G.R. No. 126554 May 31, 2000 ARB CONSTRUCTION CO., INC., and MARK MOLINA, petitioners, vs.

COURT O APPEALS, TBS SECURIT! AN" IN#ESTIGATION AGENC! $%&$%'%n(%d )y CECILIA R. BACLA!, respondents. BELLOSILLO, J. R! CONS"R#C"ION CO., INC. $ R!C% and M R& MO'IN , Vice President for Operations of R!C, in this consolidated petition, assail the Decision of the Court of ppeals in C ().R. SP Nos. *+**, and *+-./ as 0ell as the orders of the trial court dated / Septe1ber 2//- and / Dece1ber 2//- 3rantin3 private respondent "!S Securit4 and Investi3ation 3enc45s Motion for Leave to File Amended and Supplemental Complaint and den4in3 petitioner Mar6 Molina5s Motion to Dismiss, respectivel4. On 27 u3ust 2//* "!S Securit4 and Investi3ation 3enc4 $"!SS% entered into t0o $8% Service Contracts 0ith R!C 0herein "!SS a3reed to provide and post securit4 3uards in the five $7% establish1ents bein3 1aintained b4 R!C. Clause 2, of the Service Contracts provides 9 2,. "his contract shall be effective for a period of one $2% 4ear co11encin3 fro1 27th u3ust 2//* and shall be considered auto1aticall4 rene0ed for the sa1e period unless other0ise a 0ritten notice of ter1ination shall have been 3iven b4 one part4 to the other part4 thirt4 $*,% da4s in advance. In a letter dated 8* :ebruar4 2//- R!C infor1ed "!SS of its desire to ter1inate the Service Contracts effective thirt4 $*,% da4s after receipt of the letter. lso, in a letter dated 88 March 2//-, R!C throu3h its Vice President for Operations, Mar6 Molina, infor1ed "!SS that it 0as replacin3 its securit4 3uards 0ith those of )lobal Securit4 Investi3ation 3enc4 $)SI %. In response to both letters, "!SS infor1ed R!C that the latter could not preter1inate the Service Contracts nor could it post securit4 3uards fro1 )SI as it 0ould run counter to the provisions of their Service Contracts. On 8* March 2//- Molina 0rote "!SS concedin3 that indeed the ;securit4 contract dated 27 u3ust 2//* stipulates that the duration of the service shall be for a period of one 4ear, endin3 on 27 u3ust 2//- . . . and could not be preter1inated until then.; 2 Nevertheless, Molina decreased the securit4 3uards to onl4 one $2% alle3edl4 pursuant to Clause 8 of the Service Contracts 0hich provides 9 8. "he )ENC< shall adopt a 3uardin3 s4ste1 and post 3uards in accordance thereof, in the pre1ises of the client throu3hout the 0hole 8- hours dail4, usin3 variable shifts of the 3uards at such hours as 1a4 be desi3nated b4 the C'IEN" or )ENC<. s re=uired b4 the C'IEN", the securit4 3uards to be assi3ned b4 the )ENC< shall consist initiall4 of the follo0in3 . . . sub>ect to be increased or decreased b4 the C'IEN" at its sole discretion dependin3 on the securit4 situation or the e?i3enc4 of the service, b4 3ivin3 the )ENC< at least SEVEN $@% da4s prior notice. 8 "hus on 8. March 2//- "!SS filed a Complaint for Preliminary Injunction a3ainst R!C and )SI pra4in3 9 . :orth0ith and Ex-parte, that a "e1porar4 Restrainin3 Order be issued declarin3 the status uo and directin3 the Defendants or an4 person$s% actin3 in their behalf fro1 perfor1in3 acts of replacin3 the Plaintiff5s securit4 3uards fro1 other a3enciesA !. fter due hearin3 that a Brit of Preli1inar4 In>unction, in li6e tenor, be issued upon postin3 of such bond as the Conorable Court 1a4 re=uireA C. fter due hearin3, that >ud31ent be rendered 9 2. Declarin3 the t0o $8% contracts for Securit4 Services bet0een Plaintiff and R!C to be subsistin3 until u3ust 27, 2//-A 8. Orderin3 Defendant )'O! ' to refrain fro1 ta6in3 over the securit4 services of R!C and to 0ithdra0 its 3uards fro1 the pre1ises of R!C, if the4 have been posted earlierA *. Orderin3 R!C to pa4 Plaintiff attorne45s fees in the a1ount of P7,,,,,.,, . . . * In ns0er, R!C clai1ed that it decreased the nu1ber of securit4 3uards bein3 posted at its establish1ents to onl4 one $2% as the securit4 3uards assi3ned b4 "S!! 0ere found to be 3rossl4 ne3li3ent and inefficient, citin3 the follo0in3 incidents 9 .. On :ebruar4 +, 2//-, a Mitsubishi road3rader of herein defendant 0as stripped of parts a1ountin3 to P7.,+-8.,,A /. On :ebruar4 87, 2//-, a concrete vibrator and 1ercur4 li3ht asse1bl4 0ere stolen fro1 the construction site of the Multipurpose Call beside the s0i11in3 pool of herein defendant 0hich is 0orth P8,.,,.,, . . . .In conclusion, it pra4ed that the co1plaint a3ainst it be dis1issed for lac6 of 1erit. On 2+ Ma4 2//- "!SS filed a Motion for Leave to File Attac!ed Amended and Supplemental Complaint . "!SS sub1itted that it no0 desired to pursue a case for Sum of Money and Dama"es instead of the one previousl4 filed for Preliminary Injunction. It 1aintained that the Amended and Supplemental Complaint 0ould not substantiall4 alter its cause of action as both the ori3inal and a1ended co1plaint 0ere based on the sa1e set of facts.7 In addition to the alle3ations in its ori3inal co1plaint, "!SS alle3ed in its Amended and Supplemental Complaint that R!C ille3all4 deducted fro1 the pa4roll the a1ounts of P27,7,,.,, and P8,.,,.,, representin3 the value of one $2% unit concrete vibrator and cassette recorder, respectivel4. It further ar3ued that R!C 0ithheld additional a1ounts fro1 its pa4roll as pa41ent for the parts of the 3rader that 0ere stolen. + "!SS 1aintained that R!C had an outstandin3 obli3ation of P-@8,,.,.-+. Corollaril4, "!SS pra4ed for 1oral da1a3es of P7,,,,,,.,,, e?e1plar4 da1a3es of P8,,.,,,.,, and attorne45s fees of P7,,,,,.,,. On 8 Ma4 2//- the trial court issued a te1porar4 restrainin3 order but due to the e?i3enc4 of the situation "!SS decided to 0ithdra0 its securit4 contin3ent fro1 R!C5s pre1ises on 2* Ma4 2//-. R!C opposed the Motion for Leave to File Amended and Supplemental Complaint @ contendin3 that the cause of action had been substantiall4 altered.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

On / Septe1ber 2//- the R"C of Ma6ati, !r. 7/, 3ranted the 1otion of "!SS to file the 1ended and Supple1ental Co1plaint rationaliDin3 thus 9 Should the court find the alle3ations in the pleadin3s to be inade=uate, the Court should allo0 the part4 to file proper a1end1ents in accordance 0ith the 1andate of the Rules of Court that a1end1ents to pleadin3s are favored and should be liberall4 allo0ed, particularl4 in the earl4 sta3es of the la0 suit, so that the actual 1erit of the controvers4 1a4 be speedil4 deter1ined 0ithout re3ard to technicalities and in the 1ost e?peditious and ine?pensive 1anner . . . . . R!C filed a Motion for #econsideration but on * Nove1ber 2//- the 1otion 0as denied. Mean0hile, Mar6 Molina filed a Motion to Dismiss/ the Amended and Supplemental Complaint on the 3round that it did not state a cause of action insofar as he 0as concerned. !ut on / Dece1ber 2//- the trial court denied the 1otion to, dis1iss and directed Molina instead to file his ans0er 0ithin ten $2,% da4s fro1 receipt of the order. On *, Eanuar4 2//7 R!C filed a Petition 2, 0ith the Court of ppeals alle3in3 that the trial court co11itted 3rave abuse of discretion in issuin3 the Orders of / Septe1ber 2//- and * Nove1ber 2//-. On 27 :ebruar4 2//7 Molina li6e0ise filed a Petition before the Court of ppeals si1ilarl4 attributin3 3rave abuse of discretion to the trial court in issuin3 the order of / Dece1ber 2//-. Parentheticall4, upon 1otion of "!SS, the petition of Mar6 Molina in C ().R. SP No. *+-.- 0as consolidated 0ith the petition of R!C in C ().R. SP No. *+**,. On 2+ u3ust 2//+ the Court of ppeals rendered a Decision 22 den4in3 both petitions of R!C and Molina. On * October 2//+ petitioners5 Motion for #econsideration 28 0as denied. Cence, this petition. In their consolidated Petition before this Court, petitioners first sub1it that "CE CO#R" O: PPE 'S ERRED IN CO'DIN) "C " PRIV "E RESPONDEN" C D "CE RI)C" "O CC N)E I"S C #SE O: C"ION IN VIEB O: CC N)E IN "CE SI"# "ION O: "CE P R"IES :"ER "CE :I'IN) O: "CE ORI)IN ' COMP' IN". 2 In support of this assi3ned error petitioners insist that 9 . . . $"%here 0as not onl4 a substantial chan3e in private respondent5s cause of action but there 0as even an alteration in the theor4 of the case . . . $B%hile in the ori3inal co1plaint the onl4 thin3 alle3ed and is bein3 pra4ed for is for petitioner R! $ R!C% to be en>oined fro1 replacin3 the securit4 3uards of private respondent . . . and for the t0o contracts . . . to be enforced until u3ust 27, 2//- and for petitioner R! $ R!C% to be ordered to pa4 . . . attorne45s fees, 0hat is alle3ed and is bein3 pra4ed for in the a1ended and supple1ental co1plaint is for both petitioners to be ordered to pa4 P2@2,.7*.., $for unpaid services% . . . and P*,,,88+.++ $for lost inco1e% . . . plus 1oral and e?e1plar4 da1a3es and attorne45s fees. Obviousl4, petitioner R! $ R!C% is bein3 re=uired to ans0er for a liabilit4 or le3al obli3ation under the a1ended and supple1ental co1plaint 0holl4 different fro1 that stated in the ori3inal co1plaint such as but not li1ited to the a1ount of P2@2,.78.., 0hich 0as never 1entioned in the ori3inal contract. #nder these circu1stances, a different cause of action 0as introduced b4 the a1end1ent. lso, there 0as a chan3e in the theor4 of the case. Bhereas in the ori3inal contract 0hat is sou3ht for b4 private respondent is the enforce1ent of the t0o $8% contracts 0hich is 0hat is 6no0n in le3al parlance as specific perfor1ance, in the a1ended and supple1ental co1plaint 0hat is for is . . . so a rescission of the contracts 0ith da1a3es . . . 2Be cannot subscribe to the contention of petitioners that the Amended and Supplemental Complaint substantiall4 chan3ed "!SS5 cause of action nor 0as there an4 alteration in the theor4 of the case. s correctl4 observed b4 the Court of ppeals, ;the a1endator4 alle3ations are 1ere a1plifications of the cause of action for da1a3es . . . . n a1end1ent 0ill not be considered as statin3 a ne0 cause of action if the facts alle3ed in the a1ended co1plaint sho0 substantiall4 the sa1e 0ron3 0ith respect to the sa1e transaction, or if 0hat are alle3ed refer to the sa1e 1atter but are 1ore full4 and differentl4 stated, or 0here aver1ents 0hich 0ere i1plied are 1ade in e?pressed ter1s, and the sub>ect of the controvers4 or the liabilit4 sou3ht to be enforced re1ains the sa1e.; 27 "he ori3inal as 0ell as a1ended and supple1ental co1plaints readil4 disclose that the aver1ents contained therein are al1ost identical. In the ori3inal co1plaint, "!SS pra4s, a1on3 others, that the t0o $8% Service Contracts be declared as subsistin3 until 27 u3ust 2//- and that petitioners be 1ade to pa4 P7,,,,,.,, as attorne45s fees. 2+ Si3nificantl4, in its penulti1ate para3raph, "!SS pra4s ;for such other reliefs that are considered >ust and e=uitable under the pre1ises.; "his is a ;catch(all; phrase 0hich definitel4 covers the a1plifications and additional aver1ents contained in the Amended and Supplemental Complaint . Due to events supervenin3 after the filin3 of the ori3inal co1plaint, it beca1e incu1bent upon "!SS to a1end its ori3inal co1plaint. One of the supervenin3 events 0as the 0ithholdin3 b4 petitioner R!C of so1e a1ounts intended for the pa4roll of "!SS due to pilfera3e or losses 0hich alle3edl4 occurred due to the ne3li3ence and inefficienc4 of "!SS5 securit4 3uards. Plainl4, this 0ithholdin3 of the pa4roll 0as onl4 an offshoot of the preter1ination of the t0o $8% Service Contracts on the part of R!C. Si3nificantl4, the preter1ination of the Service Contracts 0as alread4 alle3ed in the ori3inal co1plaint. In fact it 0as one, if not the 1ost basic, issue discussed therein. Since the 0ithholdin3 of the pa4roll 0as onl4 an offshoot of the issue on the preter1ination of the contract, 0e can safel4 conclude that the alle3ation on the 0ithholdin3 of the pa4roll in the Amended and Supplemental Complaint 0as onl4 an a1plification of an issue that 0as alread4 included and discussed in the ori3inal co1plaint. It 0as therefore error on the part of petitioners to conclude that private respondent chan3ed its cause of action in the Amended and Supplemental Complaint . Neither could the4 sa4 that the4 0ere bein3 1ade to ans0er for a liabilit4 or le3al obli3ation that 0as 0holl4 different fro1 that stated in the ori3inal co1plaint. )rave abuse of discretion therefore could not be i1puted to the trial court for ad1ittin3 the Amended and Supplemental Complaint of private respondent "!SS. It also follo0s that the appellate court could not be faulted for puttin3 its sta1p of approval on the order of the trial court ad1ittin3 the sa1e. Petitioners also ar3ue, as their second assi3ned error, that "CE CO#R" O: PPE 'S ERRED IN CO'DIN) "C " "CE ''E) "IONS IN "CE MENDED ND S#PP'EMEN" ' COMP' IN" BERE S#::ICIEN" "O CO'D PE"I"IONER MO'IN 'I !'E "O PRIV "E RESPONDEN" IN CIS PERSON ' C P CI"<. In support of their contention petitioners sub1it 9 . . . $B%hen . . . Molina alle3edl4 applied P2@2,.7*.., pa4able to private respondent to the losses suffered b4 petitioner R! $ R!C% due to the ne3li3ence and indifference of the private

respondent5s securit4 3uards and 0hen petitioner Molina replaced the said securit4 3uards . . . Molina 0as not actin3 in his personal capacit4 but . . . as officer of petitioner R! $ R!C%. Since petitioner Molina did not so act in his personal capacit4 but onl4 in his official capacit4 as officer of petitioner R! $ R!C% then petitioner Molina cannot be held personall4 liable for the alle3ed liabilit4 of petitioner R! $ R!C% . . . . 2. In affir1in3 the order of the trial court den4in3 petitioner Molina5s Motion to Dismiss, the appellate court ruled 9 Si1ilarl4, Be find no error co11itted b4 respondent Eud3e in den4in3 the 1otion to dis1iss. In para3raphs 7, 2@, 2. of the a1ended and supple1ental co1plaint, it is alle3edF 7. !ut fate 0ould have it that defendant R!C 0ould subse=uentl4 breach the aforesaid contracts b4 surreptitiousl4 preter1inatin3 the sa1e and as precursor thereto, defendant R!C, throu3h defendant Mar6 Molina, 0ould i1pute a3ainst plaintiff pretended and fabricated violations and baselessl4 bla1e plaintiff for alle3ed losses of co1pan4 properties b4 >ust deductin3 the values thereof fro1 plaintiff5s billin3s 0ithout even co1pl4in3 0ith the procedure a3reed upon in the contracts . . . . It 1a4 be pertinent to state that all these accusations and i1putations, albeit false and concocted, 0ere 1ade b4 defendant Mar6 P. Molina . . . . 2@. Such unsalutar4 breach of contract b4 defendant R!C throu3h defendant Mar6 Molina has resulted to plaintiff5s da1a3e and pre>udice b4 0a4 of lost inco1e consistin3 of the une?pired portion of the contract, i.e., up to u3ust 27, 2//-, entailin3 a total a1ount of P*,,,8++.++ . . . . "he above alle3ations, particularl4 the subpara3raph, ;It 1a4 be pertinent to state that all these accusations and i1putations, albeit false and concocted, 0ere 1ade b4 defendant Mar6 P. Molina,; are sufficient state1ent of a cause of action a3ainst petitioner Mar6 Molina in his personal capacit4. 2/ In this re3ard, 0e a3ree 0ith petitioners. It is basic that a corporation is invested b4 la0 0ith a personalit4 separate and distinct fro1 those of the persons co1posin3 it as 0ell as fro1 that of an4 other le3al entit4 to 0hich it 1a4 be related. s a 3eneral rule, a corporation 1a4 not be 1ade to ans0er for acts or liabilities of its stoc6holders or those of the le3al entities to 0hich it 1a4 be connected and vice versa. Co0ever, the veil of corporate fiction 1a4 be pierced 0hen it is used as a shield to further an end subversive of >usticeA or for purposes that could not have been intended b4 the la0 that created itA or to defeat public convenience, >ustif4 0ron3, protect fraud, or defend cri1eA or to perpetuate deceptionA or as an alter e3o, ad>unct or business conduit for the sole benefit of the stoc6holders. 8, Prescindin3 fro1 the fore3oin3, the 3eneral rule is that officers of a corporation are not personall4 liable for their official acts unless it is sho0n that the4 have e?ceeded their authorit4. 82 rticle *2 of the Corporation Code is in point 9 Sec. *2. Lia$ility of directors, trustees or officers. 9 Directors or trustees 0ho 0illfull4 and 6no0in3l4 vote for or assent to patentl4 unla0ful acts of the corporation or 0ho are 3uilt4 of 3ross ne3li3ence or bad faith in directin3 the affairs of the corporation or ac=uire an4 personal or pecuniar4 interest conflict 0ith their dut4 as such directors, or trustees shall be liable >ointl4 and severall4 for all da1a3es resultin3 therefro1 suffered b4 the corporation, its stoc6holders or 1e1bers and other persons . . . . On the basis hereof, petitioner Molina could not be held >ointl4 and severall4 liable for an4 obli3ation 0hich petitioner R!C 1a4 be held accountable for, absent an4 proof of bad faith or 1alice on his part. Corollaril4, it is also incorrect on the part of the Court of ppeals to conclude that there 0as a sufficient cause of action a3ainst Molina as to 1a6e hi1 personall4 liable for his actuations as Vice President for Operations of R!C. cursor4 readin3 of the records of the instant case 0ould reveal that Molina did not su11aril4 0ithhold certain a1ounts fro1 the pa4roll of "!SS. Instead, he enu1erated instances 88 0hich in his vie0 0ere enou3h bases to do so. :inall4, petitioners contend that "CE CO#R" O: PPE 'S ERRED IN CO'DIN) "C " "CE "RI ' CO#R" DID NO" )R VE'< !#SE I"S DISCRE"ION IN )R N"IN) PRIV "E RESPONDEN"5S MO"ION :OR 'E VE "O :I'E MENDED ND S#PP'EMEN" ' COMP' IN" ND IN DEN<IN) PE"I"IONER MO'IN 5S MO"ION "O DISMISS. In support hereof, petitioners sub1it that 9 . . . $"%he trial court ad1itted the a1ended and supple1ental co1plaint 0hich substantiall4 chan3ed the cause of action and theor4 of the case of the private respondent. "herefore, there is $sic% abuse of discretion on the part of the trial court contrar4 to the rulin3 of the Court of ppeals that there is none. 8 s alread4 discussed, the Amended and Supplemental Complaint did not substantiall4 alter the cause of action and theor4 of the case. Conse=uentl4, the trial court and the appellate court could not be char3ed 0ith 3rave abuse of discretion in ad1ittin3 the sa1e. BCERE:ORE, the PE"I"ION is P R"I ''< )R N"ED. "he assailed Decision of the Court of ppeals in C ().R. SP No. *+-./ affir1in3 the / Dece1ber 2//- %rder of the Re3ional "rial Court(!r. 7/, Ma6ati Cit4, 0hich denied the Motion to Dis1iss of petitioner Mar6 Molina is REVERSED and SE" SIDE. Co0ever, the assailed Decision of the appellate court in C ().R. SP No. *+**, affir1in3 the / Septe1ber 2//%rder of the Re3ional "rial Court(!r. 7/, Ma6ati Cit4, 3rantin3 "!S Securit4 and Investi3ation 3enc45s Motion for Leave to File Amended and Supplemental Complaint is li6e0ise ::IRMED. "he case is re1anded to the trial court for further proceedin3s. No costs. SO ORDERED. Mendo&a and 'uena( ))*( concur* +uisum$in" and De Leon( )r*( ))*( are on leave* :ootnotes 2 / #ollo, p. 77. Id., p. /,. 8 2, I$id. Id., p. 2,-. * 22 Records, pp. 2.(2/. Penned b4 ssociate Eustice Eduardo ). #ollo, pp. 7.(7/. Montene3ro, concurred in b4 ssociate Eustices 7 Id., pp. @8(@-. E1eterio C. Cui and Eose C. de la Ra1aA id., pp. 2-8( + Id., p. +@. 277. @ 28 Id., p. @7. #ollo, p. 2+8. . 2* Id., p. .+. Id., p. 2-.

227 2+ 2@ 2. 2/

Id., pp. 2.(2/. Id., pp. 2-/(277. See Note *. #ollo, p. *.. Id., p. 87. Id., pp. 272(27*.

Pala4, Inc. v. Clave, ).R. No. 7+,@+, 82 Septe1ber 2/.*, 28- SCR +-,. 82 Nicario v. National 'abor Relations Co11ission, ).R. No. 287*-,, 2@ Septe1ber 2//., 8/7 SCR +82. 88 See Note -. 8* Id., p. 8/. Republic of the Philippines SUPREME COURT :IRS" DIVISION G.R. No. 1455*+ No,%-)%$ 1+, 2005 .OSE C. TUPA/ I# and PETRONILA C. TUPA/, Petitioners, vs. T0E COURT O APPEALS and BANK O T0E P0ILIPPINE ISLAN"S, Respondents.

8,

DECISION CARPIO, J.: T1% Ca'% "his is a petition for revie02 of the Decision8 of the Court of ppeals dated @ Septe1ber 8,,, and its Resolution dated 2. October 8,,,. "he @ Septe1ber 8,,, Decision affir1ed the rulin3 of the Re3ional "rial Court, Ma6ati, !ranch 2-- in a case for estafa under Section 2*, Presidential Decree No. 227. "he Court of ppealsG Resolution of 2. October 8,,, denied petitionersG 1otion for reconsideration. T1% a2(' Petitioners Eose C. "upaD IV and Petronila C. "upaD $;petitioners;% 0ere Vice(President for Operations and Vice( PresidentH"reasurer, respectivel4, of El Oro En3raver Corporation $;El Oro Corporation;%. El Oro Corporation had a contract 0ith the Philippine r14 to suppl4 the latter 0ith ;survival bolos.; "o finance the purchase of the ra0 1aterials for the survival bolos, petitioners, on behalf of El Oro Corporation, applied 0ith respondent !an6 of the Philippine Islands $;respondent ban6;% for t0o co11ercial letters of credit. "he letters of credit 0ere in favor of El Oro CorporationGs suppliers, "anchaoco Manufacturin3 Incorporated * $;"anchaoco Incorporated;% and Maresco Rubber and Retreadin3 Corporation - $;Maresco Corporation;%. Respondent ban6 3ranted petitionersG application and issued 'etter of Credit No. 8(,,./+(* for P7+-,.@2.,7 to "anchaoco Incorporated and 'etter of Credit No. 8(,,/2-(7 for P8/-,,,, to Maresco Corporation. Si1ultaneous 0ith the issuance of the letters of credit, petitioners si3ned trust receipts in favor of respondent ban6. On *, Septe1ber 2/.2, petitioner Eose C. "upaD IV $;petitioner Eose "upaD;% si3ned, in his personal capacit4, a trust receipt correspondin3 to 'etter of Credit No. 8(,,./+(* $for P7+-,.@2.,7%. Petitioner Eose "upaD bound hi1self to sell the 3oods covered b4 the letter of credit and to re1it the proceeds to respondent ban6, if sold, or to return the 3oods, if not sold, on or before 8/ Dece1ber 2/.2. On / October 2/.2, petitioners si3ned, in their capacities as officers of El Oro Corporation, a trust receipt correspondin3 to 'etter of Credit No. 8(,,/2-(7 $for P8/-,,,,%. Petitioners bound the1selves to sell the 3oods covered b4 that letter of credit and to re1it the proceeds to respondent ban6, if sold, or to return the 3oods, if not sold, on or before . Dece1ber 2/.2. fter "anchaoco Incorporated and Maresco Corporation delivered the ra0 1aterials to El Oro Corporation, respondent ban6 paid the for1er P7+-,.@2.,7 and P8/-,,,,, respectivel4. Petitioners did not co1pl4 0ith their underta6in3 under the trust receipts. Respondent ban6 1ade several de1ands for pa41ents but El Oro Corporation 1ade partial pa41ents onl4. On 8@ Eune 2/.* and 8. Eune 2/.*, respondent ban6Gs counsel7 and its representative+ respectivel4 sent final de1and letters to El Oro Corporation. El Oro Corporation replied that it could not full4 pa4 its debt because the r1ed :orces of the Philippines had dela4ed pa4in3 for the survival bolos. Respondent ban6 char3ed petitioners 0ith estafa under Section 2*, Presidential Decree No. 227 $;Section 2*;% @ or "rust Receipts 'a0 $;PD 227;%. fter preli1inar4 investi3ation, the then Ma6ati :iscalGs Office found probable cause to indict petitioners. "he Ma6ati :iscalGs Office filed the correspondin3 Infor1ations $doc6eted as Cri1inal Case Nos. ..-. and ..-/% 0ith the Re3ional "rial Court, Ma6ati, on 2@ Eanuar4 2/.- and the cases 0ere raffled to !ranch 2-- $;trial court;% on 8, Eanuar4 2/.-. Petitioners pleaded not 3uilt4 to the char3es and trial ensued. Durin3 the trial, respondent ban6 presented evidence on the civil aspect of the cases. T1% R345n6 o7 (1% T$5a4 Co3$( On 2+ Eul4 2//8, the trial court rendered >ud31ent ac=uittin3 petitioners of estafa on reasonable doubt. Co0ever, the trial court found petitioners solidaril4 liable 0ith El Oro Corporation for the balance of El Oro CorporationGs principal debt under the trust receipts. "he dispositive portion of the trial courtGs Decision providesF BCERE:ORE, >ud31ent is hereb4 rendered CI#I""IN) both accused Eose C. "upaD, IV and Petronila "upaD based upon reasonable doubt. Co0ever, El Oro En3raver Corporation, Eose C. "upaD, IV and Petronila "upaD, are hereb4 ordered, >ointl4 and solidaril4, to pa4 the !an6 of the Philippine Islands the outstandin3 principal obli3ation of P+8-,28/.2/ $as of Eanuar4 8*, 2//8% 0ith the stipulated interest at the rate of 2.J per annu1A plus 2,J of the total a1ount due as attorne4Gs feesA P7,,,,.,, as e?penses of liti3ationA and costs of the suit.. In holdin3 petitioners civill4 liable 0ith El Oro Corporation, the trial court heldF KSLince the civil action for the recover4 of the civil liabilit4 is dee1ed i1pliedl4 instituted 0ith the cri1inal action, as in fact the prosecution thereof 0as activel4 handled b4 the private prosecutor, the Court believes that the El Oro En3raver Corporation and both accused Eose C. "upaD and Petronila "upaD, >ointl4 and solidaril4 should be held civill4 liable to the !an6 of the Philippine Islands. "he 1ere fact that the4 0ere unable to collect in full fro1 the :P andHor the Depart1ent of National Defense the proceeds of the sale of the delivered survival bolos 1anufactured fro1 the ra0 1aterials covered b4 the trust receipt a3ree1ents is no valid defense to the civil clai1 of the said co1plainant and surel4 could not 0ipe out their civil obli3ation. fter all, the4 are free to institute an action to collect the sa1e./ Petitioners appealed to the Court of ppeals. Petitioners contended thatF $2% their ac=uittal ;operates to e?tin3uish KtheirL civil liabilit4; and $8% at an4 rate, the4 are not personall4 liable for El Oro CorporationGs debts. "he Rulin3 of the Court of ppeals

In its Decision of @ Septe1ber 8,,,, the Court of ppeals affir1ed the trial courtGs rulin3. "he appellate court heldF It is clear fro1 KSection 2*, PD 227L that civil liabilit4 arisin3 fro1 the violation of the trust receipt a3ree1ent is distinct fro1 the cri1inal liabilit4 i1posed therein. In the case of ,intola vs* Insular 'an- of Asia and America , our Supre1e Court held that ac=uittal in the estafa case $P.D. 227% is no bar to the institution of a civil action for collection. "his is because in such cases, the civil liabilit4 of the accused does not arise ex delicto but rather based ex contractu and as such is distinct and independent fro1 an4 cri1inal proceedin3s and 1a4 proceed re3ardless of the result of the latter. "hus, an independent civil action to enforce the civil liabilit4 1a4 be filed a3ainst the corporation aside fro1 the cri1inal action a3ainst the responsible officers or e1plo4ees. ??? KBLe hereb4 hold that the ac=uittal of the accused(appellants fro1 the cri1inal char3e of estafa did not operate to e?tin3uish their civil liabilit4 under the letter of credit(trust receipt arran3e1ent 0ith plaintiff(appellee, 0ith 0hich the4 dealt both in their personal capacit4 and as officers of El Oro En3raver Corporation, the letter of credit applicant and principal debtor. ppellants ar3ued that the4 cannot be held solidaril4 liable 0ith their corporation, El Oro En3raver Corporation, alle3in3 that the4 e?ecuted the sub>ect docu1ents includin3 the trust receipt a3ree1ents onl4 in their capacit4 as such corporate officers. "he4 said that these instru1ents are 1ere pro-forma and that the4 e?ecuted these instru1ents on the stren3th of a board resolution of said corporation authoriDin3 the1 to appl4 for the openin3 of a letter of credit in favor of their suppliers as 0ell as to e?ecute the other docu1ents necessar4 to acco1plish the sa1e. Such contention, ho0ever, is contradicted b4 the evidence on record. "he trust receipt a3ree1ent indicated in clear and un1ista6able ter1s that the accused si3ned the sa1e as surety for the corporation and that the4 bound the1selves directl4 and i11ediatel4 liable in the event of default 0ith respect to the obli3ation under the letters of credit 0hich 0ere 1ade part of the said a3ree1ent, 0ithout need of de1and. Even in the application for the letter of credit, it is li6e0ise clear that the underta6in3 of the accused is that of a suret4 as indicated KinL the follo0in3 0ordsF ;In consideration of 4our establishin3 the co11ercial letter of credit herein applied for substantiall4 in accordance 0ith the fore3oin3, the undersi3ned pplicant and Suret4 hereb4 a3ree, >ointl4 and severall4, to each and all stipulations, provisions and conditions on the reverse side hereof.; ??? Cavin3 contractuall4 a3reed to hold the1selves solidaril4 liable 0ith El Oro En3raver Corporation under the sub>ect trust receipt a3ree1ents 0ith appellee !an6 of the Philippine Islands, herein accused(appellants 1a4 not, therefore, invo6e the separate le3al personalit4 of the said corporation to evade their civil liabilit4 under the letter of credit(trust receipt arran3e1ent 0ith said appellee, not0ithstandin3 their ac=uittal in the cri1inal cases filed a3ainst the1. "he trial court thus did not err in holdin3 the appellants solidaril4 liable 0ith El Oro En3raver Corporation for the outstandin3 principal obli3ation of P+8-,28/.2/ $as of Eanuar4 8*, 2//8% 0ith the stipulated interest at the rate of 2.J per annu1, plus 2,J of the total a1ount due as attorne4Gs fees, P7,,,,.,, as e?penses of liti3ation and costs of suit.2, Cence, this petition. Petitioners contend thatF 2. E#D)MEN" O: CI#I"" ' OPER "EKSL "O EM"IN)#ISC "CE CIVI' 'I !I'I"< O: PE"I"IONERSKAL 8. )R N"IN) BI"CO#" DMI""IN) "C " "CE I#ES"IONED O!'I) "ION B S INC#RRED !< "CE CORPOR "ION, "CE S ME IS NO" <E" D#E ND P < !'EA *. )R N"IN) "C " "CE I#ES"IONED O!'I) "ION B S 'RE D< D#E ND P < !'E, ??? PE"I"IONERS RE NO" PERSON ''< 'I !'E "O ??? RESPONDEN" ! N&, SINCE "CE< SI)NED "CE 'E""ERKSL O: CREDI" S NS#RE"<G S O::ICERS O: E' ORO, ND "CERE:ORE, N EMC'#SIVE 'I !I'I"< O: E' OROA K NDL -. IN "CE '"ERN "IVE, "CE I#ES"IONED "R NS C"IONS RE SIM#' "ED ND VOID. 22 T1% I''3%' "he petition raises these issuesF $2% Bhether petitioners bound the1selves personall4 liable for El Oro CorporationGs debts under the trust receiptsA $8% If so 9 $a% 0hether petitionersG liabilit4 is solidar4 0ith El Oro CorporationA and $b% 0hether petitionersG ac=uittal of estafa under Section 2*, PD 227 e?tin3uished their civil liabilit4. T1% R345n6 o7 (1% Co3$( "he petition is partl4 1eritorious. Be affir1 the Court of ppealsG rulin3 0ith the 1odification that petitioner Eose "upaD is liable as 3uarantor of El Oro CorporationGs debt under the trust receipt dated *, Septe1ber 2/.2. On PetitionersG #nderta6in3 #nder the Trust Receipts corporation, bein3 a >uridical entit4, 1a4 act onl4 throu3h its directors, officers, and e1plo4ees. Debts incurred b4 these individuals, actin3 as such corporate a3ents, are not theirs but the direct liabilit4 of the corporation the4 represent.28 s an e?ception, directors or officers are personall4 liable for the corporationGs debts onl4 if the4 so contractuall4 a3ree or stipulate.2* Cere, the dorsal side of the trust receipts contains the follo0in3 stipulationF "o the !an6 of the Philippine Islands In consideration of 4our releasin3 to OOOOOOOOOOOOO under the ter1s of this "rust Receipt the 3oods described herein, IHBe, >ointl4 and severall4, a3ree and pro1ise to pa4 to 4ou, on de1and, 0hatever su1 or su1s of 1one4 0hich 4ou 1a4 call upon 1eHus to pa4 to 4ou, arisin3 out of, pertainin3 to, andHor in an4 0a4 connected 0ith, this "rust Receipt, in the event of default andHor non(fulfill1ent in an4 respect of this underta6in3 on the part of the said OOOOOOOOOOOOOO. IH0e further a3ree that 14Hour liabilit4 in this 3uarantee shall be DIREC" ND IMMEDI "E, 0ithout an4 need 0hatsoever on 4our part to ta6e an4 steps or e?haust an4 le3al re1edies that 4ou 1a4 have a3ainst the said OOOOOOOOOOOOO. before 1a6in3 de1and upon 1eHus.2- $CapitaliDation in the ori3inal% In the trust receipt dated / October 2/.2, petitioners si3ned belo0 this clause as officers of El Oro Corporation. "hus, under petitioner Petronila "upaDGs si3nature are the 0ords ;Vice(PresP"reasurer; and under petitioner Eose "upaDGs si3nature are the 0ords ;Vice(PresPOperations.; !4 so si3nin3 that trust receipt, petitioners did not bind the1selves personall4 liable for El Oro CorporationGs obli3ation. In Ong v. Court of Appeals,27 a corporate representative si3ned a solidar4 3uarantee clause in t0o trust receipts in his capacit4 as corporate

representative. "here, the Court held that the corporate representative did not underta6e to 3uarantee personall4 the pa41ent of the corporationGs debts, thusF KPLetitioner did not si3n in his personal capacit4 the solidar4 3uarantee clause found on the dorsal portion of the trust receipts. Petitioner placed his si3nature after the t4pe0ritten 0ords ; RMCO IND#S"RI ' CORPOR "ION; found at the end of the solidar4 3uarantee clause. Evidentl4, petitioner did not underta6e to 3uarant4 personall4 the pa41ent of the principal and interest of RM )RIGs debt under the t0o trust receipts. Cence, for the trust receipt dated / October 2/.2, 0e sustain petitionersG clai1 that the4 are not personall4 liable for El Oro CorporationGs obli3ation. :or the trust receipt dated *, Septe1ber 2/.2, the dorsal portion of 0hich petitioner Eose "upaD si3ned alone, 0e find that he did so in his personal capacit4. Petitioner Eose "upaD did not indicate that he 0as si3nin3 as El Oro CorporationGs Vice(President for Operations. Cence, petitioner Eose "upaD bound hi1self personall4 liable for El Oro CorporationGs debts. Not bein3 a part4 to the trust receipt dated *, Septe1ber 2/.2, petitioner Petronila "upaD is not liable under such trust receipt. The Nature of Petitioner Jose Tupazs Liabilit !n"er the Trust Receipt #ate" $% &epte'ber ()*( s stated, the dorsal side of the trust receipt dated *, Septe1ber 2/.2 providesF "o the !an6 of the Philippine Islands In consideration of 4our releasin3 to OOOOOOOOOOOOO under the ter1s of this "rust Receipt the 3oods described herein, IHBe, >ointl4 and severall4, a3ree and pro1ise to pa4 to 4ou, on de1and, 0hatever su1 or su1s of 1one4 0hich 4ou 1a4 call upon 1eHus to pa4 to 4ou, arisin3 out of, pertainin3 to, andHor in an4 0a4 connected 0ith, this "rust Receipt, in the event of default andHor non(fulfill1ent in an4 respect of this underta6in3 on the part of the said OOOOOOOOOOOOOO. IH0e further a3ree that 14Hour liabilit4 in this 3uarantee shall be DIREC" ND IMMEDI "E, 0ithout an4 need 0hatsoever on 4our part to ta6e an4 steps or e?haust an4 le3al re1edies that 4ou 1a4 have a3ainst the said OOOOOOOOOOOOOOOOO. !efore 1a6in3 de1and upon 1eHus. $#nderlinin3 suppliedA capitaliDation in the ori3inal% "he lo0er courts interpreted this to 1ean that petitioner Eose "upaD bound hi1self solidaril4 liable 0ith El Oro Corporation for the latterGs debt under that trust receipt. "his is error. In Pru"ential +an, v. -nter'e"iate Appellate Court ,2+ the Court interpreted a substantiall4 identical clause2@ in a trust receipt si3ned b4 a corporate officer 0ho bound hi1self personall4 liable for the corporationGs obli3ation. "he petitioner in that case contended that the stipulation ;0e >ointl4 and severall4 a3ree and underta6e; rendered the corporate officer solidaril4 liable 0ith the corporation. Be dis1issed this clai1 and held the corporate officer liable as 3uarantor onl4. "he Court further ruled that had there been 1ore than one si3natories to the trust receipt, the solidar4 liabilit4 0ould e?ist bet0een the 3uarantors. Be heldF Petitioner KPrudential !an6L insists that b4 virtue of the clear 0ordin3 of the ??? clause ;? ? ? 0e >ointl4 and severall4 a3ree and underta6e ? ? ?,; and the concludin3 sentence on e?haustion, KrespondentL ChiGs liabilit4 therein is solidar4. ??? Our ??? readin3 of the =uestioned solidar4 3uarant4 clause 4ields no other conclusion than that the obli3ation of Chi is onl4 that of a "uarantor. "his is further bolstered b4 the last sentence 0hich spea6s of 0aiver of e?haustion, 0hich, nevertheless, is ineffective in this case because the space therein for the part4 0hose propert4 1a4 not be e?hausted 0as not filled up. #nder rticle 8,7. of the Civil Code, the defense of e?haustion $e?cussion% 1a4 be raised b4 a 3uarantor before he 1a4 be held liable for the obli3ation. Petitioner li6e0ise ad1its that the =uestioned provision is a solidary "uaranty clause, thereb4 clearl4 distin3uishin3 it fro1 a contract of suret4. It, ho0ever, described the 3uarant4 as solidar4 bet0een the 3uarantorsA this 0ould have been correct if t0o $8% 3uarantors had si3ned it. "he clause ;0e >ointl4 and severall4 a3ree and underta6e; refers to the underta6in3 of the t0o $8% parties 0ho are to si3n it or to the liabilit4 e?istin3 bet0een the1selves. It does not refer to the underta6in3 bet0een either one or both of the1 on the one hand and the petitioner on the other 0ith respect to the liabilit4 described under the trust receipt. ??? :urther1ore, an4 doubt as to the i1port or true intent of the solidar4 3uarant4 clause should be resolved a3ainst the petitioner. "he trust receipt, to3ether 0ith the =uestioned solidar4 3uarant4 clause, is on a for1 drafted and prepared solel4 b4 the petitionerA ChiGs participation therein is li1ited to the affi?in3 of his si3nature thereon. It is, therefore, a contract of adhesionA as such, it 1ust be strictl4 construed a3ainst the part4 responsible for its preparation.2. $#nderlinin3 suppliedA italiciDation in the ori3inal% Co0ever, respondent ban6Gs suit a3ainst petitioner Eose "upaD stands despite the CourtGs findin3 that he is liable as 3uarantor onl4. :irst, e?cussion is not a pre(re=uisite to secure >ud31ent a3ainst a 3uarantor. "he 3uarantor can still de1and defer1ent of the e?ecution of the >ud31ent a3ainst hi1 until after the assets of the principal debtor shall have been e?hausted. 2/ Second, the benefit of e?cussion 1a4 be 0aived.8, #nder the trust receipt dated *, Septe1ber 2/.2, petitioner Eose "upaD 0aived e?cussion 0hen he a3reed that his ;liabilit4 in KtheL 3uarant4 shall be DIREC" ND IMMEDI "E, 0ithout an4 need 0hatsoever on ??? KtheL part Kof respondent ban6L to ta6e an4 steps or e?haust an4 le3al re1edies ???.; "he clear i1port of this stipulation is that petitioner Eose "upaD 0aived the benefit of e?cussion under his 3uarantee. s 3uarantor, petitioner Eose "upaD is liable for El Oro CorporationGs principal debt and other accessor4 liabilities $as stipulated in the trust receipt and as provided b4 la0% under the trust receipt dated *, Septe1ber 2/.2. "hat trust receipt $and the trust receipt dated / October 2/.2% provided for pa41ent of attorne4Gs fees e=uivalent to 2,J of the total a1ount due and an ;interest at the rate of @J per annum( or at such other rate as the ban6 1a4 fi?, fro1 the date due until paid ???.; 82 In the applications for the letters of credit, the parties stipulated that drafts dra0n under the letters of credit are sub>ect to interest at the rate of 2.J per annum.88 "he lo0er courts correctl4 applied the 2.J interest rate per annum considerin3 that the face value of each of the trust receipts is based on the drafts dra0n under the letters of credit. !ased on the 3uidelines laid do0n in .astern &hipping Lines/ -nc. v. Court of Appeals ,8* the accrued stipulated interest earns 28J interest per annum fro1 the ti1e of the filin3 of the Infor1ations in the Ma6ati Re3ional "rial Court on 2@ Eanuar4 2/.-. :urther, the total a1ount due as of the date of the finalit4 of this Decision 0ill earn interest at 2.J per annum until full4 paid since this 0as the stipulated rate in the applications for the letters of credit. 8"he accountin3 of El Oro CorporationGs debts as of 8* Eanuar4 2//8, 0hich the trial court used, is no lon3er useful as it does not specif4 the a1ounts o0in3 under each of the trust receipts. Cence, in the e?ecution of this

Decision, the trial court shall co1pute El Oro CorporationGs total liabilit4 under each of the trust receipts dated *, Septe1ber 2/.2 and / October 2/.2 based on the follo0in3 for1ulaF 87 "O" ' MO#N" D#E Q Kprincipal R interest R interest on interestL P partial pa41ents 1ade 8+ Interest Q principal ? 2. J per annu1 ? no. of 4ears fro1 due date 8@ until finalit4 of >ud31ent Interest on interest Q interest co1puted as of the filin3 of the co1plaint $2@ Eanuar4 2/.-% ? 28J ? no. of 4ears until finalit4 of >ud31ent ttorne4Gs fees is 2,J of the total a1ount co1puted as of finalit4 of >ud31ent "otal a1ount due as of the date of finalit4 of >ud31ent 0ill earn an interest of 2.J per annu1 until full4 paid. In so dele3atin3 this tas6, 0e reiterate 0hat 0e said in Rizal Co''ercial +an,ing Corporation v. Alfa RT0 1anufacturing Corporation8. 0here 0e also ordered the trial court to co1pute the a1ount of obli3ation due based on a for1ula substantiall4 si1ilar to that indicated aboveF "he total a1ount due ??? KunderL the ??? contractKL ??? 1a4 be easil4 deter1ined b4 the trial court throu3h a si1ple 1athe1atical co1putation based on the for1ula specified above. Mathe1atics is an e?act science, the application of 0hich needs no further proof fro1 the parties. Petitioner Jose Tupazs Ac2uittal "i" not .3tinguish his Civil Liabilit "he rule is that 0here the civil action is i1pliedl4 instituted 0ith the cri1inal action, the civil liabilit4 is not e?tin3uished b4 ac=uittal 9 K0Lhere the ac=uittal is based on reasonable doubt ??? as onl4 preponderance of evidence is re=uired in civil casesA 0here the court e?pressl4 declares that the liabilit4 of the accused is not cri1inal but onl4 civil in nature ??? as, for instance, in the felonies of estafa, theft, and 1alicious 1ischief co11itted b4 certain relatives 0ho thereb4 incur onl4 civil liabilit4 $See rt. **8, Revised Penal Code%A and, 0here the civil liabilit4 does not arise fro1 or is not based upon the cri1inal act of 0hich the accused 0as ac=uitted ???.8/ $E1phasis supplied% Cere, respondent ban6 chose not to file a separate civil action *, to recover pa41ent under the trust receipts. Instead, respondent ban6 sou3ht to recover pa41ent in Cri1inal Case Nos. ..-. and ..-/. lthou3h the trial court ac=uitted petitioner Eose "upaD, his ac=uittal did not e?tin3uish his civil liabilit4. s the Court of ppeals correctl4 held, his liabilit4 arose not fro1 the cri1inal act of 0hich he 0as ac=uitted $ ex delito% but fro1 the trust receipt contract $ex contractu% of *, Septe1ber 2/.2. Petitioner Eose "upaD si3ned the trust receipt of *, Septe1ber 2/.2 in his personal capacit4. On the other 1atters Petitioners Raise Petitioners raise for the first ti1e in this appeal the contention that El Oro CorporationGs debts under the trust receipts are not 4et due and de1andable. lternativel4, petitioners assail the trust receipts as si1ulated. "hese assertions have no 1erit. #nder the ter1s of the trust receipts dated *, Septe1ber 2/.2 and / October 2/.2, El Oro CorporationGs debts fell due on 8/ Dece1ber 2/.2 and . Dece1ber 2/.2, respectivel4. Neither is there 1erit to petitionersG clai1 that the trust receipts 0ere si1ulated. Durin3 the trial, petitioners did not den4 appl4in3 for the letters of credit and subse=uentl4 e?ecutin3 the trust receipts to secure pa41ent of the drafts dra0n under the letters of credit. 80ERE ORE, 0e GRANT the petition in part. Be A IRM the Decision of the Court of ppeals dated @ Septe1ber 8,,, and its Resolution dated 2. October 8,,, 0ith the follo0in3 MO"I ICATIONSF 2% El Oro En3raver Corporation is principall4 liable for the total a1ount due under the trust receipts dated *, Septe1ber 2/.2 and / October 2/.2, as co1puted b4 the Re3ional "rial Court, Ma6ati, !ranch 2--, upon finalit4 of this Decision, based on the for1ula provided aboveA 8% Petitioner Eose C. "upaD IV is liable for El Oro En3raver CorporationGs total debt under the trust receipt dated *, Septe1ber 2/.2 as thus co1puted b4 the Re3ional "rial Court, Ma6ati, !ranch 2--A and *% Petitioners Eose C. "upaD IV and Petronila C. "upaD are not liable under the trust receipt dated / October 2/.2. SO OR"ERE". N"ONIO ". C RPIO ssociate Eustice 8E CONCURF 0ILARIO G. "A#I"E, .R. Chief Eustice Chair1an LEONAR"O A. 9UISUMBING, CONSUELO !NARES:SANTIAGO ssociate Eustice ssociate Eustice A"OL O S. A/CUNA ssociate Eustice CERTI ICATION Pursuant to Section 2*, rticle VIII of the Constitution, it is hereb4 certified that the conclusions in the above Decision 0ere reached in consultation before the case 0as assi3ned to the 0riter of the opinion of the CourtGs Division. 0ILARIO G. "A#I"E, .R. Chief Eustice oo(no(%' #nder Rule -7 of the 2//@ Rules of Civil Procedure. 8 Penned b4 ssociate Eustice Martin S. Villara1a, Er. 0ith ssociate Eustices Salo1e . Monto4a and Ro1eo E. Calle>o, Sr., concurrin3. * Supplier of 8*,78- 6ilos of hi3h(3rade steel bars and *,7 hi3h(carbon steel sheets. "anchaoco Incorporated is also referred to as "anchaoco Manufacturin3 Incorporation and "anchaoco Manufacturin3 Corporation in other parts of the records. Supplier of /,.,, 6ilos of specialiDed rubber co1pound.
2 7 +

tt4. lfonso VerDosa. Manuel Maceda. It appears that the letter of 8. Eune 2/.* 0as also si3ned b4 tt4. lfonso VerDosa. @ ;Penalty clause. 9 "he failure of an entrustee to turn over the proceeds of the sale of the 3oods, docu1ents or instru1ents covered b4 a trust receipt to the e?tent of the a1ount o0in3 to the entruster or as appears in the trust receipt or to return said 3oods, docu1ents or instru1ents if the4 0ere not sold or disposed of in accordance 0ith the ter1s of the trust receipt shall constitute the cri1e of estafa, punishable under the provisions of rticle "hree

Cundred and :ifteen, Para3raph One $b% of ct Nu1bered "hree "housand Ei3ht Cundred and :ifteen, as a1ended, other0ise 6no0n as the Revised Penal Code. If the violation or offense is co11itted b4 a corporation, partnership, association or other >uridical entities, the penalt4 provided for in this Decree shall be i1posed upon the directors, officers, e1plo4ees or other officials or persons therein responsible for the offense, 0ithout pre>udice to the civil liabilities arisin3 fro1 the cri1inal offense.; . Records, pp. ++7(+++. / I$id., p. ++7. 2, Rollo, pp. 8.(*,. $ItaliciDation in the ori3inalA internal citations o1itted%. 22 I$id*, p. 22. 28 M M Realt4 Devt. Corp. v. N'RC, *2- Phil. .*. $2//7%. 2* I$id* 2Records, E?hs. ;D and M.; 27 --/ Phil. +/2 $8,,*%. 2+ ).R. No. @-..+, . Dece1ber 2//8, 82+ SCR 87@. See On3 v. Court of ppeals, supra note 27. 2@ "he clause readsF ;In consideration of the PR#DEN"I ' ! N& ND "R#S" COMP N< co1pl4in3 0ith the fore3oin3, 0e >ointl4 and severall4 a3ree and underta6e to pa4 on de1and to the PR#DEN"I ' ! N& ND "R#S" COMP N< all su1s of 1one4 0hich the said PR#DEN"I ' ! N& ND "R#S" COMP N< 1a4 call upon us to pa4 arisin3 out of or pertainin3 to, andHor in an4 event connected 0ith the default of andHor non(fulfill1ent in an4 respect of the underta6in3 of the aforesaidF PCI'IPPINE R <ON MI''S, INC. Be further a3ree that the PR#DEN"I ' ! N& ND "R#S" COMP N< does not have to ta6e an4 steps or e?haust its re1ed4 a3ainst aforesaidF KSSSSSSSSSSSSSSSSSSSSSSSSSSSL before 1a6in3 de1and on 1eHus.K;L $#nderlinin3 suppliedA capitaliDation in the ori3inal% 2. Prudential !an6 v. Inter1ediate ppellate Court, supra note 2+ $internal citations o1itted%. 2/ Southern Motors, Inc. v. !arbosa, // Phil. 8+* $2/7+%. 8, rticle 8,7/ $2% of the Civil Code providesF ;KEL?cussion shall not ta6e placeF $2% If the 3uarantor has e?pressl4 renounced itA ???; 82 "he trust receipts provide $Records, E?hs. ;D; and ;M;%F ;Should it beco1e necessar4 for the ! N& O: "CE PCI'IPPINE IS' NDS to avail of the services of an attorne4(at(la0 to enforce an4 or all of its ri3hts under this contract, IHBe, >ointl4 and severall4, shall pa4 to the ! N& O: "CE PCI'IPPINE IS' NDS, for and as attorne4Gs fees, a su1 e=uivalent to 2,J of the total a1ount involved, principal and interest, then unpaid, but in no case less than P2,,, 0hether actuall4 incurred or not, e?clusive of all costs or fees allo0ed b4 la0. ll obli3ations of the undersi3ned under this a3ree1ent of trust shall bear interest at

the rate of @J per annu1, or at such other rate 0hich the ! N& 1a4 fi?, fro1 the date due until paid, plus all other ban6 char3es.; lthou3h the trust receipts provided for pa41ent of ;other ban6 char3es,; it appears that respondent ban6 did not present evidence on the rates of such other char3es. Bhat respondent ban6 presented 0as the testi1on4 of one 'ourdes Palo1o that it i1posed penalt4 char3es of 28J per annum alle3edl4 based on the stipulation in the letters of credit providin3 pa41ent of ;char3es andHor other e?penses; $"SN K'ourdes Palo1oL, 7 u3ust 2/.7, pp. /(27A Records, pp. *+7( *@2%. :urther, respondent ban6 did not present proof of disclosure to El Oro Corporation of such penalt4 char3es, contrar4 to its underta6in3. Si3nificantl4, in its state1ent of account as of 8* Eanuar4 2//8, respondent ban6 did not include ;other ban6 char3es; but onl4 too6 into account the 2.J annual interest rate in co1putin3 El Oro CorporationGs liabilities $Records, p. +-7%. 88 Records, pp. 82., 88/. 8* ).R. No. /@-28, 28 Eul4 2//-, 8*- SCR @.. ;2. Bhen the obli3ation is breached, and it consists in the pa41ent of a su1 of 1one4, i.e., a loan or forbearance of 1one4, the interest due should be that 0hich 1a4 have been stipulated in 0ritin3. 3$(1%$-o$%, (1% 5n(%$%'( d3% '1a44 5('%47 %a$n 4%6a4 5n(%$%'( 7$o- (1% (5-% 5( 5' ;3d525a44y d%-and%d. In the absence of stipulation, the rate of interest shall be 28J per annu1 to be co1puted fro1 default, i.e., fro1 >udicial or e?tra>udicial de1and under and sub>ect to the provisions of rticle 22+/ of the Civil Code.; $E1phasis supplied% 8See Philippine !loo1in3 Mills, Inc. v. Court of ppeals, ).R. No. 2-8*.2, 27 October 8,,*, -2* SCR --7. 87 See RiDal Co11ercial !an6in3 Corp. v. lfa R"B Mf3. Corp., -8, Phil. @,8 $8,,2%, citin" Eastern Shippin3 'ines, Inc. v. Court of ppeals, supra note 8*. 8+ "a6in3 into account rticles 2878(287- of the Civil Code. 8@ . Dece1ber 2/.2 for the trust receipt dated / October 2/.2 and 8/ Dece1ber 2/.2 for the trust receipt dated *, Septe1ber 2/.2. 8. Supra note 87. Reported as RiDal Co11ercial !an6in3 Corp. v. lfa R"B Mf3. Corp. 8/ Padilla, et al. v. C , 82- Phil. -/8 $2/.-%. *, "he action to recover pa41ent under a trust receipt 1a4 be instituted separatel4 under rticle *2 of the Civil Code based on the trust receipt contract $Vintola v. Insular !an6 of sia and 1erica, No. '( @.+@2, 87 March 2/.., 27/ SCR 2-,A Vintola v. Insular !an6 of sia and 1erica, No. '(@*8@2, 8/ Ma4 2/.@, 27, SCR 7@.% or under rticle ** of the Civil Code based on fraud $Prudential !an6 v. Inter1ediate ppellate Court, supra note 2+%. "he civil action under rticle *2 or rticle ** proceeds independentl4 of the cri1inal action.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION A.M. No. P:01:1464 Ma$21 13, 2001 $:or1erl4 OCA IPI. No. <<:*30:P% SAL#A"OR O. BOOC, co1plainant, vs. MALA!O B. BANTUAS, S0ERI I#, RTC, BRANC0 3, ILIGAN CIT!, respondent. RESOLUTION "E LEON, .R., J.= n affidavit(co1plaint dated u3ust *2, 2/// 0as filed before the Office of the Court d1inistrator $OC % b4 Salvador !ooc char3in3 Mala4o !. !antuas, Sheriff IV of the Re3ional "rial Court $R"C%, !ranch *, Ili3an Cit4 0ith )ross I3norance of the 'a0 and )rave buse of uthorit4 relative to Civil Case No. 2@2. entitled, ;:elipe ). Eavier, Er. vs. Rufino !ooc.;

Co1plainant is the President of :ive Star Mar6etin3 Corporation. On u3ust 88, 2//- herein respondent Sheriff Mala4o !. !antuas, pursuant to a Brit of E?ecution issued in Civil Case No. 2@2. filed a Notice of 'ev4 0ith the Re3ister of Deeds, Ili3an Cit4 over a parcel of land covered b4 "C" No. "(2/8,/ and o0ned b4 :ive Star Mar6etin3 Corporation. Co1plainant alle3ed that respondent sheriff, at the instance of plaintiff, for1er Eud3e :elipe Eavier, proceeded to file the Notice of 'ev4 despite respondent sheriff5s 6no0led3e that the propert4 is o0ned b4 the corporation 0hich 0as not a part4 to the civil case. On Eul4 *2, 2//7, the corporation throu3h the co1plainant reiterated to respondent sheriff that it 0as the o0ner of the propert4 and Rufino !ooc had no share or interest in the corporation. Cence, the corporation de1anded that respondent sheriff cancel the notice of lev4, other0ise the corporation 0ould ta6e the appropriate le3al steps to protect its interest. Respondent sheriff, ho0ever, did not heed the corporation5s de1and inas1uch as on u3ust 8,, 2/// the corporation received a ;Notice of Sale on E?ecution of Real Propert4,; dated u3ust 22, 2///, coverin3 the sub>ect propert4. Respondent sheriff scheduled the public auction on u3ust *2, 2///. Conse=uentl4, the corporation, to protect its ri3hts and interests, 0as co1pelled to file an action for Iuietin3 of "itle 0ith the R"C, !ranch - of Ili3an Cit4. Respondent sheriff, in his ans0er to the co1plaint filed a3ainst hi1 before the OC , said that he filed a Notice of 'ev4 0ith the Re3ister of Deeds of Ili3an Cit4 on the share, ri3hts, interest and participation of Rufino !ooc in the parcel of land o0ned b4 :ive Star Mar6etin3 Corporation. Respondent sheriff clai1ed that Rufino !ooc is the o0ner of around 8,, shares of stoc6 in said corporation accordin3 to a docu1ent issued b4 the Securities and E?chan3e Co11ission. Respondent sheriff stressed that the lev4 0as 1ade on the share, ri3hts andHor interest and participation 0hich Rufino !ooc, as President and stoc6holder, 1a4 have in the parcel of land o0ned b4 :ive Star Mar6etin3 Corporation. Clai1in3 that he 0as onl4 actin3 pursuant to his duties as sheriff, respondent cited Section 27, Rule */ of the Rules of Court 0hich states that ? ? ? "he officer 1ust enforce an e?ecution of a 1one4 >ud31ent b4 lev4in3 on all the propert4, real and personal of ever4 na1e and nature 0hatsoever, and 0hich 1a4 be disposed of for value of the >ud31ent debtor not e?e1pt fro1 e?ecution. Real propert4 stoc6s, shares, debts, credits, and other personal propert4, or an4 interest in either real or personal propert4, 1a4 be levied upon in li6e 1anner and 0ith li6e effect as under a 0rit of e?ecution. Respondent sheriff said that 0hile co1plainant Salvador !ooc 1ade a de1and for the cancellation of lev4 1ade, the for1er dee1ed it 0ise to have the >ud31ent satisfied in accordance 0ith Section */ of the Rules of Court Respondent sheriff added that the trial court 0here the case for Iuietin3 of "itle filed b4 the corporation 0as pendin3 ordered the auction sale of the shares of stoc6 of Rufino !ooc. "he corporation alle3edl4 never =uestioned said order of the R"C. :inall4, respondent sheriff averred that the corporation is 1erel4 a du114 of Rufino !ooc and his brother Shei6din3 !ooc. Respondent sheriff sub1itted as an e?hibit an affidavit e?ecuted b4 Shei6din3 !ooc 0herein the latter ad1itted that 0hen Eud3e :elipe Eavier 0on in the civil case a3ainst Rufino !ooc, the latter si1ulated a transfer of his shares of stoc6 in :ive Star Mar6etin3 Corporation so that the propert4 1a4 not be levied upon. 2 Co1plainant, in his repl4 to respondent sheriffs co11ent belied the latter5s alle3ation that the corporation never =uestioned the auction sale. Co1plainant averred that contrar4 to the respondent sheriff5s assertion, the trial court in fact issued a restrainin3 order 0hich 0as 0ithdra0n after plaintiff5s counsel 1anifested that the respondent sheriff 0ould onl4 auction Rufino !ooc5s shares of stoc6 in the corporation and not the sub>ect propert4. "he OC found respondent sheriff liable for the char3es filed a3ainst hi1, statin3 that respondent sheriff acted in bad faith 0hen he auctioned the sub>ect propert4 inas1uch as Eud3e Man3otara had alread4 0arned hi1 that the public auction should pertain onl4 to shares of stoc6 o0ned b4 Rufino !ooc in :ive Star Mar6etin3 Corporation. Respondent sheriff, ho0ever, in violation of the order issued b4 Eud3e Man3otara and in disre3ard of the 1anifestation filed b4 plaintiffs counsel that the sale should involve onl4 the shares of stoc6, proceeded to auction the sub>ect propert4. "he OC , thus, 1ade the reco11endation thatF 2% "he instant case be RE(DOC&E"ED as a re3ular ad1inistrative 1atterA and 8% Respondent Sheriff Mala4o !. !antuas be :INED in the a1ount of "en "housand Pesos $P2,,,,,.,,% for conductin3 the auction sale in violation of the ter1s of the order issued b4 ctin3 Presidin3 Eud3e Ma1indiara P. Man3otara 0ith a S"ERN B RNIN) that a co11ission of the sa1e or si1ilar acts in the future shall be dealt 0ith 1ore severel4. careful scrutin4 of the records sho0s that respondent sheriff, in filin3 a notice of lev4 on the sub>ect propert4 as 0ell as in the certificate of sale, did not fail to 1ention that 0hat 0as bein3 levied upon and sold 0as 0hatever shares, ri3hts, interests and participation Rufino !ooc, as president and stoc6holder in :ive Star Mar6etin3 Corporation 1a4 have on sub>ect propert4. Respondent sheriff, ho0ever, overstepped his authorit4 0hen he disre3arded the distinct and separate personalit4 of the corporation fro1 that of Rufino !ooc as stoc6holder of the corporation b4 lev4in3 on the propert4 of the corporation. Respondent sheriff should not have 1ade the lev4 based on 1ere con>ecture that since Rufino !ooc is a stoc6holder and officer of the corporation, then he 1i3ht have an interest or share in the sub>ect propert4. It is settled that a corporation is clothed 0ith a personalit4 separate and distinct fro1 that of its stoc6holders. It 1a4 not be held liable for the personal indebtedness of its stoc6holders. In the case of Del #osario vs* 'ascar( )r, 8 0e i1posed the fine of P7,,,,.,, on respondent sheriff !ascar for ;allocatin3 unto hi1self the po0er of the court to 5pierce the veil of corporate entit45 and i1providentl4 assu1in3 that since co1plainant EsperanDa del Rosario is the treasurer of Miradel Develop1ent Corporation, the4 are one and the sa1e.; In the said case 0e reiterated the principle that the 1ere fact that one is a president of the corporation does not render the propert4 he o0ns or possesses the propert4 of the corporation since the president, as an individual, and the corporation are separate entities. !ased on the fore3oin3, respondent Sheriff !antuas has clearl4 acted be4ond his authorit4 0hen he levied the propert4 of :ive Star Mar6etin3 Corporation. "he fact, ho0ever, that respondent sheriff, in lev4in3 said propert4, had stated in the notice of lev4 as 0ell as in the certificate of sale that 0hat 0as bein3 levied upon and sold 0as 0hatever ri3hts, shares interest andHor participation Rufino !ooc, as stoc6holder and president in the corporation, 1a4 have on the sub>ect propert4, sho0s that respondent sheriff5s conduct 0as i1pelled partl4 b4 i3norance of Corporation 'a0 and partl4 b4 1ere overDealousness to co1pl4 0ith his duties and not b4 bad faith

or blatant disre3ard of the trial court5s order. Cence, 0e dee1 that the penalt4 of a fine of :ive "housand Pesos $P7,,,,.,,% to be i1posed on respondent sheriff 0ould suffice. BCERE:ORE, respondent Mala4o !. !antuas, Sheriff IV of the R"C of Ili3an Cit4, !ranch *, is hereb4 :INED in the su1 of :ive "housand Pesos $P7,,,,.,,% 0ith the S"ERN B RNIN) that a repetition of the sa1e or si1ilar acts in the future 0ill be dealt 0ith 1ore severel4. SO ORDERED. 'ellosillo( Mendo&a( +uisum$in" and 'uena( )) *( concur. oo(no(%' 2 nne? ;D;. 8 8,+ SCR +@., +.7 K2//8L. T0IR" "I#ISION >G.R. NO. 153535. .34y 2+, 2005? SOLI"BANK CORPORATION, Petitioners, v* MIN"ANAO ERROALLO! CORPORATION, S&o3'%' .ONG: 8ON 0ONG and SOO:OK KIM 0ONG,@ TERESITA CU, and RICAR"O P. GUE#ARA and S&o3'%,@@ #espondents. "ECISION PANGANIBAN, J.= "o >ustif4 an a0ard for 1oral and e?e1plar4 da1a3es under rticles 2/ to 82 of the Civil Code $on hu1an relations%, the clai1ants 1ust establish the other part45s 1alice or bad faith b4 clear and convincin3 evidence. "he Case !efore us is a Petition for Revie0 2 under Rule -7 of the Rules of Court, assailin3 the Dece1ber 82, 8,,2 Decision8 and the Ma4 27, 8,,8 Resolution* of the Court of ppeals $C % in C ()R CV No. +@-.8. "he C disposed as follo0sF AIN T0E LIG0T O ALL T0E OREGOING , the appeal is "ISMISSE". "he Decision appealed fro1 is A IRME".;"he assailed Resolution, on the other hand, denied petitioner5s Motion for Reconsideration. "he :acts "he C narrated the antecedents as follo0sF ;"he Maria Cristina Che1ical Industries $MCCI% and three $*% &orean corporations, na1el4, the Ssan34on3 Corporation, the Pohan3 Iron and Steel Co1pan4 and the Don3il Industries Co1pan4, 'td., decided to for3e a >oint venture and establish a corporation, under the na1e of the Mindanao :erroallo4 Corporation $Corporation for brevit4% 0ith principal offices in Ili3an Cit4. Ricardo P. )uevara 0as the President and Chair1an of the !oard of Directors of the Corporation. Eon3(Bon Con3, the )eneral Mana3er of Ssan34on3 Corporation, 0as the Vice( President of the Corporation for :inance, Mar6etin3 and d1inistration. So 0as "eresita R. Cu. On Nove1ber 8+, 2//,, the !oard of Directors of the Corporation approved a 5Resolution5 authoriDin3 its President and Chair1an of the !oard of Directors or "eresita R. Cu, actin3 to3ether 0ith Eon3(Bon Con3, to secure an o1nibus line in the a33re3ate a1ount of P*,,,,,,,,,.,, fro1 the Solidban6 ? ? ?. ??? ;In the 1eanti1e, the Corporation started its operations so1eti1e in pril, 2//2. Its indebtedness ballooned to P8,,,-7*,+.+.+/ co1pared to its assets of onl4 P+7,-@+,,,,.,,. On Ma4 82, 2//2, the Corporation secured an ordinar4 ti1e loan fro1 the Solidban6 in the a1ount of P*,8,,,,,,.,,. nother ordinar4 ti1e loan 0as 3ranted b4 the !an6 to the Corporation on Ma4 8., 2//2, in the a1ount of P2,.,,,,,,.,, or in the total a1ount of P7,,,,,,,,.,,, due on Eul4 27 and 8+, 2//2, respectivel4. ;Co0ever, the Corporation and the !an6 a3reed to consolidate and, at the sa1e ti1e, restructure the t0o $8% loan avail1ents, the sa1e pa4able on Septe1ber 8,, 2//2. "he Corporation e?ecuted 5Pro1issor4 Note No. /+( /2(,,.+7(+5 in favor of the !an6 evidencin3 its loan in the a1ount of P7,2+,,,,,.,,, pa4able on Septe1ber 8,, 2//2. "eresita Cu and Eon3(Bon Con3 affi?ed their si3natures on the note. "o secure the pa41ent of the said loan, the Corporation, throu3h Eon3(Bon Con3 and "eresita Cu, e?ecuted a 5Deed of ssi3n1ent5 in favor of the !an6 coverin3 its ri3hts, title and interest to the follo0in3F 5"he entire proceeds of drafts dra0n under Irrevocable 'etter of Credit No. M(S(,-2(8,,8,., opened 0ith "he Mitsubishi !an6 'td. 5"o64o dated Eune 2*, 2//2 for the account of Ssan34on3 Eapan Corporation, @:. Matsuo6a( "a1ura(Cho !ld3., 88(2,, 7(Cho1e, Shi1bashi, Minato(&u, "o64o, Eapan up to the e?tent of #ST2/@,+@/.,,5 ;"he Corporation li6e0ise e?ecuted a 5Iuedan5 , b4 0a4 of additional securit4, under 0hich the Corporation bound and obli3ed to 6eep and hold, in trust for the !an6 or its Order, 5:errosilicon for #ST2/@,+@/.,,5 . Eon3( Bon Con3 and "eresita Cu affi?ed their si3natures thereon for the Corporation. "he Corporation, also, throu3h Eon3(Bon Con3 and "eresita Cu, e?ecuted a 5"rust Receipt 3ree1ent5, b4 0a4 of additional securit4 for said loan, the Corporation underta6in3 to hold in trust, for the !an6, as its propert4, the follo0in3F 52. "CE MI"S#!ISCI ! N& '"D., "o64o 'HC No. M(S(,-2(8,,8,., for account of Ssan34on3 Eapan Corporation, "o64o, Eapan for #ST2/@,+@/.,, :errosilicon to e?pire Septe1ber 8,, 2//2. 58. SEC I#ED N NO. /2(-@+ dated Eune 8+, 2//2 coverin3 the follo0in3F :errosilicon for #ST2/@,+@/.,,5 ;Co0ever, shortl4 after the e?ecution of the said deeds, the Corporation stopped its operations. "he Corporation failed to pa4 its loan avail1ents fro1 the !an6 inclusive of accrued interest. On :ebruar4 22, 2//8, the !an6 sent a letter to the Corporation de1andin3 pa41ent of its loan avail1ents inclusive of interests due. "he Corporation failed to co1pl4 0ith the de1and of the !an6. On Nove1ber 8*, 2//8, the !an6 sent another letter to the KCorporationL de1andin3 pa41ent of its account 0hich, b4 Nove1ber 8*, 2//8, had a1ounted to P@,8.*,/2*.**. "he Corporation a3ain failed to co1pl4 0ith the de1and of the !an6. ;On Eanuar4 +, 2//*, the !an6 filed a co1plaint a3ainst the Corporation 0ith the Re3ional "rial Court of Ma6ati Cit4, entitled and doc6eted as 5 Solid$an- Corporation v* Mindanao Ferroalloy Corporation( Sps* )on"-.on /on" and t!e Sps* 0eresita #* Cu( Civil Case No. /*(,*.5 for 5Su1 of Mone45 0ith a plea for the issuance of a 0rit of preli1inar4 attach1ent. ? ? ? ??? ;#nder its 5 1ended Co1plaint5, the Plaintiff alle3ed that it i1pleaded Ricardo )uevara and his 0ife as Defendants because, Ka1on3 othersLF

5Defendants EON)(BON CON) and "ERESI" C#, are the Vice(Presidents of defendant corporation, and also 1e1bers of the co1pan45s !oard of Directors. "he4 are i1pleaded as >oint and solidar4 debtors of KpetitionerL ban6 havin3 si3ned the Pro1issor4 Note, Iuedan, and "rust Receipt a3ree1ents 0ith KpetitionerL, in this case. ? ? ? ? ? ? ? ? ?5 ;KPetitionerL li6e0ise filed a cri1inal co1plaint ? ? ? entitled and doc6eted as 5Solidban6 Corporation v. Ricardo )uevara, "eresita R. Cu and Eon3 Bon Con3 ? ? ? for 5Violation of P.D. 2275. On pril 2-, 2//*, the investi3atin3 Prosecutor issued a 5Resolution5 findin3 no probable cause for violation of P.D. 227 a3ainst the Respondents as the 3oods covered b4 the =uedan 50ere none?istent5 F ??? ;In their ns0er to the co1plaint Kin the civil caseL, the Spouses Eon3(Bon Con3 and Soo(o6 &i1 Con3 alle3ed, inter alia, that KpetitionerL had no cause of action a3ainst the1 asF 5? ? ? the clean loan of P7.2 M obtained 0as a corporate underta6in3 of defendant MIN: CO e?ecuted throu3h its dul4 authoriDed representatives, Ms. "eresita R. Cu and Mr. Eon3(Bon Con3, both Vice Presidents then of MIN: CO. ? ? ?.5 ??? ;KOn their part, respondentsL "eresita Cu and Ricardo )uevara alle3ed that KpetitionerL had no cause of action a3ainst the1 becauseF $a% Ricardo )uevara did not si3n an4 of the docu1ents in favor of KpetitionerLA $b% "eresita Cu si3ned the 5Pro1issor4 Note5 , 5Deed of ssi3n1ent5 , 5"rust Receipt5 and 5Iuedan5 in blan6 and 1erel4 as representative and, hence, for and in behalf of the Defendant Corporation and, hence, 0as not personall4 liable to KpetitionerL. ;In the interi1, the Corporation filed, on Eune 8,, 2//-, a 5Petition5 , 0ith the Re3ional "rial Court of Ili3an Cit4, for 5Voluntar4 Insolvenc45 ? ? ?. ??? ; ppended to the Petition 0as a list of its creditors, includin3 KpetitionerL, for the a1ount of P.,2--,/2+.,7. "he Court issued an Order, on Eul4 28, 2//-, findin3 the Petition sufficient in for1 and substance ? ? ?. ??? ;In vie0 of said develop1ent, the Court issued an Order, in Civil Case No. /*(,*., suspendin3 the proceedin3s as a3ainst the Defendant Corporation but orderin3 the proceedin3s to proceed as a3ainst the individual defendants ? ? ?. ??? ;On Dece1ber 2,, 2///, the Court rendered a Decision dis1issin3 the co1plaint for lac6 of cause of action of KpetitionerL a3ainst the Spouses Eon3(Bon Con3, "eresita Cu and the Spouses Ricardo )uevara, ? ? ?. ??? ;In dis1issin3 the co1plaint a3ainst the individual KrespondentsL, the Court a uo found and declared that KpetitionerL failed to adduce a 1orsel of evidence to prove the personal liabilit4 of the said KrespondentsL for the clai1s of KpetitionerL and that the latter i1pleaded the KrespondentsL, in its co1plaint and a1ended co1plaint, solel4 to put 1ore pressure on the Defendant Corporation to pa4 its obli3ations to KpetitionerL. ;KPetitionerL ? ? ? interposed an appeal, fro1 the Decision of the Court a uo and posed, for ? ? ? resolution, the issue of 0hether or not the individual KrespondentsL, are >ointl4 and severall4 liable to KpetitionerL for the loan avail1ents of the KrespondentL Corporation, inclusive of accrued interests and penalties. ;In the 1eanti1e, on 1otion of KpetitionerL, the Court set aside its Order, dated :ebruar4 8, 2//7, suspendin3 the proceedin3s as a3ainst the KrespondentL Corporation. KPetitionerL filed a 5Motion for Su11ar4 Eud31ent5 a3ainst the KrespondentL Corporation. On :ebruar4 8., 8,,,, the Court rendered a 5Su11ar4 Eud31ent5 a3ainst the KrespondentL Corporation, the decretal portion of 0hich reads as follo0sF 5BCERE:ORE, pre1ises considered, this Court hereb4 resolves to 3ive due course to the 1otion for su11ar4 >ud31ent filed b4 herein KpetitionerL. Conse=uentl4, >ud31ent is hereb4 rendered in favor of KPetitionerL SO'ID! N& CORPOR "ION and a3ainst KRespondentL MIND N O :ERRO ''O< CORPOR "ION, orderin3 the latter to pa4 the for1er the a1ount of P@,,.+,+.+.@,, representin3 the outstandin3 balance of the sub>ect loan as of 8- Septe1ber 2//-, plus stipulated interest at the rate of 2+J per annu1 to be co1puted fro1 the aforesaid date until full4 paid to3ether 0ith an a1ount e=uivalent to 28J of the total a1ount due each 4ear fro1 8- Septe1ber 2//- until full4 paid. 'astl4, said KrespondentL is hereb4 ordered to pa4 KpetitionerL the a1ount of P87,,,,.,, to KpetitionerL as reasonable attorne45s fees as 0ell as cost of liti3ation.; 7 In its appeal, petitioner ar3ued that $2% it had adduced the re=uisite evidence to prove the solidar4 liabilit4 of the individual respondents, and $8% it 0as not liable for their counterclai1s for da1a3es and attorne45s fees. Rulin3 of the Court of ppeals ffir1in3 the R"C, the appellate court ruled that the individual respondents 0ere not solidaril4 liable 0ith the Mindanao :erroallo4 Corporation, because the4 had acted 1erel4 as officers of the corporation, 0hich 0as the real part4 in interest. Respondent )uevara 0as not even a si3nator4 to the Pro1issor4 Note, the "rust Receipt 3ree1ent, the Deed of ssi3n1ent or the IuedanA he 0as 1erel4 authoriDed to represent Minfaco to ne3otiate 0ith and secure the loans fro1 the ban6. On the other hand, the C noted that Respondents Cu and Con3 had not si3ned the above docu1ents as co1a6ers, but as si3natories in their representative capacities as officers of Minfaco. 'i6e0ise, the C held that the individual respondents 0ere not liable to petitioner for da1a3es, si1pl4 because $2% the4 had not received the proceeds of the irrevocable 'etter of Credit, 0hich 0as the sub>ect of the Deed of ssi3n1entA and $8% the 3oods sub>ect of the "rust Receipt 3ree1ent had been found to be none?istent. "he appellate court too6 >udicial notice of the practice of ban6s and financin3 institutions to investi3ate, e?a1ine and assess all properties offered b4 borro0ers as collaterals, in order to deter1ine the feasibilit4 and advisabilit4 of 3rantin3 loans. !efore a3reein3 to the consolidation of Minfaco5s loans, it presu1ed that petitioner had done its ho1e0or6. s to the a0ard of da1a3es to the individual respondents, the C upheld the trial court5s findin3s that it 0as clearl4 unfair on petitioner5s part to have i1pleaded the 0ives of )uevara and Con3, because the 0o1en 0ere not priv4 to an4 of the transactions bet0een petitioner and Minfaco. #nder rticles 2/, 8, and 888/ of the Civil Code, such rec6less and 0anton act of pressurin3 individual respondents to settle the corporation5s obli3ations is a 3round to a0ard 1oral and e?e1plar4 da1a3es, as 0ell as attorne45s fees. Cence this Petition.+ Issues In its Me1orandu1, petitioner raises the follo0in3 issuesF

; . Bhether or not there is a1ple evidence on record to support the >oint and solidar4 liabilit4 of individual respondents 0ith Mindanao :erroallo4 Corporation. ;!. In the absence of >oint and solidar4 liabilit4K,L 0ill the provision of rticle 28,. in relation to rticle 28,@ of the Ne0 Civil Code providin3 for >oint liabilit4 be applicable to the case at bar. ;C. Ma4 ban6 practices be the proper sub>ect of >udicial notice under Sec. 2 KofL Rule 28/ of the Rules of Court. ;D. Bhether or not there is evidence to sustain the clai1 that respondents 0ere i1pleaded to appl4 pressure upon the1 to pa4 the obli3ations in lieu of MIN: CO that is declared insolvent. ;E. Bhether or not there are sufficient bases for the a0ard of various 6inds of and substantial a1ounts in da1a3es includin3 pa41ent for attorne45s fees. ;:. Bhether or not respondents co11itted fraud and 1isrepresentations and acted in bad faith. ;). Bhether or not the inclusion of respondents spouses is proper under certain circu1stances and supported b4 prevailin3 >urisprudence.;@ In su1, there are t0o 1ain =uestionsF $2% 0hether the individual respondents are liable, either >ointl4 or solidaril4, 0ith the Mindanao :erroallo4 CorporationA and $8% 0hether the a0ard of da1a3es to the individual respondents is valid and le3al. "he Court5s Rulin3 "he Petition is partl4 1eritorious. :irst IssueF Lia$ility of Individual #espondents Petitioner ar3ues that the individual respondents 0ere >ointl4 or solidaril4 liable 0ith Minfaco, either because their participation in the loan contract and the loan docu1ents 1ade the1 co1a6ersA or because the4 co11itted fraud and deception, 0hich >ustifies the piercin3 of the corporate veil. "he first contention hin3es on certain factual deter1inations 1ade b4 the trial and the appellate courts. "hese tribunals found that, althou3h he had not si3ned an4 docu1ent in connection 0ith the sub>ect transaction, Respondent )uevara 0as authoriDed to represent Minfaco in ne3otiatin3 for a P*, 1illion loan fro1 petitioner. s to Cu and Con3, it 0as deter1ined, a1on3 others, that their si3natures on the loan docu1ents other than the Deed of ssi3n1ent 0ere not prefaced 0ith the 0ord ;b4,; and that there 0ere no other si3natures to indicate 0ho had si3ned for and on behalf of Minfaco, the principal borro0er. In the Pro1issor4 Note, the4 si3ned above the printed na1e of the corporation ( ( on the space provided for ;Ma6erH!orro0er,; not on that provided for ;Co(1a6er.; Petitioner has not sho0n an4 e?ceptional circu1stance that sanctions the disre3ard of these findin3s of fact, 0hich are thus dee1ed final and conclusive upon this Court and 1a4 not be revie0ed on appeal. . 1o Personal Lia$ility for Corporate Deeds !asic is the principle that a corporation is vested b4 la0 0ith a personalit4 separate and distinct fro1 that of each person co1posin3/ or representin3 it.2, E=uall4 funda1ental is the 3eneral rule that corporate officers cannot be held personall4 liable for the conse=uences of their acts, for as lon3 as these are for and on behalf of the corporation, 0ithin the scope of their authorit4 and in 3ood faith. 22 "he separate corporate personalit4 is a shield a3ainst the personal liabilit4 of corporate officers, 0hose acts are properl4 attributed to the corporation. 28 0ramat Mercantile v* Court of Appeals2* held thusF ;Personal liabilit4 of a corporate director, trustee or officer alon3 $althou3h not necessaril4% 0ith the corporation 1a4 so validl4 attach, as a rule, onl4 0hen5 52. Ce assents $a% to a patentl4 unla0ful act of the corporation, or $b% for bad faith or 3ross ne3li3ence in directin3 its affairs, or $c% for conflict of interest, resultin3 in da1a3es to the corporation, its stoc6holders or other personsA 58. Ce consents to the issuance of 0atered stoc6s or 0ho, havin3 6no0led3e thereof, does not forth0ith file 0ith the corporate secretar4 his 0ritten ob>ection theretoA 5*. Ce a3rees to hold hi1self personall4 and solidaril4 liable 0ith the corporationA or 5-. Ce is 1ade, b4 a specific provision of la0, to personall4 ans0er for his corporate action. 5; Consistent 0ith the fore3oin3 principles, 0e sustain the C 5s rulin3 that Respondent )uevara 0as not personall4 liable for the contracts. First, it is be4ond cavil that he 0as dul4 authoriDed to act on behalf of the corporationA and that in ne3otiatin3 the loans 0ith petitioner, he did so in his official capacit4. Second, no sufficient and specific evidence 0as presented to sho0 that he had acted in bad faith or 3ross ne3li3ence in that ne3otiation. 0!ird, he did not hold hi1self personall4 and solidaril4 liable 0ith the corporation. Neither is there an4 specific provision of la0 1a6in3 hi1 personall4 ans0erable for the sub>ect corporate acts. On the other hand, Respondents Cu and Con3 si3ned the Pro1issor4 Note 0ithout the 0ord ;b4; precedin3 their si3natures, atop the desi3nation ;Ma6erH!orro0er; and the printed na1e of the corporation, as follo0sF SS$S3d% CuHCon3SS $Ma6erH!orro0er% MIND N O :ERRO ''O< Bhile their si3natures appear 0ithout =ualification, the inference that the4 si3ned in their individual capacities is ne3ated b4 the follo0in3 factsF 2% the na1e and the address of the corporation appeared on the space provided for ;Ma6erH!orro0er;A 8% Respondents Cu and Con3 had onl4 one set of si3natures on the instru1ent, 0hen there should have been t0o, if indeed the4 had intended to be bound solidaril4 ( ( the first as representatives of the corporation, and the second as the1selves in their individual capacitiesA *% the4 did not si3n under the spaces provided for ;Co(1a6er,; and neither 0ere their addresses reflected thereA and -% at the bac6 of the Pro1issor4 Note, the4 si3ned above the 0ords ; uthoriDed Representative.; Solidary Lia$ility 1ot Li"!tly Inferred Moreover, it is a?io1atic that solidar4 liabilit4 cannot be li3htl4 inferred. 2- #nder rticle 28,@ of the Civil Code, ;there is a solidar4 liabilit4 onl4 0hen the obli3ation e?pressl4 so states, or 0hen the la0 or the nature of the obli3ation re=uires solidarit4.; Since solidar4 liabilit4 is not clearl4 e?pressed in the Pro1issor4 Note and is not re=uired b4 la0 or the nature of the obli3ation in this case, no conclusion of solidar4 liabilit4 can be 1ade. :urther1ore, nothin3 supports the alle3ed >oint liabilit4 of the individual petitioners because, as correctl4 pointed out b4 the t0o lo0er courts, the evidence sho0s that there is onl4 one debtorF the corporation. In a >oint obli3ation, there 1ust be at least t0o debtors, each of 0ho1 is liable onl4 for a proportionate part of the debtA and the creditor is entitled onl4 to a proportionate part of the credit. 27

Moreover, it is rather late in the da4 to raise the alle3ed >oint liabilit4, as this 1atter has not been pleaded before the trial and the appellate courts. !efore the lo0er courts, petitioner anchored its clai1 solel4 on the alle3ed >oint and several $or solidar4% liabilit4 of the individual respondents. Petitioner 1ust be re1inded that an issue cannot be raised for the first ti1e on appeal, but seasonabl4 in the proceedin3s before the trial court. 2+ So too, the Pro1issor4 Note in =uestion is a ne3otiable instru1ent. #nder Section 2/ of the Ne3otiable Instru1ents 'a0, a3ents or representatives 1a4 si3n for the principal. "heir authorit4 1a4 be established, as in other cases of a3enc4. Section 8, of the la0 provides that a person si3nin3 ;for and on behalf of a KdisclosedL principal or in a representative capacit4 ? ? ? is not liable on the instru1ent if he 0as dul4 authoriDed.; "he authorit4 of Respondents Cu and Con3 to si3n for and on behalf of the corporation has been a1pl4 established b4 the Resolution of Minfaco5s !oard of Directors, statin3 that ; tt4. Ricardo P. )uevara $President and Chair1an%, or Ms. "eresita R. Cu $Vice President%, actin3 to3ether 0ith Mr. Eon3 Bon Con3 $Vice President%, be as the4 are hereb4 authoriDed for and in behalf of the Corporation toF 2. Ne3otiate 0ith and obtain fro1 $petitioner% the e?tension of an o1nibus line in the a33re3ate of P*, 1illion ? ? ?A and 8. E?ecute and deliver all docu1entation necessar4 to i1ple1ent all of the fore3oin3.; 2@ :urther, the a3ree1ent involved here is a ;contract of adhesion,; 0hich 0as prepared entirel4 b4 one part4 and offered to the other on a ;ta6e it or leave it; basis. :ollo0in3 the 3eneral rule, the contract 1ust be read a3ainst petitioner, because it 0as the part4 that prepared it, 2. 1ore so because a ban6 is held to hi3h standards of care in the conduct of its business.2/ In the totalit4 of the circu1stances, 0e hold that Respondents Cu and Con3 clearl4 si3ned the Note 1erel4 as representatives of Minfaco. 1o #eason to Pierce t!e Corporate ,eil #nder certain circu1stances, courts 1a4 treat a corporation as a 1ere a33roup1ent of persons, to 0ho1 liabilit4 0ill directl4 attach. "he distinct and separate corporate personalit4 1a4 be disre3arded, inter alia( 0hen the corporate identit4 is used to defeat public convenience, >ustif4 a 0ron3, protect a fraud, or defend a cri1e. 'i6e0ise, the corporate veil 1a4 be pierced 0hen the corporation acts as a 1ere alter e3o or business conduit of a person, or 0hen it is so or3aniDed and controlled and its affairs so conducted as to 1a6e it 1erel4 an instru1entalit4, a3enc4, conduit or ad>unct of another corporation. 8, !ut to disre3ard the separate >uridical personalit4 of a corporation, the 0ron3doin3 1ust be clearl4 and convincin3l4 establishedA it cannot be presu1ed.82 Petitioner contends that the corporation 0as used to protect the fraud foisted upon it b4 the individual respondents. It ar3ues that the C failed to consider the follo0in3 bad3es of fraud and evident bad faithF 2% the individual respondents 1isrepresented the corporation as solvent and financiall4 capable of pa4in3 its loanA 8% the4 6ne0 that prices of ferrosilicon 0ere declinin3 in the 0orld 1ar6et 0hen the4 secured the loan in Eune 2//2A *% not a sin3le centavo 0as paid for the loanA and -% the corporation suspended its operations shortl4 after the loan 0as 3ranted.88 :raud refers to all 6inds of deception ( ( 0hether throu3h insidious 1achination, 1anipulation, conceal1ent or 1isrepresentation ( ( that 0ould lead an ordinaril4 prudent person into error after ta6in3 the circu1stances into account.8* In contracts, a fraud 6no0n as dolo causante or causal fraud8- is basicall4 a deception used b4 one part4 prior to or si1ultaneous 0ith the contract, in order to secure the consent of the other. 87 Needless to sa4, the deceit e1plo4ed 1ust be serious. In contradistinction, onl4 so1e particular or accident of the obli3ation is referred to b4 incidental fraud or dolo incidente(8+ or that 0hich is not serious in character and 0ithout 0hich the other part4 0ould have entered into the contract an40a4. 8@ :raud 1ust be established b4 clear and convincin3 evidenceA 1ere preponderance of evidence is not ade=uate.8. !ad faith, on the other hand, i1ports a dishonest purpose or so1e 1oral obli=uit4 and conscious doin3 of a 0ron3, not si1pl4 bad >ud31ent or ne3li3ence. 8/ It is s4non41ous 0ith fraud, in that it involves a desi3n to 1islead or deceive another.*, #nfortunatel4, petitioner 0as unable to establish clearl4 and precisel4 ho0 the alle3ed fraud 0as co11itted. It failed to establish that it 0as deceived into 3rantin3 the loans because of respondents5 1isrepresentations andHor insidious actions. Iuite the contrar4, circu1stances indicate the 0ea6ness of its sub1ission. First, petitioner does not den4 that the P7 1illion loan represented the consolidation of t0o loans, *2 3ranted lon3 before the ban6 re=uired the individual respondents to e?ecute the Pro1issor4 Note, "rust Receipt 3ree1ent, Iuedan or Deed of ssi3n1ent. Cence, no 0ords, acts or 1achinations arisin3 fro1 an4 of those instru1ents could have been used b4 the1 prior to or si1ultaneous 0ith the e?ecution of the contract, or even as so1e accident or particular of the obli3ation. Second, petitioner ban6 0as in a position to verif4 for itself the solvenc4 and trust0orthiness of respondent corporation. In fact, ordinar4 business prudence re=uired it to do so before 3rantin3 the 1ulti1illion loans. It is of co11on 6no0led3e that, as a 1atter of practice, ban6s conduct e?haustive investi3ations of the financial standin3 of an applicant debtor, as 0ell as appraisals of collaterals offered as securities for loans to ensure their pro1pt and satisfactor4 pa41ent. "o uphold petitioner5s cr4 of fraud 0hen it failed to verif4 the e?istence of the 3oods covered b4 the "rust Receipt 3ree1ent and the Iuedan is to condone its ne3li3ence. )udicial 1otice of 'an- Practices "his point brin3s us to the alle3ed error of the appellate court in ta6in3 >udicial notice of the practice of ban6s in conductin3 bac63round chec6s on borro0ers and sureties. Bhile a court is not 1andated to ta6e >udicial notice of this practice under Section 2 of Rule 28/ of the Rules of Court, it nevertheless 1a4 do so under Section 8 of the sa1e Rule. "he latter Rule provides that a court, in its discretion, 1a4 ta6e >udicial notice of ;1atters 0hich are of public 6no0led3e, or ou3ht to be 6no0n to >ud3es because of their >udicial functions.; "hus, the Court has ta6en >udicial notice of the practices of ban6s and other financial institutions. Precisel4, it has noted that it is their unifor1 practice, before approvin3 a loan, to investi3ate, e?a1ine and assess 0ould(be borro0ers5 credit standin3 or real estate*8 offered as securit4 for the loan applied for. Second IssueF A2ard of Dama"es "he individual respondents 0ere a0arded 1oral and e?e1plar4 da1a3es as 0ell as attorne45s fees under rticles 2/ to 82 of the Civil Code, on the basic pre1ise that the suit 0as clearl4 1alicious and intended 1erel4 to harass.

rticle 2/ of the Civil Code e?presses the funda1ental principle of la0 on hu1an conduct that a person ;1ust, in the e?ercise of his ri3hts and in the perfor1ance of his duties, act 0ith >ustice, 3ive ever4 one his due, and observe honest4 and 3ood faith.; #nder this basic postulate, the e?ercise of a ri3ht, thou3h le3al b4 itself, 1ust nonetheless be done in accordance 0ith the proper nor1. Bhen the ri3ht is e?ercised arbitraril4, un>ustl4 or e?cessivel4 and results in da1a3e to another, a le3al 0ron3 is co11itted for 0hich the 0ron3doer 1ust be held responsible.** "o be liable under the abuse(of(ri3hts principle, three ele1ents 1ust concurF a% a le3al ri3ht or dut4, b% its e?ercise in bad faith, and c% the sole intent of pre>udicin3 or in>urin3 another. *- Needless to sa4, absence of 3ood faith*7 1ust be sufficientl4 established. rticle 8, 1a6es ;KeLver4 person 0ho, contrar4 to la0, 0illfull4 or ne3li3entl4 causes da1a3e to another; liable for da1a3es. #pon the other hand, held liable for da1a3es under rticle 82 is one 0ho ;0illfull4 causes loss or in>ur4 to another in a 1anner that is contrar4 to 1orals, 3ood custo1s or public polic4.; :or da1a3es to be properl4 a0arded under the above provisions, it is necessar4 to de1onstrate b4 clear and convincin3 evidence*+ that the action instituted b4 petitioner 0as clearl4 so unfounded and untenable as to a1ount to 3ross and evident bad faith. *@ "o >ustif4 an a0ard of da1a3es for 1alicious prosecution, one 1ust prove t0o ele1entsF 1alice or sinister desi3n to ve? or hu1iliate and 0ant of probable cause. *. Petitioner 0as proven 0ron3 in i1pleadin3 Spouses )uevara and Con3. !e4ond that fact, ho0ever, respondents have not established that the suit 0as so patently malicious as to 0arrant the a0ard of da1a3es under the Civil Code5s rticles 2/ to 82, 0hich are 3rounded on 1alice or bad faith. */ Bith the presu1ption of la0 on the side of 3ood faith, and in the absence of ade=uate proof of 1alice, 0e find that petitioner i1pleaded the spouses because it honestl4 believed that the con>u3al partnerships had benefited fro1 the proceeds of the loan, as stated in their Co1plaint and subse=uent pleadin3s. Its act does not a1ount to evident bad faith or 1aliceA hence, an a0ard for da1a3es is not proper. "he adverse result of an act per se neither 1a6es the act 0ron3ful nor sub>ects the actor to the pa41ent of da1a3es, because the la0 could not have 1eant to i1pose a penalt4 on the ri3ht to liti3ate.-, :or the sa1e reason, attorne45s fees cannot be 3ranted. rticle 88,. of the Civil Code states that in the absence of a stipulation, attorne45s fees cannot be recovered, e?cept in an4 of the follo0in3 circu1stancesF ;$2% Bhen e?e1plar4 da1a3es are a0ardedA ;$8% Bhen the defendant5s act or o1ission has co1pelled the plaintiff to liti3ate 0ith third persons or to incur e?penses to protect his interestA ;$*% In cri1inal cases of 1alicious prosecution a3ainst the plaintiffA ;$-% In case of a clearl4 unfounded civil action or proceedin3 a3ainst the plaintiffA ;$7% Bhere the defendant acted in 3ross and evident bad faith in refusin3 to satisf4 the plaintiff5s plainl4 valid, >ust and de1andable clai1A ;$+% In actions for le3al supportA ;$@% In actions for the recover4 of 0a3es of household helpers, laborers and s6illed 0or6ersA ;$.% In actions for inde1nit4 under 0or61en5s co1pensation and e1plo4er5s liabilit4 la0sA ;$/% In a separate civil action to recover civil liabilit4 arisin3 fro1 a cri1eA ;$2,% Bhen at least double >udicial costs are a0ardedA ;$22% In an4 other case 0here the court dee1s it >ust and e=uitable that attorne45s fees and e?penses of liti3ation should be recovered.; In the instant case, none of the enu1erated 3rounds for recover4 of attorne45s fees are present. 80ERE ORE, this Petition is PA#0IALL3 4#A10ED. "he assailed Decision is AFFI#MED( but the a0ard of 1oral and e?e1plar4 da1a3es as 0ell as attorne45s fees is DELE0ED. No costs. SO OR"ERE". Sando,a4:G3(5%$$%B, Co$ona, Ca$&5o:Mo$a4%', and Ga$25a, JJ., 2on23$. U Cer first na1e is not specified in title of the Petition, but is found on pa3e 2 of the Spouses5 Me1orandu1. #ollo, p. 888. UU "he na1e of Mr. )uevara5s spouse is not found in the records. 2 #ollo, pp. 2.(-8. 8 Penned b4 Eustice Ro1eo E. Calle>o Sr. $then chair, "0elfth Division, and no0 a 1e1ber of this Court% and concurred in b4 Eustices Re1edios SalaDar(:ernando and Eosefina )uevara(Salon3a $1e1bers%. * Supra, p. *-. C Decision, pp. 87(8+A id., pp. *2(*8. 7 E?cerpted fro1 the C Decision, pp. 2(2,A rollo, pp. @(2+. Citations o1itted. + "he Petition 0as dee1ed sub1itted for decision on Eune 8., 8,,-, upon the Court5s receipt of the Me1orandu1 of Respondents "eresita Cu and )uevara, si3ned b4 tt4. ntonio C. Pacis. "he Me1orandu1 of Respondent Spouses Eon3(Bon Con3 and Soo(o6 &i1 Con3, si3ned b4 tt4s. Constantine ). 3a3an and Mario R. :reD, 0as filed on Eune 82, 8,,-. Petitioner5s Me1orandu1, si3ned b4 tt4. Ma?i1ino V. !ana3a Er., 0as received b4 the Court on Eune ., 8,,-. @ Petitioner5s Me1orandu1, pp. 2,(22A rollo, pp. 8,8(8,*. Ori3inal in uppercase. . Larena v* Mapili, -,. SCR -.-, -.., u3ust @, 8,,*A 'ordal$a v* CA, -87 Phil. -,@, -27, Eanuar4 87, 8,,8A #oca v* CA, *7, SCR -2-, -8,, Eanuar4 8/, 8,,2A 'a5as v* CA, *.8 Phil. 2--, 27-, :ebruar4 2,, 8,,,. / "he4 are the stoc6holders or 1e1bers of a corporation. See Francisco v* Mejia, -27 Phil. 27*, 2+7, u3ust 2-, 8,,2A Consolidated 'an- and 0rust Corporation 6Solid$an-7 v* CA , *7+ SCR +@2, +.8, pril 2/, 8,,2A #ea!s Corp* v* 1ational La$or #elations Commission, **@ Phil. +/., @,+, pril 27, 2//@. 2, !ein3 a >uridical entit4, a corporation acts throu3h its board of directors andHor officers and a3ents. See Monfort /ermanos A"ricultural Development Corp* v* Monfort III , -*- SCR 8@, *2, Eul4 ., 8,,-A Firme v* 'u-al Enterprises and Development Corporation , -2- SCR 2/,, 8,., October 8*, 8,,*A People8s Aircar"o and .are!ousin" Co*( Inc* v* CA, *7@ Phil. .7,, .+*, October @, 2//.. 22 Francisco v* Mejia, supra, pp. 2++(2+@A 'o"o-Medellin Su"arcane Planters Association( Inc* v* 1L#C, *7@ Phil. 22,, 28@, Septe1ber 87, 2//.. 28 Consolidated 'an- and 0rust Corporation 6Solid$an-7 v* CA, supra. 2* 8*. SCR 2-, 2/, Nove1ber @, 2//-, per Vitu3, )* $cited in FC3 Construction 4roup( Inc* v* CA, *.2 Phil. 8.8, 8/,, :ebruar4 2, 8,,,%. 2Industrial Mana"ement International Development Corp* v* 1L#C , *.@ Phil. +7/, +++, Ma4 22, 8,,,A Smit!( 'ell 9 Co*( Inc* v* CA, **7 Phil. 2/-, 8,*, :ebruar4 +, 2//@A Ses$re5o v* CA, 888 SCR -++, -.2, Ma4 8-, 2//*.

27

P/ Credit Corporation v* CA, -82 Phil. .82, .*8, Nove1ber 88, 8,,2A Incion" )r* v* CA, *8@ Phil. *+-, *@*, Eune 8+, 2//+A +uiom$in" v* CA, 2./ SCR *87, *8., u3ust *,, 2//,A 0!e Imperial Insurance( Inc* v* David , 82. Phil. 8/., *,8, Nove1ber 82, 2/.-. 2+ Lim v* +ueensland 0o-yo Commodities( Inc* , -8- Phil. *7, -@, Eanuar4 -, 8,,8A Del #osario v* 'on"a, *7, SCR 2,2, 2,., Eanuar4 8*, 8,,2A Sanc!e& v* CA, *-7 Phil. 277, 2.+, Septe1ber 8/, 2//@. 2@ C Decision $referrin3 to E?hibit ; ; and Records, p. 7/7%, p. 8,A rollo, p. 8+. 2. %uano v* CA, --+ Phil. +/,, @,., March -, 8,,*A 'PI Express Card Corporation v* %lalia, -8* Phil. 7/*, 7//, Dece1ber 2-, 8,,2A 4eralde& v* CA, 8*, SCR *8,, **2, :ebruar4 8*, 2//-. 2/ See Associated 'an- v* 0an( 4# 1o* :;<=>? , Dece1ber 2-, 8,,-, p. 2, $citin3 'PI v* Casa Montessori Internationale, -*, SCR 8+8, 8/*, Ma4 8., 8,,-%A P!ilippine Commercial and International 'an- v* CA , *7, SCR --+, -@8, Eanuar4 8/, 8,,2A 'an- of t!e P!ilippine Islands v* Intermediate Appellate Court , 8,+ SCR -,., -28(-2*, :ebruar4 82, 2//8. 8, Lipat v* Pacific 'an-in" Corporation , -7, Phil. -,2, -2,, pril *,, 8,,*A Francisco v* Mejia, supra, pp. 2+7(2++A Francisco Motors Corp* v* CA, *+. Phil. *@-, *.-, Eune 87, 2///A Sulo n" 'ayan( Inc* v* Araneta( Inc*, @8 SCR *-@, *77, u3ust 2@, 2/@+. 82 Maru$eni Corporation v* Lira", -27 Phil. 8/, */, u3ust 2,, 8,,2. 88 Petitioner5s Me1orandu1, pp. 8-(87A rollo, pp. 82+(82@. 8* Maestrado v* CA, *.- Phil. -2., -*-, March /, 8,,,A Caram )r* v* Laureta, 2,* SCR @, 2., :ebruar4 8-, 2/.2. 8rticle 2**. of the Civil Code refers to this 6ind of fraud. See also 4eralde& v* CA, supra, p. **+. 87 Samson v* CA, 8*. SCR */@, -,-, Nove1ber 87, 2//-. See also "olentino, Civil Code of t!e P!ilippines, 2//2 ed., Vol. IV, p. 7,+. 8+ rticle 2*-- of the Civil Code. 8@ Caram )r* v* Laureta, supraA 0olentino( supra. 8. Incion" )r* v* CA, supra, p. *@2. 8/ Cojuan"co )r* v* CA, *+/ Phil. -2, 77, Eul4 8, 2///A P!ilippine Air Lines( Inc* v* 1L#C , *+8 Phil. 2/@, 8,-, :ebruar4 8, 2///A Samson v* CA, supra. *, Ibid. *2 "he first indebtedness 0as for P*. 8 1illion, 0hich 0as 3ranted b4 the ban6 to the corporation on Ma4 82, 2//2, 0hile the second loan of P2.. 1illion 0as 3ranted on Ma4 8., 2//2. *8 /eirs of Manlapat v* CA, )R No. 2877.7, Eune ., 8,,7, pp. 87(8+A /ome 'an-ers Savin"s 9 0rust Co* v* CA( 4# 1o* :@AB;>, pril 8+, 8,,7, p. 2@A #ural 'an- of Sta* I"nacia Inc* v* Dimatulac , --/ Phil. .,,, .28, pril 8/, 8,,*A Cru& v* 'ancom Finance Corporation, -8/ Phil. 887, 8-,, March 2/, 8,,8. ** Metropolitan .ater2or-s and Se2era"e System v* Act 0!eater( Inc ., -*8 SCR -2., -88, Eune 2@, 8,,-A #ellosa v* Pellosis, -2- Phil. @.+, @/8, u3ust /, 8,,2A Sea Commercial Company( Inc* v* CA, *@@ Phil. 882, 88/, Nove1ber 87, 2///. *Ibid. *7 In Cniversity of t!e East v* )ader , *.8 Phil. +/@, @,7, :ebruar4 2@, 8,,,, 3ood faith 0as defined as ;an honest intention to abstain fro1 ta6in3 undue advanta3e of another, even thou3h the for1s and technicalities of the la0, to3ether 0ith the absence of all infor1ation or belief of facts, 0ould render the transaction un( conscientious.; *+ Audion Electric Co* v* 1L#C, *+@ Phil. +8,, +*7, Eune 2@, 2///. *@ Savellano v* 1ort!2est Airlines, -,7 SCR -2+, -8.(-8/, Eul4 ., 8,,*A Cervantes v* CA, *+* Phil. *//, -,@, March 8, 2///. See also rticle 888, of the Civil Code. *. In!elder Corporation v* CA, 288 SCR 7@+, 7.-, Ma4 *,, 2/.*. */ A'S-C'1 'roadcastin" Corp* v* CA, *+2 Phil. -//, 7*2, Eanuar4 82, 2///. -, !S(C!N !roadcastin3 Corp. v. C , supra, p. 78/A !PI :a1il4 Savin3s !an6 v. Mani6an, --* Phil. -+*, -+., Eanuar4 2+, 8,,*A R W ! Suret4 W Insurance Co., Inc. v. Inter1ediate ppellate Court, 28/ SCR @*+, @--(@-7, Eune 88, 2/.-A Inhelder Corporation v. C , supra. Republic of the Philippines SUPREME COURT Manila "CIRD DIVISION G.R. No. 113<0* %)$3a$y 2+, 2000 MALA!ANG SAMA0AN NG MGA MANGGAGA8A SA M. GREEN IEL" CMSMG:U8PD, ITS PRESI"ENT BE"A MAG"ALENA #ILLANUE#A, MARIO "AGANIO, "ONATO GUERRERO, BELLA P. SANC0E/, ELENA TOBIS, R0O"A TAMA!O, LI8A!8A! MALLILIN, ELOISA SANTOS, "OMINA"OR REBULLO, .OSE IRLAN", TEO ILA 9UE.A"A, #ICENTE SAMONTINA, ELICITAS "URIAN, ANTONIO POL"O, ANGELINA TUGNA, SAL#A"OR PENALOSA, LU/#IMIN"A TUBIG, ILUMINA"A RI#ERA, ROMULO SUMILANG, NENITA BARBELONIA, LE#I BASILIA, RICAR"O PALAGA, MERC! ROBLES, LEO"EGARIO GARIN, "OMINGO ECLARINAL, MELC0OR GALLAR"O, MARCELO GARIN, ROSALINA BAUTISTA, MAR! ANN TALIGATOS, ALE.AN"RO SANTOS, ANTONIO RAGA, LU/ GAPULTOS, MAG"ALENA URSUA, EUGENIO OR"AN, LIGA!A MANALO, PEPITO "ELA PA/, PERLITA "IMA9UIAT, M!RNA #AS9UE/, LORENTINA SAMPAGA, ARACELI RAGA, MAEIMINA AUSTINO, MARINA TAN, OLIGARIO LOMO, PRECILA EUSEBIO, SUSAN ABOGANO, CAROLINA MANINANG, GINA GLI ONIA, OSCAR SOTTO, CELE"ONA MALIGA!A, E REN #ELAS9UE/, "ELIA ANO#ER, .OSEP0INE TALIMORO, MAG"ALENA TABOR, NARCISA SARMIENTO, SUSAN MACASIEB, ELICI"A" SISON, PRICELA CARTA, MILA MACA0ILIG, CORA/ON NUNALA, #ISITACION ELAMBRE, ELI/ABET0 INO RE, #IOLETA BARTE, LU/#IMIN"A #ILLOSA, NORMA SAL#A"OR, ELI/ABET0 BOGATE, MERL!N BALBOA, EU RECINA SARMIENTO, SIMPLICIA SIMPLICIA BORLEO, MATERNI"A" "A#I", LAILA .OP, POTENCIANA CULALA, LUCI#ITA NA#ARRO, ROLAN"O BOTIN, AMELITA MAGALONA, AGNES CENA, NOLI BARTOLA!, "ANTE A9UINO, 0ERMINIA RILLON, CAN"I"A APARI.A"O, L!"IA .IMENE/, ELI/ABET0 ANOC0E, AL"A MURO, TERESA #ILLANUE#A, TERESITA RECUENCO, ELI/A SERRANO, ESTELLA POLINAR, GERTRU"ES NUNE/, ELIPE BA"IOLA, ROSL!N ERNAN"E/, OSCAR PAGUTA, NATI#I"A" BALI8AS, ELI/ABET0 BARCIBAL, C!NT0IA ESTELLER, TEO"ORA SANTOS, ALICIA PILAR, MILA PATENO, GLORIA CATRI/, MILA MACA0ILIG, A"ELAI"A "E LEON, ROSEN"O E"ILO, ARSENIA ESPIRITU, NUMERIANO CABRERA, CONCEPSION ARRIOLA, PAULINA "IMAPASOK, ANGELA SANGCO, PRESILA ARIAS, /ENAI"A NUNES, E"IT0A IGNACIO, ROSA GUIRON, TERESITA CANETA, ALICIA ARRO, TEO ILO RU8ETAS, CARLING AGCAOILI,

ROSA NOLASCO, GERLIE PALALON, CLAU"IO "IRAS, LETICIA ALBOS, AURORA ALUBOG, LOLITA ACALEN, GREGORIO ALI#IO, GUILLERMO ANICETA, ANGELIE AN"RA"A, SUSAN ANGELES, ISABELITA AURIN, MANUELA A#ELINA, CARLING AGCAOILI, TERESITA ALANO, LOLITA AURIN, EMMABET0 ARCIAGA, CRESENCIA ACUNA, LU/#IMIN"A ABINES, LORENCIA A"ALI", OLI#IA AGUSTIN, E#ANGELINE ALCORAN, ROSALINA AL ERES, LORNA AMANTE, LORENTINA AMBITO, .ULIETA AMANONCO, CARMEN AMARILLO, .OSE INA AMBAGAN, /ENAI"A ANA!A, MARIA ANGLO, E"IT0A ANTA /O, MAR! .ANE ANTE, AN"REA A9UINO, RO8ENA ARABIT, MARIETA ARAGON, REBECCA ARCENA, L!"IA ARCI"O, ERNAN"O ARENAS, GREGORIO ARGUELLES, E"IT0A ARRIOLA, EMMA ATIEN/A, EMMA ATIEN/A, TEO"! ATIEN/A, ELI/ABET0 AUSTRIA, "IOSA A/ARES, SOLI"A A/AINA, MILAGROS BUAG, MARIA BANA"ERA, E"NAL!N BRAGA, O ELIA BITANGA, RE"ISMIN"A BUGUIS, #IOLETA BALLESTEROS, ROSARIO BALLA".A!, BETT! BORIO, ROMANA BAUTISTA, SUSARA BRA#O, LILIA BA0INGTING, ENIETA BAL"O/A, "AMIANA BANGCORE, 0ERMINIA BARIL, PETRONA BARRIOS, MILAGROS BARRAME"A, PERLA BAUTISTA, CLARITA BAUTISTA, ROSALINA BAUTISTA, A"ELINA BELGA, CONSOLACION BENAS, MARIA BERE/O, MERCE"ES BEREBER, #IOLETA BISCOC0O, ERNESTO BRIONES, AL#INA BROSOTO, AGUSTINA BUN!I, CARMEN BUGNOT, ERLIN"A BUENA LOR, LITA BA9UIN, CONSE.O BABOL, CRISANTA BACOLO", CELIA "E BACTAT, MA/IMA BAGA, ELENA BALA"A", ROSARIO BALA".A!, AMALIA BALAGTAS, ANITA BALAGTAS, MARIA BALAKIT, RU INA BALATAN, REBECCA BAL"ERAMA, AMELIA BALLESTER, BELEN BAR9UIO, BERNAN"ITA BASILI"ES, 0ELEN BATO, 0ELEN BAUTISTA, ROMANA BAUTISTA, ALME"A BA!TA, A#ELINA BELA!ON, NORMA "E BELEN, T0ELMA "E BELEN, .OCEL!N BELTRAN, ELENA BENITE/, #IRGINIA BERNAR"INO, MERLINA BINU!AG, LINA BINU!A, BLESIL"A BISNAR, S0IRLE! BOLI#AR, CRESENTACION ME"LO, .OCEL!N BONI ACIO, AMELIA BORBE, AMALIA BOROMEO, /ENAI"A BRA#O, RO"RIGO BEUL"A, TERESITA MEN"E/, ELENA CAMAN, LALIANE CAN"ELARIA, MARR! CARU.ANO, RE#ELINA CORANES, MARITESS CABRERA, .USTINA CLA/A"A, APOLONIA "ELA CRU/, #ICTORIA CRU/, .OSE INA "ELA CRU/, MARITESS CATANG0AL, E"NA CRU/, LUCIA "E CASTRO, .OSIE CARIASO, O ELIA CER#ANTES, ME"ITA CORTA"O, AMALIA CASA.EROS, LUCINA CASTILIO, EMMA CARPIO, ANACORITA CABALES, !OLAN"A CAMO, MILA CAMA/UELA, ANITA CANTO, ESTELA CANCERAN, EMENCIA CANCIO, C!NT0IA CAPALA", MERLE CASTILLO, .ESUSA CASTRO, CECILIA CASTILLO, SIL#ERITA CASTRO"ES, #I#IAN CELLANO, NORMA CELINO, TERESITA CELSO, GLORIA COLINA, E IPANIA CONSTANTINO, SAL#ACION CONSULTA, ME"ITA CORTA"O, AI"A CRU/, MARISSA "ELA CRU/, E"ITO CORCILLES, .EL!NE CRU/, ROSA CORPOS, ROSITA CUGONA, ELSIE CABELLES, EMMA CA"UT, #ICTORIA CALAN/A, BARBARA CALATA, IMEL"A CAL"ERON, CRISTINA CALI"GUI", EMMALIN"A CAMALON, MARIA CAMERINO, CARMENCITA CAMPO, CONNIE CANE/O, LOUR"ES CAPANANG, MA. MILAGROS CAPILI, M!RNA T. CAPIRAL, LOR SAMPAGA, SUSAN B. CARINO, ROSARIO CARI/ON, #IRGINIA "EL CARMEN, EMMA CARPIO, PRESCILA CARTA, E CASERO, LU/ "E CASTRO, ANNA CATARONGAN, .OSE INA CASTISIMO, .O! MANALO, EMMIE CA8ALING, .O#ITA CARA, MARINA CERBITO, MAR! CARE.ANO, ESTELA R. C0A#E/, CONCEPCION PARA.A, GINA CLAU"IO, LOR"ELI/A CORALES, E"ITO CORCIELER, ROSA C. CORROS, AMELIA CRU/, .EL!NE CRU/, 8IL RE"O "ELA CRU/, REINA CUE#AS, MARILOU "E.ECES, .OSEP0INE "ESACULA, E"IT0A "EE, E"IT0A "IA/, #IRGIE "OMON"ON, CELSA "OROPA8, #IOLETA "UMELINA, MARIBEL "IMATATAC, ELBERTO "AGANIO, LETECIA "AGO0O!, "IN"O "ALU/, ANGELITA "ANTES, GLORIA "A!O, LUCIA "E CASTRO, CARLITA "E GU/MAN, CARMEN "ELA CRU/, MERC! "E LEON, MAR! "ELOS RE!ES, MARIETA "EPILO, MATIL"E "IBLAS, .ULIETA "IMA!UGA, TEO"ORA "IMA!UGA, !OLAN"A "OM"OM, LUCITA "ONATO, NELMA "ORA"O, RITA "ORA"O, SUSAN "UNTON, 0ERMINIA SAN ESTEBAN, AMALI EUGENIO, OLI#IA EUSO!A, ERNESTO ESCOBIN, E#EL!N ESCUREL, L!"IA ESCOBIN, #ICENTE E. ELOI"A. ELENA EGAR, GLORIA ERENO, NORMA ESPIRI"ION, ARSENIA ESPIRITU, AURORA ESTACIO, "EMETRIA ESTONELO, MILAGROS ONSEGA, L!"IA LORENTINO, .ULIA ARABIER, TRINI"A" ATALLA, IMEL"A LORES, .ESSINA RANCO, MA. CRISTINA RI.AS, ESPECTACION ERRER, BER"ENA LORES, LEONILA RANCISCO, BERNAR"A AUSTINO, "OLORES ACUN"O, CRETITA AMILARAN, EMELITA IGUERAS, MA. #IRGINIA LOREN"O, AURORA RANCISCO, MA. .ESUSA RANCISCO, NENITA UENTES, MARILOU GOLINGAN, .UANITA GUERRERO, L!"IA GUE#ARRA, SOCORRO GON/AGA, PATRICIA GOMEO, ROSALIN"A GALAPIN, CARMELITA GAL#E/, TERESA GLE, SONIA GON/ALES, PRIMITA GOME/, T0ERESA GALUA, .OSE INA GELUA, BREN"A GON/AGA, LORA GALLAR"O, LUCIN"A GRACILLA, #ICTORIA GO/UM, NENITA GAMAO, E"NA GARCIA, "ANILO GARCIA, ROSARIO GIRA!, ARACELI GOME/, .OEMARIE GON/AGA, NELIA GON/AGA, MAR! GRANCE GO/ON, CARMEN GON/ALES, MERLITA GREGORIO, 0ERMINIA GON/ALES, CARLITA "E GU/MAN, MO"ESTA GABRENTINA, E"IT0A GA""I, SAL#ACIO GALIAS, MERLIN"A GALI"O, MELIN"A GAMIT, .ULIETA GARCIA, EMELITA GA#INO, C0ARITO GILLIA, GENERA GONE"A, CRESTITA GON/ALES, RANCISCA GUILING, .ULIAN 0ERNAN"E/, 0ERRA"URA, SUSANA 0IPOLITO, NERISSA 0A/, SUSAN 0ERNAE/, APOLONIA ISON, SUSAN IBARRA, LU"I#INA IGNACIO, C0OLITA IN ANTE, .ULIETA ITURRIOS, ANITA IBO, MIRASOL INGALLA, .ULIO .AR"INIANO, MERLITA .ULAO, .ULIETA .ULIAN, MARIBET0 "E .OSE, .OSEP0INE .ENER, IMEL"A .ATAP, .ULIETA .A#IER, SALOME .A#IER, #ICTORIA .A#IER, SAL#ACION .OMOLO, E"NA .ARNE, L!"IA .IMENE/, TERESITA "E .UAN, MARIL!N LUARCA, ROSITA LOSITO, ROSALINA LUMA!AG, LORNA LARGA, CRESTETA "E LEON, /ENAI"A LEGASPI, A"ELAI"A LEON, IMEL"A "E LEON, MELITINA LUMABI, L!"IA LUMABI, ASUNCION LUMACANG, REGINA LAPIA"RIO, MELANIA LUBUGUAN, E#ANGELINE LACAP, PELAGIA LACSI, LORNA LAGUI, #IRGIE LAITAN, #IRGINIA LEE, CRESTELITA "E LEON, ELICISIMA LEONERO, "IOSA LOPE, ANGELITA LOPE/, TERESITA LORICA, .UANITA MEN"IETA, .UANITA MARAN9UE/, .ANET MALI ERO, INAS MORA"OS, MELANIE MANING, LUCENA MABANGLO, CLARITA ME.IA, IRENE MEN"O/A, LILIA MORTA, #IGINIA MARA!, C0ARITO MASINA0ON, ILMA MALA!A, LILIA MORTA, #IRGINIA MARA!, C0ARITO MASINA0ON, ILMA MALA!A, LILIA MORTA, ROSITA MATIBAG, LOREN/A MLINA, SABINA "EL MUN"O, E"IT0A MU!CO, NARCISA MABE/A, MA. E MACATANGA!, CONCEPCION MAG"ARAOG, IMEL"A MA0I!A, ELSA MALLARI, LIGA!A MANA0AN, SOLE"A MANLAPAS, #IRGINIA MAPA, .OSEI MARCOS, LIBRA"A MAR9UE/, #IRGINIA MA/A, .ULIANITA MEN"IETA, E"ILBERTA MEN"O/A, IRENE MERCA"O, 0ELEN MERO!, CRISTINA ME.ARES, CECILIA MILLET, EMELITA MINON, .OSEP0INE MIRANA, PERLITA MIRANO, E#ANGELINE MISBAL, ELEANOR MORALES, TERESITA MORILLA, L!"IA NU"O, M!RIAM NA#AL, CAROLINA NOLIA, ALICIA NUNE/, MAG"ALENA NAGUI"A, ELSA NICOL, LILIA NACIONALES, MA. LI/A MABO, REME"IOS NIE#ES, MARGARITA NU!LAN, TERESITA NIE#ES, POR ERIA NARAG,

R0O"ORA NUCASA, CORA/ON OCRA!, LILIA OLIMPO, #ERONA O#ERENCIA, ERMIN OSENA, LORENCIA OLI#AROS, SOLE"A" OBEAS, NARISSA OLI#EROS, PELAGIA ORTEGA, SUSAN ORTEGA, CRISTINA PRENCIPE, PURITA PENGSON, REBECCA PACERAN, E"NA PARINA, MARIETA PINAT, EPI ANIA PA.ERLAN, ROSALINA PASIBE, CECILIA "ELA PA/, LORETA PENA, APOLONIA PALCONIT, RANCISCO PAGUIO, L!"IA PAMINTA0ON, ELSIE PACAL"O, TERESITA PA"ILLA, M!RNA PINE"A, MERCEI"TA PERE/, NO#ENA PORLUCAS, TERESITA PO"PO", A"ORACION PORNOBI, ALICIA PERILLO, 0ELEN .O! PEN"AL, LOUR"ES PAC0ECO, LU/#IMIN"A PAGALA, LORETA PAGAPULAN, RANCISCO PAGUIO, PRISCO PALACA, LORA PAMINTUAN, NOEMI PARISALES, .OSEP0INE PATRICIO, CRISTINA PE BENITO, ANGELA PECO, ANGELITA PENA, ESTER PENONES, NORMA PERE/, MAURA PERSE#ERANCIA, MARINA PETILLA, .OSIE PIA, /UL#ILITA PIO"O, REBECCA PACERAN, CLARITA POLICARPIO, MAEIMO POTENTO, POR IRIO POTENTO, LOR"ELI/A PUMARAS, ERNAN"O 9UE#E"O, .ULIANA 9UIN"O/A, C0ARITO 9UIRO/, CARMELITA ROSINO, RO"ELIA RA!ON"O!ON, LORENCIA RAGOS, REBECCA ROSALES, ROSAL!N RI#ERO, RANCISCO RUI/, RANCIA ROSERO, EMEL! RUBIO, E"ILBERTO RUIO, .UANA RUB!, RA9UEL RE!ES, MERC! ROBLES, ESTELA RELANO, ROSITA RE!ES NIM A REN"ON, EPI ANIO RAMIRO, MURIEL REALCO, BERNAR"ITA RE", LEONITA RO"IL, BENITA REBOLA, "ELMA REGALARIO, LEN! RE"ILLAS, .ULIETA "ELA ROSA, ELICITAS "ELA ROSA, SUSAN RA ALLO, ELENA RON"INA, NORMA RACELIS, .OSEP0INE RAGEL, ESPERAN/A RAMIRE/, LU/#IMIN"A RANA"A, CRISTINA RAPINSAN, .OCEL!N RE", ORLAN"O RE!ES, TERESITA RE!ES, ANGELITA ROBERTO, "ELIA ROC0A, E"LTRU"ES ROMERO, MELECIA ROSALES, /ENAI"A ROTAO, BELEN RUBIS, E RUE"A, S!L#IA SONGCA!A8ON, CRISTINA SANANO, NERCISA SARMIENTO, 0ELEN SIBAL, ESTELITA SANTOS, NORMA SIL#ESTRE, "ARLITA SINGSON, EU ROCINA SARMIENTO, M!RNA SAMSON, EMERLINA SA"IA, LORNA SALA/AR, A#ELINA SAL#A"OR, NACI ORA SALA/AR, TITA SEUS, MARI E SANTOS, GRACIA SARMIENTO, ANGELITA SUMANGIL, ELI/ABET0 SICAT, MA. #ICTORIA SI"ELA, ANALITA SAL#A"OR, MARITES SANTOS, #IRGINIA SANTOS, T0ELMA SARONG, NIL"A SA!AT, ANCITA SEGUN"O, !NAI"A SAGUI, E"IT0A SALA/AR, E"NA SAL/AR, EMMA SALEN"ARIO, SOLE"A" SAMSON, E"NA SAN "IEGO, TERESITA SAN GABRIEL, GERTRU"ES SAN .OSE, EGLECERIA OSANC0E/, ESTRELLA SANC0E/, CECILIA "ELOS SANTOS, LUISA SEGO#IA, .OCEL!N SEN"ING, ELENA SONGALIA, ELICITAS SORIANO, O ELIA TIBA!AN, AI"A TIRNI"A, MONICA TIBA!AN, CRISTETA TAMBARAN, GLORIA TAC"A, NEN#INA, ELINA TE#ES, ANTONINA "ELA TORRE, MAEIMA TANILON, NENA TABAT, /OSIMA TOLOSA, MARITA TENOSO, IMEL"A TANIO, LU/ TANIO, E#ANGELINE TA!O, .OSE INA TINGTING, ARSENIA TISO!, MAG"ALENA TRA.ANO, .OSE INA UBAL"E, GINA UMALI, IRMA #ALEN/UELA, EL! #AL"E/, PAULINA #ALE/, ROSELITA #ALLENTE, LOUR"ES #ELASCO, AI"A #ILLA, RANCISCA #ILLARITO, /ENAI"A #ISMONTE, "ELIA #ILLAMIEL, NENITA #AS9UE/, .OCEL!N #ILLASIS, ERMARGARITA #ARGAS, CELIA #ALLE, MILA CONCEPCION #IRA!, "OMINGA #AL"E/, LU/#IMIN"A #OCINA, MA"ELINE #I#ERO, RU INA #ELASCO, AUREA #I"ALEON, GLORIA "EL #ALLE, T0ELMA #ALLO!AS, C!NT0IA "ELA #EGA, A"ELA #ILLAGOME/, TERESITA #INLUAN, EU EMIA #ITAN, GLORIA #ILLA LORES, E"ORACION #AL"E/, ANGELITA #AL"E/, ILUMINA"A #ALENCI, M!RNA #AS9UE/, E#ELN!N #E.ERAMO, TEO"ORA #ELAS9UE/, E"AN #ILLANUE#A, PURITA #ILLASENOR, SAL#A"OR 8ILSON, EMELINA !U, A"EL A !U, ANA ABRIGUE, #IRGINIA A"OBAS, #ICTORIA ANTIPUESTO, MERCE"ITA CASTILLO, .OCEL!N CASTRO, CREMENIA "ELA CRU/, .OSEP0INE IGNACIO, MELITA ILILANGOS, LIGA!A LUMA!AT, "ELIA LUMBES, ROSITA LIBRA"O, "ELIA LAGRAMA"A, GEMMA MAGPANTA!, EMIL! MEN"O/A, I"ELA PANGANIBAN, LEONOR RI/AL"O, ILUMIN"A RI#ERA, "I#INA SAMBA!AN, ELMERITA SOLA!AO, NANC! SAMALA, .OSIE SUMARAN, LU/#IMIN"A ABINES, ALMA ACOL, ROBERTO A"RIATICO, GLORIA AGUINAL"O, ROSARIO ALE!O, CRISTETA ALE.AN"RO, LILIA ALMOGUERA, CARMEN AMARILLO, TRINI"A" AR"ANIEL, CERINA A#ENTA.A"O, /ENAI"A A#A!A, LOLITA ARABIS, MARIA ARSENIA, SO IA AGUINAL"O, SAL#E ABA", .OSE INA AMBANGAN EMILIA A9UINO, .OSE INA A9UINO, .ULIANA AUSAN, AMERCIANA ACOSTA, CONCEPCION ALERO/A, "IANA A"O#OS, EL! A"#INCULA, SEOMINTA ARIAS, .OSEP0INE ARCE"E, NORMA AMISTOSO, PRESENTACION ALONOS, EMMA ATIEN/A, LEONI"A A9UINO, ANITA ARILLON, A"ELAI"A ARELLANO, NORMA AMISTOSO, .OSEP0INE ARCE"E, SEMIONITA ARIAS, .OSE INA BANTUG, LOLITA BARTE, 0ERMINIA BASCO, MARGARITA BOTAR"O, RU INO BUGNOT, LOLITA BUSTILLO, ISABEL BALAKIT, ROSARIO BARRERO, TESSIE BALBOS, NORMA BENISANO, GUILLERMA BRUGES, BERNA"ETTE BARTOLOME, S0IRLE! BELMONTE, MERONA BEL/A, A/UCENA BERNALES, .OSE BASCO, NIMP0A BANTOG, BENIL"A BUBAN, REGINA BUBAN, SALOME BARRAME"A, IRENE BISCO, ELICITAS BAUTISTA, #IOLETA BURA, LINA BINU!A, BIBIANA BAAR"E, ELSA BAES, ANASTACIA BELON/O, SONIA BENO!O, ELI/ABET0 BACUNGAN, PATRICIA BARRAME"A, ERLIN"A BARCELONA, EMMA BANICO, APOLONIA BUNAO, LUCITA BOLEA, PACI ICA BARCELONA, E"IT0A BASI.AN, RENITA BA"AMA, ELENA BALA"A", CRESENCIA BA.O, BERNA"ITA BASILI", MELIN"A BEATO, !OLAN"A BATANES, E"IT0A BORILLA, ANITA BAS, ELSA CALIPUN"AN, MARIA CAMERINO,#IRGINIA CAMPOSANO, MILAGROS CAPILI, CARINA CARINO, EU EMIA CASI0AN, NENITA CASTRO, LORENCIA CASUBUAN, GIRLIE CENTENO, MARIANITA C0I9UITO, IMEL"A "ELA CRU/, TEO"OSIA GONG, TEO ILA CARACOL, TERESITA CANTA, IRENEA CUNANAN, .ULITA CAN"ILOSAS, #IOLETA CIERES, MILAGROS "ELA CRU/, LOREPES CAPULONG, CARMENCITA CAMPO, MARIL!N CARILLO, RUT0 "ELA CRU/, RITA CI.AS, L!"IA CASTOR, #IRGIE CALUBA", EMELITA CABERA, CRISTETA CRU/, ERLIN"A COGA"AS, IMEL"A CAL"ERON, SUSIE LU/ CE/AR, ESTELA C0A#E/, NORMA CABRERA, EL"A "AGATAN, LEONISA "IMACUNA, ERNA "UGTONG, LOR"ELISA "IGMA, #IRGILIO "A"IOS, LOLITA "AGTA, A"ELAI"A "ORA"O, CELSA "ATUMANONG, #IRGINIA "OCTOLERO, E"NA SAN "IEGO, .ULIETA "ANG, .ULIETA "ORANTINAO, LOLITA "AGANO, .U"IT0 "IA/, MARIA ENICANE, MARITA ESCAR"E, ENRIMITA ESMA!OR, ROSARIO EPIRITU, REME"IOS EMBOLTORIO, IRENE ESTUITA, TERESITA ERESE, ERMELIN"A ELE/O, MARIA ESTARE.A, MERLITA ES9UERRA, !OLAN"A ELICITAS, RUTO RANCIA, MART0A RUTO, LILIA LORES, SAL#ACION ORTALESA, .U"IT0 A.AR"O, SUSANA ERNAN"O, E"8IN RANCISCO, NENITA GREGOR!, ROSA CAMILO, MARI#IC GERRAR"O, C0ARITA GOREMBALEM, NORMA GRAN"E, "OLORES GUTIERRE/, C0ARLIE GARCIA, LU/ GAL#E/, A"ELAI"A GAMILLA, LU/ GAPULTOS, ERLIN"A GARCIA, 0ELEN GARCIA, ERLIN"A GAU"IA, RANCISCA GUILING, MINTA 0ERRERA, ASUNCION 0ONOA, .UAN 0ERNAN"E/, LUCERIA ANNA MAE 0ERNAN"E/, .ULIANA 0ERNAN"E/, E"IT0A IGNACIO, ANITA INOCENCIO, EULALIA INSORIO, ESTELITA IRLAN"A, MILAGROS IGNACIO, LIN"A .ABONILLO, A"ELIMA .AEL, RO8ENA .ARAB.O, ROBERT .A#ILINAR, CLARITA .OSE, CARMENCITA .UN"E/, SO IA LALUCIS, GLORIA LABITORIA,

ANGELITA LO"ES, ERLIN"A LATOGA, E#EL!N LEGASPI, ROMEO LIMC0OCO, .ESUS LARA, ESTRELLA "E LUNA, LORETA LARE/A, .OSEP0INE ALSCO, MERC! "E LEON, CONSOLACION LIBAO, MARIL!N LI8AG, TERESITA LI/A/O, LILIA MACAPAGAL, SAL#ACION MACARE/A, AMALIA MA"O, TERESITA MA"RIAGA, .O#ITA MAGNA!E, .EAN MALABA", RANCISCA MEN"O/A, NELCITA MANGANTANG, TERESITA NELLA, GENERO/A MERCA"O, CRISTETA MO.ANA, BERNAR"A MONGA"O, L!"IA MIRAN"A, ELISA MA"RILE.OS, LOI"A MAGSINO, AMELIA MALTO, .ULITA MA0IBA, M!RNA MA!ORES, LUISA MARAIG, LORENCIA MARAIG, EMMA MON/ON, IMEL"A MAG"ANGAN, #ICTORIA MARTIN, NOEMI MANGUILLO, BASILI/A ME"INA, #ICTORIO MERCA"O, ESTELA MA!PA, EMILIA MEN"O/A, LINA MAGPANTA!, ELICIANA MANLOLO, ELENA MANACOP, 8ILMA MORENO, .UANA MEN"O/A, E#EL!N "EL MUN"O, ROSIE MATUTINA, MATIL"E MANALO, TERESITA MEN"E/, ELIPINA MAGONCIA, MARIA MAN/ANO, LIGA!A MANALO, LETICIA MARC0A, MARINA MAN"IGMA, LETICIA MAN"ASOC, PRESCILLA MARTINE/, .ULIA MEN"O/A, PACITA MAGALLANES, ANGELINA MAR.ES, S0IRLE! MELIGRITO, IRENE MERCA"O, ELISA MAATUBANG, MARCELINA NICOLAS, AGUSTINA NICOLAS, ROSA NOLASCO, 8ILMA NILA!E, #IOLETA ORACION, ANGELA OSTA!A, .UANITA OSA!OS, MAG"ALENA OCAMPO, MAR"IANA OCTA, ROSELA OPAO, LIBRA"A OCAMPO, !OLAN"A OLI#ER, MARCIA ORLAN"A, PAG"UNAN, RITA PABILONA, M!RA PALACA, BET0LE0EM PALINES, GINA PALIGAR, NORMA PALIGAR, "ELMA PERE/, CLAU"IA PRA"O, .ULIE PUTONG, LU"I#INA PAGSALINGAN, MERL!N PANALIGAN, #IOLETA PANAMBITAN, NOREN PAR, ERLIN"A PARAGAS, MILA PARINO, REBECCA PENA LOR, IMEL"A PENAMORA, .ERMICILLIN PERALTA, REBECCA PIAPES, E"IT0A PILAR, MAROBET0 PILLA"O, "IOSCORO PIMENTEL, AURORA LAS PINAS, E#ANGELINA PINON, MA. NITA PON"OC, MA. MERCE"ES PO"PO", ANGELITO PAN"E/, LIGA!A PIGTAIN, LEONILA 9UIAMBAO, ELENA 9UINO, MARITESS 9UI.ANO, C0OLITA REBUENO, LOLITA RE!ES, .OCEL!N RAMOS, ROSITA RAMIRE/, ELINORA RAMOS, ISABEL RAMOS, ANNABELLE RESURRECCION, EMMA RE!ES, ALIL! ROEAS, MAR! GRACE "ELOS RE!ES, .OCEL!N "EL ROSARIO, .OSE INA RABUSA, ANGELITA ROTAIRO, SAMCETA ROSETA, E"ERLINA RUI/, /ENAI"A ROSARIO, BENITA REBOLA, ROSITA RE#ILLA, ROSITA SANTOS, RO8ENA SALA/AR, EMIL!N SARMIENTO, ANA SENIS, ELOISA SANTOS, NARCISA SONGLIA", ELMA SONGALIA, AMPARA SABIO, .ESSIE SANC0E/, #I#IAN SAMILO, GLORIA SUMALINOG, ROSALINA "ELOS SANTOS, MARIETA SOMBRERO, 0ELEN SERRETARIO, TEO"ORO SULIT, BELLA SONGUINES, LIN"A SARANTAN, ESTELLA SALABAR, MILAGROS SISON, GLORIA TALI"AGA, CECILIA TEO"ORO, ROMILLA TUA/ON, AMELITA TABULAO, MACARIA TORRES, LUTGAR"A TUSI, ESTELLA TORRE.OS, #ICTORIA TAN, MERLITA "ELA #EGA, 8E#INA ORENCIA, REME"IOS BALEC0A, TERESITA TIBAR, LAC0ICA LEONORA, .ULITA !BUT, .OSE INA /ABALA, 8INNIE /AL"ARIAGA, BEN0UR ANTENERO, MARCELINA ANTENERO, ANTONINA ALAPAN, E"IT0A ANTO/O, RO8ENA ARABIT, AN"RA A9UINO, TERESITA ANGULO, MARIA ANGLO, M!RNA ALBOS, ELENITA AUSTRIA, ANNA ABRIGUE, #IRGINIA A"OBAS, #ICTORIA ANTIPUESTO, REME"IOS BOLEC0E, MACARIA BARRIOS, T0ELMA BELEN, ESTELLA BARRETTO, .OCEL!N C0A#E/, #IRGINIA CAPISTRANO, BENE"ICTA CINCO, !OLL! CATPANG, REINA CUE#AS, #ICTORIA CALAN/A, E CASERO, ROBERTA CATALBAS, LOUR"ES CAPANANG, CLEMENCIA CRU/, .OCEL!N COSTO, MERCE"ITA CASTILLO, E"IT0A "EE, LUCITA "ONATO NORMA ESPIRI"ION, LORETA ERNAN"E/, AURORA RANCISCO, #ILMA A.AR"O, MO"ESTA GABRENTINA, TERESITA GABRIEL, SAL#ACION GAMBOA, .OSEP0INE IGNACIO, SUSAN IBARRA, ESPERAN/A .ABSON, OSCAR .AMBARO, ROSANNA .AR"IN, CORA/ON .ALOCON, /ENAI"A LEGASPI, "ELLA LAGRAMA"A, ROSITA LIBRAN"O, LIGA!A LUMA!OT, "ELIA LUMBIS, LEONORA LANC0ICA, RELAGIA LACSI, .OSE INA LUMBO, #IOLETA "E LUNA, E#EL!N MA"RI", TERESITA MORILLA, GEMMA MAGPANTA!, EMIL! MEN"O/A, IRENEA ME"INA, NARCISA MABE/A, ROSANNA ME"INA, "ELIA MARTINE/, ROSARIO MAG:ISA, E"IT0A MEN"O/A, E"ILBERTA MEN"O/A, I"ELA PANGANIBAN, O ELIA PANGANIBAN, A/UCENA POSTGO, LOUR"ES PAC0ECO, LILIA PA"ILLA, MARISSA PERE/, LOR"ELI/A PUMARES, LU/ RE!ES, NORMA RACELIS, LEONOR RI/AL"O, .OSIE SUMASAR, NANC! SAMALA, EMERLITA SOLA!AO, MERCE"ITA SAMANIEGO, BLAN"INA SIMBULAN, .OCEL!N SEN"ING, LUISITA TABERRERO, TERESITA TIBAR, ESTERLINA #AL"E/, GLORIA #E.ERANO, ILUMINA"A #ALENCIA, MERLITA "ELA #EGA, #IRGIE LAITAN, .ULIET #ILLARAMA, LUISISTA OCAMPO, NARIO AN"RES, ANSELMA TUL O, GLORIA MATEO, LANIA MEN"O/A, CONNIE CANGO, E"IT0A SALA/AR, M!RNA "ELOS SANTOS, TERESITA SERGIO, C0ARITO GILLA, LORENTINA 0ERNAE/, BERNAR"INO #IRGINIA, AMPO ANACORITA, S!L#IA POASA"AS, ESTRELLA ESPIRITU, CONCOR"IA LU/URIAGA, MARINA CERBITO, EMMA RE!ES, NOEMI PENISALES, CLARITA POLICARPIO, BELEN BANGUIO, 0ERMINIA A"#INCULA, LILIA MORTA, REGINA LAPI"ARIO, LORNA LARGA, TERESITA #INLUAN, MARITA TENOSO, NIL"S SA!AT, T0ELMA SARONG, "ELMA REGALIS, SUSAN RA AULO, ELENA RON"INA, M!RNA PIEN"A, #IOLETA "UMELINA, LORENCIA A"ALI", ILMA MELA!A, ERLIN"A "E BAUTISTA, MATIL"E "E BLAS, "OLORES ACUN"O, REBECCA LE"AMA, MA. E MACATANGA!, EMELITA MINON, NORMA PAGUIO, ELI/A #AS9UE/, GLORIA #ILLARINO, MA. .ESUS RANCISCO, TERESITA GURPI"O, LIGA!A MANALO, E PINE"A, MIRIAM OCMAR, LUISA SEGO#IA, TEO"! ATIEN/A, SOLE"A A/CURE, CARMEN "ELA CRU/, "METRIA ESTONELO, MA. LORI"A LOA/NO, IMEL"A MA0I!A, E"ILBERTA MEN"O/A, S!L#IA POSA"AS, SUSANA ORTEGA, .OSEP0INE ". TALIMORO, TERESITA LORECA, ARSENIA TISO!, LIGA!A MANALO, TERESITA GURPIO, E PINE"A, and MARIA .ESUS RANCISCO, petitioners, vs. 0ON. CRESENCIO .. RAMOS, NATIONAL LABOR RELATIONS COMMISSION, M. GREEN IEL" CBD, INC., SAUL TA8IL, CARLOS T. .A#ELOSA, RENATO C. PUANGCO, 8INCEL LIGOT, MARCIANO 0ALOG, GO"O RE"O PACENO, SR., GER#ACIO CASILLANO, LOREN/O ITAOC, ATT!. GO"O RE"O PACENO, .R., MARGARITO CABRERA, GAU"ENCIO RAC0O, SANTIAGO IBANE/, AN" RO"RIGO AGUILING, respondents. PURISIMA, J.: t bar is a Petition for Certiorari under Rule +7 of the Revised Rules of Court to annul the decision of the National 'abor Relations Co11ission in an unfair labor practice case instituted b4 a local union a3ainst its e1plo4er co1pan4 and the officers of its national federation. "he petitioner, Mala4an3 Sa1ahan n3 13a Man33a3a0a sa M. )reenfield, Inc., $!% $MSM)%, hereinafter referred to as the ;local union;, is an affiliate of the private respondent, #nited 'u1ber and )eneral Bor6ers of the Philippines $#')BP%, referred to as the ;federation;. "he collective bar3ainin3 a3ree1ent bet0een MSM) and M. )reenfield, Inc., na1es the parties as follo0sF

"his a3ree1ent 1ade and entered into b4 and bet0eenF M. )REEN:IE'D, INC. $!% a corporation dul4 or3aniDed in accordance 0ith the la0s of the Republic of the Philippines 0ith office address at &1. 2-, Merville Road, ParaXa=ue, Metro Manila, represented in this act b4 its )eneral 1ana3er, Mr. Carlos ". Eavelosa, hereinafter referred to as the Co1pan4A (and( M ' < N) S M C N N) M) M N)) ) B S M. )REEN:IE'D $!% $MSM)%H#NI"ED '#M!ER ND )ENER ' BOR&ERS O: "CE PCI'IPPINES $#')BP%, a le3iti1ate labor or3aniDation 0ith address at Suite -,-, "rinit4 !uildin3, ". M. &ala0 Street, Manila, represented in this act b4 a Ne3otiatin3 Co11ittee headed b4 its National President, Mr. )odofredo Paceno, Sr., referred to in this 3ree1ent as the #NION. 2 "he C! includes, a1on3 others, the follo0in3 pertinent provisionsF rt. II(#nion Securit4 Sec. 2. Covera"e and Scope. ll e1plo4ees 0ho are covered b4 this 3ree1ent and presentl4 1e1bers of the #NION shall re1ain 1e1bers of the #NION for the duration of this 3ree1ent as a condition precedent to continued e1plo41ent 0ith the COMP N<. ??? ??? ??? Sec. -. Dismissal. n4 such e1plo4ee 1entioned in Section 8 hereof, 0ho fails to 1aintain his 1e1bership in the #NION for non(pa41ent of #NION dues, for resi3nation and for violation of #NION5s Constitution and !4('a0s and an4 ne0 e1plo4ee as defined in Section 8 of this rticle shall upon 0ritten notice of such failure to >oin or to 1aintain 1e1bership in the #NION and upon 0ritten reco11endation to the COMP N< b4 the #NION, be dis1issed fro1 the e1plo41ent b4 the COMP N<A provided, !o2ever, that the #NION shall hold the COMP N< free and bla1eless fro1 an4 and all liabilities that 1a4 arise should the dis1issed e1plo4ee =uestion, in an4 1anner, his dis1issalA provided( furt!er that the 1atter of the e1plo4ee5s dis1issal under this rticle 1a4 be sub1itted as a 3rievance under rticle MIII and, provided( finally, that no such 0ritten reco11endation shall be 1ade upon the COMP N< nor shall COMP N< be co1pelled to act upon an4 such reco11endation 0ithin the period of si?t4 $+,% da4s prior to the e?pir4 date of this 3ree1ent confor1abl4 to la0. rt. IM Sec. -. Pro"ram Fund 9 "he Co1pan4 shall provide the a1ount of P2,,,,,.,, a 1onth for a continuin3 labor education pro3ra1 0hich shall be re1itted to the :ederation . . . 8 On Septe1ber 28, 2/.+, a local union election 0as held under the auspices of the #')BP 0herein the herein petitioner, !eda Ma3dalena Villanueva, and the other union officers 0ere proclai1ed as 0inners. Minutes of the said election 0ere dul4 filed 0ith the !ureau of 'abor Relations on Septe1ber 8/, 2/.+. On March 82, 2/.@, a Petition for I1peach1ent 0as filed 0ith the national federation #')BP b4 the defeated candidates in the afore1entioned election. On Eune 2+, 2/.@, the federation conducted an audit of the local union funds. "he investi3ation did not 4ield an4 unfavorable result and the local union officers 0ere cleared of the char3es of ano1al4 in the custod4, handlin3 and disposition of the union funds. :D2p!i:*nEt "he 2- defeated candidates filed a Petition for I1peach1entHE?pulsion of the local union officers 0ith the DO'E NCR on Nove1ber 7, 2/.@, doc6eted as NCR(OD(M(22(@.,(.@. Co0ever, the sa1e 0as dis1issed on March 8, 2/.., b4 Med( rbiter Renato Parun3o for failure to substantiate the char3es and to present evidence in support of the alle3ations. On pril 2@, 2/.., the local union held a 3eneral 1e1bership 1eetin3 at the Caruncho Co1ple? in Pasi3. Several union 1e1bers failed to attend the 1eetin3, pro1ptin3 the E?ecutive !oard to create a co11ittee tas6ed to investi3ate the non(attendance of several union 1e1bers in the said asse1bl4, pursuant to Sections and 7, rticle V of the Constitution and !4('a0s of the union, 0hich readF Se6s4on -. n3 13a 6inu6usan3 hindi pa3dalo o hindi pa3laho6 sa lahat n3 ha6ban3in n3 un4on n3 sinu1an3 6asapi o pinuno a4 1aaarin3 1a3in3 sanhi n3 pa3titi0ala3 o pa3papata0 n3 1ulta n3 hindi hihi3it sa P7,.,, sa ba0at ara0 na na36ulan3. Se6s4on 7. n3 sinu1an3 dadalo na aalis n3 hindi pa natatapos an3 pulon3 a4 ituturin3 na pa3liban at 1aparusahan iton3 alinsunod sa rticle V, Se6s4on3 - n3 Sali3an3 !atas na ito. Sino 1an3 6asapi o pis4ales na 1ahuli and datin3 sa ta6dan3 oras n3 di lala1pas sa isan3 oras a4 1a31u1ulta n3 P87.,, at baba0asin sa sahod sa pa1a1a3itan n3 salar4 deduction at hi3it sa isan3 oras n3 pa3datin3 n3 huli a4 ituturin3 na pa3liban.* On Eune 8@, 2/.., the local union 0rote respondent co1pan4 a letter re=uestin3 it to deduct the union fines fro1 the 0a3esHsalaries of those union 1e1bers 0ho failed to attend the 3eneral 1e1bership 1eetin3. portion of the said letter statedF ??? ??? ??? In connection 0ith Section - rticle II of our e?istin3 Collective !ar3ainin3 3ree1ent, please deduct the a1ount of P7,.,, fro1 each of the union 1e1bers na1ed in said anne?es on the pa4roll of Eul4 8(., 2/.. as fine for their failure to attend said 3eneral 1e1bership 1eetin3. In a Me1orandu1 dated Eul4 *, 2/.., the Secretar4 )eneral of the national federation, )odofredo PaceXo, Er. disapproved the resolution of the local union i1posin3 the P7,.,, fine. "he union officers protested such action b4 the :ederation in a Repl4 dated Eul4 -, 2/... On Eul4 22, 2/.., the :ederation 0rote respondent co1pan4 a letter advisin3 the latter not to deduct the fift4( peso fine fro1 the salaries of the union 1e1bers re=uestin3 thatF . . . an4 and all future representations b4 MSM) affectin3 a nu1ber of 1e1bers be first cleared fro1 the federation before correspondin3 action b4 the Co1pan4. 7 "he follo0in3 da4, respondent co1pan4 sent a repl4 to petitioner union5s re=uest in a letter, statin3 that it cannot deduct fines fro1 the e1plo4ees5 salar4 0ithout 3oin3 a3ainst certain la0s. "he co1pan4 su33ested that the union refer the 1atter to the proper 3overn1ent office for resolution in order to avoid placin3 the co1pan4 in the 1iddle of the issue. "he i1position of P7,.,, fine beca1e the sub>ect of bitter disa3ree1ent bet0een the :ederation and the local union cul1inatin3 in the latter5s declaration of 3eneral autono14 fro1 the for1er throu3h Resolution No. 2, passed b4 the local e?ecutive board and ratified b4 the 3eneral 1e1bership on Eul4 2+, 2/... In retaliation, the national federation as6ed respondent co1pan4 to stop the re1ittance of the local union5s share in the education funds effective u3ust 2/... "his 0as ob>ected to b4 the local union 0hich de1anded that the education fund be re1itted to it in full.

"he co1pan4 0as thus constrained to file a Co1plaint for Interpleader 0ith a Petition for Declarator4 Relief 0ith the Med( rbitration !ranch of the Depart1ent of 'abor and E1plo41ent, doc6eted as Case No. OD(M(.(-*7(... "his 0as resolved on October 8., 2/.., b4 Med( rbiter nastacio !actin in an Order, disposin3 thusF BCERE:ORE, pre1ises considered, it is hereb4 orderedF 2. "hat the #nited 'u1ber and )eneral Bor6ers of the Philippines $#')BP% throu3h its local union officers shall ad1inister the collective bar3ainin3 a3ree1ent $C! %. 8. "hat petitioner co1pan4 shall re1it the P2,,,,,.,, 1onthl4 labor education pro3ra1 fund to the #')BP sub>ect to the condition that it shall use the said a1ount for its intended purpose. *. "hat the "reasurer of the MSM) shall be authoriDed to collect fro1 the *7+ union 1e1bers the a1ount of P7,.,, as penalt4 for their failure to attend the 3eneral 1e1bership asse1bl4 on pril 2@, 2/... Co0ever, if the MSM) Officers could present the individual 0ritten authoriDations of the *7+ union 1e1bers, then the co1pan4 is obli3ed to deduct fro1 the salaries of the *7+ union 1e1bers the P7,.,, fine.+ On appeal, Director Pura(:errer Calle>a issued a Resolution dated :ebruar4 @, 2/./, 0hich 1odified in part the earlier disposition, to 0itF BCERE:ORE, pre1ises considered, the appealed portion is hereb4 1odified to the e?tent that the co1pan4 should re1it the a1ount of five thousand pesos $P7,,,,.,,% of the P2,,,,,.,, 1onthl4 labor education pro3ra1 fund to #')BP and the other P7,,,,.,, to MSM), both unions to use the sa1e for its intended purpose.@ Mean0hile, on Septe1ber 8, 2/.., several local unions $"op :or1, M. )reenfield, )rosb4, "riu1ph International, )eneral Millin3, and Vander Cons chapters% filed a Petition for udit and E?a1ination of the federation and education funds of #')BP 0hich 0as 3ranted b4 Med( rbiter Rasidali bdullah on Dece1ber 87, 2/.. in an Order 0hich directed the audit and e?a1ination of the boo6s of account of #')BP. On Septe1ber *,, 2/.., the officials of #')BP called a Special National E?ecutive !oard Meetin3 at Nasipit, 3usan del Norte 0here a Resolution 0as passed placin3 the MSM) under trusteeship and appointin3 respondent Cesar Clarete as ad1inistrator. On October 8@, 2/.., the said ad1inistrator 0rote the respondent co1pan4 infor1in3 the latter of its desi3nation of a certain lfredo &alin36in3 as local union president and ;disauthoriDin3; the incu1bent union officers fro1 representin3 the e1plo4ees. "his action b4 the national federation 0as protested b4 the petitioners in a letter to respondent co1pan4 dated Nove1ber 22, 2/... On Nove1ber 2*, 2/.., the petitioner union officers received identical letters fro1 the ad1inistrator re=uirin3 the1 to e?plain 0ithin @8 hours 0h4 the4 should not be re1oved fro1 their office and e?pelled fro1 union 1e1bership. On Nove1ber 8+, 2/.., petitioners repliedF $a% Iuestionin3 the validit4 of the alle3ed National E?ecutive !oard Resolution placin3 their union under trusteeshipA $b% Eustif4in3 the action of their union in declarin3 a 3eneral autono14 fro1 #')BP due to the latter5s inabilit4 to 3ive proper educational, or3aniDational and le3al services to its affiliates and the pendenc4 of the audit of the federation fundsA $c% dvisin3 that their union did not co11it an4 act of dislo4alt4 as it has re1ained an affiliate of #')BPA $d% )ivin3 #')BP a period of five $7% da4s to cease and desist fro1 further co11ittin3 acts of coercion, inti1idation and harass1ent.. Co0ever, as earl4 as Nove1ber 82, 2/.., the officers 0ere e?pelled fro1 the #')BP. "he ter1ination letter readF Effective toda4, Nove1ber 82, 2/.., 4ou are hereb4 e?pelled fro1 #NI"ED '#M!ER ND )ENER ' BOR&ERS O: "CE PCI'IPPINES $#')BP% for co11ittin3 acts of dislo4alt4 andHor acts ini1ical to the interest and violative to the Constitution and b4(la0s of 4our federation. <ou failed andHor refused to offer an e?planation inspite of the ti1e 3ranted to 4ou. Since 4ou are no lon3er a 1e1ber of 3ood standin3, #')BP is constrained to reco11end for 4our ter1ination fro1 4our e1plo41ent, and provided in rticle II Section -, 6no0n as #NION SEC#RI"<, in the Collective !ar3ainin3 a3ree1ent./ On the sa1e da4, the federation advised respondent co1pan4 of the e?pulsion of the *, union officers and de1anded their separation fro1 e1plo41ent pursuant to the #nion Securit4 Clause in their collective bar3ainin3 a3ree1ent. "his de1and 0as reiterated t0ice, throu3h letters dated :ebruar4 82 and March -, 2/./, respectivel4, to respondent co1pan4. "hereafter, the :ederation filed a Notice of Stri6e 0ith the National Conciliation and Mediation !oard to co1pel the co1pan4 to effect the i11ediate ter1ination of the e?pelled union officers. On March @, 2/./, under the pressure of a threatened stri6e, respondent co1pan4 ter1inated the *, union officers fro1 e1plo41ent, servin3 the1 identical copies of the ter1ination letter reproduced belo0F Be received a de1and letter dated 82 Nove1ber 2/.. fro1 the #nited 'u1ber and )eneral Bor6ers of the Philippines $#')BP% de1andin3 for 4our dis1issal fro1 e1plo41ent pursuant to the provisions of rticle II, Section - of the e?istin3 Collective !ar3ainin3 3ree1ent $C! %. In the said de1and letter, #')BP infor1ed us that as of Nove1ber 82, 2/.., 4ou 0ere e?pelled fro1 the said federation ;for co11ittin3 acts of dislo4alt4 andHor acts ini1ical to the interest of #')BP and violative to its Constitution and !4(la0s particularl4 rticle V, Section +, /, and 28, rticle MIII, Section .. In subse=uent letters dated 82 :ebruar4 and - March 2/./, the #')BP reiterated its de1and for 4our dis1issal, pointin3 out that not0ithstandin3 4our e?pulsion fro1 the federation, 4ou have continued in 4our e1plo41ent 0ith the co1pan4 in violation of Sec. 2 and - of rticle II of our C! , and of e?istin3 provisions of la0. In vie0 thereof, 0e are left 0ith no alternative but to co1pl4 0ith the provisions of the #nion Securit4 Clause of our C! . ccordin3l4, 0e hereb4 serve notice upon 4ou that 0e are dis1issin3 4ou fro1 4our e1plo41ent 0ith M. )reenfield, Inc., pursuant to Sections 2 and -, rticle II of the C! effective i11ediatel4.2, On that sa1e da4, the e?pelled union officers assi3ned in the first shift 0ere ph4sicall4 or bodil4 brou3ht out of the co1pan4 pre1ises b4 the co1pan45s securit4 3uards. 'i6e0ise, those assi3ned to the second shift 0ere not allo0ed to report for 0or6. "his provo6ed so1e of the 1e1bers of the local union to de1onstrate their protest

for the dis1issal of the said union officers. So1e union 1e1bers left their 0or6 posts and 0al6ed out of the co1pan4 pre1ises. On the other hand, the :ederation, havin3 achieved its ob>ective, 0ithdre0 the Notice of Stri6e filed 0ith the NCM!. On March ., 2/./, the petitioners filed a Notice of Stri6e 0ith the NCM!, DO'E, Manila, doc6eted as Case No. NCM!(NCR(NS(,*(82+(./, alle3in3 the follo0in3 3rounds for the stri6eF $a% Discri1ination $b% Interference in union activities $c% Mass dis1issal of union officers and shop ste0ards $d% "hreats, coercion and inti1idation $e% #nion bustin3 "he follo0in3 da4, March /, 2/./, a stri6e vote referendu1 0as conducted and out of 8, 2,* union 1e1bers 0ho cast their votes, 8,,.+ 1e1bers voted to declare a stri6e. On March 2,, 2/./, the thirt4 $*,% dis1issed union officers filed an ur3ent petition, doc6eted as Case No. NCM!( NCR(NS(,*(82+(./, 0ith the Office of the Secretar4 of the Depart1ent of 'abor and E1plo41ent pra4in3 for the suspension of the effects of their ter1ination fro1 e1plo41ent. Co0ever, the petition 0as dis1issed b4 then Secretar4 :ran6lin Drilon on pril 22, 2/./, the pertinent portion of 0hich stated as follo0sF t this point in ti1e, it is clear that the dispute at M. )reenfield is purel4 an intra(union 1atter. No 1ass la4(off is evident as the ter1inations have been li1ited to those alle3edl4 leadin3 the secessionist 3roup leavin3 MSM)(#')BP to for1 a union under the &M#. . . . ??? ??? ??? BCERE:ORE, findin3 no sufficient >urisdiction to 0arrant the e?ercise of our e?traordinar4 authorit4 under rticle 8@@ $b% of the 'abor Code, as a1ended, the instant Petition is hereb4 DISMISSED for lac6 of 1erit. SO ORDERED.22 On March 2* and 2-, 2/./, a total of @. union shop ste0ards 0ere placed under preventive suspension b4 respondent co1pan4. "his pro1pted the union 1e1bers to a3ain sta3e a 0al6(out and resulted in the official declaration of stri6e at around *F*, in the afternoon of March 2-, 2/./. "he stri6e 0as attended 0ith violence, force and inti1idation on both sides resultin3 to ph4sical in>uries to several e1plo4ees, both stri6in3 and non( stri6in3, and da1a3e to co1pan4 properties. "he e1plo4ees 0ho participated in the stri6e and alle3edl4 fi3ured in the violent incident 0ere placed under preventive suspension b4 respondent co1pan4. "he co1pan4 also sent return(to(0or6 notices to the ho1e addresses of the stri6in3 e1plo4ees thrice successivel4, on March 8@, pril . and pril *2, 2/./, respectivel4. Co0ever, respondent co1pan4 ad1itted that onl4 8+2 e1plo4ees 0ere eventuall4 accepted bac6 to 0or6. "hose 0ho did not respond to the return(to(0or6 notice 0ere sent ter1ination letters dated Ma4 2@, 2/./, reproduced belo0F M. )reenfield Inc., $!% &1. 2-, Merville Rd., ParaXa=ue, M.M. Ma4 2@, 2/./ ??? ??? ??? On March 2-, 2/./, 0ithout >ustifiable cause and 0ithout due notice, 4ou left 4our 0or6 assi3n1ent at the pre>udice of the Co1pan45s operations. On March 8@, pril 22, and pril 82, 2/./, 0e sent 4ou notices to report to the Co1pan4. Inspite of 4our receipt of said notices, 0e have not heard fro1 4ou up to this date. ccordin3l4, for 4our failure to report, it is construed that 4ou have effectivel4 abandoned 4our e1plo41ent and the Co1pan4 is, therefore, constrained to dis1iss 4ou for said cause. Ver4 trul4 4ours, M. )REEN:IE'D, INC., $!% !4F BENVE' S"EPCEN 'I)O" sst. CRD Mana3er28 On u3ust @, 2/./, the petitioners filed a verified co1plaint 0ith the rbitration !ranch, National Capital Re3ion, DO'E, Manila, doc6eted as Case No. NCR(,,(,/(,-2//(./, char3in3 private respondents of unfair labor practice 0hich consists of union bustin3, ille3al dis1issal, ille3al suspension, interference in union activities, discri1ination, threats, inti1idation, coercion, violence, and oppression. fter the filin3 of the co1plaint, the lease contracts on the respondent co1pan45s office and factor4 at Merville Subdivision, ParaXa=ue e?pired and 0ere not rene0ed. #pon de1and of the o0ners of the pre1ises, the co1pan4 0as co1pelled to vacate its office and factor4. "hereafter, the co1pan4 transferred its ad1inistration and accountHclient servicin3 depart1ent at :P(RS!S Industrial Par6 in "a3ui3, Metro Manila. :or failure to find a suitable place in Metro Manila for relocation of its factor4 and 1anufacturin3 operations, the co1pan4 0as constrained to 1ove the said depart1ents to "acloban, 'e4te. Cence, on pril 2+, 2//,, respondent co1pan4 accordin3l4 notified its e1plo4ees of a te1porar4 shutdo0n in operations. E1plo4ees 0ho 0ere interested in relocatin3 to "acloban 0ere advised to enlist on or before pril 8*, 2//,. "he co1plaint for unfair labor practice 0as assi3ned to 'abor rbiter Manuel suncion but 0as thereafter reassi3ned to 'abor rbiter Cresencio Ra1os 0hen respondents 1oved to inhibit hi1 fro1 actin3 on the case. On Dece1ber 27, 2//8, findin3 the ter1ination to be valid in co1pliance 0ith the union securit4 clause of the collective bar3ainin3 a3ree1ent, 'abor rbiter Cresencio Ra1os dis1issed the co1plaint. Petitioners then appealed to the N'RC. Durin3 its pendenc4, Co11issioner Ro1eo Puton3 retired fro1 the service, leavin3 onl4 t0o co11issioners, Co11issioner Vicente Veloso III and Con. Chair1an !artolo1e Carale in the :irst Division. Bhen Co11issioner Veloso inhibited hi1self fro1 the case, Co11issioner Eoa=uin "anodra of the "hird Division 0as te1poraril4 desi3nated to sit in the :irst Division for the proper disposition of the case. "he :irst Division affir1ed the 'abor rbiter5s disposition. Bith the denial of their 1otion for reconsideration on Eanuar4 8., 2//-, petitioners elevated the case to this Court, attributin3 3rave abuse of discretion to public respondent N'RC inF I. #PCO'DIN) "CE DISMISS ' O: "CE #NION O::ICERS !< RESPONDEN" COMP N< S V 'IDA II. CO'DIN) "C " "CE S"RI&E S" )ED !< "CE PE"I"IONERS S I''E) 'A

III. CO'DIN) "C " "CE PE"I"IONER EMP'O<EES BERE DEEMED "O C VE ! NDONED "CEIR BOR& ND CENCE, V 'ID'< DISMISSED !< RESPONDEN" COMP N<A ND IV. NO" :INDIN) RESPONDEN" COMP N< ND RESPONDEN" :EDER "ION O::ICERS )#I'"< O: C"S O: #N: IR ' !OR PR C"ICE. Not0ithstandin3 the several issues raised b4 the petitioners and respondents in the volu1inous pleadin3s presented before the N'RC and this Court, the4 revolve around and proceed fro1 the issue of 0hether or not respondent co1pan4 0as >ustified in dis1issin3 petitioner e1plo4ees 1erel4 upon the labor federation5s de1and for the enforce1ent of the union securit4 clause e1bodied in their collective bar3ainin3 a3ree1ent. !efore delvin3 into the 1ain issue, the procedural fla0 pointed out b4 the petitioners should first be resolved. Petitioners contend that the decision rendered b4 the :irst Division of the N'RC is not valid because Co11issioner "anodra, 0ho is fro1 the "hird Division, did not have an4 la0ful authorit4 to sit, 1uch less 0rite the ponencia, on a case pendin3 before the :irst Division. It is clai1ed that a co11issioner fro1 one division of the N'RC cannot be assi3ned or te1poraril4 desi3nated to another division because each division is assi3ned a particular territorial >urisdiction. "hus, the decision rendered did not have an4 le3al effect at all for bein3 irre3ularl4 issued. Petitioners5 ar3u1ent is 1isplaced. rticle 82* of the 'abor Code in enu1eratin3 the po0ers of the Chair1an of the National 'abor Relations Co11ission provides thatF "he concurrence of t0o $8% Co11issioners of a division shall be necessar4 for the pronounce1ent of a >ud31ent or resolution. Bhenever the re=uired 1e1bership in a division is not co1plete and the concurrence of t0o $8% co11issioners to arrive at a >ud31ent or resolution cannot be obtained, the Chair1an shall desi3nate such nu1ber of additional Co11issioners fro1 the other divisions as 1a4 be necessar4. It 1ust be re1e1bered that durin3 the pendenc4 of the case in the :irst Division of the N'RC, one of the three co11issioners, Co11issioner Ro1eo Puton3, retired, leavin3 Chair1an !artolo1e Carale and Co11issioner Vicente Veloso III. Subse=uentl4, Co11issioner Veloso inhibited hi1self fro1 the case because the counsel for the petitioners 0as his for1er class1ate in la0 school. "he :irst Division 0as thus left 0ith onl4 one co11issioner. Since the la0 re=uires the concurrence of t0o co11issioners to arrive at a >ud31ent or resolution, the Co11ission 0as constrained to te1poraril4 desi3nate a co11issioner fro1 another division to co1plete the :irst Division. "here is nothin3 irre3ular at all in such a te1porar4 desi3nation for the la0 e1po0ers the Chair1an to 1a6e te1porar4 assi3n1ents 0henever the re=uired concurrence is not 1et. "he la0 does not sa4 that a co11issioner fro1 the first division cannot be te1poraril4 assi3ned to the second or third division to fill the 3ap or vice versa. "he territorial divisions do not confer e?clusive >urisdiction to each division and are 1erel4 desi3ned for ad1inistrative efficienc4. )oin3 into the 1erits of the case, the court finds that the Co1plaint for unfair labor practice filed b4 the petitioners a3ainst respondent co1pan4 0hich char3es union bustin3, ille3al dis1issal, ille3al suspension, interference in union activities, discri1ination, threats, inti1idation, coercion, violence, and oppression actuall4 proceeds fro1 one 1ain issue 0hich is the ter1ination of several e1plo4ees b4 respondent co1pan4 upon the de1and of the labor federation pursuant to the union securit4 clause e1bodied in their collective bar3ainin3 a3ree1ent. Petitioners contend that their dis1issal fro1 0or6 0as effected in an arbitrar4, hast4, capricious and ille3al 1anner because it 0as underta6en b4 the respondent co1pan4 0ithout an4 prior ad1inistrative investi3ationA that, had respondent co1pan4 conducted prior independent investi3ation it 0ould have found that their e?pulsion fro1 the union 0as unla0ful si1ilarl4 for lac6 of prior ad1inistrative investi3ationA that the federation cannot reco11end the dis1issal of the union officers because it 0as not a principal part4 to the collective bar3ainin3 a3ree1ent bet0een the co1pan4 and the unionA that public respondents acted 0ith 3rave abuse of discretion 0hen the4 declared petitioners5 dis1issals as valid and the union stri6e as ille3al and in not declarin3 that respondents 0ere 3uilt4 of unfair labor practice. Private respondents, on the other hand, 1aintain that the thirt4 dis1issed e1plo4ees 0ho 0ere for1er officers of the federation have no cause of action a3ainst the co1pan4, the ter1ination of their e1plo41ent havin3 been 1ade upon the de1and of the federation pursuant to the union securit4 clause of the C! A the e?pelled officers of the local union 0ere accorded due process of la0 prior to their e?pulsion fro1 their federationA that the stri6e conducted b4 the petitioners 0as ille3al for nonco1pliance 0ith the re=uire1entsA that the e1plo4ees 0ho participated in the ille3al stri6e and in the co11ission of violence thereof 0ere validl4 ter1inated fro1 0or6A that petitioners 0ere dee1ed to have abandoned their e1plo41ent 0hen the4 did not respond to the three return to 0or6 notices sent to the1A that petitioner labor union has no le3al personalit4 to file and prosecute the case for and on behalf of the individual e1plo4ees as the ri3ht to do so is personal to the latterA and that, the officers of respondent co1pan4 cannot be liable because as 1ere corporate officers, the4 acted 0ithin the scope of their authorit4. Public respondent, throu3h the 'abor rbiter, ruled that the dis1issed union officers 0ere validl4 and le3all4 ter1inated because the dis1issal 0as effected in co1pliance 0ith the union securit4 clause of the C! 0hich is the la0 bet0een the parties. nd this 0as affir1ed b4 the Co11ission on appeal. Moreover, the 'abor rbiter declared that not0ithstandin3 the lac6 of a prior ad1inistrative investi3ation b4 respondent co1pan4, under the union securit4 clause provision in the C! , the co1pan4 cannot loo6 into the le3alit4 or ille3alit4 of the reco11endation to dis1iss b4 the union nd the obli3ation to dis1iss is 1inisterial on the part of the co1pan4. 2* "his rulin3 of the N'RC is erroneous. lthou3h this Court has ruled that union securit4 clauses e1bodied in the collective bar3ainin3 a3ree1ent 1a4 be validl4 enforced and that dis1issals pursuant thereto 1a4 li6e0ise be valid, this does not erode the funda1ental re=uire1ent of due process. "he reason behind the enforce1ent of union securit4 clauses 0hich is the sanctit4 and inviolabilit4 of contracts 2- cannot override one5s ri3ht to due process. In the case of Cari5o vs. 1ational La$or #elations Commission,27 this Court pronounced that 0hile the co1pan4, under a 1aintenance of 1e1bership provision of the collective bar3ainin3 a3ree1ent, is bound to dis1iss an4 e1plo4ee e?pelled b4 the union for dislo4alt4 upon its 0ritten re=uest, this underta6in3 should not be done hastil4 and su11aril4. "he co1pan4 acts in bad faith in dis1issin3 a 0or6er 0ithout 3ivin3 hi1 the benefit of a hearin3. "he po0er to dis1iss is a nor1al prero3ative of the e1plo4er. Co0ever, this is not 0ithout li1itation. "he e1plo4er is bound to e?ercise caution in ter1inatin3 the services of his e1plo4ees especiall4 so 0hen it is 1ade upon the re=uest of a labor union pursuant to the Collective !ar3ainin3 3ree1ent, . . .

Dis1issals 1ust not be arbitrar4 and capricious. Due process 1ust be observed in dis1issin3 an e1plo4ee because it affects not onl4 his position but also his 1eans of livelihood. E1plo4ers should respect and protect the ri3hts of their e1plo4ees, 0hich include the ri3ht to labor. In the case under scrutin4, petitioner union officers 0ere e?pelled b4 the federation for alle3edl4 co11ittin3 acts of dislo4alt4 andHor ini1ical to the interest of #')BP and in violation of its Constitution and !4(la0s. #pon de1and of the federation, the co1pan4 ter1inated the petitioners 0ithout conductin3 a separate and independent investi3ation. Respondent co1pan4 did not in=uire into the cause of the e?pulsion and 0hether or not the federation had sufficient 3rounds to effect the sa1e. Rel4in3 1erel4 upon the federation5s alle3ations, respondent co1pan4 ter1inated petitioners fro1 e1plo41ent 0hen a separate in=uir4 could have revealed if the federation had acted arbitraril4 and capriciousl4 in e?pellin3 the union officers. Respondent co1pan45s alle3ation that petitioners 0ere accorded due process is belied b4 the ter1ination letters received b4 the petitioners 0hich state that the dis1issal shall be i11ediatel4 effective. s held in the aforecited case of CariXo, ;the ri3ht of an e1plo4ee to be infor1ed of the char3es a3ainst hi1 and to reasonable opportunit4 to present his side in a controvers4 0ith either the co1pan4 or his o0n union is not 0iped a0a4 b4 a union securit4 clause or a union shop clause in a collective bar3ainin3 a3ree1ent. n e1plo4ee is entitled to be protected not onl4 fro1 a co1pan4 0hich disre3ards his ri3hts but also fro1 his o0n union the leadership of 0hich could 4ield to the te1ptation of s0ift and arbitrar4 e?pulsion fro1 1e1bership and 1ere dis1issal fro1 his >ob. Bhile respondent co1pan4 1a4 validl4 dis1iss the e1plo4ees e?pelled b4 the union for dislo4alt4 under the union securit4 clause of the collective bar3ainin3 a3ree1ent upon the reco11endation b4 the union, this dis1issal should not be done hastil4 and su11aril4 thereb4 erodin3 the e1plo4ees5 ri3ht to due process, self( or3aniDation and securit4 of tenure. "he enforce1ent of union securit4 clauses is authoriDed b4 la0 provided such enforce1ent is not characteriDed b4 arbitrariness, and al0a4s 0ith due process. 2+ Even on the assu1ption that the federation had valid 3rounds to e?pel the union officers, due process re=uires that these union officers be accorded a separate hearin3 b4 respondent co1pan4. In its decision, public respondent also declared that if co1plainants $herein petitioners% have an4 recourse in la0, their ri3ht of action is a3ainst the federation and not a3ainst the co1pan4 or its officers, rel4in3 on the findin3s of the 'abor Secretar4 that the issue of e?pulsion of petitioner union officers b4 the federation is a purel4 intra(union 1atter. 3ain, such a contention is untenable. Bhile it is true that the issue of e?pulsion of the local union officers is ori3inall4 bet0een the local union and the federation, hence, intra(union in character, the issue 0as later on converted into a ter1ination dispute 0hen the co1pan4 dis1issed the petitioners fro1 0or6 0ithout the benefit of a separate notice and hearin3. s a 1atter of fact, the records reveal that the ter1ination 0as effective on the sa1e da4 that the ter1ination notice 0as served on the petitioners. In the case of Li$erty Cotton Mills .or-ers Cnion vs* Li$erty Cotton Mills( Inc .2@, the Court held the co1pan4 liable for the pa41ent of bac60a3es for havin3 acted in bad faith in effectin3 the dis1issal of the e1plo4ees. . . . !ad faith on the part of the respondent co1pan4 1a4 be 3leaned fro1 the fact that the petitioner 0or6ers 0ere dis1issed hastil4 and su11aril4. t best, it 0as 3uilt4 of a tortious act, for 0hich it 1ust assu1e solidar4 liabilit4, since it apparentl4 chose to su11aril4 dis1iss the 0or6ers at the union5s instance secure in the union5s contractual underta6in3 that the union 0ould hold it ;free fro1 an4 liabilit4; arisin3 fro1 such dis1issal. "hus, not0ithstandin3 the fact that the dis1issal 0as at the instance of the federation and that it undertoo6 to hold the co1pan4 free fro1 an4 liabilit4 resultin3 fro1 such a dis1issal, the co1pan4 1a4 still be held liable if it 0as re1iss in its dut4 to accord the 0ould(be dis1issed e1plo4ees their ri3ht to be heard on the 1atter. nent petitioners contention that the federation 0as not a principal part4 to the collective bar3ainin3 a3ree1ent bet0een the co1pan4 and the union, suffice it to sa4 that the 1atter 0as alread4 ruled upon in the Interpleader case filed b4 respondent co1pan4. Med( rbiter nastacio !actin thus ruledF fter a careful e?a1ination of the facts and evidences presented b4 the parties, this Officer hereb4 renders its decision as follo0sF 2.% It appears on record that in Collective !ar3ainin3 3ree1ent $C! % 0hich too6 effect on Eul4 2, 2/.+, the contractin3 parties are M. )reenfield, Inc. $!% and Mala4an3 Sa1ahan n3 M3a Man33a3a0a sa M. )reenfield, Inc. $!% $MSM)%H#nited 'u1ber and )eneral Bor6ers of the Philippines $#')BP%. Co0ever, MSM) 0as not 4et re3istered labor or3aniDation at the ti1e of the si3nin3 of the C! . Cence, the union referred to in the C! is the #')BP. 2. 'i6e0ise on appeal, Director Pura :errer(Calle>a put the issue to rest as follo0sF It is undisputed that #')BP is the certified sole and e?clusive collective bar3ainin3 a3ent of all the re3ular ran6(and(file 0or6ers of the co1pan4, M. )reenfield, Inc. $pa3es *2(*8 of the records%. It has been established also that the co1pan4 and #')BP si3ned a *(4ear collective bar3ainin3 a3ree1ent effective Eul4 2, 2/.+ up to Eune *,, 2/./. 2/ lthou3h the issue of 0hether or not the federation had reasonable 3rounds to e?pel the petitioner union officers is properl4 0ithin the ori3inal and e?clusive >urisdiction of the !ureau of 'abor Relations, bein3 an intra( union conflict, this Court dee1s it >ustifiable that such issue be nonetheless ruled upon, as the 'abor rbiter did, for to re1and the sa1e to the !ureau of 'abor Relations 0ould be to intolerabl4 dela4 the case. "he 'abor rbiter found that petitioner union officers 0ere >ustifiabl4 e?pelled fro1 the federation for co11ittin3 acts of dislo4alt4 0hen it ;undertoo6 to disaffiliate fro1 the federation b4 char3in3 #')BP 0ith failure to provide an4 le3al, educational or or3aniDational support to the local. . . . and declared autono14, 0herein the4 prohibit the federation fro1 interferin3 in an4 internal and e?ternal affairs of the local union.; 8, It is 0ell(settled that findin3s of facts of the N'RC are entitled to 3reat respect and are 3enerall4 bindin3 on this Court, but it is e=uall4 0ell(settled that the Court 0ill not uphold erroneous conclusions of the N'RC as 0hen the Court finds insufficient or insubstantial evidence on record to support those factual findin3s. "he sa1e holds true 0hen it is perceived that far too 1uch is concluded, inferred or deduced fro1 the bare or inco1plete facts appearin3 of record.82 In its decision, the 'abor rbiter declared that the act of disaffiliation and declaration of autono14 b4 the local union 0as part of its ;plan to ta6e over the respondent federation.; "his is purel4 con>ecture and speculation on the part of public respondent, totall4 unsupported b4 the evidence. local union has the ri3ht to disaffiliate fro1 its 1other union or declare its autono14. local union, bein3 a separate and voluntar4 association, is free to serve the interests of all its 1e1bers includin3 the freedo1 to

disaffiliate or declare its autono14 fro1 the federation to 0hich it belon3s 0hen circu1stances 0arrant, in accordance 0ith the constitutional 3uarantee of freedo1 of association. 88 "he purpose of affiliation b4 a local union 0ith a 1other union or a federation. . . . is to increase b4 collective action the bar3ainin3 po0er in respect of the ter1s and conditions of labor. <et the locals re1ained the basic units of association, free to serve their o0n and the co11on interest of all, sub>ect to the restraints i1posed b4 the Constitution and !4('a0s of the ssociation, and free also to renounce the affiliation for 1utual 0elfare upon the ter1s laid do0n in the a3ree1ent 0hich brou3ht it into e?istence.8* "hus, a local union 0hich has affiliated itself 0ith a federation is free to sever such affiliation an4ti1e and such disaffiliation cannot be considered dislo4alt4. In the absence of specific provisions in the federation5s constitution prohibitin3 disaffiliation or the declaration of autono14 of a local union, a local 1a4 dissociate 0ith its parent union.8"he evidence on hand does not sho0 that there is such a provision in #')BP5s constitution. Respondents5 reliance upon rticle V, Section +, of the federation5s constitution is not ri3ht because said section, in fact, bolsters the petitioner union5s clai1 of its ri3ht to declare autono14F Sec. +. "he autono14 of a local union affiliated 0ith #')BP shall be respected insofar as it pertains to its internal affairs, e?cept as provided else0here in this Constitution. "here is no dislo4alt4 to spea6 of, neither is there an4 violation of the federation5s constitution because there is nothin3 in the said constitution 0hich specificall4 prohibits disaffiliation or declaration of autono14. Cence, there cannot be an4 valid dis1issal because rticle II, Section - of the union securit4 clause in the C! li1its the dis1issal to onl4 three $*% 3rounds, to 0itF failure to 1aintain 1e1bership in the union $2% for non(pa41ent of union dues, $8% for resi3nationA and $*% for violation of the union5s Constitution and !4('a0s. "o support the findin3 of dislo4alt4, the 'abor rbiter 3ave 0ei3ht to the fact that on :ebruar4 8+, 2/./, the petitioners declared as vacant all the responsible positions of #')BP, filled these vacancies throu3h an election and filed a petition for the re3istration of #BP as a national federation. It should be pointed out, ho0ever, that these occurred after the federation had alread4 e?pelled the union officers. "he e?pulsion 0as effective Nove1ber 82, 2/... "herefore, the act of establishin3 a different federation, entirel4 separate fro1 the federation 0hich e?pelled the1, is but a nor1al retaliator4 reaction to their e?pulsion. Bith re3ard to the issue of the le3alit4 or ille3alit4 of the stri6e, the 'abor rbiter held that the stri6e 0as ille3al for the follo0in3 reasonsF $2% it 0as based on an intra(union dispute 0hich cannot properl4 be the sub>ect of a stri6e, the ri3ht to stri6e bein3 li1ited to cases of bar3ainin3 deadloc6s and unfair labor practice $8% it 0as 1ade in violation of the ;no stri6e, no loc6(out; clause in the C! , and $*% it 0as attended 0ith violence, force and inti1idation upon the persons of the co1pan4 officials, other e1plo4ees reportin3 for 0or6 and third persons havin3 le3iti1ate business 0ith the co1pan4, resultin3 to serious ph4sical in>uries to several e1plo4ees and da1a3e to co1pan4 propert4. On the sub1ission that the stri6e 0as ille3al for bein3 3rounded on a non(stri6eable issue, that is, the intra( union conflict bet0een the federation and the local union, it bears reiteratin3 that 0hen respondent co1pan4 dis1issed the union officers, the issue 0as transfor1ed into a ter1ination dispute and brou3ht respondent co1pan4 into the picture. Petitioners believed in 3ood faith that in dis1issin3 the1 upon re=uest b4 the federation, respondent co1pan4 0as 3uilt4 of unfair labor practice in that it violated the petitioner5s ri3ht to self( or3aniDation. "he stri6e 0as sta3ed to protest respondent co1pan45s act of dis1issin3 the union officers. Even if the alle3ations of unfair labor practice are subse=uentl4 found out to be untrue, the presu1ption of le3alit4 of the stri6e prevails.87 nother reason 0h4 the 'abor rbiter declared the stri6e ille3al is due to the e?istence of a no stri6e no loc6out provision in the C! . 3ain, such a rulin3 is erroneous. no stri6e, no loc6 out provision can onl4 be invo6ed 0hen the stri6e is econo1ic in nature, i.e. to force 0a3e or other concessions fro1 the e1plo4er 0hich he is not re=uired b4 la0 to 3rant. 8+ Such a provision cannot be used to assail the le3alit4 of a stri6e 0hich is 3rounded on unfair labor practice, as 0as the honest belief of herein petitioners. 3ain, 0hether or not there 0as indeed unfair labor practice does not affect the stri6e. On the alle3ation of violence co11itted in the course of the stri6e, it 1ust be re1e1bered that the 'abor rbiter and the Co11ission found that ;the parties are a3reed that there 0ere violent incidents . . . resultin3 to in>uries to both sides, the union and 1ana3e1ent.; 8@ "he evidence on record sho0 that the violence cannot be attributed to the stri6in3 e1plo4ees alone for the co1pan4 itself e1plo4ed hired 1en to pacif4 the stri6ers. Bith violence co11itted on both sides, the 1ana3e1ent and the e1plo4ees, such violence cannot be a 3round for declarin3 the stri6e as ille3al. Bith respect to the dis1issal of individual petitioners, the 'abor rbiter declared that their refusal to heed respondent5s recall to 0or6 notice is a clear indication that the4 0ere no lon3er interested in continuin3 their e1plo41ent and is dee1ed abandon1ent. It is ad1itted that three return to 0or6 notices 0ere sent b4 respondent co1pan4 to the stri6in3 e1plo4ees on March 8@, pril 22, and pril 82, 2/./ and that 8+2 e1plo4ees 0ho responded to the notice 0ere ad1itted bac6 to 0or6. Co0ever, >urisprudence holds that for abandon1ent of 0or6 to e?ist, it is essential $2% that the e1plo4ee 1ust have failed to report for 0or6 or 1ust have been absent 0ithout valid or >ustifiable reasonA and $8% that there 1ust have been a clear intention to sever the e1plo4er(e1plo4ee relationship 1anifested b4 so1e overt acts. 8. Deliberate and un>ustified refusal on the part of the e1plo4ee to 3o bac6 to his 0or6 post a1d resu1e his e1plo41ent 1ust be established. bsence 1ust be acco1panied b4 overt acts unerrin3l4 pointin3 to the fact that the e1plo4ee si1pl4 does not 0ant to 0or6 an41ore. 8/ nd the burden of proof to sho0 that there 0as un>ustified refusal to 3o bac6 to 0or6 rests on the e1plo4er. In the present case, respondents failed to prove that there 0as a clear intention on the part of the stri6in3 e1plo4ees to sever their e1plo4er(e1plo4ee relationship. lthou3h ad1ittedl4 the co1pan4 sent three return to 0or6 notices to the1, it has not been substantiall4 proven that these notices 0ere actuall4 sent and received b4 the e1plo4ees. s a 1atter of fact, so1e e1plo4ees den4 that the4 ever received such notices. Others alle3ed that the4 0ere refused entr4 to the co1pan4 pre1ises b4 the securit4 3uards and 0ere advised to secure a clearance fro1 #')BP and to si3n a 0aiver. So1e e1plo4ees 0ho responded to the notice 0ere alle3edl4 told to 0ait for further notice fro1 respondent co1pan4 as there 0as lac6 of 0or6. :urther1ore, this Court has ruled that an e1plo4ee 0ho too6 steps to protest his la4(off cannot be said to have abandoned his 0or6.*, "he filin3 of a co1plaint for ille3al dis1issal is inconsistent 0ith the alle3ation of

abandon1ent. In the case under consideration, the petitioners did, in fact, file a co1plaint 0hen the4 0ere refused reinstate1ent b4 respondent co1pan4. nent public respondent5s findin3 that there 0as no unfair labor practice on the part of respondent co1pan4 and federation officers, the Court sustains the sa1e. s earlier discussed, union securit4 clauses in collective bar3ainin3 a3ree1ents, if freel4 and voluntaril4 entered into, are valid and bindin3. Corollar4, dis1issals pursuant to union securit4 clauses are valid and le3al sub>ect onl4 to the re=uire1ent of due process, that is, notice and hearin3 prior to dis1issal. "hus, the dis1issal of an e1plo4ee b4 the co1pan4 pursuant to a labor union5s de1and in accordance 0ith a union securit4 a3ree1ent does not constitute unfair labor practice. *2 Co0ever, the dis1issal 0as invalidated in this case because of respondent co1pan45s failure to accord petitioners 0ith due process, that is, notice and hearin3 prior to their ter1ination. lso, said dis1issal 0as invalidated because the reason relied upon b4 respondent :ederation 0as not valid. Nonetheless, the dis1issal still does not constitute unfair labor practice. 'astl4, the Court is of the opinion, and so holds, that respondent co1pan4 officials cannot be held personall4 liable for da1a3es on account of the e1plo4ees5 dis1issal because the e1plo4er corporation has a personalit4 separate and distinct fro1 its officers 0ho 1erel4 acted as its a3ents. It has co1e to the attention of this Court that the *,(da4 prior notice re=uire1ent for the dis1issal of e1plo4ees has been repeatedl4 violated and the sanction i1posed for such violation enunciated in .enp!il Corporation vs. 1L#C*8 has beco1e an ineffective deterrent. "hus, the Court recentl4 pro1ul3ated a decision to reinforce and 1a6e 1ore effective the re=uire1ent of notice and hearin3, a procedure that 1ust be observed before ter1ination of e1plo41ent can be le3all4 effected. In #u$en Serrano vs* 1L#C and Isetann Department Store $).R. No. 22@,-,, Eanuar4 8@, 8,,,%, the Court ruled that an e1plo4ee 0ho is dis1issed, 0hether or not for >ust or authoriDed cause but 0ithout prior notice of his ter1ination, is entitled to full bac60a3es fro1 the ti1e he 0as ter1inated until the decision in his case beco1es final, 0hen the dis1issal 0as for causeA and in case the dis1issal 0as 0ithout >ust or valid cause, the bac60a3es shall be co1puted fro1 the ti1e of his dis1issal until his actual reinstate1ent. In the case at bar, 0here the re=uire1ent of notice and hearin3 0as not co1plied 0ith, the aforecited doctrine laid do0n in the Serrano case applies. BCERE:ORE, the Petition is )R N"EDA the decision of the National 'abor Relations Co11ission in Case No. NCR(,,(,/(,-2//(./ is REVERSED and SE" SIDEA and the respondent co1pan4 is hereb4 ordered to i11ediatel4 reinstate the petitioners to their respective positions. Should reinstate1ent be not feasible, respondent co1pan4 shall pa4 separation pa4 of one 1onth salar4 for ever4 4ear of service. Since petitioners 0ere ter1inated 0ithout the re=uisite 0ritten notice at least *, da4s prior to their ter1ination, follo0in3 the recent rulin3 in the case of #u$en Serrano vs* 1ational La$or #elations Commission and Isetann Department Store, the respondent co1pan4 is hereb4 ordered to pa4 full bac60a3es to petitioner(e1plo4ees 0hile the :ederation is also ordered to pa4 full bac60a3es to petitioner(union officers 0ho 0ere dis1issed upon its insti3ation. Since the dis1issal of petitioners 0as 0ithout cause, bac60a3es shall be co1puted fro1 the ti1e the herein petitioner e1plo4ees and union officers 0ere dis1issed until their actual reinstate1ent. Should reinstate1ent be not feasible, their bac60a3es shall be co1puted fro1 the ti1e petitioners 0ere ter1inated until the finalit4 of this decision. Costs a3ainst the respondent co1pan4. :D2p!i:*nEt SO ORDERED. 4on&a"a-#eyes( )*( concur. Melo* )*( in the result. ,itu"( )*( I reiterate 14 separate opinion in Seranno vs. N'RC $).R. No. 22-,@,, 8@ Ean. 8,,,%. Pan"ani$an( )*( I reiterate 14 Separate Opinion in Seranno vs. N'RC. ).R. No. 22@,-, Ean 8@, 8,,,. oo(no(%' #ollo, p. 8/. 8 I$id*, p. *,(*2, p. .8*(.8-. * #ollo, p. *-. #ollo, p. *7. 7 I$id., p. -,. + #ollo, p. -@. @ I$id., p. -.. . #ollo, p. 2788(278*. / I$id., 278*(278-. 2, #ollo, p. 7.(7/. 22 #ollo, p. /*@. 28 #ollo, p. .*@. 2* Decicion of the 'abor rbiter, p. 2+ $p. 2/@ of #ollo% 2"andua4 Distiller4 'abor #nion vvs. N'RC, 2-/ SCR -@, citin" Victoria5s Millin3 Co., Inc. vs. Victoria5s(Manapla Bor6ers5 Or3aniDation, / SCR 2727 ).R. No. /2,.+, . Ma4 2//,, 2.7 SCR 2@@. 2+ San4o Philippines Bor6ers #nion(PSS'# vs. CaniDares, 822 SCR *+2 2@ /, SCR */2 2. #ollo, p. 2//. 2/ I$id. 8, #ollo, p. 8,, 82 !ontia vs. N'RC, 877 SCR 2+@. 88 Vol6schel vs. !ureau of 'abor Relations, 2*@ SCR -8. 8* "ropical Cut E1plo4ees5 #nion(C)B vs. "ropical Cut :ood Mar6et Inc., 2.2 SCR 2@*A da1son, Inc.
2

vs. CIR, 28@ SCR 8+.A 'ibert4 Cotton Mills Bor6er #nion vs. 'ibert4 Cotton Mills, Inc., ++ SCR 728. 8:errer vs. National 'abor Relations Co11ission, 88- SCR -2,A People5s Industrial and Co11ercial E1plo4ees and Bor6ers Or3aniDation $::B% vs. People5s Industrial and Co11ercial Corp., 228 SCR --, 87 Master Iron 'abor #nion vs. National 'abor Relations Co11ission, 82/ SCR -@. 8+ Pana4 Electric Co1pan4 Inc. vs. N'RC, 8-. SCR +..A Peoples5 Industrial and Co11ercial E1plo4ees and Bor6ers Or3aniDation $::B% vs. PIC Corp., 228 SCR --,A Consolidated 'abor ssociation of the Philippines vs. Mars1an and Co., Inc., 22 SCR 7./A Master Iron 'abor #nion vs. N'RC, 82/ SCR -@A Phil. Metal :oundries Inc. vs. CIR, /, SCR 2*7A 8@ Decision of the 'abor rbiter, #ollo, p. 8,* 8. Philippine dvertisin3 Counselors, Inc. vs. National 'abor Relations Co11ission, 8+* SCR */7A !ala4an Colle3es vs. National 'abor Relations Co11ission, 877 SCR 2. 8/ Nueva Eci>a I Electric Cooperative, Inc. vs. Minister of 'abor, 2.- SCR 87, *,. *, !ontia vs. National 'abor Relations Co11ission. 877 SCR 2+@A !atan3as 'a3una "a4abas !us Co1pan4 vs. N'RC, 828 SCR @/8A Eac6son !uildin3 Condo1iniu1 Corporation vs. N'RC, 8-+ SCR *8/. *2 "andua4 Distiller4 'abor #nion vs. N'RC, 2-/ SCR -@,A Seno vs. MendoDa, 82 SCR 228-. *8 2@, SCR +/ $2/./%

Republic of the Philippines SUPREME COURT Manila "CIRD DIVISION G.R. No. 15230+ .an3a$y 26, 2005 ACESITE CORPORATION, 0OLI"A! INN, .O0ANN ANGERBAUER and P0IL KENNE"!, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION CS%2ond "5,5'5onD and LEO A. GON/ALES, respondents. ?(((((((((((((((((((((((((((((((((? G.R. No. 152321 .an3a$y 26, 2005 LEO A. GON/ALES, petitioner, vs. ACESITE CP0ILIPPINESD 0OTEL CORPORATION, 0OLI"A! INN MANILA, .O0ANN ANGERBAUER and P0IL KENNE"!, respondents. DECISION CARPIO MORALES, J.: !efore this Court are t0o consolidated petitions for revie0 on certiorari challen3in3 the Court of ppeals Decision of October 28, 8,,2 and Resolution of :ebruar4 2/, 8,,8 in C ().R. SP No. +7-,+, FAcesite 6P!ilippines7 /otel Corporation( /oliday Inn Manila( )o!ann An"er$auer and P!il Gennedy v* 1ational La$or #elations Commission and Leo A* 4on&ales*F "he antecedents of the case are as follo0sF 'eo . )onDales $)onDales% 0as hired on October 2., 2//* as Chief of Securit4 of Manila Pavillion Cotel. 2 On Eanuar4 2, 2//7, cesite Corporation $ cesite% too6 over the operations of Manila Pavillion and rena1ed it Colida4 Inn Manila $the hotel%. cesite retained )onDales as Chief of Securit4 of the hotel. On March 87, 2//., )onDales too6 a -(da4 sic6 leave and too6 e1er3enc4 leave on March *,, 2//.. On pril 2+( 8/, 2//., he a3ain too6 a 28(da4 vacation leave, thereb4 usin3 up all leaves that he 0as entitled for the 4ear. !efore the e?piration of his 28(da4 vacation leave or on pril 8*, 2//., )onDales filed an application 8 for e1er3enc4 leave for 2, da4s co11encin3 on pril *, up to Ma4 2*, 2//.. "he application 0as not, ho0ever, approved. !4 cesiteGs clai1, he received a tele3ra1 * infor1in3 hi1 of the disapproval and as6in3 hi1 to report bac6 for 0or6 on pril *,, 2//.. )onDales did not report for 0or6 on pril *,, 2//.. On even date, he received a tele3ra1 - fro1 cesite advisin3 hi1 that he 0as on unauthoriDed leave and as6in3 hi1 to provide a 0ritten e?planation 0ithin the ne?t 8- hours 0h4 he 0as not reportin3 for 0or6. t the sa1e ti1e, he 0as re=uired to report for 0or6 the follo0in3 da4 or on Ma4 2, 2//.. On Ma4 8, 2//., )onDalesG father nacleto sent a tele3ra1 7 to cesite statin3 that he 0as still recoverin3 fro1 severe sto1ach disorder and 0ould report bac6 for 0or6 on Ma4 -, 2//.. 1edical certificate + dated Ma4 *, 2//. issued b4 a Dr. 'aureano C. )onDales, Er. statin3 that )onDales 0as under his care fro1 pril *, P Ma4 *, 2//. 0as presented to prove that he indeed 0as treated fro1 such sic6ness. On Ma4 -, 2//., around lunchti1e, )onDales reported for 0or6 and presented hi1self to Eohann n3erbauer, then Resident Mana3er of the hotel. n3erbauer clai1s that 0hen )onDales 0ent to hi1, he as6ed hi1 to e?plain 0h4 he had been absent despite orders for hi1 to report bac6 for 0or6 to 0hich he $)onDales% replied that it 0as necessar4 for hi1 to 3o ho1e to his province in bra. )onDales, on the other hand, clai1s that 0hen he conferred 0ith n3erbauer, he re=uested for leave 0ithout pa4 fro1 Ma4 7(/, 2//. 0hich 0as provisionall4 approved on condition that he $)onDales% 0ould be sendin3 his e?planation throu3h e(1ail behind his absences on pril *,, 2//. and Ma4 8, 2//. so that n3erbauer could send it to the hotel )eneral Mana3er Phil &enned4 0ho 0as then out of the countr4. round 7F** p1 of Ma4 -, 2//., )onDales sent his e?planation @ to n3erbauer throu3h e(1ail, to 0it, =uoted verbati1F "his has reference 0ith 4our verbal instruction that I 0ill sub1it 14 0ritten e?planation re3ardin3 14 absences on pril *,,2//. and Ma4 8, 2//.. t the outset, 14 profound apolo3ies for the above(stated absences. s 4ou are full4 a0are of, on pril 8@, 2//., I for1all4 re=uested 4our office that 14 official leave K0hichL 0ill e?pire on pril 8/, 2//. shall be e?tended up to Ma4 27, 2//.. Inas1uch that I 0as in the province $ !R % at that ti1e, I 0as not a0are that 14 re=uest 0as disapproved until such ti1e that I received 4our tele3ra1 t0o da4s later. 'i6e0ise, 0hen I received 4our tele3ra1, I 0as sic6 at that ti1e and this 0as dul4 co11unicated to 4our office thru tele3ra1. "his 0as the reason I failed to report for 0or6 also on Ma4 8, 2//.. s e?haustivel4 discussed to 4ou toda4, there is a 3reat necessit4 for 1e to 3o ho1e toni3ht in the province. Once a3ain, I a1 as6in3 4our 6ind understandin3 that I shall be allo0ed to 3o on leave effective to1orro0 and rest assured that I 0ill report for 0or6 after the election. t an4 rate, the trainin3 of our ne0 3uards 0ill start on Ma4 2., 2//.. "han6 4ou for this and for the past favors. In the evenin3 )onDales left for bra. lso on Ma4 -, 2//. n3erbauer sent the follo0in3 inter(office 1e1o . to )onDales, alle3edl4 received at around @F77 p1 b4 the securit4 staffF s discussed durin3 our 1eetin3, 4ou are advised to sub1it an e?planation 0ithin 8- hours 0h4 4ou did not report to 0or6 2st Ma4 2//.Y nd 0h4 4ou ca1e in late toda4 -th of Ma4 2//., as 0e had a 2,F*, M scheduled co11unication 1eetin3 0ith the inco1in3 Securit4 3enc4. Be 0ill be havin3 another 1eetin3 to1orro0 re3ardin3 the turnover of the out3oin3 Securit4 3enc4. I 0ill be e?pectin3 4our presence durin3 the said 1eetin3. :or 4our co1pliance. )onDales clai1s that he 3ot hold of a cop4 of the above(=uoted 1e1o onl4 on Ma4 ., 2//.. )onDales not havin3 reported for 0or6 on Ma4 7, 2//., n3erbauer sent hi1 on even date the follo0in3 tele3ra1/ at his provincial address in braF "CIS IS "O REI"ER "E O#R DVICE :OR <O# "O REPOR" ! C& "O BOR& IMMEDI "E'< #PON RECEIP" O: "CIS NO"ICE D#E "O VER< #R)EN" M ""ERS INVO'VIN) SEC#RI"< DEP R"MEN"GS CONCERNS BCICC IMPER "IVE'< REI#IRE <O#R PERSON ' ""EN"ION. P'E SE CONSIDER "CIS S O#R :IN ' DVICE.

)onDales, 0ho clai1s to have received the Ma4 7, 2//. tele3ra1 onl4 in the afternoon of Ma4 @, 2//., i11ediatel4 repaired bac6 to Manila on Ma4 ., 2//. onl4 to be ;hu1iliatin3l4 and i3no1iniousl4 barred b4 the 3uard $a subordinate of K)onDalesL% fro1 enterin3 the pre1ises.; It appears that on Ma4 @, 2//., n3erbauer issued the follo0in3 Notice of "er1ination 2, throu3h an inter(office 1e1oF s 4ou continuousl4 disre3ard our several advices for 4ou to report bac6 to 0or6 to attend to ver4 ur3ent 1atters involvin3 Securit4 Depart1entGs concerns 0hich, as cate3oricall4 1ade clear to 4ou, i1perativel4 re=uired 4our personal presence and attention considerin3 that 4ou are its Depart1ent Cead, thus adversel4 affectin3 the operations of said depart1ent, 0e are left 0ith no recourse but to ter1inate 4our services fro1 the Cotel effective i11ediatel4 for violations of rule no. 8@, "4pe C, of the Couse Code of Discipline P ; cts of 3ross disobedience or insubordination; and provisions of the 'abor Code, specificall4 rt. 8.8. "er1ination b4 E1plo4er, par. $a% ? ? ? 0illful disobedience b4 the e1plo4ee of the la0ful orders of his e1plo4er or representative in connection 0ith his 0or6. Please be 3uided accordin3l4. $E1phasis and underscorin3 supplied% )onDales thus filed on Ma4 8@, 2//. a co1plaint 22 a3ainst cesite, n3erbauer and &enned4 for ille3al dis1issal 0ith pra4er for reinstate1ent and pa41ent of full bac60a3es, service incentive leave, 2*th 1onth pa4, 1oral and e?e1plar4 da1a3es and attorne4Gs fees. )onDales, ho0ever, failed to appear in 8 consecutive hearin3s despite notice, 1eritin3 the dis1issal b4 the 'abor rbiter of his co1plaint b4 Order 28 of Septe1ber 2@, 2//.. )onDales refiled on Eul4 2*, 2/// his co1plaint for ille3al dis1issal 2* a3ainst n3erbauer and &enned4, 0hich he a1ended2- on Septe1ber 8,, 2///, b4 i1pleadin3 cesite as respondent. fter the filin3 of their respective position papers, pleadin3s and docu1entar4 evidence, the 'abor rbiter, b4 Decision of :ebruar4 @, 8,,,, dis1issed the co1plaint for lac6 of 1erit, it holdin3 that )onDales 0as dis1issed for >ust cause and 0as not denied of due process. )onDales appealed to the National 'abor Relations Co11ission $N'RC%, he faultin3 the 'abor rbiter as follo0sF I "he 'abor rbiter co11itted 3rave abuse of discretion in dis1issin3 the co1plaint for lac6 of 1erit. II "he 'abor rbiter seriousl4 erred in the findin3 of facts, 0hich caused 3rave or irreparable da1a3e or in>ur4 to the co1plainantHappellant. III "he 'abor rbiter seriousl4 erred in the findin3 that there 0as absence of due process in the dis1issal of the co1plaint.27 !4 Decision2+ of Dece1ber 8/, 8,,,, the N'RC reversed that of the 'abor rbiter, the dispositive portion of 0hich is =uoted verbati1F BCERE:ORE, PREMISES CONSIDERED, the decision of 'abor rbiter )eobel . !artolabac dated :ebruar4 @, 8,,, is hereb4, REVERSED. Respondents are hereb4 orderedF 2% to i11ediatel4 reinstate co1plainant to his for1er position 0ithout loss of seniorit4 ri3htsA 8% to pa4 co1plainant bac60a3es be3innin3 for the period Ma4 2+, 2//., until he is actuall4 reinstated, inclusive of all his other frin3e benefits or their 1onetar4 e=uivalentA *% to pa4 co1plainant the su1 of P.,,,,,,.,, pesos as 1oral da1a3es and the e=ual a1ount of P.,,,,,,.,, as and for e?e1plar4 da1a3esA -% to pa4 ten $2,% per cent attorne4Gs fees. $#nderscorin3 supplied% cesite thereupon filed a petition for certiorari before the Court of ppeals anchored on the follo0in3 3roundsF I. "CE N'RC )R VE'< !#SED I"S DISCRE"ION MO#N"IN) "O ' C& O: E#RISDIC"ION BCEN I" REVERSED "CE :INDIN) O: "CE ' !OR R!I"ER "C " "CE RESPONDEN" B S 'E) ''< DISMISSED :OR E#S" C #SEK.L II. "CE N'RC )R VE'< !#SED I"S DISCRE"ION MO#N"IN) "O ' C& O: E#RISDIC"ION BCEN I" REVERSED "CE :INDIN) O: "CE ' !OR R!I"ER "C " "CE RESPONDEN" B S ::ORDED PROCED#R ' D#E PROCESSK.L III. "CE N'RC )R VE'< !#SED I"S DISCRE"ION MO#N"IN) "O ' C& O: E#RISDIC"ION BCEN I" REVERSED "CE :INDIN) O: "CE ' !OR R!I"ER "C " "CE RESPONDEN" IS NO" EN"I"'ED "O CIS MONE< C' IMSK.L IV. "CE N'RC )R VE'< !#SED I"S DISCRE"ION MO#N"IN) "O ' C& O: E#RISDIC"ION BCEN I" INC'#DED PE"I"IONERS PCI' &ENNED< ND EOC NN N)ER! #ER 'I !'E "O "CE RESPONDEN" NO"BI"CS" NDIN) "CE : C" "CE< RE MERE EMP'O<EES O: "CE CO"E'K.L2@ !4 Decision2. of October 28, 8,,2, the Court of ppeals, findin3 that )onDales 0as ille3all4 dis1issed, affir1ed 0ith 1odification the N'RC decisionF fter a careful stud4 of the evidence on record and of the alle3ations of both parties, this Court is convinced that private respondent )onDales 0as ille3all4 dis1issed. "he parties hereto contest the receipt b4 private respondent )onDales of the first tele3ra1 sent b4 petitioner n3erbauer.:a2p!i:*nHt Since the evidence of petitioners is 1erel4 a piece of paper supposedl4 containin3 the contents of the tele3ra1 sent to the for1er, Be cannot accept the sa1e as proof that indeed a tele3ra1 0as sent and 0as thereafter received b4 private respondent )onDales. "he burden of proof is upon petitioners to sho0 that indeed the latter received the sa1e. Insofar as private respondent )onDalesG failure to report for 0or6 on Ma4 2, 2//., 0e 3ive credence to the 1edical certificate he sub1itted to prove that he 0as indeed indisposed durin3 the period in controvers4 especiall4 in the li3ht of the fact that the sa1e 0as issued b4 his rival in the political arena, Dr. 'aureano C. )onDales, Er., Be do not thin6 Dr. )onDales 0ho li6e0ise ran for the sa1e elective position as herein private respondent )onDales 0ould help hi1 cover up his absences if he reall4 did not treat the latter and had hi1 under his care. "hus, his failure to report for 0or6 on Ma4 2, 2//. 0as >ustified. s to the third tele3ra1, the final notice b4 petitioners to private respondent )onDales, 0hich directed hi1 to report for 0or6 i11ediatel4 upon receipt thereof, 0as co1plied 0ith b4 the latter 0hen he reported to the hotel on Ma4 ., 2//. but 0as refused entr4. Petitioners insist that he did not report to 0or6. Private respondent )onDales ho0ever sub1itted an official receipt of his diesoline purchase to evidence the fact that he 0ent to Manila on said date. nd even 3rantin3 ar3uendo that private respondent )onDales did not heed the sa1e, his i11ediate ter1ination 0as still un0arranted despite the provision on petitionerGs Couse Code of Discipline. rticle 8@@ of the 'abor Code, as a1ended, providesF R". 8@@. Miscellaneous provisions. P $a% ? ? ?.

$b% Sub>ect to the constitutional ri3ht of 0or6ers to securit4 of tenure and their ri3ht to be protected a3ainst dis1issal e?cept for >ust and authoriDed cause and 0ithout pre>udice to the re=uire1ent of notice under rticle 8.* of this Code, the e1plo4er shall furnish the 0or6er 0hose e1plo41ent is sou3ht to be ter1inated a 0ritten notice containin3 a state1ent of the causes for ter1ination and shall afford the latter a1ple opportunit4 to be heard and defend hi1self 0ith the assistance of his representative if he so desires in accordance 0ith co1pan4 rules and re3ulations pro1ul3ated pursuant to 3uidelines set b4 the Depart1ent of 'abor and E1plo41ent. n4 decision ta6en b4 the e1plo4er shall be 0ithout pre>udice to the ri3ht of the 0or6er to contest the validit4 or le3alit4 of his dis1issal b4 filin3 a co1plaint 0ith the re3ional branch of the National 'abor Relations Co11ission. "he burden of provin3 that the ter1ination 0as for a valid or authoriDed cause shall rest on the e1plo4er. "he Secretar4 of the Depart1ent of 'abor and E1plo41ent 1a4 certif4 the dispute in the event of a pri1a facie findin3 b4 the appropriate official of the Depart1ent of 'abor and E1plo41ent before 0ho1 such dispute pendin3 that the ter1ination 1a4 cause a serious labor dispute or is in i1ple1entation of a 1ass la4( off. ??? In the present case, the records do not sho0 co1pliance b4 petitioners 0ith the t0o $8%(notice rule prescribed in the above provision of la0. lthou3h several tele3ra1s 0ere sent to private respondent )onDales, there is not one $2% tele3ra1 0hich contains a state1ent of the cause for his ter1ination. "he tele3ra1 and the 1eetin3 held on Ma4 -, 2//. re=uirin3 hi1 to sub1it a 0ritten e?planation as to his absences did not apprise hi1 that he 0as bein3 considered for ter1ination. Moreover, he 0as not infor1ed that an investi3ation 0as bein3 conducted vis(Z(vis his continued absences and his non(disclosure of the fact that he 0as runnin3 for public office. In other 0ords, no notice 0as sent b4 petitioners to apprise private respondent )onDales of the char3es a3ainst hi1 nor 0as he 3iven a1ple opportunit4 to contest said char3es 0ith the assistance of counsel, if he so desired. Bhat petitioners did 0as to send hi1 a notice of ter1ination on the pre1ise that his i11ediate dis1issal is authoriDed under their Couse Code of Discipline. Bhile it is reco3niDed that co1pan4 policies and re3ulations, unless the4 are oppressive or contrar4 to la0, are 3enerall4 valid and bindin3 on the parties and 1ust be co1plied 0ith, the sa1e cannot be e?ercised for the purpose of defeatin3 the ri3hts of the e1plo4ees under the la0. #nfortunatel4 for petitioners, their e1plo4ees are still entitled to the procedural re=uire1ents of notice and hearin3 despite provisions in their code of discipline purportedl4 3ivin3 the1 the ri3ht to i11ediatel4 ter1inate their services. E1plo4ees cannot bar3ain a0a4 this ri3ht not0ithstandin3 their ac=uiescence to the e1plo4erGs rules. s to petitionersG clai1 that private respondent 0illfull4 disobe4ed their orders, the Supre1e Court in the case of 'a3atic vs. N'RC heldF In o$d%$ (1a( an %-&4oy%$ -ay d5'-5'' an %-&4oy%% on (1% 6$o3nd o7 F544734 d5'o)%d5%n2%, (1%$% -3'( )% 2on23$$%n2% o7 a( 4%a'( (Fo C2D $%G35'5(%'= (1% %-&4oy%%H' a''a54%d 2ond32( -3'( 1a,% )%%n F544734 o$ 5n(%n(5ona4, (1% F5445n6n%'' )%5n6 21a$a2(%$5B%d )y a F$on6734 and &%$,%$'% a((5(3d%I and (1a( (1% o$d%$ ,5o4a(%d -3'( 1a,% )%%n $%a'ona)4%, 4aF734, -ad% JnoFn (o (1% %-&4oy%% and -3'( &%$(a5n (o (1% d3(5%' F1521 1% 1ad )%%n %n6a6%d (o d5'21a$6%. "he present case does not sho0 the presence of the first re=uisite. s private respondent )onDalesG failure to co1pl4 0ith petitionersG orders 0ere not characteriDed b4 a perverse attitude. t 1ost he can onl4 be suspended fro1 service for assu1in3 that his leaves of absence 0ould be approved b4 1ana3e1ent. "he penalt4 of dis1issal is too harsh considerin3 that private respondent )onDales has been 0ith the co1pan4 for al1ost five $7% 4ears and has rendered unble1ished service until the period in controvers4. :or his unauthoriDed absences, Be hereb4 rule that a suspension of one $2% 0ee6 is co11ensurate to his violation of "4pe C, Couse Code of Discipline rule on unauthoriDed absences. nent the alle3ed 0illful non(disclosure b4 private respondent )onDales of his candidac4 for public office, Be find the sa1e to be unsupported b4 evidence. lIvvp!i:*net "he tenor of private respondent )onDalesG internal e1ail to petitioner n3erbauer reveals that the latter 0as a0are that the reason for the for1erGs prolon3ed absences 0as his on3oin3 ca1pai3n as !oard Me1ber of the Province of bra. Considerin3 the sa1e, Be are inclined to believe private respondent )onDalesG version of the stor4. )oin3 no0 to the propriet4 of the 1onetar4 a0ards to private respondent )onDales, Be find the a1ount P.,,,,,,.,, each as 1oral and e?e1plar4 da1a3es un0arranted. "he collective a1ount of P2,,,,,,.,, as 1oral and e?e1plar4 da1a3es is >ust under the circu1stances. Public respondent N'RCGs a0ard of ten $2,% per cent attorne4Gs fees is affir1ed. BCERE:ORE, pre1ises considered, the Decision dated Dece1ber 8/, 8,,, of public respondent National 'abor Relations Co11ission is hereb4 MODI:IED as follo0sF Petitioners are hereb4 orderedF 2. to reinstate private respondent 'eo . )onDales to his for1er position 0ithout loss of seniorit4 ri3hts or privile3es. If reinstate1ent is no lon3er feasible, then pa41ent of separation pa4 e=uivalent to [ 1onth pa4 for ever4 4ear of service is hereb4 orderedA 8. to pa4 private respondent 'eo . )onDales his full bac6 0a3es co11encin3 on 2- Ma4 2//. in vie0 of his one $2% 0ee6 suspension until he is actuall4 reinstatedA *. to pa4 P2,,,,,,.,, as 1oral and e?e1plar4 da1a3esA and -. to pa4 2,J of the total 1onetar4 a0ard as and for attorne4Gs fees. Bith costs a3ainst the petitioners.2/ $E1phasis and underscorin3 supplied% Cence, the t0o separate petitions of cesite and )onDales. In its petition, cesite contends thatF I "CE CO#R" O: PPE 'S )R VE'< ERRED BCEN I" DID NO" ::IRM "CE :INDIN) O: "CE ' !OR R!I"ER "C " "CE RESPONDEN" B S 'E) ''< DISMISSED :OR E#S" C #SE. II "CE CO#R" O: PPE 'S )R VE'< ERRED BCEN I" REVERSED "CE :INDIN) O: "CE ' !OR R!I"ER "C " RESPONDEN" B S ::ORDED PROCED#R ' D#E PROCESS. III "CE CO#R" O: PPE 'S )R VE'< ERRED BCEN I" REVERSED "CE :INDIN) O: "CE ' !OR R!I"ER "C " "CE RESPONDEN" IS NO" EN"I"'ED "O CIS MONE< C' IMS.8, )onDales, on the other hand, posits in his petition thatF

I K"CE CO#R" O: PPE 'SL )R VE'< ERRED IN DE'E"IN) "CE B RDS O: :RIN)E !ENE:I"S OR "CEIR MONE" R< EI#IV 'EN"S BCICC "CE N'RC ORDERED "O !E )IVEN "O "CE PE"I"IONER :ROM "CE "IME CE B S I''E) ''< DISMISSED #P "O CIS C"# ' REINS" "EMEN". II K"CE CO#R" O: PPE 'SL SERIO#S'< ERRED IN !ES"OBIN) "O "CE PRIV "E RESPONDEN"S "CE OP"ION BCE"CER "O REINS" "E "CE PE"I"IONER OR NO". III K"CE CO#R" O: PPE 'SL ERRED IN S#!S" N"I ''< RED#CIN) "CE MO#N" O: B RDS O: MOR ' ND EMEMP' R< D M )ES BCICC "CE N'RC DESERVIN)'< DE#D)ED "O !E CCORDED "O "CE PE"I"IONER. 82 cesite ar3ues that there 0as >ust cause for )onDalesG ter1ination under rticle 8.8 of the 'abor Code, the pertinent provision of 0hich readsF R". 8.8 "ERMIN "ION !< EMP'O<ER. P n e1plo4er 1a4 ter1inate an e1plo41ent for an4 of the follo0in3 causesF $a% Serious Misconduct of 0illful Disobedience b4 the e1plo4ee of the la0ful orders of his e1plo4er or representative in connection 0ith his 0or6A $b% )ross and habitual Ne3lect b4 the e1plo4ee of his dutiesA ??? :or, so cesite clai1s, )onDales ;sho0ed no respect for ? ? ? KtheL la0ful orders for hi1 to report bac6 to 0or6 and repeatedl4 i3nored all tele3ra1s sent to hi1,; 88 and it 1erel4 e?ercised its le3al ri3ht to dis1iss hi1 under the Couse Code of Discipline 0hich i1poses dis1issal as penalt4 for a violation of Rule 8@ thereof. cesite further clai1s that )onDales cannot fei3n i3norance of said rule because it is part of his >ob to i1ple1ent itA8* and the 1edical certificate acco1plished b4 a Dr. )onDales 0ho ;could ver4 0ell be a relative,; 0as issued in IueDon Cit4 on Ma4 *, 2//. 0hereas it stated that )onDales 0as under the ph4sicianGs care in bra fro1 pril *, to Ma4 *, 2//.. cesite further1ore clai1s that, as correctl4 ruled b4 the 'abor rbiter, the facts b4 an4 standard suffice to cause it to lose its trust and confidence in )onDales especiall4 his conceal1ent that he 0as see6in3 an elective post in bra durin3 the 2//. elections 0hich 0ould e?plain 0h4 he did not report for 0or6 as directedA 8- and that )onDales 0as afforded procedural due process as the t0in re=uire1ents of notice and hearin3 0ere co1plied 0ith throu3h the nu1erous tele3ra1s sent to both )onDalesG cit4 and provincial addresses as6in3 hi1 to report for 0or6 and e?plain his unauthoriDed absences.87 "his Court finds no reason to depart fro1 the findin3s of the Court of ppeals. Indeed, there appears to have been no >ust cause to dis1iss )onDales fro1 e1plo41ent. s correctl4 ruled b4 the Court of ppeals, )onDales cannot be considered to have F5447344y disobe4ed his e1plo4er. Billful disobedience entails the concurrence of at least t0o $8% re=uisitesF the e1plo4eeGs assailed conduct has been 0illful or intentional, the 0illfulness bein3 characteriDed b4 a ;0ron3ful and perverse attitudeA; and the order violated 1ust have been reasonable, la0ful, 1ade 6no0n to the e1plo4ee and 1ust pertain to the duties 0hich he had been en3a3ed to dischar3e. 8+ In )onDalesG case, his assailed conduct has not been sho0n to have been characteriDed b4 a perverse attitude, hence, the first re=uisite is 0antin3. Cis receipt of the tele3ra1 disapprovin3 his application for e1er3enc4 leave startin3 pril *,, 2//. has not been sho0n. nd it cannot be said that he disobe4ed the Ma4 7, 2//. tele3ra1 since he received it onl4 on Ma4 @, 2//.. On the contrar4, that he i11ediatel4 hied bac6 to Manila upon receipt thereof ne3ates a perverse attitude. s to )onDalesG alle3ed conceal1ent of his candidac4 $for provincial board 1e1ber% as a 3round for cesiteGs loss of trust and confidence in hi1, the sa1e is not i1pressed 0ith 1erit. It should be noted that cesiteGs 3round for ter1inatin3 the services of )onDales as stated in the Notice of "er1ination is his alle3ed acts of insubordinationHdisobedience. "he conceal1ent of candidac4 an3le harped upon b4 cesite can onl4 thus be considered as 1ere afterthou3ht to further >ustif4 his ille3al dis1issal. Bith re3ards to )onDalesG perceived fei3nin3 of illness, the sa1e is purel4 speculator4. If there is an4thin3 that )onDales can be faulted for, it is his bein3 too presu1ptuous that his application for leave 0ould be approved. :or his unauthoriDed absences, this Court finds that )onDales violated para3raph 8+, Rule 22 of "4pe ! offenses of the Co1pan4Gs Couse Code of Discipline P unauthoriDed absence fro1 0or6 for three consecutive da4s8@ P 0hich is punishable b4 a suspension of * da4s on the first offense P 0hen he did not report for 0or6 fro1 Ma4 7(@, 2//.. s for )onDalesG petition before this Court, he ar3ues that the Court of ppeals, absent an4 reason, 1odified the decision of the N'RC b4 deletin3 or eli1inatin3 the ;other frin3e benefits or their 1onetar4 e=uivalentA; 8. that the said court should not have 3iven cesite the option to reinstate hi1 or not since the case at bar does not fall under circu1stances for 0hich reinstate1ent is no lon3er possibleA that even assu1in3 that his reinstate1ent is not in the interest of labor, the severance pa4 of [ 1onth pa4 ordered b4 the appellate court is not in accordance 0ith la0 and >urisprudenceA and that the reduction of the 1oral and e?e1plar4 da1a3es a0arded hi1 b4 the N'RC 0as erroneous. In ille3al dis1issal cases, reinstate1ent to an ille3all4 dis1issed e1plo4eeGs for1er position 1a4 be e?cused on the 3round of ;strained relations.; "his 1a4 be invo6ed a3ainst e1plo4ees 0hose positions de1and trust and confidence, or 0hose differences 0ith their e1plo4er are of such nature or de3ree as to preclude reinstate1ent.8/ In the case at bar, )onDales 0as Chief of Securit4, 0hose dut4 0as to ;1ana3e the operation of the securit4 areas of the hotel to provide and ensure the safet4 and securit4 of the hotel 3uests, visitors, 1ana3e1ent, staff and their properties accordin3 to co1pan4 policies and local la0s.; *, It cannot be 3ainsaid that )onDalesG position is one of trust and confidence, he bein3 in char3e of the over(all securit4 of said hotel. "hus, reinstate1ent is no lon3er possible. In lieu thereof, cesite is liable to pa4 separation pa4 of 2 1onth for ever4 4ear of service. s to the a0ard of 1oral and e?e1plar4 da1a3es, this Court finds it un0arranted. Moral da1a3es are recoverable onl4 0here the dis1issal of the e1plo4ees 0as attended b4 bad faith or fraud or constituted an act oppressive to labor or 0as done in a 1anner contrar4 to 1orals, 3ood custo1s or public polic4. E?e1plar4 da1a3es on the other hand 1a4 be a0arded onl4 if the dis1issal 0as effected in a 0anton, oppressive or 1alevolent 1anner.*2 "hou3h these 3rounds have been alle3ed b4 )onDales, the4 0ere not sufficientl4 proven.lIvvp!i:*net "he appellate court affir1ed the N'RC rulin3 that n3erbauer and &enned4 are solidaril4 liable 0ith cesite. In the case of 'o"o-Medellin Su"arcane Planters Association( Inc* v* 1L#C ,*8 this Court ruledF

#nless the4 have e?ceeded their authorit4, corporate officers are, as a 3eneral rule, not personall4 liable for their official acts, because a corporation, b4 le3al fiction, has a personalit4 separate and distinct fro1 its officers, stoc6holders and 1e1bers. Co0ever, this fictional veil 1a4 be pierced 0henever the corporate personalit4 is used as a 1eans of perpetuatin3 fraud or an ille3al act, evadin3 an e?istin3 obli3ation, or confusin3 a le3iti1ate issue. In cases of ille3al dis1issal, corporate directors and officers are solidaril4 liable 0ith the corporation, 0here ter1inations of e1plo41ent are done 0ith 1alice or in bad faith. $#nderscorin3 supplied, citations o1itted% In holdin3 n3erbauer and &enned4 solidaril4 liable, the N'RC intended ;to deter other forei3n e1plo4erKsL fro1 repeatin3 the inhu1an treat1ent of their :ilipino e1plo4ees 0ho should be treated 0ith e=ual respect especiall4 in their o0n land and prevent further violation of their hu1an ri3hts as e1plo4ees.; "he records of the case do not, ho0ever, sho0 an4 inhu1an treat1ent of )onDales. Cis superiors >ust happen to be forei3ners. Moreover, as previousl4 discussed, bad faith or 1alice 0as not proven. n3erbauer, actin3 on behalf of cesite, 0as, li6e )onDales, perhaps also too presu1ptuous in thin6in3 that the tele3ra1s orderin3 the latter to report for 0or6 0ere all received on ti1e, dra0in3 hi1 to hastil4 conclude that )onDales intentionall4 disobe4ed the orders contained therein. s to the deletion of the ;frin3e benefits or their 1onetar4 e=uivalent,; this Court a3rees 0ith )onDales that it is not in accord 0ith la0 and >urisprudence. rticle 8@/ of the 'abor Code providesF R". 8@/ SEC#RI"< O: "EN#RE. P In cases of re3ular e1plo41ent, the e1plo4er shall not ter1inate the services of an e1plo4ee e?cept for >ust cause or 0hen authoriDed b4 this "itle. n e1plo4ee 0ho is un>ustl4 dis1issed fro1 0or6 shall be entitled to reinstate1ent 0ithout loss of seniorit4 ri3hts and other privile3es and to his full bac60a3es, inclusive of allo0ances, and (o 15' o(1%$ )%n%75(' o$ (1%5$ -on%(a$y %G35,a4%n( co1puted fro1 the ti1e his co1pensation 0as 0ithheld fro1 hi1 up to the ti1e of his actual reinstate1ent. $E1phasis and underscorin3 supplied% s for the a0ard of attorne4Gs fees, the sa1e is in order, )onDales havin3 been forced to liti3ate and incur e?penses to protect his ri3hts and interest.** "his Court, ho0ever, reduces the a0ard to P2,,,,,.,,. In fine, this Court affir1s the assailed decision 0ith 1odification in li3ht of the fore3oin3 discussions. 80ERE ORE, as 1odified, the decision reads as follo0sF 2% cesite Corporation is hereb4 ordered to pa4 'eo . )onDalesF a% his full bac60a3es, inclusive of allo0ances, and his other benefits or their 1onetar4 e=uivalent, to be co1puted fro1 the ti1e he 0as ille3all4 dis1issed until the finalit4 of this Decision less * da4s in vie0 of his suspensionA b% separation pa4 e=uivalent to his 2 1onth salar4 for ever4 4ear of service co1puted fro1 the ti1e )onDales 0as first e1plo4ed b4 cesite until the finalit4 of this DecisionA c% P2,,,,,.,, as attorne4Gs feesA and 8% "he co1plaint a3ainst Eohann n3erbauer and Phil &enned4 is hereb4 DISMISSED. No pronounce1ent as to costs. SO ORDERED. Pan3aniban, $Chair1an%, Sandoval()utierreD, Corona, and )arcia, EE., concur. oo(no(%' ).R. No. 278*,. #ollo at /A ).R. No. 278*82 #ollo at 2-. 8 Court of ppeals $C % #ollo at /-. * Id* at /7. Id* at /+. 7 Id* at /@. + Id* at 27-. @ Id* at //. . Id* at /.. / Id* at 2,,. 2, Id* at 2,2. 22 Id* at 2,*(2,-. 28 Id* at 2,7. 2* Id* at +*(+-. 2Id* at ++. 27 Id* at 2+.(2+/. 2+ Id* at *-(+,. 2@ Id* at 2,. 2. ).R. No. 278*,. #ollo at *+(--. 2/ Id* at -,(-*. 8, Id* at 2+(8.. 82 ).R. No. 278*82 #ollo at 2/.
2 88 8*

).R. No. 278*,. #ollo at 2@. Id* at 8,. 8Id* at 88. 87 Id* at 87. 8+ Procter and 4am$le P!ils* v* 'ondesto( 4*#* 1o* :B=A>J , March 7, 8,,- citin3 4old City Inte"rated Port Services( Inc* v* 1L#C, 2./ SCR .22 $2//,%. 8@ C #ollo at 2-7. 8. ).R. No. 278*82 #ollo at 8,(82. 8/ Marana2 /otels and #esorts Corp* v* Court of Appeals, 827 SCR 7,2, 7,@ $2//8%A 4lo$e-Mac-ay Ca$le and #adio Corporation v* 1L#C, 8,+ SCR @,2, @22(@28 $2//8%A Asia2orld Pu$lis!in" /ouse( Inc* v* %ple, 278 SCR , 82/, 88@ $2/.@%. *, Polic4 Manual, Colida4 Inn Manila at @A C #ollo at 2*.. *2 4arcia v* 1ational La$or #elations Commission, 8*- SCR +*8, +*. $2//-% $citations o1itted%. *8 8/+ SCR 2,., 28+ $2//.%. ** #asona$le v* 1ational La$or #elations Commission , 87* SCR .27, .2/ $2//+%.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 14066* A363'( 12, 2004 8OO"C0IL" 0OL"INGS, INC., petitioner, vs. ROEAS ELECTRIC AN" CONSTRUCTION COMPAN!, INC., respondent. DECISION CALLE.O, SR., J.= "his is a petition for revie0 on certiorari of the Decision 2 of the Court of ppeals in C ().R. CV No. 7+287 reversin3 the Decision8 of the Re3ional "rial Court of Ma6ati, !ranch 7@, 0hich ruled in favor of the petitioner.

T1% An(%2%d%n(' "he respondent Ro?as Electric and Construction Co1pan4, Inc. $RECCI%, for1erl4 the Ro?as Electric and Construction Co1pan4, 0as the o0ner of t0o parcels of land, identified as 'ot No. -/2( (*(!(2 covered b4 "ransfer Certificate of "itle $"C"% No. @.,.7 and 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+. portion of 'ot No. -/2( (*(!(2 0hich abutted 'ot No. -/2( (*(!(8 0as a dirt road accessin3 to the Su1ulon3 Ci3h0a4, ntipolo, RiDal. t a special 1eetin3 on Ma4 2@, 2//2, the respondent5s !oard of Directors approved a resolution authoriDin3 the corporation, throu3h its president, Roberto !. Ro?as, to sell 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+, 0ith an area of @,82* s=uare 1eters, at a price and under such ter1s and conditions 0hich he dee1ed 1ost reasonable and advanta3eous to the corporationA and to e?ecute, si3n and deliver the pertinent sales docu1ents and receive the proceeds of the sale for and on behalf of the co1pan4. * Petitioner Boodchild Coldin3s, Inc. $BCI% 0anted to bu4 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+ on 0hich it planned to construct its 0arehouse buildin3, and a portion of the ad>oinin3 lot, 'ot No. -/2( (*(!(2, so that its -7(foot container van 0ould be able to readil4 enter or leave the propert4. In a 'etter to Ro?as dated Eune 82, 2//2, BCI President Eonathan <. D4 offered to bu4 'ot No. -/2( (*(!(8 under stated ter1s and conditions for P2,,,, per s=uare 1eter or at the price of P@,82*,,,,. - One of the ter1s incorporated in D45s offer 0as the follo0in3 provisionF 7. "his Offer to Purchase is 1ade on the representation and 0arrant4 of the OBNERHSE''ER, that he holds a 3ood and re3istrable title to the propert4, 0hich shall be conve4ed C'E R and :REE of all liens and encu1brances, and that the area of @,82* s=uare 1eters of the sub>ect propert4 alread4 includes the area on 0hich the ri3ht of 0a4 traverses fro1 the 1ain lot $area% to0ards the e?it to the Su1ulon3 Ci3h0a4 as sho0n in the location plan furnished b4 the O0nerHSeller to the bu4er. :urther1ore, in the event that the ri3ht of 0a4 is insufficient for the bu4er5s purposes $e?a1pleF entr4 of a -7(foot container%, the seller a3rees to sell additional s=uare 1eter fro1 his current ad>acent propert4 to allo0 the bu4er to full access and full use of the propert4.7 Ro?as indicated his acceptance of the offer on pa3e 8 of the deed. 'ess than a 1onth later or on Eul4 2, 2//2, Ro?as, as President of RECCI, as vendor, and D4, as President of BCI, as vendee, e?ecuted a contract to sell in 0hich RECCI bound and obli3ed itself to sell to D4 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+ for P@,82*,,,,.+ On Septe1ber 7, 2//2, a Deed of bsolute Sale @ in favor of BCI 0as issued, under 0hich 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+ 0as sold for P7,,,,,,,,, receipt of 0hich 0as ac6no0led3ed b4 Ro?as under the follo0in3 ter1s and conditionsF "he Vendor a3ree $sic%, as it hereb4 a3rees and binds itself to 3ive Vendee the beneficial use of and a ri3ht of 0a4 fro1 Su1ulon3 Ci3h0a4 to the propert4 herein conve4ed consists of 87 s=uare 1eters 0ide to be used as the latter5s e3ress fro1 and in3ress to and an additional 87 s=uare 1eters in the corner of 'ot No. -/2( (*(!(2, as turnin3 andHor 1aneuverin3 area for Vendee5s vehicles. "he Vendor a3rees that in the event that the ri3ht of 0a4 is insufficient for the Vendee5s use $e? entr4 of a -7(foot container% the Vendor a3rees to sell additional s=uare 1eters fro1 its current ad>acent propert4 to allo0 the Vendee full access and full use of the propert4. O "he Vendor hereb4 underta6es and a3rees, at its account, to defend the title of the Vendee to the parcel of land and i1prove1ents herein conve4ed, a3ainst all clai1s of an4 and all persons or entities, and that the Vendor hereb4 0arrants the ri3ht of the Vendee to possess and o0n the said parcel of land and i1prove1ents thereon and 0ill defend the Vendee a3ainst all present and future clai1s andHor action in relation thereto, >udicial andHor ad1inistrative. In particular, the Vendor shall e>ect all e?istin3 s=uatters and occupants of the pre1ises 0ithin t0o $8% 0ee6s fro1 the si3nin3 hereof. In case of failure on the part of the Vendor to e>ect all occupants and s=uatters 0ithin the t0o(0ee6 period or breach of an4 of the stipulations, covenants and ter1s and conditions herein provided and that of contract to sell dated 2 Eul4 2//2, the Vendee shall have the ri3ht to cancel the sale and de1and rei1burse1ent for all pa41ents 1ade to the Vendor 0ith interest thereon at *+J per annu1. . On Septe1ber 2,, 2//2, the Bi1beco !uilder5s, Inc. $B!I% sub1itted its =uotation for P.,+-/,,,, to BCI for the construction of the 0arehouse buildin3 on a portion of the propert4 0ith an area of 7,,.. s=uare 1eters. / B!I proposed to start the pro>ect on October 2, 2//2 and to turn over the buildin3 to BCI on :ebruar4 8/, 2//8. 2, In a 'etter dated Septe1ber 2+, 2//2, Ponderosa 'eather )oods Co1pan4, Inc. confir1ed its lease a3ree1ent 0ith BCI of a 7,,,,(s=uare(1eter portion of the 0arehouse 4et to be constructed at the rental rate of P+7 per s=uare 1eter. Ponderosa e1phasiDed the need for the 0arehouse to be read4 for occupanc4 before pril 2, 2//8.22 BCI accepted the offer. Co0ever, B!I failed to co11ence the construction of the 0arehouse in October 2, 2//2 as planned because of the presence of s=uatters in the propert4 and su33ested a rene3otiation of the contract after the s=uatters shall have been evicted. 28 Subse=uentl4, the s=uatters 0ere evicted fro1 the propert4. On March *2, 2//8, BCI and B!I e?ecuted a 'etter(Contract for the construction of the 0arehouse buildin3 for P22,.,-,2+,.2* "he contractor started construction in pril 2//8 even before the buildin3 officials of ntipolo Cit4 issued a buildin3 per1it on Ma4 8., 2//8. fter the 0arehouse 0as finished, BCI issued on March 82, 2//* a certificate of occupanc4 b4 the buildin3 official. Earlier, or on March 2., 2//*, BCI, as lessor, and Ponderosa, as lessee, e?ecuted a contract of lease over a portion of the propert4 for a 1onthl4 rental of P*,,,,,, for a period of three 4ears fro1 March 2, 2//* up to :ebruar4 8., 2//+. 2In the 1eanti1e, BCI co1plained to Roberto Ro?as that the vehicles of RECCI 0ere par6ed on a portion of the propert4 over 0hich BCI had been 3ranted a ri3ht of 0a4. Ro?as pro1ised to loo6 into the 1atter. D4 and Ro?as discussed the need of the BCI to bu4 a 7,,(s=uare(1eter portion of 'ot No. -/2( (*(!(2 covered b4 "C" No. @.,.7 as provided for in the deed of absolute sale. Co0ever, Ro?as died soon thereafter. On pril 27, 2//8, the BCI 0rote the RECCI, reiteratin3 its verbal re=uests to purchase a portion of the said lot as provided for in the deed of absolute sale, and co1plained about the latter5s failure to e>ect the s=uatters 0ithin the three(1onth period a3reed upon in the said deed. "he BCI de1anded that the RECCI sell a portion of 'ot No. -/2( (*(!(2 covered b4 "C" No. @.,.7 for its beneficial use 0ithin @8 hours fro1 notice thereof, other0ise the appropriate action 0ould be filed a3ainst it. RECCI re>ected the de1and of BCI. BCI reiterated its de1and in a 'etter dated Ma4 8/, 2//8. "here 0as no response fro1 RECCI.

On Eune 2@, 2//8, the BCI filed a co1plaint a3ainst the RECCI 0ith the Re3ional "rial Court of Ma6ati, for specific perfor1ance and da1a3es, and alle3ed, inter alia, the follo0in3 in its co1plaintF 7. "he ;current ad>acent propert4; referred to in the afore=uoted para3raph of the Deed of bsolute Sale pertains to the propert4 covered b4 "ransfer Certificate of "itle No. N(@.,.7 of the Re3istr4 of Deeds of ntipolo, RiDal, re3istered in the na1e of herein defendant Ro?as Electric. +. Defendant Ro?as Electric in patent violation of the e?press and valid ter1s of the Deed of bsolute Sale un>ustifiabl4 refused to deliver to Boodchild Coldin3s the stipulated beneficial use and ri3ht of 0a4 consistin3 of 87 s=uare 1eters and 77 s=uare 1eters to the pre>udice of the plaintiff. @. Si1ilarl4, in as 1uch as the 87 s=uare 1eters and 77 s=uare 1eters alloted to Boodchild Coldin3s for its beneficial use is inade=uate as turnin3 andHor 1aneuverin3 area of its -7(foot container van, Boodchild Coldin3s 1anifested its intention pursuant to para. 7 of the Deed of Sale to purchase additional s=uare 1eters fro1 Ro?as Electric to allo0 it full access and use of the purchased propert4, ho0ever, Ro?as Electric refused and failed to 1erit Boodchild Coldin3s5 re=uest contrar4 to defendant Ro?as Electric5s obli3ation under the Deed of bsolute Sale $ nne? ; ;%. .. Moreover, defendant, li6e0ise, failed to e>ect all e?istin3 s=uatters and occupants of the pre1ises 0ithin the stipulated ti1e fra1e and as a conse=uence thereof, plaintiff5s planned construction has been considerabl4 dela4ed for seven $@% 1onths due to the s=uatters 0ho continue to trespass and obstruct the sub>ect propert4, thereb4 Boodchild Coldin3s incurred substantial losses a1ountin3 to P*,7+,,,,,.,, occasioned b4 the increased cost of construction 1aterials and labor. /. O0in3 further to Ro?as Electric5s deliberate refusal to co1pl4 0ith its obli3ation under nne? ; ,; Boodchild Coldin3s suffered unrealiDed inco1e of P*,,,,,,.,, a 1onth or P8,2,,,,,,.,, supposed inco1e fro1 rentals of the sub>ect propert4 for seven $@% 1onths. 2,. On pril 27, 2//8, Boodchild Coldin3s 1ade a final de1and to Ro?as Electric to co1pl4 0ith its obli3ations and 0arranties under the Deed of bsolute Sale but not0ithstandin3 such de1and, defendant Ro?as Electric refused and failed and continue to refuse and fail to heed plaintiff5s de1and for co1pliance. Cop4 of the de1and letter dated pril 27, 2//8 is hereto attached as nne? ;!; and 1ade an inte3ral part hereof. 22. :inall4, on 8/ Ma4 2//2, Boodchild Coldin3s 1ade a letter re=uest addressed to Ro?as Electric to particularl4 annotate on "ransfer Certificate of "itle No. N(@.,.7 the a3ree1ent under nne? ; ; 0ith respect to the beneficial use and ri3ht of 0a4, ho0ever, Ro?as Electric un>ustifiabl4 i3nored and disre3arded the sa1e. Cop4 of the letter re=uest dated 8/ Ma4 2//8 is hereto attached as nne? ;C; and 1ade an inte3ral part hereof. 28. !4 reason of Ro?as Electric5s continuous refusal and failure to co1pl4 0ith Boodchild Coldin3s5 valid de1and for co1pliance under nne? ; ,; the latter 0as constrained to liti3ate, thereb4 incurrin3 da1a3es as and b4 0a4 of attorne45s fees in the a1ount of P2,,,,,,.,, plus costs of suit and e?penses of liti3ation.27 "he BCI pra4ed that, after due proceedin3s, >ud31ent be rendered in its favor, thusF BCERE:ORE, it is respectfull4 pra4ed that >ud31ent be rendered in favor of Boodchild Coldin3s and orderin3 Ro?as Electric the follo0in3F a% to deliver to Boodchild Coldin3s the beneficial use of the stipulated 87 s=uare 1eters and 77 s=uare 1etersA b% to sell to Boodchild Coldin3s additional 87 and 2,, s=uare 1eters to allo0 it full access and use of the purchased propert4 pursuant to para. 7 of the Deed of bsolute SaleA c% to cause annotation on "ransfer Certificate of "itle No. N(@.,.7 the beneficial use and ri3ht of 0a4 3ranted to Boodchild Coldin3s under the Deed of bsolute SaleA d% to pa4 Boodchild Coldin3s the a1ount of P7,++,,,,,.,,, representin3 actual da1a3es and unrealiDed inco1eA e% to pa4 attorne45s fees in the a1ount of P2,,,,,,.,,A and f% to pa4 the costs of suit. Other reliefs >ust and e=uitable are pra4ed for.2+ In its ans0er to the co1plaint, the RECCI alle3ed that it never authoriDed its for1er president, Roberto Ro?as, to 3rant the beneficial use of an4 portion of 'ot No. -/2( (*(!(2, nor a3reed to sell an4 portion thereof or create a lien or burden thereon. It alle3ed that, under the Resolution approved on Ma4 2@, 2//2, it 1erel4 authoriDed Ro?as to sell 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+. s such, the 3rant of a ri3ht of 0a4 and the a3ree1ent to sell a portion of 'ot No. -/2( (*(!(2 covered b4 "C" No. @.,.7 in the said deed are ultra vires. "he RECCI further alle3ed that the provision therein that it 0ould sell a portion of 'ot No. -/2( (*(!(2 to the BCI lac6ed the essential ele1ents of a bindin3 contract. 2@ In its a1ended ans0er to the co1plaint, the RECCI alle3ed that the dela4 in the construction of its 0arehouse buildin3 0as due to the failure of the BCI5s contractor to secure a buildin3 per1it thereon. 2. Durin3 the trial, D4 testified that he told Ro?as that the petitioner 0as bu4in3 a portion of 'ot No. -/2( (*(!(2 consistin3 of an area of 7,, s=uare 1eters, for the price of P2,,,, per s=uare 1eter. On Nove1ber 22, 2//+, the trial court rendered >ud31ent in favor of the BCI, the decretal portion of 0hich readsF BCERE:ORE, >ud31ent is hereb4 rendered directin3 defendantF $2% "o allo0 plaintiff the beneficial use of the e?istin3 ri3ht of 0a4 plus the stipulated 87 s=. 1. and 77 s=. 1.A $8% "o sell to plaintiff an additional area of 7,, s=. 1. priced at P2,,,, per s=. 1. to allo0 said plaintiff full access and use of the purchased propert4 pursuant to Par. 7 of their Deed of bsolute SaleA $*% "o cause annotation on "C" No. N(@.,.7 the beneficial use and ri3ht of 0a4 3ranted b4 their Deed of bsolute SaleA $-% "o pa4 plaintiff the a1ount of P7,7+.,,,, representin3 actual da1a3es and plaintiff5s unrealiDed inco1eA $7% "o pa4 plaintiff P2,,,,,, representin3 attorne45s feesA and "o pa4 the costs of suit. SO ORDERED.2/

"he trial court ruled that the RECCI 0as estopped fro1 diso0nin3 the apparent authorit4 of Ro?as under the Ma4 2@, 2//2 Resolution of its !oard of Directors. "he court reasoned that to do so 0ould pre>udice the BCI 0hich transacted 0ith Ro?as in 3ood faith, believin3 that he had the authorit4 to bind the BCI relatin3 to the ease1ent of ri3ht of 0a4, as 0ell as the ri3ht to purchase a portion of 'ot No. -/2( (*(!(2 covered b4 "C" No. @.,.7. "he RECCI appealed the decision to the C , 0hich rendered a decision on Nove1ber /, 2/// reversin3 that of the trial court, and orderin3 the dis1issal of the co1plaint. "he C ruled that, under the resolution of the !oard of Directors of the RECCI, Ro?as 0as 1erel4 authoriDed to sell 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+, but not to 3rant ri3ht of 0a4 in favor of the BCI over a portion of 'ot No. -/2( (*(!(2, or to 3rant an option to the petitioner to bu4 a portion thereof. "he appellate court also ruled that the 3rant of a ri3ht of 0a4 and an option to the respondent 0ere so lopsided in favor of the respondent because the latter 0as authoriDed to fi? the location as 0ell as the price of the portion of its propert4 to be sold to the respondent. Cence, such provisions contained in the deed of absolute sale 0ere not bindin3 on the RECCI. "he appellate court ruled that the dela4 in the construction of BCI5s 0arehouse 0as due to its fault. "he Present Petition "he petitioner no0 co1es to this Court assertin3 thatF I. "CE CO#R" O: PPE 'S ERRED IN CO'DIN) "C " "CE DEED O: !SO'#"E S 'E $EMC. ;C;% IS #'"R VIRES. II. "CE CO#R" O: PPE 'S )R VE'< ERRED IN REVERSIN) "CE R#'IN) O: "CE CO#R" I#O ''OBIN) "CE P' IN"I::( PPE''EE "CE !ENE:ICI ' #SE O: "CE EMIS"IN) RI)C" O: B < P'#S "CE S"IP#' "ED 87 SI# RE ME"ERS ND 77 SI# RE ME"ERS !EC #SE "CESE RE V 'ID S"IP#' "IONS )REED !< !O"C P R"IES "O "CE DEED O: !SO'#"E S 'E $EMC. ;C;%. III. "CERE IS NO : C"# ' PROO: OR EVIDENCE :OR "CE CO#R" O: PPE 'S "O R#'E "C " "CE S"IP#' "IONS O: "CE DEED O: !SO'#"E S 'E $EMC. ;C;% BERE DIS DV N" )EO#S "O "CE PPE''EE, NOR B S PPE''EE DEPRIVED O: I"S PROPER"< BI"CO#" D#E PROCESS. IV. IN : C", I" B S BOODCCI'D BCO B S DEPRIVED O: PROPER"< BI"CO#" D#E PROCESS !< "CE SS I'ED DECISION. V. "CE DE' < IN "CE CONS"R#C"ION B S D#E "O "CE : I'#RE O: "CE PPE'' N" "O EVIC" "CE SI# ""ERS ON "CE ' ND S )REED IN "CE DEED O: !SO'#"E S 'E $EMC. ;C;%. VI. "CE CO#R" O: PPE 'S )R VE'< ERRED IN REVERSIN) "CE R#'IN) O: "CE CO#R" I#O DIREC"IN) "CE DE:END N" "O P < "CE P' IN"I:: "CE MO#N" O: P7,7+.,,,,.,, REPRESEN"IN) C"# ' D M )ES ND P' IN"I::5S #NRE 'IVED INCOME S BE'' S ""ORNE<5S :EES. 8, "he threshold issues for resolution are the follo0in3F $a% 0hether the respondent is bound b4 the provisions in the deed of absolute sale 3rantin3 to the petitioner beneficial use and a ri3ht of 0a4 over a portion of 'ot No. -/2( (*(!(2 accessin3 to the Su1ulon3 Ci3h0a4 and 3rantin3 the option to the petitioner to bu4 a portion thereof, and, if so, 0hether such a3ree1ent is enforceable a3ainst the respondentA $b% 0hether the respondent failed to e>ect the s=uatters on its propert4 0ithin t0o 0ee6s fro1 the e?ecution of the deed of absolute saleA and, $c% 0hether the respondent is liable to the petitioner for da1a3es. On the first issue, the petitioner avers that, under its Resolution of Ma4 2@, 2//2, the respondent authoriDed Ro?as, then its president, to 3rant a ri3ht of 0a4 over a portion of 'ot No. -/2( (*(!(2 in favor of the petitioner, and an option for the respondent to bu4 a portion of the said propert4. "he petitioner contends that 0hen the respondent sold 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+, it $respondent% 0as 0ell a0are of its obli3ation to provide the petitioner 0ith a 1eans of in3ress to or e3ress fro1 the propert4 to the Su1ulon3 Ci3h0a4, since the latter had no ade=uate outlet to the public hi3h0a4. "he petitioner asserts that it a3reed to bu4 the propert4 covered b4 "C" No. @.,.7 because of the 3rant b4 the respondent of a ri3ht of 0a4 and an option in its favor to bu4 a portion of the propert4 covered b4 "C" No. @.,.7. It contends that the respondent never ob>ected to Ro?as5 acceptance of its offer to purchase the propert4 and the ter1s and conditions thereinA the respondent even allo0ed Ro?as to e?ecute the deed of absolute sale in its behalf. "he petitioner asserts that the respondent even received the purchase price of the propert4 0ithout an4 ob>ection to the ter1s and conditions of the said deed of sale. "he petitioner clai1s that it acted in 3ood faith, and contends that after havin3 been benefited b4 the said sale, the respondent is estopped fro1 assailin3 its ter1s and conditions. "he petitioner notes that the respondent5s !oard of Directors never approved an4 resolution re>ectin3 the deed of absolute sale e?ecuted b4 Ro?as for and in its behalf. s such, the respondent is obli3ed to sell a portion of 'ot No. -/2( (*(!(2 covered b4 "C" No. @.,.7 0ith an area of 7,, s=uare 1eters at the price of P2,,,, per s=uare 1eter, based on its evidence and rticles +-/ and +72 of the Ne0 Civil Code. :or its part, the respondent posits that Ro?as 0as not so authoriDed under the Ma4 2@, 2//2 Resolution of its !oard of Directors to i1pose a burden or to 3rant a ri3ht of 0a4 in favor of the petitioner on 'ot No. -/2( (*(!(2, 1uch less conve4 a portion thereof to the petitioner. Cence, the respondent 0as not bound b4 such provisions contained in the deed of absolute sale. !esides, the respondent contends, the petitioner cannot enforce its ri3ht to bu4 a portion of the said propert4 since there 0as no a3ree1ent in the deed of absolute sale on the price thereof as 0ell as the specific portion and area to be purchased b4 the petitioner. Be a3ree 0ith the respondent. In San )uan Structural and Steel Fa$ricators( Inc* v* Court of Appeals ,82 0e held thatF corporation is a >uridical person separate and distinct fro1 its stoc6holders or 1e1bers. ccordin3l4, the propert4 of the corporation is not the propert4 of its stoc6holders or 1e1bers and 1a4 not be sold b4 the stoc6holders or 1e1bers 0ithout e?press authoriDation fro1 the corporation5s board of directors. Section 8* of !P +., other0ise 6no0n as the Corporation Code of the Philippines, providesF ;SEC. 8*. 0!e 'oard of Directors or 0rustees. P #nless other0ise provided in this Code, the corporate po0ers of all corporations for1ed under this Code shall be e?ercised, all business conducted and all propert4 of such corporations controlled and held b4 the board of directors or trustees to be elected fro1 a1on3 the holders of stoc6s, or 0here there is no stoc6, fro1 a1on3

the 1e1bers of the corporation, 0ho shall hold office for one $2% 4ear and until their successors are elected and =ualified.; Indubitabl4, a corporation 1a4 act onl4 throu3h its board of directors or, 0hen authoriDed either b4 its b4(la0s or b4 its board resolution, throu3h its officers or a3ents in the nor1al course of business. "he 3eneral principles of a3enc4 3overn the relation bet0een the corporation and its officers or a3ents, sub>ect to the articles of incorporation, b4(la0s, or relevant provisions of la0. O 88 )enerall4, the acts of the corporate officers 0ithin the scope of their authorit4 are bindin3 on the corporation. Co0ever, under rticle 2/2, of the Ne0 Civil Code, acts done b4 such officers be4ond the scope of their authorit4 cannot bind the corporation unless it has ratified such acts e?pressl4 or tacitl4, or is estopped fro1 den4in3 the1F rt. 2/2,. "he principal 1ust co1pl4 0ith all the obli3ations 0hich the a3ent 1a4 have contracted 0ithin the scope of his authorit4. s for an4 obli3ation 0herein the a3ent has e?ceeded his po0er, the principal is not bound e?cept 0hen he ratifies it e?pressl4 or tacitl4. "hus, contracts entered into b4 corporate officers be4ond the scope of authorit4 are unenforceable a3ainst the corporation unless ratified b4 the corporation. 8* In 'A Finance Corporation v* Court of Appeals ,8- 0e also ruled that persons dealin3 0ith an assu1ed a3enc4, 0hether the assu1ed a3enc4 be a 3eneral or special one, are bound at their peril, if the4 0ould hold the principal liable, to ascertain not onl4 the fact of a3enc4 but also the nature and e?tent of authorit4, and in case either is controverted, the burden of proof is upon the1 to establish it. In this case, the respondent denied authoriDin3 its then president Roberto !. Ro?as to sell a portion of 'ot No. -/2( (*(!(2 covered b4 "C" No. @.,.7, and to create a lien or burden thereon. "he petitioner 0as thus burdened to prove that the respondent so authoriDed Ro?as to sell the sa1e and to create a lien thereon. Central to the issue at hand is the Ma4 2@, 2//2 Resolution of the !oard of Directors of the respondent, 0hich is 0orded as follo0sF RESO'VED, as it is hereb4 resolved, that the corporation, thru the President, sell to an4 interested bu4er, its @,82*(s=.(1eter propert4 at the Su1ulon3 Ci3h0a4, ntipolo, RiDal, covered b4 "ransfer Certificate of "itle No. N(@.,.+, at a price and on ter1s and conditions 0hich he dee1s 1ost reasonable and advanta3eous to the corporationA :#R"CER RESO'VED, that Mr. RO!ER"O !. ROM S, President of the corporation, be, as he is hereb4 authoriDed to e?ecute, si3n and deliver the pertinent sales docu1ents and receive the proceeds of sale for and on behalf of the co1pan4. 87 Evidentl4, Ro?as 0as not specificall4 authoriDed under the said resolution to 3rant a ri3ht of 0a4 in favor of the petitioner on a portion of 'ot No. -/2( (*(!(2 or to a3ree to sell to the petitioner a portion thereof. "he authorit4 of Ro?as, under the resolution, to sell 'ot No. -/2( (*(!(8 covered b4 "C" No. @.,.+ did not include the authorit4 to sell a portion of the ad>acent lot, 'ot No. -/2( (*(!(2, or to create or conve4 real ri3hts thereon. Neither 1a4 such authorit4 be i1plied fro1 the authorit4 3ranted to Ro?as to sell 'ot No. -/2( (*(!(8 to the petitioner ;on such ter1s and conditions 0hich he dee1s 1ost reasonable and advanta3eous.; #nder para3raph 28, rticle 2.@. of the Ne0 Civil Code, a special po0er of attorne4 is re=uired to conve4 real ri3hts over i11ovable propert4.8+ rticle 2*7. of the Ne0 Civil Code re=uires that contracts 0hich have for their ob>ect the creation of real ri3hts over i11ovable propert4 1ust appear in a public docu1ent. 8@ "he petitioner cannot fei3n i3norance of the need for Ro?as to have been specificall4 authoriDed in 0ritin3 b4 the !oard of Directors to be able to validl4 3rant a ri3ht of 0a4 and a3ree to sell a portion of 'ot No. -/2( (*(!(2. "he rule is that if the act of the a3ent is one 0hich re=uires authorit4 in 0ritin3, those dealin3 0ith hi1 are char3ed 0ith notice of that fact. 8. Po0ers of attorne4 are 3enerall4 construed strictl4 and courts 0ill not infer or presu1e broad po0ers fro1 deeds 0hich do not sufficientl4 include propert4 or sub>ect under 0hich the a3ent is to deal. 8/ "he 3eneral rule is that the po0er of attorne4 1ust be pursued 0ithin le3al strictures, and the a3ent can neither 3o be4ond itA nor beside it. "he act done 1ust be le3all4 identical 0ith that authoriDed to be done. *, In su1, then, the consent of the respondent to the assailed provisions in the deed of absolute sale 0as not obtainedA hence, the assailed provisions are not bindin3 on it. Be re>ect the petitioner5s sub1ission that, in allo0in3 Ro?as to e?ecute the contract to sell and the deed of absolute sale and failin3 to re>ect or disapprove the sa1e, the respondent thereb4 3ave hi1 apparent authorit4 to 3rant a ri3ht of 0a4 over 'ot No. -/2( (*(!(2 and to 3rant an option for the respondent to sell a portion thereof to the petitioner. bsent estoppel or ratification, apparent authorit4 cannot re1ed4 the lac6 of the 0ritten po0er re=uired under the state1ent of frauds. *2 In addition, the petitioner5s fallac4 is its 0ron3 assu1ption of the unproved pre1ise that the respondent had full 6no0led3e of all the ter1s and conditions contained in the deed of absolute sale 0hen Ro?as e?ecuted it. It bears stressin3 that apparent authorit4 is based on estoppel and can arise fro1 t0o instancesF first, the principal 1a4 6no0in3l4 per1it the a3ent to so hold hi1self out as havin3 such authorit4, and in this 0a4, the principal beco1es estopped to clai1 that the a3ent does not have such authorit4A second, the principal 1a4 so clothe the a3ent 0ith the indicia of authorit4 as to lead a reasonabl4 prudent person to believe that he actuall4 has such authorit4.*8 "here can be no apparent authorit4 of an a3ent 0ithout acts or conduct on the part of the principal and such acts or conduct of the principal 1ust have been 6no0n and relied upon in 3ood faith and as a result of the e?ercise of reasonable prudence b4 a third person as clai1ant and such 1ust have produced a chan3e of position to its detri1ent. "he apparent po0er of an a3ent is to be deter1ined b4 the acts of the principal and not b4 the acts of the a3ent. ** :or the principle of apparent authorit4 to appl4, the petitioner 0as burdened to prove the follo0in3F $a% the acts of the respondent >ustif4in3 belief in the a3enc4 b4 the petitionerA $b% 6no0led3e thereof b4 the respondent 0hich is sou3ht to be heldA and, $c% reliance thereon b4 the petitioner consistent 0ith ordinar4 care and prudence.*- In this case, there is no evidence on record of specific acts 1ade b4 the respondent *7 sho0in3 or indicatin3 that it had full 6no0led3e of an4 representations 1ade b4 Ro?as to the petitioner that the respondent had authoriDed hi1 to 3rant to the respondent an option to bu4 a portion of 'ot No. -/2( (*(!(2 covered b4 "C" No. @.,.7, or to create a burden or lien thereon, or that the respondent allo0ed hi1 to do so. "he petitioner5s contention that b4 receivin3 and retainin3 the P7,,,,,,,, purchase price of 'ot No. -/2( (*(!(8, the respondent effectivel4 and i1pliedl4 ratified the 3rant of a ri3ht of 0a4 on the ad>acent lot, 'ot No. -/2( (*( !(2, and to 3rant to the petitioner an option to sell a portion thereof, is barren of 1erit. It bears stressin3 that the respondent sold 'ot No. -/2( (*(!(8 to the petitioner, and the latter had ta6en possession of the propert4.

s such, the respondent had the ri3ht to retain the P7,,,,,,,,, the purchase price of the propert4 it had sold to the petitioner. :or an act of the principal to be considered as an i1plied ratification of an unauthoriDed act of an a3ent, such act 1ust be inconsistent 0ith an4 other h4pothesis than that he approved and intended to adopt 0hat had been done in his na1e.*+ Ratification is based on 0aiver P the intentional relin=uish1ent of a 6no0n ri3ht. Ratification cannot be inferred fro1 acts that a principal has a ri3ht to do independentl4 of the unauthoriDed act of the a3ent. Moreover, if a 0ritin3 is re=uired to 3rant an authorit4 to do a particular act, ratification of that act 1ust also be in 0ritin3. *@ Since the respondent had not ratified the unauthoriDed acts of Ro?as, the sa1e are unenforceable.*. Cence, b4 the respondent5s retention of the a1ount, it cannot thereb4 be i1plied that it had ratified the unauthoriDed acts of its a3ent, Roberto Ro?as. On the last issue, the petitioner contends that the C erred in dis1issin3 its co1plaint for da1a3es a3ainst the respondent on its findin3 that the dela4 in the construction of its 0arehouse 0as due to its $petitioner5s% fault. "he petitioner asserts that the C should have affir1ed the rulin3 of the trial court that the respondent failed to cause the eviction of the s=uatters fro1 the propert4 on or before Septe1ber 8/, 2//2A hence, 0as liable for P7,++,,,,,. "he respondent, for its part, asserts that the dela4 in the construction of the petitioner5s 0arehouse 0as due to its late filin3 of an application for a buildin3 per1it, onl4 on Ma4 8., 2//8. "he petitioner5s contention is 1eritorious. "he respondent does not den4 that it failed to cause the eviction of the s=uatters on or before Septe1ber 8/, 2//2. Indeed, the respondent does not den4 the fact that 0hen the petitioner 0rote the respondent de1andin3 that the latter cause the eviction of the s=uatters on pril 27, 2//8, the latter 0ere still in the pre1ises. It 0as onl4 after receivin3 the said letter in pril 2//8 that the respondent caused the eviction of the s=uatters, 0hich thus cleared the 0a4 for the petitioner5s contractor to co11ence the construction of its 0arehouse and secure the appropriate buildin3 per1it therefor. "he petitioner could not be e?pected to file its application for a buildin3 per1it before pril 2//8 because the s=uatters 0ere still occup4in3 the propert4. !ecause of the respondent5s failure to cause their eviction as a3reed upon, the petitioner5s contractor failed to co11ence the construction of the 0arehouse in October 2//2 for the a3reed price of P.,+-/,,,,. In the 1eanti1e, costs of construction 1aterials spiraled. #nder the construction contract entered into bet0een the petitioner and the contractor, the petitioner 0as obli3ed to pa4 P22,.,-,2+,,*/ includin3 the additional 0or6 costin3 P2,--2,7,,, or a net increase of P2,@28,/.,. -, "he respondent is liable for the difference bet0een the ori3inal cost of construction and the increase thereon, confor1abl4 to rticle 22@, of the Ne0 Civil Code, 0hich readsF rt. 22@,. "hose 0ho in the perfor1ance of their obli3ations are 3uilt4 of fraud, ne3li3ence, or dela4 and those 0ho in an4 1anner contravene the tenor thereof, are liable for da1a3es. "he petitioner, li6e0ise, lost the a1ount of P*,/,,,,,, b4 0a4 of unearned inco1e fro1 the lease of the propert4 to the Ponderosa 'eather )oods Co1pan4. "he respondent is, thus, liable to the petitioner for the said a1ount, under rticles 88,, and 88,2 of the Ne0 Civil CodeF rt. 88,,. Inde1nification for da1a3es shall co1prehend not onl4 the value of the loss suffered, but also that of the profits 0hich the obli3ee failed to obtain. rt. 88,2. In contracts and =uasi(contracts, the da1a3es for 0hich the obli3or 0ho acted in 3ood faith is liable shall be those that are the natural and probable conse=uences of the breach of the obli3ation, and 0hich the parties have foreseen or could have reasonabl4 foreseen at the ti1e the obli3ation 0as constituted. In case of fraud, bad faith, 1alice or 0anton attitude, the obli3or shall be responsible for all da1a3es 0hich 1a4 be reasonabl4 attributed to the non(perfor1ance of the obli3ation. In su1, 0e affir1 the trial court5s a0ard of da1a3es and attorne45s fees to the petitioner. IN LIG0T O ALL T0E OREGOING, >ud31ent is hereb4 rendered A IRMING the assailed Decision of the Court of ppeals 8IT0 MO"I ICATION. "he respondent is ordered to pa4 to the petitioner the a1ount of P7,+28,/., b4 0a4 of actual da1a3es and P2,,,,,, b4 0a4 of attorne45s fees. No costs. SO OR"ERE". Puno( )*( C!airman( Austria-Martine&( 0in"a( and C!ico-1a&ario( ))*( concur. oo(no(%' Penned b4 ssociate Eustice Salo1e . Monto4a, 0ith ssociate Eustices Conrado M. Vas=ueD, Er. and "eodoro P. Re3ino, concurrin3. 8 Penned b4 Eud3e :rancisco M. VeleD. * E?hibit ;',; Records, p. 82*. E?hibit ;M,; Id. at 82-. 7 Ibid. + E?hibit ;N,; Id. at 82+. @ E?hibit ;C,; Id. at 2/8(2/7. . Id. at 2/*(2/-. / E?hibit ;D,; Id. at 2/+. 2, E?hibit ;D(2,; Id. at 2/@. 22 E?hibit ;),; Id. at 8,2. 28 E?hibit ;E,; Id. at 2/.. 2* E?hibit ;:,; Id. at 2//. 2E?hibit ;C,; Id. at 8,8(8,+. 27 Records, pp. 8(-. 2+ Id. at -(7. 2@ Id. at 8-(87. 2. Id. at 8-@. 2/ Id. at -.8. 8, Rollo, pp. 88(8*. 82 8/+ SCR +*2 $2//.%. 88 Id. at +--(+-7. 8* rt. 2-,*. "he follo0in3 contracts are unenforceable, unless the4 are ratifiedF
2

$2% "hose entered into in the na1e of another person b4 one 0ho has been 3iven no authorit4 or le3al representation, or 0ho has acted be4ond his po0ers. 8822 SCR 228 $2//8%. 87 Records, p. 82*. 8+ rt. 2.@.. Special po0ers of attorne4 are necessar4 in the follo0in3 casesF O $7% "o enter into an4 contract b4 0hich the o0nership of an i11ovable is trans1itted or ac=uired either 3ratuitousl4 or for a valuable considerationA O $28% "o create or conve4 real ri3hts over i11ovable propert4A O $2-% "o ratif4 or reco3niDe obli3ations contracted before the a3enc4A $27% n4 other act of strict do1inion. 8@ rt. 2*7.. "he follo0in3 1ust appear in a public docu1entF $2% cts and contracts 0hich have for their ob>ect the creation, trans1ission, 1odification or e?tin3uish1ent of real ri3hts over i11ovable propert4A sales of real propert4 or of an interest

therein are 3overned b4 articles 2-,*, No. 8, and 2-,7A O $*% "he po0er to ad1inister propert4, or an4 other po0er 0hich has for its ob>ect an act appearin3 or 0hich should appear in a public docu1ent, or should pre>udice a third personA $-% "he cession of actions or ri3hts proceedin3 fro1 an act appearin3 in a public docu1ent. 8. State v. Sellers and Resolute Insurance Co1pan4, 87. N.B.8d 8/8 $2/@@%. 8/ Prior v. Ca3er, --, S.B.8d 2+@ $2/+/%. *, 'an3 v. !air, *+ Mo. .7, id. *2 #nion Ca1p Corporation v. D4al, Er., -+, :.8d +@. $2/@8%.

*8

!an6er5s Protective 'ife Insurance Co. v. ddison, 8@* S.B.8d +/- $2/72%. ** Id. at +/+. *Residon v. Miller Distributors Co., Inc., 2*/ N.B.8d 28 $2/++%. *7 See Bells :ar3o !usiness v. &oDoff, +/7 :.8d /-, $2/.*%. *+ "he !oard of Supervisors v. Schac6, 2. '.E.8d 77+ $2./@%A 1erican :ood Corporation v. Central Carolina !an6 W "rust Co1pan4, 8/2 S.B.8d ./8. *@ Reuschlin and )re3or4, "he 'a0 of 3enc4 and Partnership, 8nd ed., p. @7. *. rticle 2-,*, Ne0 Civil Code $infra%. */ E?hibit ;:,; Records, p. 2//. -, "SN, *, Septe1ber 2//*, p. 2*.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 1541+3 A363'( *, 2003 SPOUSES #ICK! TAN TO0 and LUIS TO0, petitioners, vs. SOLI" BANK CORPORATION, IRST BUSINESS PAPER CORPORATION, KENNET0 NG LI and MA. #ICTORIA NG LI, respondents. BELLOSILLO, J.= RESPONDEN" SO'ID ! N& CORPOR "ION )REED "O EM"END an ;o1nibus line; credit facilit4 0orth P2, 1illion in favor of respondent :irst !usiness Paper Corporation $:!PC%. "he ter1s and conditions of the a3ree1ent as 0ell as the chec6list of docu1ents necessar4 to open the credit line 0ere stipulated in a ;letter(advise; of the !an6 dated 2+ Ma4 2//* addressed to :!PC and to its President, respondent &enneth N3 'i. 2 "he ;letter(advise;8 0as effective upon ;co1pliance 0ith the docu1entar4 re=uire1ents.; * "he docu1ents essential for the credit facilit4 and sub1itted for this purpose 0ere the $a% !oard Resolution or e?cerpts of the !oard of Directors Meetin3, dul4 ratified b4 a Notar4 Public, authoriDin3 the loan and securit4 arran3e1ent as 0ell as desi3natin3 the officers to ne3otiate and si3n for :!PC specificall4 statin3 authorit4 to 1ort3a3e, pled3e andHor assi3n the properties of the corporationA $b% a3ree1ent to purchase Do1estic !illsA and, $c% Continuin3 )uarant4 for an4 and all a1ounts si3ned b4 petitioner(spouses 'uis "oh and Vic64 "an "oh, and respondent(spouses &enneth and Ma. Victoria N3 'i. - "he spouses 'uis "oh and Vic64 "an "oh 0ere then Chair1an of the !oard and Vice(President, respectivel4, of :!PC, 0hile respondent(spouses &enneth N3 'i and Ma. Victoria N3 'i 0ere President and )eneral Mana3er, respectivel4, of the sa1e corporation. 7 It is not disputed that the credit facilit4 as 0ell as its ter1s and conditions 0as not cancelled or ter1inated, and that there 0as no prior notice of such fact as re=uired in the ;letter(advise,; if an4 0as done. On 2, Ma4 2//*, 1ore than thirt4 $*,% da4s fro1 date of the ;letter(advise,; petitioner(spouses 'uis "oh and Vic64 "an "oh and respondent(spouses &enneth N3 'i and Ma. Victoria N3 'i si3ned the re=uired Continuin3 )uarant4, 0hich 0as e1bodied in a public docu1ent prepared solel4 b4 respondent !an6. + "he ter1s of the instru1ent defined the contract arisin3 therefro1 as a suret4 a3ree1ent and provided for the solidar4 liabilit4 of the si3natories thereto for and in consideration of ;loans or advances; and ;credit in an4 other 1anner to, or at the re=uest or for the account; of :!PC. "he Continuin3 )uarant4 set forth no 1a?i1u1 li1it on the indebtedness that respondent :!PC 1a4 incur and for 0hich the sureties 1a4 be liable, statin3 that the credit facilit4 ;covers an4 and all e?istin3 indebtedness of, and such other loans and credit facilities 0hich 1a4 hereafter be 3ranted to :IRS" !#SINESS P PER CORPOR "ION.; "he suret4 also contained a de facto acceleration clause if ;default be 1ade in the pa41ent of an4 of the instru1ents, indebtedness, or other obli3ation; 3uaranteed b4 petitioners and respondents. So as to stren3then this securit4, the Continuin3 )uarant4 0aived ri3hts of the sureties a3ainst dela4 or absence of notice or de1and on the part of respondent !an6, and 3ave future consent to the !an65s action to ;e?tend or chan3e the ti1e pa41ent, andHor the 1anner, place or ter1s of pa41ent,; includin3 rene0al, of the credit facilit4 or an4 part thereof in such 1anner and upon such ter1s as the !an6 1a4 dee1 proper 0ithout notice to or further assent fro1 the sureties. "he effectivit4 of the Continuin3 )uarant4 0as not contin3ent upon an4 event or cause other than the 0ritten revocation thereof 0ith notice to the !an6 that 1a4 be e?ecuted b4 the sureties. On 2+ Eune 2//* respondent :!PC started to avail of the credit facilit4 and procure letters of credit. @ On 2@ Nove1ber 2//* :!PC opened thirteen $2*% letters of credit and obtained loans totalin3 P27,88@,72,.,,. . s the letters of credit 0ere secured, :!PC throu3h its officers &enneth N3 'i, Ma. Victoria N3 'i and Redentor Padilla as si3natories e?ecuted a series of trust receipts over the 3oods alle3edl4 purchased fro1 the proceeds of the loans./ On 2* Eanuar4 2//- respondent !an6 received infor1ation that respondent(spouses &enneth N3 'i and Ma. Victoria N3 'i had fraudulentl4 departed fro1 their con>u3al ho1e. 2, On 2- Eanuar4 2//- the !an6 served a de1and letter upon :!PC and petitioner 'uis "oh invo6in3 the acceleration clause 22 in the trust receipts of :!PC and clai1ed pa41ent for P2,,7*/,@7..+. as unpaid overdue accounts on the letters of credit plus interests and penalties 0ithin t0ent4(four $8-% hours fro1 receipt thereof. 28 "he !an6 also invo6ed the Continuin3 )uarant4 e?ecuted b4 petitioner(spouses 'uis "oh and Vic64 "an "oh 0ho 0ere the onl4 parties 6no0n to be 0ithin national >urisdiction to ans0er as sureties for the credit facilit4 of :!PC. 2* On 2@ Eanuar4 2//- respondent !an6 filed a co1plaint for su1 of 1one4 0ith e? parte application for a 0rit of preli1inar4 attach1ent a3ainst :!PC, spouses &enneth N3 'i and Ma. Victoria N3 'i, and spouses 'uis "oh and Vic64 "an "oh, doc6eted as Civil Case No. +-,-@ of R"C(!r. 2+2, Pasi3 Cit4. 2- lias su11onses 0ere served upon :!PC and spouses 'uis "oh and Vic64 "an "oh but not upon &enneth N3 'i and Ma. Victoria N3 'i 0ho had apparentl4 absconded.27

Mean0hile, 0ith the i1ple1entation of the 0rit of preli1inar4 attach1ent resultin3 in the i1poundin3 of purported properties of :!PC, the trial court 0as delu3ed 0ith third(part4 clai1s contestin3 the propriet4 of the attach1ent.2+ In the end, the !an6 relin=uished possession of all the attached properties to the third(part4 clai1ants e?cept for t0o $8% insi3nificant ite1s as it alle3edl4 could barel4 cope 0ith the 4earl4 pre1iu1s on the attach1ent bonds.2@ Petitioner(spouses 'uis "oh and Vic64 "an "oh filed a >oint ans0er to the co1plaint 0here the4 ad1itted bein3 part of :!PC fro1 its incorporation on 8/ u3ust 2//2, 0hich 0as then 6no0n as ;MN' Paper, Inc.,; until its corporate na1e 0as chan3ed to ;:irst !usiness Paper Corporation.; 2. "he4 also ac6no0led3ed that on + March 2//8 'uis "oh 0as desi3nated as one of the authoriDed corporate si3natories for transactions in relation to :!PC5s chec6in3 account 0ith respondent !an6. 2/ Mean0hile, for failin3 to file an ans0er, respondent :!PC 0as declared in default.8, Petitioner(spouses ho0ever could not be certain 0hether to den4 or ad1it the due e?ecution and authenticit4 of the Continuin3 )uarant4.82 "he4 could onl4 alle3e that the4 0ere 1ade to si3n papers in blan6 and the Continuin3 )uarant4 could have been one of the1. Still, as petitioners asserted, it 0as i1possible and absurd for the1 to have freel4 and consciousl4 e?ecuted the suret4 on 2, Ma4 2//*, the date appearin3 on its face 88 since be3innin3 March of that 4ear the4 had alread4 divested their shares in :!PC and assi3ned the1 in favor of respondent &enneth N3 'i althou3h the deeds of assi3n1ent 0ere notariDed onl4 on 2- Eune 2//*.8* Petitioners also contended that throu3h :!PC !oard Resolution dated 28 Ma4 2//* petitioner 'uis "oh 0as re1oved as an authoriDed si3nator4 for :!PC and replaced b4 respondent(spouses &enneth N3 'i and Ma. Victoria N3 'i and Redentor Padilla for all the transactions of :!PC 0ith respondent !an6.8- "he4 even resi3ned fro1 their respective positions in :!PC as reflected in the 28 Eune 2//* Secretar45s Certificate sub1itted to the Securities and E?chan3e Co11ission 87 as petitioner 'uis "oh 0as succeeded as Chair1an b4 respondent Ma. Victoria N3 'i, 0hile one M4lene C. Padilla too6 the place of petitioner Vic64 "an "oh as Vice(President.8+ :inall4, petitioners averred that so1eti1e in Eune 2//* the4 obtained fro1 respondent &enneth N3 'i their e?clusion fro1 the several suret4 a3ree1ents the4 had entered into 0ith different ban6s, i.e., Con36on3 and Shan3hai !an6, China !an6in3 Corporation, :ar East !an6 and "rust Co1pan4, and herein respondent !an6. 8@ s a 1atter of record, these other ban6s e?ecuted 0ritten suret4 a3ree1ents that sho0ed respondent &enneth N3 'i as the onl4 suret4 of :!PC5s indebtedness.8. On 2+ Ma4 2//+ the trial court pro1ul3ated its Decision in Civil Case No. +-,-@ findin3 respondent :!PC liable to pa4 respondent Solid !an6 Corporation the principal of P2,,7*/,@7..+. plus t0elve percent $28J% interest per annum fro1 finalit4 of the Decision until full4 paid, but absolvin3 petitioner(spouses 'uis "oh and Vic64 "an "oh of an4 liabilit4 to respondent !an6. 8/ "he court a =uo found that petitioners ;voluntaril4 affi?ed their si3natureKsL; on the Continuin3 )uarant4 and 0ere thus ;at so1e 3iven point in ti1e 0illin3 to be liable under those for1s,;*, althou3h it held that petitioners 0ere not bound b4 the suret4 contract since the letters of credit it 0as supposed to secure 0ere opened lon3 after petitioners had ceased to be part of :!PC. *2 "he trial court described the Continuin3 )uarant4 as effective onl4 0hile petitioner(spouses 0ere stoc6holders and officers of :!PC since respondent !an6 co1pelled petitioners to under0rite :!PC5s indebtedness as sureties 0ithout the re=uisite investi3ation of their personal solvenc4 and capabilit4 to underta6e such ris6. *8 "he lo0er court also believed that the !an6 6ne0 of petitioners5 divest1ent of their shares in :!PC and their subse=uent resi3nation as officers thereof as these facts 0ere obvious fro1 the nu1erous public docu1ents that detailed the chan3es and substitutions in the list of authoriDed si3natories for transactions bet0een :!PC and the !an6, includin3 the 1an4 trust receipts bein3 si3ned b4 persons other than petitioners, ** as 0ell as the desi3nation of ne0 :!PC officers 0hich ca1e to the notice of the !an65s Vice(President Eose Chan Er. and other officers. *On 8+ Septe1ber 2//+ the R"C(!r. 2+2 of Pasi3 Cit4 denied reconsideration of its Decision. *7 On / October 2//+ respondent !an6 appealed the Decision to the Court of ppeals, doc6eted as C ().R. CV No. 77/7@.*+ Petitioner(spouses did not 1ove for reconsideration nor appeal the findin3 of the trial court that the4 voluntaril4 e?ecuted the Continuin3 )uarant4. "he appellate court 1odified the Decision of the trial court and held that b4 si3nin3 the Continuin3 )uarant4, petitioner(spouses beca1e solidaril4 liable 0ith :!PC to pa4 respondent !an6 the a1ount of P2,,7*/,@7..+. as principal 0ith t0elve percent $28J% interest per annum fro1 finalit4 of the >ud31ent until co1pletel4 paid. *@ "he Court of ppeals ratiocinated that the provisions of the suret4 a3ree1ent did not ;indicate that Spouses 'uis and Vic64 "oh ? ? ? si3ned the instru1ent in their capacities as Chair1an of the !oard and Vice(President, respectivel4, of :!PC onl4.;*. Cence, the court a =uo deduced, ;KaLbsent an4 such indication, it 0as error for the trial court to have presu1ed that the appellees indeed si3ned the sa1e not in their personal capacities.; */ "he appellate court also ruled that as petitioners failed to e?ecute an4 0ritten revocation of the Continuin3 )uarant4 0ith notice to respondent !an6, the instru1ent re1ained in full force and effect 0hen the letters of credit 0ere availed of b4 respondent :!PC.-, :inall4, the Court of ppeals re>ected petitioners5 ar3u1ent that there 0ere ;1aterial alterations; in the provisions of the ;letter(advise,; i.e., that onl4 do1estic letters of credit 0ere opened 0hen the credit facilit4 0as for i1portation of papers and other 1aterials, and that 1ar3inal deposits 0ere not paid, contrar4 to the re=uire1ents stated in the ;letter(advise.; -2 "he si1ple response of the appellate court to this challen3e 0as, first, the ;letter(advise; itself authoriDed the issuance of do1estic letters of credit, and second, the several 0aivers e?tended b4 petitioners in the Continuin3 )uarant4, 0hich included chan3in3 the ti1e and 1anner of pa41ent of the indebtedness, >ustified the action of respondent !an6 not to char3e 1ar3inal deposits. -8 Petitioner(spouses 1oved for reconsideration of the Decision, and after respondent !an65s co11ent, filed a len3th4 #eply 0ith Motion for %ral Ar"ument.-* On 8 Eul4 8,,8 reconsideration of the Decision 0as denied on the 3round that no ne0 1atter 0as raised to 0arrant the reversal or 1odification thereof. -- Cence, this Petition for Revie0. Petitioner(spouses 'uis "oh and Vic64 "an "oh ar3ue that the Court of ppeals denied the1 due process 0hen it did not 3rant their 1otion for reconsideration and 0ithout ;botherKin3L to consider KtheirL #eply 0ith Motion for %ral Ar"ument.; "he4 1aintain that the Continuin3 )uarant4 is not le3all4 valid and bindin3 a3ainst the1 for havin3 been e?ecuted lon3 after the4 had 0ithdra0n fro1 :!PC. 'astl4, the4 clai1 that the suret4 a3ree1ent has been e?tin3uished b4 the 1aterial alterations thereof and of the ;letter(advise; 0hich 0ere alle3edl4 brou3ht about b4 $a% the provision of an acceleration clause in the trust receiptsA $b% the fli3ht of their co( sureties, respondent(spouses &enneth N3 'i and Ma. Victoria N3 'iA $c% the 3rant of credit facilit4 despite the non(pa41ent of 1ar3inal deposits in an a1ount be4ond the credit li1it of P2, 1illion pesosA $d% the inordinate

dela4 of the !an6 in de1andin3 the pa41ent of the indebtednessA $e% the presence of 3host deliveries and fictitious purchases usin3 the !an65s letters of credit and trust receiptsA $f% the e?tension of the due dates of the letters of credit 0ithout the re=uired 87J partial pa41ent per e?tensionA $3% the approval of another letter of credit, 'HC /*(,,-8, even after respondent(spouses &enneth N3 'i and Ma. Victoria N3 'i had defaulted on their previous obli3ationsA and, $h% the un1ista6able pattern of fraud. Respondent Solid !an6 1aintains on the other hand that the appellate court is presu1ed to have passed upon all points raised b4 petitioners5 #eply 0ith Motion for %ral Ar"ument as this pleadin3 for1ed part of the records of the appellate court. It also debun6s the clai1 of petitioners that the4 0ere ine?perienced and i3norant parties 0ho 0ere ta6en advanta3e of in the Continuin3 )uarant4 since petitioners are astute business1en 0ho are ver4 fa1iliar 0ith the ;ins; and ;outs; of ban6in3 practice. "he !an6 further ar3ues that the notariDation of the Continuin3 )uarant4 discredits the uncorroborated assertions a3ainst the authenticit4 and due e?ecution thereof, and that the Decision of the trial court in the civil case findin3 the suret4 a3ree1ent to be valid and bindin3 is no0 res >udicata for failure of petitioners to appeal therefro1. s a final point, the !an6 refers to the various 0aivers 1ade b4 petitioner(spouses in the Continuin3 )uarant4 to >ustif4 the e?tension of the due dates of the letters of credit. "o be3in 0ith, 0e find no 1erit in petitioners5 clai1 that the Court of ppeals deprived the1 of their ri3ht to due process 0hen the court a =uo did not address specificall4 and e?plicitl4 their #eply 0ith Motion for %ral Ar"ument. Bhile the #esolution of the appellate court of 8 Eul4 8,,8 1ade no 1ention thereof in disposin3 of their ar3u1ents on reconsideration, it is presu1ed that ;all 1atters 0ithin an issue raised in a case 0ere laid before the court and passed upon it.; -7 In the absence of evidence to the contrar4, 0e 1ust rule that the court a uo dischar3ed its tas6 properl4. Moreover, a readin3 of the assailed #esolution clearl4 1a6es reference to a ;careful revie0 of the records,; 0hich undeniabl4 includes the #eply 0ith Motion for %ral Ar"ument, hence there is no reason for petitioners to asseverate other0ise. "his Court holds that the Continuin3 )uarant4 is a valid and bindin3 contract of petitioner(spouses as it is a public docu1ent that en>o4s the presu1ption of authenticit4 and due e?ecution. lthou3h petitioners as appellees 1a4 raise issues that have not been assi3ned as errors b4 respondent !an6 as part4(appellant, i.e., unenforceabilit4 of the suret4 contract, 0e are bound b4 the consistent findin3 of the courts a =uo that petitioner(spouses 'uis "oh and Vic64 "an "oh ;voluntaril4 affi?ed their si3natureKsL; on the suret4 a3ree1ent and 0ere thus ;at so1e 3iven point in ti1e 0illin3 to be liable under those for1s.; -+ In the absence of clear, convincin3 and 1ore than preponderant evidence to the contrar4, our rulin3 cannot be other0ise. Si1ilarl4, there is no basis for petitioners to li1it their responsibilit4 thereon so lon3 as the4 0ere corporate officers and stoc6holders of :!PC. Nothin3 in the Continuin3 )uarant4 restricts their contractual underta6in3 to such condition or eventualit4. In fact the obli3ations assu1ed b4 the1 therein subsist ;upon the undersi3ned, the heirs, e?ecutors, ad1inistrators, successors and assi3ns of the undersi3ned, and shall inure to the benefit of, and be enforceable b4 4ou, 4our successors, transferees and assi3ns,; and that their co11it1ent ;shall re1ain in full force and effect until 0ritten notice shall have been received b4 Kthe !an6L that it has been revo6ed b4 the undersi3ned.; Veril4, if petitioners intended not to be char3ed as sureties after their 0ithdra0al fro1 :!PC, the4 could have si1pl4 ter1inated the a3ree1ent b4 servin3 the re=uired notice of revocation upon the !an6 as e?pressl4 allo0ed therein.-@ In 4arcia v* Court of AppealsK-.L 0e ruled P Re3ardin3 the petitioner5s clai1 that he is liable onl4 as a corporate officer of BMC, the suret4 a3ree1ent sho0s that he si3ned the sa1e not in representation of BMC or as its president but in his personal capacit4. Ce is therefore personall4 bound. "here is no la0 that prohibits a corporate officer fro1 bindin3 hi1self personall4 to ans0er for a corporate debt. Bhile the li1ited liabilit4 doctrine is intended to protect the stoc6holder b4 i11uniDin3 hi1 fro1 personal liabilit4 for the corporate debts, he 1a4 nevertheless divest hi1self of this protection b4 voluntaril4 bindin3 hi1self to the pa41ent of the corporate debts. "he petitioner cannot therefore ta6e refu3e in this doctrine that he has b4 his o0n acts effectivel4 0aived. !ut as 0e bind the spouses 'uis "oh and Vic64 "an "oh to the suret4 a3ree1ent the4 si3ned so 1ust 0e also hold respondent !an6 to its representations in the ;letter(advise; of 2+ Ma4 2//*. Particularl4, as to the e?tension of the due dates of the letters of credit, 0e cannot e?clude fro1 the Continuin3 )uarant4 the preconditions of the !an6 that 0ere plainl4 stipulated in the ;letter(advise.; :airness and >ustice dictate our doin3 so, for the !an6 itself liberall4 applies the provisions of co3nate a3ree1ents 0henever convenient to enforce its contractual ri3hts, such as, 0hen it harnessed a provision in the trust receipts e?ecuted b4 respondent :!PC to declare its entire indebtedness as due and de1andable and thereafter to e?act pa41ent thereof fro1 petitioners as sureties.-/ In the sa1e 1anner, 0e cannot disre3ard the provisions of the ;letter( advise; in siDin3 up the panopl4 of co11ercial obli3ations bet0een the parties herein. Insofar as petitioners stipulate in the Continuin3 )uarant4 that respondent !an6 ;1a4 at an4 ti1e, or fro1 ti1e to ti1e, in KitsL discretion ? ? ? e?tend or chan3e the ti1e pa41ent,; this provision even if understood as a 0aiver is confined per se to the 3rant of an e?tension and does not surrender the prere=uisites therefor as 1andated in the ;letter(advise.; In other 0ords, the authorit4 of the !an6 to defer collection conte1plates onl4 aut!ori&ed e?tensions, that is, those that 1eet the ter1s of the ;letter(advise.; Certainl4, 0hile the !an6 1a4 e?tend the due date at its discretion pursuant to the Continuin3 )uarant4, it should nonetheless co1pl4 0ith the re=uire1ents that do1estic letters of credit be supported b4 fifteen percent $27J% 1ar3inal deposit e?tendible three $*% ti1es for a period of thirt4 $*,% da4s for each e?tension, sub>ect to t0ent4(five percent $87J% partial pa41ent per e?tension. "his readin3 of the Continuin3 )uarant4 is consistent 0ith P!ilippine 1ational 'an- v* Court of Appeals 7, that an4 doubt on the ter1s and conditions of the suret4 a3ree1ent should be resolved in favor of the suret4. :urther1ore, the assurance of the sureties in the Continuin3 )uarant4 that ;KnLo act or o1ission of an4 6ind on Kthe !an65sL part in the pre1ises shall in an4 event affect or i1pair this 3uarant4; 72 1ust also be read ;strictissimi juris; for the reason that petitioners are onl4 acco11odation sureties, i.e., the4 received nothin3 out of the securit4 contract the4 si3ned. 78 "hus said, the acts or o1issions of the !an6 conceded b4 petitioners as not affectin3 nor i1pairin3 the suret4 contract refer onl4 to those occurrin3 ;in the pre1ises,; or those that have been the sub>ect of the 0aiver in the Continuin3 )uarant4, and stretch to no other. Stated other0ise, an e?tension of the period for enforcin3 the indebtedness does not b4 itself brin3 about the dischar3e of the sureties unless the e?tra ti1e is not permitted 0ithin the ter1s of the 0aiver, i.e., 0here there is no pa41ent or there is deficient settle1ent of the 1ar3inal deposit and the t0ent4(five percent $87J% consideration, in 0hich case the illicit e?tension releases the sureties. #nder rt. 8,77 of the Civil Code, the liabilit4 of a suret4 is

1easured b4 the ter1s of his contract, and 0hile he is liable to the full e?tent thereof, his accountabilit4 is strictl4 li1ited to that assu1ed b4 its ter1s. It is ad1itted in the Complaint of respondent !an6 before the trial court that several letters of credit 0ere irrevocabl4 e?tended for ninet4 $/,% da4s 0ith alar1in3l4 fla0ed and inade=uate consideration ( the indispensable 1ar3inal deposit of fifteen percent $27J% and the t0ent4(five percent $87J% prere=uisite for each e?tension of thirt4 $*,% da4s. It bears stressin3 that the re=uisite 1ar3inal deposit and securit4 for ever4 thirt4 $*,% ( da4 e?tension specified in the ;letter(advise; 0ere not set aside or abro3ated nor 0as there an4 prior notice of such fact, if an4 0as done. Moreover, these irre3ular e?tensions 0ere candidl4 ad1itted b4 Victor Ruben '. "uaDon, an account officer and 1ana3er of respondent !an6 and its lone 0itness in the civil case P IF <ou e?tended it even if there 0as no 1ar3inal depositY F <es. IF nd even if partial pa41ent is less than 87JY F <es ? ? ? ? IF <ou have repeatedl4 e?tended despite the insufficienc4 partial pa41ent re=uire1entY F I 0ould sa4 4es.7* "he fore3oin3 e?tensions of the letters of credit 1ade b4 respondent !an6 0ithout observin3 the ri3id restrictions for e?ercisin3 the privile3e are not covered b4 the 0aiver stipulated in the Continuin3 )uarant4. Evidentl4, the4 constitute illicit e?tensions prohibited under rt. 8,@/ of the Civil Code, ;KaLn e?tension 3ranted to the debtor b4 the creditor 0ithout the consent of the 3uarantor e?tin3uishes the 3uarant4.; "his act of the !an6 is not 1ere failure or dela4 on its part to de1and pa41ent after the debt has beco1e due, as 0as the case in unpaid five $7% letters of credit 0hich the !an6 did not e?tend, defer or put off, 7- but co1prises conscious, separate and bindin3 a3ree1ents to e?tend the due date, as 0as ad1itted b4 the !an6 itself P IF Co0 1uch 0as supposed to be paid on 2- Septe1ber 2//*, the ori3inal 'C of P2,+77,+@7.2*Y F #nder 'C /*(,,2@ first 1atured on 2- Septe1ber 2//*. Be rolled it over, e?tended it to Dece1ber 2*, 2//* but the4 1ade partial pa41ent that is 0h4 0e e?tended it. IF "he =uestion to 4ou no0 is ho0 1uch 0as paidY Co0 1uch is supposed to be paid on Septe1ber 2-, 2//* on the basis of the ori3inal a1ount of P2,+77,+@7.2*Y F Bhenever this obli3ation beco1es due and de1andable e?cept 0hen 4ou roll it over so there is novation there on the ori3inal obli3ations77 $underscorin" supplied%. s a result of these illicit e?tensions, petitioner(spouses 'uis "oh and Vic64 "an "oh are relieved of their obli3ations as sureties of respondent :!PC under rt. 8,@/ of the Civil Code. :urther, 0e note several suspicious circu1stances that 1ilitate a3ainst the enforce1ent of the Continuin3 )uarant4 a3ainst the acco11odation sureties. :irstl4, the 3uarant4 0as e?ecuted 1ore than thirt4 $*,% da4s fro1 the ori3inal acceptance period as re=uired in the ;letter(advise.; "hereafter, barel4 t0o $8% da4s after the Continuin3 )uarant4 0as si3ned, corporate a3ents of :!PC 0ere replaced on 28 Ma4 2//* and other ad>ust1ents in the corporate structure of :!PC ensued in the 1onth of Eune 2//*, 0hich the !an6 did not investi3ate althou3h such 0ere 1ade 6no0n to it. !4 the sa1e to6en, there is no e?planation on record for the utter 0orthlessness of the trust receipts in favor of the !an6 0hen these docu1ents ou3ht to have added 1ore securit4 to the indebtedness of :!PC. "he !an6 has in fact no infor1ation 0hether the trust receipts 0ere indeed used for the purpose for 0hich the4 0ere obtained.7+ "o be sure, the 3oods sub>ect of the trust receipts 0ere not entirel4 lost since the securit4 officer of respondent !an6 0ho conducted surveillance of :!PC even had the chance to intercept the surreptitious transfer of the ite1s under trustF ;Be sa0 t0o $8% deliver4 vans 0ith Plates Nos. ")C 87@ and P V /8. co1in3 out of the co1pound ? ? ? K0hich 0ereL ta6in3 out the last supplies stored in the co1pound.; 7@ In addition, the attached properties of :!PC, e?cept for t0o $8% of the1, 0ere perfunctoril4 abandoned b4 respondent !an6 althou3h the bonds therefor 0ere considerabl4 reduced b4 the trial court.7. "he conse=uence of these o1issions is to dischar3e the suret4, petitioners herein, under rt. 8,., of the Civil Code,7/ or at the ver4 least, 1iti3ate the liabilit4 of the suret4 up to the value of the propert4 or lien released P If the creditor ? ? ? has ac=uired a lien upon the propert4 of a principal, the creditor at once beco1es char3ed 0ith the dut4 of retainin3 such securit4, or 1aintainin3 such lien in the interest of the suret4, and an4 release or i1pair1ent of this securit4 as a pri1ar4 resource for the pa41ent of a debt, 0ill dischar3e the suret4 to the e?tent of the value of the propert4 or lien released ? ? ? ? KforL there i11ediatel4 arises a trust relation bet0een the parties, and the creditor as trustee is bound to account to the suret4 for the value of the securit4 in his hands. +, :or the sa1e reason, the 3race period 3ranted b4 respondent !an6 represents uncere1onious abandon1ent and forfeiture of the fifteen percent $27J% 1ar3inal deposit and the t0ent4(five percent $87J% partial pa41ent as fi?ed in the ;letter(advise.; "hese pa41ents are un1ista6abl4 additional securities intended to protect both respondent !an6 and the sureties in the event that the principal debtor :!PC beco1es insolvent durin3 the e?tension period. Co1pliance 0ith these re=uisites 0as not 0aived b4 petitioners in the Continuin3 )uarant4. :or this un0arranted e?ercise of discretion, respondent !an6 bears the lossA due to its unauthoriDed e?tensions to pa4 3ranted to :!PC, petitioner(spouses 'uis "oh and Vic64 "an "oh are dischar3ed as sureties under the Continuin3 )uarant4. :inall4, the fore3oin3 o1ission or ne3li3ence of respondent !an6 in failin3 to safe(6eep the securit4 provided b4 the 1ar3inal deposit and the t0ent4(five percent $87J% re=uire1ent results in the 1aterial alteration of the principal contract, i.e., the ;letter(advise,; and conse=uentl4 releases the suret4. +2 "his inference 0as ad1itted b4 the !an6 throu3h the testi1on4 of its lone 0itness that ;K0Lhenever this obli3ation beco1es due and de1andable, e?cept 0hen 4ou roll it over, $so% there is novation there on the ori3inal obli3ations.; s has been said, ;if the suret4ship contract 0as 1ade upon the condition that the principal shall furnish the creditor additional securit4, and the securit4 bein3 furnished under these conditions is after0ards released b4 the creditor, the suret4 is 0holl4 dischar3ed, 0ithout re3ard to the value of the securities released, for such a transaction a1ounts to an alteration of the 1ain contract.; +8 BCERE:ORE, the instant Petition for Revie0 is )R N"ED. "he Decision of the Court of ppeals dated 28 Dece1ber 8,,2 in C ().R. CV No. 77/7@, Solid !an6 Corporation v. :irst !usiness Paper Corporation, &enneth N3 'i, Ma. Victoria N3 'i, 'uis "oh and Vic64 "an "oh, holdin3 petitioner(spouses 'uis "oh and Vic64 "an "oh solidaril4 liable 0ith :irst !usiness Paper Corporation to pa4 Solid !an6 Corporation the a1ount of

P2,,7*/,@7..+. as principal 0ith t0elve percent $28J% interest per annu1 until full4 paid, and its Resolution of 8 Eul4 8,,8 den4in3 reconsideration thereof are REVERSED and SE" SIDE. "he Decision dated 2+ Ma4 2//+ of R"C(!r. 2+2 of Pasi3 Cit4 in Civil Case No. +-,-@, Solid !an6 Corporation v. :irst !usiness Paper Corporation, &enneth N3 'i, Ma. Victoria N3 'i, 'uis "oh and Vic64 "an "oh, findin3 :irst !usiness Paper Corporation liable to pa4 respondent Solid !an6 Corporation the principal of P2,,7*/,@7..+. plus t0elve percent $28J% interest per annu1 until full4 paid, but absolvin3 petitioner(spouses 'uis "oh and Vic64 "an "oh of an4 liabilit4 to respondent Solid !an6 Corporation is REINS" "ED and ::IRMED. No costs. SO ORDERED. +uisum$in"( Austria-Martine&( and 0in"a( ))*( concur. Callejo( Sr*( )*( on leave. oo(no(%' "SN, * u3ust 2//7, p. 88A "SN, / Nove1ber 2//7, p. -A E?hs. ;-; and ;7.; 8 Ori3inal Record, pp. 77,(77-A E?hs. ;-; and ;7.; * "SN, / Nove1ber 2//7, p. 8-. Ori3inal Record, p. 77-. 7 Id., p. 8. + Id., pp. 7,7(7,+A E?h. ; .; @ Id., p. +78. . I$id.A C Rollo, p. 2+.A "SN, 88 Eune 2//7, pp. /(22A E?hs. ; ; to ;MA; E?h. ;!!.; / I$idA "SN, + Eul4 2//7, p. 2-A E?hs. ;N; to ;V.; 2, Ori3inal Record, p. */A E?h. ;CC.; 22 Id*, p. *@A It states ;KtLhe !an6 1a4 at an4 ti1e cancel this trust and ta6e possession of said 3oods, docu1ents or instru1ents or of the proceeds as 1a4 then have been sold 0herever the said 3oods or proceeds 1a4 then be found, and in the event of an4 suspension, or failure or assi3n1ent for benefit of creditor or our non(fulfill1ent of an4 obli3ation, or of the non(pa41ent at 1aturit4 of an4 acceptance specified hereon or under an4 credit issued b4 the !an6 on our account, or of an4 indebtedness on our part to said !an6, all our obli3ations, acceptances, indebtedness, and liabilities 0hatsoever shall thereupon $0ith or 0ithout notice% 1ature and beco1e due and pa4able.; 28 Id., p. 7,/A "SN, 88 Eune 2//7, p. 22A "SN, * u3ust 2//7, p. 7A E?h. ;!!.; 2* I$id. 2Ori3inal Record, p. 2. 27 Id., pp. +7,(+72. 2+ I$id. 2@ Id., pp. -2-(-8,, --/(-72. 2. Id., p. 88-. 2/ Id., pp. 887, 8*7. 8, Id., p. +78. 82 Id., pp. 882(888. 88 Id., p. 888. 8* Id., pp. 88@, 8*+(8*.. 8Id., pp. 88@, 8*/. 87 Id., pp. 88@, 8-2. 8+ I$id. 8@ Id., pp. 888, 88@. 8. I$id. 8/ Id., p. ++,A Penned b4 Eud3e licia P. Marina(Co. *, Id., p. +7@. *2 I$id. *8 I$id. ** Id., p. +7.. *I$idA see "SN, / Nove1ber 2//7, pp. *, 8+(8@.
2 *7 *+

Id., pp. @,.(@,/. Id., p. @22. *@ C Rollo, pp. 2+@(2@/A Penned b4 ssociate Eustice Mercedes )oDo(Dadole and concurred in b4 ssociate Eustices Salvador E. ValdeD Er. and Ser3io '. PestaXo. *. Id., p. 2@-. */ I$id. -, Id., p. 2@7. -2 Id., p. 2@+. -8 I$id. -* Id., pp. 8*-(8+/. -Id., pp. 8@*(8@-. -7 Rules of Court, Rule 2*2, sec. * $o%. -+ Ori3inal Record, p. +7@. -@ :ortune Motors v. Court of ppeals, ).R. No. 2282/2, @ :ebruar4 2//@, 8+@ SCR +7*. -. ).R. No. .,8,2, 8, Nove1ber 2//,, 2/2 SCR -/*, -/@. -/ Ori3inal Record, p. *.. 7, No. '( **2@-, - Eul4 2//2, 2/. SCR @+@. 72 #nderscorin3 added. 78 Pacific "abacco Corporation v. 'orenDana, 2,8 Phil. 8*- $2/7@%. 7* "SN, 8- u3ust 2//7, pp. -8(-*. 7Ori3inal Record, pp. *+(*@A "hese letters of credit are 'C Nos. /*(,,*., /*(,,*+, /*(,,*7, /*(,,*/ and /*(,,-8. 77 "SN, 8- u3ust 2//7, p. -,. 7+ "SN, 88 Eune 2//7, pp. *8(*@. 7@ Ori3inal Record, p. 722. 7. Id., pp. -2-(-8,, --/(-72, +78. 7/ rt. 8,., readsF ;"he 3uarantors, even thou3h the4 be solidar4, are released fro1 their obli3ation 0henever b4 so1e act of the creditor the4 cannot be subro3ated to the ri3hts, 1ort3a3es, and preference of the latterA; "here is no reason not to appl4 this provision to a suret4 a3ree1ent since 3uarant4 and suret4 are co3nate contractsA see People5s !an6 and "rust Co1pan4 v. "a1buntin3, No. '(8/+++, 8/ October 2/@2, -8 SCR 22/. +, . . Stearns and N.P. :einsin3er, "he 'a0 of Suret4ship $2/*-%, pp. 2-2, 2-2a, 2-2cA Civil Code, rt. 8,.,. +2 Macondra4 and Co1pan4, Inc. PiXon, No. '(2*.2@, *2 u3ust 2/+2, 8 SCR 22,/. +8 . . Stearns, supra at 2-2bA see Civil Code, rt. 8,.,A People8s 'an- and 0rust Company v* 0am$untin", supra.

G.R. No. 126+50 A&$54 2+, 2004 T0E INSULAR LI E ASSURANCE COMPAN!, LT"., petitioner, vs. COURT O APPEALS and SUN BROT0ERS K COMPAN!, respondents. DECISION AUSTRIA:MARTINE/, J.= !efore the Court is a petition for revie0 on certiorari under Rule -7 of the Rules of Court 0hich see6s the reversal of the Decision,2 dated Ma4 8,, 2//+, of the Court of ppeals $C for brevit4% in C ().R. CV No. -+/.@ affir1in3 the Decision,8 dated pril 87, 2//-, rendered b4 the Re3ional "rial Court $!ranch 27,%, Ma6ati Cit4

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

$R"C for brevit4% in Civil Case No. /8(8@@7- e?tendin3 the lease contract sub>ect of the petition for declarator4 relief and orderin3 petitioner to pa4 attorne4Gs fees and costs. "he factual antecedents are as follo0sF On Septe1ber 8-, 2//8, Sun !rothers W Co1pan4 $Sun !rothers for brevit4% filed a petition for declarator4 relief 0ith the R"C see6in3 >udicial interpretation of the ;option to rene0; clause under a Contract of 'ease dated Septe1ber 8,, 2/...* #nder the contract, Sun !rothers leased for a period of five 4ears fro1 Dece1ber 2, 2/.@ until Nove1ber *,, 2//8, a parcel of land, 0ith an appro?i1ate area of -,827 s=uare 1eters, and the buildin3 constructed thereon, located in Ma6ati $then a Municipalit4%. "he contract stipulated that the lease 0as rene0able at the option of the tenant, Sun !rothers, for an additional five 4ears, provided the e?ercise of the option to rene0 the lease shall be 1ade b4 the tenant in 0ritin3 to "he Insular 'ife ssurance Co1pan4, 'td. $Insular for brevit4% at least ninet4 da4s before the e?piration of the period. "he contract further provided for 1onthl4 rental of P7,,,,,.,, for the first 4ear and an increase of 2,J per annu1 for the succeedin3 4ears, e?clusive of real estate ta?es and insurance pre1iu1s 0hich are for the account of Sun !rothers.Sun !rothers alle3ed that since the lease contract does not contain an4 provision as to the rental or an4 provision for an4 ne0 or additional ter1s or conditions in case of rene0al, the ter1s and conditions of the rene0al of lease should be the sa1e and the 1onthl4 rental should re1ain at P@*,8,7.,,. It pra4ed that >ud31ent be renderedF $a% declarin3 that rene0al under the contract of lease be for an additional period of five 4ears under the sa1e ter1s and conditions and the 1onthl4 rental should be P@*,8,7.,,A and, $b% orderin3 Insular to pa4 Sun !rothers P8,,,,,.,, as attorne4Gs fees and to pa4 the costs of suit.7 On Nove1ber +, 2//8, Insular filed its ns0er + clai1in3 that 0hile the lease contract 3rants Sun !rothers the option to rene0 the lease b4 3ivin3 notice thereof to Insular at least ninet4 da4s before the e?piration of the period, it has al0a4s been the a3ree1ent of the parties that Sun !rothers does not have the ri3ht to i1pose, on its sole 0ill, a rene0al of the lease as to the period or the rentalsA @ that despite the presence of the rene0al clause in the previous contracts of lease, the parties still ne3otiated, as a 1atter of course, for the rene0al of the lease in 2/@@ and 2/.@A that ne3otiation 0as the usual nor1 bet0een the parties, clearin3 up as it did va3ue portions of the previous contracts. fter trial on the 1erits, the R"C rendered its decision, dated pril 87, 2//-, rulin3 as follo0sF "he 0ordin3 of the ??? provisions of the contract is clear, una1bi3uous and need no further interpretation. "he tenant, herein petitioner, is vested solel4 0ith the option to rene0 the said contract of lease on the onl4 condition that the sa1e be 1ade 6no0n to respondent in 0ritin3 at least /, da4s before its e?piration. Petitioner, in its letter to respondent dated Ma4 88, 2//* $E?h. ;D;%, e?pressed its desire to e?ercise the option 3ranted in the contract, since there is no 1ention of an4 chan3e or increase in the a1ount of 1onthl4 rental, petitioner understood it to 1ean that the rene0al 0ill be under the sa1e ter1s and conditions. RespondentGs clai1 that the lease contract $E?h. ;C;% does not contain the true intent of the parties deserves scant consideration. It 1ust be noted, as correctl4 pointed out b4 the petitioner, that all the contracts of lease bet0een the parties and the repeated rene0als thereof 0ere entirel4 drafted, finaliDed and notariDed b4 respondent and is, thus, a contract of adhesion. !ein3 a contract of adhesion, petitionerGs onl4 role 0as for its 3eneral 1ana3er, 1ancio '. Sun to si3n the sa1e. "he respondent could have easil4 deleted this =uestioned rene0al clause in the contract if, indeed, such 0as not the intention of the parties. It could have provided therein that an4 rene0al of the lease 0ould be b4 1utual a3ree1ent of the parties or had specificall4 li1ited the period of the lease. . "he dispositive portion of the assailed decision readsF BCERE:ORE, considerin3 all the fore3oin3, >ud31ent is hereb4 rendered as follo0sF a% declarin3 that the contract of lease dated *, Septe1ber 2/.. be rene0ed for another 7 4ears startin3 fro1 *, Nove1ber 2//8 and up to 2 Dece1ber 2//@A b% declarin3 that the 1onthl4 rental on the leased pre1ises be P2,,,,,,.,, e?clusive of real estate ta?es and insurance pre1iu1s, less an4 a1ounts that petitioner 1a4 have paid respondent in the 1eanti1eA c% orderin3 the respondent to pa4 herein petitioner the a1ount of P8,,,,,.,, as attorne4Gs feesA and d% to pa4 the cost. SO ORDERED./ On Eune 2, 2//-, Insular filed a 1otion for reconsideration 2, 0hich the R"C denied in its Order dated Eul4 2., 2//-.22 Dissatisfied, Insular appealed to the C . 28 In a Decision dated Ma4 8,, 2//+, the C affir1ed the decision of the trial court.2* It reasoned that since the rene0al clause in the latest contract of Insular and Sun !rothers is silent as to the ter1s and conditions of the subse=uent contract, such subse=uent contract should follo0 the ter1s and conditions of the ori3inal contract, appl4in3 the doctrine laid do0n in the cases of Ledesma vs* )avellana(2Millare vs* /ernando(27 and Fernande& vs* Court of Appeals.2+ s re3ards the 1onthl4 rental, the C held that there 0as no 1erit to InsularGs alle3ation that the trial court acted arbitraril4 in fi?in3 the a1ount of the rent at P2,,,,,,.,, a 1onth since it considered the testi1on4 of InsularGs 0itness that i1prove1ents introduced b4 Sun !rothers still have an appraised value, 0hich value is considered b4 the C in favor of Sun !rothers in the deter1ination of the ter1s of the e?tended lease. "he C added that the trial court arrived at the a1ount of P2,,,,,,.,, after considerin3 that Sun !rothers had shouldered the 1aintenance e?penses on the buildin3 and paid real estate ta?es as 0ell as insurance pre1iu1s thereon.2@ Insular filed a 1otion for reconsideration 2. 0hich 0as denied b4 the C in its Resolution dated October 2,, 2//+.2/ Cence, the present petition for revie0 anchored on the follo0in3 3roundsF . "CE EMERCISE O: E#DICI ' POBER EN" I'S "CE D#"< "O SE""'E C"# ' CON"ROVERSIES O: 'E) ''< DEM ND !'E RI)C"S ND "O DECIDE #PON ISS#ES S#!MI""ED !< "CE P R"IES. !. BCERE P R"< P#"S IN ISS#E IN CIS P'E DIN) "C " "CE CON"R C" : I'S "O EMPRESS "CE "R#E IN"EN" O: "CE P R"IES, "CE 'OBER CO#R" IS M ND "ED "O CONSIDER "CE EM"RINSIC EVIDENCE PRESEN"ED ND "CEN DECIDE BC " "CE "R#E IN"EN" ISA !< "CE VER< N "#RE O: "CIS CC ''EN)E,

I" IS E#DICI ' !DIC "ION O: D#"< "O SIMP'< ND MERE'< R#'E "C " "CE CON"R C" IS C'E R ND M#S" !E IN"ERPRE"ED S S#CC. C. "CE MO#N" O: RE SON !'E REN" IS DE"ERMINED ON "CE ! SIS O: EVIDENCE PRESEN"ED. D. PE"I"IONER IS EN"I"'ED "O N B RD O: MOR ' ND EMEMP' R< D M )ES ND ""ORNE<GS :EES.8, Succinctl4, the issue herein is the real nature of the option to rene0 the lease under the contractual a3ree1ent of the parties. Insular insists that the option to rene0 is a bilateral a3ree1ent sub>ect to the ter1s and conditions the parties 1a4 a3ree upon. Sun !rothers, on the other hand, posits that the option to rene0 is its unilateral ri3ht effectivel4 e?ercised b4 1ere notice to Insular of the intention to e?tend the lease, at least ninet4 da4s before the e?piration of the period, 0ithout =ualification as to 1onthl4 rental or ter1 of the lease. It is a settled rule that in the e?ercise of the Supre1e CourtGs po0er of revie0, the Court is not a trier of facts and does not nor1all4 underta6e the re(e?a1ination of the evidence presented b4 the contendin3 parties durin3 the trial of the case considerin3 that the findin3s of facts of the C are conclusive and bindin3 on the Court. 82 Co0ever, the Court had reco3niDed several e?ceptions to this rule, to 0itF $2% 0hen the findin3s are 3rounded entirel4 on speculation, sur1ises or con>ecturesA $8% 0hen the inference 1ade is 1anifestl4 1ista6en, absurd or i1possibleA $*% 0hen there is 3rave abuse of discretionA C4D F1%n (1% ;3d6-%n( 5' )a'%d on a -5'a&&$%1%n'5on o7 7a2('A $7% 0hen the findin3s of facts are conflictin3A $+% 0hen in 1a6in3 its findin3s the Court of ppeals 0ent be4ond the issues of the case, or its findin3s are contrar4 to the ad1issions of both the appellant and the appelleeA $@% 0hen the findin3s are contrar4 to the trial courtA $.% 0hen the findin3s are conclusions 0ithout citation of specific evidence on 0hich the4 are basedA $/% 0hen the facts set forth in the petition as 0ell as in the petitionerGs 1ain and repl4 briefs are not disputed b4 the respondentA C10D F1%n (1% 75nd5n6' o7 7a2( a$% &$%-5'%d on (1% '3&&o'%d a)'%n2% o7 %,5d%n2% and 2on($ad52(%d )y (1% %,5d%n2% on $%2o$dI and C11D F1%n (1% Co3$( o7 A&&%a4' -an57%'(4y o,%$4ooJ%d 2%$(a5n $%4%,an( 7a2(' no( d5'&3(%d )y (1% &a$(5%', F1521, 57 &$o&%$4y 2on'5d%$%d, Fo34d ;3'(57y a d577%$%n( 2on243'5on.88 E?ceptions $-%, $2,% and $22% are present in this case. It is a cardinal rule in contract interpretation that the ascertain1ent of the intention of the contractin3 parties is to be dischar3ed b4 loo6in3 to the 0ords the4 used to pro>ect that intention in their contract, that is, all the 0ords, not >ust a particular 0ord or t0o, and 0ords in conte?t, not 0ords standin3 alone. 8* :urther1ore, rticle 2*@- of the Civil Code re=uires that the various stipulations of a contract shall be interpreted to3ether, attributin3 to the doubtful ones that sense 0hich 1a4 result fro1 all of the1 ta6en >ointl4. Confor1abl4, to ascertain the true 1eanin3 or i1port of the disputed ;option to rene0; clause in the contract of lease, the entiret4 of the contract 1ust be consideredA not 1erel4 the clause relatin3 to the ;option to rene0.; fter a careful e?a1ination of the records of the case, the Court finds it si3nificant that the disputed contract of lease is not the first contract bet0een the parties but, in fact, the third contract or the second rene0al contract. "he partiesG lessor(lessee relationship all started on Eanuar4 8/, 2/7., 0ith the ori3inal contract of lease, 8portions of 0hich provideF I INS#' R does hereb4 lease the above1entioned land and buildin3 unto the "EN N" and the "EN N" does hereb4 accept in lease fro1 INS#' R the said land and buildin3, for a period of "EN $2,% <E RS fro1 the date provided for in Clause IM hereof, rene0able at the option of the "EN N" for an additional period of "EN $2,% <E RSA PROVIDED, COBEVER, that the e?ercise of the options to rene0 the lease as herein stated shall be 1ade b4 the "EN N" in 0ritin3 to INS#' R at least NINE"< $/,% D <S before the e?piration of the periods herein 1entioned. ll rene0als shall be under the sa1e ter1s and conditions hereinstated. ......... III INSULAR %L&$%''4y 2o,%nan(' (1a( 57 on o$ )%7o$% (1% %L&5$a(5on o7 (1% &%$5od o7 T8ENT! C20D !EARS C2o,%$%d )y (1% o$565na4 TEN C10D y%a$' &%$5od o7 (1% 4%a'% and (1% $%n%Fa4 &%$5od o7 TEN C10D y%a$' 1%$%5na)o,% '(5&34a(%dD TENANT '(544 d%'5$%' (o o223&y (1% )354d5n6, INS#' R shall 3ive the "EN N" first priorit4 to lease the buildin3 at t!e mont!ly rental and under suc! ot!er terms and conditions as may $e a"reed upon $y t!e parties at t!at time .87 $E1phasis supplied% "he first rene0al of the lease contract 0as 1ade on Eanuar4 8,, 2/@. for a period of another 2, 4ears, fro1 Dece1ber 2, 2/@@ until Nove1ber *,, 2/.@, 0hich b4 that ti1e had added up to t0ent4 4ears of lease. "he parties a3reed that the lease 0as rene0able at the option of the Sun !rothers for an additional period of five 4ears 0ith the proviso that the e?ercise of the option to rene0 the lease shall be 1ade b4 the tenant in 0ritin3 to Insular at least ninet4 da4s before the e?piration of the period provided. 8+ "he contract further provided thatF 8% :or the use and occupanc4 of the leased pre1ises "EN N" shall, durin3 the first $7% 4ears of the above 2,(4ear period, pa4 in advance at the office of INS#' R, 0ithin the first five $7% da4s of ever4 1onth a 1onthl4 rental of P8-,*87.,, e?clusive of real estate ta?es and insurance pre1iu1s. $ ll real estate ta?es, other assess1ents and insurance pre1iu1s of the leased properties shall be for the account of the "EN N"%. "hereafter, the rental shall be ad>usted be3innin3 on the si?th 4ear of this lease 0ith an effective increase e=uivalent to +.7J per annu1 of the i1puted value incre1ent on the land co1pounded at 7J annuall4 for a period of five $7% 4ears usin3 the current value of the leased propert4 as base, 0hich current value is hereb4 a3reed upon b4 the parties as follo0sF 'and (((((((((((((((((((((((((((( I1prove1ents (((((((((((((((( "otal Current (((((((((( P *,@/*,7,,., , +/@,2,,.,, P Value -,-/,,+,,., ,

On the basis of the above current value, the 1onthl4 rental for the 8nd :ive $7% 4ears of the said 2,(4ear period is esti1ated to be P*,,,,8.,, e?clusive of real estate ta?es, other assess1ents and insurance pre1iu1s for the leased properties. *% E?cept for the fore3oin3 1odificationHa1end1ent, all the other ter1s and conditions of the Contract of 'ease dated 8/ Eanuar4 2/7. re1ain in full force and effect. 8@ $E1phasis supplied% "hereafter, prior to the e?piration of the fore3oin3 contract in Nove1ber 2/.@, an e?chan3e of letters ensued bet0een the contractin3 parties, as follo0sF 2. S#N !RO"CERS, in a letter dated Eul4 27, 2/.@, e?pressed its intention to rene0 the lease for a period of five 4ears.8. 8. On Eul4 *2, 2/.@, INS#' R infor1ed S#N !RO"CERS that it 0as a3reeable to the rene0al of the lease sub>ect to the follo0in3 ter1sF $a% lease period fro1 ,2 Dece1ber 2/.@ to *, Nove1ber 2//8A $b% basic 1onthl4 rental of P+,,,,,.,,A $c% annual escalation rate of 2,JA and, $d% insurance pre1iu1s, realt4 ta?es, other 3overn1ent assess1ents if an4, shall be for the account of S#N !RO"CERS. 8/ *. S#N !RO"CERS acceded to the ter1s of INS#' R *, but subse=uentl4 found the said ter1s to be ;=uite heav4;, hence in a letter dated October 7, 2/.@, it offered the follo0in3 ;co1pro1ise; ter1F $a% basic 1onthl4 rental increase of 7,J over the present 1onthl4 rental of P*,,,,,.,,, thereb4 1a6in3 the ne0 1onthl4 rental to P-7,,,,.,,A and, $b% annual escalation rate of 7J 0hich is a ne0 condition not in the old contract, in addition to the insurance pre1iu1s, realt4 ta?es, other 3overn1ent assess1ents if an4, 0hich shall be for the account of S#N !RO"CERS. *2 -. On Nove1ber 8,, 2/.@ INS#' R infor1ed S#N !RO"CERS that it 0as not a1enable to the fore3oin3 ;co1pro1ise; ter1s. It reasoned that the ne0 basic rental rate of P+,,,,,.,, is fair and reasonable considerin3 the present 1ar6et value rates of other properties in the i11ediate vicinit4. *8 7. On Nove1ber 8@, 2/.@, S#N !RO"CERS re=uested reconsideration and accept its ne0 offer of P7,,,,,.,, 1onthl4 rental and 4earl4 increase of 7J.** +. On Dece1ber 2,, 2/.@, INS#' R infor1ed S#N !RO"CERS that it 0as a3reeable to rene0al of the lease sub>ect to the follo0in3 ter1sF $a% lease period fro1 ,2 Dece1ber 2/.@ to *, Nove1ber 2//8A $b% basic 1onthl4 rental of P7,,,,,.,,A $c% annual escalation rate of 2,JA and, $d% insurance pre1iu1s, realt4 ta?es, other 3overn1ent assess1ents if an4, shall be for the account of S#N !RO"CERS. *"he fore3oin3 e?chan3e of co11unications ulti1atel4 led to the Contract of 'ease dated Septe1ber 8,, 2/.., 0hich is the second rene0ed Contract of 'ease or third contract of lease bet0een the parties. "he contract a3ain stipulated that the lease 0as rene0able at the option of the tenant for an additional five 4ears provided the e?ercise of the option to rene0 the lease shall be 1ade b4 the tenant in 0ritin3 to Insular at least ninet4 da4s before the e?piration of the period. "he lease 0as for a period of five 4ears, fro1 Dece1ber 2, 1<+* until Nove1ber *,, 1<<2, 0ith a 1onthl4 rental of P7,,,,,.,, for the first 4ear, and an increase of 2,J per annu1 for the succeedin3 4ears, e?clusive of real estate ta?es and insurance pre1iu1s 0hich are for the account of Sun !rothers.*7 3ain, the contract provided that ; %L2%&( 7o$ (1% 7o$%6o5n6 -od5752a(5onMa-%nd-%n(, a44 (1% o(1%$ (%$-' and 2ond5(5on' o7 (1% Con($a2( o7 L%a'% da(%d 2< .an3a$y 1<5+ $%-a5n 5n 7344 7o$2% and %77%2(.;*+ Prior to the e?piration of the second rene0al Contract of 'ease in 2//8, an e?chan3e of letters once 1ore transpired bet0een the parties, thusF 2. On Ma4 88, 2//8, S#N !RO"CERS co11unicated to INS#' R its intention to rene0 the lease contract, =uotin3 P2,,,,,,.,, as 1onthl4 rental.*@ 8. In response thereto in a letter dated Eune 2,, 2//8, INS#' R offered a lease period of one 4ear at a 1onthl4 rental of P7,,,,,,.,,.*. *. More than a 1onth later, S#N !RO"CERS, in a letter dated u3ust 7, 2//8, e?pressed that, under the provisions of the contract of lease, S#N !RO"CERS has the ri3ht to rene0 the lease for another period of five $7% 4ears 0ithout an4 condition for the e?ercise of the option, e?cept the 3ivin3 of 0ritten notice at least ninet4 $/,% da4s before Nove1ber *,, 2//8 and that the rental due INS#' R is the current rental. "hus, S#N !RO"CERS insisted that INS#' RGs consent is not necessar4 to the rene0al of the lease and the 1onthl4 rental due is the current rental paid b4 it.*/ -. On Septe1ber 2, 2//8, INS#' R replied to the fore3oin3 letter, e?plainin3 that the contract of lease 3ranted S#N !RO"CERS onl4 the option to rene0 the lease contract and not the ri3ht to dictate the ter1s and conditions of the rene0ed contract, especiall4 on the a1ount of rentals to be paid. -, 7. On Septe1ber 7, 2//8, S#N !RO"CERS reiterated its position that it has the validl4 e?ercised the option to rene0 the lease contract under the sa1e ter1s and conditions b4 3ivin3 notice to INS#' R as provided in the lease contract.-2 0hich apparentl4 brou3ht about an impasse b4 reason of 0hich Sun !rothers filed the petition for declarator4 relief 0ith the R"C. Clearl4, in this case, the ori3inal contract of lease dictates the interpretation of the rene0al clause. #nder the ori3inal contract of lease, the ;option to rene0; clause 1eans si1pl4 that after the 8,(4ear period of lease, or after the second contract of lease 0hich 0as to e?pire Nove1ber *,, 2/.@, the lessee, Sun !rothers, is 3iven ;75$'( &$5o$5(y (o 4%a'% (1% )354d5n6 a( (1% -on(14y $%n(a4 and 3nd%$ '321 o(1%$ (%$-' and 2ond5(5on' a' -ay )% a6$%%d 3&on )y (1% &a$(5%' a( (1a( (5-% .; "he rene0al contracts of 2/@. and 2/.@ each contained the stipulation that e?cept for the 1odification or a1end1ent relatin3 to the 1onthl4 rental and ter1 of the lease, ;a44 (1% o(1%$ (%$-' and 2ond5(5on' o7 (1% Con($a2( o7 L%a'% da(%d 2< .an3a$y 1<5+ $%-a5n 5n 7344 7o$2% and %77%2(,;-8 and, therefore, in pursuance thereof, the 1onthl4 rentals and other ter1s and conditions of the proposed rene0al contract 0ere a3reed upon b4 the parties in said 2/@. and 2/.@ rene0ed contracts of lease. Conse=uentl4, Sun !rothersG interpretation based solel4 on the rene0al clause under scrutin4 co1pletel4 i3norin3 the ori3inal contract of lease, is not plausible. "he contractin3 partiesG intent as can be 3leaned fro1 the ori3inal contract of lease and confir1ed b4 their subse=uent acts in the 2/@@ and 2/.@ rene0al contracts, 0as to constitute the rene0al of the lease sub>ect to ter1s and conditions to be a3reed upon b4 the parties at the ti1e of each rene0al. :urther1ore, the subse=uent acts of the parties, evidenced b4 the e?chan3e of letters bet0een the t0o contenders, clearl4 sho0 that their understandin3 and interpretation of the ;option to rene0; clause is that 0hich is e?plicitl4 provided in the ori3inal contract of lease. "hus, after Sun !rothers si3nified its intention to rene0 the lease in 2/@@ and in 2/.@, a series of offers and counter(offers on the 1onthl4 rental and the ter1 of

lease follo0ed until the parties reached an a3ree1ent thereon. Sun !rothers co1plied 0ith the ter1s of the ori3inal contract of lease on the option to rene0 until 2//8 0hen, 1id0a4 throu3h the ne3otiations, in the face of a P7,,,,,,.,, 1onthl4 rental pe33ed b4 Insular, Sun !rothers did a volte face and suddenl4 insisted that it had a unilateral ri3ht to rene0. "he cases of Ledesma vs* )avellana( Millare vs* /ernando and Fernande& vs* Court of Appeals , relied upon b4 the lo0er courts, find no application in the present case since the 2/@@ and 2/.@ rene0al contracts e?plicitl4 adopted all the other provisions of the ori3inal contract of lease dated Eanuar4 8/, 2/7., includin3 the provision on contract rene0als, e?cept those that relate to the 1onthl4 rental and the ter1 of the lease. Bhen the lan3ua3e of the contract is e?plicit leavin3 no doubt as to the intention of the drafters thereof, the courts 1a4 not read into it an4 other intention that 0ould contradict its plain i1port. -* "he Court 0ould be re0ritin3 the contract of lease bet0een Insular and Sun !rothers under the 3uise of construction 0ere 0e to interpret the ;option to rene0; clause as Sun !rothers propounds it, despite the e?press provision in the ori3inal contract of lease and the contractin3 partiesG subse=uent acts. s the Court has held in #iviera Filipina( Inc* vs* Court of Appeals(-- a 2o3$(, %,%n (1% S3&$%-% Co3$(, 1a' no $561( (o -aJ% n%F 2on($a2(' 7o$ (1% &a$(5%' o$ 56no$% (1o'% a4$%ady -ad% )y (1%-, '5-&4y (o a,o5d '%%-5n6 1a$d'15&'. N%5(1%$ a)'($a2( ;3'(52% no$ (1% $34% o7 45)%$a4 2on'($32(5on ;3'(575%' (1% 2$%a(5on o7 a 2on($a2( 7o$ (1% &a$(5%' F1521 (1%y d5d no( -aJ% (1%-'%4,%' o$ (1% 5-&o'5(5on 3&on on% &a$(y (o a 2on($a2( o7 an o)456a(5on no( a''3-%d.;-7 "he Court 0ill no0 discuss the 1erit of InsularGs clai1 for 1onthl4 rental and da1a3es. Insular pleads that the Court should fi? the 1onthl4 rental at P7,,,,,,.,,. Sun !rothers alle3es that the said a1ount is unreasonable, if not, unconscionable. Co0ever, no evidence, other than its self(servin3 assertion, 0as offered b4 Sun !rothers to substantiate its contention. On the other hand, Insular sub1itted in evidence the ppraisal Report 0hich esti1ated the fair rental value of the sub>ect leased propert4 at P@,,,,,,.,, as of October *,, 2//2.-+ "he testi1on4 of the appraiser, E?ecutive Vice President, En3r. Oliver Morales, of the Cuervo ppraisers, Inc.-@ 0as not proven b4 Sun !rothers to be biased and partial on their esti1ation of the fair rental value of the sub>ect leased propert4. In addition, Insular presented the Contract of 'ease it entered into 0ith Binso1e Develop1ent Corporation dated March *,, 2//* involvin3 an .,8,, s=uare 1eter propert4 0hich is al1ost t0ice the siDe of the sub>ect leased propert4 and li6e0ise located in Ma6ati, 0here the 1onthl4 rental for the first 4ear, startin3 Dece1ber 2//8, 0as fi?ed at P+,,,,,,.,,.-. Sun !rothers failed to de1onstrate that this contract has been assailed in court or that the a3reed 1onthl4 rental 0as found to be unconscionable. Suffice it to state that courts 1a4 ta6e >udicial notice of the 3eneral increase in rentals of lease contract rene0als 1uch 1ore 0ith business establish1ents,-/ especiall4 in this case 0here the sub>ect leased propert4 covers a -,827 s=uare 1eter pri1e propert4 centrall4 located in a 0ell(developed co11ercial district of the Cit4 of Ma6ati. 7, !ased thereon, the Court finds the a1ount of P7,,,,,,.,, as reasonable 1onthl4 rental. Co0ever, the Court cannot validl4 i1pose said a1ount on Sun !rothers as 1onthl4 rental since it 0as not a3reed upon b4 the parties. It is not the province of the Court to 1a6e a contract for the parties or bind parties to one 0hen no consensual a3ree1ent 0as entered into. 72 !ut the a1ount of P7,,,,,,.,, a 1onth since 2//8 or P+ Million a 4ear, can be considered actual or co1pensator4 da1a3es representin3 reasonable rental value or unrealiDed 1onthl4 inco1e for Sun !rothersG continued occupation and en>o41ent of the leased propert4. "his is in consonance 0ith Producers 'an- of t!e P!ilippines vs* Court of Appeals 78 0herein the Court had enunciated the 6inds of actual da1a3es, thusF . . . "here are t0o 6inds of actual or co1pensator4 da1a3esF one is the loss of 0hat a person alread4 possesses, and the other is the failure to receive as a benefit that 0hich 0ould have pertained to hi1 ? ? ?. In the latter instance, (1% 7a-545a$ $34% 5' (1a( da-a6%' 2on'5'(5n6 o7 3n$%a45B%d &$o75(', 7$%G3%n(4y $%7%$$%d a' Aganacias frustra"asA o$ Alucru' cessans,H a$% no( (o )% 6$an(%d on (1% )a'5' o7 -%$% '&%234a(5on, 2on;%2(3$%, o$ '3$-5'%, )3( $a(1%$ )y $%7%$%n2% (o 'o-% $%a'ona)4y d%75n5(% '(anda$d '321 a' -a$J%( ,a43%, %'(a)45'1%d %L&%$5%n2%, o$ d5$%2( 5n7%$%n2% 7$o- JnoFn 25$23-'(an2%'.7* In addition, records disclose that in an Order dated pril *,, 2//* the trial court authoriDed Sun !rothers to 1a6e a consi3nation of its 1onthl4 rentals of P+/,7--.@7 starin3 the 1onth of Dece1ber 2//8 0hile the case pends in the trial court.7- "he a1ount of 1onthl4 rentals consi3ned 77 should be deducted fro1 the total a1ount of actual or co1pensator4 da1a3es herein 3ranted to Insular. :urther1ore, such actual or co1pensator4 da1a3es due shall earn interest at the le3al rate of 28J per annu1 co1puted fro1 the date of finalit4 of this decision until full pa41ent 0ould have actuall4 been 1ade, in accordance 0ith the rulin3 of this Court in Eastern S!ippin" Lines( Inc* vs* Court of Appeals( 7+ to 0itF I. Bhen an obli3ation, re3ardless of its source, i.e., la0, contracts, =uasi(contracts, delicts or =uasi(delicts is breached, the contravenor can be held liable for da1a3es. "he provisions under "itle MVIII on ;Da1a3es; of the Civil Code 3overn in deter1inin3 the 1easure of recoverable da1a3es. II. Bith re3ard particularl4 to an a0ard of interest in the concept of actual and co1pensator4 da1a3es, the rate of interest, as 0ell as the accrual thereof, is i1posed, as follo0sF 2. Bhen the obli3ation is breached, and it consists in the pa41ent of a su1 of 1one4, i.e., a loan or forbearance of 1one4, the interest due should be that 0hich 1a4 have been stipulated in 0ritin3. :urther1ore, the interest due shall itself earn le3al interest fro1 the ti1e it is >udiciall4 de1anded. In the absence of stipulation, the rate of interest shall be 28J per annu1 to be co1puted fro1 default, i.e., fro1 >udicial or e?tra>udicial de1and under and sub>ect to the provisions of rticle 22+/ of the Civil Code. 8. Bhen an obli3ation, not constitutin3 a loan or forbearance of 1one4, is breached, an interest on the a1ount of da1a3es a0arded 1a4 be i1posed at the discretion of the court at the rate of +J per annu1. No interest, ho0ever, shall be ad>ud3ed on unli=uidated clai1s or da1a3es e?cept 0hen or until the de1and can be established 0ith reasonable certaint4. ccordin3l4, 0here the de1and is established 0ith reasonable certaint4, the interest shall be3in to run fro1 the ti1e the clai1 is 1ade >udiciall4 or e?tra>udiciall4 $ rt. 22+/, Civil Code% but 0hen such certaint4 cannot be so reasonabl4 established at the ti1e the de1and is 1ade, the interest shall be3in to run onl4 fro1 the date the >ud31ent of the court is 1ade $at 0hich ti1e the =uantification of da1a3es 1a4 be dee1ed to have been reasonabl4 ascertained%. "he actual base for the co1putation of le3al interest shall, in an4 case, be on the a1ount finall4 ad>ud3ed.

*. 81%n (1% ;3d6-%n( o7 (1% 2o3$( aFa$d5n6 a '3- o7 -on%y )%2o-%' 75na4 and %L%23(o$y, (1% $a(% o7 4%6a4 5n(%$%'(, F1%(1%$ (1% 2a'% 7a44' 3nd%$ &a$a6$a&1 1 o$ &a$a6$a&1 2, a)o,%, '1a44 )% 12N &%$ ann3- 7$o- '321 75na45(y 3n(54 5(' 'a(5'7a2(5on, (15' 5n(%$5- &%$5od )%5n6 d%%-%d (o )% )y (1%n an %G35,a4%n( (o a 7o$)%a$an2% o7 2$%d5(. $E1phasis supplied%7@ Moreover, the Court ta6es e?ception fro1 the C Gs opinion that the i1prove1ents introduced b4 Sun !rothers should be considered in the latterGs favor in considerin3 the ter1s of the rent. "he fact that Sun !rothers had shouldered 1aintenance e?penses on the buildin3 and paid real estate ta?es as 0ell as insurance pre1iu1s is inconse=uential and i11aterial in fi?in3 the rent. "he i1prove1ents introduced and the pa41ent of e?penses, ta?es and pre1iu1s have al0a4s been e?cluded in the deter1ination of the 1onthl4 rental in the contracts of lease bet0een the parties. "he Court cannot disre3ard this fact si1pl4 because it later beco1es disadvanta3eous to one part4, especiall4 0hen Sun !rothers voluntaril4 assu1ed the obli3ation in the ori3inal contract. s to 1oral da1a3es, InsularGs pra4er that 1oral da1a3es not less than P7 Million be a0arded because its na1e and reputation has been defa1ed b4 Sun !rothers, is not tenable. "he rule is that 1oral da1a3es can not be 3ranted in favor of a corporation. !ein3 an artificial person and havin3 e?istence onl4 in le3al conte1plation, a corporation has no feelin3s, no e1otions, no sensesA it cannot, therefore, e?perience ph4sical sufferin3, 1ental an3uish, fri3ht, serious an?iet4, 0ounded feelin3s or 1oral shoc6 or social hu1iliation, 0hich can be suffered onl4 b4 one havin3 a nervous s4ste1.7. s to InsularGs plea for e?e1plar4 da1a3es, the Court finds the sa1e 1eritorious. In contracts and =uasi( contracts, the court 1a4 a0ard e?e1plar4 da1a3es if the defendant acted in a 0anton, fraudulent, rec6less, oppressive, or 1alevolent 1anner. 7/ Sun !rothers 0as in evident bad faith 0hen in the course of ne3otiations for the third rene0al of the lease contract in 2//8, it 0antonl4 and oppressivel4 insisted that it had a unilateral ri3ht to rene0 to lease thereb4 resultin3 in an i1passe bet0een the parties and 0hich Sun !rothers too6 advanta3e of and used as a basis for institutin3 the proceedin3s for declarator4 relief, althou3h its prior actions since Eanuar4 8/, 2/7. 0hen the ori3inal contract of lease 0as e?ecuted, spannin3 1ore than three decades, indicated that it 0as 0ell(a0are of the contractual stipulation that after a t0ent4(4ear period of lease, the ri3ht to rene0 the lease 0as sub>ect to such ter1s and conditions that the parties 1a4 1utuall4 a3ree upon at the ti1e, as e?pressl4 provided for in the ori3inal contract of lease. Conse=uentl4, an a0ard of e?e1plar4 da1a3es in the a1ount of P7,,,,,,.,, is in order b4 0a4 of e?a1ple and correction for the public 3ood and also to serve as a deterrent to the co11ission of si1ilar 1isdeeds b4 others. #nder rticle 88,. of the Civil Code, attorne4Gs fees 1a4 be a0arded not onl4 0hen e?e1plar4 da1a3es is a0arded but also 0hen a part4 is co1pelled to liti3ate or to incur e?penses to protect its interest b4 reason of an un>ustified act of the other part4. +, In the present case, Insular 0as constrained to en3a3e the services of counsel and to incur e?penses of liti3ation in order to protect its interest to the sub>ect propert4 a3ainst Sun !rothersG utterl4 unfounded insistence on an alle3ed unilateral ri3ht to rene0 the lease. "he a0ard of P87,,,,,.,, is reasonable in vie0 of the ti1e it has ta6en this case to be resolved. +2 BCERE:ORE, the assailed Decision, dated Ma4 8,, 2//+, of the Court of ppeals in C ().R. CV No. -+/.@ is RE#ERSE" and SET ASI"E. In lieu thereof, >ud31ent is rendered orderin3 respondent Sun !rothers and Co1pan4 to pa4 petitioner Insular 'ife ssurance Co1pan4, 'td. actual da1a3es in the a1ount of :ive Cundred "housand Pesos $P7,,,,,,.,,% 1onthl4, representin3 the unrealiDed 1onthl4 inco1e of petitioner or P+ Million a 4ear fro1 Dece1ber 2, 2//8 until respondent vacates the leased pre1ises. "he a1ount of 1onthl4 rentals consi3ned 0ith the trial court shall be deducted fro1 the total a1ount of actual or co1pensator4 da1a3es due. :urther1ore, such actual or co1pensator4 da1a3es due shall earn interest at the le3al rate of 28J per annu1 co1puted fro1 the date of finalit4 of this decision until full pa41ent thereof. In addition, private respondent Sun !rothers and Co1pan4 is ordered to pa4 petitioner e?e1plar4 da1a3es in the a1ount of :ive Cundred "housand Pesos $P7,,,,,,.,,%A and attorne4Gs fees in the su1 of "0o Cundred :ift4 "housand Pesos $P87,,,,,.,,%. Double costs a3ainst private respondent. SO ORDERED. Puno( +uisum$in"( Callejo( Sr*( and 0in"a( ))*( concur. oo(no(%' Penned b4 Eustice ntonio M. MartineD and concurred in b4 Eustices Ricardo P. )alveD and Portia . Cor1achuelos. 8 Penned b4 Eud3e Erna :alloran liposa. * Ori3inal Record, p. 2. Id*, pp. 2/.(2//. 7 Id*, p. 2. + Id*, p. 27. @ Id*, pp. 2+(2@. . Rollo, pp. +*(+-. / Id*( p. +7. 2, Ori3inal Record, p. */@. 22 Id*, p. --7. 28 Court of ppeals $C %, Rollo, p. 2/. 2* Rollo, p. 2,.. 2282 SCR @/- $2/.*%. 27 272 SCR -.- $272%. 2+ 2++ SCR 7@@ $2/..%. 2@ Rollo, pp. 22*(22-. 2. C Rollo, p. 22.. 2/ Id*, p. 27/. 8, Rollo, pp. 88(8*. 82 PestaXo vs. Su1a4an3, *-+ SCR .@,, .@/ $8,,,%A !aXas, Er. vs. Court of ppeals, *87 SCR
2

87/, 8@2 $8,,,%A !orro1eo vs. Sun, *2@ SCR 2@+, 2.8 $2///%A 'a3rosa vs. Court of ppeals, *28 SCR 8/., *2, $2///%A Securit4 !an6 and "rust Co1pan4 vs. "riu1ph 'u1ber and Construction Corporation, *,2 SCR 7*@, 7-. $2///%. 88 'an36aan Realt4 Develop1ent, Inc. vs. #nited Coconut Planters !an6, *-@ SCR 7-8, 7-/ $8,,,%A No6o1 vs. National 'abor Relations Co11ission, **+ SCR /@, 22, $8,,,%A Co11issioner of Internal Revenue vs. E1broider4 and )ar1ents Industries $Phil.%, Inc., *,7 SCR @,, @- $2///%A Sta. Maria vs. Court of ppeals, 8.7 SCR *72, *7@ $2//.%. 8* 'i1son vs. Court of ppeals, *7@ SCR 8,/, 82+ $8,,2%A China !an6in3 Corporation vs. Court of ppeals, 8+7 SCR *8@, **. $2//+%A Ceirs of Severo 'e3aspi, Sr. vs. Vda. de Da4ot, 2.. SCR 7,., 72$2//,%A :ernandeD vs. Court of ppeals, 2++ SCR 7@@, 7.@ $2/..%. 8Ori3inal Record, p. 2... 87 Id*, pp. 2..(2./. 8+ Id*, p. 2/7. 8@ Id*, p. 2/+. 8. Id*, p. 87.. 8/ Id*, p. 87/.

*, *2

I$id* Id*, p. 8+,. *8 Id*, p. 8+2. ** Id*, p. 8+8. *Id*, p. 8+*. *7 Id*, pp. 2/.(2//. *+ Id*, p. 2//. *@ Id*, p. 8,,. *. Id*, p. 8+7. */ Id*, p. 8++. -, Id*, p. 2+.. -2 Id*, p. 8,8 -8 Id*, pp. 2/+, 2//. -* )er1an Marine 3encies, Inc. vs. National 'abor Relations Co11ission, *7, SCR +8/, +-2 $8,,2%A CruD vs. Court of ppeals, 8/* SCR 8*/, 878 $2//.%. -*., SCR 8-7 $8,,8%. -7 Id*, p. 8+*, citin3 Collins vs. North0est Casualt4 Co., 2., Bash *-@, */ P8d /.+, /@ 'R 28*7. -+ Ori3inal Record, p. 8.@. -@ "SN, October +, 2//8. -. "he contract of Binso1e Develop1ent Corporation provided for the follo0in3 1onthl4 rental sche1eF P+,,,,,,.,, P ,2 Dec. 2//8 to *, Nov. 2//* P++,,,,,.,, P ,2 Dec. 2//* to *, Nov. 2//@ P@7/,,,,.,, P ,2 Dec. 2//@ to *, Nov. 2//. P.7*,.@7.,, P ,2 Dec. 2//. to *, Nov. 8,,, P/*/,8+*.,, P ,2 Dec. 8,,, to *, Nov. 8,,8 $Ori3inal Record, p. *,*%. -/ Catun3al vs. Cao, *77 SCR 8/, -2 $8,,2%. 7, "he Municipalit4 of Ma6ati 0as converted into the Cit4 of Ma6ati b4 virtue of Republic ct No. @.7-, other0ise 6no0n as ;"he Charter of the Cit4 of Ma6ati;, 0hich 0as approved on Eul4 2/, 2//-. 72 !arrera vs. 'orenDo, *./ SCR *8/, *** $8,,8%A Pascual vs. Ra1os, *.- SCR 2,7, 227 $8,,8%A '' and Co1pan4 Develop1ent and 3ro(Industrial Corporation vs. Cuan3 Chao Chun, *@. SCR +28, +88 $8,,8%A Sabio vs. International Corporate !oo6, Inc., *+- SCR *.7, -,- $8,,2%A Ra1nani vs. Court of ppeals, *+, SCR +-7, +7+ $8,,2%A Chua vs. Court of ppeals, *,2 SCR *7+, *+- $2///%A CuiDon vs. Court of ppeals, 8+, SCR +-7, ++@ $2//+%. 78 *+7 SCR *8+ $8,,2%. 7* Id*, p. **@, citin3 "alisa4(Sila4 Millin3 Co., Inc. vs. sociacion de 3ricultores de "alisa4(Sila4, Inc., 8-@ SCR *+2, *.2 $2//7%. RURAL BANK O MAKATI, INC., ESTEBAN S. SIL#A AN" MAG"ALENA #. LAN"IC0O, Petitioners/ G.R. No. 150*63 .34y 2, 2004 (versus( MUNICIPALIT! O MAKATI AN" ATT!. #ICTOR A. L. #ALERO, Respon"ents.

777

Ori3inal Record, p. 2,@. s of Ma4 2*, 2//*, Sun !rothers has consi3ned P-2@,8+..7, for 1onthl4 rentals fro1 Dece1ber 2//8 to Ma4 2//*, id., pp. 227(22.. 7+ 8*- SCR @. $2//-%. 7@ Id., pp. /7(/@. 7. National Po0er Corporation vs. Philipp !rothers Oceanic, Inc., *+/ SCR +8/, +-/ $8,,2%A Canil Develop1ent Co., 'td. vs. Court of ppeals, *+8 SCR 2, 2- $8,,2%A c1e Shoe, Rubber and Plastic Corp. vs. Court of ppeals, 8+, SCR @2-, @88 $2//+%A '!C E?press, Inc. vs. Court of ppeals, 8*+ SCR +,8, +,@ $2//-%. 7/ rticle 88*8, Civil Code. +, R". 88,.. In the absence of stipulation, attorne4Gs fees and e?penses of liti3ation, other than >udicial costs, cannot be recovered, e?ceptF $2% .!en exemplary dama"es are a2ardedK $8% .!en t!e defendantLs act or omission !as compelled t!e plaintiff to liti"ate 2it! t!ird persons or to incur expenses to protect !is interestK $*% In cri1inal cases of 1alicious prosecution a3ainst the plaintiffA $-% In case of a clearl4 unfounded civil action or proceedin3 a3ainst the plaintiffA $7% Bhere the defendant acted in 3ross and evident bad faith in refusin3 to satisf4 the plaintiffGs plainl4 valid, >ust and de1andable clai1A $+% In actions for le3al supportA $@% In actions for the recover4 of 0a3es of household helpers, laborers and s6illed 0or6ersA $.% In actions for inde1nit4 under 0or61enGs co1pensation and e1plo4erGs liabilit4 la0sA $/% In a separate civil action to recover civil liabilit4 arisin3 fro1 a cri1eA $2,% .!en at least dou$le judicial costs are a2ardedA $22% In an4 other case 0here the court dee1s it >ust and e=uitable that attorne4Gs fees and e?penses of liti3ation should be recovered. In all cases, the attorne4Gs fees and e?penses of liti3ation 1ust be reasonable. +2 #nited Coconut Planters !an6 vs. "eofilo C. Ra1os, ).R. No. 2-@.,,, Nove1ber 22, 8,,*, p. 8,A Chin3 Sen !en vs. Court of ppeals, *2- SCR @+8, @@* $2///%.

"ECISION 9UISUMBING, J.= In its decision K2L dated Eul4 2@, 8,,2, in C ().R. CV No. 7.82-, the Court of ppeals affir1ed the decision K8L dated October 88, 2//+ of the Re3ional "rial Court of Ma6ati Cit4, !ranch 2*-, in Civil Case No. /2(8.++ dis1issin3 petitionersG Co1plaint for Recover4 of a Su1 of Mone4 and Da1a3es. Petitioners no0 assail said C decision as 0ell as the resolution K*L dated Nove1ber /, 8,,2, 0hich denied their Motion for Reconsideration.
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"he facts are as follo0sF So1eti1e in u3ust 2//,, tt4. Victor .'. Valero, then the Municipal ttorne4 of the Municipalit4 of Ma6ati, upon re=uest of the Municipal "reasurer, 0ent to the Rural !an6 of Ma6ati to in=uire about the ban6Gs pa41ents of ta?es and fees to the 1unicipalit4. Ce 0as infor1ed, ho0ever, b4 petitioner Ma3dalena V. 'andicho, corporate secretar4 of the ban6, that the ban6 0as e?e1pt fro1 pa4in3 ta?es under Republic ct No. @8,, as a1ended. K-L

On Nove1ber 2/, 2//,, the 1unicipalit4 lod3ed a co1plaint 0ith the ProsecutorGs Office, char3in3 petitioners Esteban S. Silva, president and 3eneral 1ana3er of the ban6 and Ma3dalena V. 'andicho for violation of Section 82$a%, Chapter II, rticle * in relation to Sections 2,7 and 2+/ of the Metropolitan "a? Code. On pril 7, 2//2, an Infor1ation doc6eted as Cri1inal Case No. 2-,8,., for violation of Municipal Ordinance Nos. 288 and */ for non(pa41ent of the 1a4orGs per1it fee, 0as filed 0ith the Metropolitan "rial Court $Me"C% of Ma6ati a3ainst petitioners. nother Infor1ation, doc6eted as Cri1inal Case No. 2-,8,/, for non(pa41ent of annual business ta?, in violation of Metro Manila Co11ission Ordinance No. .8(,*, Section 82$a%, Chapter II, rticle *, 0as li6e0ise filed 0ith the Me"C. Bhile said cases 0ere pendin3 0ith the 1unicipal court, respondent 1unicipalit4 ordered the closure of the ban6. "his pro1pted petitioners to pa4, under protest, the 1a4orGs per1it fee and the annual fi?ed ta? in the a1ount of P.8,-,..++. On October 2., 2//2, petitioners filed 0ith the R"C of Ma6ati a Co1plaint for Su1 of Mone4 and Da1a3es, doc6eted as Civil Case No. /2(8.++. Petitioners alle3ed that the4 0ere constrained to pa4 the a1ount of P.8,-,..++ because of the closure order, issued despite the pendenc4 of Cri1inal Cases Nos. 2-,8,.(,/ and the lac6 of an4 notice or assess1ent of the fees to be paid. "he4 averred that the collection of the ta?esHfees 0as oppressive, arbitrar4, un>ust and ille3al. dditionall4, the4 alle3ed that respondent tt4. Valero had no po0er to enforce la0s and ordinances, thus his action in enforcin3 the collection of the per1it fees and business ta?es 0as ultra vires. Petitioners clai1ed that the ban6 lost e?pected earnin3s in the a1ount of P2/,@@.. Petitioners then assailed the 1unicipal ordinances of Ma6ati as invalid for 0ant of the re=uisite publication.
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In its ns0er, respondent 1unicipalit4 asserted that petitionersG pa41ent of P.8,-,..++ 0as for a le3al obli3ation because the pa41ent of the 1a4orGs per1it fee as 0ell as the 1unicipal business license 0as re=uired of all business concerns. ccordin3 to respondent, said re=uire1ent 0as in furtherance of the police po0er of the 1unicipalit4 to re3ulate businesses. :or his part, tt4. Valero filed an ns0er clai1in3 that there 0as no coercion co11itted b4 the 1unicipalit4, that pa41ent 0as a le3al obli3ation of the ban6, and that its clai1 of e?e1ption had no le3al basis. Ce further alle3ed that petitionersG action 0as clearl4 intended to harass and hu1iliate hi1 and as counterclai1, he as6ed for 1oral and other da1a3es. On October 88, 2//+, the R"C decided Civil Case No. /2(8.++ as follo0sF BCERE:ORE, in vie0 of all the fore3oin3, >ud31ent is hereb4 rendered dis1issin3 the co1plaint. On the counterclai1, the plaintiffs are hereb4 ordered >ointl4 and severall4 to pa4 to defendant Victor Valero the su1 of P8,,,,,,.,, as 1oral da1a3es and the a1ount of P7,,,,,.,, as attorne4Gs fees. chanrobles virtual la0 librar4 "he counterclai1 of defendant Municipalit4 is dis1issed. Cost a3ainst the plaintiffs. SO ORDERED. K7L In findin3 for respondents, the R"C ruled that the ban6 0as en3a3ed in business as a rural ban6. Cence, it should secure the necessar4 per1it and business license, as 0ell as pa4 the correspondin3 char3es and fees. It found that the 1unicipalit4 had authorit4 to i1pose licenses and per1it fees on persons en3a3in3 in business, under its police po0er e1bodied under the 3eneral 0elfare clause. lso, the R"C declared un1eritorious petitionersG clai1 for e?e1ption under Rep. ct No. @8, since said e?e1ption had been 0ithdra0n b4 E?ecutive Order No. /* K+L and the Rural !an6 ct of 2//8. K@L "hese statutes no lon3er e?e1pted rural ban6s fro1 pa4in3 corporate inco1e ta?es and local ta?es, fees and char3es. It also found petitionersG clai1 of lac6 of publication of MMC Ordinance Nos. .8(,* and Municipal Ordinance No. 288 to be 1ere alle3ations unsupported b4 clear and convincin3 evidence. In a0ardin3 da1a3es to tt4. Valero, the R"C found that he had been 1aliciousl4 i1pleaded as defendant. It noted that tt4. Valero, as a 1unicipal le3al officer, 0as tas6ed to enforce 1unicipal ordinances. In short, he 0as 1erel4 an a3ent of the local chief e?ecutive and should not be faulted for perfor1in3 his assi3ned tas6. Petitioners seasonabl4 1oved for reconsideration, but this 0as denied b4 the R"C in its Order dated Eanuar4 2,, 2//@. K.L Petitioners appealed to the Court of ppeals in C ().R. CV No. 7.82-. "he appellate court sustained the lo0er court in this 0iseF BCERE:ORE, pre1ises considered, the appealed decision is hereb4 ::IRMED in toto. SO ORDERED. K/L "he Court of ppeals found the order of closure of the ban6 valid and >ustified since the ban6 0as operatin3 0ithout an4 per1it and 0ithout havin3 paid the re=uisite per1it fee. "hus, declared the Court of ppeals, \it is not 1erel4 a 1atter of enforce1ent and collection of fees, as the appellants 0ould have it, but a violation of the 1unicipalit4Gs authorit4 to re3ulate the businesses operatin3 0ithin its territor4.] K2,L chanrobles virtual la0 librar4 "he appellate court also brushed aside petitionersG clai1 that the 3eneral 0elfare clause is li1ited onl4 to le3islative action. It declared that the e?ercise of police po0er b4 the 1unicipalit4 0as 1andated b4 the 3eneral 0elfare clause, 0hich authoriDes the local 3overn1ent units to enact ordinances, not onl4 to carr4 into effect and dischar3e such duties as are conferred upon the1 b4 la0, but also those for the 3ood of the 1unicipalit4 and its inhabitants. "his 1andate includes the re3ulation of useful occupations and enterprises. Petitioner 1oved for reconsideration, but the appellate court in its resolution K22L of Nove1ber /, 8,,2 denied the sa1e. Cence, this instant petition alle3in3 that the Conorable Court of ppeals seriousl4 erred inF $2% ? ? ?CO'DIN) "C " "CE C'OS#RE !< "CE PPE''EE, VIC"OR V 'ERO, O: "CE PPE'' N" ! N& B S 'E)I"IM "E EMERCISE O: PO'ICE POBER !< "CE M#NICIP 'I"< O: M & "IA chanrobles virtual la0 librar4 $8% ? ? ?NO" CONSIDERIN) "CE : C" "C " M & "I ORDIN NCE 288 REI#IRIN) M <ORGS PERMI" :OR OPER "ION O: N ES" !'ISCMEN" ND MMC ORDIN NCE NO. .8(,* BERE DMI""ED S NO" P#!'ISCED S REI#IRED IN " ^ D , E" '., vs. "#VER , NO. '(+*/27, DECEM!ER 8/, 2/.+ ND "C " NO " M SSESSMEN" B S PRESEN"ED "O "CE ! N&A chanrobles virtual la0 librar4 $*% ? ? ? B RDIN) MOR ' D M )ES "O PPE''EE VIC"OR V 'ERO IN "CE MO#N" O: P8,,,,,,.,, ND ""ORNE<GS :EES IN "CE S#M O: P7,,,,,.,,A chanrobles virtual la0 librar4 $-% ? ? ?NO" B RDIN) "O "CE PPE'' N" ! N&, "CE MO#N" O: P7@,.7-.,, REPRESEN"IN) "CE MO#N" #NE#S"'< ND I''E) ''< CO''EC"ED :ROM "CE PPE'' N" ! N&A chanrobles virtual la0 librar4 $7% ? ? ?NO" B RDIN) "CE MO#N" O: P2,,-2*.@7 <E R'< REPRESEN"IN) "CE #NRE 'IVED PRO:I" BCICC "CE PPE'' N" ! N& IS !EIN) DEPRIVED O: IN "CE #SE O: "CE :ORES ID MO#N" P'#S 'E) '
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IN"ERES" ''OBED IN E#D)MEN" :ROM "CE "IME O: "CE EM"R E#DICI ' DEM ND. $DEM ND 'E""ER, D "ED OC"O!ER -, 2//2, EMCI!I" \O] :OR "CE PPE'' N"S%A $+% ? ? ?NO" )R N"IN) "O PPE'' N"S ES"E! N S. SI'V ND M )D 'EN ' NDICCO MOR ' D M )ES IN "CE MO#N" O: P27,,,,.,,A $@% ? ? ?NO" B RDIN) "O PPE'' N"S, P2,,,,,,,,.,, EMEMP' R< D M )ESA 87J O: "CE PPE'' N"S C' IM S ND :OR ""ORNE<SG :EE ND COS"S O: S#I". K28L Essentiall4, the follo0in3 are the relevant issues for our resolutionF chanrobles virtual la0 librar4 2. Bhether or not petitioner ban6 is liable to pa4 the business ta?es and 1a4orGs per1it fees i1posed b4 respondentA 8. Bhether or not the closure of petitioner ban6 is validA *. Bhether or not petitioners are entitled to an a0ard of unrealiDed profit and da1a3esA -. Bhether or not respondent tt4. Victor Valero is entitled to da1a3es. On the first issue, petitioner ban6 clai1s that of the P.8,-,..++ it paid under protest, it is actuall4 liable onl4 for the a1ount of P8-,27-, representin3 ta?es, fees and char3es due be3innin3 2/.@, or after the issuance of E.O. No. /*. Prior to said 4ear, it 0as e?e1pt fro1 pa4in3 an4 ta?es, fees, and char3es b4 virtue of Rep. ct No. @8,. Be find the ban6Gs clai1 for refund untenable no0. Section 2- of Rep. ct No. @8,, as a1ended b4 Republic ct No. -2,+, K2*L approved on Eul4 2/, 2/+-, had e?e1pted rural ban6s 0ith net assets not e?ceedin3 one 1illion pesos $P2,,,,,,,,% fro1 the pa41ent of all ta?es, char3es and fees. "he records sho0 that as of Dece1ber 8/, 2/.+, petitioner ban6Gs net assets a1ounted onl4 to P@-7,-*8.8/ K2-L or belo0 the one 1illion ceilin3 provided for in Section 2- of the old Rural !an6in3 ct. Cence, under Rep. ct No. @8,, petitioner ban6 could clai1 to be e?e1pt fro1 pa41ent of all ta?es, char3es and fees under the afore1entioned provision. Co0ever, on Dece1ber 2@, 2/.+, E?ecutive Order No. /* 0as issued b4 then President CoraDon =uino, 0ithdra0in3 all ta? and dut4 incentives 0ith certain e?ceptions. Notabl4, not included a1on3 the e?ceptions 0ere those 3ranted to rural ban6s under Rep. ct No. @8,. Bith the passa3e of said la0, petitioner could no lon3er clai1 an4 e?e1ption fro1 pa41ent of business ta?es and per1it fees. No0, as to the refund of P7@,.7- clai1ed b4 petitioners alle3edl4 because of overpa41ent of ta?es and fees, 0e note that petitioners have not ade=uatel4 substantiated their clai1. s found b4 the Court of ppealsF chanrobles virtual
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s to the co1putation of the pa4able fees, the plaintiffs(appellants clai1 an overpa41ent and pra4 for a refund. It is not clearl4 sho0n fro1 their ar3u1ent that such overpa41ent e?ists. nd fro1 their initial co1plaint, the4 even as6ed for the refund of the 0hole P.8,-,..++ paid, 0hich co1plaint 0as instituted in 2//2. "he4 clai1 havin3 paid the fees and char3es due since 2//2, 0hich is irrelevant, since the P.8,-,..++ 0as paid for the period before 2//2, and thus no deduction can be 1ade for pa41ents after that period. It is not clear 0here their co1putation of P7@,.7-.,, o0ed the1 ca1e fro1, and lac6in3 solid support, their pra4er for a partial refund 1ust fail. Plaintiffs(appellants have failed to sho0 that the pa41ent of fees and char3es even covered the period before their e?e1ption 0as 0ithdra0n. K27L :actual findin3s of the Court of ppeals, 0hich are supported on record, are bindin3 and conclusive upon this Court. s repeatedl4 held, such findin3s 0ill not be disturbed unless the4 are palpabl4 unsupported b4 the evidence on record or unless the >ud31ent itself is based on 1isapprehension of facts. K2+L Moreover, in a petition for revie0, onl4 =uestions of la0 are properl4 raised. On this score, the refund sou3ht b4 petitioners could not be entertained 1uch less 3ranted. nent the second issue, petitioner ban6 clai1s that the closure of respondent ban6 0as an i1proper e?ercise of police po0er because a 1unicipal corporation has no inherent but onl4 dele3ated police po0er, 0hich 1ust be e?ercised not b4 the 1unicipal 1a4or but b4 the 1unicipal council throu3h the enact1ent of ordinances. It also assailed the Court of ppeals for invo6in3 the )eneral Belfare Clause e1bodied in Section 2+ K2@L of the 'ocal )overn1ent Code of 2//2, 0hich too6 effect in 2//8, K2.L 0hen the closure of the ban6 0as actuall4 done on Eul4 *2, 2//2. chanrobles virtual la0 librar4 Indeed the 'ocal )overn1ent Code of 2//2 0as not 4et in effect 0hen the 1unicipalit4 ordered petitioner ban6Gs closure on Eul4 *2, 2//2. Co0ever, the 3eneral 0elfare clause invo6ed b4 the Court of ppeals is not found on the provisions of said la0 alone. Even under the old 'ocal )overn1ent Code $!atas Pa1bansa !l3. **@%K2/L 0hich 0as then in effect, a 3eneral 0elfare clause 0as provided for in Section @ thereof. Municipal corporations are a3encies of the State for the pro1otion and 1aintenance of local self(3overn1ent and as such are endo0ed 0ith police po0ers in order to effectivel4 acco1plish and carr4 out the declared ob>ects of their creation. K8,L "he authorit4 of a local 3overn1ent unit to e?ercise police po0er under a 3eneral 0elfare clause is not a recent develop1ent. "his 0as alread4 provided for as earl4 as the d1inistrative Code of 2/2@. K82L Since then it has been reenacted and i1ple1ented b4 ne0 statutes on the 1atter. "hus, the closure of the ban6 0as a valid e?ercise of police po0er pursuant to the 3eneral 0elfare clause contained in and restated b4 !.P. !l3. **@, 0hich 0as then the la0 3overnin3 local 3overn1ent units. No reversible error arises in this instance insofar as the validit4 of respondent 1unicipalit4Gs e?ercise of police po0er for the 3eneral 0elfare is concerned. chanrobles
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"he 3eneral 0elfare clause has t0o branches. "he first, 6no0n as the 3eneral le3islative po0er, authoriDes the 1unicipal council to enact ordinances and 1a6e re3ulations not repu3nant to la0, as 1a4 be necessar4 to carr4 into effect and dischar3e the po0ers and duties conferred upon the 1unicipal council b4 la0. "he second, 6no0n as the police po0er proper, authoriDes the 1unicipalit4 to enact ordinances as 1a4 be necessar4 and proper for the health and safet4, prosperit4, 1orals, peace, 3ood order, co1fort, and convenience of the 1unicipalit4 and its inhabitants, and for the protection of their propert4. K88L chanrobles virtual la0 librar4 In the present case, the ordinances i1posin3 licenses and re=uirin3 per1its for an4 business establish1ent, for purposes of re3ulation enacted b4 the 1unicipal council of Ma6ati, fall 0ithin the purvie0 of the first branch of the 3eneral 0elfare clause. Moreover, the ordinance of the 1unicipalit4 i1posin3 the annual business ta? is part of the po0er of ta?ation vested upon local 3overn1ents as provided for under Section . of !.P. !l3. **@, K8*L to 0itF Sec. .. uthorit4 to Create Sources of Revenue.( $2% Each local 3overn1ent unit shall have the po0er to create its o0n sources of revenue and to lev4 ta?es, sub>ect to such li1itations as 1a4 be provided b4 la0. chanrobles virtual la0
librar4

? ? ? I1ple1entation of these ordinances is vested in the 1unicipal 1a4or, 0ho is the chief e?ecutive of the 1unicipalit4 as provided for under the 'ocal )overn1ent Code, to 0itF

Sec. 2-2. Po0ers and Duties.( $2% "he 1a4or shall be the chief e?ecutive of the 1unicipal 3overn1ent and shall e?ercise such po0ers, duties and functions as provided in this Code and other la0s. $8% Ce shallF ? ? ? $6% )rant licenses and per1its in accordance 0ith e?istin3 la0s or 1unicipal ordinances and revo6e the1 for violation of the conditions upon 0hich the4 have been 3rantedA ? ? ? $o% Enforce la0s, 1unicipal ordinances and resolutions and issue necessar4 orders for their faithful and proper enforce1ent and e?ecutionA chanrobles virtual la0 librar4 $p% Ensure that all ta?es and other revenues of the 1unicipalit4 are collected, and that 1unicipal funds are spent in accordance 0ith la0, ordinances and re3ulationsA ? ? ? $t% Cause to be instituted >udicial proceedin3s in connection 0ith the violation of ordinances, for the collection of ta?es, fees and char3es, and for the recover4 of propert4 and funds of the 1unicipalit4, and other0ise to protect the interest of the 1unicipalit4A K8-L $E1phasis supplied.% chanrobles virtual la0 librar4 ? ? ? Conse=uentl4, the 1unicipal 1a4or, as chief e?ecutive, 0as clothed 0ith authorit4 to create a Special "as6 :orce headed b4 respondent tt4. Victor .'. Valero to enforce and i1ple1ent said ordinances and resolutions and to file appropriate char3es and prosecute violators. K87L Respondent Valero could hardl4 be faulted for perfor1in3 his official duties under the cited circu1stances. Petitioners contend that MMC Ordinance No. .8(,* and Municipal Ordinance No. 288 are void for lac6 of publication. "his a3ain raises a factual issue, 0hich this Court 1a4 not loo6 into. s repeatedl4 held, this Court is not a trier of facts. K8+L !esides, both the Court of ppeals and the trial court found lac6 of sufficient evidence on this point to support petitionersG clai1, thusF nd finall4 the 1atter of the lac6 of publication is once a3ain alle3ed b4 the plaintiffs(appellants, clai1in3 that the 1atter 0as s6irted b4 the trial court. "his ar3u1ent 1ust fail, in the li3ht of the trial courtGs s=uarel4 findin3 lac6 of evidence to support the alle3ation of the plaintiffs(appellants. Be =uote fro1 the trial courtGs decisionF "he contention that MMC Ordinance No. .8(,* and Municipal Ordinance No. 288 of Ma6ati are void as the4 0ere not publishced $sic% is untenable. "he 1ere alle3ation of the plaintiff is not sufficient to declare said ordinances void. "he plaintiffs failed to adduce clear, convincin3 and co1petent evidence to prove said Ordinances void. Moreover, in this >urisdiction, an ordinance is presu1ed to be valid unless declared other0ise b4 a Court in an appropriate proceedin3 0here the validit4 of the ordinance is directl4 put in issue. K8@L On the issue of the closure of the ban6, 0e find that the ban6 0as not en3a3ed in an4 ille3al or i11oral activities to 0arrant its outri3ht closure. "he appropriate re1edies to enforce pa41ent of delin=uent ta?es or fees are provided for in Section +8 of the 'ocal "a? Code, to 0itF Sec. +8. Civil Re1edies.( "he civil re1edies available to enforce pa41ent of delin=uent ta?es shall be b4 distraint of personal propert4, and b4 le3al action. Either of these re1edies or both si1ultaneousl4 1a4 be pursued at the discretion of the proper authorit4. chanrobles virtual la0 librar4 "he pa41ent of other revenues accruin3 to local 3overn1ents shall be enforced b4 le3al action. K8.L Said Section +8 did not provide for closure. Moreover, the order of closure violated petitionerGs ri3ht to due process, considerin3 that the records sho0 that the ban6 e?ercised 3ood faith and presented 0hat it thou3ht 0as a valid and le3al >ustification for not pa4in3 the re=uired ta?es and fees. "he violation of a 1unicipal ordinance does not e1po0er a 1unicipal 1a4or to avail of e?tra>udicial re1edies. K8/L It should have observed due process before orderin3 the ban6Gs closure. :inall4, on the issue of da1a3es, 0e a3ree 0ith both the trial and the appellate courts that the ban6 is not entitled to an4 da1a3es. "he a0ard of 1oral da1a3es cannot be 3ranted to a corporation, it bein3 an artificial person that e?ists onl4 in le3al conte1plation and cannot, therefore, e?perience ph4sical sufferin3 and 1ental an3uish, 0hich can be e?perienced onl4 b4 one havin3 a nervous s4ste1. K*,L "here is also no sufficient basis for the a0ard of e?e1plar4 da1a3es. "here bein3 no 1oral da1a3es, e?e1plar4 da1a3es could not be a0arded also. s to attorne4Gs fees, aside fro1 lac6 of ade=uate support and proof on the 1atter, these fees are not recoverable as a 1atter of ri3ht but depend on the sound discretion of the courts. K*2L #nder the circu1stances of this case, the a0ard of da1a3es to tt4. Valero is also baseless. Be cannot ascribe an4 ille3al 1otive or 1alice to the ban6 for i1pleadin3 tt4. Valero as an officer of respondent 1unicipalit4. "he ban6 filed the case a3ainst respondent 1unicipalit4 in the honest belief that it is e?e1pt fro1 pa4in3 ta?es and fees. Since tt4. Valero 0as the official char3ed 0ith the i1ple1entation of the ordinances of respondent 1unicipalit4, he 0as ri3htl4 i1pleaded as a necessar4 part4 in the case. BCERE:ORE, the assailed Decision dated Eul4 2@, 8,,2, of the Court of ppeals in C ().R. CV No. 7.82- is ::IRMED 0ith MODI:IC "IONS, so that $2% the order den4in3 an4 clai1 for refunds and fees alle3edl4 overpaid b4 the ban6, as 0ell as the denial of an4 a0ard for da1a3es and unrealiDed profits, is hereb4 S#S" INEDA $8% the order decreein3 the closure of petitioner ban6 is SE" SIDEA and $*% the a0ard of 1oral da1a3es and attorne4Gs fees to tt4. Victor .'. Valero is DE'E"ED. No pronounce1ent as to costs. chanrobles virtual la0 librar4 SO ORDERED. P3no, J./ 4Chair'an5, Ca44%;o, S$., and T5n6a, JJ., 2on23$. A3'($5a:Ma$(5n%B, J., on 4%a,%.
crala0 crala0

OOOOOOOOOOOOOOOOOOOOOOOOOOOO Endno(%'=
M:N #ollo( pp* B>->B* Penned $y Associate )ustice Pres$itero )* ,elasco( )r*( 2it! Associate )ustices 'ienvenido L* #eyes( and )uan +* Enri ue&( )r* concurrin"* M@N CA #ollo( pp* ;:-A-;J* chanrobles virtual la0 librar4 MBN #ollo( p* <?* chanrobles virtual la0 librar4 M>N #epu$lic Act 1o* J@?* Entitled OAn Act Providin" For 0!e Creation( %r"ani&ation And %peration %f #ural 'an-s( And For %t!er Purposes*P Sec* :>* of said la2 readsQ OAll rural $an-s created and or"ani&ed under t!e provisions of t!is Act 2it! net assets not exceedin" one million pesos( excludin" t!e counterpart capital su$scri$ed and paid in $y t!e 4overnment under Sections seven and ei"!t of t!is Act( s!all $e exempt from t!e payment of all taxes( c!ar"es and fees of 2!atever nature and descriptionQ Provided( !o2ever( 0!at

2!en t!e net assets of a rural $an- exceed one million pesos( t!e taxes( c!ar"es and fees s!all $e levied in t!e proportion t!at suc! excess $ears to t!e said net assetsQ Provided( finally( 0!at 2!en t!e net assets of a rural $an- exceed t!ree million pesos( it s!all pay taxes( fees and c!ar"es li-e any ot!er $an-*P M;N #ecords( p* BJJ* chanrobles virtual la0 librar4 M<N E*%* 1o* =B* Entitled O.it!dra2in" All 0ax and Duty Incentives( Su$ject to Certain Exceptions( Expandin" t!e Po2ers of t!e Fiscal Incentives #evie2 'oard( and For %t!er Purposes*P Section : of said Executive %rder states in partQ O0!e provisions of any "eneral or special la2 to t!e contrary not2it!standin"( all tax and duty incentives "ranted to "overnment and private entities are !ere$y 2it!dra2nRP MJN #epu$lic Act 1o* JB;B* an act providin" for t!e creation( or"ani&ation and operation of rural $an-s( and for ot!er purposes* MAN #ecords( p* B=A* chanrobles virtual la0 librar4 M=N #ollo( p* >@* chanrobles virtual la0 librar4 M:?N Id* at B=* chanrobles virtual la0 librar4 M::N Id* at <?* M:@N Id* at =-:?* chanrobles virtual la0 librar4 M:BN An Act to Furt!er Amend Section Fourteen of #epu$lic Act 1um$ered Seven /undred 02enty( As Amended( %t!er2ise -no2n as #ural 'an-sL Act* M:>N #ecords( p* @;:K Statement of Condition( p* @* M:;N #ollo( p* >:* chanrobles virtual la0 librar4 M:<N Austria v* Court of Appeals( 4*#* 1o* :BBB@B( = Marc! @???( B@J SC#A <<A( <J>* M:JN SEC* :<* 4eneral .elfare* S Every local "overnment unit s!all exercise t!e po2ers expressly "ranted( t!ose necessarily implied t!erefrom( as 2ell as po2ers necessary( appropriate( or incidental for its efficient and effective "overnance and t!ose 2!ic! are essential to t!e promotion of t!e "eneral 2elfare* .it!in t!eir respective territorial jurisdictions( local "overnment units s!all ensure and support( amon" ot!er t!in"s( t!e preservation and enric!ment of culture( promote !ealt! and safety( en!ance t!e ri"!t of t!e people to a $alanced ecolo"y( encoura"e and support t!e development of appropriate and selfreliant scientific and tec!nolo"ical capa$ilities( improve pu$lic morals( en!ance economic prosperity and social justice( promote full employment amon" t!eir residents( maintain peace and

order( and preserve t!e comfort and convenience of t!eir in!a$itants* chanrobles virtual la0 librar4 M:AN SEC* ;B<* Effectivity Clause S 0!is Code s!all ta-e effect on )anuary first( nineteen !undred and ninety-t2o( unless ot!er2ise provided !erein( after its complete pu$lication in at least one 6:7 ne2spaper of "eneral circulation* chanrobles virtual la0 librar4 M:=N '*P* 'l"* BBJ( Sec* J* 4overnmental Po2ers in 4eneral* S Every local "overnment unit s!all exercise t!e po2ers expressly "ranted( t!ose necessarily implied t!erefrom( as 2ell as po2ers necessary and proper for "overnance suc! as to promote !ealt! and safety( en!ance prosperity( improve morals( and maintain peace and order in t!e local "overnment unit( and preserve t!e comfort and convenience of t!e in!a$itants t!erein* chanrobles virtual
la0 librar4

M@?N 0atel v* Municipality of ,irac( 4*#* 1o* >?@>B( :: Marc! :==@( @?J SC#A :;J( :<?* chanrobles virtual la0 librar4 M@:N SEC* @@BA* 4eneral po2er of council to enact ordinances and ma-e re"ulations* S 0!e municipal council s!all enact suc! ordinances and ma-e suc! re"ulations( not repu"nant to la2( as may $e necessary to carry into effect and disc!ar"e t!e po2ers and duties conferred upon it $y la2 and suc! as s!all seem necessary and proper to provide for t!e !ealt! and safety( promote t!e prosperity( improve t!e morals( peace( "ood order( comfort( and convenience of t!e municipality and t!e in!a$itants t!ereof( and for t!e protection of t!e property t!erein* M@@N See #uperto 4* Martin( Pu$lic Corporations :<; 6:=J: Ed*7
chanrobles virtual la0 librar4 chanrobles virtual la0 librar4 virtual la0 librar4

M@BN 1o2 Section :A of t!e Local 4overnment Code of :==:* M@>N Section :>:( '*P* 'l"* BBJ( Local 4overnment Code*
chanrobles

M@;N #ecords( pp* B@:-B@B* chanrobles virtual la0 librar4 M@<N 0an v* Mende&( )r*( 4*#* 1o* :BA<<=( < )une @??@( BAB SC#A @?@( @::* M@JN #ollo( pp* >:->@* chanrobles virtual la0 librar4 M@AN Section <@( P*D* 1o* @B:( as amended( also -no2n as t!e OLocal 0ax Code*P M@=N Estate of 4re"oria Francisco v* Court of Appeals( 4*#* 1o* =;@J=( @; )uly :==:( :== SC#A ;=;( <??* MB?N A'S-C'1 'roadcastin" Corporation v* Court of Appeals( 4*#* 1o* :@A<=?( @: )anuary :===( B?: SC#A ;J@( <?@-<?B* MB:N Article @@BB( Civil Code of t!e P!ilippines*

G.R. No. 124*15. .an3a$y 24, 2000 RU INA LU! LIM petitioner, v* COURT O APPEALS, AUTO TRUCK TBA CORPORATION, SPEE" "ISTRIBUTING, INC., ACTI#E "ISTRIBUTORS, ALLIANCE MARKETING CORPORATION, ACTION COMPAN!, INC. Respon"ents. "ECISION BUENA, J.= Ma4 a corporation, in its universalit4, be the proper sub>ect of and be included in the inventor4 of the estate of a deceased personY Petitioner disputes before us throu3h the instant petition for revie0 on certiorari, the decision2 of the Court of ppeals pro1ul3ated on 2. pril 2//+, in C ()R SP No. *.+2@, 0hich nullified and set aside the orders dated ,Eul4 2//78, 28 Septe1ber 2//7* and 27 Septe1ber 2//7- of the Re3ional "rial Court of IueDon Cit4, !ranch /*, sittin3 as a probate court. Petitioner Rufina 'u4 'i1 is the survivin3 spouse of the late Pastor <. 'i1 0hose estate is the sub>ect of probate proceedin3s in Special Proceedin3s I(/7(8***-, entitled, ;In ReF Intestate Estate of Pastor <. 'i1 Rufina 'u4 'i1, represented b4 )eor3e 'u4, Petitioner;. Private respondents uto "ruc6 Corporation, lliance Mar6etin3 Corporation, Speed Distributin3, Inc., ctive Distributin3, Inc. and ction Co1pan4 are corporations for1ed, or3aniDed and e?istin3 under Philippine la0s and 0hich o0ned real properties covered under the "orrens s4ste1. On 22 Eune 2//-, Pastor <. 'i1 died intestate. Cerein petitioner, as survivin3 spouse and dul4 represented b4 her nephe0 )eor3e 'u4, filed on 2@ March 2//7, a >oint petition 7 for the ad1inistration of the estate of Pastor <. 'i1 before the Re3ional "rial Court of IueDon Cit4. Private respondent corporations, 0hose properties 0ere included in the inventor4 of the estate of Pastor <. 'i1, then filed a 1otion+ for the liftin3 of lis pendens and 1otion@ for e?clusion of certain properties fro1 the estate of the decedent. In an order. dated ,. Eune 2//7, the Re3ional "rial Court of IueDon Cit4, !ranch /*, sittin3 as a probate court, 3ranted the private respondents t0in 1otions, in this 0iseF ;Bherefore, the Re3ister of Deeds of IueDon Cit4 is hereb4 ordered to lift, e?pun3e or delete the annotation of lis pendens on "ransfer Certificates of "itle Nos. 22+@2+, 22+@2@, 22+@2., 22+@2/ and 72.8 and it is hereb4 further ordered that the properties covered b4 the sa1e titles as 0ell as those properties b4 $sic% "ransfer Certificate of "itle Nos. +2*-/-, *+*28*, 8*+8*+ and 8+*8*+ are e?cluded fro1 these proceedin3s. SO ORDERED.; Subse=uentl4, Rufina 'u4 'i1 filed a verified a1ended petition / 0hich contained the follo0in3 aver1entsF ;*. "he late Pastor <. 'i1 personall4 o0ned durin3 his lifeti1e the follo0in3 business entities, to 0itF !usiness Entit4 ddressF
2 In C )R SP No. *.+2@, pro1ul3ated on 2. pril 2//+, penned b4 Eustice Ra1on and Eustice Portia lino(Cor1achuelos, "hirteenth Division. 8 #ollo, p..*. * #ollo, pp./8(/-. - I$id( /7(/@. 7 Doc6eted as Special Proceedin3 No. I(/7(8***-A#ollo, pp. @+(.8. + #ollo, p.*8. @ #ollo, pp. .-(.@. . #ollo, p.**. / I$id* !arcelona and concurred in b4 Eustice rte1on D. 'una

MMMM lliance Mar6etin3 ,Inc. !loc6 *, 'ot +, Dacca !: Co1es, Paraa=ue, Metro Manila. MMMM Speed Distributin3 Inc. /2, !arrio Nio3, 3uinaldo Ci3h0a4, !acoor, Cavite. MMMM uto "ruc6 "! Corp. 8872 Roosevelt venue, IueDon Cit4. MMMM ctive Distributors, Inc. !loc6 *, 'ot +, Dacca !: Co1es, Paraa=ue, Metro Manila. MMMM ction Co1pan4 2,, 8,th venue Murph4, IueDon Cit4 or /8(D Mc( rthur Ci3h0a4 ValenDuela !ulacan. ;*.2 lthou3h the above business entities dealt and en3a3ed in business 0ith the public as corporations, all their capital, assets and e=uit4 0ere ho0ever, personall4 o0ned b4 the late Pastor < 'i1. Cence the alle3ed stoc6holders and officers appearin3 in the respective articles of incorporation of the above business entities 0ere 1ere du11ies of Pastor <. 'i1, and the4 0ere listed therein onl4 for purposes of re3istration 0ith the Securities and E?chan3e Co11ission. ;-. Pastor 'i1, li6e0ise, had "i1e, Savin3s and Current Deposits 0ith the follo0in3 ban6sF $a% Metroban6, )race Par6, Caloocan Cit4 and IueDon venue, IueDon Cit4 !ranches and $b% :irst Intestate !an6 $for1erl4 Producers !an6%, RiDal Co11ercial !an6in3 Corporation and in other ban6s 0hose identities are 4et to be deter1ined. ;7. "hat the follo0in3 real properties, althou3h re3istered in the na1e of the above entities, 0ere actuall4 ac=uired b4 Pastor <. 'i1 durin3 his 1arria3e 0ith petitioner, to 0itF Corporation "itle 'ocation MMMM 6. uto "ruc6 "C"No. +2@@8+ Sto.Do1in3o "! Corporation Cainta,RiDal =. lliance Mar6etin3 "C" No. 8@./+ Prance, Metro Manila Copies of the above(1entioned "ransfer Certificate of "itle andHor "a? Declarations are hereto attached as nne?es ;C; to ;B;. MMMM ;@. "he afore1entioned properties andHor real interests left b4 the late Pastor <. 'i1, are all con>u3al in nature, havin3 been ac=uired b4 hi1 durin3 the e?istence of his 1arria3e 0ith petitioner. ;.. "here are other real and personal properties o0ned b4 Pastor <. 'i1 0hich petitioner could not as 4et identif4. Petitioner, ho0ever 0ill sub1it to this Conorable Court the identities thereof and the necessar4 docu1ents coverin3 the sa1e as soon as possible.; On ,- Eul4 2//7, the Re3ional "rial Court actin3 on petitioners 1otion issued an order 2,, thusF ;Bherefore, the order dated ,. Eune 2//7 is hereb4 set aside and the Re3istr4 of Deeds of IueDon Cit4 is hereb4 directed to reinstate the annotation of lis pendens in case said annotation had alread4 been deleted andHor cancelled said "C" Nos. 22+@2+, 22+@2@, 22+@2., 22+@2/ and 728.8. :urther 1ore $sic%, said properties covered b4 "C" Nos. +2*-/-, *+728*, 8*+87+ and 8*+8*@ b4 virtue of the petitioner are included in the instant petition. SO ORDERED.; On ,- Septe1ber 2//7, the probate court appointed Rufina 'i1 as special ad1inistrator 22 and Mi3uel 'i1 and 'a04er Donald 'ee, as co(special ad1inistrators of the estate of Pastor <. 'i1, after 0hich letters of ad1inistration 0ere accordin3l4 issued. In an order28 dated 28 Septe1ber 2//7, the probate court denied ane0 private respondents 1otion for e?clusion, in this 0iseF ;"he issue precisel4 raised b4 the petitioner in her petition is 0hether the corporations are the 1ere alter e3os or instru1entalities of Pastor 'i1, Other0ise $sic% stated, the issue involves the piercin3 of the corporate veil, a 1atter that is clearl4 0ithin the >urisdiction of this Conorable Court and not the Securities and E?chan3e Co11ission. "hus, in the case of Cease vs. Court of ppeals, /* SCR -.*, the crucial issue decided b4 the re3ular court 0as 0hether the corporation involved therein 0as the 1ere e?tension of the decedent. fter findin3 in the affir1ative, the Court ruled that the assets of the corporation are also assets of the estate. readin3 of P.D. /,8, the la0 relied upon b4 oppositors, sho0s that the SECs e?clusive $sic% applies onl4 to intra(corporate controvers4. It is si1pl4 a suit to settle the intestate estate of a deceased person 0ho, durin3 his lifeti1e, ac=uired several properties and put up corporations as his instru1entalities. SO ORDERED.; On 27 Septe1ber 2//7, the probate court actin3 on an ex parte 1otion filed b4 petitioner, issued an order 2* the dispositive portion of 0hich readsF
2, I$id( p.*7. 22 Order dated ,- Septe1ber 2//7, issued b4 R"C (IueDon Cit4 !ranch /*, Presidin3 Eud3e 1ado M. Costales, in SP Proc. No. I(/7(8***-A #ollo, pp. ..(/2. 28 Order dated 28 Septe1ber 2//7, issued b4 R"C( IueDon Cit4, !ranch /*, Presidin3 Eud3e 1ado M. Costales, in SP. Proc. No. I(/7(8***-A #ollo, pp. /8(/-. 2* Order dated 27 Septe1ber, issued b4 R"C(IueDon Cit4, !ranch /*, Presidin3 Eud3e 1ado M. Costales, in SP Proc. No. I(/7(8***-A #ollo, pp. /7(/@.

;Bherefore, the parties and the follo0in3 ban6s concerned herein under enu1erated are hereb4 ordered to co1pl4 strictl4 0ith this order and to produce and sub1it to the special ad1inistrators , throu3h this Conorable Court 0ithin $7% five da4s fro1 receipt of this order their respective records of the savin3sHcurrent accountsHti1e deposits and other deposits in the na1es of Pastor 'i1 andHor corporations above(1entioned, sho0in3 all the transactions 1ade or done concernin3 savin3s Hcurrent accounts fro1 Eanuar4 2//- up to their receipt of this court order. MMM MMM MMM SO ORDERED.; Private respondent filed a special civil action for certiorari2-, 0ith an ur3ent pra4er for a restrainin3 order or 0rit of preli1inar4 in>unction, before the Court of ppeals =uestionin3 the orders of the Re3ional "rial Court, sittin3 as a probate court. On 2. pril 2//+, the Court of ppeals, findin3 in favor of herein private respondents, rendered the assailed decision27, the decretal portion of 0hich declaresF ;Bherefore, pre1ises considered, the instant special civil action for certiorari is hereb4 3ranted, "he i1pu3ned orders issued b4 respondent court on Eul4 -,2//7 and Septe1ber 28, 2//7 are hereb4 nullified and set aside. "he i1pu3ned order issued b4 respondent on Septe1ber 27, 2//7 is nullified insofar as petitioner corporations; ban6 accounts and records are concerned. SO ORDERED.; "hrou3h the e?pedienc4 of Rule -7 of the Rules of Court, herein petitioner Rufina 'u4 'i1 no0 co1es before us 0ith a lone assi3n1ent of error2+F ;"he respondent Court of ppeals erred in reversin3 the orders of the lo0er court 0hich 1erel4 allo0ed the preli1inar4 or provisional inclusion of the private respondents as part of the estate of the late deceased $sic% Pastor <. 'i1 0ith the respondent Cort of ppeals arro3atin3 unto itself the po0er to repeal, to disobe4 or to i3nore the clear and e?plicit provisions of Rules .2,.*,.- and .@ of the Rules of Court and thereb4 preventin3 the petitioner, fro1 perfor1in3 her dut4 as special ad1inistrator of the estate as e?pressl4 provided in the said Rules.; Petitioners contentions tread on perilous 3rounds. In the instant petition for revie0, petitioner pra4s that 0e affir1 the orders issued b4 the probate court 0hich 0ere subse=uentl4 set aside b4 the Court of ppeals. <et, before 0e delve into the 1erits of the case, a revie0 of the rules on >urisdiction over probate proceedin3s is indeed in order. "he provisions of Republic ct @+/22@, 0hich introduced a1end1ents to !atas Pa1bansa !l3. 28/, are pertinentF AS%2(5on 1. Section 2/ of !atas Pa1bansa !l3. 28/, other0ise 6no0n as the ;Eudiciar4 Reor3aniDation ct of 2/.,;, is hereb4 a1ended to read as follo0sF Section 2/. Eurisdiction in civil cases. Re3ional "rial Courts shall e?ercise e?clusive >urisdictionF ??? ??? ??? $-% In all 1atters of probate, both testate and intestate, 0here the 3ross value of the estate e?ceeds One Cundred "housand Pesos $P2,,,,,,% or, in probate 1atters in Metro Manila, 0here such 3ross value e?ceeds "0o Cundred "housand Pesos $P8,,,,,,%A ??? ??? ??? Section *. Section ** of the sa1e la0 is hereb4 a1ended to read as follo0sF Section **. Eurisdiction of Metropolitan "rial Courts, Municipal "rial Courts and Municipal Circuit "rial Courts in Civil Cases.(Metropolitan "rial Courts, Municipal "rial Courts and Municipal Circuit "rial Courts shall e?erciseF 2. E?clusive ori3inal >urisdiction over civil actions and probate proceedin3s, testate and intestate, includin3 the 3rant of provisional re1edies in proper cases, 0here the value of the personal propert4, estate or a1ount of the de1and does not e?ceed One Cundred "housand Pesos$P2,,,,,,% or, in Metro Manila 0here such personal propert4, estate or a1ount of the de1and does not e?ceed "0o Cundred "housand Pesos $P8,,,,,,%, e?clusive of interest, da1a3es of 0hatever 6ind, attorne4s fees, liti3ation e?penses and costs, the a1ount of 0hich 1ust be specificall4 alle3ed, Provided, that interest, da1a3es of 0hatever 6ind, attorne4s, liti3ation e?penses and costs shall be included in the deter1ination of the filin3 fees, Provided further, that 0here there are several clai1s or causes of actions bet0een the sa1e or different parties, e1bodied in the sa1e co1plaint, the a1ount of the de1and shall be the totalit4 of the clai1s in all the causes of action, irrespective of 0hether the causes of action arose out of the sa1e or different transactionsA ??? ??? ???; Si1pl4 put, the deter1ination of 0hich court e?ercises >urisdiction over 1atters of probate depends upon the 3ross value of the estate of the decedent. s to the po0er and authorit4 of the probate court, petitioner relies heavil4 on the principle that a probate court 1a4 pass upon title to certain properties, al$eit provisionall4, for the purpose of deter1inin3 0hether a certain propert4 should or should not be included in the inventor4. In a litan4 of cases, Be defined the para1eters b4 0hich the court 1a4 e?tend its probin3 ar1s in the deter1ination of the =uestion of title in probate proceedin3s. "his Court, in PA&TOR/ JR. vs. CO!RT O6 APP.AL& ,2. heldF ;M M M s a rule, the =uestion of o0nership is an e?traneous 1atter 0hich the probate court cannot resolve 0ith finalit4. "hus, for the purpose of deter1inin3 0hether a certain propert4 should or should not be included in the inventor4 of estate properties, the Probate Court 1a4 pass upon the title thereto, but such deter1ination is provisional, not conclusive, and is sub>ect to the final decision in a separate action to resolve title.; Be reiterated the rule in P.R.-RA vs. CO!RT O6 APP.AL&2/F ;M M M "he function of resolvin3 0hether or not a certain propert4 should be included in the inventor4 or list of properties to be ad1inistered b4 the ad1inistrator is one clearl4 0ithin the co1petence of the probate court.
2- #ollo, p. *8. 27 I$id( pp. *8(-,. 2+ Petition for Revie0 in )R No. 28-@27A #ollo, pp. 8,(82. 2@ Republic ct @+/2, other0ise 6no0n as ; n ct E?pandin3 the Eurisdiction of the Metropolitan "rial Courts, Municipal "rial Courts and Municipal Circuit "rial Courts, 1endin3 for the Purpose !atas Pa1bansa !l3. 28/, Other0ise &no0n as the Eudiciar4 Reor3aniDation ct of 2/.,;, approved on 87 March 2//-. 2. )R No. '(7+*-,, 8- Eune 2/.*A 288 SCR ..7. 2/ )R No. '(.22-@, 8, Eune 2/./A 2@- SCR 27-.

Co0ever, the courts deter1ination is onl4 provisional in character, not conclusive, and is sub>ect to the final decision in a separate action 0hich 1a4 be instituted b4 the parties.; :urther, in 1ORAL.& vs. C6- O6 CA7-T. 8, citin3 C!-8ON vs. RA1OL.T.82, Be 1ade an e?position on the probate courts li1ited >urisdictionF ;It is a 0ell(settled rule that a probate court or one in char3e of proceedin3s 0hether testate or intestate cannot ad>udicate or deter1ine title to properties clai1ed to be a part of the estate and 0hich are e=uall4 clai1ed to belon3 to outside parties. ll that the said court could do as re3ards said properties is to deter1ine 0hether the4 should or should not be included in the inventor4 or list of properties to be ad1inistered b4 the ad1inistrator. If there is no dispute, 0ell and 3oodA but if there is, then the parties, the ad1inistrator and the opposin3 parties have to resort to an ordinar4 action for a final deter1ination of the conflictin3 clai1s of title because the probate court cannot do so.; 3ain, in 7AL.RA vs. -N&.RTO88, Be had occasion to elucidate, throu3h Mr. Eustice ndres Narvasa 8*F ;Settled is the rule that a Court of :irst Instance $no0 Re3ional "rial Court%, actin3 as a probate court, e?ercises but li1ited >urisdiction, and thus has no po0er to ta6e co3niDance of and deter1ine the issue of title to propert4 clai1ed b4 a third person adversel4 to the decedent, unless the clai1ant and all other parties havin3 le3al interest in the propert4 consent, e?pressl4 or i1pliedl4, to the sub1ission of the =uestion to the probate court for ad>ud31ent, or the interests of third persons are not thereb4 pre>udiced, the reason for the e?ception bein3 that the =uestion of 0hether or not a particular 1atter should be resolved b4 the court in the e?ercise of its 3eneral >urisdiction or of its li1ited >urisdiction as a special court $e.3. probate, land re3istration, etc.%, is in realit4 not a >urisdictional but in essence of procedural one, involvin3 a 1ode of practice 0hich 1a4 be 0aived. ? ?? ? ? ?. T1%'% 2on'5d%$a(5on' a''3-% 6$%a(%$ 2o6%n2y F1%$%, a' 1%$%, (1% To$$%n' (5(4% 5' no( 5n (1% d%2%d%n(' na-% )3( 5n o(1%$', a '5(3a(5on on F1521 (15' Co3$( 1a' a4$%ady 1ad o22a'5on (o $34% ? ? ?.;$e1phasis Ours% Petitioner, in the present case, ar3ues that the parcels of land covered under the "orrens s4ste1 and re3istered in the na1e of private respondent corporations should be included in the inventor4 of the estate of the decedent Pastor <. 'i1, alle3in3 that after all the deter1ination b4 the probate court of 0hether these properties should be included or not is 1erel4 provisional in nature, thus, not conclusive and sub>ect to a final deter1ination in a separate action brou3ht for the purpose of ad>ud3in3 once and for all the issue of title. <et, under the peculiar circu1stances, 0here the parcels of land are re3istered in the na1e of private respondent corporations, the >urisprudence pronounced in +OL-&A9 vs./ ALC-#8- is of 3reat essence and finds applicabilit4, thusF ;It does not 1atter that respondent(ad1inistratri? has evidence purportin3 to support her clai1 of o0nership, for, on the other hand, petitioners have a "orrens title in their favor, 0hich under the la0 is endo0ed 0ith incontestabilit4 until after it has been set aside in the 1anner indicated in the la0 itself, 0hich, of course, does not include, brin3in3 up the 1atter as a 1ere incident in special proceedin3s for the settle1ent of the estate of deceased persons. ? ? ?; ;? ? ?. In re3ard to such incident of inclusion or e?clusion, Be hold that if a propert4 covered b4 "orrens title is involved, the presu1ptive conclusiveness of such title should be 3iven due 0ei3ht, and in the absence of stron3 co1pellin3 evidence to the contrar4, the holder thereof should be considered as the o0ner of the propert4 in controvers4 until his title is nullified or 1odified in an appropriate ordinar4 action, particularl4, 0hen as in the case at bar, possession of the propert4 itself is in the persons na1ed in the title. ? ? ?; perusal of the records 0ould reveal that no stron3 co1pellin3 evidence 0as ever presented b4 petitioner to bolster her bare assertions as to the title of the deceased Pastor <. 'i1 over the properties. Even so, P.D. 278/, other0ise 6no0n as, ; "he Propert4 Re3istration Decree;, proscribes collateral attac6 on "orrens "itle, henceF ;??? ??? ??? Section -.. Certificate not sub>ect to collateral attac6. ( certificate of title shall not be sub>ect to collateral attac6. It cannot be altered, 1odified or cancelled e?cept in a direct proceedin3 in accordance 0ith la0.; In C!-8ON vs. RA1OL.T., 0here si1ilarl4 as in the case at bar, the propert4 sub>ect of the controvers4 0as dul4 re3istered under the "orrens s4ste1, Be cate3oricall4 statedF ;? ? ? Cavin3 been apprised of the fact that the propert4 in =uestion 0as in the possession of third parties and 1ore i1portant, covered b4 a transfer certificate of title issued in the na1e of such third parties, the respondent court should have denied the 1otion of the respondent ad1inistrator and e?cluded the propert4 in =uestion fro1 the inventor4 of the propert4 of the estate. It had no authorit4 to deprive such third persons of their possession and o0nership of the propert4. ? ? ?; Inas1uch as the real properties included in the inventor4 of the estate of the late Pastor <. 'i1 are in the possession of and are re3istered in the na1e of private respondent corporations, 0hich under the la0 possess a personalit4 separate and distinct fro1 their stoc6holders, and in the absence of an4 co3enc4 to shred the veil of corporate fiction, the presu1ption of conclusiveness of said titles in favor of private respondents should stand undisturbed. ccordin3l4, the probate court 0as re1iss in den4in3 private respondents 1otion for e?clusion. Bhile it 1a4 be true that the Re3ional "rial Court, actin3 in a restricted capacit4 and e?ercisin3 li1ited >urisdiction as a probate court, is co1petent to issue orders involvin3 inclusion or e?clusion of certain properties in the inventor4 of the estate of the decedent, and to ad>ud3e, al$eit, provisionall4 the =uestion of title over properties, it is no less true that such authorit4 conferred upon b4 la0 and reinforced b4 >urisprudence, should be e?ercised >udiciousl4, 0ith due re3ard and caution to the peculiar circu1stances of each individual case. Not0ithstandin3 that the real properties 0ere dul4 re3istered under the "orrens s4ste1 in the na1e of private respondents, and as such 0ere to be afforded the presu1ptive conclusiveness of title, the probate court obviousl4 opted to shut its e4es to this 3lea14 fact and still proceeded to issue the i1pu3ned orders.

8, 82 88 8* 8-

)R No. '(-@287, 8/ Dece1ber 2/.+A 2-+ SCR *@*. 28/ SCR -/7. )R No. '(7+7,-, Ma4 @, 2/.@A 2-/ SCR 7**. 'ater Chief Eustice of the Supre1e Court. )R No. '(-7-/-, u3ust *2, 2/@.A .7 SCR 82*.

!4 its denial of the 1otion for e?clusion, the probate court in effect acted in utter disre3ard of the presu1ption of conclusiveness of title in favor of private respondents. Certainl4, the probate court throu3h such braDen act trans3ressed the clear provisions of la0 and infrin3ed settled >urisprudence on this 1atter. Moreover, petitioner ur3es that not onl4 the properties of private respondent corporations are properl4 part of the decedents estate but also the private respondent corporations the1selves. "o rivet such fli1s4 contention, petitioner cited that the late Pastor <. 'i1 durin3 his lifeti1e, or3aniDed and 0holl4(o0ned the five corporations, 0hich are the private respondents in the instant case. 87 Petitioner thus attached as nne?es ;:; 8+ and ;);8@ of the petition for revie0 affidavits e?ecuted b4 "eresa 'i1 and 'ani Benceslao 0hich a1on3 others, contained aver1ents that the incorporators of #ni0ide Distributin3, Inc. included on the list had no actual participation in the or3aniDation and incorporation of the said corporation. "he affiants added that the persons 0hose na1es appeared on the articles of incorporation of #ni0ide Distributin3, Inc., as incorporators thereof, are 1ere du11ies since the4 have not actuall4 contributed an4 a1ount to the capital stoc6 of the corporation and have been 1erel4 as6ed b4 the late Pastor <. 'i1 to affi? their respective si3natures thereon. It is settled that a corporation is clothed 0ith personalit4 separate and distinct fro1 that of the persons co1posin3 it. It 1a4 not 3enerall4 be held liable for that of the persons co1posin3 it. It 1a4 not be held liable for the personal indebtedness of its stoc6holders or those of the entities connected 0ith it. 8. Rudi1entar4 is the rule that a corporation is invested b4 la0 0ith a personalit4 distinct and separate fro1 its stoc6holders or 1e1bers. In the sa1e vein, a corporation b4 le3al fiction and convenience is an entit4 shielded b4 a protective 1antle and i1bued b4 la0 0ith a character alien to the persons co1prisin3 it. Nonetheless, the shield is not at all ti1es invincible. "hus, in 6-R&T P:-L-PP-N. -NT.RNAT-ONAL +AN; vs. CO!RT O6 APP.AL&8/, Be enunciatedF ;? ? ? Bhen the fiction is ur3ed as a 1eans of perpetratin3 a fraud or an ille3al act or as a vehicle for the evasion of an e?istin3 obli3ation, the circu1vention of statutes, the achieve1ent or perfection of a 1onopol4 or 3enerall4 the perpetration of 6naver4 or cri1e, the veil 0ith 0hich the la0 covers and isolates the corporation fro1 the 1e1bers or stoc6holders 0ho co1pose it 0ill be lifted to allo0 for its consideration 1erel4 as an a33re3ation of individuals. ? ? ?; Piercin3 the veil of corporate entit4 re=uires the court to see throu3h the protective shroud 0hich e?e1pts its stoc6holders fro1 liabilities that ordinaril4, the4 could be sub>ect to, or distin3uishes one corporation fro1 a see1in3l4 separate one, 0ere it not for the e?istin3 corporate fiction. *, "he corporate 1as6 1a4 be lifted and the corporate veil 1a4 be pierced 0hen a corporation is >ust but the alter e3o of a person or of another corporation. Bhere bad3es of fraud e?ist, 0here public convenience is defeatedA 0here a 0ron3 is sou3ht to be >ustified thereb4, the corporate fiction or the notion of le3al entit4 should co1e to nau3ht.*2 :urther, the test in deter1inin3 the applicabilit4 of the doctrine of piercin3 the veil of corporate fiction is as follo0sF 2% Control, not 1ere 1a>orit4 or co1plete stoc6 control, but co1plete do1ination, not onl4 of finances but of polic4 and business practice in respect to the transaction attac6ed so that the corporate entit4 as to this transaction had at the ti1e no separate 1ind, 0ill or e?istence of its o0nA $8% Such control 1ust have been used b4 the defendant to co11it fraud or 0ron3, to perpetuate the violation of a statutor4 or other positive le3al dut4, or dishonest and un>ust act in contravention of plaintiffs le3al ri3htA and $*% "he aforesaid control and breach of dut4 1ust pro?i1atel4 cause the in>ur4 or un>ust loss co1plained of. "he absence of an4 of these ele1ents prevent ;piercin3 the corporate veil;.*8 Mere o0nership b4 a sin3le stoc6holder or b4 another corporation of all or nearl4 all of the capital stoc6 of a corporation is not of itself a sufficient reason for disre3ardin3 the fiction of separate corporate personalities. ** Moreover, to disre3ard the separate >uridical personalit4 of a corporation, the 0ron3(doin3 1ust be clearl4 and convincin3l4 established. It cannot be presu1ed. *)rantin3 ar"uendo that the Re3ional "rial Court in this case 0as not 1erel4 actin3 in a li1ited capacit4 as a probate court, petitioner nonetheless failed to adduce co1petent evidence that 0ould have >ustified the court to i1pale the veil of corporate fiction. "rul4, the reliance reposed b4 petitioner on the affidavits e?ecuted b4 "eresa 'i1 and 'ani Benceslao is unavailin3 considerin3 that the afore1entioned docu1ents possess no 0ei3ht4 probative value pursuant to the hearsa4 rule. !esides it is i1perative for us to stress that such affidavits are inad1issible in evidence inas1uch as the affiants 0ere not at all presented durin3 the course of the proceedin3s in the lo0er court. "o put it differentl4, for this Court to uphold the ad1issibilit4 of said docu1ents 0ould be to rele3ate fro1 Our dut4 to appl4 such basic rule of evidence in a 1anner consistent 0ith the la0 and >urisprudence. Our pronounce1ent in P.OPL. +AN; AN# TR!&T CO1PAN9 vs. L.ON-#A&*7 finds pertinenceF ; ffidavits are classified as hearsa4 evidence since the4 are not 3enerall4 prepared b4 the affiant but b4 another 0ho uses his o0n lan3ua3e in 0ritin3 the affiants state1ents, 0hich 1a4 thus be either o1itted or 1isunderstood b4 the one 0ritin3 the1. Moreover, the adverse part4 is deprived of the opportunit4 to cross( e?a1ine the affiants. :or this reason, affidavits are 3enerall4 re>ected for bein3 hearsa4, unless the affiant the1selves are placed on the 0itness stand to testif4 thereon.; s to the order*+ of the lo0er court, dated 27 Septe1ber 2//7, the Court of ppeals correctl4 observed that the Re3ional "rial Court, !ranch /* acted 0ithout >urisdiction in issuin3 said orderA "he probate court had no authorit4 to de1and the production of ban6 accounts in the na1e of the private respondent corporations. 80ERE ORE, in vie0 of the fore3oin3 dis=uisitions, the instant petition is hereb4 DISMISSED for lac6 of 1erit and the decision of the Court of ppeals 0hich nullified and set aside the orders issued b4 the Re3ional "rial Court, !ranch /*, actin3 as a probate court, dated ,- Eul4 2//7 and 28 Septe1ber 2//7 is ::IRMED.
cr_l_0virtualibr_r4 cr_l_0virtualibr_r4 cr_l_0virtualibr_r4 cr_l_0virtualibr_r4 cr_l_0virtualibr_r4 cr_l_0virtualibr_r4

87 #ollo, p.2@. 8+ ffidavit e?ecuted b4 "eresa ". 'i1, dated 2* Eanuar4 2//7A #ollo, p.@-. 8@ ffidavit e?ecuted b4 'ani ). BenceslaoA #ollo, p. @7. 8. Mata3uina Inte3rated Bood Products, Inc. vs* Court of ppeals, 8+* SCR -/,. 8/ 878 SCR 87/. *, "raders Ro4al !an6 vs* Court of ppeals, 8+/ SCR 27. *2 Concept !uilders, Inc. vs* N'RC, 87@, SCR 2-/. *8 87@ SCR 2-/. ** "raders Ro4al !an6 vs* Court of ppeals,8+/ SCR 27. *- Mata3uina Inte3rated Bood Products Inc. vs* Court of ppeals, 8+* SCR -/2, citin3 Del Rosario vs* N'RC, )R No. .7-2+, 8- Eul4 2//,, 2.@ SCR @@@. *7 8,@ SCR 2+-. *+ #ollo, pp./7(/@.

SO OR"ERE". 'ellosillo( 6C!airman7( Mendo&a( +uisum$in"( and De Leon( )r*( ))*( concur* Republic of the Philippines SUPREME COURT :IRS" DIVISION G.R. No. 143312. A363'( 12, 2005 RICAR"O S. SIL#ERIO, .R., ESSES "E#ELOPMENT CORPORATION, and TRI:STAR ARMS, INC., Petitioners, vs. ILIPINO BUSINESS CONSULTANTS, INC., Respondent. DECISION CARPIO, J.= "he Case !efore us is a petition for revie0 of the Order of the Re3ional "rial Court, :ourth Eudicial Re3ion, !ranch MI, !ala4an, !atan3as $;R"C !ala4an;% dated 8+ Ma4 8,,,. 2 "he order suspended the enforce1ent of the 0rit of possession that the R"C !ala4an had previousl4 issued in favor of petitioners Ricardo S. Silverio, Er. $;Silverio, Er.;%, Esses Develop1ent Corporation $;Esses;% and "ri(Star :ar1s, Inc. $;"ri(Star;%. :ilipino !usiness Consultants, Inc. $;:!CI;%, no0 :ilipino Vastland Co1pan4, Inc. sou3ht to suspend the 0rit of possession on the 3round of a supervenin3 event. :!CI clai1ed that it had >ust ac=uired all the stoc6s of Esses and "ri(Star. s the ne0 o0ner of Esses and "ri(Star, :!CI asserted its ri3ht of possession to the disputed propert4. Petitioners Silverio, Er., Esses and "ri(Star =uestion the R"C !ala4anGs suspension of the 0rit of possession and its >urisdiction to hold hearin3s on the supervenin3 event. "he ntecedent :acts "he parties are 0ran3lin3 over possession of a +8 hectare(land in Calata3an, !atan3as $;Calata3an Propert4;%. Silverio, Er. is the President of Esses and "ri(Star. Esses and "ri(Star 0ere in possession of the Calata3an Propert4, covered b4 "C" No. "(778,, and re3istered in the na1es of Esses and "ri(Star. On 88 Septe1ber 2//7, Esses and "ri(Star e?ecuted a Deed of Sale 0ith ssu1ption of Mort3a3e in favor of :!CI. Esses and "ri(Star failed to redee1 the Calata3an Propert4. On 8@ Ma4 2//@, :!CI filed a Petition for Consolidation of "itle of the Calata3an Propert4 0ith the R"C !ala4an. 8 :!CI obtained a >ud31ent b4 default. Subse=uentl4, "C" No. "(778,, in the na1es of Esses and "ri(Star 0as cancelled and "C" No. "(@@+7+ 0as issued in :!CIGs na1e. On 8, pril 2//., the R"C !ala4an issued a 0rit of possession in :!CIGs favor. :!CI then entered the Calata3an Propert4. Bhen Silverio, Er., Esses and "ri(Star learned of the >ud31ent b4 default and 0rit of possession, the4 filed a petition for relief fro1 >ud31ent and the recall of the 0rit of possession. Silverio, Er., Esses and "ri(Star alle3ed that the >ud31ent b4 default is void because the R"C !ala4an did not ac=uire >urisdiction over the1. :!CI alle3edl4 for3ed the service of su11ons on the1. On 8. Dece1ber 2//., the R"C !ala4an nullified and set aside the >ud31ent b4 default and the 0rit of possession. "he R"C !ala4an found that the su11ons and the co1plaint 0ere not served on Silverio, Er., Esses and "ri(Star. "he R"C !ala4an directed the service of su11ons ane0 on Silverio, Er., Esses and "ri(Star. "he R"C !ala4an denied :!CIGs 1otion for reconsideration of the order. :!CI then filed a petition for certiorari 0ith the Court of ppeals =uestionin3 the R"C !ala4anGs 8. Dece1ber 2//. Order. * On 8. pril 8,,,, the Court of ppeals denied :!CIGs petition. "he Court of ppeals also denied :!CIGs 1otion for reconsideration. On 2* u3ust 8,,2, the Supre1e Court denied :!CIGs petition. On 2- pril 2///, the R"C !ala4an 1odified its 8. Dece1ber 2//. Order b4 upholdin3 :!CIGs possession of the Calata3an Propert4. "he R"C !ala4an ruled that :!CI could not be deprived of possession of the Calata3an Propert4 because :!CI 1ade substantial i1prove1ents on it. Possession could revert to Silverio, Er., Esses and "ri(Star onl4 if the4 rei1burse :!CI. "he R"C !ala4an 3ave Silverio, Er., Esses and "ri(Star 27 da4s to file their responsive pleadin3s. Silverio, Er., Esses and "ri(Star 1oved for the partial reconsideration of the 2- pril 2/// Order. Silverio, Er., Esses and "ri(Star ar3ued that since the >ud31ent b4 default 0as nullified, the4 should be restored to their possession of the Calata3an Propert4. :!CI did not file an4 opposition to the 1otion. On / Nove1ber 2///, the R"C !ala4an reversed its 2- pril 2/// Order b4 holdin3 that Silverio, Er., Esses and "ri(Star had no dut4 to rei1burse :!CI. "he R"C !ala4an pointed out that :!CI offered no evidence to substantiate its clai1 for e?penses. "he / Nove1ber 2/// Order also restored possession of the Calata3an Propert4 to Silverio, Er., Esses and "ri(Star pursuant to Rule */, Section 7 of the 2//@ Rules of Civil Procedure. "his provision provides for restitution in case of reversal of an e?ecuted >ud31ent. On @ Eanuar4 8,,,, the R"C !ala4an denied :!CIGs 1otion for reconsideration. On . Ma4 8,,,, the R"C !ala4an issued the 0rit of possession to Silverio, Er., Esses and "ri(Star. On 28 Ma4 8,,,, :!CI filed 0ith the R"C !ala4an a Manifestation and Motion to Recall Brit of Possession on the 3round that the decision of the Court of ppeals in C ().R. SP No. 7+/8- 0as not 4et final and :!CIGs 1otion for reconsideration 0as still pendin3. "he R"C !ala4an set the hearin3 on 8+ Ma4 8,,,. On 8* Ma4 8,,,, :!CI filed 0ith the R"C !ala4an an #r3ent E?(Parte Motion to Suspend Enforce1ent of Brit of Possession. :!CI pointed out that it is no0 the ne0 o0ner of Esses and "ri(Star havin3 purchased the ;substantial and controllin3 shares of stoc6s;- of the t0o corporations. On the 8+ Ma4 8,,, hearin3, :!CI reiterated its clai1 of a supervenin3 event, its o0nership of Esses and "ri( Star. :!CI infor1ed the R"C !ala4an that a ne0 board of directors for Esses and "ri(Star had been convened follo0in3 the resi3nation of the 1e1bers of the board of directors. "he previous actions of the for1er board of directors have been abandoned and the services of tt4. Vicente !. Chuidian, the counsel of petitioners Silverio, Er., Esses and "ri(Star, have been ter1inated. On the sa1e da4, the R"C !ala4an issued the order suspendin3 the 0rit of possession it had earlier issued to Silverio, Er., Esses and "ri(Star. "he R"C !ala4an reasoned that it 0ould violate the la0 on foru1 shoppin3 if it e?ecuted the 0rit 0hile :!CIGs 1otion for reconsideration of the Court of ppealsG decision and ur3ent 1otion to suspend the issuance of the 0rit of possession re1ained pendin3 0ith the Court of ppeals. "he R"C !ala4an noted that because of :!CIGs stron3 resistance, Silverio, Er., Esses and "ri(Star have still to ta6e possession of the Calata3an Propert4. More than ten da4s had alread4 passed fro1 the ti1e that the R"C !ala4an had issued the 0rit of possession. :!CI had barricaded the Calata3an Propert4, threatenin3 bloodshed if possession 0ill be ta6en a0a4 fro1 it. "he R"C !ala4an believed that if it 0ould not restrain Silverio, Er., Esses and "ri(Star fro1

ta6in3 possession of the Calata3an Propert4, a violent confrontation bet0een the parties 1i3ht erupt as reported in the "e1po ne0spaper in its 8+ Ma4 8,,, issue. Bithout issuin3 a restrainin3 order, the R"C !ala4an suspended the 0rit b4 re=uestin3 the counsel of Silverio, Er., Esses and "ri(Star to allo0 the court to stud4 the volu1inous records of the case, 0hich are to be presented at the hearin3 on 2+ Eune 8,,,. "he hearin3 0ould deter1ine the e?istence of a supervenin3 event. On 27 Eune 8,,,, the R"C !ala4an issued an Order cancellin3 the 2+ Eune 8,,, hearin3 so that the Court of ppeals could resolve the issue re3ardin3 the e?istence of a supervenin3 event. Co0ever, the R"C !ala4an declared that the suspension of the 0rit of possession 0ould be lifted on 2@ Eune 8,,,. On . u3ust 8,,,, Silverio, Er., Esses and "ri(Star filed a co1plaint for annul1ent of contracts 0ith da1a3es 0ith the Re3ional "rial Court of 'as PiXas Cit4, !ranch 8@7 $;R"C 'as PiXas;%. 7 Issues Silverio, Er., Esses and "ri(Star ar3ue thatF I n ex parte 1otion cannot le3all4 constitute an initiator4 basis for the R"C !ala4an to conduct additional hearin3s in order to validate certain ne0 alle3ations. Neither can said ex parte 1otion be the basis for the suspension of a 0rit of possession bein3 i1ple1ented. II Bhen the R"C !ala4an suspended the 0rit of possession, it 0as barred fro1 hearin3 intra(corporate disputes. nd thou3h Con3ress has no0 a1ended our la0 on the 1atter, the R"C still cannot proceed because of due process and res judicata reasons. III final and e?ecutor4 >ud31ent cannot be en>oined e?cept b4 an appropriate petition for relief, a direct attac6 in another action or a collateral act in another action. IV Respondent :!CI is as6in3 for a suspension of the 0rit of possession 0hile at the sa1e ti1e threatenin3 violence if the 0rit of possession 0ere to be i1ple1ented. "he R"C !ala4an had no la0ful basis to suspend the 0rit under these ad1itted circu1stances. V Respondent has not directl4 ans0ered petitionersG le3al theor4. "he petition is founded on ad1itted facts upon 0hich relief is sou3ht under Rule -7. Respondent has altered these facts P presentin3 its so called ;counterstate1ents of facts and issues; P 0hich involve =uestions of fact that are still litis pendentia at the R"C !ala4an. nd 0hich even involve an atte1pt to var4 res judicata. VI Contrar4 to respondentGs clai1s, that the R"C order of 27 Eune 8,,, has rendered this case ;1oot and acade1ic; P =uite on the contrar4 P said order calls upon the Supre1e Court to decide 0hether or not, the R"C !ala4an 1a4 continue to conduct its hearin3s on suspendin3 the 0rit of possession. VII RespondentGs theor4 that an order suspendin3 a 0rit of possession is interlocutor4 in nature, and therefore inappealable, is not supported b4 >urisprudence. VIII RespondentGs vie0s on 0hen suspendin3 a 0rit of e?ecution is appropriate P 0ould ;1a6e the e?ception as rule.; nd respondentGs reliance on Flores vs* CA, et al. is totall4 1isplaced. In the Flores case, the part4 bein3 dispossessed 0as a >ud31ent creditor, 0ho 0as ad1itted b4 the adverse part4 to be the o0ner. IM "he =uestion of jus possessionis on the Calata3an Propert4 is alread4 res judicata 0hile the =uestion of jus possidendi is still under litis pendentia. :or that reason, respondent has lost all his le3al options in retainin3 the propert4 procured under a ;fa6ed service; of su11ons. M Respondents ar3u1ents in his 22(,+(,2 Me1o P on $a% ;foru1 shoppin3;, $b% ;petitionersG lac6 of capacit4 to sue;, $c% ;service of su11ons alread4 served; $d% ;no intra(corporate dispute; and $e% ;the relief herein pree1pted b4 events; P are ratiocinations of 1iniscule 0ei3ht, 1eritin3 onl4 the sli3htest co11ent. + :!CI raises the follo0in3 issuesF 2. Bhether the present case has been rendered 1oot and acade1ic b4 the Order of the R"C !ala4an dated 27 Eune 8,,, and the filin3 of an action 0ith the Re3ional "rial Court of 'as PiXas Cit4A 8. Bhether the present appeal should be dis1issed on the 3round of foru1 shoppin3A *. Bhether the R"C !ala4an had the authorit4 to suspend enforce1ent of the 0rit of possession and to conduct hearin3s on a ne0 set of factsA -. Bhether the present case involves an intra(corporate controvers4A 7. Bhether appeal b4 certiorari under Rule -7 is the proper re1ed4 under the 3iven facts of the case. @ "he Rulin3 of the Court "he petition has 1erit. Procedural Issues !efore resolvin3 the threshold issue, 0hich is the e?istence of a supervenin3 event, 0e first address the follo0in3 procedural issuesF $2% 0hether appeal is the proper re1ed4 a3ainst an order suspendin3 the e?ecution of a 0rit of possessionA $8% 0hether the issue of possession 0as 1ooted b4 the 27 Eune 8,,, Order of the R"C !ala4anA and $*% 0hether the filin3 of a civil case 0ith the R"C 'as PiXas constitutes foru1 shoppin3. 5$'(, interlocutor4 orders are those that deter1ine incidental 1atters that do not touch on the 1erits of the case or put an end to the proceedin3s. . "he proper re1ed4 to =uestion an i1provident interlocutor4 order is a petition for certiorari under Rule +7, not Rule -7. / petition for revie0 under Rule -7 is the proper 1ode of redress to =uestion final >ud31ents. 2, n order sta4in3 the e?ecution of the 0rit of possession is an interlocutor4 order. 22 Clearl4, this order cannot be appealed. petition for certiorari 0as therefore the correct re1ed4. Moreover, Silverio, Er., Esses and "ri(Star pointed out that the R"C !ala4an acted on an ex-parte 1otion to suspend the 0rit of possession, 0hich is a liti3ious 1atter, 0ithout co1pl4in3 0ith the rules on notice and hearin3. Silverio, Er., Esses and "ri(Star also assail the R"C !ala4anGs i1pendin3 1ove to accept :!CIGs evidence on its subse=uent o0nership of Esses and "ri(Star. In effect, Silverio, Er., Esses and "ri(Star accuse the R"C !ala4an of actin3 0ithout or in e?cess of >urisdiction or 0ith 3rave abuse of discretion, 0hich is 0ithin the a1bit of certiorari.

Co0ever, in the e?ercise of our >udicial discretion, 0e 0ill treat the appeal as a petition under Rule +7. 28 "echnical rules 1ust be suspended 0henever the purposes of >ustice 0arrant it, such as in this case 0here substantial and i1portant issues a0ait resolution. S%2ond, the R"C !ala4anGs 27 Eune 8,,, Order liftin3 the suspension of the 0rit of possession 0as issued to correct its action on :!CIGs ex-parte 1otion, 0hich did not have the re=uired notice and hearin3. "his issue has thus beco1e a fait accompli. Co0ever, 0hile the 27 Eune 8,,, Order is supposed to have 1ooted the suspension of the e?ecution of the 0rit of possession b4 liftin3 the suspension on 2@ Eune 8,,,, Silverio, Er., Esses and "ri(Star clai1 that the 0rit has not been e?ecuted in their favor. "hus, the issues in this petition are far fro1 bein3 1oot. lso, the e?istence of a supervenin3 event is another issue that 1ust be resolved since the R"C !ala4an had instead sub1itted to the ;hi3her courts; the resolution of this issue. T15$d, Silverio, Er., Esses and "ri(Star are not 3uilt4 of foru1 shoppin3 for filin3 another action a3ainst :!CI 0ith the R"C 'as PiXas durin3 the pendenc4 of this case 0ith the R"C !ala4an. :oru1 shoppin3 consists of filin3 1ultiple suits involvin3 the sa1e parties for the sa1e cause of action, either si1ultaneousl4 or successivel4, to obtain a favorable >ud31ent.2* "he parties and cause of action in the present case before the R"C !ala4an and in the case before the R"C 'as PiXas are different. "he present case 0as filed b4 :!CI a3ainst Silverio, Er., Esses and "ri(Star for the consolidation of title over the Calata3an Propert4. On the other hand, the case before the R"C 'as PiXas 0as filed b4 Silverio, Er., Esses and "ri(Star a3ainst :!CI and other defendants for the annul1ent of contract 0ith da1a3es, tort and culpa a uiliana $civil fraud%. In its co1plaint before the R"C 'as PiXas, Silverio, Er., Esses and "ri(Star infor1ed the court that there is a pendin3 case 0ith the R"C !ala4an over the Calata3an Propert4. 2- Silverio, Er., Esses and "ri(Star 1ade it clear in the co1plaint that the case before the R"C 'as PiXas 0ill focus on the Ma6ati "uscan4 propert4 and an4 reference to the Calata3an Propert4 is ;1eant to serve onl4 as proof or evidence of the plan, s4ste1, sche1e, habit, etc., lur6in3 behind defendantsG interloc6in3 acts constitutin3 interloc6in3 tort and interloc6in3 fraud.; 27 Clearl4, :!CIGs clai1 of foru1 shoppin3 a3ainst Silverio, Er., Esses and "ri(Star has no basis. 1o Supervenin" Event in t!is Case :!CI too6 possession of the Calata3an Propert4 after the R"C !ala4an rendered a >ud31ent b4 default in :!CIGs favor. "he >ud31ent b4 default 0as nullified after the R"C !ala4an found out that the service of su11ons on Silverio, Er., Esses and "ri(Star 0as procured fraudulentl4. "he R"C !ala4an thus recalled the 0rit of possession it had issued to :!CI. Silverio, Er., Esses and "ri(Star 0ere served ane0 0ith su11ons. "he R"C !ala4an restored possession of the Calata3an Propert4 to Silverio, Er., Esses and "ri(Star as restitution resultin3 fro1 the annul1ent of the >ud31ent b4 default. "he order restorin3 possession of the Calata3an Propert4 to Silverio, Er., Esses and "ri(Star has attained finalit4. "his case then proceeded to pre(trial. :!CI has resisted the enforce1ent of the 0rit of possession b4 barricadin3 the Calata3an Propert4 and threatenin3 violence if its possession of the propert4 is ta6en a0a4 fro1 it. "o avoid bloodshed, as :!CI also clai1ed that Silverio, Er. had ar1ed civilians threatenin3 to shoot :!CIGs representatives, 2+ the R"C !ala4an 1o1entaril4 suspended the e?ecution of the 0rit. "he R"C !ala4an also had to rule on :!CIGs clai1 of a supervenin3 event that 0ould alle3edl4 1a6e the e?ecution of the 0rit absurd, 2@ as :!CI alle3es it no0 o0ns the controllin3 interest in Esses and "ri(Star. "he R"C !ala4an lifted the suspension of the 0rit but it cancelled the hearin3s on the supervenin3 event to 3ive 0a4 to the Court of ppealsG action on this issue. "he R"C !ala4an decided to a0ait the appellate courtGs resolution because it did not 0ant to violate the rule a3ainst foru1 shoppin3. Silverio, Er., Esses and "ri(Star ar3ue that the R"C !ala4an has no po0er to conduct hearin3s on the supervenin3 event because res judicata has set in on the issue. "he4 also contend that the supervenin3 event is an intra( corporate controvers4 that is 0ithin the >urisdiction of the Securities and E?chan3e Co11ission, not the trial court. Silverio, Er., Esses and "ri(Star point out that despite the liftin3 of the suspension R"C !ala4an has still to e?ecute the 0rit of possession in their favor. On the other hand, :!CI 1aintains that its ac=uisition of Esses and "ri(Star is a supervenin3 event, 0hich the R"C !ala4an could hear and is sufficient 3round to sta4 the e?ecution of the 0rit of possession. Be rule in favor of Silverio, Er., Esses and "ri(Star. "he court 1a4 sta4 i11ediate e?ecution of a >ud31ent 0hen supervenin3 events, occurrin3 subse=uent to the >ud31ent, brin3 about a 1aterial chan3e in the situation of the parties. 2. "o >ustif4 the sta4 of i11ediate e?ecution, the supervenin3 events 1ust have a direct effect on the 1atter alread4 liti3ated and settled. 2/ Or, the supervenin3 events 1ust create a substantial chan3e in the ri3hts or relations of the parties 0hich 0ould render e?ecution of a final >ud31ent un>ust, i1possible or ine=uitable 1a6in3 it i1perative to sta4 i11ediate e?ecution in the interest of >ustice.8, In this case, there is no >ud31ent on the 1erits, onl4 a >ud31ent on a technicalit4. Even then, the >ud31ent of default rendered in :!CIGs favor 0as voided because the R"C !ala4an did not ac=uire >urisdiction over Silverio, Er., Esses and "ri(Star due to a fraudulent service of su11ons. "he case for consolidation of title, fro1 0hich this petition ste11ed, is in fact still bein3 liti3ated before the R"C !ala4an. "he issuance of the 0rit of possession in favor of Silverio, Er., Esses and "ri(Star is also not a >ud31ent on the 1erits.82 0rit of possession is an order 0hereb4 the sheriff is co11anded to place a person in possession of real or personal propert4. 88 "he issuance of the 0rit of possession to Silverio, Er., Esses and "ri(Star is but an order of restitution P a conse=uence of the nullification of the >ud31ent b4 default. "he order of restitution placed the parties in the situation prior to the R"C !ala4anGs rendition of the void >ud31ent b4 default. "itle to the Calata3an Propert4 is still in the na1es of Esses and "ri(Star. Possession of the Calata3an Propert4 1ust revert to Esses and "ri(Star as le3al o0ners of the propert4. Co0ever, 0ith the reinstitution of the case for consolidation of title 0ith the R"C !ala4an, possession of the Calata3an Propert4 is no0 sub>ect to the outco1e of the case. Nonetheless, 0hile this case is still under liti3ation P it is onl4 in the pre(trial sta3e P Esses and "ri(Star in 0hose na1es the Calata3an Propert4 is titled and in 0hose favor the order of restitution 0as issued, are the ones entitled to possession of the propert4. Be do not a3ree 0ith Silverio, Er., Esses and "ri(StarGs assertion that the R"C !ala4an has no po0er to conduct a hearin3 on the e?istence of a supervenin3 event because of res judicata. #es judicata does not set in 0here the court is 0ithout >urisdiction over the sub>ect or person, and therefore, the >ud31ent is a nullit4 8* such as the >ud31ent b4 default in this case. "he order that voided the >ud31ent b4 default and the order of restitution 1erel4 reco3niDed the nullit4 of the >ud31ent b4 default. "he orders did not ad>udicate on the 1erits of the

case. Since res judicata had not set in, the case 0as tried ane0 upon the proper service of su11ons on Silverio, Er., Esses and "ri(Star. Moreover, it is the court issuin3 the 0rit of possession that has control and supervision over its processes. 8- "he R"C !ala4an can therefore hear the evidence on the e?istence of a supervenin3 event, provided the sub>ect 1atter is 0ithin the >urisdiction of the court, as this could affect the e?ecution of the 0rit of possession. Be are, therefore, dis1a4ed 0ith the R"C !ala4anGs referral of the e?istence of the supervenin3 event to the ;hi3her courts.; Courts 1ust not shir6 fro1 their dut4 to rule on an issue. "he dut4 of the appellate or hi3her courts is to revie0 the findin3s and rulin3s of the lo0er courts, not to issue advisories. Courts 1ust e?ecute its processes and should not succu1b to threats b4 an4 of the parties to resort to violence in case of such enforce1ent. Cad the R"C !ala4an i11ediatel4 passed upon :!CIGs alle3ation of a supervenin3 event, it 0ould have been apparent that this clai1 is 0ithout 1erit. "he R"C !ala4an should have then enforced posthaste the 0rit of possession in Silverio, Er., Esses and "ri(StarGs favor. :!CIGs ac=uisition of the ;substantial and controllin3 shares of stoc6s; 87 of Esses and "ri(Star does not create a substantial chan3e in the ri3hts or relations of the parties that 0ould entitle :!CI to possession of the Calata3an Propert4, a corporate propert4 of Esses and "ri(Star. Esses and "ri(Star, >ust li6e :!CI, are corporations. corporation has a personalit4 distinct fro1 that of its stoc6holders. s earl4 as the case of &toc,hol"ers of 6. <uanzon an" &ons/ -nc. v. Register of #ee"s of 1anila ,8+ the Court e?plained the principle of separate >uridical personalit4 in this 0iseF corporation is a >uridical person distinct fro1 the 1e1bers co1posin3 it. Properties re3istered in the na1e of the corporation are o0ned b4 it as an entit4 separate and distinct fro1 its 1e1bers. Bhile shares of stoc6 constitute personal propert4, the4 do not represent propert4 of the corporation. "he corporation has propert4 of its o0n 0hich consists chiefl4 of real estate $Nelson v. O0en, 22* la., *@8, 82 So. @7A Morro0 v. )ould, 2-7 Io0a 2, 28* N.B. @-*%. share of stoc6 onl4 t4pifies an ali=uot part of the corporation5s propert4, or the ri3ht to share in its proceeds to that e?tent 0hen distributed accordin3 to la0 and e=uit4 $Call W :ale4 v. laba1a "er1inal, 2@* la */., 7+ So., 8*7%, but its holder is not the o0ner of an4 part of the capital of the corporation $!radle4 v. !auder, *+ Ohio St., 8.%. Nor is he entitled to the possession of an4 definite portion of its propert4 or assets $)ottfried v. Miller, 2,- #.S., 782A Eones v. Davis, *7 Ohio St., -@-%. "he stoc6holder is not a co(o0ner or tenant in co11on of the corporate propert4 $Carton v. Cohnston, 2++ la., *2@, 72 So., //8%. "hus, :!CIGs alle3ed controllin3 shareholdin3s in Esses and "ri(Star 1erel4 represent a proportionate or ali=uot interest in the properties of the t0o corporations. Such controllin3 shareholdin3s do not vest :!CI 0ith an4 le3al ri3ht or title to an4 of Esses and "ri(StarGs corporate properties. s a stoc6holder, :!CI has an interest in Esses and "ri(StarGs corporate properties that is onl4 e=uitable or beneficial in nature. Even assu1in3 that :!CI is the controllin3 shareholder of Esses and "ri(Star, it does not le3all4 1a6e it the o0ner of the Calata3an Propert4, 0hich is le3all4 o0ned b4 Esses and "ri(Star as distinct >uridical persons. s such, :!CI is not entitled to the possession of an4 definite portion of the Calata3an Propert4 or an4 of Esses and "ri(StarGs properties or assets. :!CI is not a co(o0ner or tenant in co11on of the Calata3an Propert4 or an4 of Esses and "ri(StarGs corporate properties. Be see no reason 0h4 the e?ecution of the 0rit of possession has been lon3 dela4ed. Possession of the Calata3an Propert4 1ust be restored to Esses and "ri(Star throu3h their representative, Silverio, Er. "here is no proof on record that Silverio, Er. has ceased to be the representative of Esses and "ri(Star in this case. 80ERE ORE, 0e )R N" the petition. "he Re3ional "rial Court, !ranch MI, !ala4an, !atan3as is ordered to i11ediatel4 e?ecute the 0rit of possession in Civil Case No. **7+ in favor of Esses Develop1ent Corporation and "ri(Star :ar1s, Inc. throu3h their representative, Ricardo S. Silverio, Er. No costs. SO ORDERED. Davide, Er., C.E., $Chair1an%, Iuisu1bin3, <nares(Santia3o, and Dcuna, EE., concur. oo(no(%' Penned b4 Eud3e Roberto '. Ma6alintal. 8 Doc6eted as Civil Case No. **7+. * Doc6eted as C ().R. SP No. 7+/8-. #ollo, pp. @,(@2. 7 Doc6eted as Civil Case No. 'P(,,(,2+*. + #ollo, pp. *7+(*7@. @ I$id*, p. 8*2. . Diesel Construction Co1pan4, Inc. v. Eollibee :oods Corporation, *., Phil. .2* $8,,,%. / I$id* 2, I$id* 22 I$id* 28 I$id*K )o v. Court of ppeals, *7. Phil. 82- $2//.%. 2* "he E?ecutive Secretar4 v. )ordon, *7/ Phil. 8++ $2//.%. 2#ollo, p. 87*. 27 I$id. 2+ I$id*, p. @-. 2@ I$id*
2 2.

Serrano v. Court of ppeals, ).R. No. 2**..* , 2, Dece1ber 8,,*, -2@ SCR -27. 2/ I$id* 8, I$id* 82 See OSC R M. CERERR , REMEDI ' ' B, Vol. II, 8,,, ed., p. -72. 88 I$id* 8* revalo v. Con. !enedicto, 27@ Phil. 2@7 $2/@-%. 8Ceirs of :rancisco )uballa, Sr. v. Court of ppeals, ).R. No. @.88*, 2/ Dece1ber 2/.., 2+. SCR 72. citin3 Vda. de Di1a4u3a vs. Ra41undo and Nable, @+ Phil. 2-* $2/-+%. 87 #ollo, pp. @,(@2. 8+ ).R. No. '(2.82+, *, October 2/+8, + SCR *@*A See also MartineD v. Court of ppeals, ).R. No. 2*2+@*, 2, Septe1ber 8,,-, -*. SCR 2*,A )ood Earth E1poriu1, Inc. v. Court of ppeals, ).R. No. .8@/@, 8@ :ebruar4 2//2, 2/- SCR 7--A Ma3sa4sa4('abrador v. Court of ppeals, ).R. No. 7.2+., 2/ Dece1ber 2/./, 2., SCR 8++.

Republic of the Philippines SUPREME COURT SECOND DIVISION G.R. No. 14<35*. Ma$21 04, 2005 MOBILIA PRO"UCTS, INC., Petitioners, vs. 0A.IME UME/A8A, Respondent. G.R. No. 14<403. Ma$21 04, 2005

PEOPLE O T0E P0ILIPPINES, Petitioners, vs. 0ON. .U"GE RUMOL"O R. ERNAN"E/ and 0A.IME UME/A8A, Respondents. DECISION CALLE.O, SR., J.= !efore the Court are t0o consolidated petitionsF a petition for revie0 on certiorari filed b4 the People of the Philippines, doc6eted as ).R. No. 2-/-,* of the Resolution 2 of the Court of ppeals $C % in C ().R. SP No. 78--, 0hich reversed its decision and 3ranted the petition for certiorari, prohibition and 1anda1us filed b4 respondent Ca>i1e #1eDa0aA and the petition for revie0 on certiorari doc6eted as ).R. No. 2-/*7@ filed b4 petitioner Mobilia Products, Inc. $MPI%, the intervenor in the C , assailin3 the sa1e Resolution of the appellate court. "he ntecedents "he antecedents 0ere a1pl4 su11ariDed b4 the Office of the Solicitor )eneral $OS)% in the petition at bar, to 0itF Mobilia Products, Inc. is a corporation en3a3ed in the 1anufacture and e?port of =ualit4 furniture 0hich caters onl4 to the purchase orders boo6ed and placed throu3h Mobilia Products Eapan, the 1other co1pan4 0hich does all the 1ar6etin3 and boo6in3. fter orders fro1 custo1ers are boo6ed at the 1other co1pan4 in Eapan, the sa1e are coursed throu3h Mobilia Philippines for i1ple1entation and production, after 0hich, the ordered ite1s are shipped to Eapan throu3h the 1other co1pan4. Mobilia Products Eapan sent Ca>i1e #1eDa0a to the Philippines in order to head Mobilia Products, Inc. as President and )eneral Mana3er. "o =ualif4 hi1 as such and as a !oard Director, he 0as entrusted 0ith one no1inal share of stoc6. So1eti1e in the last 0ee6 of Eanuar4 2//7, #1eDa0a, then the President and )eneral Mana3er of Mobilia Products, Inc., or3aniDed another co1pan4 0ith his 0ife &i1i6o, and his sister, Mitsu4o <a3uchi, to be 6no0n as ste1 Philippines Corporation, F5(1o3( (1% JnoF4%d6% o7 (1% C1a5$-an and C15%7 EL%23(5,% O7752%$ S3'3-o Koda5$a and (1% o(1%$ -%-)%$' o7 (1% Boa$d o7 "5$%2(o$' o7 Mo)545a. "he said co1pan4 0ould be en3a3ed in the sa1e business as Mobilia. Spouses #1eDa0a recruited Eustin 'e3aspi, for1er Production Mana3er of Mobilia, to act as Mana3er and one <oshi6aDu Ca4ano of Phoeni? Marble Corporation to serve as investors KsicL. Pendin3 for1al or3aniDation, Spouses #1eDa0a, Eustin 'e3aspi and <oshi6aDu Ca4ano 0anted to accelerate the 1ar6et potentials of ste1 b4 participatin3 in the International :urniture :air 2//7 held at the Bord "rade Centre of Sin3apore on March + to 2,, 2//7. One of the re=uire1ents of such :air 0as that the furniture e?hibits 1ust arrive and be received at Sin3apore not later than :ebruar4 8*, 2//7. Pressed for ti1e, 0ith less than one 1onth to prepare and 0hile ste1 had 4et no e=uip1ent and 1achiner4, no staff and no read4 personnel, #1eDa0a, 0ith 3rave abuse of the confidence reposed on hi1 as President and )eneral Mana3er of Mobilia Products, Inc., and in conspirac4 0ith his 0ife, his sister Mitsu4o <a3uchi, <oshi6aDu Ca4ano and Eustin 'e3aspi, all 0ith intent to 3ain for the1selves and for their co1pan4 ste1 Philippines Corporation, stole protot4pe furniture fro1 petitioner Mobilia so that the said pieces of furniture 0ould be presented and e?hibited as belon3in3 to ste1 in the International :urniture :air G/7 in Sin3apore. In order to avoid detection, #1eDa0a contacted Cenr4 Chua, the o0ner of De0 :oa1, one of the suppliers of Mobilia, for that the latter to load several pieces of protot4pe furniture into a De0 :oa1 truc6 and store the1 at the De0 :oa1 0arehouse. "he first batch of furniture 0as stolen on :ebruar4 ., 2//7, 0hen Mr. Cenr4 Chua, upon the re=uest of respondent #1eDa0a, caused to be loaded into his De0 :oa1 truc6 t0o protot4pe sofa 1odels 0orth P7,,,,,,.,,, after 0hich, the sa1e 0ere spirited fro1 the Mobilia co1pound, then transported and stored in Cenr4 ChuaGs 0arehouse. 3ain, on :ebruar4 2., 2//7, #1eDa0a, 0ith 3rave abuse of confidence and ta6in3 advanta3e of his position as President and )eneral Mana3er, unla0full4 stole e?pensive furniture fro1 MobiliaGs factor4 0orth P8,/+-,.@7.,,. In order to avoid detection, the said furniture 0ere loaded in the truc6 belon3in3 to De0 :oa1, 0ith respondent #1eDa0a personall4 supervisin3 the loadin3, the cartin3 and spiritin3 a0a4 of the said furniture. "hus, ta6in3 advanta3e of his position as )eneral Mana3er, he 1ana3ed to have the said furniture ta6en out of the co1pan4 pre1ises and passed the co1pan4 3uard 0ithout an4 proble1 and difficult4. :urther, on :ebruar4 2/, 2//7, around 2 oGcloc6 in the afternoon, respondent #1eDa0a a3ain loaded into his 1otor vehicle, and too6 a0a4 fro1 co1pan4 pre1ises under the sa1e irre3ular and unla0ful circu1stances, an e?pensive three(seater sofa 0orth P877,,,,.,,. "he ta6in3 out of the said furniture 0as effected in violation of the standard procedures established b4 petitioner corporation 0hich re=uires that ever4 ship1ent or ta6in3 out of the furniture be chec6ed and revie0ed b4 MobiliaGs Production, Plannin3, Inventor4 Costin3 and Control $PPICC% Division. ll the fore3oin3 furniture 0ere transported to and stored at Cenr4 ChuaGs 0arehouse. fter so1eti1e, the fore3oin3 furniture 0ere photo3raphed for slide photos at Photo :olio at the Recla1ation rea, Cebu Cit4 and then finall4 catalo3ued for use in the Sin3apore :air for the use of ste1 and its supposed o0ners, na1el4F spouses #1eDa0a, Ca4ano and 'e3aspi. "he fore3oin3 furniture 1odels 0ere finall4 shipped for e?hibition at the International :urniture :air G/7 in Sin3apore as furniture belon3in3 to ste1 Philippines Corporation. So1eti1e in March 2//7, based on orders boo6ed for ste1, #1eDa0a, 0ith unfaithfulness and abuse of confidence reposed on hi1 as the President and )eneral Mana3er of petitioner Mobilia, ordered and caused the 1anufacture of ei3ht4(nine $./% pieces of furniture 0ith a total value of P2@,2,.,7,,.,,. "he said pieces of furniture 0ere 1ade 0ith Mobilia supplies, 1aterials and 1achineries, as 0ell as 0ith Mobilia ti1e and personnel, all of 0hich 0ere under the ad1inistration and control of #1eDa0a as President and )eneral Mana3er. "he said 1aterials and supplies, the ti1e and labor, 0ere supposed to be used for the 1anufacture and production of =ualit4 furniture for the EMC'#SIVE #SE of Mobilia. Co0ever, #1eDa0a, in violation of his dut4 to appl4 the sa1e for the use of Mobilia and the dut4 to account for the sa1e, converted their use for the benefit of ste1 or for the use and benefit of #1eDa0a, his 0ife and sister, <oshi6aDu Ca4ano and 'e3aspi, 1uch to the da1a3e and pre>udice of Mobilia Products. "he sa1e furniture could also have been ta6en out of the co1pan4 pre1ises b4 #1eDa0a and cohorts for ship1ent and deliver4 to ste1 custo1ers had it not been for the ti1el4 discover4 of the previous theft. O 8 "he !oard of Directors of MPI, consistin3 of its Chair1an Susu1o &odaira and 1e1bers <asushi &ato and Rolando Nonato, approved a Resolution on Ma4 8, 2//7 authoriDin3 the filin3 of a co1plaint a3ainst #1eDa0a

for t0o counts of =ualified theft alle3edl4 co11itted on :ebruar4 2. and 2/, 2//7. ttached to the co1plaint 0as the Eoint ffidavit of Danilo 'allaban, )eor3e del Rio and <asushi &ato. "he case 0as doc6eted as I.S. No. /7( 8@7. On Ma4 27, 2//7, the public prosecutor filed an Infor1ation for =ualified theft a3ainst #1eDa0a 0ith the Re3ional "rial Court $R"C% of 'apu('apu Cit4. "he accusator4 portion of the Infor1ation, doc6eted as Cri1inal Case No. ,2*8*2(', readsF "hat durin3 or about the period co1prised bet0een the 2.th and 2/th da4 of :ebruar4 2//7, in the Cit4 of 'apu( 'apu, Philippines, 0ithin the >urisdiction of this Conorable Court, the accused, 0hile bein3 then the President and )eneral Mana3er of Mobilia Products, Inc., a corporation en3a3ed in the 1anufacture and e?port of furniture, holdin3 office and doin3 business in the Mactan E?port Processin3 Vone, 'apu('apu Cit4, 0ith 3rave abuse of the confidence reposed upon hi1 b4 his e1plo4er, 0ith intent to 3ain, did then and there 0illfull4, unla0full4 and feloniousl4 ta6e, steal and carr4 a0a4 fro1 the corporationGs factor4 in Mactan E?port Processin3 Vone, 'apu( 'apu Cit4, e?pensive pieces of furniture, to 0itF 2% 2 set, Model No. *, 8(seater )er1an leather sofa, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 8,.,287.,, 8% 2 set, Model No. ., 8(seater )er1an leather sofa, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P *27,,,,.,, *% 2 set, Model No. 7, 8(seater )er1an leather sofa, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2,.,,,,.,, -% 2 set, Model No. -, 8(seater )er1an leather sofa, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 8@@,7,,.,, 7% 2 set, Model No. +, 2(seater )er1an leather sofa, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2-+,87,.,, +% 2 set, Model No. 8, 8(seater )er1an leather sofa, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 887,,,,.,, @% 2 set, Model No. 2, 8(seater )er1an leather sofa, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 8@7,,,,.,, .% 2 piece, Model "able No. 8, Italian 1arble table, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P /*,@7,.,, /% 2 piece, Model "able No. -, Italian 1arble table, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2,7,,,,.,, 2,% 8 pieces, Model Pedestal No. +, Italian 1arble pedestal, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( P 27,,,,,.,, 22% 2 piece, Model Colu1n Standard No. 22, Italian 1arble 0orth ( ( ( ( ( ( ( ( ( ( ( ( P /*,@7,.,, 28% 2 piece, Model "able No. 2, Italian 1arble table, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2,7,,,,.,, 2*% 2 piece, Model Ci3h "able No. 2,, Italian 1arble, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2.@,7,,.,, 2-% 2 piece, Model "able No. ., Italian 1arble table, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2.@,7,,.,, 27% 2 piece, Model "able No. @ Italian 1arble table, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2.@,7,,.,, 2+% 2 piece, Model "able No. 7 Italian 1arble table, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 228,7,,.,, 2@% 2 piece, Model "able No. /, Italian 1arble table, 0orth ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 2.@,7,,.,, 2.% *(seater sofa, 0orth( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( ( P 877,,,,.,, 0ith an a33re3ate value of P*,82/,.@7.,,, Philippine currenc4, 0ithout the consent of his e1plo4er, to the da1a3e and pre>udice of Mobilia Products, Inc., in the said a1ount of P*,82/,.@7.,,. Contrar4 to la0.* On 1otion of the prosecution, the trial court issued a 0rit of preli1inar4 attach1ent coverin3 the properties of #1eDa0a. #1eDa0a then filed an O1nibus Motion to =uash the infor1ation filed a3ainst hi1, the dischar3e of the 0rit of attach1ent issued b4 the trial court, and to set the case for preli1inar4 investi3ation. MPI, the private co1plainant therein, opposed the 1otion. In the 1eanti1e on Eul4 82, 2//7, MPI filed another cri1inal co1plaint for =ualified theft a3ainst #1eDa0a, his 0ife &i1i6o #1eDa0a, Mitsu4o <a3uchi, Eustin 'e3aspi, <oshi6aDu Ca4ano and Cenr4 Chua alle3edl4 co11itted in March 2//7, 0ith the Office of the Cit4 Prosecutor. "he case 0as doc6eted as I.S. No. /7(--8. On Eul4 87, 2//7, the trial court issued an Order in Cri1inal Case No. ,2*8*2(' den4in3 the o1nibus 1otion. On >oint 1otion of #1eDa0a and the public prosecutor, the trial court ordered a reinvesti3ation of the case. Confor1abl4, the public prosecutor conducted a reinvesti3ation of Cri1inal Case No. ,2*8*2(' >ointl4 0ith I.S. No. /7(--8. On Septe1ber 87, 2//7, #1eDa0a filed a petition 0ith the Securities and E?chan3e Co11ission $SEC%, doc6eted as SEC Case No. ,,8/2/, for the nullification of the Resolution issued b4 the three alle3ed 1e1bers of MPI !oard of Directors, authoriDin3 the filin3 of cri1inal co1plaints a3ainst hi1 in behalf of the corporation. On Eanuar4 *, 2//+, the public prosecutor issued a Eoint Resolution findin3 probable cause for =ualified theft and one count of estafa a3ainst #1eDa0a, and dis1issin3 the case a3ainst the other accused. "he Prosecutor 1aintained his findin3 of probable cause a3ainst #1eDa0a in Cri1inal Case No. ,2*8*2('. On :ebruar4 8,, 2//+, the public prosecutor filed an Infor1ation for =ualified theft 0ith the R"C of 'apu('apu Cit4 a3ainst #1eDa0a, doc6eted as Cri1inal Case No. ,2*-8*('. "he accusator4 portion readsF "hat on the .th da4 of :ebruar4 2//7, in the Cit4 of 'apu('apu, Philippines, 0ithin the >urisdiction of this Conorable Court, the above(na1ed accused, 0hile bein3 the President and )eneral Mana3er of Mobilia Products, Inc., a corporation en3a3ed in the 1anufacture and e?port of =ualit4 furniture, 0hose principal place of business is at the Mactan E?port Processin3 Vone, 'apu('apu Cit4, 0ith intent to 3ain, 0ithout the consent of his e1plo4er, and 0ith 3rave abuse of confidence, did then and there 0illfull4, unla0full4 and feloniousl4 ta6e, steal and carr4 a0a4 fro1 the corporationGs factor4 the follo0in3 e?pensive pieces of furniture, to 0itF

2% 2 set, Model No. 8, 8(seater )er1an leather sofa, all valued at . . . . . . . . . . . . . . P 887,,,,.,, 8% 2 set, Model No. 2, 8(seater )er1an leather sofa, all valued at . . . . . . . . . . . . . . . . P 8@7,,,,.,, 0ith an a33re3ate value of P7,,,,,,.,, Philippine Currenc4, to the da1a3e and pre>udice of Mobilia Products, Inc. CON"R R< "O ' B.nother Infor1ation for estafa 0as thereafter filed a3ainst the sa1e accused, doc6eted as Cri1inal Case No. ,2*-8-('. "he accusator4 portion readsF "hat so1eti1e in March 2//7, in the Cit4 of 'apu('apu, Philippines, 0ithin the >urisdiction of this Conorable Court, the above(na1ed accused, b4 1eans of unfaithfulness and abuse of confidence reposed upon hi1 as the President and )eneral Mana3er of Mobilia Products, Inc., did then and there 0illfull4, unla0full4 and feloniousl4 1isappropriate and convert to his o0n personal use and benefit the a1ount of Seventeen Million One Cundred Ei3ht "housand :ive Cundred $P2@,2,.,7,,.,,% Pesos, Philippine Currenc4, 0hich 0as the total value of the furnitures ordered and 1anufactured b4 the accused or at his instance usin3 Mobilia supplies, 1aterials and 1achineries, as 0ell as ti1e and personnel 0hich 0ere supposed to be for the e?clusive use of Mobilia Products, Inc. but 0ere converted for the use and benefit of the accused and ste1 Philippines Corporation, a co1pan4 or fir1 en3a3ed in the sa1e business as that of Mobilia Products, Inc., 0hich is, KinL the 1anufacture and production of =ualit4 furniture for e?port, o0ned b4 the accused, to the da1a3e and pre>udice of Mobilia Products, Inc. CON"R R< "O ' B.7 On pril 87, 2//+, #1eDa0a filed a 1otion for the suspension of the proceedin3s on the 3round of the pendenc4 of his petition 0ith the SEC in Case No. ,,8/2/. "he trial court, ho0ever, issued an Order on Ma4 82, 2//+, den4in3 the said 1otion. It held that the filin3 and the pendenc4 of a petition before the SEC did not 0arrant a suspension of the cri1inal cases. On Septe1ber 87, 2//., #1eDa0a 0as arrai3ned and pleaded not 3uilt4. On Septe1ber *,, 2//., #1eDa0a filed ane0 a Eoint Motion to Iuash the Infor1ations in Cri1inal Cases Nos. ,2*8*2(' and ,2*-8*(', on the 3round that the facts alle3ed therein did not constitute the felon4 of =ualified theft. #1eDa0a clai1ed that based on the Eoint ffidavit of the 0itnesses for the prosecution sub1itted durin3 the preli1inar4 investi3ation, <asushi &ato and )eor3e del Rio, MPI Vice(President and the head of the #pholster4 Depart1ent, respectivel4, the appropriate char3e should be estafa and not =ualified theft. #1eDa0a further clai1ed that for their failure to ob>ect to and resist his alle3ed delictual acts, the said 0itnesses 0ere as 3uilt4 as he 0as and should have been included in the Infor1ation. Ce also asserted that there 0as, li6e0ise, no alle3ation in the Infor1ations as to 0ho 0as the o0ner of the articles stolenA hence, there 0as no offended part4. Ce noted that the Infor1ations 1erel4 alle3ed that MPI 0as his e1plo4er. Ce further posited that there 0as no valid char3e a3ainst hi1 because the resolution authoriDin3 the filin3 of the cases a3ainst hi1 0as approved b4 a 1ere 1inorit4 of the 1e1bers of the MPI !oard of Directors. + #1eDa0a, li6e0ise, filed a Motion to Iuash @ the Infor1ation in Cri1inal Case No. ,2*-8-(' on the 3round that the facts alle3ed in the Infor1ation did not constitute the felon4 of estafa. Ce posited that the Infor1ation did not contain an4 alle3ation that an4 de1and 0as 1ade for hi1 to return the 3oods. :urther1ore, the o0ner of the said articles 0as not specified. Ce noted that as 3leaned fro1 the Eoint ffidavit of the 0itnesses for the prosecution, there 0as no la0ful private co1plainant. Ce reiterated that the MPI board resolution authoriDin3 the filin3 of the char3e a3ainst hi1 0as not approved b4 the 1a>orit4 of the 1e1bers of its board of directors. #1eDa0a also alle3ed that the char3e for estafa 0ith abuse of confidence 0as alread4 included in the char3e for =ualified theft, 0here it 0as alle3ed that he co11itted theft 0ith abuse of confidenceA hence, the char3e for estafa should be =uashed, other0ise, he 0ould be placed in double >eopard4. "he 1otion 0as dul4 opposed b4 the prosecution. On Eanuar4 8/, 2///, the trial court issued a Eoint Order . dis1issin3 the cases for lac6 of >urisdiction. It held that the dispute bet0een the private co1plainant and the accused over the o0nership of the properties sub>ect of the char3es is intra(corporate in nature, and 0as 0ithin the e?clusive >urisdiction of the SEC. It ruled that #1eDa0a, as a 1e1ber of the board of directors and president of MPI, 0as also a stoc6holder thereof. Bhile #1eDa0a clai1ed to be the $ona fide o0ner of the properties sub>ect of the Infor1ations 0hich he appropriated for hi1self, the private co1plainant disputes the sa1eA hence, accordin3 to the trial court, the conflictin3 clai1s of the parties should be resolved b4 the SEC. "he private and public prosecutors received their respective copies of the Eoint Order on :ebruar4 8, 2///. "he MPI, throu3h the private prosecutor, filed a 1otion for reconsideration of the >oint order of the court and for the reinstate1ent of the cases on :ebruar4 27, 2///. "he MPI relied on the follo0in3 3roundsF a. "he Conorable Court has >urisdiction and 1ust e?ercise it over these casesA b. "he above(entitled case is not an intra(corporate controvers4A and c. "he accused could not clai1 o0nership nor co(o0nership of the properties of private co1plainant corporation./ "he MPI 1aintained that the trial court had >urisdiction over the cases and cited Section 7 of Presidential Decree $P.D.% No. /,8( , 0hich provides the rules on cases over 0hich the SEC has ori3inal and e?clusive >urisdiction. cop4 of the 1otion 0as served on the public prosecutor for his approval. Co0ever, the public prosecutor did not affi? his confor1it4 to the 1otion, and instead opted to appear before the trial court durin3 the hearin3 of the sa1e. Durin3 the hearin3, both the public and private prosecutors appeared. In support of his 1otion, the private prosecutor ar3ued that the trial of the case 1ust be done in the presence of and under the control and supervision of the public prosecutor.2, "he trial court denied the 1otion in an Order dated pril 2/, 2///. It held that the SEC, not the trial court, had >urisdiction over intra(corporate controversies. It also ruled that the 1otion of the private co1plainant 0as pro forma, it appearin3 that the public prosecutor had not approved the sa1e. "he public prosecutor received a cop4 of the Order on pril 8,, 2///. On pril 8+, 2///, the People of the Philippines, throu3h the OS), filed a petition for certiorari and mandamus 0ith the C a3ainst Presidin3 Eud3e Ru1uldo R. :ernandeD and #1eDa0a, doc6eted as C ().R. SP No. 78--,. "he C allo0ed the MPI to intervene as petitioner, and ad1itted its petition( in(intervention. "he People of the Philippines, as the petitioner therein, raised the follo0in3 issuesF

I BCE"CER OR NO" I" IS "CE 'E) ' ND MINIS"ERI ' D#"< O: "CE RE)ION ' "RI ' CO#R" "O " &E CO)NIV NCE ND E#RISDIC"ION O: "CESE S#!EEC" CRIMIN ' C SESA II BCE"CER OR NO" "CE SEC#RI"IES ND EMCC N)E COMMISSION C S E#RISDIC"ION OVER "CE CRIMIN ' C SES ) INS" RESPONDEN" C EIME #MEV B A III BCE"CER OR NO" RESPONDEN" E#D)E COMMI""ED )R VE !#SE O: DISCRE"ION MO#N"IN) "O ' C& OR EMCESS O: E#RISDIC"ION IN DISMISSIN) "CE CRIMIN ' C SES ND DEN<IN) PE"I"IONERGS MO"ION :OR RECONSIDER "ION.22 "he People asserted that the controvers4 involvin3 the cri1inal cases 0as not bet0een #1eDa0a and the other stoc6holders of MPI, but one bet0een hi1 as the accused therein and the People of the Philippines. It averred that under Section 8,$b% of !atas Pa1bansa $!.P.% !l3. 28/, the R"C has e?clusive >urisdiction over the cases a3ainst #1eDa0a. It also alle3ed that in dis1issin3 the cri1inal cases a3ainst #1eDa0a on the 3round that it had no >urisdiction over the cri1es char3ed, the R"C co11itted 3rave abuse of its discretion a1ountin3 to e?cess or lac6 of >urisdiction. On Septe1ber 8, 2///, the C rendered >ud31ent 3rantin3 the petition and nullif4in3 the assailed Orders of the R"C. It ruled that the issue of o0nership of the properties sub>ect of the Infor1ations 0as not an intra(corporate dispute. It held that #1eDa0a, althou3h president and 3eneral 1ana3er of the MPI and a stoc6holder thereof, 0as not a >oint o0ner or co(o0ner of the personal properties sub>ect of the char3es. It also held that the dispute bet0een a private corporation and an4 of its stoc6holders relative to the o0nership of properties does not ipso facto ne3ate the >urisdiction of the R"C over the cri1inal cases under !.P. !l3. 28/, as a1ended. It also declared that the 1aterial aver1ents of the Infor1ations sufficientl4 char3ed =ualified theft and estafa. #1eDa0a filed a 1otion for the reconsideration of the decision of the C . In a co1plete volte face, the appellate court issued a Resolution on u3ust ., 8,,2, 3rantin3 the 1otion and reversin3 its decision. It affir1ed the rulin3 of the R"C that the dispute bet0een #1eDa0a and the other stoc6holders and officers over the i1ple1entation of the MPIGs standard procedure is intra(corporate in natureA hence, 0ithin the e?clusive >urisdiction of the SEC. Citin3 Section 7$a%$b% of P.D. No. /,8( , and the rulin3 of this Court in Alleje v* Court of Appeals,28 the appellate court ruled that based on the 1aterial alle3ations of the Solicitor )eneral in the petition before the C , the SEC had e?clusive >urisdiction over the conflictin3 clai1s of the parties. It li6e0ise affir1ed the rulin3 of the R"C that the absence of an4 alle3ation in the Infor1ation that the MPI 0as the o0ner of the properties sub>ect of the Infor1ation is fatal. "he petitioner MPI filed the instant petition for revie0 on certiorari, raisin3 the follo0in3 issuesF I BCE"CER OR NO" "CE SEC#RI"IES ND EMCC N)E COMMISSION C S E#RISDIC"ION OVER "CE CRIMIN ' C SES ) INS" #MEV B . II BCE"CER OR NO" '' "CE NECESS R< E'EMEN"S O: "CE CRIMES O: I# 'I:IED "CE:" ND ES0AFA RE S#::ICIEN"'< ''E)ED IN "CE IN:ORM "IONS. III EVEN SS#MIN) A#4CE1D% "C " "CE : C"S ''E)ED DO NO" CONS"I"#"E N O::ENSE "CE CORREC" R#'IN) IS NO" "O DISMISS "CE C SE !#" "O ORDER MENDMEN". IV BCE"CER OR NO" "CE S" "E CS 'OS" I"S RI)C" "O PPE '. V BCE"CER OR NO" "CE MO"ION :OR RECONSIDER "ION O: #MEV B IS P#% F%#MA.2* "he People of the Philippines filed a separate petition for revie0 on certiorari, contendin3 thatF 2. "CE CO#R" O: PPE 'S COMMI""ED SERIO#S ERRORS O: ' B ND )R VE !#SE O: DISCRE"ION IN :INDIN) "C " "CE PE"I"ION :OR M ND M#S, CER"IOR RI ND INE#NC"ION B S :I'ED O#" O: "IME ND "C " PE"I"IONER C S 'OS" I"S RI)C" "O PPE 'A 8. "CE CO#R" O: PE 'S COMMI""ED SERIO#S ERRORS O: ' B IN R#'IN) "C " NO" '' "CE E'EMEN"S O: I# 'I:IED "CE:" ND ES" : RE PRESEN"A *. "CE CO#R" O: PPE 'S COMMI""ED !' " N" ND SERIO#S ERRORS O: ' B IN :INDIN) "C " "CE SEC#RI"IES ND EMCC N)E COMMISSION $SEC% C S E#RISDIC"ION OVER "CE S#!EEC" CRIMIN ' C SESA -. "CE CO#R" O: PPE 'S COMMI""ED SERIO#S ERRORS O: ' B ND )R VE !#SE O: DISCRE"ION IN )IVIN) D#E CO#RSE "O "CE PRO(:ORM MO"ION :OR RECONSIDER "ION O: #MEV B . 2"he t0o petitions 0ere consolidated in the Second Division of the Court. "he threshold issues for resolution are the follo0in3F $a% 0hether or not the petition for certiorari of the People of the Philippines in the C assailin3 the Eanuar4 8/, 2/// Eoint Order of the trial court 0as ti1e(barredA $b% 0hether the R"C has >urisdiction over the cri1es char3ed in the said Infor1ationsA $c% 0hether the Infor1ations sufficientl4 char3e the felonies of =ualified theft and estafaA and $d% if in the affir1ative, 0hether all the ele1ents of =ualified theft and estafa are alle3ed in the Infor1ations. On the first issue, the C held that the Public Prosecutor failed to file a 1otion for the reconsideration of the trial courtGs Eanuar4 8/, 2/// Eoint Order dis1issin3 the cases, that is, 0ithin fifteen da4s fro1 receipt of a cop4 of the said order on :ebruar4 8, 2///A neither did the People appeal the said Order 0ithin the period therefor. "hus, accordin3 to the C , the People filed its petition for certiorari, prohibition and mandamus assailin3 the Eanuar4 8/, 2/// Eoint Order of the trial court onl4 on pril 8+, 2///, 0ell be4ond the +,(da4 period therefor. "he appellate court, li6e0ise, held that the filin3 of the 1otion for reconsideration of the said Eoint Order b4 the private prosecutor 0ithout the confor1it4 of the Public Prosecutor did not toll the period for the People to file its 1otion for reconsideration thereof, or to appeal therefro1, or to file a petition for certiorari, prohibition or 1anda1us. It ruled that, havin3 lost its ri3ht to appeal in due course, the People 0as proscribed fro1 filin3 a petition for certiorari, prohibition or 1anda1us. "he C declared that the 1otion for reconsideration filed b4 petitioner MPI of the Eoint Order of the R"C is pro forma, the public prosecutor not havin3 si3nified his 0ritten confor1it4 thereto. On the other hand, the petitioner People of the Philippines insists that 0hile the public prosecutor did not e?pressl4 confor1 to the 1otion for reconsideration of the Eanuar4 8/, 2/// Eoint Order of the trial court filed b4 the private prosecutor, throu3h the public prosecutorGs presence durin3 the hearin3 of the said 1otion, his

supervision and control over the private prosecutor durin3 the said hearin3, he in effect adopted and confor1ed to the said 1otion for reconsideration. In his co11ent on the petitions, respondent #1eDa0a 1aintains that the 1otion for reconsideration of the >oint order of the trial court filed b4 the private prosecutor did not interrupt the period 0ithin 0hich the People could appeal, citin3 the rulin3 of this Court in Ca$ral v* Puno*27 "he respondent posits that the findin3 of the trial court, 0hich 0as affir1ed b4 the C , that the public prosecutor did not confor1 to the 1otion for reconsideration of the private prosecutor, is bindin3 on this Court. "he respondent also avers that the petitioner has no personalit4 to file the petition. Moreover, he insists that 0hether the public prosecutor confor1ed to the private prosecutorGs 1otion for reconsideration is a =uestion of fact 0hich is not proper in a petition for revie0 on certiorari. "he CourtGs Rulin3 "he contention of the petitioner People of the Philippines is not correct. ll cri1inal actions co11enced b4 co1plaint or infor1ation shall be prosecuted under the direction and control of the public prosecutor. 2+ Bhen the civil action for civil liabilit4 is instituted in the cri1inal action pursuant to Rule 222 of the Rules on Cri1inal Procedure, the offended part4 1a4 intervene, b4 counsel, in the prosecution of the offense. 2@ In #amiscal( )r* v* Sandi"an$ayan,2. 0e held that under Section 2+, Rule 22, of the Rules of Cri1inal Procedure, the offended part4 1a4 intervene in the cri1inal action personall4 or b4 counsel, 0ho 0ill then act as private prosecutor for the protection of his interests and in the interest of the speed4 and ine?pensive ad1inistration of >ustice. separate action for the purpose 0ould onl4 prove to be costl4, burdenso1e and ti1e(consu1in3 for both parties and further dela4 the final disposition of the case. "he 1ultiplicit4 of suits 1ust be avoided. Bith the i1plied institution of the civil action in the cri1inal action, the t0o actions are 1er3ed into one co1posite proceedin3, 0ith the cri1inal action predo1inatin3 the civil. "he pri1e purpose of the cri1inal action is to punish the offender in order to deter hi1 and others fro1 co11ittin3 the sa1e or si1ilar offense, to isolate hi1 fro1 societ4, refor1 and rehabilitate hi1 or, in 3eneral, to 1aintain social order. 2/ "he intervention of the private offended part4, throu3h counsel, and his prosecution of the case shall be under the control and supervision of the public prosecutor until the final ter1ination of the case. public prosecutor 0ho has been entrusted b4 la0 0ith the prosecution of cri1inal cases is dut4(bound to ta6e char3e thereof until its final ter1ination, for under the la0, he assu1es full responsibilit4 for his failure or success since he is the one 1ore ade=uatel4 prepared to pursue it to its ter1ination. 8, "he prosecution of offenses is a public function. Indeed, the sole purpose of the civil action is the resolution, reparation or inde1nification of the private offended part4 for the da1a3e or in>ur4 he sustained b4 reason of the delictual or felonious act of the accused. 82 #nder rticle 2,- of the Revised Penal Code, the follo0in3 are the civil liabilities of the accusedF R". 2,-. .!at is included in civil lia$ility .9 "he civil liabilit4 established in rticles 2,,, 2,2, 2,8 and 2,* of this Code includesF 2. RestitutionA 8. Reparation of the da1a3e causedA *. Inde1nification for conse=uential da1a3es. "hus, 0hen the offended part4, throu3h counsel, has asserted his ri3ht to intervene in the proceedin3s, it is error to consider his appearance 1erel4 as a 1atter of tolerance.88 "he public prosecutor 1a4 turn over the actual prosecution of the cri1inal case, in the e?ercise of his discretion, but he 1a4, at an4 ti1e, ta6e over the actual conduct of the trial. Co0ever, it is necessar4 that the public prosecutor be present at the trial until the final ter1ination of the caseA other0ise, if he is absent, it cannot be 3ainsaid that the trial is under his supervision and control. 8* In a cri1inal case in 0hich the offended part4 is the State, the interest of the private co1plainant or the offended part4 is li1ited to the civil liabilit4 arisin3 therefro1. Cence, if a cri1inal case is dis1issed b4 the trial court or if there is an ac=uittal, a reconsideration of the order of dis1issal or ac=uittal 1a4 be underta6en, 0henever le3all4 feasible, insofar as the cri1inal aspect thereof is concerned and 1a4 be 1ade onl4 b4 the public prosecutorA or in the case of an appeal, b4 the State onl4, throu3h the OS). "he private co1plainant or offended part4 1a4 not underta6e such 1otion for reconsideration or appeal on the cri1inal aspect of the case.8- Co0ever, the offended part4 or private co1plainant 1a4 file a 1otion for reconsideration of such dis1issal or ac=uittal or appeal therefro1 but onl4 insofar as the civil aspect thereof is concerned. 87 In so doin3, the private co1plainant or offended part4 need not secure the confor1it4 of the public prosecutor. If the court denies his 1otion for reconsideration, the private co1plainant or offended part4 1a4 appeal or file a petition for certiorari or mandamus, if 3rave abuse a1ountin3 to e?cess or lac6 of >urisdiction is sho0n and the a33rieved part4 has no ri3ht of appeal or 3iven an ade=uate re1ed4 in the ordinar4 course of la0. "he public and private prosecutors are not precluded, 0henever feasible, fro1 filin3 a >oint 1otion for the reconsideration of the dis1issal of the case or the ac=uittal of the accused, on the cri1inal and civil aspects of the cases. In the present case, onl4 petitioner MPI, throu3h counsel, filed a 1otion for the reconsideration of the trial courtGs Eoint Order dated Eanuar4 8/, 2///, pra4in3 for the reinstate1ent of the cases insofar as the civil aspect thereof is concerned. "he public prosecutor did not approve nor confor1 to the said 1otion. lthou3h petitioner MPI provided a1ple space for the said confor1it4 of the public prosecutor, the latter did not do soA he 1erel4 appeared durin3 the hearin3 of the said 1otion 0ith the private prosecutor 0hen the latter presented his oral ar3u1ents in support of the said 1otion. "he fact that the public prosecutor did not confor1 to the said 1otion, ho0ever, does not 1ean that the sa1e is pro forma. It 1ust be stressed that the propriet4 and efficac4 of the 1otion, insofar as the civil aspect of the cases is concerned, is not dependent upon the confor1it4 of the public prosecutor. Cence, the filin3 of the >oint 1otion for reconsideration effectivel4 suspended the runnin3 of the period for petitioner MPI to assail the >oint order in the C via an appeal or a special civil action for certiorari or mandamus under Rule +7 of the Rules of Court. Co0ever, since the public prosecutor did not file an4 1otion for the reconsideration of the >oint order nor confor1 to the 1otion of petitioner MPI, insofar as the cri1inal aspect of the cases is concerned, the period for the State to assail the said >oint order 0as not suspended. Onl4 the 1otion for reconsideration filed b4 the public prosecutor of the >oint order of dis1issal of the cases could have tolled the period 0ithin 0hich the State could appeal, insofar as the cri1inal aspect of the cases 0as concerned. "he bare fact that the public prosecutor appeared for the State durin3 the hearin3 of the 1otion for reconsideration of petitioner MPI does not a1ount to or constitute his adoption of the said 1otion as that of the State. s ruled b4 this Court in Ca$ral v* PunoF8+

Bhile it is true that the offended part4, Silvino San Die3o, throu3h the private prosecutor, filed a 1otion for reconsideration 0ithin the re3le1entar4 fifteen(da4 period, such 1ove did not stop the runnin3 of the period for appeal. Ce did not have the le3al personalit4 to appeal or file the 1otion for reconsideration on his behalf. "he prosecution in a cri1inal case throu3h the private prosecutor is under the direction and control of the :iscal, and onl4 the 1otion for reconsideration or appeal filed b4 the :iscal could have interrupted the period for appeal. 8@ Be a3ree 0ith the rulin3 of the C that the petition for certiorari filed b4 the petitioner People of the Philippines 0ith the C on pril 8+, 2/// 0as filed be4ond the +,(da4 period as provided in Section -, Rule +7 of the Rules of Court,8. it appearin3 that the public prosecutor received a cop4 of the >oint order of the trial court on :ebruar4 8, 2///, and, thus, had onl4 until pril *, 2/// 0ithin 0hich to file the said petition. Even then, the Court still holds that the C erred in dis1issin3 the petition of the People of the Philippines si1pl4 because the public prosecutor erred in not hi1self filin3 a 1otion for reconsideration of the >oint order of the trial court, on his perception that b4 bein3 present durin3 the hearin3 of the 1otion for reconsideration of petitioner MPI, he thereb4 adopted the said 1otion as that of the StateGs. "he settled rule is that the State is not estopped b4 the 1ista6es of its officers and e1plo4ees. Indeed, in Cru&( )r* v* Court of Appeals(8/ the Court declaredF O Estoppel does not lie a3ainst the 3overn1ent because of the supposedl4 1ista6en acts or o1issions of its a3ents. s 0e declared in People v. CastaXeda, ;there is the lon3 fa1iliar rule that erroneous application and enforce1ent of the la0 b4 public officers do not bloc6 subse=uent correct application of the statute and that the 3overn1ent is never estopped b4 1ista6e or error on the part of its a3ents.; "he Court also held in C!ua v* Court of AppealsF*, O Bhile ordinaril4, certiorari is unavailin3 0here the appeal period has lapsed, there are e?ceptions. 1on3 the1 are $a% 0hen public 0elfare and the advance1ent of public polic4 dictatesA $b% 0hen the broader interest of >ustice so re=uiresA $c% 0hen the 0rits issued are null and voidA or $d% 2!en t!e uestioned order amounts to an oppressive exercise of judicial aut!ority . O*2 On the second issue, the petitioners assert that the C erred in holdin3 that the dispute bet0een it and the respondent is intra(corporate in natureA hence, 0ithin the e?clusive >urisdiction of the SEC. s 3leaned fro1 the 1aterial alle3ations of the Infor1ations, the R"C had e?clusive >urisdiction over the cri1es char3ed. Petitioner MPI further avers that even if there is no alle3ation in the Infor1ations identif4in3 it as the o0ner of the personal properties described in the Infor1ations, its o0nership of the properties can be inferred fro1 the other alle3ations. "he petitioners 1aintain that even if the Infor1ations are deficient, the re1ed4 is the a1end1ent of the Infor1ations and not the dis1issal of the cases. :or his part, the respondent avers that the assailed Resolution of the C is correct, and that it is the appellate courtGs decision 0hich is erroneous. Be a3ree 0ith the petitioners. ccordin3 to Section 8, of !.P. !l3. 28/ P SEC. 8,. )urisdiction in criminal cases.9 Re3ional "rial Courts shall e?ercise e?clusive ori3inal >urisdiction in all cri1inal cases not 0ithin the e?clusive >urisdiction of an4 court, tribunal or bod4, e?cept those no0 fallin3 under the e?clusive and concurrent >urisdiction of the Sandi3anba4an 0hich shall hereafter be e?clusivel4 ta6en co3niDance of b4 the latter. Section *8 thereof 0as later a1ended b4 Section 8 of Republic ct No. @+/2, as follo0sF Sec. *8. )urisdiction of Metropolitan 0rial Courts( Municipal 0rial Courts and Municipal Circuit 0rial Courts in Criminal Cases. P E?cept in cases fallin3 0ithin the e?clusive ori3inal >urisdiction of the Re3ional "rial Court and of the Sandi3anba4an, the Metropolitan "rial Courts, and Municipal Circuit "rial Courts shall e?erciseF $2% E?clusive ori3inal >urisdiction over all violations of cit4 or 1unicipal ordinances co11itted 0ithin their respective territorial >urisdictionA and $8% E?clusive ori3inal >urisdiction over all offenses punishable 0ith i1prison1ent not e?ceedin3 si? $+% 4ears irrespective of the a1ount of fine, and re3ardless of other i1posable accessor4 or other penalties, includin3 the civil liabilit4 arisin3 fro1 such offenses or predicated thereon, irrespective of 6ind, nature, value or a1ount thereofF Provided, !o2ever, "hat in offenses involvin3 da1a3e to propert4 throu3h cri1inal ne3li3ence, the4 shall have e?clusive ori3inal >urisdiction thereof. Case la0 has it that in order to deter1ine the >urisdiction of the court in cri1inal cases, the co1plaint or Infor1ation 1ust be e?a1ined for the purpose of ascertainin3 0hether or not the facts set out therein and the prescribed period provided for b4 la0 are 0ithin the >urisdiction of the court, and 0here the said Infor1ation or co1plaint is filed. It is settled that the >urisdiction of the court in cri1inal cases is deter1ined b4 the alle3ations of the co1plaint or Infor1ation and not b4 the findin3s based on the evidence of the court after trial. *8 Eurisdiction is conferred onl4 b4 the Constitution or b4 the la0 in force at the ti1e of the filin3 of the Infor1ation or co1plaint. Once >urisdiction is vested in the court, it is retained up to the end of the liti3ation. Indeed, in People v* Purisima,** this Court held thatF In cri1inal prosecutions, it is settled that the >urisdiction of the court is not deter1ined b4 0hat 1a4 be 1eted out to the offender after trial or even b4 the result of the evidence that 0ould be presented at the trial, $ut b4 the extent of t!e penalty 2!ic! t!e la2 imposes for the 1isde1eanor, cri1e or violation char3ed in the co1plaint. If the facts recited in the co1plaint and the punis!ment provided for $y la2 are sufficient to sho0 that the court in 0hich the co1plaint is presented has >urisdiction, that court 1ust assu1e >urisdiction. In Cri1inal Case No. ,2*8*2(', the value of the properties sub>ect of =ualified theft is P*,82/,.@7.,,, 0hile in Cri1inal Case No. ,2*-8*(', the value of the propert4 0as pe33ed at P877,,,,.,,. #nder rticle *,/ of the Revised Penal Code, the penalt4 for theft 0hen the value of the stolen propert4 e?ceeds P88,,,,.,, is as follo0sF 2. "he penalt4 of prision mayor in its 1ini1u1 and 1ediu1 periods, if the value of the thin3 stolen is 1ore than 28,,,, pesos but does not e?ceed 8,,,,, pesosA but if the value of the thin3 stolen e?ceeds the latter a1ount, the penalt4 shall be the 1a?i1u1 period of the one prescribed in this para3raph and one 4ear of each additional ten thousand pesos, but the total of the penalt4 0hich 1a4 be i1posed shall not e?ceed t0ent4 4ears. In such cases, and in connection 0ith the accessor4 penalties 0hich 1a4 be i1posed and for the purpose of the other provisions of this Code, the penalt4 shall be ter1ed prision mayor or reclusion temporal, as the case 1a4 be. rticle *2, of the Revised Penal Code further provides for the penalt4 for =ualified theftF rt. *2,. +ualified t!eft. P "he cri1e of theft shall be punished b4 the penalties ne?t hi3her b4 t0o de3rees than those respectivel4 specified in the ne?t precedin3 article, if co11itted b4 a do1estic servant, or 0ith 3rave

abuse of confidence, or if the propert4 stolen is 1otor vehicle, 1ail 1atter or lar3e cattle or consists of coconuts ta6en fro1 the pre1ises of a plantation, fish ta6en fro1 a fishpond or fisher4 or if propert4 is ta6en on the occasion of fire, earth=ua6e, t4phoon, volcanic eruption, or an4 other cala1it4, vehicular accident or civil disturbance. On the other hand, in Cri1inal Case No. ,2*-8-(' for estafa, the a1ount of the fraud involved is P7,,,,,,.,,, and under rticle *27 of the Revised Penal Code, the penalt4 for such cri1e is P 2st. "he penalt4 of prision correccional in its 1a?i1u1 period to prision mayor in its 1ini1u1 period, if the a1ount of the fraud is over 28,,,, pesos but does not e?ceed 88,,,, pesosA and if such a1ount e?ceeds the latter su1, the penalt4 provided in this para3raph shall be i1posed in its 1a?i1u1 period, addin3 one 4ear for each additional 2,,,,, pesosA but the total penalt4 0hich 1a4 be i1posed shall not e?ceed t0ent4 4ears. In such cases, and in connection 0ith the accessor4 penalties 0hich 1a4 be i1posed and for the purpose of the other provisions of this Code, the penalt4 shall be ter1ed prision mayor or reclusion temporal, as the case 1a4 be. Patentl4, then, based on the 1aterial alle3ations of the Infor1ations in the three cases, the court a uo had e?clusive >urisdiction over the cri1es char3ed. "he bare fact that the respondent 0as the president and 3eneral 1ana3er of the petitioner corporation 0hen the cri1es char3ed 0ere alle3edl4 co11itted and 0as then a stoc6holder thereof does not in itself deprive the court a uo of its e?clusive >urisdiction over the cri1es char3ed. "he propert4 of the corporation is not the propert4 of the stoc6holders or 1e1bers or of its officers 0ho are stoc6holders. *- s the Court held in an avuncular caseF*7 ... Properties re3istered in the na1e of the corporation are o0ned b4 it as an entit4 separate and distinct fro1 its 1e1bers. Bhile shares of stoc6 constitute personal propert4, the4 do not represent propert4 of the corporation. "he corporation has propert4 of its o0n 0hich consists chiefl4 of real estate $Nelson v. O0en, 22* la., *@8, 82 So. @7A Morro0 v. )ould, 2-7 Io0a, 2, 28* N.B. @-*%. share of stoc6 onl4 t4pifies an ali=uot part of the corporationGs propert4, or the ri3ht to share in its proceeds to that e?tent 0hen distributed accordin3 to la0 and e=uit4 $Call W :ale4 v. laba1a "er1inal, 2@* la., */., 7+ So. 8*7%, but its holder is not the o0ner of an4 part of the capital of the corporation $!radle4 v. !auder, *+ Ohio St., 8.%. Nor is he entitled to the possession of an4 definite portion of its propert4 or assets $)ottfried v. Miller, 2,- #.S., 782A Eones v. Davis, *7 Ohio St., -@-%. "he stoc6holder is not a co(o0ner or tenant in co11on of the corporate propert4 $Carton v. Eohnston, 2++ la., *2@, 72 So., //8% O;*+ s earl4 as the case of Fis!er v* 0rinidad( *@ the Court alread4 declared that ;KtLhe distinction bet0een the title of a corporation, and the interest of its 1e1bers or stoc6holders in the propert4 of the corporation, is fa1iliar and 0ell(settled. "he o0nership of that propert4 is in the corporation, and not in the holders of shares of its stoc6. "he interest of each stoc6holder consists in the ri3ht to a proportionate part of the profits 0henever dividends are declared b4 the corporation, durin3 its e?istence, under its charter, and to a li6e proportion of the propert4 re1ainin3, upon the ter1ination or dissolution of the corporation, after pa41ent of its debts.; *. Be also a3ree 0ith the rulin3 of the C in its decision that the SEC $no0 the Re3ional "rial Court% had no >urisdiction over the cases filed in the court a uo. "he appellate courtGs reliance in the assailed Resolution issued b4 the !oard of Directors of the petitioner corporation, on Section 7$b% of P.D. No. /,8, has no factual and le3al basis. Section 7 of P.D. No. /,8( provides that the SEC */ shall have ori3inal and e?clusive >urisdiction to hear and decide cases involvin3 the follo0in3F $a% devices or sche1es e1plo4ed b4, or an4 acts of, the board of directors, business associates, its officers or partners, a1ountin3 to fraud and 1isrepresentation 0hich 1a4 be detri1ental to the interest of the public andHor of the stoc6holders, partners, 1e1bers of association or or3aniDations re3istered 0ith the Co11ission, and $b% controversies arisin3 out of intra(corporate or partnership relations, bet0een and a1on3 stoc6holders, 1e1bers or associatesA bet0een an4 or all of the1 and the corporation, partnership or association of 0hich the4 are stoc6holders, 1e1bers or associates, respectivel4. In Fa$ia v* Court of Appeals ,-, the Court e?plained that Section 7 of P.D. No. /,8( should be ta6en in con>unction 0ith Section + of the la0. It then proceeded to e?plainF In s4nthesis, Sec. 7 of PD =?@-A 1andates that cases involvin3 fraudulent actions and devices 0hich are detri1ental to the interest of stoc6holders, 1e1bers or associates and directors of the corporation are 0ithin the ori3inal and e?clusive >urisdiction of the SEC. "a6en in con>unction 0ith Sec. + of the sa1e la0, it 0ill be 3athered that the fraudulent actsHsche1es 0hich the SEC shall e?clusivel4 investi3ate and prosecute are those ;in violation of an4 la0 or rules and re3ulations ad1inistered and enforced b4 the Co11ission; alone. "his investi3ative and prosecutorial po0ers of the SEC are further ;0ithout pre>udice to an4 liabilit4 for violation of an4 provision of 0!e #evised Penal Code*F :ro1 the fore3oin3, it can thus be concluded that the filin3 of the civilHintra(corporate case before the SEC does not preclude the si1ultaneous and conco1itant filin3 of a cri1inal action before the re3ular courtsA such that, a fraudulent act 1a4 3ive rise to liabilit4 for violation of the rules and re3ulations of the SEC co3niDable b4 the SEC itself, as 0ell as cri1inal liabilit4 for violation of the #evised Penal Code co3niDable b4 the re3ular courts, both char3es to be filed and proceeded independentl4, and 1a4 be si1ultaneousl4 0ith the other. -2 "hus, the filin3 of a petition in the SEC for the nullification of the Resolution of Ma4 8, 2//7 issued b4 the Chair1an and t0o 1e1bers of the !oard of Directors of petitioner MPI, 0hich authoriDed the filin3 of cri1inal cases a3ainst respondent #1eDa0a, 0as not a bar to his prosecution for estafa and =ualified theft for his alle3ed fraudulent and delictual acts. "he relationship of the part4(liti3ants 0ith each other or the position held b4 petitioner as a corporate officer in respondent MPI durin3 the ti1e he co11itted the cri1e beco1es 1erel4 incidental and holds no bearin3 on >urisdiction. Bhat is essential is that the fraudulent acts are li6e0ise of a cri1inal nature and hence co3niDable b4 the re3ular courts. -8 "hus, not0ithstandin3 the fact that respondent #1eDa0a 0as the president and 3eneral 1ana3er of petitioner MPI and a stoc6holder thereof, the latter 1a4 still be prosecuted for the cri1es char3ed. "he alle3ed fraudulent acts of respondent #1eDa0a in this case constitute the ele1ent of abuse of confidence, deceit or fraudulent 1eans, and da1a3e under rticle *27 of the Revised Penal Code on estafa.-* Be a3ree 0ith the enco1passin3 dis=uisitions of the C in its decision, to 0itF O dispute involvin3 the corporation and its stoc6holders is not necessaril4 an intra(corporate dispute co3niDable onl4 b4 the Securities and E?chan3e Co11ission. Nor does it ipso facto ne3ate the >urisdiction of the

Re3ional "rial Court over the sub>ect cases. "he Supre1e Court citin3 the case of ,iray v* Court of Appeals $).R. No. /8-.2, 2/2 SCR *,. K2//,L% in 0orio v* Court of Appeals $).R. No. 2,@8/*, March 8, 2//-, 8*, SCR +8+% heldF FIt s!ould $e o$vious t!at not every conflict $et2een a corporation and its stoc-!olders involves corporate matters t!at only t!e SEC can resolve in t!e exercise of its adjudicatory or uasi-judicial po2ers*F s the Supre1e Court further ruled in the 0orio case that Fa contrary interpretation 2ould distort t!e meanin" and intent of P*D* =?@-A( t!e la2 re-or"ani&in" t!e Securities and Exc!an"e Commission* 0!e $etter policy in determinin" 2!ic! $ody !as jurisdiction over a case 2ould $e to consider not only t!e relations!ip of t!e parties $ut also t!e nature of t!e uestions raised in t!e su$ject of t!e controversy* -On the last issue, 0e find and so hold that the Infor1ations state all the essential ele1ents of estafa and =ualified theft. It 0as ade=uatel4 alle3ed that respondent #1eDa0a, bein3 the President and )eneral Mana3er of petitioner MPI, stole and 1isappropriated the properties of his e1plo4er, 1ore specificall4, petitioner MPI. s e?postulated b4 the C in its decisionF O In an4 event, the alle3ations in the infor1ations, if h4potheticall4 ad1itted, are sufficient to bind #1eDa0a to the char3es of =ualified theft and estafa. s aptl4 ruled b4 the court a =uo in its Order of Eul4 87, 2//7, all t!e elements of t!e offense of ualified t!eft are present* 0!ere is no $asis for claimin" ot!er2ise* Furt!ermore( t!e private offended party( as 2ell as t!e su$ject matter of t!e felonious ta-in" and t!e o2ners!ip t!ereof( !ave $een ade uately indicated or identified leavin" no room for any dou$t on t!ese matters* Considerin3 that the 1otions to =uash of Septe1ber *,, 2//. are funda1entall4 rehash of the 1otion to =uash filed on Ma4 8/, 2//7 and the culpable acts sub>ect of the ne0 infor1ations are virtuall4 the sa1e as the first infor1ation filed a3ainst #1eDa0a, there is no conceivable reason 0h4 the court a uo abandoned its previous stand and controverted itself in re3ard the sufficienc4 of the infor1ations. In our considered vie0, and as the court a =uo had correctl4 held in its Order of Ma4 8+, 2//+, Feven a SEC rulin" voidin" t!e resolution aut!ori&in" t!e filin" of criminal c!ar"es versus t!e accused /ajime Cme&a2a can !ave no $earin" on t!e validity of t!e informations filed in t!ese t!ree criminal cases as pointed out $y private complainant( t!e pu$lic offenses of ualified t!eft and estafa can M$eN prosecuted de officio*F "he resolution of the office of the prosecutor on the preli1inar4 investi3ation as 0ell as the re(investi3ation conducted on the letter(co1plaint filed b4 private co1plainant co1pan4 sufficientl4 established prima facie case a3ainst the accused and the le3alit4 or ille3alit4 of the constitution of the board 0hich authoriDed the filin3 of the co1plaint does not 1ateriall4 affect either the infor1ations filed a3ainst #1eDa0a or the pendin3 cri1inal proceedin3s. s petitioners contend, the action is no0 bet0een the People of the Philippines and herein private respondent. -7 IN LIG0T O ALL T0E OREGOING, the petitions are )R N"ED. "he Resolution of the Court of ppeals in C ( ).R. SP No. 78--, dated u3ust ., 8,,2 is REVERSED and SE" SIDE. "he Decision of the Court of ppeals dated Septe1ber 8, 2/// is ::IRMED. SO ORDERED. Puno, $Chair1an%, ustria(MartineD, "in3a, and Chico(NaDario, EE., concur. oo(no(%' 8@ Penned b4 ssociate Eustice !ernardo P. besa1is Id. at +2,. 8. $retired%, 0ith ssociate Eustices "eodoro P. Re3ino "he Rule has been a1ended b4 the Resolution of $retired% and Presbitero E. Velasco, Er. $no0 Court the Court in .M. No. ,,(8(,*(SC pro1ul3ated on d1inistrator%, concurrin3. u3ust 2, 8,,,. 8 8/ #ollo, pp. 28(2@ $).R. No. 2-/-,*%. 2/- SCR 2-7 $2//2%. * *, Id. at .*(.7. *-- SCR 2*+ $8,,,%. *2 Id. at .@(... Id* at 2-@(2-.. 7 *8 Id. at /,(/2. 'uaya v* Polo, 2+/ SCR -@2 $2/./%. + ** Id. at /*(2,-. +/ SCR *-2 $2/@+%. @ *Id. at 2,7(227. San )uan Structural and Steel Fa$ricators( Inc* v* . Id* at 22+(28,. Court of Appeals, 8/+ SCR +*2 $2//.%. / *7 Id. at 282(288. 'oyer-#oxas v* Court of Appeals, 822 SCR -@, 2, Id. at 28.. $2//8%, citin3 Stoc-!olders of F* 4uan&on and Sons( 22 Id* at 2-/. Inc* v* #e"ister of Deeds of Manila( + SCR *@* 28 8,- SCR -/7 $2//7%. $2/+8%. 2* *+ #ollo, p. *,. $).R. No. 2-/*7@% Id. at -.7. 2*@ #ollo, p. 8@. $).R. No. 2-/-,*% -* Phil. /@* $2/88%. 27 *. @, SCR +,+ $2/@+%. Id. at /.+, citin3 Mr. Eustice )ra4 in 4i$$ons v* 2+ Section 7, Rule 22, of the Rules on Cri1inal Ma!on( 2*+ #.S. 7-/. */ Procedure. P.D. /,8( has been repealed b4 Republic ct No. 2@ Id*( Section 2+. .@//, 0hich provides in Sec. 7.8 thereof that the 2. ).R. Nos. 2-,7@+(//, Dece1ber 2*, 8,,-. >urisdiction of the SEC under Section 7 of P.D. /,8( 2/ I$id. has been transferred to the appropriate R"C. 8, -, People v* 'eriales, @, SCR *+2 $2/@+%. *.. SCR 7@- $8,,8%. 82 -2 #amiscal( )r* v* Sandi"an$ayan( supra . Id* at 7@/* 88 -8 Id* Id. at 7.,(7.2. 8* -* Id. Id* 8-1eplum( Inc* v* %r$eso, *.- SCR -++ $8,,8%. #ollo( p. @@. $).R. No. 2-/*7@% 87 -7 I$id. Id* at @7(@@. 8+ Supra note 2*. Republic of the Philippines SUPREME COURT Manila :IRS" DIVISION G.R. No. 1242<3 No,%-)%$ 20, 2000 .G SUMMIT 0OL"INGS, INC., petitioner( vs. COURT O APPEALS, COMMITTEE ON PRI#ATI/ATION, 5(' C1a5$-an and M%-)%$'I ASSET PRI#ATI/ATION TRUST and P0IL!AR"S 0OL"INGS, INC., respondents*
2

DECISION !NARES:SANTIAGO, J.: On Eanuar4 8@, 2/@@, the National Invest1ent and Develop1ent Corporation $NIDC%, a 3overn1ent corporation, entered into a Eoint Venture 3ree1ent $EV % 0ith &a0asa6i Ceav4 Industries, 'td. of &obe, Eapan $&a0asa6i% for the construction, operation, and 1ana3e1ent of the Subic National Ship4ard, Inc. $SNS%, 0hich subse=uentl4 beca1e the Philippine Ship4ard and En3ineerin3 Corporation $PCI'SECO%. #nder the EV , NIDC and &a0asa6i 0ould 1aintain a shareholdin3 proportion of +,J(-,J, respectivel4. One of the provisions of the EV accorded the parties the ri3ht of first refusal should either part4 sell, assi3n or transfer its interest in the >oint venture. "hus, para3raph 2.- of the EV statesF ;Neither part4 shall sell, transfer or assi3n all or an4 part of its interest in SNS to an4 third part4 0ithout 3ivin3 the other under t!e same terms the ri3ht of first refusal. "his provision shall not appl4 if the transferee is a corporation o0ned or controlled b4 the )OVERNMEN" or b4 a & B S &I affiliate.; $Italics supplied.% On Nove1ber 87, 2/.+, NIDC transferred all its ri3hts, title and interest in PCI'SECO to the Philippine National !an6 $PN!%. More than t0o 1onths later or on :ebruar4 *, 2/.@, b4 virtue of d1inistrative Order No. 2-, PN!Gs interest in PCI'SECO 0as transferred to the National )overn1ent. Mean0hile, on Dece1ber ., 2/.+, President CoraDon C. =uino issued Procla1ation No. 7, establishin3 the Co11ittee on PrivatiDation $COP% and the sset PrivatiDation "rust $ P"% to ta6e title to and possession of, conserve, 1ana3e and dispose of non(perfor1in3 assets of the National )overn1ent. On :ebruar4 8@, 2/.@, a trust a3ree1ent 0as entered into bet0een the National )overn1ent and the P" b4 virtue of 0hich the latter 0as na1ed the trustee of the National )overn1entGs share in PCI'SECO. In 2/./, as a result of a =uasi( reor3aniDation of PCI'SECO to settle its hu3e obli3ations to PN!, the National )overn1entGs shareholdin3s in PCI'SECO increased to /@.-2J thereb4 reducin3 &a0asa6iGs shareholdin3s to 8.7/J. E?ercisin3 their discretion, the COP and the P" dee1ed it in the best interest of the national econo14 and the 3overn1ent to privatiDe PCI'SECO b4 sellin3 .@.+@J of its total outstandin3 capital stoc6 to private entities. fter a series of ne3otiations bet0een the P" and &asa0a6i, the4 a3reed that the latterGs ri3ht of first refusal under the EV be ;e?chan3ed; for the ri3ht to top b4 five percent $7J% the hi3hest bid for said shares. "he4 further a3reed that &a0asa6i 0ould be entitled to na1e a co1pan4 in 0hich it 0as a stoc6holder, 0hich could e?ercise the ri3ht to top. On Septe1ber @, 2//,, &a0asa6i infor1ed P" that Phil4ards Coldin3s, Inc. $PCI% 0ould e?ercise its ri3ht to top b4 7J. t the pre(biddin3 conference held on Septe1ber 8., 2//*, interested bidders 0ere 3iven copies of the EV bet0een NIDC and &a0asa6i, and of the sset Specific !iddin3 Rules $ S!R% drafted for the .@.+@J e=uit4 6sic72 in PCI'SECO of the National )overn1ent. Salient provisions of the S!R stateF ;2.,. "he sub>ect of this sset PrivatiDation "rust $ P"% sale throu3h public biddin3 is the National )overn1entGs e=uit4 in PCI'SECO consistin3 of ./+,.+/,/-8 shares of stoc6 $representin3 .@.+@J of PCI'SECOGs oustandin3 capital stoc6%, 0hich 0ill be sold as a 0hole bloc6 in accordance 0ith the rules herein enu1erated. ??? ??? ??? *.,. "his public biddin3 shall be on an Indicative Price !iddin3 basis. "he Indicative price set for the National )overn1entGs .@.+@J e=uit4 in PCI'SECO is PESOS= ONE BILLION T0REE 0UN"RE" MILLION CP1,300,000,000.00D. ??? ??? ??? 28.,. "he bidder shall be solel4 responsible for e?a1inin3 0ith appropriate care these rules, the official bid for1s, includin3 an4 addenda or a1end1ents thereto issued durin3 the biddin3 period. "he bidder shall li6e0ise be responsible for infor1in3 itself 0ith respect to an4 and all conditions concernin3 the PCI'SECO Shares 0hich 1a4, in an4 1anner, affect the bidderGs proposal. :ailure on the part of the bidder to so e?a1ine and infor1 itself shall be its sole ris6 and no relief for error or o1ission 0ill be 3iven b4 P" or COP. ? ? ?.; "he provisions of the S!R 0ere e?plained to the interested bidders 0ho 0ere notified that biddin3 0ould be held on Dece1ber 8, 2//*. t the public biddin3 on said date, the consortiu1 co1posed of petitioner E) Su11it Coldin3s, Inc., Se1ba0an3 Ship4ard 'td. of Sin3apore $Se1ba0an3%, and Euron3 Ship4ard 'i1ited of Mala4sia $Euron3%, 0as declared the hi3hest bidder at P8.,* billion. "he follo0in3 da4, Dece1ber *, 2//*, the COP approved the sale of .@.+@J National )overn1ent shares of stoc6 in PCI'SECO to said consortiu1. It notified petitioner of said approval ;sub>ect to the ri3ht of &a0asa6i Ceav4 Industries, Inc.HPhil4ards Coldin3s, Inc. to top E)SMIGs $petitionerGs% bid b4 7J as specified in the biddin3 rules.; On Dece1ber 8/, 2//*, petitioner infor1ed the P" that it 0as protestin3 the offer of PCI to top its bid on the 3rounds thatF $a% the &a0asa6iHPCI consortiu1 co1posed of &a0asa6i, Phil4ards, Mitsui, &eppel, SM )roup, IC"SI and Insular 'ife violated the S!R because the last four $-% co1panies 0ere the losin3 bidders $for P2.78. billion% thereb4 circu1ventin3 the la0 and pre>udicin3 the 0ea6 0innin3 bidderA $b% onl4 &a0asa6i could e?ercise the ri3ht to topA $c% 3ivin3 the sa1e option to top to PCI constituted un0arranted benefit to a third part4A $d% no ri3ht of first refusal can be e?ercised in a public biddin3 or auction sale, and $e% the E) Su11it Consortiu1 0as not estopped fro1 =uestionin3 the proceedin3s. On :ebruar4 8, 2//-, petitioner 0as notified that PCI had full4 paid the balance of the purchase price of the sub>ect biddin3. On :ebruar4 @, 2//-, the P" notified petitioner that PCI had e?ercised its option to top the hi3hest bid and that the COP had approved the sa1e on Eanuar4 +, 2//-. On :ebruar4 8-, 2//-, the P" and PCI e?ecuted a Stoc6 Purchase 3ree1ent. Conse=uentl4, petitioner filed 0ith this Court a petition for mandamus under G.R. No. 11405*. On Ma4 22,2//-, said petition 0as referred to the Court of ppeals ((( ;? ? ? for proper deter1ination and disposition, pursuant to Section /, para3raph 2 of !.P. 28/, 3rantin3 the Court of ppeals Nori3inal >urisdiction to issue 0rits of 1anda1us ? ? ? and au?iliar4 0rits or processes, 0hether or not in aid of its appellate >urisdiction,G 0hich >urisdiction is concurrent 0ith this Court, there bein3 no special and i1portant reason for this Court to assu1e >urisdiction over the case in the first instance.; 8 On Eul4 2., 2//7, the Court of ppeals ;denied; for lac6 of 1erit the petition for mandamus. Citin3 4uanio v* Fernande&(* it held that mandamus is not the proper re1ed4 to ;co1pel the undoin3 of an act alread4 done or the correction of a 0ron3 alread4 perpetuated, even thou3h the action ta6en 0as clearl4 ille3al.; It 0as further ruled that it 0as not the proper foru1 for a ;1ere petition for mandamus; that ai1ed to =uestion the constitutionalit4 or le3alit4 of the ri3ht of first refusal and the ri3ht to top that 0as e?ercised b4 &a0asa6iHPCI and that the 1atter 1ust be brou3ht ;b4 the proper part4 in the proper foru1 at the proper ti1e and threshed out in a full blo0n trial.;

fter rulin3 that the ri3ht of first refusal and the ri3ht to top are prima facie le3al, the Court of ppeals found petitioner to be in estoppel for the follo0in3 reasonsF ;7. If petitioner found the ri3ht to top to be ille3al, it should not have participated in the public biddin3A or it should have =uestioned the le3alit4 of the rules before the courts or filed a petition for declarator4 relief $Rule +-, Rules of Court% before the public biddin3 could have ta6en place. !4 participatin3 in the public biddin3, 0ith full 6no0led3e of the ri3ht to top 3ranted to &a0asa6iHPhil4ards, petitioner is estopped fro1 =uestionin3 the validit4 of the a0ard 3iven to Phil4ards after the latter e?ercised the ri3ht to top and had paid in full the purchase price of the sub>ect shares, pursuant to the S!R. +. "he fact that the losin3 bidder, &eppel Consortiu1 $co1posed of &eppel, SM )roup, Insular 'ife ssurance, Mitsui and IC"SI% appears to have >oined Phil4ards in the latterGs effort to raise P8.2*2 billion necessar4 in e?ercisin3 the ri3ht to top b4 7J is a valid activit4 in free enterprise that is not contrar4 to la0, public polic4 or public 1orals. It should not be a cause of 3rievance for petitioner as it is the ver4 essence of free co1petition in the business 0orld. stute business1en involved in the public biddin3 in =uestion 6ne0 0hat the4 0ere up a3ainst. nd 0hen the4 participated in the public biddin3 0ith prior 6no0led3e of the ri3ht to top, the4 did so, 0ith full 6no0led3e of the eventualit4 that the hi3hest bidder 1a4 still be topped b4 &a0asa6iHPhil4ards b4 7J. It is ad1itted b4 petitioner that it li6e0ise represents a consortiu1 co1posed of E) Su11it, Se1ba0an3 Sin3apore and Euron3 of Mala4sia. Bh4 should petitioner then e?pect Phil4ards to li1it itself to its o0n resources 0hen the latter can enter into a3ree1ents 0ith other entities to help it raise the 1one4 it needed to pa4 the full purchase price as in fact it had alread4 paid the National )overn1ent in the a1ount of P8.2*2 billion as re=uired under the S!RY;Petitioner filed a 1otion for the reconsideration of said Decision 0hich 0as denied on March 27, 2//+. Petitioner thus filed the instant petition for revie0 on certiorari, raisin3 the follo0in3 ar3u1entsF I. "CE CO#R" O: PPE 'S )RIEVO#S'< ERRED IN CO'DIN) "C " PE"I"IONER E) S#MMI" IS 'E) ''< ES"OPPED :ROM CC ''EN)IN) "CE 'E) 'I"< O: "CE RI)C" "O "OP, INSER"ED IN "CE !IDDIN) R#'ES, S BE'' S "CE RI)C" O: :IRS" RE:#S ' :ROM BCICC "CE RI)C" "O "OP B S DMI""ED'< SO#RCED, !< SIMP'< S" "IN) "C " "COSE RI)C"S RE V 'ID ND EN:ORCE !'E BI"CO#" R#'IN) ON N< O: "CE IMPOR" N" 'E) ' ND CONS"I"#"ION ' )RO#NDS R ISED !< "CE PE"I"IONER S :O''OBSF $ % "CE RI)C" O: :IRS" RE:#S ', )R N"ED "O E P NESE CORPOR "ION " "IME BCEN I" CE'D -,J EI#I"< IN PCI'SECO, ' NDCO'DIN) CORPOR "ION, IS N#'' ND VOID :OR !EIN) CON"R R< "O "CE CONS"I"#"ION. $!% "CE RI)C" "O "OP B S )R N"ED "O "CE E P NESE CORPOR "ION " "IME BCEN I" MERE'< CE'D 8.+J EI#I"< IN PCI'SECO. $C% "CE RI)C" O: :IRS" RE:#S ' )R N"ED "O "CE E P NESE CORPOR "ION OVER SC RES O: S"OC& IS CON"R R< "O "CE CORPOR "ION CODE. $D% "CE RI)C" "O "OP IS CON"R R< "O P#!'IC PO'IC< S I" IS N "CEM "O COMPE"I"IVE P#!'IC !IDDIN) :OR !EIN) #ND#'< RES"RIC"IVE "CEREO:, ND, MOREOVER, IS CON"R R< "O D#E PROCESS O: ' B S I" IS ) INS" "CE ! SIC R#DIMEN"S O: : IR P' <. $E% "CE )R N" O: "CE RI)C" "O "OP IS CRIMIN ' VIO' "ION O: "CE N"I()R :" ' B S I" )IVES C'E R'< #NB RR N"ED !ENE:I" IN : VOR O: PCI'< RDS S SCOBN !< C'E R ND #NDISP#"ED DOC#MEN" R< EVIDENCE. II. "CE CO#R" O: PPE 'S )RIEVO#S'< ERRED IN CO'DIN) "C " M ND M#S IS NO" PROPER REMED< IN "CIS C SE. III. :O''OBIN) I"S OBN :INDIN)S, "CE CO#R" O: PPE 'S )RIEVO#S'< ERRED $ % IN NO" DIREC"IN) "C " "RI ' !E CE'D ON ''E)ED ISS#ES O: : C" ND $!% IN NO" PPOIN"IN) N AMICCS CC#IAE :ROM MON) "CE ' B<ERS IN "CE COMMISSION ON #DI" "O DE"ERMINE "CE PP'IC !I'I"< O: I"S REI#IREMEN"S "O "CE "R NS C"IONS IN "CIS C SE. 7 In their co11ent on the petition, private respondent PCI contends that the real part4 in interest 0hich should have filed the petition for mandamus is the E) Su11it Consortiu1 and not solel4 petitioner E) Su11it Coldin3s, Inc. 0hich is >ust a part of that consortiu1. Since Se1ba0an3 and Euron3, the other 1e1bers of the consortiu1, are indispensable parties to the petition, + petitionerGs failure to i1plead the1 as co(petitioners 0arranted the dis1issal of the petition. Public respondentsG contention 1ust fail. Bhile it is true that Rule *, Section 8 of the Rules of Court provides that ;$a%ll persons havin3 an interest in the sub>ect of the action and in obtainin3 the relief de1anded shall be >oined as plaintiffs,; petitioner 1a4 file the petition alone. In the first place, Se1ba0an3 and Euron3 are not indispensable parties, such that their non(>oinder as petitioners 0ill not necessaril4 result in a failure to arrive at a final deter1ination of the case.@ "he4 1a4 be necessar4 parties as the4 0ere 1e1bers of the consortiu1 that 0on the public biddin3 prior to the e?ercise of the ri3ht to top b4 private respondent, but the petition 1a4 be resolved even 0ithout their active participation. Secondl4, there is a doubt as to 0hether or not said forei3n corporations are ;sub>ect to the >urisdiction of the court as to both service of process and venue.; . "hirdl4, petitioner 1a4 be dee1ed to represent Se1ba0an3 and Euron3. "he ad1ission of petitionerGs counsel that said forei3n corporations are under0ritin3 his and the other counselGs fees reflects this fact. / !4 the ne?us that binds the 1e1bers of the consortiu1, in the event that petitioner succeeds in pursuin3 this case, it is bound to respect the e?istence of the consortiu1 and the correspondin3 responsibilities arisin3 therefro1. Public respondents also contend that petitioner has no standin3 to =uestion the le3alit4 of a provision of the EV in 0hich it is not a part4. 2, Co0ever, as this Court held in Gilos$ayan v* Morato(22 there is a difference bet0een the rule on real(part4(in(interest and the rule on standin3, as the latter has constitutional underpinnin3s. In the case at bar, petitioner has sufficientl4 alle3ed constitutional ra1ifications in the =uestioned public biddin3 of the PCI'SECO that 1erit the attention of the Court. Moreover, the prospect of financial 3ains arisin3 fro1 the a0ard of the sale of PCI'SECO is enou3h personal sta6e in the outco1e of the controvers4 to vest upon petitioner the locus standi to file the petition for mandamus. !esides, 0ithout &a0asa6i(PCIGs ri3ht to top the hi3hest bid, petitioner 0ould have been a0arded the sale as the hi3hest bidder. 0innin3 bidder has personalit4 to initiate proceedin3s to prevent settin3 at nau3ht his ri3htA other0ise, his ri3ht to due process 0ould be violated. 28 s such 0innin3 bidder, petitioner has ;a present substantial interest,; or such interest in the sub>ect 1atter of action as 0ill entitle it, under substantive la0, to recover if the evidence is sufficient. 2*

Bith respect to the propriet4 of the re1ed4 availed b4 petitioner, the Court of ppeals correctl4 held that the special civil action of mandamus is not the proper re1ed4 to =uestion the le3alit4 of the e?ercise of the ri3ht to top b4 private respondent. It does not lie to co1pel the a0ard of a contract sub>ect of biddin3 to an unsuccessful bidder.2- Mandamus applies as a re1ed4 onl4 0here petitionerGs ri3ht is founded clearl4 in la0 and not 0hen it is doubtful.27 "husF ;In order that a 0rit of 1anda1us 1a4 issue, it is essential that the person petitionin3 for the sa1e has a clear le3al ri3ht to the thin3 de1anded and that it is the i1perative dut4 of the respondent to perfor1 the act re=uired. It neither confers po0ers nor i1poses duties and is never issued in doubtful cases. It is si1pl4 a co11and to e?ercise a po0er alread4 possessed and to perfor1 a dut4 alread4 i1posed.; 2+ "he Court of ppeals cannot declare petitioner as the 0innin3 bidder in this case and direct the COPH P" to a0ard the sale to it 0ithout first deter1inin3 the validit4 of the ri3ht to top stipulated in the S!R. Moreover, the sale of 3overn1ent share in PCI'SECO is a fait accompli, in vie0 of the e?ecution of the Stoc6 Purchase 3ree1ent bet0een P" and PCI. Mandamus 1a4 not be availed to direct the e?ercise of >ud31ent or discretion in a particular 0a4 or to retract or reverse an action alread4 ta6en in the e?ercise of either. 2@ !e that as it 1a4, the Court of ppeals erred 0hen it dis1issed the petition on the sole 3round of the i1propriet4 of the special civil action of mandamus. It 1ust be stressed that the petition 0as also one for certiorari, see6in3 to nullif4 the a0ard of the sale to private respondent of the PCI'SECO shares. Veril4, the petition alle3es that ;respondents COP and P" have co11itted such a 3rave abuse of discretion tanta1ount to lac6 or e?cess of their >urisdiction in insistin3 on a0ardin3 the bid to Phil4ards, for the various reasons stated herein, particularl4 since the ri3ht of first refusal and the ri3ht to top the bid are unconstitutional, contrar4 to la0 and public polic4.;2. PetitionerGs failure to include certiorari in its caption should not ne3ate the fact that the petition char3ed public respondent 0ith 3rave abuse of discretion in a0ardin3 the sale to private respondent. Bell(settled is the rule that it is not the caption of the pleadin3 but the alle3ations therein that deter1ine the nature of the action and the Court shall 3rant relief 0arranted b4 the alle3ations and the proof even if no such relief is pra4ed for.2/ PetitionerGs 1ain contention is that PCI'SECO, as a ship4ard, is a public utilit4 and, hence, could be operated onl4 b4 a corporation at least +,J of 0hose capital is o0ned b4 :ilipino citiDens, in accordance 0ith rticle MII, Section 2, of the Constitution. Petitioner asserts that a ship4ard is a public utilit4 pursuant to Section 2* $b% of Co11on0ealth ct No. 2-+.8, Respondents, on the other hand, contend that ship4ards are no lon3er public utilities b4 e?press provision of Presidential Decree No. +++, 0hich provided incentives to the shipbuildin3 and ship repair industr4. Indeed, P.D. No. +++ dated March 7, 2/@7 e?plicitl4 stated that a ;ship4ard; 0as not a ;public utilit4.; Section 2 thereof provide as follo0sF ;d% R%65'($a(5on $%G35$%d )3( no( a' P3)452 U(545(y. P "he business of constructin3 and repairin3 vessels or parts thereof shall not be considered a public utilit4 and no Certificate of Public Convenience shall be re=uired therefor. Co0ever, no ship4ard, 3ravin3 doc6, 1arine rail0a4 or 1arine repair shop and no person or enterprise shall en3a3e in the construction andHor repair of an4 vessel, or an4 phase or part thereof, 0ithout a valid Certificate of Re3istration and license for this purpose fro1 the Mariti1e Industr4 uthorit4, e?cept those o0ned or operated b4 the r1ed :orces of the Philippines or b4 forei3n 3overn1ents pursuant to a treat4 or a3ree1ent.; $#nderscorin3 supplied.% Co0ever, Section 2 of P.D. No. +++ 0as e?pressl4 repealed b4 Section 8, of !atas Pa1bansa !l3. */2, the Invest1ent Incentive Polic4 ct of 2/.*.82 Subse=uentl4, E?ecutive Order No. 88+, the O1nibus Invest1ents Code of 2/.@, 0as issued and Section .7 thereof e?pressl4 repealed !.P. !l3. */2. 88 "he e?press repeal of !.P. !l3. */2 b4 E.O. No. 88+ did not revive Section 2 of P.D. No. +++, declassif4in3 the shipbuildin3 and ship repair industr4 as a public utilit4, as said e?ecutive order did not provide other0ise. Bhen a la0 0hich e?pressl4 repeals a prior la0 is itself repealed, the la0 first repealed shall not be thereb4 revived unless e?pressl4 so provided.8* Conse=uentl4, 0hen the P" drafted the S!R so1eti1e in 2//*, P.D. No. +++ no lon3er e?isted in our statute boo6s. Bhile it is true that the repeal of a statute does not operate to i1pair ri3hts that have beco1e vested or accrued 0hile the statute 0as in force, there are no vested ri3hts of the parties that should be protected in the case at bar. "he reason is si1pleF said decree 0as alread4 ine?istent 0hen the S!R 0as issued. ship4ard such as PCI'SECO bein3 a public utilit4 as provided b4 la0, the follo0in3 provision of the rticle MII of the Constitution appliesF ;Sec. 22. No franchise, certificate, or an4 other for1 of authoriDation for the operation of a public utilit4 shall be 3ranted e?cept to citiDens of the Philippines or to corporations or associations or3aniDed under the la0s of the Philippines at least sixty per centu' of 2!ose capital is o2ned $y suc! citi&ens , nor shall such franchise, certificate, or authoriDation be e?clusive in character or for a lon3er period than fift4 4ears. Neither shall an4 such franchise or ri3ht be 3ranted e?cept under the condition that it shall be sub>ect to a1end1ent, alteration, or repeal b4 the Con3ress 0hen the co11on 3ood so re=uires. "he State shall encoura3e e=uit4 participation in public utilities b4 the 3eneral public. 0!e participation of forei"n investors in t!e "overnin" $ody of any pu$lic utility enterprise s!all $e limited to t!eir proportionate s!are in its capital( and all t!e executive and mana"in" officers of suc! corporation or association s!all $e citi&ens of t!e P!ilippines*F $Italics supplied.% "he pro3enitor of this constitutional provision, rticle MIV, Section 7 of the 2/@* Constitution, re=uired the sa1e proportion of +,J(-,J capitaliDation. "he EV bet0een NIDC and &a0asa6i entered into on Eanuar4 8@, 2/@@ 1anifests the intention of the parties to abide b4 the constitutional 1andate on capitaliDation of public utilities. 8Para3raph 2.* of the EV , as a1ended b4 ddendu1 No. 8 dated Dece1ber 8., 2/.*, 87 providesF ;"he authoriDed capital stoc6 of PCI'SECO shall be P**, 1ilion. "he parties shall thereafter increase their subscription in PCI'SECO as 1a4 be necessar4 and as called b4 the !oard of Directors, 1aintainin3 a proportion of +,J(-,J for NIDC and & B S &I, respectivel4, up to a total subscribed and paid(up capital stoc6 of P*28 1illion.; $#nderscorin3 supplied.% >oint venture is an association of persons or co1panies >ointl4 underta6in3 so1e co11ercial enterprise 0ith all of the1 3enerall4 contributin3 assets and sharin3 ris6s. It re=uires a co11unit4 of interest in the perfor1ance of the sub>ect 1atter, a ri3ht to direct and 3overn the polic4 in connection there0ith, and dut4, 0hich 1a4 be altered b4 a3ree1ent to share both in profit and losses. 8+ Persons and business enterprises usuall4 enter into a >oint venture because it is e?e1pt fro1 corporate inco1e ta?. 8@ Considered 1ore of a partnership,8. a >oint venture is 3overned b4 the la0s on contracts and on partnership. "he >oint venture created bet0een NIDC and &a0asa6i falls 0ithin the purvie0 of an ;association; pursuant to Section 7 of rticle MIV of

the 2/@* Constitution and Section 22 of rticle MII of the 2/.@ Constitution. Conse=uentl4, a >oint venture that 0ould en3a3e in the business of operatin3 a public utilit4, such as a ship4ard, 1ust observe the proportion of +,J(-,J :ilipino(forei3n capitaliDation. Notabl4, para3raph 2.- of the EV accorded the parties the ri3ht of first refusal ; under t!e same terms.; "his phrase i1plies that 0hen either part4 e?ercises the ri3ht of first refusal under para3raph 2.-, the4 can onl4 do so to the e?tent allo0ed the1 b4 para3raphs 2.8 and 2.* of the EV or under the proportion of +,J(-,J of the shares of stoc6. "hus, should the NIDC opt to sell its shares of stoc6 to a third part4, &a0asa6i could onl4 e?ercise its ri3ht of first refusal to the e?tent that its total shares of stoc6 0ould not e?ceed -,J of the entire shares of stoc6 of SNS or PCI'SECO. "he NIDC, on the other hand, 1a4 purchase even be4ond +,J of the total shares. s a 3overn1ent corporation and necessaril4 a 2,,J :ilipino(o0ned corporation, there is nothin3 to prevent its purchase of stoc6s even be4ond +,J of the capitaliDation as the Constitution clearl4 li1its onl4 forei3n capitaliDation. Parentheticall4, the Mariti1e Industr4 uthorit4 $M RIN % 0hich has been tas6ed to re3ulate the operation of shipbuildin3 and ship repair 4ards, 8/ abides b4 the :ilipino capitaliDation re=uire1ent as far as corporations and partnerships are concerned. Co0ever, Section 8.*.2 $a% of its Me1orandu1 Circular No. /7, Series of 2//-, *, settin3 out the Revised I1ple1entin3 )uidelines on the 'icensin3 of Shipbuilders, Ship Repairers, float Repairers, !oatbuilders and Shipbrea6ers, see1s to e?e1pt >oint ventures re3istered 0ith the SEC, the !OI and the EPV fro1 the +,J re=uire1ent of :ilipino o0nership. *2 "he said provision statesF ;"he applicant 1ust be a :ilipino citiDen or a corporationHpartnership at least +,J of the authoriDed capital stoc6 of 0hich is o0ned b4 :ilipino citiDens e?cept for >oint ventures 0hich are re3istered 0ith the Securities and E?chan3e Co11ission, the !oard of Invest1ents andHor E?port Processin3 Vone uthorities.; *8 "he constitutionalit4 of said M RIN 3uideline, ho0ever, is not in issue here. &a0asa6i 0as bound b4 its contractual o$li"ation under the EV that li1its its ri3ht of first refusal to -,J of the total capitaliDation of PCI'SECO. "hus, KaFa'aJ5 2anno( &3$21a'% )%yond 40N o7 (1% 2a&5(a45Ba(5on o7 (1% ;o5n( ,%n(3$% on a22o3n( o7 )o(1 2on'(5(3(5ona4 and 2on($a2(3a4 &$o'2$5&(5on'. :ro1 the facts on record, it appears that at the outset, the P" and &a0asa6i respected the +,J(-,J capitaliDation proportion in PCI'SECO. Co0ever, P" subse=uentl4 encoura3ed &a0asa6i to participate in the public biddin3 of the National )overn1entGs shareholdin3s of .@.+@J of the total PCI'SECO shares, definitel4 over and above the -,J li1it of its shareholdin3s. In so doin3, the P" 0ent be4ond the a1bit of its authorit4. It is 0ell settled that the role of courts is to ascertain 0hether a branch or instru1entalit4 of )overn1ent has trans3ressed its constitutional or statutor4 boundaries. "he courts, 1ust e?a1ine those boundaries in the li3ht of provisions of the la0. Other0ise, it 0ould stra4 into the real1 of polic4 decision(1a6in3. ** Procla1ation No. 7,, creatin3 the COP and the P", 0as issued b4 President CoraDon C. =uino pursuant to her le3islative po0ers under the Provisional Constitution of 2/.+. Section 28 of said Procla1ation vested the P" 0ith the follo0in3 po0ersF $2% "o for1ulate and, after approval b4 the Co11ittee, i1ple1ent a pro3ra1 for the disposition of assets transferred to it under this Procla1ation, such pro3ra1 to be co1pleted 0ithin a period of five 4ears fro1 the date of the issuance of this Procla1ationA $8% Sub>ect to its havin3 received the prior 0ritten approval of the Co11ittee to sell such asset at a price and on ter1s of pa41ent and to a part4 disclosed to the Co11ittee, to sell each asset referred to it b4 the Co11ittee to such part4 and on such ter1s as in its discretion are in the best interest of the National )overn1ent, and for such purpose to e?ecute and deliver, on behalf and in the na1e of the National )overn1ent, such deeds of sale, contracts and other instru1ents as 1a4 be necessar4 or appropriate to conve4 title to such assetsA ??? ??? ??? $@% "o adopt its internal rules and re3ulations, to adopt, alter and use a seal 0hich shall be >udiciall4 noticedA to enter into contractsA to sue and be suedA ??? ??? ? ? ?; Pursuant to these provisions, the P" drafted the S!R. Since the P"Gs rule(1a6in3 authorit4 is 1erel4 dele3ated, the S!R should be 1easured b4 the standard set b4 said procla1ation. *- Notabl4, the discretion 3ranted b4 the procla1ation to the P" for the sale of 3overn1ent propert4 is circu1scribed onl4 b4 the ;best interest of the National )overn1ent.; I1plicitl4 0ritten in an4 dele3ated le3islative authorit4, such as that provided for in Procla1ation No. 7,, is the re=uisite that the rules and re3ulations 0hich an ad1inistrative bod4 adopts 1ust respect pertinent provisions of the Constitution and the la0.*7 rticle MII, Section 22 of the Constitution providin3 for a +,J :ilipino capitaliDation in order that public utilities 1a4 be 3ranted a franchise should thus be dee1ed a para1ount consideration in draftin3 the S!R. In this re3ard, 0orth notin3 is para3raph 27., of the S!R, 0hich provides thatF ;In the event that the 0innin3 bidder is a 2,,J forei3n(o0ned corporation, it 1a4 na1e its no1inee corporation to 0ho1 the N) shares shall be conve4ed, provided it o0ns -,J e=uit4 in the no1inee corporation, so as not to affect PCI'SECOGs =ualification to o0n real estate properties in the Philippines.; "his rule is frau3ht 0ith dan3erous i1plications. It allo0s a co1pletel4 forei3n corporation to participate in the public biddin3 of 1ore than +,J of the total shares of a public utilit4 corporation 0ithout settin3 a period 0ithin 0hich the forei3n bidder should na1e its no1inee. s it is, the rule allo0s a totall4 forei3n investor to en3a3e in the business of operatin3 a public utilit4 for an unli1ited period of ti1e in total disre3ard of the constitutional proscription on the percenta3e of :ilipino o0nership of corporations en3a3ed therein. Para3raph 27., of the S!R is thus directl4 and openl4 repu3nant to the Constitution considerin3 that it allo0s forei3n corporations to operate a public utilit4 for an unli1ited period of ti1e. In carr4in3 out its ob>ective of disposin3 of 3overn1ent propert4, the P" should ta6e into account the pertinent la0s. Since the 1ethod of disposin3 the PCI'SECO that the P" had adopted 0as throu3h public biddin3, it 0as dut4(bound to follo0 the rules and re3ulations on competitive public biddin3, in order to uphold the ele1entar4 rule on fairness in such disposition. s this Court once saidF ;? ? ?. co1petitive public biddin3 ai1s to protect the public interest b4 3ivin3 the public the best possible advanta3es throu3h open co1petition. It is a 1echanis1 that enables the 3overn1ent a3enc4 to avoid or preclude ano1alies in the e?ecution of public contracts.; *+ "he 0ord ;biddin3; in its co1prehensive sense 1eans 1a6in3 an offer *@ or an invitation to prospective contractors 0hereb4 the 3overn1ent 1anifests its intention to 1a6e proposals *. for the purchase of supplies,

1aterials and e=uip1ent for official business or public use, */ or for public 0or6s or repair. "he three principles in public biddin3 areF the offer to the publicA an opportunit4 for co1petitionA and a basis for e?act co1parison of bids. "he distinctive character of the s4ste1 is destro4ed and the purpose of its adoption is th0arted 0hen a re3ulation thereon e?cludes an4 of these principles. -, Public biddin3 of 3overn1ent contracts and for the disposition of 3overn1ent assets should have the sa1e principles and ob>ectives. "heir onl4 difference, if at all, is that in the public biddin3 for public contracts, the a0ard is 3enerall4 3iven to the lo0est bidder 0hile in the disposition of 3overn1ent assets, the a0ard is to the hi3hest bidder. -2 "he ter1 ;public biddin3; i1ports a sale to the hi3hest bidder 0ith absolute freedo1 for co1petitive biddin3. -8 #nder Section 7,- of the )overn1ent uditin3 Rules and Re3ulations, a public auction, 0hich is the 1ode of divest1ent or disposal of 3overn1ent propert4, shall adhere to established 1echanics and procedures in public biddin3.-* In such public auction sales, the presence of a Co11ission on udit $CO % representative 0ho shall see to the proper observance of auditin3 rules is i1perative. -- In this case, there is no record that a CO representative 0itnessed the public auction on Dece1ber 8, 2//*. Neither is there a sho0in3 that the P" observed the re=uire1ent of CO Circular No. ./(8/+, to the effect that a 3overn1ent entit4 that is disposin3 of 3overn1ent propert4 shall furnish the CO 0ith the disposal procedure adopted. 'i6e0ise, no0here in the record is it stated that the P" heeded the su33estion of Secretar4 of :inance and COP Chair1an Ea41e that its decision to 3rant &a0asa6i the ri3ht to top the hi3hest bid be 1ade ;6no0n to the Co11ission on udit.; Bhat appears on record is that the CO did not approve the S!R, specificall4 the provision on the ri3ht to top the hi3hest bidder. "hus, then CO Chair1an Pascasio S. !anaria, repl4in3 to the =uer4 of petitionerGs counsel on 0hether or not the CO had approved the ri3ht to top the hi3hest bid b4 7J, statedF ;Per infor1ation received fro1 our uditor at P", no prior approval 0as issued b4 their Office re3ardin3 said preferential option. Be have instructed our uditor thereat to advise this Office of the result of the revie0 of the CorporationGs procedures for the sale of the assets includin3 the revie0 of the biddin3 docu1ents pertainin3 to the sub>ect public biddin3 pursuant to the provisions of the Co11ission on udit Circular No. ./(8/+ dated Eanuar4 8@, 2/./.;-7 In accordin3 the &CIHPCI the ri3ht to top, the P" violated the rule on co1petitive public biddin3, under 0hich the hi3hest bidder is declared the 0inner entitled to the a0ard of the sub>ect of the auction sale. In effect, the 3rant to &CIHPCI of the ri3ht to top can be li6ened to a second biddin3, 0hich, ho0ever, is allo0ed onl4 if there is a failure of biddin3, such as 0hen there is onl4 one bidder or none at all. -+ !4 placin3 &CIHPCI in the advanta3eous position of toppin3 the hi3hest bidder, the P" set aside the basic rule in public biddin3 that there be an opportunit4 for co1petition. Bhile it 1a4 be ar3ued that the ri3ht to top 0as ai1ed at 3ivin3 the best financial advanta3e to the 3overn1ent, the 1anner b4 0hich that ri3ht 0as conceived and arrived at in this case 1anifested bias in favor of &CI, thereb4 clearl4 brushin3 aside the rule on fair competition. More i1portantl4, the S!R provision on the ri3ht to top the hi3hest bidder co1pletel4 disre3arded the stipulation in the EV bet0een NIDC and &CI to co1pl4 0ith the +,J(-,J capitaliDation arran3e1ent 0hereb4 &CI, the forei3n investor, 0ould be able to e?ercise its ri3ht of first refusal to the e?tent of onl4 -,J of the total capitaliDation of the PCI'SECO. "hus, &CI, 0hose invest1ent e?posure 0as alread4 di1inished to onl4 8.7/J of the total PCI'SECO shares, 0as 3iven the privile3e, throu3h its no1inee PCI, of e?ercisin3 the ri3ht to top the hi3hest bid to .@.+@J of those shares or definitel4 over and above its -,J contractual ri3ht to PCI'SECO shares under the EV . Conse=uentl4, the P" rendered nu3ator4 the constitutional and contractual proscriptions clearl4 to favor a forei3n investor. :urther1ore, 0hile the ri3ht of first refusal entitled &CI to priorit4 in the a0ard of the contract, that ri3ht cannot bar another bidder fro1 sub1ittin3 a bid because, precisel4, the la0 re=uires public biddin3 in 3overn1ent contracts.-@ "hus, b4 en3raftin3 in the provisions of the S!R the ri3ht to top, 0hich 0as onl4 an offshoot of the ri3ht of first refusal, the P" effectivel4 did a0a4 0ith pubic biddin3 insofar as &CIHPCI 0as concerned. "o be sure, the ri3ht to top is different fro1 the ri3ht to 1atch. In the latter, a =ualified $idder is 3iven the privile3e of offerin3 the sa1e bid as that of the hi3hest bidder. -. In the for1er, as provided for b4 the S!R, a non-$idder is accorded the ri3ht to top the hi3hest bid. "here is reason, therefore, for the petitioner to co1plain that the P" 1ade a sho0 of a public biddin3 in order to elicit the hi3hest bid, onl4 to a0ard the sale to a non(bidder. "he unfair 1anner b4 0hich the purported public biddin3 0as conducted b4 the P" is even 1ade 1ore blatant b4 the fact that after the ;public biddin3,; &CI e?ercised the ri3ht to top throu3h its no1inee, private respondent PCI, 0hich has a1on3 its stoc6holders so1e losin3 bidders. In draftin3 the S!R, the P" should have noted the fact that forei3n investors 0ere co1petin3 in the biddin3. Bhile it is true that forei3n invest1ent should be encoura3ed in this countr4, ho0ever, the S!R provision on the ri3ht to top is unfair to all co1petitors, be the4 forei3n or local, in the public auction of .@.+@J of PCI'SECO shares as it provided for a 1ethod that 0ould set at nau3ht the entire public biddin3. It 0as thus error for the Court of ppeals to conclude that petitioner 0as estopped fro1 contestin3 the validit4 of the S!R and the biddin3 procedure conducted pursuant to it. It is clear fro1 the provisions of the S!R itself that the basic rules on fair co1petition in public biddin3s have been disre3arded. lthou3h petitioner had the opportunit4 to e?a1ine the S!R before it participated in the biddin3, it cannot be estopped fro1 =uestionin3 the unconstitutional, ille3al and ine=uitable provisions thereof. Estoppel is unavailin3 in this caseA other0ise, it 0ould sta1p validit4 to an act that is prohibited b4 la0 or a3ainst public polic4. -/ 80ERE ORE, the instant petition for revie0 on certiorari is )R N"ED. "he assailed Decision and Resolution of the Court of ppeals are REVERSED and SE" SIDE. Petitioner is ordered to pa4 to P" its bid price of "0o !illion "hirt4 Million Pesos $P8,,*,,,,,,,,,.,,%, less its bid deposit plus interests upon the finalit4 of this Decision. In turn, P" is ordered toF $a% accept said a1ount of P8,,*,,,,,,,,,.,, less bid deposit and interests fro1 petitionerA $b% e?ecute a Stoc6 Purchase 3ree1ent 0ith petitionerA $c% cause the issuance in favor of petitioner of the certificates of stoc6s representin3 .@.+@J of PCI'SECOGs total capitaliDationA $d% return to private respondent PCI the a1ount of "0o !illion One Cundred "hirt4 One Million :ive Cundred "housand Pesos $P8,2*2,7,,,,,,.,,%A and $e% cause the cancellation of the stoc6 certificates issued to PCI. SO ORDERED. Davide, Er., C.E., $Chair1an%, Puno, &apunan, and Pardo, EE., concur. oo(no(%'

"he headin3 of the S!R states that the sa1e rules 0ere specificall4 set up for ; <*.4N %G35(y of the national 3overn1ent in Philippine Ship4ard W En3ineerin3 Corporation $PCI'SECO%; $#ollo of C ( ).R. SP No. *-8,., p. -+%. 8 C Record, p. 2*7A C ().R. SP No. *-8,.. * 77 Phil. .2- $2/*2%. #ollo, pp. 8,/(82,. 7 Petition, pp. 27(2+. + #ollo, pp. 8.-(8... @ Rules of Court, Rule *, Sec. @. . Sec. ., supra. / C Record, p. -@*A "SN, March 8, 2//7, pp. //(2,,. 2, #ollo, pp. *.(-,. 22 *2+ Phil. +78, +/7 $2//7%. 28 SeeQ Republic v. N'RC, *2- Phil. 7,@, 7*.. 2* &ilosba4an v. Morato, supra at p. +/.. 2!orro1eo v. Cit4 of Manila, +8 Phil. 728 $2/*7%. 27 )arces v. Court of ppeals, *8. Phil. -,*, -,/ citin3 #niversit4 of San 3ustin v. Court of ppeals, ).R. No. 2,,7.., 8*, SCR @+2 $2//-%A "a1ano v. Man3lapus, ).R. No. 2,8@.@, 82- SCR 7+@ $2//8%A Sanson v. !arrios, +* Phil. 2// $2/*+%, and Marcelo v. "antuico, Er., ).R. No. +,,@-, 2-8 SCR -*/ $2/.+%. 2+ 'i1 "a4 v. Court of ppeals, ).R. No. 28+./2, 8/* SCR +*-, +7* $2//.% citin3 #niversit4 of San 3ustin, Inc. v. Court of ppeals, supra at pp. @@2( @@8. 2@ n3chan3co, Er. v. Con. O1buds1an, **7 Phil. @++, @@2(@@8 $2//@%. 2. C Record, pp. -8(-*. 2/ Solid Co1es, Inc. v. Court of ppeals, **@ Phil. +,7, +2* $2//@%. 8, "he ter1 ;public service; includes ever4 person that no0 or hereafter 1a4 o0n, operate, 1ana3e, or control in the Philippines, for hire or co1pensation, 0ith 3eneral or li1ited clientele, 0hether per1anent, occasional or accidental, and done for 3eneral business purposes, an4 co11on carrier, railroad, street rail0a4, traction rail0a4, sub(0a4 1otor vehicle, either for frei3ht or passen3er, or both 0ith or 0ithout fi?ed route and 0hatever 1a4 be its classification, frei3ht or carrier service of an4 class, e?press service, stea1boat, or stea1ship line, pontines, ferries, and 0ater craft, en3a3ed in the transportation of passen3ers or frei3ht or both, '15&ya$d, 1arine rail0a4, 1arine repair shop, 0harf or doc6, ice plant, ice(refri3eration plant, canal, irri3ation s4ste1, 3as, electric li3ht, heat and po0er, 0ater suppl4 and po0er, petroleu1, se0era3e s4ste1, 0ire or 0ireless co11unications s4ste1, 0ire or 0ireless broadcastin3 stations and other si1ilar public services ? ? ?. $E1phasis supplied% 82 "he repealin3 clause statesF ;Sec. 8,. "he follo0in3 provisions are hereb4 repealedF 2% Section 7*, P.D. -+* $Mineral Resources Develop1ent Decree%A 8% Section 2, P. D. +++ $Shipbuildin3 and Ship Repair Industr4%A *% Section +, P. D. 22,2 $Radioactive Minerals%A -% 'OI 7,. e?tendin3 P.D. @/2 and P.D. /8- $Su3ar%A and 7% "he follo0in3 articles of Presidential Decree 2@./F 8, 2., 2/, 88, 8., *,, */, -/$d%, +8, and @@. rticles -7, -+ and -. are hereb4 a1ended onl4 0ith respect to do1estic and e?port producers. ll other la0s, decrees, e?ecutive orders, ad1inistrative orders, rules and re3ulations or parts thereof 0hich are inconsistent 0ith the provisions of this ct are hereb4 repealed, a1ended or 1odified accordin3l4. ll other incentive s4ste1s 0hich are not in an4 0a4 affected b4 the provisions of this ct 1a4 be restructured b4 the President so as to render the1

cost(efficient and to 1a6e the1 confor1 0ith the other polic4 3uidelines in the declaration of polic4 provided in Section 8 of this ct.; 88 ; R". .7. #epealin" Clause* S "he follo0in3 provisions or la0s are hereb4 repealedF 2% !atas Pa1bansa -8% !atas Pa1bansa */2 $2/.*% *% Presidential Decree No. 82. -% Presidential Decree No. 2-2/ 7% Presidential Decree No. 2+8*, as a1ended +% Presidential Decree No. 2@./ $2/.2% @% Presidential Decree No. 8,*8 .% E?ecutive Order No. .27 /% E?ecutive Order No. 2/-7 $2/.7% ll other la0s, decrees, e?ecutive orders, ad1inistrative orders, rules and re3ulations or parts thereof 0hich are inconsistent 0ith the provisions of this Code are hereb4 repealed, a1ended or 1odified accordin3l4.; 8* d1inistrative Code of 2/.@, !oo6 I, Chapter 7, Section 82. 8C Record, pp. 7*(+/. 87 C Record, pp. @2(@8. 8+ &ilosba4an, Incorporated v. )uin3ona, Er., supra, at p. 2--. 8@ VI'' N#EV , PCI'IPPINE CORPOR "E ' B, 2//. ed., p. @8/. 8. urbach v. Sanitar4 Bares Manufacturin3 Corporation, ).R. No. @7.@7, 2., SCR 2*,, 2-@ $2/./%. 8/ P.D. No. 2,7/. *, "his 0as published in the Malaya on Dece1ber *,, 2//- and sub1itted to the #.P. 'a0 Center on Eanuar4 *, 2//7. *2 Chapter II, !oo6 II of E?ecutive Order No. 88+ providesF R". -+. Permitted Investments* P $2% Bithout need of prior authorit4, an4one not a Philippine national as that ter1 is defined in rticle 27 of this Code, and not other0ise dis=ualified b4 la0, 1a4 investF $a% In an4 enterprise re3istered under !oo6 One hereof, to the e?tent that the total invest1ent of non(Philippine nationals therein 0ould not affect its status as a re3istered enterprise under the la0A $b% In an enterprise not re3istered under !oo6 One hereof, to the e?tent that the total invest1ent of non(Philippine nationals herein shall not e?ceed fort4 percent $-,J% of the outstandin3 capital of that enterprise, unless e?istin3 la0 forbids an4 non( Philippine o0nership in the enterprise or li1its o0nership b4 non(Philippine national to a percenta3e s1aller than fort4 percent $-,J%. $8% Bithin thirt4 $*,% da4s after notice of the invest1ent is received b4 it, the enterprise in 0hich an4 invest1ent is 1ade b4 a non(Philippine national shall re3ister the sa1e 0ith the !oard of Invest1ents for purposes of record. Invest1ents 1ade in the for1 of forei3n e?chan3e or other assets actuall4 transferred to the Philippines shall also be re3istered 0ith the Central !an6. "he !oard shall assess and appraise the value of such assets other than forei3n e?chan3e. *8 "here is no record sho0in3 that the >oint venture bet0een NIDC and &a0asa6i 0as re3istered 0ith the SEC, the !oard of Invest1ents andHor E?port Processin3 Vone uthorities. ** !ureau Veritas v. Office of the President, ).R. No. 2,2+@., 8,7 SCR @,7, @2. $2//8%. *Philippine Co11unications Satellite Corporation v. lcuaD, ).RF No. .-.2., 2., SCR 82., 887 $2/./%. *7 Manila Prince Cotel v. )SIS, **7 Phil. .8, 2,2 $2//@%. *+ National :ood uthorit4 v. Court of ppeals, *8* Phil. 77., 7@- $2//+% citin3 Danville Mariti1e, Inc. v. Co11ission on udit, ).R. No. .78.7, 2@7 SCR @,2 $2/./% and Mala3a v. Penachos, Er., ).R. No. .++/7, 82* SCR 72+ $2//8%.

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'#CEN RIO, ' B ON P#!'IC !IDDIN) ND 3overn1ent funds and propert4. "hus, the uditor )OVERNMEN" CON"R C"S, 2/+, ed., p. 2 citin3 actin3 as such 0itness 1a4 verball4 advise the Mercer v. North 'ittle Roc6 Special School District, a3enc4 head or his dul4 authoriDed representative of 2@@ r6. 28@, + S.B.8d 2+, 2.. an4 ob>ectionable featureHs of the proceedin3s. *. I$id., citin3 rt. 2*8+, Civil Code. Other0ise, he 1a4 si3n docu1ents and other */ I$id., citin3 Secs. 8,-2(8,-8 of Revised papers pertinent onl4 to those proceedin3s 0hich he d1inistrative Code. 0itnessed 0ith his co11ents 0hich he dee1s -, Mala3a v. Penachos, Er., ).R. No. .++/7, 82* SCR necessar4 under the circu1stances. Related advices 72+, 78+ $2//8%. andHor co11ents done in 0ritin3 should invariabl4 -2 Danville Mariti1e, Inc. v. Co11ission on udit, be sent officiall4 to and dul4 receipted for b4 the ).R. No. .78.7, 2@7 SCR @,2, @22 $2/./%. head of the a3enc4 or his dul4 authoriDed -8 I$id., p. @28. representative concerned. "hese 0ritten advices or -* CO Circular No. ./(8/+ dated Eanuar4 8@, 2/./, co11ents shall for1 part of the bases of action to No. VI $2%A )OVERNMEN" CCO#N"IN) ND be ta6en b4 the auditor in the pre(audit or post audit #DI"IN) M N# ', Vol. I, p. *,2. of the sub>ect transactions.; --7 "he pertinent provision of CO Circular No. ./(8/+ #ollo, p. 2**. -+ statesF Danville Mariti1e, Inc. v. Co11ission on udit, ;VII. CO RO'E D#RIN) DISPOS 'F ( supra* at p. @28. -@ In all 1odes or instances of disposal of 3overn1ent SeeF )ov. )arcia v. Con. !ur3os, *7* Phil. @-,, propert4 or assets as hereinabove conte1plated, @+@(@+. $2//.%. -. the proceedin3s shall be underta6en b4 the Manila Prince Cotel v. )SIS, supra( at p. 2,,. In appropriate authorit4 in the presence of the uditor that case, the biddin3 rules provided that ;if for an4 or other CO representative 0ho shall act as an reason, the Ci3hest !idder cannot be a0arded the intelli3ent, responsible and articulate 0itness !loc6 of Shares, )SIS 1a4 offer this to the other thereto. "he said act of 0itnessin3 shall not be Iualified !idders that have validl4 sub1itted bids confined 1erel4 to seein3 0hat is bein3 done durin3 provided that these Iualified !idders are 0illin3 to the proceedin3s but shall be related to the 1ore 1atch the hi3hest bid in ter1s of price per share.; -/ 1eanin3ful dischar3e b4 the uditor of hisHher Develop1ent !an6 of the Philippines v. Court of constitutional dut4 to e?a1ine, audit and settle all ppeals, *-. Phil. 2-, *8 $2//.%. accounts pertainin3 to the e?penditures or uses of Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 123+<3 No,%-)%$ 22, 2001 LUISITO PA"ILLA and P0OENIE:OMEGA "E#ELOPMENT AN" MANAGEMENT CORPORATION, petitioners, vs. T0E 0ONORABLE COURT O APPEALS and SUSANA REALT!, INC., respondents. 9UISUMBING, J.: "his petition for revie0 see6s the reversal of the Court of ppeals decision 2 in C ().R. SP No. *++.7, refusin3 to set aside $2% the order dated Nove1ber 8/, 2//- of the Re3ional "rial Court of Pasa4 Cit4, !ranch 22*, 0hich authoriDed the issuance of an alias 0rit of e?ecution in connection 0ith Civil Case No. @*,8 filed before said courtA and $8% the order dated :ebruar4 2,, 2//7, 0hich denied petitioners5 1otion for reconsideration of the order of Nove1ber 8/, 2//-, re3ardin3 the annul1ent of the alias 0rit of e?ecution and cancellation of the notice of lev4 and sale dated Dece1ber 2+, 2//-, issued pursuant to the i1ple1entation of said alias 0rit. "he antecedent facts, as su11ariDed b4 the Court of ppeals, are as follo0sF ;On Eune 8@, 2/.*, Susana Realt4, Inc. $SRI%, b4 a deed of absolute sale, sold to the 'i3ht Rail "ransit uthorit4 $'R" % several parcels of land located in "aft venue E?tension, San Rafael District, Pasa4 Cit4. #nder para3raph @ of the deed of sale, SRI reserved to itself the ri3ht of first refusal to develop andHor i1prove the propert4 sold should the 'R" decide to lease andHor assi3n to an4 person the ri3ht to develop andHor i1prove the propert4. On Nove1ber 8., 2/.+, the 'R" and Phoeni? O1e3a Develop1ent and Mana3e1ent Corporation $Phoeni? O1e3a% entered into a Co11ercial Stall Concession Contract authoriDin3 the latter to construct and develop co11ercial stalls on a /, s=. 1. portion of the propert4 bou3ht fro1 SRI. SRI opposed the a3ree1ent as havin3 violated the deed of sale it entered 0ith 'R" . tripartite a3ree1ent 0as later concluded b4 the parties, ho0ever, 0hereb4 SRI a3reed to honor the ter1s of the concession contract and to lease to Phoeni? O1e3a its $SRI5s% propert4 $re1ainin3 propert4% ad>acent to the /, s=. 1. portion sub>ect of the concession contract.:D2p!i:*nEt contract 0as thus entered into on Eul4 8., 2/.. bet0een Phoeni? O1e3a and SRI 0ith 'R" 0hereb4 Phoeni? O1e3a undertoo6 to construct co11ercial stalls on the /,(s=. 1. propert4 in accordance 0ith plans and specifications prepared b4 the latter, the construction to be3in, ho0ever, onl4 upon SRI5s approval of such plans and specifications. lso on Eul4 8., 2/.., Phoeni? O1e3a, b4 a deed of assi3n1ent, assi3ned its ri3ht and interests over the re1ainin3 propert4 unto its sister co1pan4, P& Develop1ent and Mana3e1ent Corporation $P& %. Si3natories to the deed of assi3n1ent 0ere Eduardo )atchalian in his capacit4 as President of Phoeni? O1e3a, and 'uisito !. Padilla $Padilla%, one of the petitioners herein, in his capacit4 as President and )eneral Mana3er of P& . "he develop1ent of the re1ainin3 propert4 havin3 been assi3ned to P& , it entered into a contract of lease 0ith SRI li6e0ise on Eul4 8., 2/..F In the 1eanti1e, SRI sold part of its re1ainin3 propert4 to a third part4. n a1ended contract of lease 0as thus for3ed in Eanuar4 2/./ a1on3 SRI, P& and Phoeni? O1e3a, 0hereb4 the parties a3reed to substitute the alread4 sold portion ,of SRI5s re1ainin3 propert4 0ith 8 parcels of land also belon3in3 to SRI. In this a1ended contract of lease, P& 0as a3ain represented b4 Padilla in his capacit4 as its President and )eneral Mana3er. nd Phoeni? O1e3a. 0hich 0as not a part4, to the Eul4 8.. 2/.. lease contract sou3ht to be a1ended but 0hich 0as a part4 to the a1ended contract. 0as also represented b4 Padilla as Chair1an of the !oard of Directors of Phoeni? O1e3a. P& 5s buildin3 per1it 0as later revo6ed due to certain violations of the National !uildin3 Code $!P *--%.

On u3ust 8-, 2/./, P& 0as allo0ed b4 the $Depart1ent% of Public Bor6s and Ci3h0a4$s% to resu1e construction on the leased pre1ises sub>ect to P& 5s correction of the defects in the construction to confor1 to !P *--. s SRI5s approval of P& 5s a1ended plans in the construction 0as re=uired, P& trans1itted the sa1e to SRI 0hich 0ithheld approval thereof pendin3 P& 5s correction of the defects in the construction. Repeated re=uests for approval of its a1ended plans not havin3 been heeded b4 SRI, P& filed at the court a =uo the action at bar for rescission of contract of lease a3ainst SRI, alle3in3 that SRI5s refusal to approve the plans 0ithout an4 >ustifiable reason deprived it of the use of the co11ercial stalls, thereb4 incurrin3 losses. SRI, upon the other hand, clai1ed that it 0as P& 0hich violated the ter1s of their contract, alle3in3 that P& failed to co1plete 0ithin si? 1onths the construction of the co11ercial stalls durin3 0hich period it 0as not pa4in3 an4 rentals and that P& undertoo6 the construction 0ithout first havin3 its plans approved.;8 $#nderscorin3 in the ori3inal.% On Eanuar4 @,2//2, the R"C rendered its decision, as follo0sF ;BCERE:ORE, >ud31ent is hereb4 renderedF 2. Declarin3 the rescission and ter1ination of the Contract of 'ease, as a1ended, and the passin3 in o0nership of all the i1prove1ents no0 e?istin3 on the pre1ises, and orderin3 plaintiff to surrender possession of the leased pre1ises to the defendant. 8. Orderin3 plaintiff to pa4 to the defendant the follo0in3 su1s of 1one4F $a% P2,@7,,,,,.,, as of pril *,, 2//,, plus 1onthl4 rental of P8,,,,,, per 1onth startin3 in Ma4, 2//,, until plaintiff shall turn over possession of the pre1ises to the defendant, 0ith interest at 2J per 1onth until full4 paidA $b% Moral da1a3es in the a1ount of P2,,,,,,.,,A $c% E?e1plar4 da1a3es in the a1ount of P2,,,,,,.,,A and $d% ttorne45s fees in the a1ount of P27,,,,,.,,A and $e% "he cost of suit.;* P& appealed the R"C decision to the Court of ppeals. On October 8, 2//8, the C affir1ed the R"C decision, decreein3 as follo0sF ;BCERE:ORE, 0ith MODI:IC "IONS that the a0ard of P2,,,,,,.,, for 1oral da1a3es and P2,,,,,,.,, for e?e1plar4 da1a3es is DE'E"ED fro1 the >ud31ent appealed fro1, the rest thereof not inconsistent here0ith is ::IRMED. No costs.;P& 5 S 1otion for reconsideration 0as denied b4 the C in a resolution dated March 27, 2//*. P& then filed before this Court a petition for revie0 on certiorari, 0hich 0e denied in a resolution dated Septe1ber 8@, 2//*. Be li6e0ise denied P& 5s 1otion for reconsideration in a resolution dated Eanuar4 2@, 2//-. 0rit of e?ecution 0as issued in due course b4 the R"C, 0hich reads as follo0sF ;NOB "CERE:ORE, 4ou are hereb4 co11anded to cause the e?ecution of the aforesaid decision, orderin3 the plaintiff and all persons clai1in3 under it to surrender possession of the pre1ises to the defendant, and that of the 3oods and chattels of the plaintiff 4ou cause to be 1ade the su1 of` P2,@7,,,,,.,, plus 1onthl4 rental of P8,,,,,,.,, startin3 in Ma4, 2//, until plaintiff shall turn over possession of the pre1ises to defendant 0ith interest of 2J per 1onth until full4 paid, and the further su1 of PI7,,,,,.,, as attorne45s fees, and the cost of suit, to3ether 0ith 4our la0ful fees for service of this e?ecution all in Philippine currenc4, and that 4ou tender the sa1e to defendant Susana Realt4, Inc. aside fro1 4our o0n fees on this e?ecution and to li6e0ise return this 0rit to this Court 0ithin si?t4 $+,% da4s fro1 receipt hereof 0ith 4our proceedin3s endorsed thereon. !ut if sufficient personal propert4 of the plaintiff cannot be found 0hereof to satisf4 the a1ount of said >ud31ent, 4ou are hereb4 directed to lev4 the real propert4 of the said plaintiff and to sell the sa1e or so 1uch thereof in the 1anner provided for b4 la0 for the satisfaction of the said >ud31ent.; 7 Possession of the sub>ect properties 0as subse=uentl4 restored to SRI, but the 1onetar4 a0ard 0as left unsatisfied. "hus, on Nove1ber 2-, 2//-, SRI filed a 1otion for issuance of an alias 0rit a3ainst herein petitioners, based on the trial court5s observation that P& and Phoeni?(O1e3a are one and the sa1e entit4. "his 0as 3ranted b4 the R"C in an order+ dated Nove1ber 8/, 2//-, 0hich readsF ;BCERE:ORE, as pra4ed for b4 the defendant(>ud31ent creditor Susana Realt4, Inc., let an alias 0rit of e?ecution issue a3ainst the properties, both real and personal, of P& Develop1ent and Mana3e1ent Corporation, of Phoeni?(O1e3a Develop1ent Corporation, and of 'uisito !. Padilla, for the enforce1ent of the decision dated Eanuar4 @, 2//2, pro1ul3ated b4 this Court, the sa1e be i1ple1ented b4 deput4 sheriff Edilberto . Santia3o.; $#nderscorin3 b4 petitioners.% "he R"C issued an alias 0rit on the sa1e da4 pursuant to the above orderF ;NOB "CERE:ORE, 4ou are hereb4 co11anded to cause the e?ecution of the aforesaid decision and that of the 3oods and chattels of the plaintiff, P& Develop1ent and Mana3e1ent Corporation, Phoeni?( O1e3a, caused to be 1ade the su1 of P2,@7,,,,,.,, plus 1onthl4 rentals of P8,,,,,,.,, startin3 in Ma4, 2//, 0ith interest of 2J per 1onth, until full4 paid, and the further su1 of P27,,,,,.,, as attorne45s feesA P2,,,,,,.,, 1oral da1a3es and the cost of suit, to3ether 0ith 4our la0ful fees for service of this e?ecution all in Philippine currenc4, and that 4ou tender the sa1e to the defendant S#S N RE '"<, INC., aside fro1 4our o0n fees on this e?ecution and to li6e0ise return this 0rit to this Court 0ithin +, da4s fro1 receipt hereof 0ith 4our proceedin3 indorsed thereon. !ut if sufficient personal properties of the plaintiff cannot be found 0hereof to satisf4 the a1ount of said >ud31ent, 4ou are directed to lev4 the real propert4 of the plaintiff, P& Develop1ent and Mana3e1ent Corporation, Phoeni?(O1e3a Develop1ent and Mana3e1ent Corporation and 'uisito !. Padilla and to sell the sa1e or so 1uch thereof in the 1anner provided for b4 la0 for the satisfaction of the said >ud31ent.;@ lle3in3 that the 0rit of e?ecution cannot be enforced a3ainst the1, herein petitioners filed 0ith the R"C on Dece1ber 27, 2//-, an o1nibus 1otion for the reconsideration of the order of Nove1ber 8/, 2//-, and for annul1ent of the alias 0rit of the sa1e date and cancellation of the notice of lev4 and sale dated Dece1ber 2+, 2//-. Petitioners assailed these orders as confiscator4, since the4 0ere never parties to the case filed b4 P& a3ainst SRI, and the4 0ere unable to present evidence on their behalf. "he 1otion 0as denied on :ebruar4 2,, 2//7.

Subse=uentl4, on March ., 2//7, petitioners filed 0ith the Court of ppeals a petition for certiorari and prohibition under Rule +7 of the Rules of Court. "his petition 0as also deniedA so 0as petitioners5 1otion for reconsideration of said denial. "he Court of ppeals a3reed 0ith the R"C5s findin3 that there is evidence on record to support the R"C5s conclusion that P& and Phoeni?(O1e3a are one and the sa1e, or that the for1er is a 1ere conduit of the latter. It pointed out that petitioner Padilla is both president and 3eneral 1ana3er of P& and at the sa1e ti1e chair1an of the board of directors and controllin3 stoc6holder of Phoeni?(O1e3a. P& and Phoeni?(O1e3a also shared officers, laborers, and offices. Bhile a0are that the dispositive portion of the R"C decision holds onl4 P& liable to SRI, the Court of ppeals pointed out that the intent of the R"C 0as clearl4 to hold P& , Phoeni?(O1e3a, and Padilla liable, as sho0n in the bod4 of the R"C decision. "he rule that the dispositive portion of a decision is the sub>ect of e?ecution onl4 applies 0here the disposition is clear and une=uivocal, accordin3 to the C , unli6e in this case 0here there is uncertaint4 and a1bi3uit4. "he bod4 of the decision 1a4 be consulted to construe the >ud31ent in this case. On the clai1 that Phoeni?(O1e3a and Padilla 0ere not parties to the case, the C ruled that ;a person not so i1pleaded to an action is dee1ed to be a part4 to a suit 0hen he has the ri3ht to control the proceedin3s, to 1a6e defense, to adduce and cross e?a1ine 0itnesses, and to appeal fro1 a decision $ +@ C.E.S. ..@ cited in lbert v. #niversit4 Publishin3 Co., 2* SCR .-%. "hat petitioner Padilla is in realit4 the one 0ho had and dul4 e?ercised these ri3hts is 3larin3l4 borne b4 the records.; . Cence, this petition for revie0, in 0hich petitioners alle3e that the C erredF I. ...IN RENDERIN) "CE DECISION ND RESO'#"ION IN I#ES"ION... IN DE:I NCE O: ' B ND E#RISPR#DENCE !< S#S" ININ) "CE "RI ' CO#R"5S ORDER ND BRI" !O"C D "ED NOVEM!ER 8/, 2//-... :INDIN) PE"I"IONERS EOIN"'< ND SEVER ''< 'I !'E BI"C P& , "CERE!< #"CORIVIN) "CE EMEC#"ION O: "CE DECISION... ) INS" "CEIR PROPER"IES, DESPI"E "CE DMI""ED : C" "C " (( . PE"I"IONERS BERE NEVER IMP'E DED S P R"IES IN "CE C SE !E:ORE "CE "RI ' CO#R" $CIVI' C SE NO. @*,8%, "CERE!< CON:IRMIN) "CE OPPRESSIVE ND CON:ISC "OR< N "#RE O: "CE ORDER ND BRI" $ NNEMES N ND O%A !. PE"I"IONERS CO#'D NO" ND DID NO" C VE N< OPPOR"#NI"< "O DD#CE EVIDENCE "O RE:#"E "CE C #SES O: C"IONS ''E)ED IN RESPONDEN" SRI5S COMP' IN" !E:ORE "CE "RI ' CO#R" $CIVI' C SE NO. @*,8% "C#S VIO' "IN) "CEIR RI)C" "O D#E PROCESS O: ' B. II. ...IN CONC'#SIONS RE CCED IN "CE DECISION ND RESO'#"ION IN I#ES"ION... !< ::IRMIN) "CE ORDER ND BRI"... S ISS#ED !< "CE "RI ' CO#R" IN CIVI' C SE NO. @*,8 BCICC EMP NDED "CE SCOPE O: "CE BRI" CO'DIN) PE"I"IONERS SO'ID RI'< 'I !'E BI"C P& NO"BI"CS" NDIN) "C " "CIS :INDIN) B S NO" CON" INED IN "CE DISPOSI"IVE POR"ION O: "CE DECISION..., IN DE:I NCE O: ' B ND E#RISPR#DENCE ON "CE M ""ER. III. ...IN PP'<IN) "CE DOC"RINE O: PIERCIN) "CE VEI' O: CORPOR "E :IC"ION "O "CE C SE " ! R DESPI"E "CE : C" "C " "CE )RO#NDS :OR I"S PP'IC "ION #NDER C SE ' B C VE NO" !EEN SCOBN, "CERE!< !RO) "IN) PRONO#NCEMEN"S O: "CIS CONOR !'E CO#R" IN N#MERO#S DECISIONS ON "CE S#!EEC" . IV. ...IN ::IRMIN) "CE ORDER ND BRI"... O: "CE "RI ' CO#R" NO"BI"CS" NDIN) "CE !SENCE O: N< MIS" &E, OMISSION OR M!I)#I"< IN "CE E N# R< /, 2//2 DECISION IN "CE M IN C SE... S BO#'D C VE E#S"I:IED I"S MODI:IC "ION P#RS# N" "O EM" N" E#RISPR#DENCE ON "CE M ""ER. / Petitioners stress that the R"C, the C , and this Court, in the 1ain case $Civil Case No. @*,8%, did not find the1 solidaril4 liable 0ith P& , and ri3htl4 so since P& and Phoeni?(O1e3a are t0o different entities. Phoeni?( O1e3a5s onl4 participation in the properties sub>ect of the 1ain case 0as as the construction co1pan4 that 0ould develop the properties on behalf of P& . Phoeni?(O1e3a 0as involved in the a1ended lease a3ree1ent bet0een SRI and P& onl4 to the e?tent that it had to appl4 the ter1s of the tripartite a3ree1ent $a1on3 'R" , SRI, and Phoeni?(O1e3a% to the develop1ent of the 'R" (o0ned propert4 situated in front of the lots leased to P& b4 SRI.2, Petitioners ar3ue that the a1ended lease contract 0as, in realit4, onl4 bet0een SRI and P& . Petitioners protest the piercin3 of the veil of corporate fiction bet0een the1selves and P& . "he4 contend, citin3 Filmerco Commercial Co*( Inc* v. IAC( No. '(@,++2, 2-/ SCR 2/* $2/.@%, that the court 1ust first ac=uire >urisdiction over the corporation atte1ptin3 to 1isuse the corporate vehicle to shield the co11ission of a fraud. Petitioners contend that the findin3 b4 the trial court as re3ards the sin3le personalit4 of P& and Phoeni?( O1e3a 0as 1ade onl4 to refute P& 5s clai1 that it 0as not liable for constructions 1ade b4 Phoeni?( O1e3a outside the leased areas. On the other hand, private respondent ar3ues that there is no error in the issuance of the alias 0rit of e?ecution a3ainst the properties of petitioners since the trial court, the C , and this Court had all ruled that petitioners and P& are in realit4 one and the sa1e entit4. "his is the reason 0h4, 0hen the first 0rit of e?ecution 0as returned unsatisfied, SRI 1oved for the issuance of an alias 0rit of e?ecution not onl4 a3ainst the properties of P& but those of petitioners as 0ell. "here is no violation of petitioners5 ri3ht to due process since petitioner Padilla activel4 participated in the proceedin3s before the R "C as the responsible officer of both P& and Phoeni?( O1e3a. Private respondent also contends that the C ruled on the necessit4 of construin3 the dispositive portion of the >ud31ent alon3 0ith its te?t, 0hich petitioners alle3edl4 accepted b4 not discussin3 the issue in their pleadin3s. "o our 1ind, the 1ain issue for our consideration is 0hether or not the trial court had >urisdiction over petitioners, to >ustif4 the issuance of an alias 0rit of e?ecution a3ainst their properties. court ac=uires >urisdiction over a person throu3h either a valid service of su11ons or the person5s voluntar4 appearance in court.22 court 1ust necessaril4 have >urisdiction over a part4 for the latter to be bound b4 a court decision. ;)enerall4 accepted is the principle that no 1an shall be affected b4 an4 proceedin3 to 0hich he is a stran3er, and stran3ers to a case are not bound b4 >ud31ent rendered b4 the court. ???;, 28 In the present case, 0e note that the trial court never ac=uired >urisdiction over petitioners throu3h an4 of the 1odes 1entioned above. Neither of the petitioners 0as even i1pleaded, as a part4 to the case. 2* Bithout the trial court havin3 ac=uired >urisdiction over petitioners, the latter could not be bound b4 the decision of the court. E?ecution can onl4 be issued a3ainst a part4 and not a3ainst one 0ho 0as not accorded his da4 in court.2- "o lev4 upon their properties to satisf4 a >ud31ent in a case in 0hich the4 0ere not even parties is not onl4 inappropriateA it 1ost certainl4 is deprivation of propert4 0ithout due process of la0.27 "his 0e cannot allo0.

"he courts a uo ruled that petitioner Padilla, in particular, had his da4 in court. s 3eneral 1ana3er of P& , he activel4 participated in the case in the trial court. Ce ;ha$d% the ri3ht to control the proceedin3s, to 1a6e defense, to adduce and cross e?a1ine 0itnesses, and to appeal fro1 a decision.; 2+ "herefore, Padilla and Phoeni?(O1e3a, of 0hich Padilla is chair1an of the board, could not no0 ar3ue that the4 did not have the opportunit4 to present their case in court, accordin3 to private respondent. "o be3in 0ith, it is clear that Padilla participated in the proceedin3s belo0 as 3eneral 1ana3er of P& and not in an4 other capacit4. "he fact that at the sa1e ti1e he 0as the chair1an of the board of Phoeni?(O1e3a cannot, b4 an4 stretch of reasonin3, e=uate to participation b4 Phoeni?( O1e3a in the sa1e proceedin3s. Be a3ain stress that Phoeni?(O1e3a 0as not a part4 to the case and so could not have ta6en part therein. Private respondent, ho0ever, insists that the trial court had pierced the veil of corporate fiction protectin3 petitioners, and this >ustifies e?ecution a3ainst their properties. "he 3eneral rule is that a corporation is clothed 0ith a personalit4 separate and distinct fro1 the persons co1posin3 it. It 1a4 not be held liable for the obli3ations of the persons co1posin3 it, and neither can its stoc6holders be held liable for its obli3ations. 2@ "his veil of corporate fiction 1a4 onl4 be disre3arded in cases 0here the corporate vehicle is bein3 used to defeat public convenience, >ustif4 0ron3, protect fraud, or defend cri1e. 2. P& and Phoeni?(O1e3a are ad1ittedl4 sister co1panies, and 1a4 be sharin3 personnel and resources, but 0e find in the present case no alle3ation, 1uch less positive proof, that their separate corporate personalities are bein3 used to defeat public convenience, >ustif4 0ron3, protect fraud, or defend cri1e. ;:or the separate >uridical personalit4 of a corporation to be disre3arded, the 0ron3doin3 1ust be clearl4 and convincin3l4 established. It cannot be presu1ed.;2/ Be find no reason to >ustif4 piercin3 the corporate veil in this instance. Be understand private respondent5s frustration at not bein3 able to have the 1onetar4 a0ard in their favor satisfied. !ut 3iven the circu1stances of this case, public respondent cannot order the seiDure of petitioners5 properties 0ithout violatin3 their constitutionall4 enshrined ri3ht to due process, 1erel4 to co1pensate private respondent.:D2p!i:*nEt 80ERE ORE, the instant petition is GRANTE". "he assailed decision and resolution of the Court of ppeals in C ().R. SP No. *++.7 are SET ASI"E, and the order of the trial court dated Nove1ber 8/, 2//- and the alias 0rit of e?ecution issued on the sa1e date in connection 0ith Civil Case No. @*,8, are declared NULL and #OI". Costs a3ainst private respondent. SO OR"ERE". 'ellosillo( Mendo&a( 'uena( De Leon( )r*( ))*( concur. oo(no(%' Rollo, p. 2,-. 8 Id* at **(*7. * Id* at 2,8(2,*. Id* at 2*/(2-,. 7 Id* at 2--. + Id* at 2-7(2-/. @ Id* at 272. . Id* at -*. / Id* at 2.(2/. 2, Id* at .8. 22 /emedes v* Court of Appeals( ).R. Nos. 2,@2*8 W 2,.-@8, *2+ SCR *-@, *@-(*@7 $2///%. 28 Matu"uina Inte"rated .ood Products* Inc* v* Court of Appeals( ).R. No. /.*2,, 8+* SCR -/,, 7,7 $2//+%. 2* Rollo, pp. -*, .7. 2I$id* 27 Le"arda v* Court of Appeals( ).R. No. /--7@, 8., SCR +-8, +7+ $2//@%. 2+ Rollo, p. -*. 2@ Asionics P!ilippines* Inc* v* 1L#C( ).R. No. 28-/7,, 8/, SCR 2+-, 2@2 $2//.%, citin3 Santos v* 1L#C* ).R. No. 2,2+//, 87- SCR +@* $2//+%. 2. Goppel 6P!il*7( Inc* v* 3atco( ).R. No. -@+@*, @@ Phil -/+, 7,7 $2/-+%. 2/ Matu3uina Inte3rated Bood Products, Inc. v. Court of ppeals, ).R. No. /.*2,, 8+* SCR -/,, 7,/ $2//+%
2