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[G.R. No. 124293. January 31, 2005]

J.G. SUMMIT HOLDINGS, IN.,petitioner, vs.OURT O! "##$"LS% OMMITT$$ ON

#RI&"TI'"TION, ()* +a(ran an- M/r*% "SS$T #RI&"TI'"TION TRUST% an- #HIL"RDS

HOLDINGS, IN., respondents.

R $ S O L U T I O N

I. !a)*

The undisputed facts of the case, as set forth in our Resolution of September 24, 2003, are as follows:

On January 2, !"", the #ational $n%estment and &e%elopment 'orporation (#$&'), a *o%ernment

corporation, entered into a Joint +enture *reement (J+) with -awasa.i /ea%y $ndustries, td1 of

-obe, Japan (-S-$) for the construction, operation and mana*ement of the Subic #ational

Shipyard, $nc1 (S#S) which subseuently became the hilippine Shipyard and 5n*ineerin* 'orporation

(/$S5'O)1 6nder the J+, the #$&' and -S-$ will contribute 330 million for the

capitali7ation of /$S5'O in the proportion of 809409 respecti%ely1 One of its salient features is the

*rant to the parties of the r(+) o (r*) ru*ashould either of them decide to sell, assi*n or transfer its

interest in the ;oint %enture, %i7:

!14 #either party shall sell, transfer or assi*n all or any part of its interest in S#S t the preb iddin* conference held on September !A, !""3, inte rested bidders were *i%

J+ between #$&' and -S-$, and of the sset Specific Biddin* Rules (SBR

#ational >o%ernmentDs A189 euity share in /$S5'O1 The pro%isions of the SBR

to the interested bidders who were notified that the biddin* would be held on &ecem

portion of the SBR reads:

!10 The sub;ect of this sset ri%ati7ation Trust (T) sale throu*h public biddin

>o%ernmentDs euity in /$S5'O consistin* of A"8,A8","42 shares of stoc. (represe

/$S5'ODs outstandin* capital stoc.), which will be sold as a whole bloc. in accordan

herein enumerated1

FFF FFF FFF

210 The hi*hest bid, as well as the buyer, shall be sub;ect to the final appro%al

Board of Trustees and the 'ommittee on ri%ati7ation ('O)1

21! T reser%es the ri*ht in its sole discretion, to re;ect any or all bids1

310 This public biddin* shall be on an $ndicati%e rice Biddin* basis1 The $ndica

the #ational >o%ernmentDs A189 euity in /$S5'O is 5SOS: O#5 B$$O# T/?$$O# (!,300,000,000100)1

FFF FFF FFF

810 The hi*hest ualified bid will be submitted to the T Board of Trustees at its

followin* the biddin*, for the purpose of determinin* whether or not it should be endo

Board of Trustees to the 'O, and the latter appro%es the same1 The T shall ad%ise

$ndustries, $nc1 andGor its nominee, o%ernment1 -awasa.i /ea%y $ndustries, $nc1 andGor

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deposit with T the amount eui%alent to ten percent (!09) of the hi*hest bid plus fi%e percent (@9)

thereof within the thirty (30)day period mentioned in para*raph 810 abo%e1 T will then ser%e notice

upon -awasa.i /ea%y $ndustries, $nc1 andGor 1R1 #o1 !!40@1 On ?ay !!, !""4, said petition

the 'ourt of ppeals1 On July !A, !""@, the 'ourt of ppeals denied the same for lac.

that the petition for mandamus was not the proper remedy to uestion the constitutiona

the ri*ht of first refusal and the ri*ht to top that was eFercised by -S-$G/$, an

must be brou*ht Eby the proper party in the proper forum at the proper time and thres

blown trial1E The 'ourt of ppeals further ruled that the ri*ht of first refusal and the ri*ht

facie le*al and that the petitioner, Eby participatin* in the public biddin*, with full .nowl

to top *ranted to -S-$Go%ernment in /$S5'O is il

because it %iolates the rules on competiti%e biddin* K but more so, because i

corporations to own more than 409 euity in the shipyard1 $t also held that Ealthou*h t

the opportunity to eFamine the SBR before it participated in the biddin*, it cannot b

uestionin* the unconstitutional, ille*al and ineuitable pro%isions thereof1E Thus, this '

transfer of the national *o%ernmentDs A189 share in /$S5'O to hilyard Summit, as the hi*hest bidder, to ta.e title to the said shares, %i7:

/5R5COR5, the instant petition for re%iew on certiorari is >R#T5&1 The assaile

Resolution of the 'ourt of ppeals are R5+5RS5& and S5T S$&51 etitioner is ordere

its bid price of Two Billion Thirty ?illion esos (2,030,000,000100), less its bid depo

upon the finality of this &ecision1 $n turn, T is ordered to:

(a) accept the said amount of 2,030,000,000100 less bid deposit and interests from p

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e find no merit in petitionerLs contention that the propriety of the biddin* process in%ol%ed in the

present case has been confused with the policy issue of the fate of the shippin* industry which,

petitioner maintains, has ne%er been an issue that is determinati%e of this case1 The 'ourtLs Resolution

of September 24, 2003 re%eals a clear and definiti%e rulin* on the propriety of the biddin* process1 $n

discussin* whether the ri*ht to top *ranted to -S-$ in eFchan*e for its ri*ht of first refusal %iolates

the principles of competiti%e biddin*, we made an eFhausti%e discourse on the rules and principles of

public biddin* and whether they were complied with in the case at bar1

809409 Cilipinoforei*n euity ratio, as it was a pi%otal issue1 $n doin* so, we reco*ni7ed the impact

of our rulin* on the shipbuildin* industry which was beyond a%oidance 1

e re;ect petitionerLs ar*ument that the present case may be considered under the Supreme 'ourt

Resolution dated Cebruary 23, !"A4 which included amon* en banccases those in%ol%in* a no%el

uestion of law and those where a doctrine or principle laid down by the court en bancor in di%ision

may be modified or re%ersed1 The case was resol%ed based on basic principles of the ri*ht of first

refusal in commercial law and estoppel in ci%il law1 'ontractual obli*ations arisin* from ri*hts of first

refusal are not new in this ;urisdiction and ha%e been reco*ni7ed in numerous cases1

.nown a ci%il law concept to reuire an elon*ated discussion1 Cundamental principles on public biddin*

were li.ewise used to resol%e the issues raised by the petitioner1 To be sure, petitioner leans on the

ri*ht to top in a public biddin* in ar*uin* that the case at bar in%ol%es a no%el issue1 e are not

swayed1 The ri*ht to top was merely a condition or a reser%ation made in the biddin* rules which was

fully disclosed to all biddin* parties1 $n 6urau &r()a*, rr*n)- /y T+o-or H. Hunrann 7.

O( o )+ #r*(-n), ) a1,

award (Jalandoni %1 #RR, !0A hil1 4A8 S1 $n the E$n%itat

and BidE (nneF E',E supra), the '$SS 'ommittee a- an ;r** r*r7a)(on o

Go7rnn) )o * ;r(* o ()* -(*r)(on (n -(-(n

r(7a)(? )+ o7rnn)>* *+ar* (n #HILS$O1 $t was not a whimsical or ar

pluc.ed from the ether and inserted in the biddin* rules but a condition which the T

best way the *o%ernment could comply with its contractual obli*ations to -S-$ un

its mandate of *ettin* the most ad%anta*eous deal for the *o%ernment1 The ri*ht to t

in the mutual ri*ht of first refusal in the J+ and was reached by a*reement of the *

-S-$1

Curther, there is no MeFecuti%e interference in the functions of this 'ourt by the

memorandum by Secretary of Cinance Jose $sidro 'amacho1 The memorandum was

ac.nowled*e its filin*1 $t had no further le*al si*nificance1 #otably too, )+ a**a(- R

S)/r 24, 2003 a* -(-- unan(ou*y /y )+ S(a !(r*) D(7(*(on

r*on-n)*1

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*ain, we emphasi7e that a decision or resolution of a &i%ision is that o f the Supreme 'ourt

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c1 That /$S5'O owned land at the time that the ri*ht of first refusal was a*reed upon and at the

time of the biddin* are most rele%ant1

d1 hether a shipyard is a public utility is not the core issue in this case1

31 Craud and bad faith attend the alle*ed con%ersion of an ineFistent ri*ht of first refusal to the ri*ht to

top1

a1 The history behind the birth of the ri*ht to top shows fraud and bad faith1

b1 The ri*ht of first refusal was, indeed, Meffecti%ely useless1

41 etitioner is not le*ally estopped to challen*e the ri*ht to top in this case1

a1 5stoppel is una%ailin* as it would stamp %alidity to an act that is prohibited by law or a*ainst public

policy1

b1 &eception was patentI the ri*ht to top was an attracti%e nuisance1

c1 The !09 bid deposit was placed in escrow1

J1>1 SummitLs insistence that the ri*ht to top cannot be sourced from the ri*ht of first refusal is not new

and we ha%e already ruled on the issue in our Resolution of September 24, 20031 e upheld the

mutual ri*ht of first refusal in the J+1 roup, $nsular ife

ssurance, ?itsui and $'TS$), has ;oined /$HR&S in the latterDs effort to raise 21!3! billion

necessary in eFercisin* the ri*ht to top is not contrary to law, public policy or public morals1 There is

nothin* in the SBR that bars the losin* bidders from ;oinin* either the winnin* bidder (should the ri*ht

to top is not eFercised) or -S-$G/$ (should it eFercise its ri*ht to top as it did), to raise the

purchase price1 The petitioner did not alle*e, nor was it shown by competent e%idence, that the

participation of the losin* bidders in the public biddin* was done with fraudulent intent1 bsent any proof

of fraud, the formation by o%ernmentDs shares in /$S5'O to respondent 11 Summit submits that since /$S5'O is a landho

-S-$ could eFercise its ri*ht of first refusal only up to 409 of the shares of /$S

constitutional prohibition on landholdin* by corporations with more than 409 forei*n

further ar*ues that since -S-$ already held at least 409 euity in /$S5'O

refusal was inutile and as such, could not subseuently be con%erted into the ri*ht to

also asserts that, at present, /$S5'O continues to %iolate the constitution

landholdin*s as its shares are more than 409 forei*nowned1

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on*)()u)(on (()(n an- onr*+( )o !(((no* an- !(((no orora)(on*1 s /$HR&S

correctly puts it, if /$S5'O still owns land, the ri*ht of first refusal can be %alidly assi*ned to a

ualified Cilipino entity in order to maintain the 809409 ratio1 This transfer, by itself, does not amount

to a %iolation of the nti&ummy aws, absent proof of any fraudulent intent1 The transfer could be

made either to a nominee or such other party which the holder of the ri*ht of first refusal feels it can

comfortably do business with1 lternati%ely, /$S5'O may di%est of its landholdin*s, in which case

-S-$, in eFercisin* its ri*ht of first refusal, can eFceed 409 of /$S5'OLs euity1 In a), () an

7n / *a(- )+a) ( )+ or(n *+ar+o-(n* o a an-+o-(n orora)(on ;-* 40B, () (*

no) )+ or(n *)oC+o-r*> onr*+( o )+ *+ar* +(+ (* a-7r*y a)- /u) )+

aa()y o )+ orora)(on )o on an-Q that is, the corporation becomes disualified to own land1

This finds support under the basic corporate law principle that the corporation and its stoc.holders are

separate ;uridical entities1 $n this %ein, the ri*ht of first refusal o%er shares pertains to the shareholders

whereas the capacity to own land pertains to the corporation1 /ence, the fact that /$S5'O owns

land cannot depri%e stoc.holders of their ri*ht of first refusal1 No a -(*=ua((* a r*on ro

ur+a*(n *+ar* (n a an-+o-(n orora)(on 7n ( )+ a))r ( ;- )+ ao- or(n

=u()y, +a) )+ a -(*=ua((* (* )+ orora)(on ro on(n an- 1 This is the clear import of

the followin* pro%isions in the 'onstitution:

Section 21 ll lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all

forces of potential ener*y, fisheries, forests or timber, wildlife, flora and fauna, and other natural

resources are owned by the State1 ith the eFception of a*ricultural lands, all other natural resources

shall not be alienated1 The eFploration, de%elopment, and utili7ation of natural resources shall be under

the full control and super%ision of the State1 The State may directly underta.e such acti%ities, or it may

enter into coproduction, ;oint %enture, or productionsharin* a*reements ()+ !(((no ()(?n*, or

orora)(on* or a**o(a)(on* a) a*) *(;)y r n)u o +o* a()a (* on- /y *u+

()(?n*1 Such a*reements may be for a period not eFceedin* twentyfi%e years, renewable for not

more than twentyfi%e years, and under such terms and conditions as may be pro%ided by law1 $n cases

of water ri*hts for irri*ation, water supply, fisheries, or industrial uses other than the de%elopment of

water power, beneficial use may be the measure and limit of the *rant1

FFF FFF FFF

Section 1 Sa%e in cases of hereditary succession, no r(7a) an-* *+a / )ran*rr- or

on7y- ;) )o (n-(7(-ua*, orora)(on*, or a**o(a)(on* =ua((- )o a=u(r or +o- an-*

o )+ u/( -oa(n1

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statements11 Summit misreads

the pro%isions of the 'onstitution cited in its own pleadin*s, to wit:

2"12 etitioner has consistently pointed out in the past that pri%ate respondent is not a 809409

corporation, and this %iolates the 'onstitution F F F The %iolation continues to this day because under

the law, () on)(nu* )o on ra ror)y

FFF FFF FFF

321 To re%iew the constitutional pro%isions in%ol%ed, Section !4, rticle $+ of the !"3 'onstitution

(the J+ was si*ned in !"), pro%ided:

MSa%e in cases of hereditary succession, no r(7a) an-*shall be transferred or con%eyed eFcept to

indi%iduals, corporations, or associations ualified to acuire or hold lands of the public domain1

321! This pro%ision is the same as Section , rticle $$ of the !"A 'onstitution1

3212 6nder the ublic and ct, corporations ualified to acuire or hold an-* o )+ u/(

-oa(nare corporations at least 809 of which is owned by Cilipino citi7ens (Sec1 22, 'ommonwealth

ct !4!, as amended)1 ( emphases supplied)

s correctly obser%ed by the public respondents, the prohibition in the 'onstitution applies only to

ownership of land1eneral 'redit 'orporation (>'') Q R5#T 'O?#H

''' 5uity 'orporation (5uity) Q S6BS$&$RH 'O?#H of >''

lsons &e%elopment Q Stoc.h older in the franchise companies of >''

>'' 'ompany was incorporated as a finance and in%estment company wh''' franchise companies in the different urban centers of the country1

$n order to also en*a*e in uasiban.in* acti%ities, G oran(?- $=u()y or

)aC(n o7r )+ ora)(on* an- anan) o )+ 7ar(ou* ran+(* o

lsons &e%elopment and the lcantara Camily each owned shares in the

companies1

"*on* D7on) an- "an)ara a(y *o- )+(r *+ar+o-(n* (n )+

oan(* )o $=u()y. 5uity in turn issued a Mbearer promissory note for year maturity date at !A9 interest per annum1lcantara family later assi*nedthe promissory note to lsons &e%elopment who then became the holder of the

&emand letters for payment of interest were sent to 5uity1 $=u()y a--

ay )+ *)(ua)- (n)r*) since it no lon*er had assets or property to settnor was it eFtended financial support by >''1

6nable to collect on the promissory note, "*on* (- a oa(n) or a

aa(n*) $=u()y an- G (>'' was impleaded since under the doctrine of picorporate fiction, 5uity was or*ani7ed as a tool and mere conduit of >'')1

r*uments of 5uity: it was p urposely or*ani7ed by >'' for the latter to a%oid 'entral

Re*ulations on &OSR$ (&irectors, Officers, Stoc.holders, Related $nterests) limitat

a)- an (n)r-(ary or /r(- or oan )ran*a)(on* an- o)+r G )o ()* ran+(

*oy -n-n) uon G or ()* un-(n r=u(rn)* )o *)) =u()y ur

(n7*)or* on )+ ran+(**.

r*ument of >'': () anno) / +- (a/ *(n () (* a -(*)(n) an- *ara) n)()y

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RT' rendered ;ud*ment in fa%or of lsons &e%elopment findin* 5uity as an instrumentality or

ad;unct of >''1 ' affirmed the decision of RT'1

ISSU$

O# there is basis for piercin* >''Ls %iel of corporate fiction

RULING

$S.

The relationship between >'' and 5uity ha%in* been that of parentsubsidiary corporations, the

doctrine of piercin* the %eil of corporate fiction is applicable in this case since it was established that

*a(- ra)(on*+( a* u*- )o ror r)a(n un)(on* no) +ara)r(?- ()+ ()(ay.

The 'ourt disre*arded the separate eFistence of the parent (>'') and the subsidiary (5uity) ha%in*

been the latter controlled by the parent that its separate identity is hardly discernible thus becomin* a

mere instrumentality or alter e*o of the former1

"* a arn) orora)(on, G ay / +- (a/ or )+ a)* an- on)ra)* o ()* *u/*(-(ary

F$=u()yEmost especially if it ac.nowled*ed its liability to lsons &e%elopment .nowin* it had no

sufficient property with which to settle its obli*ations1

M"IN DOTRIN$ O! S$#"R"T$ JURIDI"L $NTIT an- #I$RING TH$ &$IL O! OR#OR"T$!ITION

The first conseuence of the &octrine of Separate ersonality of the 'orporation is that a corporation

may not be able made to answer for acts and liabilities of its stoc.holders or those of le*al entities to

which it may be connected or %ice %ersa1

But the notion of separate personality may be disre*arded under the &octrine of iercin* the +eil of

'orporate Cictionas in fact the court will often ooC a) )+ orora)(on a* a r o)(on o

(n-(7(-ua* or an ara)(on o r*on* un-r)aC(n /u*(n** a* a rou, -(*rar-(n )+

*ara) 8ur(-(a r*ona()y o )+ orora)(on un(y(n )+ rou.nother formulation of this

doctrine is that when two (2) business enterprises are owned, conducted and controlled by the same

parties, both law and euity will, when necessary to protect the ri*hts of third parties, disre*ard the

le*al fiction that two corporations are distinct entities and treat them as identical or one and the same1

"(a/(()y o Do)r(n o #(r(n )+ &( o orora) !()(on

uthorities are a*reed on at least three (3) basic areas where piercin * the %e

law co%ers and isolates the corporation from any other le*al entity to which it ma

allowed1These are: !) -a) o u/( on7n(n,'' and 5uity(more than "09 of the stoc.holders of 5uity were aof >''I when 5uityLs resident sold shareholdin*s of 5uity incompanies, the entire proceeds were surrendered to >'', not to 5u

b) 'ertain financin* and mana*ement arran*ements between the 2, handle the funds of 5uity(>'' financed 5uity, the latter was in factsubsidiary of >''I )+ un-* (n7*)- /y $=u()y (n )+ ran+a)uay a ro GE

c) +irtual domination if not control wielded by >'' o%er the finances, and practices of 5uity(not only was 5uity incorporated by >''*rossly inadeuate capital to pursue its line of business to the/u*(n** aa(r* r on*(-r- a* G>* on>* /u*(n** n-were sharin* one and same office when both were still operation;u)(7* o $=u()y n7r a)- (n-n-n)y /u) )ooC )+(r or-

d) 5stablishment of 5uity by >'' to circum%ent 'B rules(5uity w>'' for the purpose of circum%entin* 'B rules and nti6sury %iolated 'B rules by: u*(n a* a on-u() ()* non:=ua*( /anC a()+ou) rour* a(()(* )o na/ G )o ;)n- r-() )$=u()y +(+ o /yon- )+ /orror>* (() ()+ou) )+ nou)*)an-(n /aan (n )+ /ooC o aoun)*E

M &ar- 7*. Lo? In.

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GR No. 153KK

January 14, 2004

!"TS

ope7 $nc1 Q R5#T 'O?#H

S.y +ision 'orporation Q S6BS$&$RH 'O?#H of ope7 $nc1

5u*enio ope7 Jr1, resident of ope7 $nc1 (L$ND$R) and ?el +elarde (>eneral ?ana*er ofS.y +ision 6ORROA$R) entered into a loan a*reement co%erin* !0 million1 The

a*reement eFpressly pro%ided that upon circumstances constitutin* default of the borrower,lender has the ri*ht to declare the loan to*ether with the accrued interest immediately due andpayable1

+elarde failed to pay the installments as they became due so Lo? In. a-7(*- +( )+a) +

ay u* +(* r)(rn) /n()* ro SCy &(*(on (n ar)(a *))n) o +(* oan CT5R/5 S5TT5S /$S ''O6#TB$$T$5S TO S-H +$S$O# #& >$+5S /$S R$TT5#$#STR6'T$O#S TO S-H +$S$O#1

hen ope7 $nc1 submitted a computation of the retirement benefits due to +elarde, +elardeinformed the company of the erroneous fi*ure used as salary in the computation benefits1 Hro)*)- )+ ou)a)(on a**r)(n )+a) )+ (u)- un(=u(-a)- a-7an* ro SCy&(*(on +a- ara-y /n (=u(-a)-.

ope7 $nc1 then filed a complaint for collection of sum of money a*ainst +elarde alle*in*

+elarde %iolated their loan a*reement and despite letters of demand, +elarde refused to pay1

r*uments of +elarde:

a1 The loan a*reement did not reflect the true a*reement since it wasry a o7r -oun) )o 7(-n )+ rar- )o +( o#10 ((on or +(* oya)y an- ;n) roran a*Gnra Manarand that () a* +n + a* o- /yLo? In. )o r)(r )+a) )+ ayn) a* rn-r-(o**(/, roo)(n )+ oany )o ar )+a) +(*r)(rn) /n()* ou- (n*)a- / a(- )o )+ oan.

+elarde filed a counterclaim assertin* that + a* n)()- )o r)(rn) /n()* ro SCy&(*(on (n )+ aoun) o #9K ((on, una(- *aar(* an- una(- *+ar ro )+ n)(no o )+ orora)(on.

ope7 $nc1 filed a motion to dismiss the counte rclaim on the *round of lac. of ;urisdiction+(+

-r &ar- )o ( +(* oo*()(on )+a) )+ 7( o orora) ()(on u*) / (r- )o

+o- Lo? In. (a/ or +(* oun)ra(*. +elarde opposed that RT'o%er the case -u )o )+ )or)(ou* annr +r + a* or- (n)o r)(r

RT' denied motion to dismiss the counterclaim and rendered in fa%or of +ela

there is identity between ope7 $nc1 and S.y +ision to merit the piercin* the fiction1

' re%ersed RT' decision and held that there was failure to show the presencircumstances to ;ustify the application of piercin* the %eil of corporate fiction1

ISSU$S

O# RT' has ;urisdiction o%er the case

O# there is basis to pierce the %eil of corporate fiction of ope7 $nc1

RULING

!1 O# RT' has ;urisdiction o%er the caseQ$S(initially S' held that S5' had ;urisdic

because amended an* law, RT' nadawan*naay ;urisdiction o%er the case)

Section @(c) of 1&1 "02 (as amended by R11 A"", the Securities Re*ulation 'o

corporate officerLs dismissal1 Cor a corporate officerLs dismissal is always a corpora

intracorporate contro%ersy and that its nature is not altered by the reason or wisdom wh

&irectors may ha%e in ta.in* such action1

ith re*ard to +elardeLs claim for unpaid salaries, unpaid share in net income, reasona

stoc. ownership plan and other benefits for ser%ices rendered to S.y +ision , 8ur(*

r)a(n* )o )+ Sur()(* $;+an o(**(on

N6 IT "N 6$ S "ID TH"T TH$ OURT H$LD TH"T &$L"RD$ A"S " STO@HOL

&ISION, no) a r oy

The uestion of remuneration in%ol%in* a person who is not a mere employee but a stoc

officer of the corporation is no) a *( a/or ro/but a matter that o* ()+(n

orora) aa(r* an- anan), and is in fact a corporate contro%ersy in contemp

'orporation 'ode1

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N6 A+n )+ oun)ra(* r (-, #D 902:" a* an-- /y R" K99 +(+ )ran*rr-

)+ 8ur(*-()(on o (n)ra:orora) on)ro7r*(* )o )+ RT.

21 O# there is basis to pierce the %eil of corporate fiction of ope7 $nc1 Q NO (naay separate ;uridical

personality si subsidiary company (S.y +ision) from its parent company (ope7 $nc1)

The filin* a*ainst ope7 $nc1 (parent company) is improper1 The ra ar)y:(n:(n)r*) (n )+(* a* (*

S@ &ISION F*u/*(-(ary oanyE.

$t cannot be *ainsaid that a subsidiary has an independent and separate ;uridical personality,distinct from that of its parent company, hence, any a( or *u() aa(n*) )+ a))r Farn) oanyE

-o* no) /(n- )+ orr F*u/*(-(aryE an- 7( 7r*a 1

Requisites to apply Piercing the eil of Corporate !iction"

(!) on)ro,not merely ma;ority or complete stoc. controlI

(2) suchon)ro u*) +a7 /n u*- /y )+ -n-an) )o o() rau- or ron , to perpetuate

the %iolation of a statutory or other positi%e le*al duty, or dishonest acts in contra%ention of plaintiffLs

le*al ri*htsI

(3) theaor*a(- on)ro an- /ra+ o -u)y u*) ro;(a)y au* )+ (n8ury or un8u*) o**oa(n- o.

#owhere, howe%er, in the pleadin*s and other records of the case can it be *athered that respondent

(ope7 $nc1) has complete control o%er S.y +ision, not only of finances but of policy and business

practice in respect to the transaction attac.ed, so that S.y +ision had at the time of the transaction no

separate mind, will or eFistence of its own1 The ;(*)n o (n)roC(n -(r)or*, orora)

o(r* an- *+ar+o-r* (* no) nou+ 8u*)((a)(on )o (r )+ 7( o orora) ()(on (n )+

a/*n o rau- or o)+r u/( o(y on*(-ra)(on*1

As to the alleged deception that Velarde was forced to sign the loan ag reement on the a

was merely for purpose of documenting the reward to him: $T '# B5 S$& T/T 'O6

T/T T/5R5 S #O &5'5T$O#

SCy &(*(on>* (n7o7n) (n )+ )ran*a)(onsub;ect of the case spran* only after a pr

apparently proffered by +elarde that his retirement benefits from S.y +ision be used in p

of his loan from respondent1

5Fcerpts of the letter from resident of ope7 $nc1 to +elarde:

lease note that in order to effect the application of your retirement benefits to

partial payment of your loan! you #ill need to give

$%y&Central #ritten instructions on the sa'e in the soonest possible ti'

"hould you be able to liquidate the advances as

requested by $%y&Central,the said amount will be applied to the partial

payment of your loan and we shall ad#ust the amount of principal and in terest

due from you accordingly.

The a*reement to setoff is an amendment of the loan a*reement resultin* to an identity

interestbetween ope7 $nc1 and S.y +ision $S 6#T5#B5 and, therefore, #OT S6CC$

the %eil of corporate fiction1

The abo%euoted))r (* ar )+a), )o ) a *):o, () (* a on-()(on sine q

aro7a )+ro /y SCyn)ra u*) / o/)a(n-, an- )+a) )()(onr (=u(-a)ro SCy &(*(on1 These conditions hardly manifest that respondent possessed that d

o%er S.y +ision as to ma.e the latter its mere instrumentality, a*ency or ad;unct1

H(r* o Durano 7. Uy

[G.R. No. 1345. O)o/r 24, 2000]

GON'"G":R$$S, .

!"TS )aa* au an a* /u) aaaaa+ aay ra au an (**u E +a+a+a+a+a

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The uestion of whether a corporation is a mere alter e*o is purely one of fact1

T+ 7(-n *+o* )+a) r*on-n)* *u**uy o(- ()+ a )+ r=u(rn)* ora=u(*()(7 r*r()(on )o *) (n. T+ ror)(* r on7y- )o r*on-n)* /y ur+a* or

(n+r()an, an- (n a+ a* )+ r*on-n)* r (n a)ua, on)(nuou*, on an- a-7r*o****(on o )+ ror)(*.

31 AON )+ )()(onr* +a7 a oo- a( o onr*+(:NO

Turnin* now to petitionersL claim to ownership and title, it is uncontested that their claim hin*eslar*ely on T'T #os1 T!03 and T!04, issued in the name of petitioner Ramon &urano $$$1 /owe%er, the%alidity of these certificates of title was put to serious doubt by the followin*: ( 1E )+ r)((a)* r7a)+ aC o r(*)r- )() o o )o )+ ror)(*%[24]F2E )+ a- ron*)()u)- )()* oo r no) ro-u- (n 7(-n% an- F3E )+ -- o *a /)n o an- Durano o. a* unno)ar(?- an- )+u*, unr(*)ra/. The unre*istrability of the deed of sale is a seriousdefect that should affect the %alidity of the certificates of title1 #otari7ation of the deed of sale isessential to its re*istrability, (/au* o )+(* 8ur(*-()(ona (-(n), o/*r7 )+a) )+ a/o(ru*)an* (n-(a) non )oo ary )+ aCn** o )()(onr*> 7(-n oonr*+(.

@1 AON )()(onr* an a( (n-a*(/(()y o Torrn* )():NO

There e%en appears to be undue haste in the con%eyance of the property to &ubulldo7in* operations by &urano P 'o1 were still underway when the deed of sale toeFecuted on September !@, !"01 T+r (* no) 7n an (n-(a)(on )+a) Durano )ran*r r(*)ra)(on o )+ ror)y (n ()* na /or () on7y- )+ *a )o Du

The rule on indefeasibility of title, i.e., that Torrens titles can be attac.ed for fraudyear from the date of issuance of the decree of re*istration, does not alto*ether deprparty of a remedy at law1

The decree (of re*istration) becomes incontro%ertible and can no lon*er be re%iewyear from the date of the decree so that the only remedy of the landowner whose prowron*fully or erroneously re*istered in anotherLs name is to brin* an ordinary acrecon%eyance, which is an action in personamand is always a%ailable as lon* as the passed to an innocent third party for %alue1 $f the property has passed into the handspurchaser for %alue, the remedy is an action for dama*es1

81 AON r*on-n)* *+ou- ay a))orny>* * an- -aa*:$S

e also uphold the award of liti*ation eFpenses and attorneyLs fees, it bein* clear thatcompelled respondents to liti*ate and incur eFpenses to re*ain ri*htful possession andthe disputed property1

#N6 7. R()ra))o Grou, In., R(a))o In)rna)(ona, In. an- Da-a*an Gnra Mr+

G.R. No. 1421 Juy 31, 2001 @"#UN"N,

!"TS

etitioner hilippine #ational Ban. is a domestic corporation or*ani7ed an

hilippine law1 ?eanwhile, respondents Ritratto >roup, $nc1, Riatto $nterna&adasan >eneral ?erchandise are domestic corporations, li.ewise, or*ani7under hilippine law1

n ?ay 2", !""8, #N6 In)rna)(ona !(nan L)-. F#N6:I!LE a *u/*(-(ary o

oran(?- an- -o(n /u*(n** (n Hon @on, ;)n-- a ))r o r-()r*on-n)*in the amount of 6S300,000100 secured by real estate mort*o%er four (4) parcels of land in ?a.ati 'ity1

http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn36http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn19http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn21http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn22http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn24http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn27http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn27http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn27http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn25http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn36http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn19http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn21http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn22http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn24http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn27http://sc.judiciary.gov.ph/jurisprudence/2000/oct2000/136456.htm#_edn25

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Respondents made repayments of the loan incurred by remittin* those amounts to their loan

account with #B$C in /on* -on*1 /owe%er, as of pril 30, !""A, their outstandin*obli*ations stood at 6S!,4",24101 ursuant to the terms of the real estate mort*a*es,#N6:I!L, )+rou+ ()* a))orny:(n:a) #N6, no)((- )+ r*on-n)* o )+ oro*ur oa )+ ra *)a) or)a* an- )+a) )+ ror)(* *u/8) )+ro r )o / *o- a) au/( au)(on on May 2, 1999 a) )+ MaCa)( ()y Ha.

R()ra))o, ). ". (- a oa(n) or (n8un)(on ()+ rayr or )+ (**uan o a r() o

r((nary (n8un)(on an-or )orary r*)ra(n(n or-r before RT' ?a.ati a*ainst #B1 2hr TRO was *ranted1

)()(onr (- a o)(on )o -(*(** on )+ roun-* o a(ur )o *)a) a au* o a)(onan- )+ a/*n o any r(7()y /)n )+ )()(onr an- r*on-n)*.

RT 7Trial court ;ud*e issued an Order for the issuance of a writ of preliminary in;unction1

RT' denied the ?T&1 RT' ruled that since #B$C, is a wholly owned subsidiary ofdefendant hilippine #ational Ban., the suit a*ainst the defendant #B is a suit a*ainst #B$C1 $n ;ustifyin* its rulin*, the trial court, citin* the case of %oppel hil. &nc. vs.'atco,!! reasoned that the corporate entity may be disre*arded where a corporation is themere alter e*o, or business conduit of a person or where the corporation is so or*ani7ed andcontrolled and its affairs are so conducted, as to ma.e it merely an instrumentality, a*ency,conduit or ad;unct of another corporation1!

ppeal by certiorari u nder rule 4@ was instit uted by the petitioners then1

#)()(onr* a(*

#o pri%ity of contract1 >& in the issuance of preliminary in;unction

R*on-n)P* arun)*

41 e%en assumin* arguendothat petitioner and #B$C are two separate entities, petitioner isstill the partyininterest in the application for preliminary in;unction because it is tas.ed tocommit acts of foreclosin* respondentsD properties1

@1 the entire credit facility is %oid as it contains stipulations in %iolation of the principle of mutualityof contracts1@

. $n addition, r*on-n)* 8u*)((- )+ a) o )+ our) a quo (n ay(n )+ -o)r(n o

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Similarly, in this ;urisdiction, we ha%e held that the do)r(n o (r(n )+ orora) 7( (* an=u()a/ -o)r(n -7o- )o a--r** *()ua)(on* +r )+ *ara) orora) r*ona()y oa orora)(on (* a/u*- or u*- or ronu uro**. Th -o)r(n a(* +n )+ orora)()(on (* u*- )o -a) u/( on7n(n, 8u*)(y ron, ro)) rau- or -n- r(, or+n () (* a- a* a *+(- )o onu* )+ ()(a) (**u*, or +r a orora)(on (* )+r alter egoor business conduit of a person, or where the corporation is so or*ani7ed and controlledand its affairs are so conducted as to ma.e it merely an instrumentality, a*ency, conduit or ad;unct ofanother corporation1

$n Concept Builders! &nc. v. )*+C,!8 we ha%e laid the test in determinin* the applicability of the doctrineof piercin* the %eil of corporate fiction, to wit:

!1 'ontrol, not mere ma;ority or complete control, but complete domination, not only of financesbut of policy and business practice in respect to the transaction attac.ed so that the corporateentity as to this transaction had at the time no separate mind, will or eFistence of its own1

21 Such control must ha%e been used by the defendant to commit fraud or wron*, to perpetuatethe %iolation of a statutory or other positi%e le*al duty, or dishonest and, un;ust act incontra%ention of plaintiffs le*al ri*htsI and,

31 The aforesaid control and breach of duty must proFimately cause the in;ury or un;ust losscomplained of1

T+ a/*n o any on o )+* n)* r7n)*

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which upheld the uestioned Order1 etition for certiorari with S' assailin* that Resolution

was denied for lac. of merit1

R&C' and petitioners finally obtains possession of the ice plant1 etitioners did not reemploy

pri%ate respondents1

ri%ate respondents filed complaints a*ainst petitioners for ille*al dismissal1

The ssistant Re*ional &irector rendered a decision directin* 'abu*ao $ce lant, $nc1, $locos

'ommercial 'orporation andGor lberto Sunioto reinstate the complainants to their formerpositions without loss of seniority pri%ile*es and to pay their bac.wa*es1

etitioners appealed to the #R', which affirmed the Re*ional &irectorDs decision and

dismissed the appeal for lac. of merit reasonin* that when R&C' too. possession of theproperty and pri%ate respondents were terminated in !"3, the latter already had a %ested ri*htto their security of tenure, and when they were rehired those ri*hts continued1

ppeal to S'

$ssue:

O# there was an employeeemployer relationship between petitioners and pri%ate

respondents1

/eld:

#o1

hen, on July 30, !"3, 5?R'O'$$ sold the plant to R&C', '$$ had terminated the

ser%ices of its employees, includin* herein pri%ate respondents, *i%in* them their separation pay which

they had accepted1 $t may be said that pri%ate respondents had slept on their ri*hts when they failed to

contest such termination at the time of sale, if they belie%ed they had ri*hts to protect1hen R&C' too.

o%er ownership and mana*ement, therefore, it hired its own employees, not the pri%ate respondents,

who were no lon*er there1

$t cannot be ;ustifiably said that the plant to*ether with its staff and personnel mo%ed from one

ownership to another1 #o succession of employment ri*hts and obli*ations can be said to ha%e ta.en

place between 5?R'O'$$#ilo +illanue%a, on the one hand, and petitioners on the other1

etitioners e%entually acuired possession by %irtue of the eFercise of their ri*ht of redemption and of a

?andatory $n;unction in their fa%or1

ri%ate respondents can neither successfully in%o.e security of tenure in their fa%or1 Their

tenure should not be rec.oned from !"8 because they were already terminated in !"31 ri%ate

respondents were only rehired in !"4 by #ilo +illanue%a1 etitioners too. o%er by ;udicial process in

!"A so that pri%ate respondents had actually only four years of rehired employment with #ilo

+illanue%a, durin* all of which period, petitioners fou*ht hard a*ainst #ilo +illanue%a to reco%er

possession of the plant1 $nsofar as petitioners are concerned therefore, there was no tenurial security to

spea. of that would entitle pri%ate respondents to reinstatement and bac.wa*es1

On the personal liability of petitioner, Sunio, who was made ;ointly and se%e

with etitioner 'ompany and '$$ for the payment of the bac.wa*es of pri%ate respon

error1 The ssistant Re*ional &irectorDs &ecision failed to disclose the reason why

personally liable1 Respondents, howe%er, alle*ed as *rounds thereof, his bein* the o

(!G2) interest of said corporation, and his alle*ed arbitrary dismissal of pri%ate respon

Sunio was impleaded in the 'omplaint his capacity as >eneral ?ana*er of petitioner co

appears to be no e%idence on record that he acted maliciously or in bad faith in terminat

of pri%ate respondents1 /is act, therefore, was within the scope of his authority and was

$t is basic that a corporation is in%ested by law with a personality separate athose of the persons composin* it as well as from that of any other le*al entity to w

related1 ?ere ownership by a sin*le stoc.holder or by another corporation of all or

capital stoc. of a corporation is not of itself sufficient *round for disre*ardin* the se

personality1 etitioner Sunio, therefore, should not ha%e been made personally ans

payment of pri%ate respondentsD bac. salaries1

T/5 'O5'TOR OC $#T5R# R5+5#65 % T/5 '6B C$$$#O, $#'1 &5 '5B6

>1R1 #o1 !2!"

?ay 3!, !"82

Cacts:

the E'lub Cilipino, $nc1 de 'ebu,E ('lub, for short), is a ci%ic corporation or*a

laws of the hilippines with an ori*inal authori7ed capital stoc. of 22,000

subseuently increased to 200,0001001 #either in the articles or bylaws is there a pro%ision relati%e to di%idends and

althou*h it is co%enanted that upon its dissolution, the 'lubDs remainin* assdebts, shall be donated to a charitable hilippine $nstitution in 'ebu

The 'lub owns and operates a club house, a bowlin* alley, a *olf course (on a

the *o%ernment), and a barrestaurant where it sells wines and liuors, soft dr

short orders to its members and their *uests1 The bar,restaurantwas a nece

the operation of the club and its *olfcourse1

The club is operated mainly with funds deri%ed from membership fees and

profits it had, were used to defray its o%erhead eFpenses and to impro%e its *o

s a result of a ca pital surplus, arisin* from the re%alu ation of its real propert

price of which increased, the 'lub declared stoc. di%idendsI but no actual cash

distributed to the stoc.holders1

B$R a*ent disco%ered that the 'lub has ne%er p aid percenta *e taF on the

its bar and restaurant, althou*h it secured B4, B"(a) and B licenses1

&ecember 22, !A@2, the 'ollector of $nternal Re%enue assessed a*ainst and

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and percenta*e taFes, surchar*e and compromise penalty, alle*edly due from it as a .eeper of

bar and restaurant1

The 'lub wrote the 'ollector, reuestin* for the cancellation of the assessment1 The reuest

ha%in* been denied, the 'lub filed petition for re%iew1

$ssue:

!1 hether the respondent 'lub is liable for the payment of the sum of !2,08A1A4, as fiFed and

percenta*e taFes and surchar*es prescribed in sections !A2, !A3 and !"! of the TaF 'ode, under

which the assessment was made, in connection with the operation of its bar and restaurant, durin* the

periods mentioned abo%eI and

21 hether it is liable for the payment of the sum of @00100 as compromise penalty1

/eld:

Section !A2, of the TaF 'ode states, E6nless otherwise pro%ided, e%ery person en*a*in* in a

business on which the percenta*e taF is imposed shall pay in full a fiFed annual taF of ten pesos for

each calendar year or fraction thereof in which such person shall en*a*e in said business1E Section !A3

pro%ides in *eneral that Ethe percenta*e taFes on business shall be payable at the end of each calendar

uarter in the amount lawfully due on the business transacted durin* each uarterI etc1E nd section

!"!, same TaF 'ode, pro%ides Eercenta*e taF 1 1 1 -eepers of restaurants, refreshment parlors and

other eatin* places shall pay a taF three per centum, and .eepers of bar and cafes where wines or

liuors are ser%ed fi%e per centum of their *ross receipts 1 1 1E1

$t has been held that the liability for fiFed and percenta*e taFes, as pro%ided by these sections,

does not ipso factoattach by mere reason of the operation of a bar and restaurant1 Cor the liability to

attach, the operator thereof must be en*a*ed in the business as a bar.eeper and restaurateur1

The plain and ordinary meanin* of businessis restricted to acti%ities or affairs where profit is

the purpose or li%elihood is the moti%e, and the term business when used without ualification, should

be construed in its plain and ordinary meanin*, restricted to acti%ities for profit or li%elihood1

The 'lub was or*ani7ed to de%elop and culti%ate sports of all class and denomination, for the

healthful recreation and entertainment of its stoc.holders and membersI that upon its dissolution, its

remainin* assets, after payin* debts, shall be donated to a charitable hilippine $nstitution in 'ebuI that

it is operated mainly with funds deri%ed from membership fees and duesI that the 'lubDs bar and

restaurant catered only to its members and their *uestsI that there was in fact no cash di%idend

distribution to its stoc.holders and that whate%er was deri%ed on retail from its bar and restaurant was

used to defray its o%erall o%erhead eFpenses and to impro%e its *olfcourse (costpluseFpensesbasis),

it stands to reason that the 'lub is not en*a*ed in the business of an operator of bar and restaurant1

$t is conceded that the 'lub deri%ed profit from the operation of its bar and rest

fact does not necessarily con%ert it into a profitma.in* enterprise1 The bar and

necessary ad;uncts of the 'lub to foster its purposes and the profits deri%ed therefrom

incidental to the primary ob;ect of de%elopin* and culti%atin* sports for the healthfu

entertainment of the stoc.holders and members1 That a 'lub ma.es some profit, do

profitma.in* 'lub1 s has been remar.ed a club should always stri%e, whene%er p

surplus1

The 'lub is not a stoc. corporation1 The facts that the capital stoc. of the res

di%ided into shares, does not detract from the findin* of the trial court that it is not business of operator of bar and restaurant1 hat is determinati%e of whether or not the in such business is its ob;ect or purpose, as stated in its articles and bylaws1 $t is a famactual purpose is not controlled by the corporate form or by the commercial aspect prosecuted, but may be shown by eFtrinsic e%idence, includin* the bylaws andoperation1 Crom the eFtrinsic e%idence adduced, the TaF 'ourt concluded that the 'lubin the business as a bar.eeper and restaurateur1

Cor a stoc. corporation to eFist, two reuisites must be complied with, to wit: (!

di%ided into shares and (2) an authority to distribute to the holders of such share

allotments of the surplus profits on the basis of the shares held (sec1 3, ct #o1 !4@"

bar, nowhere in its articles of incorporation or bylaws could be found an authority for t

its di%idends or surplus profits1 Strictly spea.in*, it cannot, therefore, be considered a st

within the contemplation of the corporation law1

taF is a burd en, and , as such, it should n ot be deemed imp osed upo n frate

profit, nonstoc. or*ani7ations, unless the intent to the contrary is manifest and pate

BO5 5l.s 'lub, et al1,supra), which is not the case in the present appeal1

/a%in* arri%ed at the conclusion that respondent 'lub is not en*a*ed in the

operator of a bar and restaurant, and therefore, not liable for fiFed and percenta*e taFe

it is not liable for any penalty, much less of a compromise penalty1

S+(*(-, In. 7. "

-.+. )o. /0011! 2ebruary 34! 344

!"TS

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TaC(n "r)( 1144F3E o )+ (7( o- an-Section 8, Rule 3" of the Rulse of 'ourt, it is plain that ana)(on or r7(7a o 8u-n) u*) / /rou+) ()+(n )n yar* ro )+ )( *a(- 8u-n)/o* (na1

/ere, the a)(on or r7(7a o 8u-n) a* (n*)()u)- ony (n 1999, or or )+an )n)y:(7 F25Eyar* a)r )+ 8u-n) +a- /o (na. Hn, )+ a)(on (* /arr- /y ;)(n)(7r*r()(on1

3he )overn'ent&Republic is -3 a real party in interest< thus, it C5- -E43=ER institute theaction -R raise the defense of i'prescriptability

A+( () (* )ru )+a) r*r()(on -o* no) run aa(n*) )+ S)a) , the *a ay NOT / (n7oC-/y )+ o7rnn) (n )+(* a* SIN$ IT IS NO LONG$R INT$R$ST$D IN TH$ SU6J$TM"TT$R1 A+( a Aaa ay +a7 /on- )o )+ o7rnn) a) )+ )( Raa Ga7?P*)() a* or-r- an- (n Lan- R(*)ra)(on a* No. N:31, )+ *a no onr +o-* )ru)o-ay1 The6a** on7r*(on an- D7on) ") o 1992and#roaa)(on No. 21pro%idedthe transfer of +allace 5ir $tation 5reas to the Bases Conversion and 0evelop'ent 5uthority.

A()+ )+ )ran*r o a Aaa )o )+ 6D", )+ GO&$RNM$NT NO LONG$R H"S " RIGHTor (n)r*) )o ro))1 'onseuently, the Ru/( (* NOT a ra ar)y (n (n)r*) an- () ay no)(n*)()u) )+ (n*)an) a)(on1 #or may it raise the defense of (r*r()(/(()y, )+ *a /(na(a/ ony (n a** +r )+ o7rnn) (* a ar)y (n (n)r*) 1

6nder Section 2 of Rule 3 of the !"" Rules of 'i%il rocedure, Ee%ery action must be prosecuted ordefended in the name of the real party in interest1E To ualify a r*on )o / a ra ar)y (n (n)r*) ,he u*) aar )o / )+ #R$S$NT R$"L OAN$R o )+ r(+) *ou+) )o nor-(ioneer&nsurance v. ', !@ S'R 88A

5lthough a corporation created by the Republic, BC05 has a $EP5R53E personality distinctfro' the govern'ent< thus, it is -3 an agent of the Republic and can sue or be suedindependently fro' the latter

6D" (* an n)()y (n7*)- ()+ a r*ona()y *ara) an- -(*)(n) ro )+ o7rnn) under

its 'harter1 $ts un)(on*ar /a*(ay #RO#RI$T"R (n na)ur1 The roo)(on o ono( an-

*o(a -7on) o n)ra Lu?on, (n ar)(uar, an- )+ oun)ryP* oa or n+*eneral, DO NOT aC )+ 6D" =u(7an) )o )+ Go7rnn) 1 5%en corporations*o%ernment to act as its a*ents for the reali7ation of its pro*rams, such as the SSS, GSar(- )+ NI", are held by the court as NOT o7rnn):un)(on orora)(on* (n7*o7rnn)a a))r(/u)*,a)+ou+ ror(n un)(on* a(- a) roo)(n u/(u/( ar.

$t may thus be said that the 6D" (* NOT " M$R$ "G$N o )+ Go7rnn) /u) /o-y ror(n ror()ary un)(on*1

3he Marcha Ruling is -3 applicable in the case at bar

E.B. Marcha 3ransport Co., 4nc. v. 45C F14 SR" 2 [19K]E (* ()- a* au)+or()yRu/( (* )+ ror ar)y )o *u or )+ ro7ry o o****(on o ror)y +o )+ (n*)()u)(on o )+ *u()a* no onr +- /y )+ na)(ona o7rnn) but by torts uthority 1E.B. Marcha (*, +o7r, NOT ON "LL !OURS ()+ )+ a* a) /ar

Mar+a a* S+(*

Theour) on*(-r- )+ Ru/( a ror ar)y )o

*u *(n )+ L"IMS O! TH$ R$#U6LI an- )+#HILI##IN$ #ORTS "UTHORIT aa(n*) )+

)()(onr )+r(n r TH$ S"M$1

To -(*(** )+ oa(n) (n E.B.

Marcha ou- +a7 /rou+) n-**-ayin the settlement of the matter since the would ha%e to refile the case on the sameclaim already liti*ated upon1

T+ a(* o )+ Ru/(

*a1 Republic can in%o.e

imprescriptibility while B'&

T+ ru )+a) r

aa(n*) )+ S)a)OR#OR"TIONSR$"T$D 6 TH$#UR#OS$S, it bethe Republic has bGR"NT$$S, althocreation, ar (n )+r*on*5%ingstonCo.! 24! a 48")1

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arenthetically, petitioner Shipside was not a party to the ori*inal suit for cancellation of titlecommenced by the Republic twentyse%en years for which it is now bein* made to answer, nay, bein*made to suffer financial losses1

$t should also be noted that )()(onr (* un=u*)(ona/y a /uyr (n oo- a()+ an- or 7au,+a7(n a=u(r- )+ ror)y (n 193, or @ years after the issuance of the ori*inal certificate of title,as a third transferee1 $f only not to do %iolence and to *i%e some measure of respect to the TorrensSystem, petitioner must be afforded some measure of protection1

)B: +ecall in our Consti class! &)C++A(E government agencies which have their own special

charters 5such as BCA in this case< is )( immune from suit. 7nincorporated government agencies

)( have their charters and act as mere A-E)(" of the -overnment; thus! are covered by the

"tate=s immunity from suit.

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Republic of the hilippinesSU#R$M$ OURT

?anila

T/$R& &$+$S$O#G.R. No. 1433 !/ruary 20, 2001SHI#SID$ INOR#OR"T$D, petitioner,%s1TH$ HON. OURT O! "##$"LS [S(a !orr T)+ D(7(*(on], HON. R$GION"L TRI"L

OURT, 6R"NH 2 FSan !rnan-o ()y, La Un(onE T+ R$#U6LI O! TH$#HILI##IN$S, respondents1

M$LO, .

Before the 'ourt is a )()(on or r)(orar( (- /y S+(*(- Inorora)-under Rule 8@ of the !""Rules on 'i%il rocedure aa(n*) )+ r*ou)(on* o )+ our) o "a*promul*ated on #o%ember4, !""" and ?ay 23, 2000, +(+ r*)(7y, -(*(**- a )()(on or r)(orar( an- ro+(/()(onand thereafter denied a motion for reconsideration1

The antecedent facts are, undisputed:

On October 2", !"@A, Or((na r)((a) o T() No. 0:3K1 a* (**u- (n a7or o Raa Ga7?,o7r our ar* o an- ot ! with 8,@! suare metersI ot 2, with !8, suare metersI ot 3with !,@A3 suare metersI and ot 4, with @0A suare meters1

On pril !!, !"80, ots #o1 ! and 4 r on7y- /y Raa Ga7? (n a7or o !(((na Maar(,oa)ra Lana, R(na 6u*)o*, an- $r(n-a 6aa)/a) in " D$$D O! S"L$which was inscribed as5ntry #o1 "!!@ O'T #o103A! on u*ust !0, !"801 'onseuently, Transfer 'ertificate #o1 T4304 wasissued in fa%or of the buyers co%erin* ots #o1 ! and 41

ot #o1 ! is described as:

parcel of land (ot !, lan S6!@ "82!, 1R1 'ase #o1 #3 8!I 1R1'1 Record #o1 # !40!2,situated in the Barrio of oro, ?unicipality of San Cernando, ro%ince of a 6nion, bounded onthe #5, by the CoreshoreI on the S5, by ublic and and property of the Ben*uet'onsolidated ?inin* 'ompanyI on the S, by properties of Rafael >al%e7 (6S ?ilitaryReser%ation 'amp allace) and olicarpio ?unarI and on the #, by an old Barrio Road1Be*innin* at a point mar.ed E!E on plan, bein* S1 4 de*1 !!D1, 280138 from B111?1 !,SanCernando, thence

S1 88 de*1 !"D51, !341"@ m1 to point 2I S1!4 de*1 @D1, !!1" m1 to point 3IS1 !2 de*1 4@D1, 2100 m1 to point 4I S1 !2 de*1 4@D, 81"0 m1 to point @I#1 8" de*1, 32D1, !08100 m1 to point 8I #1 @2 de*1, 2!D1, 381A@ m1 to point I#1 2! de*1 3!D51, 4210! m1 to the point of be*innin*I containin* an area of S$ C$+5 /6#&R5& #& S5+5#TH O#5 (8,@!) SU6R5 ?5T5RS, more or referred to are indicated on the planI and mar.ed on the *roundI bearin*s true,Cebruary 42!, !"@1

ot #o1 4 has the followin* technical description:

parcel of land (ot 4, lan S6!@" 82!, 1R1 'ase #o1 #38 ! 1R1'1 Recordsituated in the Barrio of oro, ?unicipality of San Cernando, a 6nion1 Boundethe property of the Ben*uet 'onsolidated ?inin* 'ompanyI on the S1 by prope'arinoI and on the # by the property of Rafael >al%e7 (6S ?ilitary Reser%atallace)1 Be*innin* at a point mar.ed E!E on plan, bein* S1 de*1 24D1 2@"!18B111?1 !, San Cernando, thence S1 !2 de*1 4@D1, 3103 m1 to point 2I #1 " d!31"2 m1 to point 3I #1 23 de*1 28D51, @100 m1 to the point of be*innin*I contaiC$+5 /6#&5& #& 5$>/T (@0A) SU6R5 ?5T5RS, more or less1 ll pointsindicated in the plan and mar.ed on the *roundI bearin*s true, date of sur%ey, !"@1

On u*ust !8, !"80, Maar(, ) a. *o- Lo)* No. 1 an- 4 )o Lan)o on*o(-a)- oany1 The deed of sale co%erin* the aforesaid property was inscribed as 5ntry #o1#o1 T43041 Subseuently, Tran*r r)((a) No. T:4314 a* (**u- (n )+ na oon*o(-a)- M(n(n oany a* onr o Lo)* No. 1 an-41

On Cebruary !, !"83, UN@NOAN )o Lan)o on*o(-a)- M(n(n oany , the oIn*)an o La Un(on, Second Judicial &istrict, (**u- an Or-rin and Re*istration '(R' Record #o1 #!40!2) entitled ERafael >al%e7, pplicant, 5li7a Bustos, et al1, artieRu/( o )+ #+(((n*, Mo7an)E -ar(n OT No. 0:3K1 o )+ R(*)ry o D#ro7(n o La Un(on (**u- (n )+ na o Raa Ga7? , NULL "ND &OID, an- oana)(on )+ro1

The Order pertinently pro%ided: ccordin*ly, with the fore*oin*, and without preri*hts of incidental parties concerned herein to institute their respecti%e appropcompatible with whate%er cause they may ha%e, it is hereby declared and this cthat both proceedin*s in and Re*istration 'ase #o1 #38! and Ori*inal 'ertifiof the Re*istry of &eeds for the pro%ince of a 6nion issued in %irtue thereof anthe name of Rafael >al%e7, are null and %oidI the Re*ister of &eeds for the ro6nion is hereby ordered to cancel the said ori*inal certificate andGor such othertitle issued subseuent thereto ha%in* reference to the same parcels of landI wpronouncement as to costs1

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On October 2A, !"83, Lan)o on*o(-a)- M(n(n oany SOLD TO H$R$IN #$TITION$RS+(*(-Lo)* No. 1 an- 4, with the deed bein* entered in T'T #o1 43!4 as entry #o1 !23A!1 Transfer'ertificate of Title #o1 T@!0 was thus issued in fa%or of the petitioner which startin* since theneFercised proprietary ri*hts o%er ots #o1 ! and 41

$n the meantime, Raa Ga7? (- +(* o)(on or ron*(-ra)(on aa(n*) )+ or-r (**u- /y)+ )r(a our) -ar(n OT No. 0:3K1 nu an- 7o(- 1 The o)(on a* -n(-on January 2@, !"8@1On appeal, the our) o "a* ru- (n a7or o )+ Ru/( o )+ #+(((n* in a Resolutionpromul*ated on u*ust !4, !"3 in '>1R1 #o1 3808!R1 >wphi.n?t

Thereafter, the 'ourt of ppeals issued an 5ntry of Jud*ment, certifyin* that its decision dated u*ust!4, !"3 became final and eFecutory on October 23, !"31

On pril 22, !"4, the trial court in 1R1'1 'ase #o1 #38! issued a writ of eFecution of the ;ud*mentwhich was ser%ed on the Re*ister of &eeds, San Cernando, a 6nion on pril 2", !"41

TA$NT !OUR LONG $"RS, thereafter, on January !4, !""", the O( o )+ So(()or Gnrar(7- a ))rdated January !!, !""" from ?r1 +ictor >1 Cloresca, +iceresident, John /ay orooint &e%elopment 'orporation, statin* that the aorn)(on- or-r* an- -(*(on o )+ )r(aour) (n L.R.. No. N:31H"&$ NOT 6$$N $$UT$D /y )+ R(*)r o D-*, San Cernando,a 6nion -*() r() o )+ r() o ;u)(on 1

On pril 2!, !""", the Office of the So(()or Gnra (- a oa(n) or R$&I&"L O! JUDGM$NTan- ana)(on o )()*before the Re*ional Trial 'ourt of the Cirst Judicial Re*ion (Branch 28, SanCernando, a 6nion) doc.eted therein as 'i%il 'ase #o1 8348 entitled, ERepublic of the hilippines,laintiff, %ersus /eirs of Rafael >al%e7, represented by Teresita Tan, Reynaldo ?amaril, 5lisa Bustos,

5rlinda Balatbat, Re*ina Bustos, Shipside $ncorporated and the Re*ister of &eeds of a 6nion,&efendants1E

The e%idence shows that the impleaded defendants (eFcept the Re*ister of &eeds of the pro%ince of a6nion) are the successorsin interest of Rafael >al%e7 (not Reynaldo >al%e7 as alle*ed by the Solicitor>eneral) o%er the property co%ered by O'T #o1 03A!, namely: (a) Shipside $nc1 which is presently there*istered owner in fee simple of ots #o1 ! and 4 co%ered by T'T #o1 T @!0, with a total area of,0" suare metersI (b) 5lisa Bustos, Jesusito >al%e7, and Teresita Tan who are the re*istered ownersof ot #o1 2 of O'T #o1 03A!I and (c) 5lisa Bustos, Cilipina ?amaril, Re*ina Bustos and 5rlindaBalatbat who are the re*istered owners of ot #o1 3 of O'T #o1 03A!, now co%ered by T'T #o1 T4"!8, with an area of !,@A3 suare meters1

$n its complaint in 'i%il 'ase #o18348, )+ So(()or Gnra aru- )+a) *(n )+ )r(a our) (n LRa* No. 31 +a- ru- an- -ar- OT No. 0:3K1 )o / nu an- 7o(- , which rulin* wassubseuently affirmed by the 'ourt of ppeals, the -n-an)*:*u**or*:(n:(n)r*) o Raa

Ga7? +a7 NO &"LID TITL$ o7r )+ ror)y o7r- /y OT No. 0:3K1 , and theTorrens titles issued in their names should be conseuently cancelled1

On July 22, !""", )()(onr S+(*(-, In. (- ()* Mo)(on )o D(*(** , based on the *rounds: (!) the oa(n) *)a)- no au* o a)(on/au* ony (na an- ;u)ay / *u/8) o an a)(on or r7(7a o 8u-n)% (2) the a(n)( (* NOT )+ ra(n)r*) /au* )+ ra ror)yco%ered by the Torrens titles sou*ht to be cancelleof 'amp allace (allace ir Station), r un-r )+ onr*+( an- a-(n(*)ra)(oon7r*(on D7on) "u)+or()y F6D"Eunder Republic ct #o1 22I (3) a(n)(a)(on (* /arr- /y r*r()(onI V4) twentyfi%e years ha%in* lapsed since the issuanc

eFecution, no a)(on or r7(7a o 8u-n) ay / (n*)()u)-because under ara*r!!44 of the 'i%il 'ode, *u+ a)(on ay / /rou+) ony ()+(n )n F10E yar* ro 8u-n) +a- /n rn-r-1

n O##OSITIONto the o)(on )o -(*(** a* (- /y )+ So(()or Gnra on u*alle*in* amon* others, that: (!) the ra ar)y:(n:(n)r*) (* )+ Ru/( o )+ #+((r*r()(on DO$S NOT run aa(n*) )+ S)a)1

On u*ust 3!, !""", the )r(a our) D$NI$D )()(onrP* o)(on )o -(*(**and on Ocits o)(on or ron*(-ra)(on a* (C(* )urn- -on1

On October 2!, !""", )()(onr S+(*(- (n*)()u)- a )()(on or r)(orar( an- ro)+ our) o "a*, doc.eted therein as '>1R1 S #o1 @@@3@, on the *round that trial court denyin* its motion to dismiss and its subseuent motion for reconsideration weFcess of ;urisdiction1

On #o%ember 4, !""", )+ our) o "a* DISMISS$D )+ )()(onin '>1R1 S #)+ roun- )+a) )+ 7r((a)(on an- r)((a)(on (n )+ )()(on, )(n-r )+ *(na)ur6a/(n, Jr1, a* M"D$ AITHOUT "UTHORIT, )+r /(n no roo )+r(n )+a) 6aau)+or(?- )o (n*)()u) )+ )()(on for and in behalf and of petitioner1

On ?ay 23, 2000, the our) o "a* -n(- )()(onrP*, o)(on or ron*(-ra*rounds that: (!E a oa(n) (- on /+a o a orora)(on an / a- ony ( a6oar- o D(r)or*, and in the absence thereof, the petition cannot prosper and be *racourseI and (2) )()(onr a* una/ )o *+o )+a) () +a- *u/*)an)(ay o(- (r=u(r(n roo o au)+or()yto institute an action or proceedin*1

/ence, the instant petition1

$n support of its petition, Shipside, $nc1 asse%erates that:

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!1 The /onorable 'ourt of ppeals *ra%ely abused its discretion in dismissin* the petitionwhen it made a conclusi%e le*al presumption that ?r1 Balbin had no authority to si*n thepetition despite the clarity of laws, ;urisprudence and SecretaryDs certificate to the contraryI

21 The /onorable 'ourt of ppeals abused its discretion when it dismissed the petition, ineffect affirmin* the *ra%e abuse of discretion committed by the lower court when it refused todismiss the !""" 'omplaint for Re%i%al of a !"3 ;ud*ment, in %iolation of clear laws and;urisprudence1

etitioner li.ewise adopted the ar*uments it raised in the petitionD and commentGreply it filed with the

'ourt of ppeals, attached to its petition as 5Fhibit EEand E#E, respecti%ely1

$n his 'omment, the So(()or Gnra o7- or )+ -(*(**a o )+ (n*)an) )()(on based on thefollowin* considerations: (!) Lorn?o 6a/(n, who si*ned for and in behalf of petitioner in the%erification and certification of nonforum shoppin* portion of the petition, a(- )o *+o roo o +(*au)+or(?a)(on )o (n*)()u) )+ )()(on or r)(orar(and prohibition with the 'ourt of ppeals, thus thelatter court acted correctly in dismissin* the sameI (2) the real partyininterest in the case at bar /(n)+ Ru/( o )+ #+(((n*, ()* a(* ar IM#R$SRI#TI6L$ 1

$n order to preser%e the ri*hts of herein parties, the 'ourt issued a temporary restrainin* order on June28, 2000 en;oinin* the trial court from conductin* further proceedin*s in 'i%il 'ase #o1 83481

T+ (**u* o*()- (n )+(* a* ar F1E +)+r or no) an au)+or(?a)(on ro )()(onrP* 6oar-o D(r)or* (* *)( r=u(r- (n or-r or ()* r*(-n) anar )o (n*)()u) or on a aa)(on or an- (n /+a o )+ orora)(on% an- F2E +)+r or no) )+ Ru/( o )+ #+(((n*an a(n)a(n )+ a)(on or r7(7a o 8u-n) +r(n.

e find for petitioner1

nent the first issue:

The 'ourt of ppeals dismissed the petition for certiorari on the *round that oren7o Balbin, theresident mana*er for petitioner, who was the si*natory in the %erification and certification on nonforumshoppin*, failed to show proof that he was authori7ed by petitionerDs board of directors to file such apetition1

" orora)(on, such as petitioner, +a* no or;) )+o* ;r**y onrr- on () /y )+orora)(on o- an- )+o* )+a) ar ((- or (n(-n)a )o ()* ;(*)n F#r(n( o LIMIT$D"#"ITE1 $n turn, a corporation ;r(** *a(- or* )+rou+ ()* /oar- o -(r)or* an-or ()*-uy au)+or(?- o(r* an- an)* F#r(n( o $NTR"LI'$D M"N"G$M$NTE1 Thus, it hasbeen obser%ed that )+ or o a orora)(on )o *u an- / *u- (n any our) (* o-- ()+ )+/oar- o -(r)or*that eFercises its corporate powers 5remium 6arble +esources! &nc. v. CA! 284

S'R !! 1R1 #o1 !38!00, July 24, 2000)1 Such resimply a condition affectin* the form of the pleadin*, non:o(an ()+ +(+ -on**ar(y rn-r )+ a-(n a)ay -)(7. &r((a)(on (* *(y (n)n-- )oa**uran )+a) )+ aa)(on* (n )+ a-(n ar )ru an- orr) and not the prodima*ination or a matter of speculation, and that the pleadin* is filed in *ood faith1 The )+ orr)(on o )+ a-(n ( 7r((a)(on (* aC(nORa) on )+ a-(n a)+o7r((-, ( )+ a))n-(n (ru*)an* ar *u+ )+a) *)r() o(an ()+ )+ ru-(*n*- ()+ (n or-r )+a) )+ n-* o 8u*)( ay )+r/y / *r7- 1

On the other hand, )+ aC o $RTI!I"TIONaa(n*) oru *+o(nis nray)+ *u/(**(on )+ro a)r )+ ((n o )+ )()(on 1 S)(on 5, Ru 45 o )+ 199#ro-urpro%ides that the a(ur o )+ )()(onr )o *u/() )+ r=u(r- -ouaoany )+ )()(on, (nu-(n )+ r)((a)(on aa(n*) oru *+o(n, *+a SU!!II$NT GROUND !OR TH$ DISMISS"L TH$R$OC1 The *a rua(* )o aa(n*) oru *+o(n *(n- /y a r*on on /+a o a orora)(on +(+ ar u/y roo )+a) *a(- *(na)ory (* au)+or(?- )o ( a )()(on on /+a o )+ orora

$n certain E2CEP34-56 C4RC7M$35-CE$, howe%er, the our) +a* ao- )+ BE)+ r)((a)(on1 $n*oyola v. Court of Appeals! et. al. (24@ S'R 4

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certificate of nonforum shoppin*1 ?oreo%er, in*oyola! +oadway! and 7y! the 'ourt eFcused non,compliance with the reuirement as to the certificate of nonforum shoppin*1 ith more reason shouldwe allow the instant petition since p)()(onr +r(n did sub'it a certification on non:foru'shopping! a((n ony )o *+o roo )+a) )+ *(na)ory a* au)+or(?- )o -o *o1 That p)()(onr*u/*=un)y *u/())- a *r)aryP* r)((a) a))*)(n )+a) 6a/(n a* au)+or(?- )o ( ana)(on on /+a o )()(onr li.ewise, MITIG"T$S THIS O&$RSIGHT1

$t must also be .ept in mind that while the reuirement of the certificate of nonforum shoppin* ismandatory, nonetheless )+ r=u(rn)* MUST NOT / (n)rr)- TOO LIT$R"LL an- )+u*-a) )+ o/8)(7 o r7n)(n )+ un-*(ra/ ra)( o oru:*+o(n 5Bernardo v.

)*+C! 12@@ S'R !0A

#ow to the second issue:

The a)(on (n*)()u)- /y )+ So(()or Gnra in the trial court is one for r7(7a o 8u-n) +(+(* o7rn- /y "r)( 1144F3E o )+ (7( o- and S)(on , Ru 39 o )+ 199 Ru* on (7(#ro-ur1

"r)( 1144F3E ro7(-*that an action upon a ;ud*ment E'ust be brought #ithin *> years fro' theti'e the right of action accrues .On the other hand, Section 8, Rule 3" pro%ides that a (na an-;u)ory 8u-n) or or-r ay / ;u)- on 'otion ()+(n (7 F5E yar* ro )+ -a) o ()*n)ry, but that after the lapse of such time, and before it is barred by the statute of limitations, a;ud*ment may be enfor ced by action1 Ta.in* these two pro%isions into con sideration, it is plain tha t ana)(on or r7(7a o 8u-n) u*) / /rou+) ()+(n )n yar* ro )+ )( *a(- 8u-n)

/o* (na1

Crom the records of this, case, it is clear that the ;ud*ment sou*ht to be re%i%ed became finalon ctober 30! 101 On the other hand, the a)(on or r7(7a o 8u-n) a* (n*)()u)- ony (n1999, or or )+an )n)y:(7 F25E yar* a)r )+ 8u-n) +a- /o (na. Hn, )+ a)(on(* /arr- /y ;)(n)(7 r*r()(onconsiderin* that Dsuch an action can be instituted only within ten(!0) years from the time the cause of action accrues1

The Solicitor >eneral, nonetheless, ar*ues that the StateDs cause of action in the cancellation of theland title issued to petitionerDs predecessorininterest is imprescriptible because it is included in 'ampallace, which belon*s to the *o%ernment1

The ar*ument is misleadin*1

A+( () (* )ru )+a) r*r()(on -o* no) run aa(n*) )+ S)a) , the *a ay NOT / (n7oC-/y )+ o7rnn) (n )+(* a* SIN$ IT IS NO LONG$R INT$R$ST$D IN TH$ SU6J$T

M"TT$R1 A+( a Aaa ay +a7 /on- )o )+ o7rnn) a) )+ )( R)() a* or-r- an- (n Lan- R(*)ra)(on a* No. N:31, )+ *a no on)o-ay1

Republic ct #o1 22, otherwise .nown as )+ 6a** on7r*(on an- D7on)created the Bases 'on%ersion and &e%elopment uthority S)(on 4 r)(nn)y ro7(

Section 41 urposes of the Conversion Authority. , The on7r*(on "u)+or()yfollowin* purposes:

(a) (o o#n, hold and&or ad'inisterthe military reser%ations of JohnStation, +allace 5ir $tation! OD&onnell Transmitter Station, San ?i*'ommunications Station, ?t1 Sta1 Rita Station (/ermosa, Bataan) andof ?etro ?anila military camps which may be transferred to it by the

S)(on 2 o #roaa)(on No. 21 , issued on July 2, !""3, also pro%ides:

Section 21 3ransfer of +allace 5ir $tation 5reas to the Bases Conversion 0evelop'ent 5uthority. ll areas co%ered by the allace ir Station as embdefined by the !"4 ?ilitary Bases *reement between the hilippines and theof merica, as amended, eFcludin* those co%ered by residential roclamatiohectare area for the radar and communication station of the hilippine ir Corctransferred to the Bases 'on%ersion &e%elopment uthority 111

A()+ )+ )ran*r o a Aaa )o )+ 6D", )+ GO&$RNM$NT NO LONG$R Hor (n)r*) )o ro))1 'onseuently, the Ru/( (* NOT a ra ar)y (n (n)r*) an-(n*)()u) )+ (n*)an) a)(on1 #or may it raise the defense of (r*r()(/(()y, )+ *aa(a/ ony (n a** +r )+ o7rnn) (* a ar)y (n (n)r*) 1

6nder Section 2 of Rule 3 of the !"" Rules of 'i%il rocedure, Ee%ery action must be pdefended in the name of the real party in interest1E To ualify a r*on )o / a ra arwhose name an action must be prosecuted, he u*) aar )o / )+ r*n) ra or(+) *ou+) )o nor-(ioneer &nsurance v. ', !@ S'R 88A

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#onetheless, it has been posited that the transfer of military reser%ations and their eFtensions to theB'& is basically for the purpose of acceleratin* the sound and balanced con%ersion of these militaryreser%ations into alternati%e producti%e uses and to enhance the benefits to be deri%ed from suchproperty as a measure of promotin* the economic and social de%elopment, particularly of 'entral u7onand, in *eneral, the countryDs *oal for enhancement (Section 2, Republic ct #o1 22)1 $t is contendedthat the transfer of these military reser%ations to the 'on%ersion uthority does not amount to anabdication on the part of the Republic of its interests, but simply a reco*nition of the need to create abody corporate which will act as its a*ent for the reali7ation of its pro*ram1 $t is conseuently assertedthat the Republic remains to be the real party in interest and the 'on%ersion uthority merely its a*ent1

e, howe%er, must not lose si*ht of the fact that the 6D" (* an n)()y (n7*)- ()+ a r*ona()y*ara) an- -(*)(n) ro )+ o7rnn)1 Section 3 of Republic ct #o1 22 reads:

Section 31 Creation of the Bases Conversion and evelopment Authority. There is herebycreated a body corporate to be .nown as the 'on%ersion uthority which shall ha%e theattribute of perpetual succession and shall be %ested with the powers of a corporation1

$t may not be amiss to state at this point that the functions of *o%ernment ha%e been classified into*o%ernmental or constituent and proprietary or ministrant1 hile public benefit and public welfare,particularly, the promotion of the economic and social de%elopment of 'entral u7on, may beattributable to the operation of the B'&, yet it is certain that the un)(on* ror- /y )+ 6D"ar /a*(ay #RO#RI$T"R (n na)ur1 The roo)(on o ono( an- *o(a -7on) on)ra Lu?on, (n ar)(uar, an- )+ oun)ryP* oa or n+ann), in *eneral, DO NOT aC)+ 6D" =u(7an) )o )+ Go7rnn)1 Other corporations ha%e been created by *o%ernment toact as its a*ents for the reali7ation of its pro*rams, the SSS, GSIS, N"A"S" ar(- )+ NI", to count afew, and yet, the 'ourt has ruled that these entities, a)+ou+ ror(n un)(on* a(- a)roo)(n u/( (n)r*) an- u/( ar, are NOT o7rnn):un)(on orora)(on*(n7*)- ()+ o7rnn)a a))r(/u)*1

$t may thus be said that the 6D" (* NOT " M$R$ "G$N o )+ Go7rnn) /u) a orora)/o-y ror(n ror()ary un)(on*1

?oreo%er, Section @ of Republic ct #o1 22 pro%ides:

Section @1 owers of the Conversion Authority. To carry out its ob;ecti%es under this ct, the'on%ersion uthority is hereby %ested with the followin* powers:

(a) To succeed in its corporate name, to sue and be sued in such corporate name andto adopt, alter and use a corporate seal which shall be ;udicially noticedI

/a%in* the capacity to sue or be sued, it should thus be the B'& which may file an action to cancelpetitionerDs title, not the Republic, the former bein* the real party in interest1 One ha%in* no ri*ht or

interest to protect cannot in%o.e the ;urisdiction of the court as a party plaintiff in an actio+alla! !"" S'R 4"@

$t can be said that in suin* for the reco%ery of the rentals, the Republic of the as principal of the hilippine orts uthority, directly eFercisin* the commissionconferred on the latter as its a*ent1 e may presume that, by doin* so, the Rehilippines did not intend 1to retain the said rentals for its own use, considerin*%oluntary act it had transferred the land in uestion to the hilippine orts uthJuly !!, !"41 The Republic of the hilippines had simply sou*ht to assist, not hilippine orts uthority, whose title to the disputed property it continues to remay eFpect then that the said rentals, once collected by the Republic of the hbe turned o%er by it to the hilippine orts uthority conformably to the purposeA@1

E.B. Marcha (*, +o7r, NOT ON "LL !OURS ()+ )+ a* a) /ar1

$n Marcha, the our) on*(-r- )+ Ru/( a ror ar)y )o *u *(n )+ L"R$#U6LI an- )+ #HILI##IN$ #ORTS "UTHORIT aa(n*) )+ )()(onr )+r(n

S"M$1To -(*(** )+ oa(n) (n E.B. Marcha ou- +a7 /rou+) n-** -asettlement of the matter since the would ha%e to refile the case on the same claim aupon1

Su+ (* no) )+ a* +r *(n )o ao )+ o7rnn) )o *u +r(n na/* () )(**u o (r*r()(/(()y, a a( +(+ (* no) a7a(a/ )o )+ 6D" 1 T+ ru )+a-o* no) run aa(n*) )+ S)a)DO$S NOT "##L TO OR#OR"TIONS or ar)(((a R$"T$D 6 TH$ ST"T$ !OR S#$I"L #UR#OS$S, it bein* said that when the titlehas been di%ested, ITS GR"NT$$S, althou*h artificial bodies of its own creation, ar (na)ory a* or-(nary r*on*5%ingston v.*e9igh Valley Coal Co.! 24! a 48")1 By raof imprescriptibility, a claim which cannot be raised by the B'&, the >o%ernment not oB'&, as it did in E.B. 6archa! it e%en supplants the latter, a course of action proscribe

?oreo%er, to reco*ni7e the >o%ernment as a proper party to sue in this case would set aas it would allow the Republic to prosecute, on behalf of *o%ernmentowned or controllecauses of action which ha%e already prescribed, on the preteFt that the >o%ernment is t

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interest a*ainst whom prescription does not run, said corporations ha%in* been created merely asa*ents for the reali7ation of *o%ernment pro*rams1

arenthetically, petitioner was not a party to the ori*inal suit for cancellation of title commenced by theRepublic twentyse%en years for which it is now bein* made to answer, nay, bein* made to sufferfinancial losses1

$t should also be noted that )()(onr (* un=u*)(ona/y a /uyr (n oo- a()+ an- or 7au,+a7(n a=u(r- )+ ror)y (n 193, or @ years after the issuance of the ori*inal certificate of title,as a third transferee1 $f only not to do %iolence and to *i%e some measure of respect to the Torrens

System, petitioner must be afforded some measure of protection1

One more point1

Since the portion in dispute now forms part of the property owned and administered by the Bases'on%ersion and &e%elopment uthority, it is alienable and re*isterable real property1

e find it unnecessary to rule on the other matters raised by the herein parties1

/5R5COR5, the petition is hereby *ranted and the orders dated u*ust 3!, !""" and October 4,!""" of the Re*ional Trial, 'ourt of the Cirst #ational Judicial Re*ion (Branch 28, San Cernando, a6nion) in 'i%il 'ase #o1 8348 entitled ERepublic of the hilippines, laintiff, %ersus /eirs of Rafael>al%e7, et1 al1, &efendantsE as well as the resolutions promul*ated on #o%ember 4, !""" and ?ay 23,2000 by the 'ourt of ppeals (Twelfth &i%ision) in

'>1R1 S #o1 @@@3@ entitled EShipside, $nc1, etitioner %ersus Ron1 lfredo 'a;i*al, as Jud*e, RT',San Cernando, a 6nion, Branch 28, and the Republic of the hilippines, RespondentsE are herebyre%ersed and set aside1 The complaint in 'i%il 'ase #o1 8348, Re*ional Trial 'ourt, Branch 28, SanCernando 'ity, a 6nion entitled ERepublic of the hilippines, laintiff, %ersus /eirs of Rafael >al%e7, etal1E is ordered dismissed, without pre;udice to the filin* of an appropriate action by the Bases&e%elopment and 'on%ersion uthority1

SO OR&5R5&1

Vitug! anganiban! -onzaga,+eyes! and "andoval,-utierrez! .!concur1

G.R. No. 1433 !/ruary 20, 2001FS+(*(- Inorora)- %s1 our) o "a* an- Ru/( o )+ #+(((n*ES$#"R"T$ O#INION&ITUG, .

$ find no doctrinal difficulty in adherin* to the draft ponencia written by our esteemed 'hJustice JR?, insofar as it declares that an action for re%i%al of ;ud*ment is barred by eprescription, if not brou*ht within ten (!0) years from the time the ri*ht of action accruesrticle !!44(3) of the #ew 'i%il 'ode1 $t appears that the ;ud*ment in the instant c ase hon 23 October !"3 or well more than two decades prior to the action for its re%i%al insti!"""1 >wphi.n?t

ith due respect, howe%er, $ still am unable to subscribe to the idea that prescriptionD min%o.ed by the *o%ernment in this case upon the thesis that the transfer of 'amp allac'on%ersion &e%elopment uthority renders the Republic with no ri*ht or interest to prote

unualified under the rules of procedure to be the real partyininterest1 hile it is true th22, otherwise .nown as the Bases 'on%ersion and &e%elopment ct of !""2, authoriof the military reser%ations and their eFtensions to the 'on%ersion uthority, the same, hbasically for the purpose of acceleratin* the sound and balanced con%ersion of these mireser%ations into alternati%e producti%e uses and to enhance the benefits to be deri%ed fproperty as a measure of promotin* the economic and social de%elopment, particularly, u7on and, $n *eneral, the countryDs *oal for enhancement1!The transfer of these militato the 'on%ersion uthority does not amount to an abdication on the part of the Republibut simply a reco*nition of the need to create a body corporate which will act as its a*enreali7ation of its pro*ram specified in the ct1 $t ou*ht to follow that the Republic remainpartyininterest and the 'on%ersion uthority bein* merely its a*ent1

$n 51B1 ?archa Transport 'o1, $nc1 %s1 $ntermediate ppellate 'ourt,2the 'ourt succinctissue of whether or not the Republic of the hilippines would be a proper party to sue fopossession of property which at the time of the institution of the suit was no lon*er bein*national *o%ernment but by the hilippine orts uthority1 The 'ourt ruled:

E?ore importantly, as we see it, dismissin* the complaint on the *round that ththe hilippines is not the proper party would result in needless delay in the settmatter and also in dero*ation of the policy a*ainst multiplicity of suits1 Such a dreuire the hilippine orts uthority to refile the %ery same complaint already Republic of the hilippines and brin* bac. the parties as it were to suare one

E$t can be said that in suin* for the reco%ery of the rentals, the Republic of the acted as principal of the hilippine orts uthority, directly eFercisin* the commearlier conferred on the latter as its a*ent1 e may presume that, by doin* so, the hilippines did not intend to retain the said rentals for its own use, consider%oluntary act it had transferred the land in uestion to the hilippine orts uthJuly !!, !"41 The Republic of the hilippines had simply sou*ht to assist, not hilippine orts uthority, whose title to the disputed property it continues to remay eFact then that the said rentals, once collected by the Republic of the hilturned o%er by it to the hilippine orts uthority conformably to the purposes o

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There would seem to be no co*ent reason for i*norin* that rationale specially when ta.en in li*ht of thefact that the ori*inal suit for cancellation of title of petitionerDs predecessorininterest was commencedby the Republic itself, and it was only in !""2 that the sub;ect military camp was transferred to the'on%ersion uthority1

Roan a)+o( "o*)o( "-(n(*)ra)or o Da7ao, In. 7. Lan- R(*)ra)(on o(**(on an-

R(*)r o D-* o Da7ao ()y

-.+. )o. *,D/! ecember 34! 1

!"TS

This is a )()(on or 'anda'us(- /y )+ Roan a)+o( "o*)o( "-(n(*)ra)or o

Da7ao*C(n )+ r7r*a o a r*ou)(on /y )+ Lan- R(*)ra)(on o(**(onr

October 4, !"@4: ?ateo 1 Ro-(*, a !(((no ()(?n an- r*(-n) o )+ ()y o Da7ao,

;u)- a D$$D O! S"L$ o a ar o an- located in the same city (n a7or o )+

Roan a)+o( "o*)o( "-(n(*)ra)or o Da7ao In., a OR#OR"TION SOL$

oran(?-and eFistin* (n aor-an ()+ #+(((n La*, ()+ M*r. o7(* T+(/au), a

ana-(an ()(?n, a* a)ua (nu/n)1

6pon application for re*istration, respondentR(*)r o D-*, ha%in* in mind a pre%ious

resolution of 'C$ ?anila wherein the 'armelite #uns of &a%ao were made to prepare an

affida%it to the effect that 80 per cent of the members of their corporation were Cilipino citi7ens

when they sou*ht to re*ister in fa%or of their con*re*ation of deed of donation of a parcel of

land, r=u(r- *a(- orora)(on *o )o *u/() a *((ar a(-a7() -ar(n )+a) 0 r

n) o )+ /r* )+ro r !(((no ()(?n*.

T+ 7n- R"" (n )+ ))r -a)- Jun 2K, 1954, ;r**- ((nn** )o *u/() an

a(-a7(), /o)+ no) (n )+ *a )nor a* )+a) a- )+ #ror** o )+ ar() Nun*

/au* )+ )o a** r NOT SIMIL"R : (!) the con*re*ation of the 'armelite #uns had

fi%e incorporators, the corporation sole has only oneI (2) that accordin* to their articles of

incorporation, the or*ani7ation of the 'armelite #uns became the owner of properties donated

to it, +ra* )+ a* a) /ar,)+ )o)a()y o )+ a)+o( oua)(on o Da7

/o )+ onr o )+ ror)ybou*ht to be re*istered1

T+ a))r a* rrr- )o )+ Lan- R(*)ra)(on o(**(onr en cons

r*ou)(on. " r*ou)(on a* rn-r-on September 2!, !"@4, holdin* that

ro7(*(on* o S)(on 1 an- 5 o "r)( III o )+ #+(((n on*)()u)(on

a* NOT =ua((- )o a=u(r r(7a) an-* (n )+ #+(((n*, in the a/*n

)+a) a) a*) 0 r n)u o )+ a()a, ror)y, or a**)* o )+ Roa"o*)o( "-(n(*)ra)or o Da7ao, In., a* a)uay on- or on)ro-

()(?n*, )+r /(n no =u*)(on )+a) )+ r*n) (nu/n) o )+ oro

a ana-(an ()(?n1

Thus, the R' or-r- )+ R(*)r- D-* o Da7ao TO D$N R$GISTR

-- o *a (n )+ a/*n o roo o o(an ()+ *u+ on-()(on 1

")r )+ Mo)(on To Ron*(-r *a(- r*ou)(on a* D$NI$

or 'anda'usa* (n*)()u)- ()+ )+(* our) /y *a(- orora)(on *o

under the 'orporation aw as well as the settled ;urisprudence on the matter, t

a* ;u)- IN !"&OR O! TH$ "THOLI HURH PER $E+(+

a=u(r r(7a) ar(u)ura an-* or )+ *)a/(*+n) an- a(n)nan

or*+(1

#)()(onr on*(*)n)y a(n)a(n-that a orora)(on *o, (rr*)(7 o

o ()* (nu/n), (* NOT ro+(/()- or -(*=ua((- )o a=u(r an- +o- ra

The orora)(on La an- )+ anon La are eFplicit in their ro7(*(on* )+a

*o or

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801@ per cent of the *roup1 $t was, therefore, allowed that the constitutional reuirement was

fully met and satisfied1

R*on-n)*, on )+ o)+r +an-, a7rr-that althou*h it mi*ht be true that petitioner is not

the owner of the land purchased, y) + +a* on)ro o7r )+ *a, ()+ u or )o

a-(n(*)r, )aC o****(on o, a(na), )ran*r, nu/r, * or -(*o* o any or a

an-* an- )+(r (ro7n)* r(*)r- (n )+ na o )+ orora)(on *o. This set

up, respondents ar*ued, falls short of a trust1 The respondents instead tried to pro%e that inreality, the /n((ary o *(a*)(a ror)(* ar no) /r* or a()+u o )+

+ur+ /u) *oon *, r+a* )+ #on)((a !a)+r.

R*on-n)*li.ewise ad%anced the opinion that in construin* the constitutional pro%ision

callin* for 0 r n) o !(((no ()(?n*+(, )+ r()r(on *+ou- / )+ #RO#$RTI$S OR

"SS$TS )+ro1

ISSU$ O# the petitioner, as a corporation sole, can re*ister the parcels of land it bou*ht

RULING

H5S, it can1

Sections ! and @ of rt1 $$$ of the hilippine 'onstitution OS pri%ate corporations to acuire

pri%ate a*ricultural lands of public domain RO+$&5& that a) a*) 0B )+ a()aof such

corporations or associations is owned by 2ilipino citizens , SU6J$T TO "N $ISTING RI GHT, ran),

a*, or on**(on "T TH$ TIM$ O! TH$ IN"UGUR"TION O! TH$ GO&$RNM$NT

$ST"6LISH$D UND$R ONSTITUTION1

But the ?>@ require'ents 0E$ -3 apply to petitioner because being a sole corporation, it

acts -3 as an +-ER but 'erely an 50M4-4$3R53R on behalf of the C=7RC= A the real

o#ner

" orora)(on *o (* a S#$I"L or o orora)(on u*uay a**o(a)- ()+ )+

'oncei%ed and introduced into )+ oon a /y *+r n**()y , this le*al creatio

referred to as E)+a) un+ay raC o $n(*+ aE was desi*ned to facilitate the eFerc

functions of ownership carried on by the clerics for and ON 6$H"L! O! TH$ HURH

rar-- a* )+ ror)y onr(See $ 'ou%ierDs aw &ictionary, p1 8A28A3)1

" orora)(on *o on*(*)* o on r*on ony, an- +(* *u**or* F+o ( a

)(E,in some particular station, who are (norora)- /y a (n or-r )o (7 )+ *aa()(* an- a-7an)a*, particularly that of perpetuity, which in their natural person

ha%e had1 (Reid %s1 Barry, "3 Cla1 A4", !!2 So1 A48)1

T+ ro7(*(on* o our orora)(on a on r((ou* orora)(on* ar (u(na)(n

)+ *)an- o )()(onr1 The pro%isions clearly pro%ide that a bishop, chief priest or

upon filin* with S5' to be incorporated as a corporation sole, is charged #ith the a

the temporalities and the mana*ement of the estates and properties of his reli*ious

society, or church within its territorial ;urisdiction which he SH"LL HOLD IN TRU

purpose behalf, and benefit of the reli*ious society, or order so incorporated or of the

the diocese, or district or*ani7ation is an or*ani7ed and constituent part1

The 'annon aw contains similar pro%isions re*ardin* the duties of the corporation sole

administrator of the church properties, to wit: )o )+ oa Or-(nary r)a(n* )+ -u)y )

-((n (n )+ "DMINISTR"TIONof all the ecclesiastical properties located within the

a%oid their remo%al from his ;urisdiction1

Thus, /(*+o* or ar+/(*+o*, a* )+ a* ay /, a* orora)(on* *o, ar

ry ad'inistratorsof the church properties that come to their possession, in which

trust for the church1 $t can also be said that while it is true that church properties could b

by a natural persons, problems re*ardin* succession to said properties can not be a%oid

his death1 Throu*h this le*al fiction, howe%er, church properties acuired by the incumb

corporation sole pass, by operation of law, upon his death not his personal heirs but to h

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office1 $t could be seen, therefore, that a orora)(on *o (* ra)- no) ony )o a-(n(*)r )+

)ora()(* o )+ +ur+ or r((ou* *o()y +r + /on* /u) a*o )o +o- an- )ran*()

)+ *a )o +(* *u**or (n *a(- o( 1

$f the ownership or title to the properties do not pass to the administrators, #ho are the o#ners of

church properties

The 'ourt, citin* 'ampes y ulido, e*islacion y Jurisprudencia 'anonica, ruled in the case of (rinidad

vs. +oman Catholic Archbishop of 6anilathat *(a*)(a ror)(* ar OAN$D 6 TH$

HURH$S, (n*)()u)(on* an- anon(ay *)a/(*+- r(7a) orora)(on* )o +(+ *a(-

ror)(* +a7 /n -ona)-1

Petitioner, as a corporation sole, has been granted the P+ER to P7RC=5$E R 5C74RE

private agricultural lands as trustee&ad'inistrator

Crom the data secured from the Securities and 5Fchan*e 'ommission, e find that the Roan

a)+o( 6(*+o o 'a/oana a* (norora)- Fa* a orora)(on *oEwhich a-(n(*)r- a

)+ )ora()(* o )+ +ur+ ;(*)(n or oa)- (n )+ (*an- o M(n-anao 1 La)r on, +o7r,

n -(o** r or- an- n orora)(on* *o r ra)- such as petitionerRoan

a)+o( "o*)o( "-(n(*)ra)or o Da7ao, In.,which succeeded in the administration of all theEtemporalitiesE of the Roman 'atholic 'hurch eFistin* in &a%ao1

ccordin* to our 'or poration aw, ublic ct #o1 !@4", appro%ed pril !, ! "08, a orora)(on *o

is or*ani7ed and o'posed of a single individual, the head of any reli*ious society or

church, or )+ "DMINISTR"TION of the te'poralities of such society or church 1 By

E)ora()(*< (* an) *)a) an- ror)(* NOT US$D $LUSI&$L or r((ou*

or*+(1 The *u**or (n o( o *u+ r((ou* +a- or chief priest incorporated as a

corpo