G.R. No.

58168 December 19, 1989

CONCEPCION MAGSAYSAY-LABRADOR, SOLEDAD MAGSAYSAY-CABRERA, LUISA MAGSAYSAYCORPUZ, assisted be her husband, Dr. Jose Corpuz, FELICIDAD P. MAGSAYSAY, and MERCEDES
MAGSAYSAY-DIAZ, petitioners,
vs.
THE COURT OF APPEALS and ADELAIDA RODRIGUEZ-MAGSAYSAY, Special Administratrix of the
Estate of the late Genaro F. Magsaysay respondents.

FERNAN, C.J.:
In this petition for review on certiorari, petitioners seek to reverse and set aside [1] the decision of the Court
of Appeals dated July l3, 1981, 1 affirming that of the Court of First Instance of Zambales and Olongapo City
which denied petitioners' motion to intervene in an annulment suit filed by herein private respondent, and [2]
its resolution dated September 7, 1981, denying their motion for reconsideration.
Petitioners are raising a purely legal question; whether or not respondent Court of Appeals correctly denied
their motion for intervention.
The facts are not controverted.
On February 9, 1979, Adelaida Rodriguez-Magsaysay, widow and special administratix of the estate of the
late Senator Genaro Magsaysay, brought before the then Court of First Instance of Olongapo an action
against Artemio Panganiban, Subic Land Corporation (SUBIC), Filipinas Manufacturer's Bank
(FILMANBANK) and the Register of Deeds of Zambales. In her complaint, she alleged that in 1958, she and
her husband acquired, thru conjugal funds, a parcel of land with improvements, known as "Pequena Island",
covered by TCT No. 3258; that after the death of her husband, she discovered [a] an annotation at the back
of TCT No. 3258 that "the land was acquired by her husband from his separate capital;" [b] the registration
of a Deed of Assignment dated June 25, 1976 purportedly executed by the late Senator in favor of SUBIC,
as a result of which TCT No. 3258 was cancelled and TCT No. 22431 issued in the name of SUBIC; and [c]
the registration of Deed of Mortgage dated April 28, 1977 in the amount of P 2,700,000.00 executed by
SUBIC in favor of FILMANBANK; that the foregoing acts were void and done in an attempt to defraud the
conjugal partnership considering that the land is conjugal, her marital consent to the annotation on TCT No.
3258 was not obtained, the change made by the Register of Deeds of the titleholders was effected without
the approval of the Commissioner of Land Registration and that the late Senator did not execute the
purported Deed of Assignment or his consent thereto, if obtained, was secured by mistake, violence and
intimidation. She further alleged that the assignment in favor of SUBIC was without consideration and
consequently null and void. She prayed that the Deed of Assignment and the Deed of Mortgage be annulled
and that the Register of Deeds be ordered to cancel TCT No. 22431 and to issue a new title in her favor.
On March 7, 1979, herein petitioners, sisters of the late senator, filed a motion for intervention on the ground
that on June 20, 1978, their brother conveyed to them one-half (1/2 ) of his shareholdings in SUBIC or a
total of 416,566.6 shares and as assignees of around 41 % of the total outstanding shares of such stocks of
SUBIC, they have a substantial and legal interest in the subject matter of litigation and that they have a legal
interest in the success of the suit with respect to SUBIC.
On July 26, 1979, the court denied the motion for intervention, and ruled that petitioners have no legal
interest whatsoever in the matter in litigation and their being alleged assignees or transferees of certain
shares in SUBIC cannot legally entitle them to intervene because SUBIC has a personality separate and
distinct from its stockholders.

On appeal, respondent Court of Appeals found no factual or legal justification to disturb the findings of the
lower court. The appellate court further stated that whatever claims the petitioners have against the late
Senator or against SUBIC for that matter can be ventilated in a separate proceeding, such that with the
denial of the motion for intervention, they are not left without any remedy or judicial relief under existing law.
Petitioners' motion for reconsideration was denied. Hence, the instant recourse.
Petitioners anchor their right to intervene on the purported assignment made by the late Senator of a certain
portion of his shareholdings to them as evidenced by a Deed of Sale dated June 20, 1978. 2 Such transfer,
petitioners posit, clothes them with an interest, protected by law, in the matter of litigation.
Invoking the principle enunciated in the case of PNB v. Phil. Veg. Oil Co., 49 Phil. 857,862 & 853
(1927), 3petitioners strongly argue that their ownership of 41.66% of the entire outstanding capital stock of
SUBIC entitles them to a significant vote in the corporate affairs; that they are affected by the action of the
widow of their late brother for it concerns the only tangible asset of the corporation and that it appears that
they are more vitally interested in the outcome of the case than SUBIC.
Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, this Court affirms the respondent
court's holding that petitioners herein have no legal interest in the subject matter in litigation so as to entitle
them to intervene in the proceedings below. In the case of Batama Farmers' Cooperative Marketing
Association, Inc. v. Rosal, 4 we held: "As clearly stated in Section 2 of Rule 12 of the Rules of Court, to be
permitted to intervene in a pending action, the party must have a legal interest in the matter in litigation, or in
the success of either of the parties or an interest against both, or he must be so situated as to be adversely
affected by a distribution or other disposition of the property in the custody of the court or an officer thereof ."
To allow intervention, [a] it must be shown that the movant has legal interest in the matter in litigation, or
otherwise qualified; and [b] consideration must be given as to whether the adjudication of the rights of the
original parties may be delayed or prejudiced, or whether the intervenor's rights may be protected in a
separate proceeding or not. Both requirements must concur as the first is not more important than the
second. 5
The interest which entitles a person to intervene in a suit between other parties must be in the matter in
litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct
legal operation and effect of the judgment. Otherwise, if persons not parties of the action could be allowed to
intervene, proceedings will become unnecessarily complicated, expensive and interminable. And this is not
the policy of the law. 6
The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and which
would put the intervenor in a legal position to litigate a fact alleged in the complaint, without the
establishment of which plaintiff could not recover. 7
Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural,
consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a
right in the management of the corporation and to share in the profits thereof and in the properties and
assets thereof on dissolution, after payment of the corporate debts and obligations.
While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it
does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate
property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate
property, which is owned by the corporation as a distinct legal person. 8

Petitioners further contend that the availability of other remedies, as declared by the Court of appeals, is
totally immaterial to the availability of the remedy of intervention.
We cannot give credit to such averment. As earlier stated, that the movant's interest may be protected in a
separate proceeding is a factor to be considered in allowing or disallowing a motion for intervention. It is
significant to note at this juncture that as per records, there are four pending cases involving the parties
herein, enumerated as follows: [1] Special Proceedings No. 122122 before the CFI of Manila, Branch XXII,
entitled "Concepcion Magsaysay-Labrador, et al. v. Subic Land Corp., et al.", involving the validity of the
transfer by the late Genaro Magsaysay of one-half of his shareholdings in Subic Land Corporation; [2] Civil
Case No. 2577-0 before the CFI of Zambales, Branch III, "Adelaida Rodriguez-Magsaysay v. Panganiban,
etc.; Concepcion Labrador, et al. Intervenors", seeking to annul the purported Deed of Assignment in favor
of SUBIC and its annotation at the back of TCT No. 3258 in the name of respondent's deceased husband;
[3] SEC Case No. 001770, filed by respondent praying, among other things that she be declared in her
capacity as the surviving spouse and administratrix of the estate of Genaro Magsaysay as the sole
subscriber and stockholder of SUBIC. There, petitioners, by motion, sought to intervene. Their motion to
reconsider the denial of their motion to intervene was granted; [4] SP No. Q-26739 before the CFI of Rizal,
Branch IV, petitioners herein filing a contingent claim pursuant to Section 5, Rule 86, Revised Rules of
Court. 9 Petitioners' interests are no doubt amply protected in these cases.
Neither do we lend credence to petitioners' argument that they are more interested in the outcome of the
case than the corporation-assignee, owing to the fact that the latter is willing to compromise with widowrespondent and since a compromise involves the giving of reciprocal concessions, the only conceivable
concession the corporation may give is a total or partial relinquishment of the corporate assets. 10
Such claim all the more bolsters the contingent nature of petitioners' interest in the subject of litigation.
The factual findings of the trial court are clear on this point. The petitioners cannot claim the right to
intervene on the strength of the transfer of shares allegedly executed by the late Senator. The corporation
did not keep books and records. 11 Perforce, no transfer was ever recorded, much less effected as to
prejudice third parties. The transfer must be registered in the books of the corporation to affect third persons.
The law on corporations is explicit. Section 63 of the Corporation Code provides, thus: "No transfer,
however, shall be valid, except as between the parties, until the transfer is recorded in the books of the
corporation showing the names of the parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred."
And even assuming arguendo that there was a valid transfer, petitioners are nonetheless barred from
intervening inasmuch as their rights can be ventilated and amply protected in another proceeding.
WHEREFORE, the instant petition is hereby DENIED. Costs against petitioners.
SO ORDERED.

G.R. No. L-31061 August 17, 1976

SULO NG BAYAN INC., plaintiff-appellant,
vs.
GREGORIO ARANETA, INC., PARADISE FARMS, INC., NATIONAL WATERWORKS & SEWERAGE
AUTHORITY, HACIENDA CARETAS, INC, and REGISTER OF DEEDS OF BULACAN, defendantsappellees.
Hill & Associates Law Offices for appellant.
Araneta, Mendoza & Papa for appellee Gregorio Araneta, Inc.
Carlos, Madarang, Carballo & Valdez for Paradise Farms, Inc.
Leopoldo M. Abellera, Arsenio J. Magpale & Raul G. Bernardo, Office of the Government Corporate Counsel
for appellee National Waterworks & Sewerage Authority.
Candido G. del Rosario for appellee Hacienda Caretas, Inc.

ANTONIO, J.:
The issue posed in this appeal is whether or not plaintiff corporation (non- stock may institute an action in
behalf of its individual members for the recovery of certain parcels of land allegedly owned by said
members; for the nullification of the transfer certificates of title issued in favor of defendants appellees
covering the aforesaid parcels of land; for a declaration of "plaintiff's members as absolute owners of the
property" and the issuance of the corresponding certificate of title; and for damages.
On April 26, 1966, plaintiff-appellant Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of
First Instance of Bulacan, Fifth Judicial District, Valenzuela, Bulacan, against defendants-appellees to
recover the ownership and possession of a large tract of land in San Jose del Monte, Bulacan, containing an
area of 27,982,250 square meters, more or less, registered under the Torrens System in the name of
defendants-appellees' predecessors-in-interest. 1 The complaint, as amended on June 13, 1966, specifically
alleged that plaintiff is a corporation organized and existing under the laws of the Philippines, with its
principal office and place of business at San Jose del Monte, Bulacan; that its membership is composed of
natural persons residing at San Jose del Monte, Bulacan; that the members of the plaintiff corporation,
through themselves and their predecessors-in-interest, had pioneered in the clearing of the fore-mentioned
tract of land, cultivated the same since the Spanish regime and continuously possessed the said property
openly and public under concept of ownership adverse against the whole world; that defendant-appellee
Gregorio Araneta, Inc., sometime in the year 1958, through force and intimidation, ejected the members of
the plaintiff corporation fro their possession of the aforementioned vast tract of land; that upon investigation
conducted by the members and officers of plaintiff corporation, they found out for the first time in the year
1961 that the land in question "had been either fraudelently or erroneously included, by direct or constructive
fraud, in Original Certificate of Title No. 466 of the Land of Records of the province of Bulacan", issued on
May 11, 1916, which title is fictitious, non-existent and devoid of legal efficacy due to the fact that "no
original survey nor plan whatsoever" appears to have been submitted as a basis thereof and that the Court
of First Instance of Bulacan which issued the decree of registration did not acquire jurisdiction over the land
registration case because no notice of such proceeding was given to the members of the plaintiff corporation
who were then in actual possession of said properties; that as a consequence of the nullity of the original
title, all subsequent titles derived therefrom, such as Transfer Certificate of Title No. 4903 issued in favor of
Gregorio Araneta and Carmen Zaragoza, which was subsequently cancelled by Transfer Certificate of Title

No. 7573 in the name of Gregorio Araneta, Inc., Transfer Certificate of Title No. 4988 issued in the name of,
the National Waterworks & Sewerage Authority (NWSA), Transfer Certificate of Title No. 4986 issued in the
name of Hacienda Caretas, Inc., and another transfer certificate of title in the name of Paradise Farms, Inc.,
are therefore void. Plaintiff-appellant consequently prayed (1) that Original Certificate of Title No. 466, as
well as all transfer certificates of title issued and derived therefrom, be nullified; (2) that "plaintiff's members"
be declared as absolute owners in common of said property and that the corresponding certificate of title be
issued to plaintiff; and (3) that defendant-appellee Gregorio Araneta, Inc. be ordered to pay to plaintiff the
damages therein specified.
On September 2, 1966, defendant-appellee Gregorio Araneta, Inc. filed a motion to dismiss the amended
complaint on the grounds that (1) the complaint states no cause of action; and (2) the cause of action, if any,
is barred by prescription and laches. Paradise Farms, Inc. and Hacienda Caretas, Inc. filed motions to
dismiss based on the same grounds. Appellee National Waterworks & Sewerage Authority did not file any
motion to dismiss. However, it pleaded in its answer as special and affirmative defenses lack of cause of
action by the plaintiff-appellant and the barring of such action by prescription and laches.
During the pendency of the motion to dismiss, plaintiff-appellant filed a motion, dated October 7, 1966,
praying that the case be transferred to another branch of the Court of First Instance sitting at Malolos,
Bulacan, According to defendants-appellees, they were not furnished a copy of said motion, hence, on
October 14, 1966, the lower court issued an Order requiring plaintiff-appellant to furnish the appellees copy
of said motion, hence, on October 14, 1966, defendant-appellant's motion dated October 7, 1966 and,
consequently, prayed that the said motion be denied for lack of notice and for failure of the plaintiff-appellant
to comply with the Order of October 14, 1966. Similarly, defendant-appellee paradise Farms, Inc. filed, on
December 2, 1966, a manifestation information the court that it also did not receive a copy of the aforementioned of appellant. On January 24, 1967, the trial court issued an Order dismissing the amended
complaint.
On February 14, 1967, appellant filed a motion to reconsider the Order of dismissal on the grounds that the
court had no jurisdiction to issue the Order of dismissal, because its request for the transfer of the case from
the Valenzuela Branch of the Court of First Instance to the Malolos Branch of the said court has been
approved by the Department of Justice; that the complaint states a sufficient cause of action because the
subject matter of the controversy in one of common interest to the members of the corporation who are so
numerous that the present complaint should be treated as a class suit; and that the action is not barred by
the statute of limitations because (a) an action for the reconveyance of property registered through fraud
does not prescribe, and (b) an action to impugn a void judgment may be brought any time. This motion was
denied by the trial court in its Order dated February 22, 1967. From the afore-mentioned Order of dismissal
and the Order denying its motion for reconsideration, plaintiff-appellant appealed to the Court of Appeals.
On September 3, 1969, the Court of Appeals, upon finding that no question of fact was involved in the
appeal but only questions of law and jurisdiction, certified this case to this Court for resolution of the legal
issues involved in the controversy.
I
Appellant contends, as a first assignment of error, that the trial court acted without authority and jurisdiction
in dismissing the amended complaint when the Secretary of Justice had already approved the transfer of the
case to any one of the two branches of the Court of First Instance of Malolos, Bulacan.
Appellant confuses the jurisdiction of a court and the venue of cases with the assignment of cases in the
different branches of the same Court of First Instance. Jurisdiction implies the power of the court to decide a
case, while venue the place of action. There is no question that respondent court has jurisdiction over the
case. The venue of actions in the Court of First Instance is prescribed in Section 2, Rule 4 of the Revised

Rules of Court. The laying of venue is not left to the caprice of plaintiff, but must be in accordance with the
aforesaid provision of the rules. 2The mere fact that a request for the transfer of a case to another branch of
the same court has been approved by the Secretary of Justice does not divest the court originally taking
cognizance thereof of its jurisdiction, much less does it change the venue of the action. As correctly
observed by the trial court, the indorsement of the Undersecretary of Justice did not order the transfer of the
case to the Malolos Branch of the Bulacan Court of First Instance, but only "authorized" it for the reason
given by plaintiff's counsel that the transfer would be convenient for the parties. The trial court is not without
power to either grant or deny the motion, especially in the light of a strong opposition thereto filed by the
defendant. We hold that the court a quo acted within its authority in denying the motion for the transfer the
case to Malolos notwithstanding the authorization" of the same by the Secretary of Justice.
II
Let us now consider the substantive aspect of the Order of dismissal.
In dismissing the amended complaint, the court a quo said:
The issue of lack of cause of action raised in the motions to dismiss refer to the lack of
personality of plaintiff to file the instant action. Essentially, the term 'cause of action' is
composed of two elements: (1) the right of the plaintiff and (2) the violation of such right by
the defendant. (Moran, Vol. 1, p. 111). For these reasons, the rules require that every action
must be prosecuted and defended in the name of the real party in interest and that all
persons having an interest in the subject of the action and in obtaining the relief demanded
shall be joined as plaintiffs (Sec. 2, Rule 3). In the amended complaint, the people whose
rights were alleged to have been violated by being deprived and dispossessed of their land
are the members of the corporation and not the corporation itself. The corporation has a
separate. and distinct personality from its members, and this is not a mere technicality but a
matter of substantive law. There is no allegation that the members have assigned their rights
to the corporation or any showing that the corporation has in any way or manner succeeded
to such rights. The corporation evidently did not have any rights violated by the defendants
for which it could seek redress. Even if the Court should find against the defendants,
therefore, the plaintiff corporation would not be entitled to the reliefs prayed for, which are
recoveries of ownership and possession of the land, issuance of the corresponding title in its
name, and payment of damages. Neither can such reliefs be awarded to the members
allegedly deprived of their land, since they are not parties to the suit. It appearing clearly that
the action has not been filed in the names of the real parties in interest, the complaint must
be dismissed on the ground of lack of cause of action. 3
Viewed in the light of existing law and jurisprudence, We find that the trial court correctly dismissed the
amended complaint.
It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal
entity to be considered as separate and apart from the individual stockholders or members who compose it,
and is not affected by the personal rights, obligations and transactions of its stockholders or members. 4 The
property of the corporation is its property and not that of the stockholders, as owners, although they have
equities in it. Properties registered in the name of the corporation are owned by it as an entity separate and
distinct from its members. 5 Conversely, a corporation ordinarily has no interest in the individual property of
its stockholders unless transferred to the corporation, "even in the case of a one-man corporation. 6 The
mere fact that one is president of a corporation does not render the property which he owns or possesses
the property of the corporation, since the president, as individual, and the corporation are separate
similarities. 7 Similarly, stockholders in a corporation engaged in buying and dealing in real estate whose
certificates of stock entitled the holder thereof to an allotment in the distribution of the land of the corporation

upon surrender of their stock certificates were considered not to have such legal or equitable title or interest
in the land, as would support a suit for title, especially against parties other than the corporation. 8
It must be noted, however, that the juridical personality of the corporation, as separate and distinct from the
persons composing it, is but a legal fiction introduced for the purpose of convenience and to subserve the
ends of justice. 9 This separate personality of the corporation may be disregarded, or the veil of corporate
fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work -an injustice, or
where necessary to achieve equity. 10
Thus, when "the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, ... the law will regard the corporation as an association of persons, or in the case of two
corporations, merge them into one, the one being merely regarded as part or instrumentality of the
other. 11 The same is true where a corporation is a dummy and serves no business purpose and is intended
only as a blind, or an alter ego or business conduit for the sole benefit of the stockholders. 12 This doctrine of
disregarding the distinct personality of the corporation has been applied by the courts in those cases when
the corporate entity is used for the evasion of taxes 13 or when the veil of corporate fiction is used to confuse
legitimate issue of employer-employee relationship, 14 or when necessary for the protection of creditors, in
which case the veil of corporate fiction may be pierced and the funds of the corporation may be garnished to
satisfy the debts of a principal stockholder. 15 The aforecited principle is resorted to by the courts as a
measure protection for third parties to prevent fraud, illegality or injustice. 16
It has not been claimed that the members have assigned or transferred whatever rights they may have on
the land in question to the plaintiff corporation. Absent any showing of interest, therefore, a corporation, like
plaintiff-appellant herein, has no personality to bring an action for and in behalf of its stockholders or
members for the purpose of recovering property which belongs to said stockholders or members in their
personal capacities.
It is fundamental that there cannot be a cause of action 'without an antecedent primary legal right conferred'
by law upon a person. 17 Evidently, there can be no wrong without a corresponding right, and no breach of
duty by one person without a corresponding right belonging to some other person. 18 Thus, the essential
elements of a cause of action are legal right of the plaintiff, correlative obligation of the defendant, an act or
omission of the defendant in violation of the aforesaid legal right. 19 Clearly, no right of action exists in favor
of plaintiff corporation, for as shown heretofore it does not have any interest in the subject matter of the case
which is material and, direct so as to entitle it to file the suit as a real party in interest.
III
Appellant maintains, however, that the amended complaint may be treated as a class suit, pursuant to
Section 12 of Rule 3 of the Revised Rules of Court.
In order that a class suit may prosper, the following requisites must be present: (1) that the subject matter of
the controversy is one of common or general interest to many persons; and (2) that the parties are so
numerous that it is impracticable to bring them all before the court. 20
Under the first requisite, the person who sues must have an interest in the controversy, common with those
for whom he sues, and there must be that unity of interest between him and all such other persons which
would entitle them to maintain the action if suit was brought by them jointly. 21
As to what constitutes common interest in the subject matter of the controversy, it has been explained
in Scott v. Donald 22 thus:

The interest that will allow parties to join in a bill of complaint, or that will enable the court to
dispense with the presence of all the parties, when numerous, except a determinate number,
is not only an interest in the question, but one in common in the subject Matter of the suit; ...
a community of interest growing out of the nature and condition of the right in dispute; for,
although there may not be any privity between the numerous parties, there is a common
title out of which the question arises, and which lies at the foundation of the proceedings ...
[here] the only matter in common among the plaintiffs, or between them and the defendants,
is an interest in the Question involved which alone cannot lay a foundation for the joinder of
parties. There is scarcely a suit at law, or in equity which settles a Principle or applies a
principle to a given state of facts, or in which a general statute is interpreted, that does not
involved a Question in which other parties are interested. ... (Emphasis supplied )
Here, there is only one party plaintiff, and the plaintiff corporation does not even have an interest in the
subject matter of the controversy, and cannot, therefore, represent its members or stockholders who claim to
own in their individual capacities ownership of the said property. Moreover, as correctly stated by the
appellees, a class suit does not lie in actions for the recovery of property where several persons claim
Partnership of their respective portions of the property, as each one could alleged and prove his respective
right in a different way for each portion of the land, so that they cannot all be held to have Identical title
through acquisition prescription. 23
Having shown that no cause of action in favor of the plaintiff exists and that the action in the lower court
cannot be considered as a class suit, it would be unnecessary and an Idle exercise for this Court to resolve
the remaining issue of whether or not the plaintiffs action for reconveyance of real property based upon
constructive or implied trust had already prescribed.
ACCORDINGLY, the instant appeal is hereby DISMISSED with costs against the plaintiff-appellant.
Fernando, C.J., Barredo, Aquino and Concepcion, Jr., JJ., concur.

THIRD DIVISION
[G.R. NO. 168306 : June 19, 2007]
WILLIAM C. YAO, SR., LUISA C. YAO, RICHARD C. YAO, WILLIAM C. YAO JR., and ROGER C.
YAO, Petitioners, v. THE PEOPLE OF THE PHILIPPINES, PETRON CORPORATION and PILIPINAS
SHELL PETROLEUM CORP., and its Principal, SHELL INT L PETROLEUM CO. LTD., Respondents.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, petitioners William C. Yao, Sr.,
Luisa C. Yao, Richard C. Yao, William C. Yao, Jr., and Roger C. Yao pray for the reversal of the Decision
dated 30 September 2004,2 and Resolution dated 1 June 2005, of the Court of Appeals in CA G.R. SP No.
79256,3 affirming the two Orders, both dated 5 June 2003, of the Regional Trial Court (RTC), Branch 17,
Cavite City, relative to Search Warrants No. 2-2003 and No. 3-2003.4 In the said Orders, the RTC denied
the petitioners' Motion to Quash Search Warrant5 and Motion for the Return of the Motor Compressor and
Liquified Petroleum Gas (LPG) Refilling Machine.6
The following are the facts:
Petitioners are incorporators and officers of MASAGANA GAS CORPORATION (MASAGANA), an entity
engaged in the refilling, sale and distribution of LPG products. Private respondents Petron Corporation
(Petron) and Pilipinas Shell Petroleum Corporation (Pilipinas Shell) are two of the largest bulk suppliers and
producers of LPG in the Philippines. Their LPG products are sold under the marks "GASUL" and
"SHELLANE," respectively. Petron is the registered owner in the Philippines of the trademarks GASUL and
GASUL cylinders used for its LPG products. It is the sole entity in the Philippines authorized to allow refillers
and distributors to refill, use, sell, and distribute GASUL LPG containers, products and its trademarks.
Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename, trademarks,
symbols, or designs of its principal, Shell International Petroleum Company Limited (Shell International),
including the marks SHELLANE and SHELL device in connection with the production, sale and distribution
of SHELLANE LPGs. It is the only corporation in the Philippines authorized to allow refillers and distributors
to refill, use, sell and distribute SHELLANE LPG containers and products.7
On 3 April 2003, National Bureau of Investigation (NBI) agent Ritche N. Oblanca (Oblanca) filed two
applications for search warrant with the RTC, Branch 17, Cavite City, against petitioners and other
occupants of the MASAGANA compound located at Governor's Drive, Barangay Lapidario, Trece Martires,
Cavite City, for alleged violation of Section 155, in relation to Section 170 of Republic Act No. 8293,
otherwise known as "The Intellectual Property Code of the Philippines."8 The two applications for search
warrant uniformly alleged that per information, belief, and personal verification of Oblanca, the petitioners
are actually producing, selling, offering for sale and/or distributing LPG products using steel cylinders owned
by, and bearing the tradenames, trademarks, and devices of Petron and Pilipinas Shell, without authority
and in violation of the rights of the said entities.
In his two separate affidavits9 attached to the two applications for search warrant, Oblanca alleged:
1. [That] on 11 February 2003, the National Bureau of Investigation ("NBI") received a letter-complaint from
Atty. Bienvenido I. Somera Jr. of Villaraza and Angangco, on behalf of among others, [Petron Corporation
(PETRON)] and Pilipinas Shell Petroleum Corporation (PSPC), the authorized representative of Shell
International Petroleum Company Limited ("Shell International"), requesting assistance in the investigation

and, if warranted, apprehension and prosecution of certain persons and/or establishments suspected of
violating the intellectual property rights [of PETRON] and of PSPC and Shell International.
2. [That] on the basis of the letter-complaint, I, together with Agent Angelo Zarzoso, was assigned as the
NBI agent on the case.
3. [That] prior to conducting the investigation on the reported illegal activities, he reviewed the certificates of
trademark registrations issued in favor of [PETRON], PSPC and Shell International as well as other
documents and other evidence obtained by the investigative agency authorized by [PETRON], PSPC and
Shell International to investigate and cause the investigation of persons and establishments violating the
rights of [PETRON], PSPC and Shell International, represented by Mr. Bernabe C. Alajar. Certified copies of
the foregoing trademark registrations are attached hereto as Annexes "A" to ":E".
4. [That] among the establishments alleged to be unlawfully refilling and unlawfully selling and distributing
[Gasul LPG and] Shellane products is Masagana Gas Corporation ("MASAGANA"). Based on Securities and
Exchange Commission Records, MASAGANA has its principal office address at 9775 Kamagong Street,
San Antonio Village, Makati, Metro Manila. The incorporators and directors of MASAGANA are William C.
Yao, Sr., Luisa C. Yao, Richard C. Yao, William C. Yao, Jr., and Roger C. Yao. x x x.
5. I confirmed that MASAGANA is not authorized to use [PETRON and] Shellane LPG cylinders and its
trademarks and tradenames or to be refillers or distributors of [PETRON and] Shellane LPG's.
6. I went to MASAGANA's refilling station located at Governor's Drive, Barangay Lapidario, Trece Martires
City (sic), Cavite to investigate its activities. I confirmed that MASAGANA is indeed engaged in the
unauthorized refilling, sale and/or distribution of [Gasul and] Shellane LPG cylinders. I found out that
MASAGANA delivery trucks with Plate Nos. UMN-971, PEZ-612, WTE-527, XAM-970 and WFC-603 coming
in and out of the refilling plant located at the aforementioned address contained multi-brand LPG cylinders
including [Gasul and] Shellane. x x x.
7. [That] on 13 February 2003, I conducted a test-buy accompanied by Mr. Bernabe C. Alajar. After asking
the purpose of our visit, MASAGANA's guard allowed us to enter the MASAGANA refilling plant to purchase
GASUL and SHELLANE LPGs. x x x. We were issued an order slip which we presented to the cashier's
office located near the refilling station. After paying the amount x x x covering the cost of the cylinders and
their contents, they were issued Cash Invoice No. 56210 dated February 13, 2003. We were, thereafter,
assisted by the plant attendant in choosing empty GASUL and SHELLANE 11 kg. cylinders, x x x were
brought to the refilling station [and filled in their presence.] I noticed that no valve seals were placed on the
cylinders.
[That] while inside the refilling plant doing the test-buy, I noticed that stockpiles of multi-branded cylinders
including GASUL and SHELLANE cylinders were stored near the refilling station. I also noticed that the total
land area of the refilling plant is about 7,000 to 10,000 square meters. At the corner right side of the
compound immediately upon entering the gate is a covered area where the maintenance of the cylinders is
taking place. Located at the back right corner of the compound are two storage tanks while at the left side
also at the corner portion is another storage tank. Several meters and fronting the said storage tank is where
the refilling station and the office are located. It is also in this storage tank where the elevated blue water
tank depicting MASAGANA CORP. is located. About eleven (11) refilling pumps and stock piles of multibranded cylinders including Shellane and GASUL are stored in the refilling station. At the left side of the
entrance gate is the guard house with small door for the pedestrians and at the right is a blue steel gate
used for incoming and outgoing vehicles.
8. [That] on 27 February 2003, I conducted another test-buy accompanied by Mr. Bernabe C. Alajar. x x x
After choosing the cylinders, we were issued an order slip which we presented to the cashier. Upon

payment, Cash Invoice No. 56398 was issued covering the cost of both GASUL and SHELLANE LPG
cylinders and their contents. x x x Both cylinders were refilled in our presence and no valve seals were
placed on the cylinders.
Copies of the photographs of the delivery trucks, LPG cylinders and registration papers were also attached
to the aforementioned affidavits.10
Bernabe C. Alajar (Alajar), owner of Able Research and Consulting Services Inc., was hired by Petron and
Pilipinas Shell to assist them in carrying out their Brand Protection Program. Alajar accompanied Oblanca
during the surveillance of and test-buys at the refilling plant of MASAGANA. He also executed two separate
affidavits corroborating the statements of Oblanca. These were annexed to the two applications for search
warrant.11
After conducting the preliminary examination on Oblanca and Alajar, and upon reviewing their sworn
affidavits and other attached documents, Judge Melchor Q.C. Sadang (Judge Sadang), Presiding Judge of
the RTC, Branch 17, Cavite City, found probable cause and correspondingly issued Search Warrants No. 22003 and No. 3-2003.12 The search warrants commanded any peace officer to make an immediate search of
the MASAGANA compound and to seize the following items:
Under Search Warrant No. 2-2003:
A. Empty/filled LPG cylinder tanks/containers, bearing the tradename "SHELLANE", "SHELL" (Device) of
Pilipinas Shell Petroleum Corporation and the trademarks and other devices owned by Shell International
Petroleum Company, Ltd.;
b. Machinery and/or equipment being used or intended to be used for the purpose of illegally refilling LPG
cylinders belonging to Pilipinas Shell Petroleum Corporation bearing the latter's tradename as well as the
marks belonging to Shell International Petroleum Company, Ltd., enumerated hereunder:
1. Bulk/Bullet LPG storage tanks;
2. Compressor/s (for pneumatic refilling system);
3. LPG hydraulic pump/s;
4. LPG refilling heads/hoses and appurtenances or LPG filling assembly;
5. LPG pipeline gate valve or ball valve and handles and levers;
6. LPG weighing scales; andcralawlibrary
7. Seals simulating the shell trademark.
c. Sales invoices, ledgers, journals, official receipts, purchase orders, and all other books of accounts,
inventories and documents pertaining to the production, sale and/or distribution of the aforesaid
goods/products.
d. Delivery truck bearing Plate Nos. WTE-527, XAM-970 and WFC-603, hauling trucks, and/or other delivery
trucks or vehicles or conveyances being used or intended to be used for the purpose of selling and/or
distributing the above-mentioned counterfeit products.

Under Search Warrant No. 3-2003:

A. Empty/filled LPG cylinder tanks/containers, bearing Petron Corporation's (Petron) tradename and its
tradename "GASUL" and other devices owned and/or used exclusively by Petron;
b. Machinery and/or equipment being used or intended to be used for the purpose of illegally refilling LPG
cylinders belonging to Petron enumerated hereunder;
1. Bulk/Bullet LPG storage tanks;
2. Compressor/s (for pneumatic filling system);
3. LPG hydraulic pump/s;
4. LPG filling heads/hoses and appurtenances or LPG filling assembly;
5. LPG pipeline gate valve or ball valve and handles levers;
6. LPG weighing scales; andcralawlibrary
7. Seals bearing the Petron mark;
c. Sales invoices, ledgers, journals, official receipts, purchase orders, and all other books of accounts,
inventories and documents pertaining to the production, sale and/or distribution of the aforesaid
goods/products; andcralawlibrary
d. Delivery trucks bearing Plate Nos. UMN-971, PEZ-612 and WFC-603, hauling trucks, and/or other
delivery trucks or vehicles or conveyances being used for the purpose of selling and/or distributing the
above-mentioned counterfeit products.
Upon the issuance of the said search warrants, Oblanca and several NBI operatives immediately proceeded
to the MASAGANA compound and served the search warrants on petitioners.13 After searching the premises
of MASAGANA, the following articles described in Search Warrant No. 2-2003 were seized:
A. Thirty-eight (38) filled 11 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum
Corporation and the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;
b. Thirty-nine (39) empty 11 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum
Corporation and the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;
c. Eight (8) filled 50 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum Corporation and
the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;
d. Three (3) empty 50 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum Corporation
and the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;
e. One (1) set of motor compressor for filling system.
Pursuant to Search Warrant No. 3-2003, the following articles were also seized:

A. Six (6) filled 11 kg. LPG cylinders without seal, bearing Petron's tradename and its trademark "GASUL"
and other devices owned and/or used exclusively by Petron;
b. Sixty-three (63) empty 11 kg. LPG cylinders, bearing Petron's tradename and its trademark "GASUL" and
other devices owned and/or used exclusively by Petron;
c. Seven (7) tampered 11 kg. LPG cylinders, bearing Petron's tradename and its trademark "GASUL" and
other devices owned and/or used exclusively by Petron;
d. Five (5) tampered 50 kg. LPG cylinders, bearing Petron's tradename and its trademark "GASUL" and
other devices owned and/or used exclusively by Petron with tampered "GASUL" logo;
e. One (1) set of motor compressor for filling system; andcralawlibrary
f. One (1) set of LPG refilling machine.
On 22 April 2003, petitioners filed with the RTC a Motion to Quash Search Warrants No. 2-2003 and No. 3200314 on the following grounds:
1. There is no probable cause for the issuance of the search warrant and the conditions for the issuance of a
search warrant were not complied with;
2. Applicant NBI Agent Ritchie N. Oblanca and his witness Bernabe C. Alajar do not have any authority to
apply for a search warrant. Furthermore, they committed perjury when they alleged in their sworn
statements that they conducted a test-buy on two occasions;
3. The place to be searched was not specified in the Search Warrant as the place has an area of 10,000
square meters (one hectare) more or less, for which reason the place to be searched must be indicated with
particularity;
4. The search warrant is characterized as a general warrant as the items to be seized as mentioned in the
search warrant are being used in the conduct of the lawful business of respondents and the same are not
being used in refilling Shellane and Gasul LPGs.
On 30 April 2003, MASAGANA, as third party claimant, filed with the RTC a Motion for the Return of Motor
Compressor and LPG Refilling Machine.15 It claimed that it is the owner of the said motor compressor and
LPG refilling machine; that these items were used in the operation of its legitimate business; and that their
seizure will jeopardize its business interests.
On 5 June 2003, the RTC issued two Orders, one of which denied the petitioners' Motion to Quash Search
Warrants No. 2-2003 and No. 3-2003, and the other one also denied the Motion for the Return of Motor
Compressor and LPG Refilling Machine of MASAGANA, for lack of merit.16
With respect to the Order denying the petitioners' motion to quash Search Warrants No. 2-2003 and No. 32003, the RTC held that based on the testimonies of Oblanca and Alajar, as well as the documentary
evidence consisting of receipts, photographs, intellectual property and corporate registration papers, there is
probable cause to believe that petitioners are engaged in the business of refilling or using cylinders which
bear the trademarks or devices of Petron and Pilipinas Shell in the place sought to be searched and that
such activity is probably in violation of Section 155 in relation to Section 170 of Republic Act No. 8293.

It also ruled that Oblanca and Alajar had personal knowledge of the acts complained of since they were the
ones who monitored the activities of and conducted test-buys on MASAGANA; that the search warrants in
question are not general warrants because the compound searched are solely used and occupied by
MASAGANA, and as such, there was no need to particularize the areas within the compound that would be
searched; and that the items to be seized in the subject search warrants were sufficiently described with
particularity as the same was limited to cylinder tanks bearing the trademarks GASUL and SHELLANE.
As regards the Order denying the motion of MASAGANA for the return of its motor compressor and LPG
refilling machine, the RTC resolved that MASAGANA cannot be considered a third party claimant whose
rights were violated as a result of the seizure since the evidence disclosed that petitioners are stockholders
of MASAGANA and that they conduct their business through the same juridical entity. It maintained that to
rule otherwise would result in the misapplication and debasement of the veil of corporate fiction. It also
stated that the veil of corporate fiction cannot be used as a refuge from liability.
Further, the RTC ratiocinated that ownership by another person or entity of the seized items is not a ground
to order its return; that in seizures pursuant to a search warrant, what is important is that the seized items
were used or intended to be used as means of committing the offense complained of; that by its very nature,
the properties sought to be returned in the instant case appear to be related to and intended for the illegal
activity for which the search warrants were applied for; and that the items seized are instruments of an
offense.
Petitioners filed Motions for Reconsideration of the assailed Orders,17 but these were denied by the RTC in
its Order dated 21 July 2003 for lack of compelling reasons.18
Subsequently, petitioners appealed the two Orders of the RTC to the Court of Appeals via a special civil
action for certiorari under Rule 65 of the Rules of Court.19 On 30 September 2004, the Court of Appeals
promulgated its Decision affirming the Orders of the RTC.20 It adopted in essence the bases and reasons of
the RTC in its two Orders. The decretal portion thereof reads:
Based on the foregoing, this Court finds no reason to disturb the assailed Orders of the respondent judge.
Grave abuse of discretion has not been proven to exist in this case.
WHEREFORE, the petition is hereby DISMISSED for lack of merit. The assailed orders both dated June 5,
2003 are hereby AFFIRMED.
Petitioners filed a Motion for Reconsideration21 of the Decision of the Court of Appeals, but this was denied
in its Resolution dated 1 June 2005 for lack of merit.22
Petitioners filed the instant petition on the following grounds:
I.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PRESIDING JUDGE OF RTC
CAVITE CITY HAD SUFFICIENT BASIS IN DECLARING THE EXISTENCE OF PROBABLE CAUSE;
II.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NBI AGENT (RITCHIE OBLANCA)
CAN APPLY FOR THE SEARCH WARRANTS NOTHWITHSTANDING HIS LACK OF AUTHORITY;
III.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE REQUIREMENT OF GIVING A
PARTICULAR DESCRIPTION OF THE PLACE TO BE SEARCHED WAS COMPLIED WITH;
IV.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE APPLICATIONS AND THE
SEARCH WARRANTS THEMSELVES SHOW NO AMBIGUITY OF THE ITEMS TO BE SEIZED;
V.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE COMPLAINT IS DIRECTED
AGAINST MASAGANA GAS CORPORATION, ACTING THROUGH ITS OFFICERS AND DIRECTORS,
HENCE MASAGANA GAS CORPORATION MAY NOT BE CONSIDERED AS THIRD PARTY CLAIMANT
WHOSE RIGHTS WERE VIOLATED AS A RESULT OF THE SEIZURE.23
Apropos the first issue, petitioners allege that Oblanca and Alajar had no personal knowledge of the matters
on which they testified; that Oblanca and Alajar lied to Judge Sadang when they stated under oath that they
were the ones who conducted the test-buys on two different occasions; that the truth of the matter is that
Oblanca and Alajar never made the purchases personally; that the transactions were undertaken by other
persons namely, Nikko Javier and G. Villanueva as shown in the Entry/Exit Slips of MASAGANA; and that
even if it were true that Oblanca and Alajar asked Nikko Javier and G. Villanueva to conduct the test-buys,
the information relayed by the latter two to the former was mere hearsay.24
Petitioners also contend that if Oblanca and Alajar had indeed used different names in purchasing the LPG
cylinders, they should have mentioned it in their applications for search warrants and in their testimonies
during the preliminary examination; that it was only after the petitioners had submitted to the RTC the
entry/exit slips showing different personalities who made the purchases that Oblanca and Alajar explained
that they had to use different names in order to avoid detection; that Alajar is not connected with either of the
private respondents; that Alajar was not in a position to inform the RTC as to the distinguishing trademarks
of SHELLANE and GASUL; that Oblanca was not also competent to testify on the marks allegedly infringed
by petitioners; that Judge Sadang failed to ask probing questions on the distinguishing marks of SHELLANE
and GASUL; that the findings of the Brand Protection Committee of Pilipinas Shell were not submitted nor
presented to the RTC; that although Judge Sadang examined Oblanca and Alajar, the former did not ask
exhaustive questions; and that the questions Judge Sadang asked were merely rehash of the contents of
the affidavits of Oblanca and Alajar.25
These contentions are devoid of merit.
Article III, Section 2, of the present Constitution states the requirements before a search warrant may be
validly issued, to wit:
Section 2. The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no
search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by
the judge after examination under oath or affirmation of the complainant and the witnesses he may produce,
and particularly describing the place to be searched and the persons or things to be seized. (emphasis
supplied).
Section 4 of Rule 126 of the Revised Rules on Criminal Procedure, provides with more particularity the
requisites in issuing a search warrant, viz:

SEC. 4. Requisites for issuing search warrant. - A search warrant shall not issue except upon probable
cause in connection with one specific offense to be determined personally by the judge after examination
under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing
the place to be searched and the things to be seized which may be anywhere in the Philippines.
According to the foregoing provisions, a search warrant can be issued only upon a finding of probable
cause. Probable cause for search warrant means such facts and circumstances which would lead a
reasonably discreet and prudent man to believe that an offense has been committed and that the objects
sought in connection with the offense are in the place to be searched.26
The facts and circumstances being referred thereto pertain to facts, data or information personally known to
the applicant and the witnesses he may present.27 The applicant or his witnesses must have personal
knowledge of the circumstances surrounding the commission of the offense being complained of. "Reliable
information" is insufficient. Mere affidavits are not enough, and the judge must depose in writing the
complainant and his witnesses.28
Section 155 of Republic Act No. 8293 identifies the acts constituting trademark infringement, thus:
SEC. 155. Remedies; Infringement. - Any person who shall, without the consent of the owner of the
registered mark:
155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or
the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution,
advertising of any goods or services including other preparatory steps necessary to carry out the sale of any
goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake,
or to deceive; or
155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and
apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering
for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to
cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the
registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment
any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is
actual sale of goods or services using the infringing material.
As can be gleaned in Section 155.1, mere unauthorized use of a container bearing a registered trademark in
connection with the sale, distribution or advertising of goods or services which is likely to cause confusion,
mistake or deception among the buyers/consumers can be considered as trademark infringement.
In his sworn affidavits,29 Oblanca stated that before conducting an investigation on the alleged illegal
activities of MASAGANA, he reviewed the certificates of trademark registrations issued by the Philippine
Intellectual Property Office in favor of Petron and Pilipinas Shell; that he confirmed from Petron and Pilipinas
Shell that MASAGANA is not authorized to sell, use, refill or distribute GASUL and SHELLANE LPG cylinder
containers; that he and Alajar monitored the activities of MASAGANA in its refilling plant station located
within its compound at Governor's Drive, Barangay Lapidario, Trece Martires, Cavite City; that, using
different names, they conducted two test-buys therein where they purchased LPG cylinders bearing the
trademarks GASUL and SHELLANE; that the said GASUL and SHELLANE LPG cylinders were refilled in
their presence by the MASAGANA employees; that while they were inside the MASAGANA compound, he
noticed stock piles of multi-branded cylinders including GASUL and SHELLANE LPG cylinders; and that
they observed delivery trucks loaded with GASUL and SHELLANE LPG cylinders coming in and out of the

MASAGANA compound and making deliveries to various retail outlets. These allegations were corroborated
by Alajar in his separate affidavits.
In support of the foregoing statements, Oblanca also submitted the following documentary and object
evidence:
1. Certified true copy of the Certificate of Registration No. 44046 for "SHELL (DEVICE)" in the name of Shell
International;
2. Certified true copy of the Certificate of Registration No. 41789 for "SHELL (DEVICE)' in the name of Shell
International;
3. Certified true copy of the Certificate of Registration No. 37525 for "SHELL (DEVICE) in the name of Shell
International;
4. Certified true copy of the Certificate of Registration No. R-2813 for "SHELL" in the name of Shell
International;
5. Certified true copy of the Certificate of Registration No. 31443 for "SHELLANE" in the name of Shell
International;
6. Certified true copy of the Certificate of Registration No. 57945 for the mark "GASUL" in the name of
Petron;
7. Certified true copy of the Certificate of Registration No. C-147 for "GASUL CYLINDER CONTAINING
LIQUEFIED PETROLEUM GAS" in the name of Petron;
8. Certified true copy of the Certificate of Registration No. 61920 for the mark "GASUL AND DEVICE" in the
name of Petron;
9. Certified true copy of the Articles of Incorporation of Masagana;
10. Certified true copy of the By-laws of Masagana;
11. Certified true copy of the latest General Information Sheet of Masagana on file with the Securities and
Exchange Commission;
12. Pictures of delivery trucks coming in and out of Masagana while it delivered Gasul and Shellane LPG;
13. Cash Invoice No. 56210 dated 13 February 2003 issued by Masagana for the Gasul and Shellane LPG
purchased by Agent Oblanca and witness Alajar;
14. Pictures of the Shellane and Gasul LPG' 's covered by Cash Invoice No. 56210 purchased from
Masagana by Agent Oblanca and witness Alajar;
15. Cash Invoice No. 56398 dated 27 February 2003 issued by Masagana for the Gasul and Shellane LPG
purchased by Agent Oblanca and witness Alajar; andcralawlibrary
16. Pictures of the Shellane and Gasul LPG's covered by Cash Invoice No. 56398 purchased from
Masagana by Agent Oblanca and witness Alajar.30

Extant from the foregoing testimonial, documentary and object evidence is that Oblanca and Alajar have
personal knowledge of the fact that petitioners, through MASAGANA, have been using the LPG cylinders
bearing the marks GASUL and SHELLANE without permission from Petron and Pilipinas Shell, a probable
cause for trademark infringement. Both Oblanca and Alajar were clear and insistent that they were the very
same persons who monitored the activities of MASAGANA; that they conducted test-buys thereon; and that
in order to avoid suspicion, they used different names during the test-buys. They also personally witnessed
the refilling of LPG cylinders bearing the marks GASUL and SHELLANE inside the MASAGANA refilling
plant station and the deliveries of these refilled containers to some outlets using mini-trucks.
Indeed, the aforesaid facts and circumstances are sufficient to establish probable cause. It should be borne
in mind that the determination of probable cause does not call for the application of the rules and standards
of proof that a judgment of conviction requires after trial on the merits. As the term implies, "probable cause"
is concerned with probability, not absolute or even moral certainty. The standards of judgment are those of a
reasonably prudent man, not the exacting calibrations of a judge after a full blown trial.31
The fact that Oblanca and Alajar used different names in the purchase receipts do not negate personal
knowledge on their part. It is a common practice of the law enforcers such as NBI agents during covert
investigations to use different names in order to conceal their true identities. This is reasonable and
understandable so as not to endanger the life of the undercover agents and to facilitate the lawful arrest or
apprehension of suspected violators of the law.
Petitioners' contention that Oblanca and Alajar should have mentioned the fact that they used different
names in their respective affidavits and during the preliminary examination is puerile. The argument is too
vacuous to merit serious consideration. There is nothing in the provisions of law concerning the issuance of
a search warrant which directly or indirectly mandates that the applicant of the search warrant or his
witnesses should state in their affidavits the fact that they used different names while conducting undercover
investigations, or to divulge such fact during the preliminary examination. In the light of other more material
facts which needed to be established for a finding of probable cause, it is not difficult to believe that Oblanca
and Alajar failed to mention that they used aliases in entering the MASAGANA compound due to mere
oversight.
It cannot be gainfully said that Oblanca and Alajar are not competent to testify on the trademarks infringed
by the petitioners. As earlier discussed, Oblanca declared under oath that before conducting an investigation
on the alleged illegal activities of MASAGANA, he reviewed the certificates of trademark registrations issued
by the Philippine Intellectual Property Office in favor of Petron and Pilipinas Shell. These certifications of
trademark registrations were attached by Oblanca in his applications for the search warrants. Alajar, on the
other hand, works as a private investigator and, in fact, owns a private investigation and
research/consultation firm. His firm was hired and authorized, pursuant to the Brand Protection Program of
Petron and Pilipinas Shell, to verify reports that MASAGANA is involved in the illegal sale and refill of
GASUL and SHELLANE LPG cylinders.32 As part of the job, he studied and familiarized himself with the
registered trademarks of GASUL and SHELLANE, and the distinct features of the LPG cylinders bearing the
same trademarks before conducting surveillance and test-buys on MASAGANA.33 He also submitted to
Oblanca several copies of the same registered trademark registrations and accompanied Oblanca during
the surveillance and test-buys.
As to whether the form and manner of questioning made by Judge Sadang complies with the requirements
of law, Section 5 of Rule 126 of the Revised Rules on Criminal Procedure, prescribes the rules in the
examination of the complainant and his witnesses when applying for search warrant, to wit:
SEC. 5. Examination of complainant; record. - The judge must, before issuing the warrant, personally
examine in the form of searching questions and answers, in writing under oath, the complainant and the

witnesses he may produce on facts personally known to them and attach to the record their sworn
statements, together with the affidavits submitted.
The searching questions propounded to the applicant and the witnesses depend largely on the discretion of
the judge. Although there is no hard-and fast rule governing how a judge should conduct his investigation, it
is axiomatic that the examination must be probing and exhaustive, not merely routinary, general, peripheral,
perfunctory or pro forma. The judge must not simply rehash the contents of the affidavit but must make his
own inquiry on the intent and justification of the application.34
After perusing the Transcript of Stenographic Notes of the preliminary examination, we found the questions
of Judge Sadang to be sufficiently probing, not at all superficial and perfunctory.35 The testimonies of
Oblanca and Alajar were consistent with each other and their narration of facts was credible. As correctly
found by the Court of Appeals:
This Court is likewise not convinced that respondent Judge failed to ask probing questions in his
determination of the existence of probable cause. This Court has thoroughly examined the Transcript of
Stenographic Notes taken during the investigation conducted by the respondent Judge and found that
respondent Judge lengthily inquired into the circumstances of the case. For instance, he required the NBI
agent to confirm the contents of his affidavit, inquired as to where the "test-buys" were conducted and by
whom, verified whether PSPC and PETRON have registered trademarks or tradenames, required the NBI
witness to explain how the "test-buys" were conducted and to describe the LPG cylinders purchased from
Masagana Gas Corporation, inquired why the applications for Search Warrant were filed in Cavite City
considering that Masagana Gas Corporation was located in Trece Martires, Cavite, inquired whether the NBI
Agent has a sketch of the place and if there was any distinguishing sign to identify the place to be searched,
and inquired about their alleged tailing and monitoring of the delivery trucks. x x x.36
Since probable cause is dependent largely on the opinion and findings of the judge who conducted the
examination and who had the opportunity to question the applicant and his witnesses, the findings of the
judge deserves great weight. The reviewing court can overturn such findings only upon proof that the judge
disregarded the facts before him or ignored the clear dictates of reason.37 We find no compelling reason to
disturb Judge Sadang's findings herein.
Anent the second issue, petitioners argue that Judge Sadang failed to require Oblanca to show his authority
to apply for search warrants; that Oblanca is a member of the Anti-Organized Crime and not that of the
Intellectual Property Division of the NBI; that all complaints for infringement should be investigated by the
Intellectual Property Division of the NBI; that it is highly irregular that an agent not assigned to the
Intellectual Property Division would apply for a search warrant and without authority from the NBI Director;
that the alleged letter-complaint of Atty. Bienvenido Somera, Jr. of Villaraza and Angangco Law Office was
not produced in court; that Judge Sadang did not require Oblanca to produce the alleged letter-complaint
which is material and relevant to the determination of the existence of probable cause; and that Petron and
Pilipinas Shell, being two different corporations, should have issued a board resolution authorizing the
Villaraza and Angangco Law Office to apply for search warrant in their behalf.38
We reject these protestations.
The authority of Oblanca to apply for the search warrants in question is clearly discussed and explained in
his affidavit, viz:
[That] on 11 February 2003, the National Bureau of Investigation (NBI) received a letter-complaint from Atty.
Bienvenido I. Somera, Jr. of Villaraza and Angangco, on behalf of among others, Petron Corporation
(PETRON) [and Pilipinas Shell Petroleum Corporation (PSPC), the authorized representative of Shell
International Petroleum Company Limited (SHELL INTERNATIONAL)] requesting assistance in the

investigation and, if warranted, apprehension and prosecution of certain persons and/or establishments
suspected of violating the intellectual property rights of PETRON [and of PSPC and Shell International.]
11. [That] on the basis of the letter-complaint, I, together with Agent Angelo Zarzoso, was assigned as the
NBI agent on the case.39
The fact that Oblanca is a member of the Anti-Organized Crime Division and not that of the Intellectual
Property Division does not abrogate his authority to apply for search warrant. As aptly stated by the RTC
and the Court of Appeals, there is nothing in the provisions on search warrant under Rule 126 of the
Revised Rules on Criminal Procedure, which specifically commands that the applicant law enforcer must be
a member of a division that is assigned or related to the subject crime or offense before the application for
search warrant may be acted upon. The petitioners did not also cite any law, rule or regulation mandating
such requirement. At most, petitioners may only be referring to the administrative organization and/or
internal rule or practice of the NBI. However, not only did petitioners failed to establish the existence thereof,
but they also did not prove that such administrative organization and/or internal rule or practice are
inviolable.
Neither is the presentation of the letter-complaint of Atty. Somera and board resolutions from Petron and
Pilipinas Shell required or necessary in determining probable cause. As heretofore discussed, the affidavits
of Oblanca and Alajar, coupled with the object and documentary evidence they presented, are sufficient to
establish probable cause. It can also be presumed that Oblanca, as an NBI agent, is a public officer who
had regularly performed his official duty.40 He would not have initiated an investigation on MASAGANA
without a proper complaint. Furthermore, Atty. Somera did not step up to deny his letter-complaint.
Regarding the third issue, petitioners posit that the applications for search warrants of Oblanca did not
specify the particular area to be searched, hence, giving the raiding team wide latitude in determining what
areas they can search. They aver that the search warrants were general warrants, and are therefore
violative of the Constitution. Petitioners also assert that since the MASAGANA compound is about 10,000.00
square meters with several structures erected on the lot, the search warrants should have defined the areas
to be searched.
The long standing rule is that a description of the place to be searched is sufficient if the officer with the
warrant can, with reasonable effort, ascertain and identify the place intended and distinguish it from other
places in the community. Any designation or description known to the locality that points out the place to the
exclusion of all others, and on inquiry leads the officers unerringly to it, satisfies the constitutional
requirement.41
Moreover, in the determination of whether a search warrant describes the premises to be searched with
sufficient particularity, it has been held that the executing officer's prior knowledge as to the place intended
in the warrant is relevant. This would seem to be especially true where the executing officer is the affiant on
whose affidavit the warrant had been issued, and when he knows that the judge who issued the warrant
intended the compound described in the affidavit.42
The search warrants in question commanded any peace officer to make an immediate search on
MASAGANA compound located at Governor's Drive, Barangay Lapidario, Trece Martires, Cavite City. It
appears that the raiding team had ascertained and reached MASAGANA compound without difficulty since
MASAGANA does not have any other offices/plants in Trece Martires, Cavite City. Moreover, Oblanca, who
was with the raiding team, was already familiar with the MASAGANA compound as he and Alajar had
monitored and conducted test-buys thereat.
Even if there are several structures inside the MASAGANA compound, there was no need to particularize
the areas to be searched because, as correctly stated by Petron and Pilipinas Shell, these structures

constitute the essential and necessary components of the petitioners' business and cannot be treated
separately as they form part of one entire compound. The compound is owned and used solely by
MASAGANA. What the case law merely requires is that, the place to be searched can be distinguished in
relation to the other places in the community. Indubitably, this requisite was complied with in the instant
case.
As to the fourth issue, petitioners asseverate that the search warrants did not indicate with particularity the
items to be seized since the search warrants merely described the items to be seized as LPG cylinders
bearing the trademarks GASUL and SHELLANE without specifying their sizes.
A search warrant may be said to particularly describe the things to be seized when the description therein is
as specific as the circumstances will ordinarily allow; or when the description expresses a conclusion of fact
not of law by which the warrant officer may be guided in making the search and seizure; or when the things
described are limited to those which bear direct relation to the offense for which the warrant is being
issued.43
While it is true that the property to be seized under a warrant must be particularly described therein and no
other property can be taken thereunder, yet the description is required to be specific only in so far as the
circumstances will ordinarily allow. The law does not require that the things to be seized must be described
in precise and minute details as to leave no room for doubt on the part of the searching authorities;
otherwise it would be virtually impossible for the applicants to obtain a search warrant as they would not
know exactly what kind of things they are looking for. Once described, however, the articles subject of the
search and seizure need not be so invariant as to require absolute concordance, in our view, between those
seized and those described in the warrant. Substantial similarity of those articles described as a class or
specie would suffice.44
Measured against this standard, we find that the items to be seized under the search warrants in question
were sufficiently described with particularity. The articles to be confiscated were restricted to the following:
(1) LPG cylinders bearing the trademarks GASUL and SHELLANE; (2) Machines and equipments used or
intended to be used in the illegal refilling of GASUL and SHELLANE cylinders. These machines were also
specifically enumerated and listed in the search warrants; (3) Documents which pertain only to the
production, sale and distribution of the GASUL and SHELLANE LPG cylinders; and (4) Delivery trucks
bearing Plate Nos. WTE-527, XAM-970 and WFC-603, hauling trucks, and/or other delivery trucks or
vehicles or conveyances being used or intended to be used for the purpose of selling and/or distributing
GASUL and SHELLANE LPG cylinders.45
Additionally, since the described items are clearly limited only to those which bear direct relation to the
offense, i.e., violation of section 155 of Republic Act No. 8293, for which the warrant was issued, the
requirement of particularity of description is satisfied.
Given the foregoing, the indication of the accurate sizes of the GASUL and SHELLANE LPG cylinders or
tanks would be unnecessary.
Finally, petitioners claim that MASAGANA has the right to intervene and to move for the return of the seized
items; that the items seized by the raiding team were being used in the legitimate business of MASAGANA;
that the raiding team had no right to seize them under the guise that the same were being used in refilling
GASUL and SHELLANE LPG cylinders; and that there being no action for infringement filed against them
and/or MASAGANA from the seizure of the items up to the present, it is only fair that the seized articles be
returned to the lawful owner in accordance with Section 20 of A.M. No. 02-1-06-SC.
It is an elementary and fundamental principle of corporation law that a corporation is an entity separate and
distinct from its stockholders, directors or officers. However, when the notion of legal entity is used to defeat

public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an
association of persons, or in the case of two corporations merge them into one.46 In other words, the law will
not recognize the separate corporate existence if the corporation is being used pursuant to the foregoing
unlawful objectives. This non-recognition is sometimes referred to as the doctrine of piercing the veil of
corporate entity or disregarding the fiction of corporate entity. Where the separate corporate entity is
disregarded, the corporation will be treated merely as an association of persons and the stockholders or
members will be considered as the corporation, that is, liability will attach personally or directly to the officers
and stockholders.47
As we now find, the petitioners, as directors/officers of MASAGANA, are utilizing the latter in violating the
intellectual property rights of Petron and Pilipinas Shell. Thus, petitioners collectively and MASAGANA
should be considered as one and the same person for liability purposes. Consequently, MASAGANA's third
party claim serves no refuge for petitioners.
Even if we were to sustain the separate personality of MASAGANA from that of the petitioners, the effect will
be the same. The law does not require that the property to be seized should be owned by the person against
whom the search warrants is directed. Ownership, therefore, is of no consequence, and it is sufficient that
the person against whom the warrant is directed has control or possession of the property sought to be
seized.48 Hence, even if, as petitioners claimed, the properties seized belong to MASAGANA as a separate
entity, their seizure pursuant to the search warrants is still valid.
Further, it is apparent that the motor compressor, LPG refilling machine and the GASUL and SHELL LPG
cylinders seized were the corpus delicti, the body or substance of the crime, or the evidence of the
commission of trademark infringement. These were the very instruments used or intended to be used by the
petitioners in trademark infringement. It is possible that, if returned to MASAGANA, these items will be used
again in violating the intellectual property rights of Petron and Pilipinas Shell.49Thus, the RTC was justified in
denying the petitioners' motion for their return so as to prevent the petitioners and/or MASAGANA from
using them again in trademark infringement.
Petitioners' reliance on Section 20 of A.M. No. 02-1-06-SC,50 is not tenable. As correctly observed by the
Solicitor General, A.M. 02-1-06-SC is not applicable in the present case because it governs only searches
and seizures in civil actions for infringement of intellectual property rights.51 The offense complained of
herein is for criminal violation of Section 155 in relation to Section 17052 of Republic Act No. 8293.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 79256, dated 30 September 2004 and 1 June 2005, respectively, are hereby AFFIRMED. Costs against
petitioners.
SO ORDERED.

SECOND DIVISION
[G.R. NO. 150416 : July 21, 2006]
SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN PHILIPPINES, INC., and/or
represented by MANASSEH C. ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO M. LUCENARA,
DIONICES O. TIPGOS, LORESTO C. MURILLON, ISRAEL C. NINAL, GEORGE G. SOMOSOT, JESSIE
T. ORBISO, LORETO PAEL and JOEL BACUBAS, Petitioners, v. NORTHEASTERN MINDANAO
MISSION OF SEVENTH DAY ADVENTIST, INC., and/or represented by JOSUE A. LAYON, WENDELL
M. SERRANO, FLORANTE P. TY and JETHRO CALAHAT and/or SEVENTH DAY ADVENTIST CHURCH
[OF] NORTHEASTERN MINDANAO MISSION,*Respondents.
DECISION
CORONA, J.:
This Petition for Review on Certiorari assails the Court of Appeals (CA) decision1 and resolution2 in CA-G.R.
CV No. 41966 affirming, with modification, the decision of the Regional Trial Court (RTC) of Bayugan,
Agusan del Sur, Branch 7 in Civil Case No. 63.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate of Title (TCT) No. 4468 in Bayugan,
Agusan del Sur originally owned by Felix Cosio and his wife, Felisa Cuysona.
On April 21, 1959, the spouses Cosio donated the land to the South Philippine Union Mission of Seventh
Day Adventist Church of Bayugan Esperanza, Agusan (SPUM-SDA Bayugan).3 Part of the deed of donation
read:
KNOW ALL MEN BY THESE PRESENTS:
That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,] 40 years of age, [h]usband and wife, both are
citizen[s] of the Philippines, and resident[s] with post office address in the Barrio of Bayugan, Municipality of
Esperanza, Province of Agusan, Philippines, do hereby grant, convey and forever quit claim by way of
Donation or gift unto the South Philippine [Union] Mission of Seventh Day Adventist Church of Bayugan,
Esperanza, Agusan, all the rights, title, interest, claim and demand both at law and as well in possession as
in expectancy of in and to all the place of land and portion situated in the Barrio of Bayugan, Municipality of
Esperanza, Province of Agusan, Philippines, more particularly and bounded as follows, to wit:
1. a parcel of land for Church Site purposes only.
2. situated [in Barrio Bayugan, Esperanza].
3. Area: 30 meters wide and 30 meters length or 900 square meters.
4. Lot No. 822-Pls-225. Homestead Application No. V-36704, Title No. P-285.
5. Bounded Areas
North by National High Way; East by Bricio Gerona; South by Serapio Abijaron and West by Feliz Cosio
xxx.4

The donation was allegedly accepted by one Liberato Rayos, an elder of the Seventh Day Adventist Church,
on behalf of the donee.
Twenty-one years later, however, on February 28, 1980, the same parcel of land was sold by the spouses
Cosio to the Seventh Day Adventist Church of Northeastern Mindanao Mission (SDA-NEMM).5TCT No.
4468 was thereafter issued in the name of SDA-NEMM.6
Claiming to be the alleged donee's successors-in-interest, petitioners asserted ownership over the property.
This was opposed by respondents who argued that at the time of the donation, SPUM-SDA Bayugan could
not legally be a donee
because, not having been incorporated yet, it had no juridical personality. Neither were petitioners members
of the local church then, hence, the donation could not have been made particularly to them.
On September 28, 1987, petitioners filed a case, docketed as Civil Case No. 63 (a suit for cancellation of
title, quieting of ownership and possession, declaratory relief and reconveyance with prayer for preliminary
injunction and damages), in the RTC of Bayugan, Agusan del Sur. After trial, the trial court rendered a
decision7 on November 20, 1992 upholding the sale in favor of respondents.
On appeal, the CA affirmed the RTC decision but deleted the award of moral damages and attorney's
fees.8 Petitioners' motion for reconsideration was likewise denied. Thus, this petition.
The issue in this petition is simple: should SDA-NEMM's ownership of the lot covered by TCT No. 4468 be
upheld?9 We answer in the affirmative.
The controversy between petitioners and respondents involves two supposed transfers of the lot previously
owned by the spouses Cosio: (1) a donation to petitioners' alleged predecessors-in-interest in 1959 and (2)
a sale to respondents in 1980.
Donation is undeniably one of the modes of acquiring ownership of real property. Likewise, ownership of a
property may be transferred by tradition as a consequence of a sale.
Petitioners contend that the appellate court should not have ruled on the validity of the donation since it was
not among the issues raised on appeal. This is not correct because an appeal generally opens the entire
case for review.
We agree with the appellate court that the alleged donation to petitioners was void.
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor ofanother
person who accepts it. The donation could not have been made in favor of an entity yet inexistent at the time
it was made. Nor could it have been accepted as there was yet no one to accept it.
The deed of donation was not in favor of any informal group of SDA members but a supposed SPUM-SDA
Bayugan (the local church) which, at the time, had neither juridical personality nor capacity to accept such
gift.
Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation.
But there are stringent requirements before one can qualify as a de facto corporation:
(a) the existence of a valid law under which it may be incorporated;

(b) an attempt in good faith to incorporate; andcralawlibrary

(c) assumption of corporate powers.10
While there existed the old Corporation Law (Act 1459),11 a law under which SPUM-SDA Bayugan could
have been organized, there is no proof that there was an attempt to incorporate at that time.
The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the
existence of a de facto corporation.12 We have held that an organization not registered with the Securities
and Exchange Commission (SEC) cannot be considered a corporation in any concept, not even as a
corporation de facto.13 Petitioners themselves admitted that at the time of the donation, they were not
registered with the SEC, nor did they even attempt to organize14 to comply with legal requirements.
Corporate existence begins only from the moment a certificate of incorporation is issued. No such certificate
was ever issued to petitioners or their supposed predecessor-in-interest at the time of the donation.
Petitioners obviously could not have claimed succession to an entity that never came to exist. Neither could
the principle of separate juridical personality apply since there was never any corporation15 to speak of. And,
as already stated, some of the representatives of petitioner Seventh Day Adventist Conference Church of
Southern Philippines, Inc. were not even members of the local church then, thus, they could not even claim
that the donation was particularly for them.16
"The de facto doctrine thus effects a compromise between two conflicting public interest[s] the one opposed
to an unauthorized assumption of corporate privileges; the other in favor of doing justice to the parties and of
establishing a general assurance of security in business dealing with corporations."17
Generally, the doctrine exists to protect the public dealing with supposed corporate entities, not to favor the
defective or non-existent corporation.18
In view of the foregoing, petitioners' arguments anchored on their supposed de facto status hold no water.
We are convinced that there was no donation to petitioners or their supposed predecessor-in-interest.
On the other hand, there is sufficient basis to affirm the title of SDA-NEMM. The factual findings of the trial
court in this regard were not convincingly disputed. This Court is not a trier of facts. Only questions of law
are the proper subject of a Petition for Review on Certiorari .19
Sustaining the validity of respondents' title as well as their right of ownership over the property, the trial court
stated:
[W]hen Felix Cosio was shown the Absolute Deed of Sale during the hearing xxx he acknowledged that the
same was his xxx but that it was not his intention to sell the controverted property because he had
previously donated the same lot to the South Philippine Union Mission of SDA Church of BayuganEsperanza. Cosio avouched that had it been his intendment to sell, he would not have disposed of it for a
mere P2,000.00 in two installments but for P50,000.00 or P60,000.00. According to him, the P2,000.00 was
not a consideration of the sale but only a form of help extended.
A thorough analysis and perusal, nonetheless, of the Deed of Absolute Sale disclosed that it has the
essential requisites of contracts pursuant to xxx Article 1318 of the Civil Code, except that the
consideration of P2,000.00 is somewhat insufficient for a [1,069-square meter] land. Would then this
inadequacy of the consideration render the contract invalid?cralawlibrary
Article 1355 of the Civil Code provides:

Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there
has been fraud, mistake or undue influence.
No evidence [of fraud, mistake or undue influence] was adduced by [petitioners].
xxx
Well-entrenched is the rule that a Certificate of Title is generally a conclusive evidence of [ownership]
of the land. There is that strong and solid presumption that titles were legally issued and that they are valid.
It is irrevocable and indefeasible and the duty of the Court is to see to it that the title is maintained and
respected unless challenged in a direct proceeding. xxx The title shall be received as evidence in all the
Courts and shall be conclusive as to all matters contained therein.
[This action was instituted almost seven years after the certificate of title in respondents' name was issued in
1980.]20
According to Art. 1477 of the Civil Code, the ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof. On this, the noted author Arturo Tolentino had this to say:
The execution of [a] public instrument xxx transfers the ownership from the vendor to the vendee who may
thereafter exercise the rights of an owner over the same21
Here, transfer of ownership from the spouses Cosio to SDA-NEMM was made upon constructive delivery of
the property on February 28, 1980 when the sale was made through a public instrument.22 TCT No. 4468
was thereafter issued and it remains in the name of SDA-NEMM.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.
Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, JJ., concur

G.R. No. 136448 November 3, 1999

LIM TONG LIM, petitioner,
vs.
PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.

PANGANIBAN, J.:
A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and
to divide the profits or losses that may arise therefrom, even if it is shown that they have not contributed any
capital of their own to a "common fund." Their contribution may be in the form of credit or industry, not
necessarily cash or fixed assets. Being partner, they are all liable for debts incurred by or on behalf of the
partnership. The liability for a contract entered into on behalf of an unincorporated association or ostensible
corporation may lie in a person who may not have directly transacted on its behalf, but reaped benefits from
that contract.
The Case
In the Petition for Review on Certiorari before us, Lim Tong Lim assails the November 26, 1998 Decision of
the Court of Appeals in CA-GR CV
41477, 1 which disposed as follows:
WHEREFORE, [there being] no reversible error in the appealed decision, the same is hereby
affirmed. 2
The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was affirmed by the CA,
reads as follows:
WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on
September 20, 1990;
2. That defendants are jointly liable to plaintiff for the following amounts, subject to the
modifications as hereinafter made by reason of the special and unique facts and
circumstances and the proceedings that transpired during the trial of this case;
a. P532,045.00 representing [the] unpaid purchase price of the fishing nets
covered by the Agreement plus P68,000.00 representing the unpaid price of
the floats not covered by said Agreement;
b. 12% interest per annum counted from date of plaintiff's invoices and
computed on their respective amounts as follows:
i. Accrued interest of P73,221.00 on Invoice No. 14407 for
P385,377.80 dated February 9, 1990;
ii. Accrued interest for P27,904.02 on Invoice No. 14413 for
P146,868.00 dated February 13, 1990;

iii. Accrued interest of P12,920.00 on Invoice No. 14426 for

P68,000.00 dated February 19, 1990;
c. P50,000.00 as and for attorney's fees, plus P8,500.00 representing
P500.00 per appearance in court;
d. P65,000.00 representing P5,000.00 monthly rental for storage charges on
the nets counted from September 20, 1990 (date of attachment) to
September 12, 1991 (date of auction sale);
e. Cost of suit.
With respect to the joint liability of defendants for the principal obligation or for the
unpaid price of nets and floats in the amount of P532,045.00 and P68,000.00,
respectively, or for the total amount P600,045.00, this Court noted that these items
were attached to guarantee any judgment that may be rendered in favor of the
plaintiff but, upon agreement of the parties, and, to avoid further deterioration of the
nets during the pendency of this case, it was ordered sold at public auction for not
less than P900,000.00 for which the plaintiff was the sole and winning bidder. The
proceeds of the sale paid for by plaintiff was deposited in court. In effect, the amount
of P900,000.00 replaced the attached property as a guaranty for any judgment that
plaintiff may be able to secure in this case with the ownership and possession of the
nets and floats awarded and delivered by the sheriff to plaintiff as the highest bidder
in the public auction sale. It has also been noted that ownership of the nets [was]
retained by the plaintiff until full payment [was] made as stipulated in the invoices;
hence, in effect, the plaintiff attached its own properties. It [was] for this reason also
that this Court earlier ordered the attachment bond filed by plaintiff to guaranty
damages to defendants to be cancelled and for the P900,000.00 cash bidded and
paid for by plaintiff to serve as its bond in favor of defendants.
From the foregoing, it would appear therefore that whatever judgment the plaintiff
may be entitled to in this case will have to be satisfied from the amount of
P900,000.00 as this amount replaced the attached nets and floats. Considering,
however, that the total judgment obligation as computed above would amount to only
P840,216.92, it would be inequitable, unfair and unjust to award the excess to the
defendants who are not entitled to damages and who did not put up a single centavo
to raise the amount of P900,000.00 aside from the fact that they are not the owners
of the nets and floats. For this reason, the defendants are hereby relieved from any
and all liabilities arising from the monetary judgment obligation enumerated above
and for plaintiff to retain possession and ownership of the nets and floats and for the
reimbursement of the P900,000.00 deposited by it with the Clerk of Court.
SO ORDERED. 3
The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated
February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear
Industries, Inc. (herein respondent). They claimed that they were engaged in a business venture with
Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The total price of the nets
amounted to P532,045. Four hundred pieces of floats worth P68,000 were also sold to the Corporation. 4

The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents filed a
collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary
attachment. The suit was brought against the three in their capacities as general partners, on the allegation
that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the
Securities and Exchange Commission. 5 On September 20, 1990, the lower court issued a Writ of
Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes which
was then docked at the Fisheries Port, Navotas, Metro Manila.
Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a
reasonable time within which to pay. He also turned over to respondent some of the nets which were in his
possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to crossexamine witnesses and to present evidence on his behalf, because of his failure to appear in subsequent
hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim and moved
for the lifting of the Writ of Attachment.6 The trial court maintained the Writ, and upon motion of private
respondent, ordered the sale of the fishing nets at a public auction. Philippine Fishing Gear Industries won
the bidding and deposited with the said court the sales proceeds of P900,000. 7
On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries
was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to
pay respondent. 8
The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the
witnesses presented and (2) on a Compromise Agreement executed by the three 9 in Civil Case No. 1492MN which Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of
nullity of commercial documents; (b) a reformation of contracts; (c) a declaration of ownership of fishing
boats; (d) an injunction and (e) damages.10 The Compromise Agreement provided:
a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4)
vessels sold in the amount of P5,750,000.00 including the fishing net. This
P5,750,000.00 shall be applied as full payment for P3,250,000.00 in favor of
JL Holdings Corporation and/or Lim Tong Lim;
b) If the four (4) vessel[s] and the fishing net will be sold at a higher price
than P5,750,000.00 whatever will be the excess will be divided into 3: 1/3 Lim
Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao;
c) If the proceeds of the sale the vessels will be less than P5,750,000.00
whatever the deficiency shall be shouldered and paid to JL Holding
Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao. 11
The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that
joint liability could be presumed from the equal distribution of the profit and loss. 21
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.
Ruling of the Court of Appeals
In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao in a fishing business
and may thus be held liable as a such for the fishing nets and floats purchased by and for the use of the
partnership. The appellate court ruled:

The evidence establishes that all the defendants including herein appellant Lim Tong Lim
undertook a partnership for a specific undertaking, that is for commercial fishing . . . .
Oviously, the ultimate undertaking of the defendants was to divide the profits among
themselves which is what a partnership essentially is . . . . By a contract of partnership, two
or more persons bind themselves to contribute money, property or industry to a common
fund with the intention of dividing the profits among themselves (Article 1767, New Civil
Code). 13
Hence, petitioner brought this recourse before this Court. 14
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse the assailed Decision on the following
grounds:
I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE
AGREEMENT THAT CHUA, YAO AND PETITIONER LIM ENTERED INTO IN A
SEPARATE CASE, THAT A PARTNERSHIP AGREEMENT EXISTED AMONG THEM.
II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR
OCEAN QUEST FISHING CORPORATION WHEN HE BOUGHT THE NETS FROM
PHILIPPINE FISHING, THE COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING
LIABILITY TO PETITIONER LIM AS WELL.
III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF
PETITIONER LIM'S GOODS.
In determining whether petitioner may be held liable for the fishing nets and floats from respondent, the
Court must resolve this key issue: whether by their acts, Lim, Chua and Yao could be deemed to have
entered into a partnership.
This Court's Ruling
The Petition is devoid of merit.
First and Second Issues:
Existence of a Partnership
and Petitioner's Liability
In arguing that he should not be held liable for the equipment purchased from respondent, petitioner
controverts the CA finding that a partnership existed between him, Peter Yao and Antonio Chua. He asserts
that the CA based its finding on the Compromise Agreement alone. Furthermore, he disclaims any direct
participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao
only, and that he has not even met the representatives of the respondent company. Petitioner further argues
that he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease " dated February 1, 1990,
showed that he had merely leased to the two the main asset of the purported partnership the fishing
boat F/B Lourdes. The lease was for six months, with a monthly rental of P37,500 plus 25 percent of the
gross catch of the boat.

We are not persuaded by the arguments of petitioner. The facts as found by the two lower courts clearly
showed that there existed a partnership among Chua, Yao and him, pursuant to Article 1767 of the Civil
Code which provides:
Art. 1767 By the contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the
profits among themselves.
Specifically, both lower courts ruled that a partnership among the three existed based on the following
factual findings: 15
(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial
fishing to join him, while Antonio Chua was already Yao's partner;
(2) That after convening for a few times, Lim, Chua, and Yao verbally agreed to acquire two
fishing boats, the FB Lourdes and the FB Nelson for the sum of P3.35 million;
(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim, to
finance the venture.
(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed of
Sale over these two (2) boats in favor of Petitioner Lim Tong Lim only to serve as security for
the loan extended by Jesus Lim;
(5) That Lim, Chua and Yao agreed that the refurbishing, re-equipping, repairing, dry docking
and other expenses for the boats would be shouldered by Chua and Yao;
(6) That because of the "unavailability of funds," Jesus Lim again extended a loan to the
partnership in the amount of P1 million secured by a check, because of which, Yao and
Chua entrusted the ownership papers of two other boats, Chua's FB Lady Anne
Mel and Yao's FB Tracy to Lim Tong Lim.
(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought nets
from Respondent Philippine Fishing Gear, in behalf of "Ocean Quest Fishing Corporation,"
their purported business name.
(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch 72 by
Antonio Chua and Peter Yao against Lim Tong Lim for (a) declaration of nullity of commercial
documents; (b) reformation of contracts; (c) declaration of ownership of fishing boats; (4)
injunction; and (e) damages.
(9) That the case was amicably settled through a Compromise Agreement executed between
the parties-litigants the terms of which are already enumerated above.
From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a
fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from
Jesus Lim who was petitioner's brother. In their Compromise Agreement, they subsequently revealed their
intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the
excess or loss. These boats, the purchase and the repair of which were financed with borrowed money, fell
under the term "common fund" under Article 1767. The contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or industry. That the parties agreed that any loss or profit from the

sale and operation of the boats would be divided equally among them also shows that they had indeed
formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the
nets and the floats. The fishing nets and the floats, both essential to fishing, were obviously acquired in
furtherance of their business. It would have been inconceivable for Lim to involve himself so much in buying
the boat but not in the acquisition of the aforesaid equipment, without which the business could not have
proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged
in the fishing business. They purchased the boats, which constituted the main assets of the partnership, and
they agreed that the proceeds from the sales and operations thereof would be divided among them.
We stress that under Rule 45, a petition for review like the present case should involve only questions of
law. Thus, the foregoing factual findings of the RTC and the CA are binding on this Court, absent any cogent
proof that the present action is embraced by one of the exceptions to the rule. 16 In assailing the factual
findings of the two lower courts, petitioner effectively goes beyond the bounds of a petition for review under
Rule 45.
Compromise Agreement
Not the Sole Basis of Partnership
Petitioner argues that the appellate court's sole basis for assuming the existence of a partnership was the
Compromise Agreement. He also claims that the settlement was entered into only to end the dispute among
them, but not to adjudicate their preexisting rights and obligations. His arguments are baseless. The
Agreement was but an embodiment of the relationship extant among the parties prior to its execution.
A proper adjudication of claimants' rights mandates that courts must review and thoroughly appraise all
relevant facts. Both lower courts have done so and have found, correctly, a preexisting partnership among
the parties. In implying that the lower courts have decided on the basis of one piece of document alone,
petitioner fails to appreciate that the CA and the RTC delved into the history of the document and explored
all the possible consequential combinations in harmony with law, logic and fairness. Verily, the two lower
courts' factual findings mentioned above nullified petitioner's argument that the existence of a partnership
was based only on the Compromise Agreement.
Petitioner Was a Partner,
Not a Lessor
We are not convinced by petitioner's argument that he was merely the lessor of the boats to Chua and Yao,
not a partner in the fishing venture. His argument allegedly finds support in the Contract of Lease and the
registration papers showing that he was the owner of the boats, including F/B Lourdes where the nets were
found.
His allegation defies logic. In effect, he would like this Court to believe that he consented to the sale of his
own boats to pay a debt of Chua and Yao, with the excess of the proceeds to be divided among the three of
them. No lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a
preexisting partnership among all three.

Verily, as found by the lower courts, petitioner entered into a business agreement with Chua and Yao, in
which debts were undertaken in order to finance the acquisition and the upgrading of the vessels which
would be used in their fishing business. The sale of the boats, as well as the division among the three of the
balance remaining after the payment of their loans, proves beyond cavil that F/B Lourdes, though registered
in his name, was not his own property but an asset of the partnership. It is not uncommon to register the
properties acquired from a loan in the name of the person the lender trusts, who in this case is the petitioner
himself. After all, he is the brother of the creditor, Jesus Lim.
We stress that it is unreasonable indeed, it is absurd for petitioner to sell his property to pay a debt he
did not incur, if the relationship among the three of them was merely that of lessor-lessee, instead of
partners.
Corporation by Estoppel
Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed only to Chua
and Yao, and not to him. Again, we disagree.
Sec. 21 of the Corporation Code of the Philippines provides:
Sec. 21. Corporation by estoppel. All persons who assume to act as a corporation
knowing it to be without authority to do so shall be liable as general partners for all debts,
liabilities and damages incurred or arising as a result thereof: Provided however, That when
any such ostensible corporation is sued on any transaction entered by it as a corporation or
on any tort committed by it as such, it shall not be allowed to use as a defense its lack of
corporate personality.
One who assumes an obligation to an ostensible corporation as such, cannot resist
performance thereof on the ground that there was in fact no corporation.
Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped
from denying its corporate existence. "The reason behind this doctrine is obvious an unincorporated
association has no personality and would be incompetent to act and appropriate for itself the power and
attributes of a corporation as provided by law; it cannot create agents or confer authority on another to act in
its behalf; thus, those who act or purport to act as its representatives or agents do so without authority and
at their own risk. And as it is an elementary principle of law that a person who acts as an agent without
authority or without a principal is himself regarded as the principal, possessed of all the right and subject to
all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation which has no
valid existence assumes such privileges and obligations and becomes personally liable for contracts entered
into or for other acts performed as such agent. 17
The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the first
instance, an unincorporated association, which represented itself to be a corporation, will be estopped from
denying its corporate capacity in a suit against it by a third person who relied in good faith on such
representation. It cannot allege lack of personality to be sued to evade its responsibility for a contract it
entered into and by virtue of which it received advantages and benefits.
On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as
a corporation and received benefits from it, may be barred from denying its corporate existence in a suit
brought against the alleged corporation. In such case, all those who benefited from the transaction made by
the ostensible corporation, despite knowledge of its legal defects, may be held liable for contracts they
impliedly assented to or took advantage of.

There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid for the nets
it sold. The only question here is whether petitioner should be held jointly 18 liable with Chua and Yao.
Petitioner contests such liability, insisting that only those who dealt in the name of the ostensible corporation
should be held liable. Since his name does not appear on any of the contracts and since he never directly
transacted with the respondent corporation, ergo, he cannot be held liable.
Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat which has
earlier been proven to be an asset of the partnership. He in fact questions the attachment of the nets,
because the Writ has effectively stopped his use of the fishing vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a corporation.
Although it was never legally formed for unknown reasons, this fact alone does not preclude the liabilities of
the three as contracting parties in representation of it. Clearly, under the law on estoppel, those acting on
behalf of a corporation and those benefited by it, knowing it to be without valid existence, are held liable as
general partners.
Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having reaped
the benefits of the contract entered into by persons with whom he previously had an existing relationship, he
is deemed to be part of said association and is covered by the scope of the doctrine of corporation by
estoppel. We reiterate the ruling of the Court in Alonso v. Villamor: 19
A litigation is not a game of technicalities in which one, more deeply schooled and skilled in
the subtle art of movement and position, entraps and destroys the other. It is, rather, a
contest in which each contending party fully and fairly lays before the court the facts in issue
and then, brushing aside as wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike duels,
are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy, deserves scant consideration
from courts. There should be no vested rights in technicalities.
Third Issue:
Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets. We agree with
the Court of Appeals that this issue is now moot and academic. As previously discussed, F/B Lourdes was
an asset of the partnership and that it was placed in the name of petitioner, only to assure payment of the
debt he and his partners owed. The nets and the floats were specifically manufactured and tailor-made
according to their own design, and were bought and used in the fishing venture they agreed upon. Hence,
the issuance of the Writ to assure the payment of the price stipulated in the invoices is proper. Besides, by
specific agreement, ownership of the nets remained with Respondent Philippine Fishing Gear, until full
payment thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ., concur.
Vitug, J., pls. see concurring opinion.