00 which was more than sufficient to pay off her indebtedness
to the Bank, and its insistence on the rental price of P3.00 per picul
thus unnecessarily increasing the value by only a difference of
P200.00, inevitably brought about the rescission of the lease contract
to the damage and prejudice of Rita Gueco Tapnio in the aforesaid
sum of P2,800.00. The unreasonableness of the position adopted by
the board of directors of the Philippine National Bank in refusing to
approve the lease at the rate of P2.80 per picul and insisting on the rate
of P3.00 per picul, if only to increase the retail value by only P200.00
is shown by the fact that all the accounts of Rita Gueco Tapnio with
the Bank were secured by chattel mortgage on standing crops,
assignment of leasehold rights and interests on her properties, and
surety bonds, aside from the fact that from Exh. 8-Bank, it appears that
she was offering to execute a real estate mortgage in favor of the Bank
to replace the surety bond. This statement is further bolstered by the
fact that Rita Gueco Tapnio apparently had the means to pay her
obligation to the Bank, as shown by the fact that she has been granted
several sugar crop loans of the total value of almost P80,000.00 for the
agricultural years from 1952 to 1956." 1
Its motion for the reconsideration of the decision of the Court of Appeals having
been denied, petitioner filed the present petition. LLphil
On February 22, 1957, Tuazon wrote a letter, informing the Bank that he was no
longer interested in continuing the lease of sugar quota allotment. The crop year
1956-1957 ended and Mrs. Tapnio failed to utilize her sugar quota, resulting in
her loss in the sum of P2,800.00 which she should have received had the lease in
favor of Tuazon been implemented.
It has been clearly shown that when the Branch Manager of petitioner required
the parties to raise the consideration of the lease from P2.50 to P2.80 per picul, or
a total of P2,800.00, they readily agreed. Hence, in his letter to the Branch
Manager of the Bank on August 10, 1956, Tuazon informed him that the
minimum lease rental of P2.80 per picul was acceptable to him and that he even
offered to use the loan secured by him from petitioner to pay in full the sum of
P2,800.00 which was the total consideration of the lease. This arrangement was
not only satisfactory to the Branch Manager but it was also approved by
Vice-President J. V. Buenaventura of the PNB. Under that arrangement, Rita
Gueco Tapnio could have realized the amount of P2,800.00, which was more
than enough to pay the balance of her indebtedness to the Bank which was
secured by the bond of Philamgen.
There is no question that Tapnio's failure to utilize her sugar quota for the crop
year 1956-1957 was due to the disapproval of the lease by the Board of Directors
of petitioner. The issue, therefore, is whether or not petitioner is liable for the
damage caused.
As observed by the trial court, time is of the essence in the approval of the lease
of sugar quota allotments, since the same must be utilized during the milling
season, because any allotment which is not filled during such milling season may
be reallocated by the Sugar Quota Administration to other holders of
allotments. 3 There was no proof that there was any other person at that time
willing to lease the sugar quota allotment of private respondents for a price
higher than P2.80 per picul. "The fact that there were isolated transactions
wherein the consideration for the lease was P3.00 a picul", according to the trial
court, "does not necessarily mean that there are always ready takers of said
price." The unreasonableness of the position adopted by the petitioner's Board of
Directors is shown by the fact that the difference between the amount of P2.80
per picul offered by Tuazon and the P3.00 per picul demanded by the Board
amounted only to a total sum of P200.00. Considering that all the accounts of
Rita Gueco Tapnio with the Bank were secured by chattel mortgage on standing
crops, assignment of leasehold rights and interests on her properties, and surety
bonds and that she had apparently "the means to pay her obligation to the Bank,
as shown by the fact that she has been granted several sugar crop loans of the
total value of almost P80,000.00 for the agricultural years from 1952 to 1956",
there was no reasonable basis for the Board of Directors of petitioner to have
rejected the lease agreement because of a measly sum of P200.00.
While petitioner had the ultimate authority of approving or disapproving the
proposed lease since the quota was mortgaged to the Bank, the latter certainly
cannot escape its responsibility of observing, for the protection of the interest of
private respondents, that degree of care, precaution and vigilance which the
circumstances justly demand in approving or disapproving the lease of said
sugar quota. The law makes it imperative that every person "must in the exercise
of his rights and in the performance of his duties, act with justice, give everyone
his due, and observe honesty and good faith." 4 This petitioner failed to do.
Certainly, it knew that the agricultural year was about to expire, that by its
disapproval of the lease private respondents would be unable to utilize the sugar
quota in question. In failing to observe the reasonable degree of care and
vigilance which the surrounding circumstances reasonably impose, petitioner is
consequently liable for the damages caused on private respondents. Under
Article 21 of the New Civil Code, "any person who wilfully causes loss or injury
to another in a manner that is contrary to morals, good customs or public policy
shall compensate the latter for the damage." The afore-cited provisions on
human relations were intended to expand the concept of torts in this jurisdiction
by granting adequate legal remedy for the untold number of moral wrongs which
is impossible for human foresight to specifically provide in the statutes. 5
A corporation is civilly liable in the same manner as natural persons for torts,
because "generally speaking, the rules governing the liability of a principal or
master for a tort committed by an agent or servant are the same whether the
principal or master be a natural person or a corporation, and whether the servant
or agent be a natural or artificial person. All of the authorities agree that a
principal or master is liable for every tort which he expressly directs or
authorizes, and this is just as true of a corporation as of a natural person. A
corporation is liable, therefore, whenever a tortious act is committed by an
officer or agent under express direction or authority from the stockholders or
members acting as a body, or, generally, from the directors as the governing
body." 6
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is
hereby AFFIRMED. LibLex
(Philippine National Bank v. Court of Appeals, G.R. No. L-27155, [May 18,
|||
Xxxxxxxxxxxxxxxxxxxxxxxxxxxx
DECISION
TINGA, J :p
DECISION
CARPIO, J : p
The Case
This petition for review 1 assails the 4 January 1999 Decision 2 and 26 January
2000 Resolution of the Court of Appeals in CA-G.R. CV No. 40151. The Court
of Appeals affirmed with modification the 14 December 1992 Decision 3 of the
Regional Trial Court of Legazpi City, Branch 10, in Civil Case No. 8236. The
Court of Appeals held Filipinas Broadcasting Network, Inc. and its broadcasters
Hermogenes Alegre and Carmelo Rima liable for libel and ordered them to
solidarily pay Ago Medical and Educational Center-Bicol Christian College of
Medicine moral damages, attorney's fees and costs of suit.
The Antecedents
"Exposé" is a radio documentary 4 program hosted by Carmelo 'Mel' Rima
("Rima") and Hermogenes ‘Jun' Alegre ("Alegre"). 5Exposé is aired every
morning over DZRC-AM which is owned by Filipinas Broadcasting Network,
Inc. ("FBNI"). "Exposé" is heard over Legazpi City, the Albay municipalities
and other Bicol areas. 6
In the morning of 14 and 15 December 1989, Rima and Alegre exposed various
alleged complaints from students, teachers and parents against Ago Medical and
Educational Center-Bicol Christian College of Medicine ("AMEC") and its
administrators. Claiming that the broadcasts were defamatory, AMEC and
Angelita Ago ("Ago"), as Dean of AMEC's College of Medicine, filed a
complaint for damages 7 against FBNI, Rima and Alegre on 27 February 1990.
Quoted are portions of the allegedly libelous broadcasts: ETHCDS
JUN ALEGRE:
Let us begin with the less burdensome: if you have children taking
medical course at AMEC-BCCM, advise them to pass all subjects
because if they fail in any subject they will repeat their year level,
taking up all subjects including those they have passed already.
Several students had approached me stating that they had consulted
with the DECS which told them that there is no such regulation. If
[there] is no such regulation why is AMEC doing the same?
Third: Students are required to take and pay for the subject even if the
subject does not have an instructor — such greed for money on the
part of AMEC's administration. Take the subject Anatomy: students
would pay for the subject upon enrolment because it is offered by the
school. However there would be no instructor for such subject.
Students would be informed that course would be moved to a later
date because the school is still searching for the appropriate
instructor.
MEL RIMA:
May I say I'm sorry to Dean Justita Lola. But this is the truth. The truth
is this, that your are no longer fit to teach. You are too old. As an
aviation, your case is zero visibility. Don't insist.
. . . Why did AMEC still absorb her as a teacher, a dean, and chairman
of the scholarship committee at that. The reason is practical cost
saving in salaries, because an old person is not fastidious, so long as
she has money to buy the ingredient of beetle juice. The elderly can
get by — that's why she (Lola) was taken in as Dean.
Thereafter, trial ensued. During the presentation of the evidence for the defense,
Atty. Edmundo Cea, collaborating counsel of Atty. Lozares, filed a Motion to
Dismiss 11 on FBNI's behalf. The trial court denied the motion to dismiss.
Consequently, FBNI filed a separate Answer claiming that it exercised due
diligence in the selection and supervision of Rima and Alegre. FBNI claimed
that before hiring a broadcaster, the broadcaster should (1) file an application; (2)
be interviewed; and (3) undergo an apprenticeship and training program after
passing the interview. FBNI likewise claimed that it always reminds its
broadcasters to "observe truth, fairness and objectivity in their broadcasts and to
refrain from using libelous and indecent language." Moreover, FBNI requires all
broadcasters to pass the Kapisanan ng mga Brodkaster sa Pilipinas ("KBP")
accreditation test and to secure a KBP permit.
On 14 December 1992, the trial court rendered a Decision 12 finding FBNI and
Alegre liable for libel except Rima. The trial court held that the broadcasts are
libelous per se. The trial court rejected the broadcasters' claim that their
utterances were the result of straight reporting because it had no factual basis.
The broadcasters did not even verify their reports before airing them to show
good faith. In holding FBNI liable for libel, the trial court found that FBNI failed
to exercise diligence in the selection and supervision of its employees.
In absolving Rima from the charge, the trial court ruled that Rima's only
participation was when he agreed with Alegre's exposé. The trial court found
Rima's statement within the "bounds of freedom of speech, expression, and of
the press." The dispositive portion of the decision reads:
WHEREFORE, premises considered, this court finds for the
plaintiff. Considering the degree of damages caused by the
controversial utterances, which are not found by this court to be really
very serious and damaging, and there being no showing that indeed
the enrollment of plaintiff school dropped, defendants Hermogenes
"Jun" Alegre, Jr. and Filipinas Broadcasting Network (owner of the
radio station DZRC), are hereby jointly and severally ordered to pay
plaintiff Ago Medical and Educational Center-Bicol Christian College
of Medicine (AMEC-BCCM) the amount of P300,000.00 moral
damages, plus P30,000.00 reimbursement of attorney's fees, and to
pay the costs of suit.
DETcAH
Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago,
on the other, appealed the decision to the Court of Appeals. The Court of
Appeals affirmed the trial court's judgment with modification. The appellate
court made Rima solidarily liable with FBNI and Alegre. The appellate court
denied Ago's claim for damages and attorney's fees because the broadcasts were
directed against AMEC, and not against her. The dispositive portion of the Court
of Appeals' decision reads:
SO ORDERED. 14
FBNI, Rima and Alegre filed a motion for reconsideration which the Court of
Appeals denied in its 26 January 2000 Resolution.
Hence, FBNI filed this petition. 15
The Ruling of the Court of Appeals
The Court of Appeals upheld the trial court's ruling that the questioned
broadcasts are libelous per se and that FBNI, Rima and Alegre failed to
overcome the legal presumption of malice. The Court of Appeals found Rima
and Alegre's claim that they were actuated by their moral and social duty to
inform the public of the students' gripes as insufficient to justify the utterance of
the defamatory remarks.
Finding no factual basis for the imputations against AMEC's administrators, the
Court of Appeals ruled that the broadcasts were made "with reckless disregard as
to whether they were true or false." The appellate court pointed out that FBNI,
Rima and Alegre failed to present in court any of the students who allegedly
complained against AMEC. Rima and Alegre merely gave a single name when
asked to identify the students. According to the Court of Appeals, these
circumstances cast doubt on the veracity of the broadcasters' claim that they
were "impelled by their moral and social duty to inform the public about the
students' gripes."
The Court of Appeals found Rima also liable for libel since he remarked that "(1)
AMEC-BCCM is a dumping ground for morally and physically misfit teachers;
(2) AMEC obtained the services of Dean Justita Lola to minimize expenses on
its employees' salaries; and (3) AMEC burdened the students with unreasonable
imposition and false regulations." 16
The Court of Appeals held that FBNI failed to exercise due diligence in the
selection and supervision of its employees for allowing Rima and Alegre to
make the radio broadcasts without the proper KBP accreditation. The Court of
Appeals denied Ago's claim for damages and attorney's fees because the libelous
remarks were directed against AMEC, and not against her. The Court of Appeals
adjudged FBNI, Rima and Alegre solidarily liable to pay AMEC moral damages,
attorney's fees and costs of suit.
CIAacS
Issues
FBNI raises the following issues for resolution:
I. WHETHER THE BROADCASTS ARE LIBELOUS;
II. WHETHER AMEC IS ENTITLED TO MORAL
DAMAGES;
III. WHETHER THE AWARD OF ATTORNEY'S FEES
IS PROPER; and
IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH
RIMA AND ALEGRE FOR PAYMENT OF MORAL
DAMAGES, ATTORNEY'S FEES AND COSTS OF
SUIT.
The Court's Ruling
We deny the petition.
This is a civil action for damages as a result of the allegedly defamatory remarks
of Rima and Alegre against AMEC. 17 While AMEC did not point out clearly the
legal basis for its complaint, a reading of the complaint reveals that AMEC's
cause of action is based on Articles 30 and 33 of the Civil Code. Article
30 18 authorizes a separate civil action to recover civil liability arising from a
criminal offense. On the other hand, Article 33 19 particularly provides that the
injured party may bring a separate civil action for damages in cases of
defamation, fraud, and physical injuries. AMEC also invokes Article 19 20 of the
Civil Code to justify its claim for damages. AMEC cites Articles
2176 21 and 2180 22 of the Civil Code to hold FBNI solidarily liable with Rima
and Alegre.
I.
Whether the broadcasts are libelous
A libel 23 is a public and malicious imputation of a crime, or of a vice or defect,
real or imaginary, or any act or omission, condition, status, or circumstance
tending to cause the dishonor, discredit, or contempt of a natural or juridical
person, or to blacken the memory of one who is dead. 24
There is no question that the broadcasts were made public and imputed to AMEC
defects or circumstances tending to cause it dishonor, discredit and contempt.
Rima and Alegre's remarks such as "greed for money on the part of AMEC's
administrators"; "AMEC is a dumping ground, garbage of . . . moral and physical
misfits"; and AMEC students who graduate "will be liabilities rather than assets"
of the society are libelous per se. Taken as a whole, the broadcasts suggest that
AMEC is a money-making institution where physically and morally unfit
teachers abound. HDCAaS
However, FBNI contends that the broadcasts are not malicious. FBNI claims that
Rima and Alegre were plainly impelled by their civic duty to air the students'
gripes. FBNI alleges that there is no evidence that ill will or spite motivated
Rima and Alegre in making the broadcasts. FBNI further points out that Rima
and Alegre exerted efforts to obtain AMEC's side and gave Ago the opportunity
to defend AMEC and its administrators. FBNI concludes that since there is no
malice, there is no libel.
FBNI's contentions are untenable.
Every defamatory imputation is presumed malicious. 25 Rima and Alegre failed
to show adequately their good intention and justifiable motive in airing the
supposed gripes of the students. As hosts of a documentary or public affairs
program, Rima and Alegre should have presented the public issues "free
from inaccurate and misleading information." 26 Hearing the students' alleged
complaints a month before the exposé, 27 they had sufficient time to verify their
sources and information. However, Rima and Alegre hardly made a thorough
investigation of the students' alleged gripes. Neither did they inquire about nor
confirm the purported irregularities in AMEC from the Department of Education,
Culture and Sports. Alegre testified that he merely went to AMEC to verify his
report from an alleged AMEC official who refused to disclose any information.
Alegre simply relied on the words of the students "because they were many and
not because there is proof that what they are saying is true." 28 This plainly
shows Rima and Alegre's reckless disregard of whether their report was true or
not.
Contrary to FBNI's claim, the broadcasts were not "the result of straight
reporting." Significantly, some courts in the United States apply the privilege of
"neutral reportage" in libel cases involving matters of public interest or public
figures. Under this privilege, a republisher who accurately and disinterestedly
reports certain defamatory statements made against public figures is shielded
from liability, regardless of the republisher's subjective awareness of the truth or
falsity of the accusation. 29 Rima and Alegre cannot invoke the privilege of
neutral reportage because unfounded comments abound in the broadcasts.
Moreover, there is no existing controversy involving AMEC when the
broadcasts were made. The privilege of neutral reportage applies where the
defamed person is a public figure who is involved in an existing controversy, and
a party to that controversy makes the defamatory statement. 30
However, FBNI argues vigorously that malice in law does not apply to this case.
Citing Borjal v. Court of Appeals, 31 FBNI contends that the broadcasts "fall
within the coverage of qualifiedly privileged communications" for being
commentaries on matters of public interest. Such being the case, AMEC should
prove malice in fact or actual malice. Since AMEC allegedly failed to prove
actual malice, there is no libel. AISHcD
The allegation that plaintiff was getting tremendous aids from foreign
foundations like Mcdonald Foundation prove not to be true also. The
truth is there is no Mcdonald Foundation existing. Although a big
building of plaintiff school was given the name Mcdonald building,
that was only in order to honor the first missionary in Bicol of
plaintiffs' religion, as explained by Dr. Lita Ago. Contrary to the claim
of defendants over the air, not a single centavo appears to be received
by plaintiff school from the aforementioned McDonald Foundation
which does not exist.
Defendants did not even also bother to prove their claim, though
denied by Dra. Ago, that when medical students fail in one subject,
they are made to repeat all the other subject[s], even those they have
already passed, nor their claim that the school charges laboratory fees
even if there are no laboratories in the school. No evidence was
presented to prove the bases for these claims, at least in order to give
semblance of good faith.
As for the allegation that plaintiff is the dumping ground for misfits,
and immoral teachers, defendant[s] singled out Dean Justita Lola who
is said to be so old, with zero visibility already. Dean Lola testified in
court last Jan. 21, 1991, and was found to be 75 years old. . . . Even
older people prove to be effective teachers like Supreme Court
Justices who are still very much in demand as law professors in their
late years. Counsel for defendants is past 75 but is found by this court
to be still very sharp and effective. So is plaintiffs' counsel.
Dr. Lola was observed by this court not to be physically decrepit yet,
nor mentally infirmed, but is still alert and docile.
1. . . .
The broadcasts fail to meet the standards prescribed in the Radio Code, which
lays down the code of ethical conduct governing practitioners in the radio
broadcast industry. The Radio Code is a voluntary code of conduct imposed by
the radio broadcast industry on its own members. The Radio Code is a public
warranty by the radio broadcast industry that radio broadcast practitioners are
subject to a code by which their conduct are measured for lapses, liability and
sanctions.
The public has a right to expect and demand that radio broadcast practitioners
live up to the code of conduct of their profession, just like other professionals. A
professional code of conduct provides the standards for determining whether a
person has acted justly, honestly and with good faith in the exercise of his rights
and performance of his duties as required by Article 19 37 of the Civil Code. A
professional code of conduct also provides the standards for determining
whether a person who willfully causes loss or injury to another has acted in a
manner contrary to morals or good customs under Article 21 38 of the Civil
Code. TESDcA
II.
Whether AMEC is entitled to moral damages
FBNI contends that AMEC is not entitled to moral damages because it is a
corporation. 39
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. 40 The Court
of Appeals cites Mambulao Lumber Co. v. PNB, et al. 41 to justify the award of
moral damages. However, the Court's statement in Mambulao that "a
corporation may have a good reputation which, if besmirched, may also be a
ground for the award of moral damages" is an obiter dictum. 42
Nevertheless, AMEC's claim for moral damages falls under item 7 of Article
2219 43 of the Civil Code. This provision expressly authorizes the recovery of
moral damages in cases of libel, slander or any other form of defamation. Article
2219(7) does not qualify whether the plaintiff is a natural or juridical person.
Therefore, a juridical person such as a corporation can validly complain for libel
or any other form of defamation and claim for moral damages. 44
Moreover, where the broadcast is libelous per se, the law implies damages. 45 In
such a case, evidence of an honest mistake or the want of character or reputation
of the party libeled goes only in mitigation of damages. 46 Neither in such a case
is the plaintiff required to introduce evidence of actual damages as a condition
precedent to the recovery of some damages. 47 In this case, the broadcasts are
libelous per se. Thus, AMEC is entitled to moral damages.
However, we find the award of P300,000 moral damages unreasonable. The
record shows that even though the broadcasts were libelous per se, AMEC has
not suffered any substantial or material damage to its reputation. Therefore, we
reduce the award of moral damages from P300,000 to P150,000.
III.
Whether the award of attorney's fees is proper
FBNI contends that since AMEC is not entitled to moral damages, there is no
basis for the award of attorney's fees. FBNI adds that the instant case does not
fall under the enumeration in Article 2208 48 of the Civil Code.
The award of attorney's fees is not proper because AMEC failed to justify
satisfactorily its claim for attorney's fees. AMEC did not adduce evidence to
warrant the award of attorney's fees. Moreover, both the trial and appellate
courts failed to explicitly state in their respective decisions the rationale for the
award of attorney's fees. 49 In Inter-Asia Investment Industries, Inc. v. Court of
Appeals, 50 we held that:
[I]t is an accepted doctrine that the award thereof as an item of
damages is the exception rather than the rule, and counsel's fees are
not to be awarded every time a party wins a suit. The power of the
court to award attorney's fees under Article 2208 of the Civil Code
demands factual, legal and equitable justification, without which the
award is a conclusion without a premise, its basis being improperly
left to speculation and conjecture. In all events, the court must
explicitly state in the text of the decision, and not only in the decretal
portion thereof, the legal reason for the award of attorney's
fees. 51(Emphasis supplied) ASHEca
While it mentioned about the award of attorney's fees by stating that it "lies
within the discretion of the court and depends upon the circumstances of each
case," the Court of Appeals failed to point out any circumstance to justify the
award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre for moral damages,
attorney's fees and costs of suit
FBNI contends that it is not solidarily liable with Rima and Alegre for the
payment of damages and attorney's fees because it exercised due diligence in the
selection and supervision of its employees, particularly Rima and Alegre. FBNI
maintains that its broadcasters, including Rima and Alegre, undergo a "very
regimented process" before they are allowed to go on air. "Those who apply for
broadcaster are subjected to interviews, examinations and an apprenticeship
program."
FBNI further argues that Alegre's age and lack of training are irrelevant to his
competence as a broadcaster. FBNI points out that the "minor deficiencies in the
KBP accreditation of Rima and Alegre do not in any way prove that FBNI did
not exercise the diligence of a good father of a family in selecting and
supervising them." Rima's accreditation lapsed due to his non-payment of the
KBP annual fees while Alegre's accreditation card was delayed allegedly for
reasons attributable to the KBP Manila Office. FBNI claims that membership in
the KBP is merely voluntary and not required by any law or government
regulation.
FBNI's arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are jointly and severally
liable for the tort which they commit. 52 Joint tort feasors are all the persons who
command, instigate, promote, encourage, advise, countenance, cooperate in, aid
or abet the commission of a tort, or who approve of it after it is done, if done for
their benefit. 53 Thus, AMEC correctly anchored its cause of action against
FBNI on Articles 2176 and 2180 of the Civil Code. HaAIES
SO ORDERED.
(Filipinas Broadcasting Network, Inc. v. Ago Medical & Educational
|||
DECISION
KAPUNAN, J : p
Petitioner secured the airline tickets for the trips of the athletes and officials of
the Federation to the South East Asian Games in Kuala Lumpur as well as
various other trips to the People's Republic of China and Brisbane. The total cost
of the tickets amounted to P449,654.83. For the tickets received, the Federation
made two partial payments, both in September of 1989, in the total amount of
P176,467.50. 2
On 4 October 1989, petitioner wrote the Federation, through the private
respondent a demand letter requesting for the amount of P265,894.33. 3 On 30
October 1989, the Federation, through the Project Gintong Alay, paid the
amount of P31,603.00. 4
On 27 December 1989, Henri Kahn issued a personal check in the amount of
P50,000 as partial payment for the outstanding balance of the
Federation. 5 Thereafter, no further payments were made despite repeated
demands.
This prompted petitioner to file a civil case before the Regional Trial Court of
Manila. Petitioner sued Henri Kahn in his personal capacity and as President of
the Federation and impleaded the Federation as an alternative defendant.
Petitioner sought to hold Henri Kahn liable for the unpaid balance for the tickets
purchased by the Federation on the ground that Henri Kahn allegedly guaranteed
the said obligation. 6
Henri Kahn filed his answer with counterclaim. While not denying the allegation
that the Federation owed the amount P207,524.20, representing the unpaid
balance for the plane tickets, he averred that the petitioner has no cause of action
against him either in his personal capacity or in his official capacity as president
of the Federation. He maintained that he did not guarantee payment but merely
acted as an agent of the Federation which has a separate and distinct juridical
personality. 7
On the other hand, the Federation failed to file its answer, hence, was declared in
default by the trial court. 8
In due course, the trial court rendered judgment and ruled in favor of the
petitioner and declared Henri Kahn personally liable for the unpaid obligation of
the Federation. In arriving at the said ruling, the trial court rationalized:
Defendant Henri Kahn would have been correct in his contentions had
it been duly established that defendant Federation is a corporation.
The trouble, however, is that neither the plaintiff nor the defendant
Henri Kahn has adduced any evidence proving the corporate existence
of the defendant Federation. In paragraph 2 of its complaint, plaintiff
asserted that "defendant Philippine Football Federation is a sports
association . . . ." This has not been denied by defendant Henri Kahn in
his Answer. Being the President of defendant Federation, its corporate
existence is within the personal knowledge of defendant Henri Kahn.
He could have easily denied specifically the assertion of the plaintiff
that it is a mere sports association if it were a domestic corporation.
But he did not.
Only Henri Kahn elevated the above decision to the Court of Appeals. On 21
December 1994, the respondent court rendered a decision reversing the trial
court, the decretal portion of said decision reads:
WHEREFORE, premises considered, the judgment appealed from is
hereby REVERSED and SET ASIDE and another one is rendered
dismissing the complaint against defendant Henri S. Kahn. 11
In finding for Henri Kahn, the Court of Appeals recognized the juridical
existence of the Federation. It rationalized that since petitioner failed to prove
that Henri Kahn guaranteed the obligation of the Federation, he should not be
held liable for the same as said entity has a separate and distinct personality from
its officers.
Petitioner filed a motion for reconsideration and as an alternative prayer pleaded
that the Federation be held liable for the unpaid obligation. The same was denied
by the appellate court in its resolution of 8 February 1995, where it stated that:
As to the alternative prayer for the Modification of the Decision by
expressly declaring in the dispositive portion thereof the Philippine
Football Federation (PFF) as liable for the unpaid obligation, it should
be remembered that the trial court dismissed the complaint against the
Philippine Football Federation, and the plaintiff did not appeal from
this decision. Hence, the Philippine Football Federation is not a party
to this appeal and consequently, no judgment may be pronounced by
this Court against the PFF without violating the due process clause, let
alone the fact that the judgment dismissing the complaint against it,
had already become final by virtue of the plaintiff's failure to appeal
therefrom. The alternative prayer is therefore similarly DENIED. 12
Petitioner now seeks recourse to this Court and alleges that the respondent court
committed the following assigned errors: 13
A. THE, HONORABLE COURT OF APPEALS ERRED
IN HOLDING THAT PETITIONER HAD DEALT
WITH THE PHILIPPINE FOOTBALL FEDERATION
(PFF) AS A CORPORATE ENTITY AND IN NOT
HOLDING THAT PRIVATE RESPONDENT HENRI
KAHN WAS THE ONE, WHO REPRESENTED THE
PFF AS HAVING CORPORATE PERSONALITY.
B. THE HONORABLE COURT OF APPEALS ERRED
IN NOT HOLDING PRIVATE RESPONDENT HENRI
KAHN PERSONALLY LIABLE FOR THE
OBLIGATION OF THE UNINCORPORATED PFF,
HAVING NEGOTIATED WITH PETITIONER AND
CONTRACTED THE OBLIGATION IN BEHALF OF
THE PFF, MADE A PARTIAL PAYMENT AN
ASSURED PETITIONER OF FULLY SETTLING THE
OBLIGATION.
C. ASSUMING ARGUENDO THAT PRIVATE
RESPONDENT KAHN IS NOT PERSONALLY
LIABLE, THE HONORABLE COURT OF APPEALS
ERRED IN NOT EXPRESSLY DECLARING IN ITS
DECISION THAT THE PFF IS SOLELY LIABLE FOR
THE OBLIGATION.
The resolution of the case at bar hinges on the determination of the existence of
the Philippine Football Federation as a juridical person. In the assailed decision,
the appellate court recognized the existence of the Federation. In support of this,
the CA cited Republic Act 3135, otherwise known as the Revised Charter of the
Philippine Amateur Athletic Federation, and Presidential Decree No. 604 as the
laws from which said Federation derives its existence.
As correctly observed by the appellate court, both R.A. 3135 and P.D. No.
604 recognized the juridical existence of national sports associations. This may
be gleaned from the powers and functions granted to these associations. Section
14 of R.A. 3135 provides:
SEC. 14. Functions, powers and duties of Associations. — The
National Sports' Association shall have the following functions,
powers and duties:
The above powers and functions granted to national sports associations clearly
indicate that these entities may acquire a juridical personality. The power to
purchase, sell, lease and encumber property are acts which may only be done by
persons, whether natural or artificial, with juridical capacity. However, while we
agree with the appellate court that national sports associations may be accorded
corporate status, such does not automatically take place by the mere passage of
these laws.
Clearly the above cited provisions require that before an entity may be
considered as a national sports association, such entity must be recognized by the
accrediting organization, the Philippine, Amateur Athletic Federation under R.A.
3135, and the Department of Youth and Sports Development under P.D. 604.
This fact of recognition, however, Henri Kahn failed to substantiate. In
attempting to prove the juridical existence of the Federation, Henri Kahn
attached to his motion for reconsideration before the trial court a copy of the
constitution and by-laws of the Philippine Football Federation. Unfortunately,
the same does not prove that said Federation has indeed been recognized and
accredited by either the Philippine Amateur Athletic Federation or the
Department of Youth and Sports Development. Accordingly, we rule that the
Philippine Football Federation is not a national sports association within the
purview of the aforementioned laws and does not have corporate existence of its
own. caCTHI
Thus being said, it follows that private respondent Henry Kahn should be held
liable for the unpaid obligations of the unincorporated Philippine Football
Federation. It is a settled principle in corporation law that any person acting or
purporting to act on behalf of a corporation which has no valid existence
assumes such privileges and becomes personally liable for contract entered into
or for other acts performed as such agent. 14 As president of the Federation,
Henri Kahn is presumed to have known about the corporate existence or
non-existence of the Federation. We cannot subscribe to the position taken by
the appellate court that even assuming that the Federation was defectively
incorporated, the petitioner cannot deny the corporate existence of the
Federation because it had contracted and dealt with the Federation in such a
manner as to recognize and in effect admit its existence. 15 The doctrine of
corporation by estoppel is mistakenly applied by the respondent court to the
petitioner. The application of the doctrine applies to a third party only when he
tries to escape liabilities on a contract from which he has benefited on the
irrelevant ground of defective incorporation. 16 In the case at bar, the petitioner is
not trying to escape liability from the contract but rather is the one claiming from
the contract.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE.
The decision of the Regional Trial Court of Manila, Branch 35, in Civil Case No.
90-53595 is hereby REINSTATED.
SO ORDERED.
(International Express Travel & Tour Services, Inc. v. Court of Appeals, G.R.
|||
GUTIERREZ, JR., J : p
This is a petition to review the decision and resolution of the Court of Appeals in
CA-G.R. No. 14530 affirming the earlier decision of the Regional Trial Court of
Laguna, Branch 37, at Calamba, in the consolidated RTC Civil Case Nos.
802-84-C and 803-84-C entitled "Heirs of Eugenia V. Roxas, Inc. v. Rebecca
Boyer-Roxas" and Heirs of Eugenia V. Roxas, Inc. v. Guillermo Roxas," the
dispositive portion of which reads:
"IN VIEW OF THE FOREGOING, judgment is hereby rendered in
favor of the plaintiff and against the defendants, by ordering as it is
hereby ordered that:
b) Pay the plaintiff the amount of P300.00 per month from September
10, 1983, for her occupancy of the residential house until the same is
vacated;
d) Pay the plaintiff the amount of P100.00 per month from September
10, 1983, until the said unfinished building is removed from the land
of the plaintiff; and
2) In RTC Civil Case No. 803-84-C: Guillermo Roxas and all persons
claiming under him to: LexLib
b) Pay the plaintiff the amount of P300.00 per month from September
10, 1983, for his occupancy of the said residential house until the same
is vacated; and
In two (2) separate complaints for recovery of possession filed with the Regional
Trial Court of Laguna against petitioners Rebecca Boyer-Roxas and Guillermo
Roxas respectively, respondent corporation, Heirs of Eugenia V. Roxas, Inc.,
prayed for the ejectment of the petitioners from buildings inside the Hidden
Valley Springs Resort located at Limao, Calauan, Laguna allegedly owned by
the respondent corporation.
In the case of petitioner Rebecca Boyer-Roxas (Civil Case No. 802-84-C), the
respondent corporation alleged that Rebecca is in possession of two (2) houses,
one of which is still under construction, built at the expense of the respondent
corporation; and that her occupancy on the two (2) houses was only upon the
tolerance of the respondent corporation.
In the case of petitioner Guillermo Roxas (Civil Case No. 803-84-C), the
respondent corporation alleged that Guillermo occupies a house which was built
at the expense of the former during the time when Guillermo's father, Eriberto
Roxas, was still living and was the general manager of the respondent
corporation; that the house was originally intended as a recreation hall but was
converted for the residential use of Guillermo; and that Guillermo's possession
over the house and lot was only upon the tolerance of the respondent
corporation.
In both cases, the respondent corporation alleged that the petitioners never paid
rentals for the use of the buildings and the lots and that they ignored the demand
letters for them to vacate the buildings.
In their separate answers, the petitioners traversed the allegations in the
complaint by stating that they are heirs of Eugenia V. Roxas and therefore,
co-owners of the Hidden Valley Springs Resort; and as co-owners of the
property, they have the right to stay within its premises.
The cases were consolidated and tried jointly.
At the pre-trial, the parties limited the issues as follows:
"1) whether plaintiff is entitled to recover the questioned premises;
II. The respondent Court erred in not holding that petitioners were in
fact denied due process or their day in court brought about by the gross
negligence of their former counsel.
Were the petitioners denied due process of law in the lower court?
After the cases were re-raffled to the sala of Presiding Judge Odilon Bautista of
Branch 37 the following events transpired:
On July 3, 1986, the lower court issued an Order setting the hearing of the cases
on July 21, 1986. Petitioner Rebecca V. Roxas received a copy of the Order on
July 15, 1986, while petitioner Guillermo Roxas received his copy on July 18,
1986. Atty. Conrado Manicad, the petitioners' counsel received another copy of
the Order on July 11, 1986. (Original Records, p. 260)
On motion of the respondent corporation's counsel, the lower court issued an
Order dated July 15, 1986 cancelling the July 21, 1986 hearing and resetting the
hearing to August 11, 1986. (Original records, 262-263) Three separate copies of
the order were sent and received by the petitioners and their counsel. (Original
Records, pp. 268, 269, 271)
A motion to cancel and re-schedule the August 11, 1986 hearing filed by the
respondent corporation's counsel was denied in an Order dated August 8, 1986.
Again separate copies of the Order were sent and received by the petitioners and
their counsel. (Original Records, pp. 276-279)
At the hearing held on August 11, 1986, only Atty. Benito P. Fabie, counsel for
the respondent corporation appeared. Neither the petitioners nor their counsel
appeared despite notice of hearing. The lower court then issued an Order on the
same date, to wit:
"ORDER
When these cases were called for continuation of trial, Atty. Benito P.
Fabie appeared before this Court, however, the defendants and their
lawyer despite receipt of the Order setting the case for hearing today
failed to appear. On Motion of Atty. Fabie, further cross examination
of witness Victoria Vallarta is hereby considered as having been
waived.
The plaintiff is hereby given twenty (20) days from today within
which to submit formal offer of evidence and defendants are also
given ten (10) days from receipt of such formal offer of evidence to
file their objection thereto.
Copies of the Order were sent and received by the petitioners and their counsel
on the following dates — Rebecca Boyer-Roxas on August 20, 1986, Guillermo
Roxas on August 26, 1986, and Atty. Conrado Manicad on September 19, 1986.
(Original Records, pp. 288-290)
On September 1, 1986, the respondent corporation filed its "Formal Offer of
Evidence." In an Order dated September 29, 1986, the lower court issued an
Order admitting exhibits "A" to "M-3" submitted by the respondent corporation
in its "Formal Offer of Evidence . . . there being no objection . . . ." (Original
Records, p. 418) Copies of this Order were sent and received by the petitioners
and their counsel on the following dates: Rebecca Boyer-Roxas on October 9,
1986 and Atty. Conrado Manicad on October 4, 1986 (Original Records, pp. 420,
421, 428)
The scheduled hearing on September 29, 1986 did not push through as the
petitioners and their counsel were not present prompting Atty. Benito Fabie, the
respondent corporation's counsel to move that the cases be submitted for
decision. The lower court denied the motion and set the cases for hearing on
October 22, 1986. However, in its Order dated September 29, 1986, the
court warned that in the event the petitioners and their counsel failed to appear
on the next scheduled hearing, the court shall consider the cases submitted for
decision based on the evidence on record. (Original Records, p. 429, 430 and
431)
Separate copies of this Order were sent and received by the petitioners and their
counsel on the following dates: Rebecca Boyer-Roxas on October 9, 1986,
Guillermo Roxas on October 9, 1986; and Atty. Conrado Manicad on October 1,
1986. (Original Records, pp. 429-430) prcd
Despite notice, the petitioners and their counsel again filed to attend the
scheduled October 22, 1986 hearing. Atty. Fabie representing the respondent
corporation was present. Hence, in its Order dated October 22, 1986, on motion
of Atty. Fabie and pursuant to the order dated September 29, 1986, the Court
considered the cases submitted for decision. (Original Records, p. 436)
On November 14, 1986, the respondent corporation, filed a "Manifestation",
stating that ". . . it is submitting without further argument its `Opposition to the
Motion for Reconsideration' for the consideration of the Honorable Court in
resolving subject incident." (Original Records, p. 442)
On December 16, 1986, the lower court issued an Order, to wit:
"ORDER
Considering that the Court up to this date has not received any Motion
for Reconsideration filed by the defendants in the above-entitled cases,
the Court cannot act on the Opposition to Motion for Reconsideration
filed by the plaintiff and received by the Court on November 14,
1986." (Original Records, p. 446)
On January 15, 1987, the lower court rendered the questioned decision in the two
(2) cases. (Original Records, pp. 453-459)
On January 20, 1987, Atty. Conrado Manicad, the petitioners' counsel filed an
Ex-Parte Manifestation and attached thereto, a motion for reconsideration of the
October 22, 1986 order submitting the cases for decision. He prayed that the
Order be set aside and the cases be re-opened for reception of evidence for the
petitioners. He averred that: 1) within the reglementary period he prepared the
motion for reconsideration and among other documents, the draft was sent to his
law office thru his messenger; after signing the final copies, he caused the
service of a copy to the respondent corporation's counsel with the instruction that
the copy of the Court be filed; however, there was a miscommunication between
his secretary and messenger in that the secretary mailed the copy for the
respondent corporation's counsel and placed the rest in an envelope for the
messenger to file the same in court but the messenger thought that it was the
secretary who would file it; it was only later on when it was discovered that the
copy for the Court has not yet been filed and that such failure to file the motion
for reconsideration was due to excusable neglect and/or accident. The motion for
reconsideration contained the following allegations: that on the date set for
hearing (October 22, 1986), he was on his way to Calamba to attend the hearing
but his car suffered transmission breakdown; and that despite efforts to repair
said transmission, the car remained inoperative resulting in his absence at the
said hearing. (Original Records, pp. 460-469)
On February 3, 1987, Atty. Manicad filed a motion for reconsideration of the
January 15, 1987 decision. He explained that he had to file the motion because
the receiving clerk refused to admit the motion for reconsideration attached to
the ex-parte manifestation because there was no proof of service to the other
party. Included in the motion for reconsideration was a notice of hearing of the
motion on February 3, 1987. (Original Records, p. 476-A)
On February 4, 1987, the respondent corporation through its counsel filed a
Manifestation and Motion manifesting that they received the copy of the motion
for reconsideration only today (February 4, 1987), hence they prayed for the
postponement of the hearing. (Original Records, pp., 478-479)
On the same day, February 4, 1987, the lower court issued an Order setting the
hearing on February 13, 1987 on the ground that it received the motion for
reconsideration late. Copies of this Order were sent separately to the petitioners
and their counsel. The records show that Atty. Manicad received his copy on
February 11, 1987. As regards the petitioners, the records reveal that Rebecca
Boyer-Roxas did not receive her copy while as regards Guillermo Roxas,
somebody signed for him but did not indicate when the copy was received.
(Original Records, pp. 481-483)
At the scheduled February 13, 1987 hearing, the counsels for the parties were
present. However, the hearing was reset for March 6, 1987 in order to allow the
respondent corporation to file its opposition to the motion for reconsideration.
(Order dated February 13, 1987, Original Records, p. 486) Copies of the Order
were sent and received by the petitioners and their counsel on the following dates:
Rebecca Boyer-Roxas on February 23, 1987; Guillermo Roxas on February 23,
1987 and Atty. Manicad on February 19, 1987. (Original Records, pp. 487,
489-490)
The records are not clear as to whether or not the scheduled hearing on March 6,
1987 was held. Nevertheless, the records reveal that on March 13, 1987, the
lower court issued an Order denying the motion for reconsideration.
The well-settled doctrine is that the client is bound by the mistakes of his lawyer.
(Aguila v. Court of First Instance of Batangas, Branch I, 160 SCRA 352 [1988];
See also Vivero v. Santos, et al., 98 Phil. 500 [1956]; Isaac v. Mendoza, 89 Phil.
279 [1951]; Montes v. Court of First Instance of Tayabas, 48 Phil. 640 [1926];
People v. Manzanilla, 43 Phil. 167 [1922]; United States v. Dungca, 27 Phil. 274
[1914]; and United States v. Umali, 15 Phil. 33 [1910]) This rule, however, has
its exceptions. Thus, in several cases, we ruled that the party is not bound by the
actions of his counsel in case the gross negligence of the counsel resulted in the
client's deprivation of his property without due process of law. In the case
of Legarda v. Court of Appeals (195 SCRA 418 [1991]), we said:
"In People's Homesite & Housing Corp. v. Tiongco and Escasa
(12 SCRA 471 [1964]), this Court ruled as follows:
"In its questioned decision dated November 19, 1989 the Court of
Appeals found, in no uncertain terms, the negligence of the then
counsel for petitioners when he failed to file the proper motion to
dismiss or to draw a compromise agreement if it was true that they
agreed on a settlement of the case; or in simply filing an answer; and
that after having been furnished a copy of the decision by the court he
failed to appeal therefrom or to file a petition for relief from the order
declaring petitioners in default. In all these instances the appellate
court found said counsel negligent but his acts were held to bind his
client, petitioners herein, nevertheless.
The Court disagrees and finds that the negligence of counsel in this
case appears to be so gross and inexcusable. This was compounded by
the fact, that after petitioner gave said counsel another chance to make
up for his omissions by asking him to file a petition for annulment of
the judgment in the appellate court, again counsel abandoned the case
of petitioner in that after he received a copy of the adverse judgment of
the appellate court, he did not do anything to save the situation or
inform his client of the judgment. He allowed the judgment to lapse
and become final. Such reckless and gross negligence should not be
allowed to bind the petitioner. Petitioner was thereby effectively
deprived of her day in court." (at pp. 426-427)
The herein petitioners', however, are not similarly situated as the parties
mentioned in the abovecited cases. We cannot rule that they, too, were victims of
the gross negligence of their counsel.
The petitioners are to be blamed for the October 22, 1986 order issued by the
lower court submitting the cases for decision. They received notices of the
scheduled hearings and yet they did not do anything. More specifically, the
parties received notice of the Order dated September 29, 1986 with
the warning that if they fail to attend the October 22, 1986 hearing, the cases
would be submitted for decision based on the evidence on record. Earlier, at the
scheduled hearing on September 29, 1986, the counsel for the respondent
corporation moved that the cases be submitted for decision for failure of the
petitioners and their counsel to attend despite notice. The lower court denied the
motion and gave the petitioners and their counsel another chance by
rescheduling the October 22, 1986 hearing.
Indeed, the petitioners knew all along that their counsel was not attending the
scheduled hearings. They did not take steps to change their counsel or make him
attend to their cases until it was too late. On the contrary, they continued to retain
the services of Atty. Manicad knowing fully well his lapses vis-a-vis their cases.
They, therefore, cannot raise the alleged gross negligence of their counsel
resulting in their denial of due process to warrant the reversal of the lower court's
decision. In a similar case, Aguila v. Court of First Instance of Batangas, Branch
1 (supra), we ruled:
"In the instant case, the petitioner should have noticed the succession
of errors committed by his counsel and taken appropriate steps for his
replacement before it was altogether too late. He did not. On the
contrary, he continued to retain his counsel through the series of
proceedings that all resulted in the rejection of his cause, obviously
through such counsel's 'ineptitude' and, let it be added, the clients'
forbearance. The petitioner's reverses should nave cautioned him that
his lawyer was mishandling his case and moved him to seek the help
of other counsel, which he did in the end but rather tardily.
The petitioners point out that their occupancy of the staff house which was later
used as the residence of Eriberto Roxas, husband of petitioner Rebecca
Boyer-Roxas and the recreation hall which was converted into a residential
house were with the blessings of Eufrocino Roxas, the deceased husband of
Eugenia V. Roxas, who was the majority and controlling stockholder of the
corporation. In his lifetime, Eufrocino Roxas together with Eriberto Roxas, the
husband or petitioner Rebecca Boyer-Roxas, and the father of petitioner
Guillermo Roxas managed the corporation. The Board of Directors did not
object to such an arrangement. The petitioners argue that ". . . that authority thus
given by Eufrocino Roxas for the conversion of the recreation hall into a
residential house can no longer be questioned by the stockholders of the private
respondent and/or its board of directors for they impliedly but no less explicitly
delegated such authority to said Eufrocino Roxas." (Rollo, p. 12)
Again, we must emphasize that the respondent corporation has a distinct
personality separate from its members. The corporation transacts its business
only through its officers or agents. (Western Agro Industrial Corporation v.
Court of Appeals, supra) Whatever authority these officers or agents may have
is derived from the board of directors or other governing body unless conferred
by the charter of the corporation. An officer's power as an agent of the
corporation must be sought from the statute, charter, the by-laws or in a
delegation of authority to such officer, from the acts of the board of directors,
formally expressed or implied from a habit or custom of doing business.
(Vicente v. Geraldez, 52 SCRA 210 [1973])
In the present case, the record shows that Eufrocino V. Roxas who then
controlled the management of the corporation, being the majority stockholder,
consented to the petitioners' stay within the questioned properties. Specifically,
Eufrocino Roxas gave his consent to the conversion of the recreation hall to a
residential house, now occupied by petitioner Guillermo Roxas. The Board of
Directors did not object to the actions of Eufrocino Roxas. The petitioners were
allowed to stay within the questioned properties until August 27, 1983, when the
Board of Directors approved a Resolution ejecting the petitioners, to wit:
"RESOLUTION No. 83-12
In such a case, the provisions of Article 448 of the Civil Code govern the
relationship between petitioner Rebecca Boyer-Roxas and the respondent
corporation, to wit:LibLex
"ART. 448. — The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as his
own the works, sowing or planting after payment of the indemnity
provided for in articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land
if its value is considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the buildings or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof."
595-617)
DECISION
PEREZ, J : p
(Sgd.)
Benny Hung
II.
In essence, the basic issue is whether petitioner can be held liable for
the satisfaction of the RTC's Decision against B & R Sportswear Distributor,
Inc.? As we answer this question, we shall pass upon the grounds raised by
petitioner.
Petitioner claims that he never represented B & R Sportswear
Distributor, Inc., the non-existent corporation sued by respondent; that it
would be unfair to treat his single proprietorship B & R Sportswear
Enterprises as B & R Sportswear Distributor, Inc.; that the confusing
similarity in the names should not be taken against him because he
established his single proprietorship long before respondent sued; that he did
not defraud respondent; that he even paid respondent "in the course of their
mutual transactions;" and that without fraud, he cannot be held liable for the
obligations of B & R Footwear Distributors, Inc. or B & R Sportswear
Distributor, Inc. by piercing the veil of corporate fiction.
Petitioner also states that the "real corporation" B & R Footwear
Distributors, Inc. or Guess? Footwear acknowledged itself as the "real
defendant." It answered the complaint and participated in the trial. According
to petitioner, respondent should have executed the judgment against it as the
"real contracting party" in the merchant agreements. Execution against him
was wrong since he was not served with summons nor was he a party to the
case. Thus, the lower courts did not acquire jurisdiction over him, and their
decisions are null and void for lack of due process. cdtai
179-192)