Corporation Code Cases

8/13/2019 Corporation Code Cases

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 155650 July 20, 2006

MANILA INTERNATIONAL AIRPORT AUTHORITY,petitioner,vs.COURT OF APPEALS, CITY OF PARAAUE, CITY MAYOR OF PARAAUE,SANGGUNIANG PANGLUNGSO! NG PARAAUE, CITY ASSESSOR OF PARAAUE,"#$ CITY TREASURER OF PARAAUE,respondents.

D E C I S I N

CARPIO, J.%

T&' A#(')'$'#(*

Petitioner Manila International Airport Authorit! "MIAA# operates the Nino! A$uino InternationalAirport "NAIA# Co%ple& in Para'a$ue Cit! under E&ecutive rder No. ()*, other+ise no+n asthe Revised Charter of the Manila International Airport Authority"-MIAA Charter-#. E&ecutiverder No. ()* +as issued on / 0ul! /(1* b! then President 2erdinand E. Marcos.Subse$uentl!, E&ecutive rder Nos. ()(/and (1a%ended the MIAA Charter.

As operator of the international airport, MIAA ad%inisters the land, i%prove%ents ande$uip%ent +ithin the NAIA Co%ple&. 3he MIAA Charter transferred to MIAA appro&i%atel! 4))hectares of land,*includin5 the run+a!s and buildin5s "-Airport 6ands and Buildin5s-# then

under the Bureau of Air 3ransportation.7

3he MIAA Charter further provides that no portion ofthe land transferred to MIAA shall be disposed of throu5h sale or an! other %ode unlessspecificall! approved b! the President of the Philippines.8

n / March /((9, the ffice of the :overn%ent Corporate Counsel ":CC# issued pinionNo. )4/. 3he :CC opined that the 6ocal :overn%ent Code of /((/ +ithdre+ the e&e%ptionfro% real estate ta& 5ranted to MIAA under Section / of the MIAA Charter. 3hus, MIAAne5otiated +ith respondent Cit! of Para'a$ue to pa! the real estate ta& i%posed b! the Cit!.MIAA then paid so%e of the real estate ta& alread! due.

n 1 0une ))/, MIAA received 2inal Notices of Real Estate 3a& Delin$uenc! fro% the Cit! ofPara'a$ue for the ta&able !ears /(( to ))/. MIAA;s real estate ta& delin$uenc! is broen

do+n as follo+sEAR 3A= D?E PENA63> 33A6

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:RAND 33A6 P*(,7*8,14/.(8 P*,)9),14*.79 P 47,8)4,98.7

/((@/((9 RP3 +as paid on Dec. 7, /((9 as per .R.(794/) for P7,)9,)1.98

(794/)/ for P1,494,71).))

(794/)* for P7(,//8.))4

n /9 0ul! ))/, the Cit! of Para'a$ue, throu5h its Cit! 3reasurer, issued notices of lev! and

+arrants of lev! on the Airport 6ands and Buildin5s. 3he Ma!or of the Cit! of Para'a$uethreatened to sell at public auction the Airport 6ands and Buildin5s should MIAA fail to pa! thereal estate ta& delin$uenc!. MIAA thus sou5ht a clarification of :CC pinion No. )4/.

n ( Au5ust ))/, the :CC issued pinion No. /79 clarif!in5 :CC pinion No. )4/. 3he:CC pointed out that Section )4 of the 6ocal :overn%ent Code re$uires persons e&e%ptfro% real estate ta& to sho+ proof of e&e%ption. 3he :CC opined that Section / of the MIAACharter is the proof that MIAA is e&e%pt fro% real estate ta&.

n / ctober ))/, MIAA filed +ith the Court of Appeals an ori5inal petition for prohibition andinunction, +ith pra!er for preli%inar! inunction or te%porar! restrainin5 order. 3he petitionsou5ht to restrain the Cit! of Para'a$ue fro% i%posin5 real estate ta& on, lev!in5 a5ainst, and

auctionin5 for public sale the Airport 6ands and Buildin5s. 3he petition +as doceted as CA@:.R. SP No. 44191.

n 8 ctober ))/, the Court of Appeals dis%issed the petition because MIAA filed it be!ondthe 4)@da! re5le%entar! period. 3he Court of Appeals also denied on 9 Septe%ber ))MIAA;s %otion for reconsideration and supple%ental %otion for reconsideration. ence, MIAAfiled on 8 Dece%ber )) the present petition for revie+.9

Mean+hile, in 0anuar! ))*, the Cit! of Para'a$ue posted notices of auction sale at theBaran5a! alls of Baran5a!s italeF, Sto. Ni'o, and 3a%bo, Para'a$ue Cit!G in the public%aret of Baran5a! 6a uertaG and in the %ain lobb! of the Para'a$ue Cit! all. 3he Cit! ofPara'a$ue published the notices in the * and /) 0anuar! ))* issues of the Philippine Daily

Inquirer, a ne+spaper of 5eneral circulation in the Philippines. 3he notices announced the publicauction sale of the Airport 6ands and Buildin5s to the hi5hest bidder on 9 2ebruar! ))*, /)


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Para'a$ue, Sangguniang Panglungsodn5 Para'a$ue, Cit! 3reasurer of Para'a$ue, and theCit! Assessor of Para'a$ue "-respondents-# H fro% auctionin5 the Airport 6ands and Buildin5s.

n 9 2ebruar! ))*, this Court issued a te%porar! restrainin5 order "3R# effectivei%%ediatel!. 3he Court ordered respondents to cease and desist fro% sellin5 at public auctionthe Airport 6ands and Buildin5s. Respondents received the 3R on the sa%e da! that the Court

issued it. o+ever, respondents received the 3R onl! at /


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assess%ents issued b! the Cit! of Para'a$ue, and all proceedin5s taen pursuant to suchassess%ents, are void. In such event, the other issues raised in this petition beco%e %oot.

T&' Cou-(4* Rul/#

e rule that MIAA;s Airport 6ands and Buildin5s are e&e%pt fro% real estate ta& i%posed b!local 5overn%ents.

irst, MIAA is not a 5overn%ent@o+ned or controlled corporation but an /#*(-u'#("l/(yof theNational :overn%ent and thus e&e%pt fro% local ta&ation. Second, the real properties of MIAAare o#'$ y (&' R'ul/)of the Philippines and thus e&e%pt fro% real estate ta&.

1. MIAA /* No( " Go'-#'#(3O#'$ o- Co#(-oll'$ Co-o-"(/o#

Respondents ar5ue that MIAA, bein5 a 5overn%ent@o+ned or controlled corporation, is note&e%pt fro% real estate ta&. Respondents clai% that the deletion of the phrase -an!5overn%ent@o+ned or controlled so e&e%pt b! its charter- in Section *7"e# of the 6ocal

:overn%ent Code +ithdre+ the real estate ta& e&e%ption of 5overn%ent@o+ned or controlledcorporations. 3he deleted phrase appeared in Section 7)"a# of the /(97 Real Propert! 3a&Code enu%eratin5 the entities e&e%pt fro% real estate ta&.

3here is no dispute that a 5overn%ent@o+ned or controlled corporation is not e&e%pt fro% realestate ta&. o+ever, MIAA is not a 5overn%ent@o+ned or controlled corporation. Section "/*#of the Introductor! Provisions of the Ad%inistrative Code of /(19 defines a 5overn%ent@o+nedor controlled corporation as follo+s=of all the outstandin5 shares of stoc ofBASEC, endorsed in blan, to5ether +ith deeds of assi5n%ent of practicall! all theoutstandin5 shares of stoc of the three "*# corporations above %entioned "+hichhold >=.?;of all BASEC stoc#, si5ned b! the o+ners thereof althou5h not notariFed. D

More specificall!, found in Malacanan5 "and no+ in the custod! of the PC::# +ere>*>>= of the ;*=* outstanding shares ofMetro %ay Drydoc& Corporation J +hich alle5edl! o+ns /*4,*9) shares of BASECstocG

*# the deeds of assi5n%ent of ? outstanding shares of "rident Manage#ent Co.*Inc.H +hich alle5edl! o+ns 9,7/ shares of BASEC stoc, assi5ned in blanG Dand

7# stoc certificates correspondin5 to ;H*H;= out of the ;:?*?:> outstanding shares of%ASEC+ stoc&8 that is, all but 8 H all endorsed in blan. DD

hile the petitioner;s counsel +as $uic to dispute this asserted fact, assurin5 this Court thatthe BASEC stocholders +ere still in possession of their respective stoc certificates and had-never endorsed the% in blan or to an!one else,- 100that denial is e&posed b! his o+n priorand subse$uent recorded state%ents as a %ere 5esture of defiance rather than a verifiablefactual declaration.

B! resolution dated Septe%ber 8, /(14, this Court 5ranted BASEC;s counsel a period of /)da!s -to S?BMI3,as underta&en )y hi#* the certificates of stoc issued to the stocholders of BASEC as of April *, /(14, as listed in Anne& ;P; of the petition.; 101Counsel thereafter

%oved for e&tensionG and in his %otion dated ctober , /(14, he declared inter aliathat -saidcertificates of stoc are in the possession of third parties, a%on5 +ho% bein5 the respondentsthe%selves andpetitioner is still endeavoring to secure copiesthereof fro% the%.- 102n thesa%e da! he filed another %otion pra!in5 that he be allo+ed -to secure copiesof theCertificates of Stoc in the na%e of Metro Ba! Dr!doc, Inc., and of all other Certificates, ofStoc of petitioner;s stocholders in possession of respondents.- 10


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In a Manifestation dated ctober /), /(14,, 10the Solicitor :eneral not unreasonabl! ar5uedthat counsel;s aforestated %otion to secure copies of the stoc certificates -confir%s the factthat stocholders of petitioner corporation are not in possession of "their# certificates ofstoc,- and the reason, accordin5 to hi%, +as -that (8 of said shares have been endorsedin blan and found in Malaca'an5 after the for%er President and his fa%il! fled the countr!.- 3othis %anifestation BASEC;s counsel replied on Nove%ber 8, /(14, as alread! %entioned,

Stubbornl! insistin5 that the fir%;s stocholders had not reall! assi5ned their stoc. 105

In vie+ of the parties; conflictin5 declarations, this Court resolved on Nove%ber 9, /(14 a%on5other thin5s -to re$uire the petitioner to deposit upon proper receipt +ith Cler of Court0uanito Rano the originals of the stoc& certificates alle5ed to be in its possession or accessibleto it, %entioned and described in Anne& ;P; of its petition, "and other pleadin5s# +ithin ten"/)# da!s fro% notice.- 106In a %otion filed on Dece%ber 8, /(14, 10BASEC;s counsel %adethe state%ent, $uite surprisin5 in the pre%ises, that -it +ill ne5otiate +ith the o+ners "of theBASEC stoc in $uestion# to allo+ petitioner to borro+ fro% the%, if available, the certificatesreferred to- but that -it needs a %ore sufficient ti%e therefor- "sic#. BASEC;s counsel ho+evereventuall! had to confess inabilit! to produce the ori5inals of the stoc certificates, puttin5 upthe feeble e&cuse that +hile he had -re$uested the stocholders to allo+ "hi%# to borro+ said

certificates, so%e of "the%# clai%ed that the! had delivered the certificates to third partiesb! +a! of pled5e andQor to secure perfor%ance of obli5ations, +hile others alle5edl! haveentrusted the% to third parties in vie+ of last national e%er5enc!.- 10 e has convenientl!o%itted, nor has he offered to 5ive the details of the transactions adverted to b! hi%, or toe&plain +h! he had not i%pressed on the supposed stocholders the pri%ordial i%portance ofconvincin5 this Court of their present custod! of the ori5inals of the stoc, or if he had done so,+h! the stocholders are un+illin5 to a5ree to so%e sort of arran5e%ent so that the ori5inals oftheir certificates %i5ht at the ver! least be e&hibited to the Court. ?nder the circu%stances, theCourt can onl! conclude that he could not 5et the ori5inals fro% the stocholders for the si%plereason that, as the Solicitor :eneral %aintains, said stocholders in truth no lon5er have the%in their possession, these havin5 alread! been assi5ned in blan to then President Marcos.

/. acts /ustify Issuance of Sequestration and "a&eover +rders

In the li5ht of the affir%ative sho+in5 b! the :overn%ent that,pri#a facieat least, thestocholders and directors of BASEC as of April, /(14 10D+ere %ere -du%%ies,- no%ineesor alter egosof President MarcosG at an! rate, that the! are no lon5er o+ners of an! shares ofstoc in the corporation, the conclusion cannot be avoided that said stocholders and directorshave no basis and no standin5 +hatever to cause the filin5 and prosecution of the instantproceedin5G and to 5rant relief to BASEC, as pra!ed for in the petition, +ould in effect be torestore the assets, properties and business se$uestered and taen over b! the PC:: topersons +ho are -du%%ies,- no%inees or alter egosof the for%er president.

2ro% the standpoint of the PC::, the facts herein stated at so%e len5th do indeed sho+ that the

private corporation no+n as BASEC +as -o+ned or controlled b! for%er President 2erdinand E.Marcos durin5 his ad%inistration, throu5h no%inees, b! tain5 advanta5e of "his# publicoffice andQor usin5 "his# po+ers, authorit!, influence ,- and that NASSC and other propert! ofthe 5overn%ent had been taen over b! BASECG and the situation ustified the se$uestration as+ell as the provisional taeover of the corporation in the public interest, in accordance +ith the ter%sof E&ecutive rders No. / and , pendin5 the filin5 of the re$uisite actions +ith the Sandi5anba!anto cause divest%ent of title thereto fro% Marcos, and its adudication in favor of the Republicpursuant to E&ecutive rder No. /7.


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As alread! earlier stated, this Court a5rees that this assess%ent of the facts is correctG accordin5l!, itsustains the acts of se$uestration and taeover b! the PC:: as bein5 in accord +ith the la+, and,in vie+ of +hat has thus far been set out in this opinion, pronounces to be +ithout %erit the theor!that said acts, and the e&ecutive orders pursuant to +hich the! +ere done, are fatall! defective in notaccordin5 to the parties affected prior notice and hearin5, or an ade$uate re%ed! to i%pu5n, setaside or other+ise obtain relief therefro%, or that the PC:: had acted as prosecutor and ud5e at

the sa%e ti%e.

. Executive +rders 3ot a %ill of Attainder

Neither +ill this Court sustain the theor! that the e&ecutive orders in $uestion are a bill ofattainder. 110-A bill of attainder is a le5islative act +hich inflicts punish%ent +ithout udicialtrial.- 111-Its essence is the substitution of a le5islative for a udicial deter%ination of 5uilt.- 112

In the first place, nothin5 in the e&ecutive orders can be reasonabl! construed as a deter%ination ordeclaration of 5uilt. n the contrar!, the e&ecutive orders, inclusive of E&ecutive rder No. /7, %aeit perfectl! clear that an! ud5%ent of 5uilt in the a%assin5 or ac$uisition of -ill@5otten +ealth- is to behanded do+n b! a udicial tribunal, in this case, the Sandigan)ayan*upon co%plaint filed and

prosecuted b! the PC::. In the second place, no punish%ent is inflicted b! the e&ecutive orders, asthe %erest 5lance at their provisions +ill i%%ediatel! %ae apparent. In no sense, therefore, %a!the e&ecutive orders be re5arded as a bill of attainder.

*. 3o 4iolation of Right against Self-Incri#ination and (nreasona)le Searches and Sei,ures

BASEC also contends that its ri5ht a5ainst self incri%ination and unreasonable searches andseiFures had been trans5ressed b! the rder of April /1, /(14 +hich re$uired it -to producecorporate records fro% /(9* to /(14 under pain of conte%pt of the Co%%ission if it fails to do so.-3he order +as issued upon the authorit! of Section * "e# of E&ecutive rder No. /, treatin5 of thePC::;s po+er to -issue subpoenas re$uirin5 the production of such boos, papers, contracts,records, state%ents of accounts and other docu%ents as %a! be %aterial to the investi5ationconducted b! the Co%%ission, - and para5raph "*#, E&ecutive rder No. dealin5 +ith its po+er to-re$uire all persons in the Philippines holdin5 "alle5ed -ill@5otten-# assets or properties, +hetherlocated in the Philippines or abroad, in their na%es as no%inees, a5ents or trustees, to %ae fulldisclosure of the sa%e .- 3he contention lacs %erit.

It is ele%entar! that the ri5ht a5ainst self@incri%ination has no application to uridical persons.

hile an individual %a! la+full! refuse to ans+er incri%inatin5 $uestions unlessprotected b! an i%%unit! statute, it does not follo+ that a corporation, vested +ith specialprivile5es and franchises, %a! refuse to sho+ its hand +hen char5ed +ith an abuseofsuchprivile5es 11ousin( and is testi&on* alone that he

successfull* ne(otiated for the e'ect&ent of all the s6uatters fro& the propert* will not suffice.
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actuall* spent the a&ount. InSalas v. Court of Appeals!$1%we said that the )urden of proof of

the da&a(es suffered is on the part* clai&in( the sa&e. It his dut* to present evidence to

support his clai& for actual da&a(es. If he failed to do so! he has onl* hi&self to )la&e if noaward for actual da&a(es is handed down.

In fine! as we declared inP#$C S"ippin% & Transport Corp. v. Court of Appeals!$1#%)asic

is the rule that to recover actual da&a(es! the a&ount of loss &ust not onl* )e capa)le of proof)ut &ust actuall* )e proven with reasona)le de(ree of certaint*! pre&ised upon co&petent proof

or )est evidence o)taina)le of the actual a&ount thereof.

:e (o to the second issue of whether o&es! Inc.! was a part* to the transactions

entered into )* petitioner 3osadas and private respondents and thus could )e held 'ointl* andseverall* with petitioner 3osadas. 3rivate respondents contend that petitioner 3osadas

surreptitiousl* for&ed o&es! Inc.! and transferred the su)'ect parcel of land to it to

evade pa*&ent and defraud creditors! includin( private respondents. This alle(ation does notfind support in the evidence on record.

On the contrar* we hold that respondents Court of Appeals co&&itted a reversi)le error

when it upheld the factual findin( of the trial court that petitionersE lia)ilit* was a((ravated )*the fact that o&es! Inc.! was for&ed )* petitioner 3osadas after de&and for pa*&ent

had )een &ade! evidentl* for her to evade pa*&ent of her o)li(ation! there)* showin( that the

transfer of her propert* to o&es! Inc.! was in fraud of creditors.

:e easil* (lean fro& the record that private respondents sent de&and letters on ,1 Au(ust1""1 and 1@ Septe&)er 1""1! or &ore than a *ear and a half after the e=ecution of the Deed of

Assi(n&ent on 11 Dece&)er 1"8"! and the issuance of the Articles of Incorporation of petitioner

o&es on ,# 0anuar* 1""?. And! the transfer was &ade at the ti&e the relationship)etween petitioner 3osadas and private respondents was supposedl* ver* pleasant. In fact the

Deed of Assi(n&ent dated 11 Dece&)er 1"8" and the Articles of Incorporation of o&es! Inc.! issued ,# 0anuar* 1""? were )oth si(ned )* respondent +ravo hi&self aswitness. It cannot )e said then that the incorporation of petitioner o&es and theeventual transfer of the su)'ect propert* to it were in fraud of private respondent as such were

done with the full ;nowled(e of respondent +ravo hi&self.

+esides petitioner 3osadas is not the &a'orit* stoc;holder of petitioner o&es! Inc.!as erroneousl* stated )* the lower court. The Articles of Incorporation of petitioner o&es! Inc.! clearl* show that petitioner 3osadas owns appro=i&atel* 77 onl* of the capital

stoc;. >ence petitioner 3osadas cannot )e considered as an alter e(o of petitioner o&es! Inc.

To disre(ard the separate 'uridical personalit* of a corporation! the wron(doin( &ust )e

clearl* and convincin(l* esta)lished. It cannot )e presu&ed. This is ele&entar*. Thusin'ayer(Ro)as v. Court of Appeals!$1-%we said that the separate personalit* of the corporation&a* )e disre(arded onl* when the corporation is used as a cloa; or cover for fraud or ille(alit*!

or to wor; in'ustice! or where necessar* for the protection of the creditors. Accordin(l* inDel

Rosario v. #LRC!$18%where the 3hilsa International 3lace&ent and Services Corp. was or(ani9edand re(istered with the 3OBA in 1"81! several *ears )efore the co&plainant was filed a case in

1"8! we held that this cannot i&pl* fraud.
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O)viousl* in the instant case! private respondents failed to show proof that petitioner

3osadas acted in )ad faith. Conse6uentl* since private respondents failed to show that petitioner

o&es! Inc.! was a part* to an* of the supposed transactions! not even to the a(ree&entto ne(otiate with and relocate the s6uatters! it cannot )e held lia)le! na* 'ointl* and in solidu&! to

pa* private respondents. In this case since it was petitioner Aida M. 3osadas who contracted

respondent +ravo to render the su)'ect services! onl* she is lia)le to pa* the a&ounts ad'ud(edherein.

:e now resolved the third and final issue. 3rivate respondents ur(e the court to co&pel

petitioners to e=ecute a &ana(e&ent contract with the& on the )asis of the authori9ation letter

dated Ma* 7! 1"8". The full te=t of B=h DG reads2

I here)* certif* that we have dul* authori9ed the )earer! Bn(ineer +ravo to ne(otiate!

in our )ehalf! the e'ect&ent of s6uatters fro& our propert* of 1.# hectares! &ore or

less! in Sucat! Muntinlupa. This authorit* is e=tended to hi& as the representatives of

the Mana(ers! under our a(ree&ent for the& to underta;e the develop&ent of said

area and the construction of housin( units intended to convert the land into a firstclass su)division.G

The aforecited docu&ent is nothin( &ore than a to/who&/it/&a*/concernG authori9ation

letter to ne(otiate with the s6uatters. Althou(h it appears that there was an a(ree&ent for thedevelop&ent of the area! there is no showin( that sa&e was never perfected and

finali9ed. 3rivate respondents presented in evidence onl* drafts of a proposed &ana(e&ent

contract with petitionerEs handwritten &ar(inal notes )ut the &ana(e&ent contract was not put in

its final for&. The reason wh* there was no final uncorrected draft was )ecause the parties couldnot a(ree on the stipulations of said contract! which even the private respondents ad&itted as

found )* the trial court.$1"% As a conse6uence the &ana(e&ent drafts su)&itted )* the private

respondents should at )est )e considered as &ere unaccepted offers. :e find no co(ent reason!considerin( that the parties no lon(er are in a har&onious relationship! for the e=ecution of a

contract to develop a su)division.

It is funda&ental that there can )e no contract in the true sense in the a)sence of the ele&ent

of a(ree&ent! or of &utual assent of the parties. To co&pel petitioner 3osadas! whether asrepresentatives of petitioners o&es or in her personal capacit*! to e=ecute a

&ana(e&ent contract under the ter&s and conditions of private respondents would )e to violate

the principle of consensualit* of contracts. InP"ilippine #ational *an+ v. Court of Appeals!$,?%we held that if the assent is wantin( on the part of one who contracts! his act has no &ore

efficac* than if it had )een done under duress or )* a person of unsound &ind. In orderin(

petitioner 3osadas to e=ecute a &ana(e&ent contract with private respondents! the trial court in

effect is puttin( her under duress.

The parties are )ound to fulfill the stipulations in a contract onl* upon its perfection. At

an*ti&e prior to the perfection of a contract! unaccepted offers and proposals re&ain as such and

cannot )e considered as )indin( co&&it&ents hence not de&anda)le.

+HERE'ORE! the petition is 3ARTIA


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RBS3ONDBNTS the a&ount of 3@7!???.?? as )alance for the preparation of the architectural

desi(n! site develop&ent plan and surve*. All other clai&s of respondents are here)* DBNIBD

for lac; of &erit.

SO OR#ERE#

Melo, Kapunan, andPardo, JJ., concur.Davide, Jr., C.J. (Chairman), no part for&er counsel of a part*.

2IRS3 DIISIN

>G.R. No. 10


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3his special civil action ostensibl! raises the $uestion of +hether theNational 6abor Relations Co%%ission co%%itted 5rave abuse of discretion+hen it issued a Vbrea@open orderW to the sheriff to be enforced a5ainstpersonal propert! found in the pre%ises of petitionerUs sister co%pan!.

Petitioner Concept Builders, Inc., a do%estic corporation, +ith principaloffice at == Ma!san Road, alenFuela, Metro Manila, is en5a5ed in theconstruction business. Private respondents +ere e%plo!ed b! said co%pan!as laborers, carpenters and ri55ers.

n Nove%ber, /(1/, private respondents +ere served individual +rittennotices of ter%ination of e%plo!%ent b! petitioner, effective on Nove%ber *),/(1/. It +as stated in the individual notices that their contracts of e%plo!%enthad e&pired and the proect in +hich the! +ere hired had been co%pleted.

Public respondent found it to be, the fact, ho+ever, that at the ti%e of the

ter%ination of private respondentUs e%plo!%ent, the proect in +hich the!+ere hired had not !et been finished and co%pleted. Petitioner had toen5a5e the services of sub@contractors +hose +orers perfor%ed thefunctions of private respondents.

A55rieved, private respondents filed a co%plaint for ille5al dis%issal,unfair labor practice and non@pa!%ent of their le5al holida! pa!, overti%e pa!and thirteenth@%onth pa! a5ainst petitioner.

n Dece%ber /(, /(17, the 6abor Arbiter rendered ud5%ent /orderin5petitioner to reinstate private respondents and to pa! the% bac +a5es

e$uivalent to one !ear or three hundred +orin5 da!s.n Nove%ber 9, :>?=* the National 6abor Relations Co%%ission "N6RC#

dis%issed the %otion for reconsideration filed b! petitioner on the 5round thatthe said decision had alread! beco%e final and e&ecutor!.

n ctober /4, /(14, the N6RC Research and Infor%ation Depart%ent%ade the findin5 that private respondentsU bac+a5es a%ounted toP/((,1)).)).*

n ctober (, /(14, the 6abor Arbiter issued a +rit of e&ecution directin5

the sheriff to e&ecute the Decision, dated Dece%ber /(, /(17. 3he +rit +aspartiall! satisfied throu5h 5arnish%ent of su%s fro% petitionerUs debtor, theMetropolitan ater+ors and Se+era5e Authorit!, in the a%ount ofP1/,*18.*7. Said a%ount +as turned over to the cashier of the N6RC.

n 2ebruar! /, /(1(, an Alias rit of E&ecution +as issued b! the 6aborArbiter directin5 the sheriff to collect fro% herein petitioner the su% of
http://sc.judiciary.gov.ph/jurisprudence/1996/may1996/108734.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1996/may1996/108734.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1996/may1996/108734.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/1996/may1996/108734.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1996/may1996/108734.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1996/may1996/108734.htm#_edn3


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3he :eneral Infor%ation Sheet sub%itted b! the petitioner/ revealed thefollo+in533I 3#!"""!??.??

Antonio :.


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7 Ma*san Road

Valen9uela! Metro Manila.G

n the other hand, the :eneral Infor%ation Sheet of PPI revealed the

follo+in5D>D % the Claparol! 2teel

Corporation e$$etive the next da%, Jul% /, /


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@HEREFORE, the petition is DISMISSED and the assailed resolutions ofthe N6RC, dated April *, /(( and Dece%ber *, /((, are A22IRMED.

SO OR!ERE!.

Padilla BChair#an* %ellosillo* 4itug* and9apunan* //.* concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L32


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Manila, and vice@versa. n 0anuar! 1, /(8(, he sold the afore%entioned t+o certificates ofpublic convenience to the Pan5asinan 3ransportation Co%pan!, Inc. "other+ise no+n asPantranco#, for P*8),))).)) +ith the condition, a%on5 others, that the seller "illara%a# -shallnot for a period of /) !ears fro% the date of this sale, appl! for an! 3P? service identical orco%petin5 +ith the bu!er.-

Barel! three %onths thereafter, or on March 4, /(8(< a corporation called illa Re! 3ransit, Inc."+hich shall be referred to hereafter as the Corporation# +as or5aniFed +ith a capital stoc ofP8)),))).)) divided into 8,))) shares of the par value of P/)).)) eachG P)),))).)) +as thesubscribed stocG Natividad R. illara%a "+ife of 0ose M. illara%a# +as one of theincorporators, and she subscribed for P/,))).))G the balance of P/((,))).)) +as subscribedb! the brother and sister@in@la+ of 0ose M. illara%aG of the subscribed capital stoc,P/)8,))).)) +as paid to the treasurer of the corporation, +ho +as Natividad R. illara%a.

In less than a %onth after its re5istration +ith the Securities and E&chan5e Co%%ission "March/), /(8(#, the Corporation, on April 9, /(8(, bou5htfivecertificates of public convenience, fort!@nine buses, tools and e$uip%ent fro% one alentin 2ernando, for the su% of P7(,))).)), of+hich P/)),))).)) +as paid upon the si5nin5 of the contractG P8),))).)) +as pa!able upon

the final approval of the sale b! the PSCG P7(,8)).)) one !ear after the final approval of thesaleG and the balance of P8),))).)) -shall be paid b! the B?>ER to the different suppliers ofthe SE66ER.-

3he ver! sa%e da! that the afore%entioned contract of sale +as e&ecuted, the parties theretoi%%ediatel! applied +ith the PSC for its approval, +ith a pra!er for the issuance of a provisionalauthorit! in favor of the vendee Corporation to operate the service therein involved./n Ma! /(,/(8(, the PSC 5ranted the provisional per%it pra!ed for, upon the condition that -it %a! be%odified or revoed b! the Co%%ission at an! ti%e, shall be subect to +hatever action that%a! be taen on the basic application and shall be valid onl! durin5 the pendenc! of saidapplication.- Before the PSC could tae final action on said application for approval of sale,ho+ever, the Sheriff of Manila, on 0ul! 9, /(8(, levied on t$o of the five certificates of pu)licconvenienceinvolved therein, na%el!, those issued under PSC cases Nos. 8(7(7 and 4*91),pursuant to a +rit of e&ecution issued b! the Court of 2irst Instance of Pan5asinan in Civil CaseNo. /*9(1, in favor of Eusebio 2errer, plaintiff, ud5%ent creditor, a5ainst alentin 2ernando,defendant, ud5%ent debtor. 3he Sheriff %ade and entered the lev! in the records of the PSC.n 0ul! /4, /(8(, a public sale +as conducted b! the Sheriff of the said t$ocertificates ofpublic convenience. 2errer +as the hi5hest bidder, and a certificate of sale +as issued in hisna%e.

3hereafter, 2errer sold the t$ocertificates of public convenience to Pantranco, and ointl!sub%itted for approval their correspondin5 contract of sale to the PSC.Pantranco thereinpra!ed that it be authoriFed provisionall! to operate the service involved in thesaid t$ocertificates.

3he applications for approval of sale, filed before the PSC, b! 2ernando and the Corporation,Case No. /7)89, and that of 2errer and Pantranco, Case No. /491, +ere scheduled for a

oint hearin5. In the %eanti%e, to +it, on 0ul! , /(8(, the PSC issued an order disposin5 thatdurin5 the pendenc! of the cases and before a final resolution on the aforesaid applications, thePantranco shall be the one to operate provisionall! the service under the t$ocertificatese%braced in the contract bet+een 2errer and Pantranco. 3he Corporation too issue +ith thisparticular rulin5 of the PSC and elevated the %atter to the Supre%e Court,*+hich decreed, after


77/175

deliberation, that until the issue on the o+nership of the disputed certificates shall have beenfinall! settled b! the proper court, the Corporation should be the one to operate the linesprovisionall!.

n Nove%ber 7, /(8(, the Corporation filed in the Court of 2irst Instance of Manila, a co%plaintfor the annul%ent of the sheriff;s sale of the aforesaid t$ocertificates of public convenience

"PSC Cases Nos. 8(7(7 and 4*91)# in favor of the defendant 2errer, and the subse$uent salethereof b! the latter to Pantranco, a5ainst 2errer, Pantranco and the PSC. 3he plaintiffCorporation pra!ed therein that all the orders of the PSC relative to the parties; dispute over thesaid certificates be annulled.

In separate ans+ers, the defendants 2errer and Pantranco averred that the plaintiff Corporationhad no valid title to the certificates in $uestion because the contract pursuant to +hich itac$uired the% fro% 2ernando +as subect to a suspensive condition H the approval of the PSCH +hich has not !et been fulfilled, and, therefore, the Sheriff;s lev! and the conse$uent sale atpublic auction of the certificates referred to, as +ell as the sale of the sa%e b! 2errer toPantranco, +ere valid and re5ular, and vested unto Pantranco, a superior ri5ht thereto.

Pantranco, on its part, filed a third@part! co%plaint a5ainst 0ose M. illara%a, alle5in5 thatillara%a and the Corporation, are one and the sa%eG that illara%a andQor the Corporation+as dis$ualified fro% operatin5 the t+o certificates in $uestion b! virtue of the afore%entioneda5ree%ent bet+een said illara%a and Pantranco, +hich stipulated that illara%a -shall not fora period of /) !ears fro% the date of this sale, appl! for an! 3P? service identical or co%petin5+ith the bu!er.-

?pon the oinder of the issues in both the co%plaint and third@part! co%plaint, the case +astried, and thereafter decision +as rendered in the ter%s, as above stated.

As stated at the be5innin5, all the parties involved have appealed fro% the decision. 3he!sub%itted a oint record on appeal.

Pantranco disputes the correctness of the decision insofar as it holds that illa Re! 3ransit, Inc."Corporation# is a distinct and separate entit! fro% 0ose M. illara%aG that the restriction clausein the contract of 0anuar! 1, /(8( bet+een Pantranco and illara%a is null and voidG that theSheriff;s sale of 0ul! /4, /(8(, is lie+ise null and voidG and the failure to a+ard da%a5es in itsfavor and a5ainst illara%a.

2errer, for his part, challen5es the decision insofar as it holds that the sheriff;s sale is null andvoidG and the sale of the t$ocertificates in $uestion b! alentin 2ernando to the Corporation, isvalid. e also assails the a+ard of P8,))).)) as attorne!;s fees in favor of the Corporation, andthe failure to a+ard %oral da%a5es to hi% as pra!ed for in his counterclai%.

3he Corporation, on the other hand, pra!s for a revie+ of that portion of the decision a+ardin5onl! P8,))).)) as attorne!;s fees, and insistin5 that it is entitled to an a+ard of P/)),))).)) b!+a! of e&e%plar! da%a5es.

After a careful stud! of the facts obtainin5 in the case, the vital issues to be resolved are< "/#Does the stipulation bet+een illara%a and Pantranco, as contained in the deed of sale, thatthe for%er -SA66 N3 2R A PERID 2 /) >EARS 2RM 3E DA3E 2 3IS SA6E,

APP6> 2R AN> 3P? SERICE IDEN3ICA6 R CMPE3IN: I3 3E B?>ER,- appl! to


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ne+ lines onl! or does it include e&istin5 linesG "# Assu%in5 that said stipulation covers allinds of lines, is such stipulation valid and enforceableG "*# In the affir%ative, that saidstipulation is valid, did it bind the Corporation

2or convenience, e propose to discuss the fore5oin5 issues b! startin5 +ith the lastproposition.

3he evidence has disclosed that illara%a, albeit +as not an incorporator or stocholder of theCorporation, alle5in5 that he did not beco%e such, because he did not have sufficient funds toinvest, his +ife, ho+ever, +as an incorporator +ith the least subscribed nu%ber of shares, and+as elected treasurer of the Corporation. 3he finances of the Corporation +hich, under allconcepts in the la+, are supposed to be under the control and ad%inistration of the treasurereepin5 the% as trust fund for the Corporation, +ere, nonetheless, %anipulated and disbursedas if the! +ere the private funds of illara%a, in such a +a! and e&tent that illara%a appearedto be the actual o+ner@treasurer of the business +ithout re5ard to the ri5hts of the stocholders.3he follo+in5 testi%on! of illara%a,7to5ether +ith the other evidence on record, attests to thateffectouheard the testi%on! presented here b! the ban re5ardin5 the initial openin5 deposit of NE?NDRED 2IE 3?SAND PESS, of +hich a%ount Ei5ht!@2ive 3housand Pesos +as achec dra+n b! !ourself personall!. In the direct e&a%ination !ou told the Court that thereason !ou dre+ a chec for Ei5ht!@2ive 3housand Pesos +as because !ou and !our +ife,or !our +ife, had spent the %one! of the stocholders 5iven to her for incorporation. ill !ouplease tell the onorable Court if !ou ne+ at the ti%e !our +ife +as spendin5 the %one! topa! debts, !ou personall! ne+ she +as spendin5 the %one! of the incorporators

A. >ou no+ %! %one! and %! +ife;s %one! are one. e never tal about those thin5s.

. Doctor, !our ans+er then is that since !our %one! and !our +ife;s %one! are one

%one! and !ou did not no+ +hen !our +ife +as pa!in5 debts +ith the incorporator;s%one!

A. Because so%eti%es she uses %! %one!, and so%eti%es the %one! 5iven to her she5ives to %e and I deposit the %one!.

. Actuall!, aside fro% !our +ife, !ou +ere also the custodian of so%e of theincorporators here, in the be5innin5

A. Not necessaril!, the! 5ive to %! +ife and +hen %! +ife hands to %e I did not no+ itbelon5ed to the incorporators.

. It supposes then !our +ife 5ives !ou so%e of the %one! received b! her in hercapacit! as treasurer of the corporation

A. Ma!be.

. hat did !ou do +ith the %one!, deposit in a re5ular account

A. Deposit in %! account.


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. f all the %one! 5iven to !our +ife, she did not receive an! chec

A. I do not re%e%ber.

. Is it usual for !ou, Doctor, to be 5iven 2ift! 3housand Pesos +ithout even asin5 +hatis this

&&& &&& &&&

0?D:E< Refor% the $uestion.

. 3he subscription of !our brother@in@la+, Mr. Re!es, is 2ift!@3+o 3housand Pesos, did!our +ife 5ive !ou 2ift!@t+o 3housand Pesos

A. I have testified before that so%eti%es %! +ife 5ives %e %one! and I do not no+e&actl! for +hat.

3he evidence further sho+s that the initial cash capitaliFation of the corporation of P/)8,))).))+as %ostl! financed b! illara%a. f the P/)8,))).)) deposited in the 2irst National Cit! Banof Ne+ >or, representin5 the initial paid@up capital of the Corporation, P18,))).)) +as coveredb! illara%a;s personal chec. 3he deposit slip for the said a%ount of P/)8,))).)) +asad%itted in evidence as E&h. *, +hich sho+s on its face that P),))).)) +as paid in cash andP18,))).)) thereof +as covered b! Chec No. 2@8)9/ of the 2irst National Cit! Ban of Ne+>or. 3he testi%onies of Alfonso Sancho8and 0oa$uin A%ansec,4both e%plo!ees of said ban,have proved that the dra+er of the chec +as 0ose illara%a hi%self.

Another +itness, Celso Rivera, accountant of the Corporation, testified that +hile in the boos ofthe corporation there appears an entr! that the treasurer received P(8,))).)) as secondinstall%ent of the paid@in subscriptions, and, subse$uentl!, also P/)),))).)) as the firstinstall%ent of the offer for second subscriptions +orth P)),))).)) fro% the ori5inalsubscribers, !et illara%a directed hi% "Rivera# to %ae vouchers li$uidatin5 the su%s.93hus, it+as %ade to appear that the P(8,))).)) +as delivered to illara%a in pa!%ent for e$uip%entpurchased fro% hi%, and the P/)),))).)) +as loaned as advances to the stocholders. 3hesaid accountant, ho+ever, testified that he +as not a+are of an! a%ount of %one! that hadactuall! passed hands a%on5 the parties involved,1and actuall! the onl! %one! of thecorporation +as the P/)8,))).)) covered b! the deposit slip E&h. *, of +hich as %entionedabove, P18,))).)) +as paid b! illara%a;s personal chec.

2urther, the evidence sho+s that +hen the Corporation +as in its initial %onths of operation,illara%a purchased and paid +ith his personal checs 2ord trucs for the Corporation. E&hibits) and / disclose that the said purchases +ere paid b! Philippine Ban of Co%%erce ChecsNos. ((4/1@B and ((*4/@B, respectivel!. 3hese checs have been sufficientl! established b!2austo Abad, Assistant Accountant of Manila 3radin5 Suppl! Co., fro% +hich the trucs +erepurchased(and Aristedes Solano, an e%plo!ee of the Philippine Ban of Co%%erce,/)ashavin5 been dra+n b! illara%a.

E&hibits 4 to /( and E&h. , +hich are photostatic copies of led5er entries and voucherssho+in5 that illara%a had co@%in5led his personal funds and transactions +ith those %ade inthe na%e of the Corporation, are ver! illu%inatin5 evidence. illara%a has assailed thead%issibilit! of these e&hibits, contendin5 that no evidentiar! value +hatsoever should be 5iven


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to the% since -the! +ere %erel! photostatic copies of the ori5inals, the best evidence bein5 theori5inals the%selves.- Accordin5 to hi%, at the ti%e Pantranco offered the said e&hibits, it +asthe %ost liel! possessor of the ori5inals thereof because the! +ere stolen fro% the files of theCorporation and onl! Pantranco +as able to produce the alle5ed photostat copies thereof.

Section 8 of Rule /*) of the Rules of Court provides for the re$uisites for the ad%issibilit! of

secondar! evidence +hen the ori5inal is in the custod! of the adverse part!, thus< "/#opponent;s possession of the ori5inalG "# reasonable notice to opponent to produce the ori5inalG"*# satisfactor! proof of its e&istenceG and "7# failure or refusal of opponent to produce theori5inal in court.//illara%a has practicall! ad%itted the second and fourth re$uisites./As to thethird, he ad%itted their previous e&istence in the files of the Corporation and also that he hadseen so%e of the%./*Re5ardin5 the first ele%ent, illara%a;s theor! is that since even at theti%e of the issuance of the su)poena duces tecu#, the ori5inals +ere alread! %issin5,therefore, the Corporation +as no lon5er in possession of the sa%e. o+ever, it is notnecessar! for a part! seein5 to introduce secondar! evidence to sho+ that the ori5inal is in theactual possession of his adversar!. It is enou5h that the circu%stances are such as to indicatethat the +ritin5 is in his possession or under his control. Neither is it re$uired that the part!entitled to the custod! of the instru%ent should, on bein5 notified to produce it, ad%it havin5 it in

his possession./7ence, secondar! evidence is ad%issible +here he denies havin5 it in hispossession. 3he part! callin5 for such evidence %a! introduce a cop! thereof as in the case ofloss. 2or, a%on5 the e&ceptions to the best evidence rule is -+hen the ori5inal has been lost,destro!ed, or cannot be produced in court.-/83he ori5inals of the vouchers in $uestion %ust bedee%ed to have been lost, as even the Corporation ad%its such loss. ie+ed upon this li5ht,there can be no doubt as to the ad%issibilit! in evidence of E&hibits 4 to /( and .

3ain5 account of the fore5oin5 evidence, to5ether +ith Celso Rivera;s testi%on!,/4it +ouldappear that< illara%a supplied the or5aniFation e&penses and the assets of the Corporation,such as trucs and e$uip%entG/9there +as no actual pa!%ent b! the ori5inal subscribers of thea%ounts of P(8,))).)) and P/)),))).)) as appearin5 in the boosG/1illara%a %ade use ofthe %one! of the Corporation and deposited the% to his private accountsG/(and the Corporation

paid his personal accounts.)

illara%a hi%self ad%itted that he %in5led the corporate funds +ith his o+n %one!./e alsoad%itted that 5asoline purchases of the Corporation +ere %ade in his na%ebecause -he hade&istin5 account +ith Stanvac +hich +as properl! secured and he +anted the Corporation tobenefit fro% the rebates that he received.-*

3he fore5oin5 circu%stances are stron5 persuasive evidence sho+in5 that illara%a has beentoo %uch involved in the affairs of the Corporation to alto5ether ne5ative the clai% that he +asonl! a part@ti%e 5eneral %ana5er. 3he! sho+ be!ond doubt that the Corporation is his alterego.

It is si5nificant that not a sin5le one of the acts enu%erated above as proof of illara%a;soneness +ith the Corporation has been denied b! hi%. n the contrar!, he has ad%itted the%+ith offered e&cuses.

illara%a has ad%itted, for instance, havin5 paid P18,))).)) of the initial capital of theCorporation +ith the la%e e&cuse that -his +ife had re$uested hi% to rei%burse the a%ountentrusted to her b! the incorporators and +hich she had used to pa! the obli5ations of Dr.illara%a "her husband# incurred +hile he +as still the o+ner of illa Re! 3ransit, a sin5le


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proprietorship.- But +ith his ad%ission that he had received P*8),))).)) fro% Pantranco for thesale of the t$ocertificates and one unit,7it beco%es difficult to accept illara%a;s e&planationthat he and his +ife, after consultation,8spent the %one! of their relatives "the stocholders#+hen the! +ere supposed to have their o+n %one!. Even if Pantranco paid the P*8),))).)) inchec to hi%, as clai%ed, it could have been eas! for illara%a to have deposited said chec inhis account and issued his o+n chec to pa! his obli5ations. And there is no evidence adduced

that the said a%ount of P*8),))).)) +as all spent or +as insufficient to settle his priorobli5ations in his business, and in the li5ht of the stipulation in the deed of sale bet+eenillara%a and Pantranco that P8),))).)) of the sellin5 price +as ear%ared for the pa!%entsof accounts due to his creditors, the e&cuse appears unbelievable.

n his havin5 paid for purchases b! the Corporation of trucs fro% the Manila 3radin5 Suppl!Co. +ith his personal checs, his reason +as that he +as onl! sharin5 +ith the Corporation hiscredit +ith so%e co%panies. And his %ain reason for %in5lin5 his funds +ith that of theCorporation and for the latter;s pa!in5 his private bills is that it +ould be %ore convenient thathe ept the %one! to be used in pa!in5 the re5istration fees on ti%e, and since he had loaned%one! to the Corporation, this +ould be set off b! the latter;s pa!in5 his bills. illara%aad%itted, ho+ever, that the corporate funds in his possession +ere not onl! for re5istration fees

but for other i%portant obli5ations +hich +ere not specified.4

Indeed, +hile illara%a +as not the 3reasurer of the Corporation but +as, alle5edl!, onl! a part@ti%e %ana5er,9he ad%itted not onl! havin5 held the corporate %one! but that he advanced andlent funds for the Corporation, and !et there +as no Board Resolution allo+in5 it.1

illara%a;s e&planation on the %atter of his involve%ent +ith the corporate affairs of theCorporation onl! renders %ore credible Pantranco;s clai% that his control over the corporation,especiall! in the %ana5e%ent and disposition of its funds, +as so e&tensive and inti%ate that itis i%possible to se5re5ate and identif! +hich %one! belon5ed to +ho%. 3he interference ofillara%a in the co%ple& affairs of the corporation, and particularl! its finances, are %uch tooinconsistent +ith the ends and purposes of the Corporation la+, +hich, precisel!, sees to

separate personal responsibilities fro% corporate undertain5s. It is the ver! essence ofincorporation that the acts and conduct of the corporation be carried out in its o+n corporatena%e because it has its o+n personalit!.

3he doctrine that a corporation is a le5al entit! distinct and separate fro% the %e%bers andstocholders +ho co%pose it is reco5niFed and respected in all cases +hich are +ithin reasonand the la+.(hen the fiction is ur5ed as a %eans of perpetratin5 a fraud or an ille5al act or asa vehicle for the evasion of an e&istin5 obli5ation, the circu%vention of statutes, theachieve%ent or perfection of a %onopol! or 5enerall! the perpetration of naver! or cri%e,*)theveil +ith +hich the la+ covers and isolates the corporation fro% the %e%bers or stocholders+ho co%pose it +ill be lifted to allo+ for its consideration %erel! as an a55re5ation ofindividuals.

?pon the fore5oin5 considerations, e are of the opinion, and so hold, that the preponderanceof evidence have sho+n that the illa Re! 3ransit, Inc. is an alter egoof 0ose M. illara%a, andthat the restrictive clause in the contract entered into b! the latter and Pantranco is alsoenforceable and bindin5 a5ainst the said Corporation. 2or the rule is that a seller or pro%isor%a! not %ae use of a corporate entit! as a %eans of evadin5 the obli5ation of hiscovenant.*/here the Corporation is substantiall! the alter egoof the covenantor to therestrictive a5ree%ent, it can be enoined fro% co%petin5 +ith the covenantee.*


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3he Corporation contends that even on the supposition that illa Re! 3ransit, Inc. and illara%aare one and the sa%e, the restrictive clause in the contract bet+een illara%a and Pantrancodoes not include the purchase of e&istin5 lines but it onl! applies to application for the ne+ lines.3he clause in dispute reads thusowever! this distinct and separate personalit* is &erel* a fiction created )* law for

convenience and to pro&ote 'ustice. Accordin(l*! this separate personalit* of the

corporation &a* )e disre(arded! or the veil of corporate fiction pierced! in cases

where it is used as a cloa; or cover for found 4sic5 ille(alit*! or to wor; an in'ustice! or

where necessar* to achieve e6uit* or when necessar* for the protection of

creditors. 4Sulo n( +a*an! Inc. v!. Araneta! Inc.! -, SCRA 7@-5 Corporations areco&posed of natural persons and the le(al fiction of a separate corporate personalit* is

not a shield for the co&&ission of in'ustice and ine6uit*. 4Che&ple= 3hilippines! Inc.

vs. 3a&atian! - SCRA @?85

In the instant case! evidence shows that the plaintiff/appellant Francisco Motors

Corporation is co&posed of the heirs of the late +enita Trinidad as directors and
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incorporators for who& defendant Kre(orio Manuel rendered le(al services in the

intestate estate case of their deceased &other. Considerin( the aforestated principles

and circu&stances esta)lished in this case! e6uit* and 'ustice de&ands plaintiff/

appellantEs veil of corporate identit* should )e pierced and the defendant )e

co&pensated for le(al services rendered to the heirs! who are directors of the plaintiff/

appellant corporation.G$1,%

Now )efore us! petitioner assi(ns the followin( errors2

/I.

T>B CORT OF A33BAB VBI< OF COR3ORATB BNTITH.

II.

T>B CORT OF A33BAAT T>BRB :AS0RISDICTION OVBR 3BTITIONBR :IT> RBS3BCT TO T>B

CONTBRCence! it avers the heirs should have )eensued in their personal capacit*! and not involve the corporation.$1@%

:ith re(ard to the per&issive counterclai&! petitioner also insists that there was no proper

service of the answer containin( the per&issive counterclai&. It clai&s that the counterclai& is a

separate case which can onl* )e properl* served upon the opposin( part* throu(hsu&&ons. Further petitioner states that )* nature! a per&issive counterclai& is one which does

not arise out of nor is necessaril* connected with the su)'ect of the opposin( part*Es

clai&. 3etitioner avers that since there was no service of su&&ons upon it with re(ard to thecounterclai&! then the court did not ac6uire 'urisdiction over petitioner. Since a counterclai& is

considered an action independent fro& the answer! accordin( to petitioner! then in effect there

should )e two si&ultaneous actions )etween the sa&e parties2 each part* is at the sa&e ti&e )othplaintiff and defendant with respect to the other!$1%re6uirin( in each case separate su&&onses.

In their Co&&ent! private respondents focus on the two 6uestions raised )* petitioner. The*

defend the propriet* of piercin( the veil of corporate fiction! )ut den* the necessit* of servin(

separate su&&onses on petitioner in re(ard to their per&issive counterclai& contained in theanswer.
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3rivate respondents &aintain )oth trial and appellate courts found that respondent Kre(orio

Manuel was e&plo*ed as assistant le(al officer of petitioner corporation! and that his services

were solicited )* the incorporators! directors and &e&)ers to handle and represent the& inSpecial 3roceedin(s No. -8?7! concernin( the Intestate Bstate of the late +enita Trinidad. The*

assert that the &e&)ers of petitioner corporation too; advanta(e of their positions )* not

co&pensatin( respondent Kre(orio Manuel after the ter&ination of the estate proceedin(sdespite his repeated de&ands for pa*&ent of his services. The* cite findin(s of the appellate

court that support piercin( the veil of corporate identit* in this particular case. The* assert that

the corporate veil &a* )e disre(arded when it is used to defeat pu)lic convenience! 'ustif*wron(! protect fraud! and defend cri&e. It &a* also )e pierced! accordin( to the&! where the

corporate entit* is )ein( used as an alter e(o! ad'unct! or )usiness conduit for the sole )enefit of

the stoc;holders or of another corporate entit*. In these instances! the* aver! the corporation

should )e treated &erel* as an association of individual persons.$1#%

3rivate respondents dispute petitionerEs clai& that its ri(ht to due process was violated when

respondentsE counterclai& was (ranted due course! althou(h no su&&ons was served upon

it. The* clai& that no provision in the Rules of Court re6uires service of su&&ons upon a

defendant in a counterclai&. 3rivate respondents ar(ue that when the petitioner filed itsco&plaint )efore the trial court it voluntaril* su)&itted itself to the 'urisdiction of the court. As

a conse6uence! the issuance of su&&ons on it was no lon(er necessar*. 3rivate respondents sa*the* served a cop* of their answer with affir&ative defenses and counterclai& on petitionerEs

for&er counsel! Nicanor K. Alvare9. :hile petitioner would have the Court )elieve that

respondents served said cop* upon Alvare9 after he had withdrawn his appearance as counsel for

the petitioner! private respondents assert that this contention is utterl* )aseless. Records disclosethat the answer was received two 4,5 da*s )efore the for&er counsel for petitioner withdrew his

appearance! accordin( to private respondents. The* &aintain that the present petition is )ut a

for& of dilator* appeal! to set off petitionerEs o)li(ations to the respondents )* runnin( up &oreinterest it could recover fro& the&. 3rivate respondents therefore clai& da&a(es a(ainst

petitioner.$1-%

To resolve the issues in this case! we &ust first deter&ine the propriet* of piercin( the veilof corporate fiction.

+asic in corporation law is the principle that a corporation has a separate personalit* distinct

fro& its stoc;holders and fro& other corporations to which it &a* )e connected.$18%>owever!

under the doctrine of piercin( the veil of corporate entit*! the corporationEs separate 'uridicalpersonalit* &a* )e disre(arded! for e=a&ple! when the corporate identit* is used to defeat pu)lic

convenience! 'ustif* wron(! protect fraud! or defend cri&e. Also! where the corporation is a

&ere alter e(o or )usiness conduit of a person! or where the corporation is so or(ani9ed andcontrolled and its affairs are so conducted as to &a;e it &erel* an instru&entalit*! a(enc*!

conduit or ad'unct of another corporation! then its distinct personalit* &a* )e i(nored. $1"%In thesecircu&stances! the courts will treat the corporation as a &ere a((rupation of persons and the

lia)ilit* will directl* attach to the&. The le(al fiction of a separate corporate personalit* in thosecited instances! for reasons of pu)lic polic* and in the interest of 'ustice! will )e 'ustifia)l* set

aside.

In our view! however! (iven the facts and circu&stances of this case! the doctrine of piercin(the corporate veil has no relevant application here. Respondent court erred in per&ittin( the trial
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courtEs resort to this doctrine. The rationale )ehind piercin( a corporationEs identit* in a (iven

case is to re&ove the )arrier )etween the corporation fro& the persons co&prisin( it to thwart

the fraudulent and ille(al sche&es of those who use the corporate personalit* as a shield forunderta;in( certain proscri)ed activities. >owever! in the case at )ar! instead of holdin( certain

individuals or persons responsi)le for an alle(ed corporate act! the situation has )een reversed. It

is the petitioner as a corporation which is )ein( ordered to answer for the personal lia)ilit* ofcertain individual directors! officers and incorporators concerned. >ence! it appears to us that

the doctrine has )een turned upside down )ecause of its erroneous invocation. Note that

accordin( to private respondent Kre(orio Manuel his services were solicited as counsel for&e&)ers of the Francisco fa&il* to represent the& in the intestate proceedin(s over +enita

TrinidadEs estate. These estate proceedin(s did not involve an* )usiness of petitioner.

Note also that he sou(ht to collect le(al fees not 'ust fro& certain Francisco fa&il* &e&)ers

)ut also fro& petitioner corporation on the clai&s that its &ana(e&ent had re6uested his servicesand he acceded thereto as an e&plo*ee of petitioner fro& who& it could )e deduced he was also

receivin( a salar*. >is &ove to recover unpaid le(al fees throu(h a counterclai& a(ainst

Francisco Motors Corporation! to offset the unpaid )alance of the purchase and repair of a 'eep

)od* could onl* result fro& an o)vious &isapprehension that petitionerEs corporate assets could)e used to answer for the lia)ilities of its individual directors! officers! and incorporators. Such

result if per&itted could easil* pre'udice the corporation! its own creditors! and even otherstoc;holders hence! clearl* ine6uitous to petitioner.

Further&ore! considerin( the nature of the le(al services involved! whatever o)li(ation said

incorporators! directors and officers of the corporation had incurred! it was incurred in their

personal capacit*. :hen directors and officers of a corporation are una)le to co&pensate a part*for a personal o)li(ation! it is far/fetched to alle(e that the corporation is perpetuatin( fraud or

pro&otin( in'ustice! and )e there)* held lia)le therefor )* piercin( its corporate veil. :hile

there are no hard and fast rules on disre(ardin( separate corporate identit*! we &ust alwa*s )e

&indful of its function and purpose. A court should )e careful in assessin( the &ilieu where thedoctrine of piercin( the corporate veil &a* )e applied. Otherwise an in'ustice! althou(h

unintended! &a* result fro& its erroneous application.

The personalit* of the corporation and those of its incorporators! directors and officers intheir personal capacities ou(ht to )e ;ept separate in this case. The clai& for le(al fees a(ainst

the concerned individual incorporators! officers and directors could not )e properl* directed

a(ainst the corporation without violatin( )asic principles (overnin( corporations. Moreover!ever* action includin( a counterclai& &ust )e prosecuted or defended in the na&e of the

real part* in interest.$,?%It is plainl* an error to la* the clai& for le(al fees of private respondent

Kre(orio Manuel at the door of petitioner 4FMC5 rather than individual &e&)ers of theFrancisco fa&il*.

>owever! with re(ard to the procedural issue raised )* petitionerEs alle(ation! that it needed

to )e su&&oned anew in order for the court to ac6uire 'urisdiction over it! we a(ree with

respondent courtEs view to the contrar*. Section @! Rule 11 of the9ule! o$ Courtprovides that acounterclai& or cross/clai& &ust )e answered within ten 41?5 da*s fro& service. Nothin( in the

Rules of Court sa*s that su&&ons should first )e served on the defendant )efore an answer to

counterclai& &ust )e &ade. The purpose of a su&&ons is to ena)le the court to ac6uire'urisdiction over the person of the defendant. Althou(h a counterclai& is treated as an entirel*
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distinct and independent action! the defendant in the counterclai&! )ein( the plaintiff in the

ori(inal co&plaint! has alread* su)&itted to the 'urisdiction of the court. Followin( Rule "!

Section 7 of the 1""-9ule! o$ Civil Proedure!$,1% if a defendant 4herein petitioner5 fails toanswer the counterclai&! then upon &otion of plaintiff! the defendant &a* )e declared in

default. This is what happened to petitioner in this case! and this Court finds no procedural error

in the disposition of the appellate court on this particular issue. Moreover! as noted )* therespondent court! when petitioner filed its &otion see;in( to set aside the order of default! in

effect it su)&itted itself to the 'urisdiction of the court. As well said )* respondent court2

Further on the lac; of 'urisdiction as raised )* plaintiff/appellant$!% $t%he records

show that upon its re6uest! plaintiff/appellant was (ranted ti&e to file a &otion for

reconsideration of the disputed decision. 3laintiff/appellant did file its &otion for

reconsideration to set aside the order of default and the 'ud(&ent rendered on the

counterclai&.

Thus! even if the court ac6uired no 'urisdiction over plaintiff/appellant on the

counterclai&! as it vi(orousl* insists! plaintiff/appellant is considered to have

su)&itted to the courtEs 'urisdiction when it filed the &otion for reconsideration

see;in( relief fro& the court. 4Soriano vs. 3alacio! 1, SCRA @@-5. A part* is

estopped fro& assailin( the 'urisdiction of a court after voluntaril* su)&ittin( hi&self

to its 'urisdiction. 4Te'ones vs. Kironella! 1" SCRA 1??5. Bstoppel is a )ar a(ainst

an* clai&s of lac; of 'urisdiction. 4+alais vs. +alais! 1" SCRA 7-5.G$,,%

+HERE'ORE! the petition is here)* KRANTBD and the assailed decision is here)*

RBVBRSBD insofar onl* as it held Francisco Motors Corporation lia)le for the le(al o)li(ation

owin( to private respondent Kre(orio Manuel )ut this decision is without pre'udice to his filin(

the proper suit a(ainst the concerned &e&)ers of the Francisco fa&il* in their personalcapacit*. No pronounce&ent as to costs.

SO OR#ERE#.

ello!illo, (Chairman), Puno, Mendo#a, anduena, JJ., concur.

2IRS3 DIISIN

>G.R. No. 16


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RAMOS, RO!RIGO P. CA9USAO, JR., E!GAR G. PONCE,RONAL! ALLAN PARINAS, RO!EL PALO, REYNAL!O R.RAGUCOS, MARIO T. TOLE!O, 9ERNAR!INO PA!UA,!OMINGO P. 9ILAN, ARNEL BALLE!ORES, RAMON RETUTA,JR., PANTALEON TA9ANGIN, AL9ERTO PAN!O, BIRGILIO E.O9AR, EULOGIO !. !IGA, SR., !ANIEL LLA!O, RONILO9ALTAAR, MARITO PAN!O, LEOPOL!O FUNTILA, GERRY 9.CARRI!O, @ILLIAM A. TA9UCOL, ANTONIO L. RAMOS, SR.,PA9LO P. PA!RE, HENRY 9. GANIR, TEOTIMO R. REUILMAN,CIPRIANO ULPIN!O, ROGER 9A9I!A, SAMUEL PERALTA,9ONIFACIO TUMALIP, E!GAR A9LOG, EFREN A9ELLA,RO!RIGO RA9OY, RENATO SILBA, GEORGE PERALTA,RONILO 9AR9OSA, JULIAN 9UENAFE, FLORENCIO CARIO,9ERNIE TUM9AGA, RO!RIGO CA9AERO, ELMER TAMO,

LEOPOL!O NANA, NELIE 9OSE, !EMETRIO HERRERA,RO!OLFO A9ELLA, ALBIN ELEFANTE, RE!ENTOR GARCIA,JERRY PALACPAC, JOSE PAET, ARTHUR I9EA, ELIER9ORJA, E!MUN!O ASPIRAS, JOSE B. PESCA!OR, @ILLIAMGARCIA, ERNESTO P. MANGULA9NAN, 9ENJAMIN 9. 9LAA,JOSELITO P. CACA9ELOS, LEON R. GALANTA, JR., MARIANOP. TEJA!A, PE!RITO C. ORTI, JR., NESTOR E. 9ALCITA, FLOR9UR9ANO, HERNAN!O A. PIMENTEL, ALE A. GOME,ARNAL!O P. 9OSE, NAPOLEON 9AL!ERAS, CARLINO B.RULLO!A, JR., RAN!Y R. AMO!O, CORNELIO R. RAGUINI,RO9ERT CERIA, JUANITO U. UGAL!E, AL9ERTO PAJO,ALFRE!O BALOROSO, RUFINO A!RIATICO, 9ARTOLOME C.E!ROSOLAN, JR., REYNANTE A. ALCAIN, NOELITO SUSA "#$BICENTE NABA, respondents.

! E C I S I O N

YNARES3SANTIAGO, J.%

3his petition for revie+ on certiorariassails the decision of the Court of

Appeals dated 0anuar! *), ))7 in CA@:.R. SP No. 98(/, K/L+hich set asidethe decision and resolution of the National 6abor Relations Co%%ission, andits resolution dated Ma! 7, ))7KLden!in5 reconsideration thereof.

Petitioner 3i%es 3ransportation Co%pan!, Inc. "3i%es# is a corporationen5a5ed in the business of land transportation. Prior to its closure in /((9,the 3i%es E%plo!ees ?nion "3E?# +as for%ed and issued a certificate of
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union re5istration. 3i%es challen5ed the le5iti%ac! of 3E? b! filin5 a petitionfor the cancellation of its union re5istration.

n March *, /((9, 3E? held a strie in response to 3i%esU alle5edatte%pt to for% a rival union and its dis%issal of the e%plo!ees identified to

be active union %e%bers. ?pon petition b! 3i%es, then 6abor Secretar!, andno+ Associate 0ustice of this Court, 6eonardo A. uisu%bin5, assu%edurisdiction over the case and referred the %atter to the N6RC for co%pulsor!arbitration. 3he case +as doceted as N6RC NCR CC@)))/*7@(9. A return@to@+or order +as lie+ise issued on March /), /((9.

In a certification election held on 0ul! /, /((9, 3E? +as certified as thesole and e&clusive collective bar5ainin5 a5ent in 3i%es. Conse$uentl!, 3E?Uspresident +rote the %ana5e%ent of 3i%es and re$uested for collectivebar5ainin5. 3i%es refused on the 5round that the decision of the Med@Arbiterupholdin5 the validit! of the certification election +as not !et final ande&ecutor!.

3E? filed a Notice of Strie on Au5ust 1, /((9. AnotherconciliationQ%ediation proceedin5 +as conducted for the purpose of settlin5the bre+in5 dispute. In the %eanti%e, 3i%esU %ana5e%ent i%ple%ented aretrench%ent pro5ra% and notices of retrench%ent dated Septe%ber /4,/((9 +ere sent to so%e of its e%plo!ees, includin5 the respondents herein,infor%in5 the% of their retrench%ent effective *) da!s thereafter.

n ctober /9, /((9, 3E? held a strie vote on 5rounds of unfair laborpractice on the part of 3i%es. 2or alle5ed participation in +hat it dee%ed +asan ille5al strie, 3i%es ter%inated all the /* striin5 e%plo!ees b! virtue oft+o notices dated ctober 4, /((9 and Nove%ber 7, /((9.K*Ln Nove%ber/9, /((9, then D6E Secretar! uisu%bin5 issued the second return@to@+ororder certif!in5 the dispute to the N6RC. hile the strie +as ended, thee%plo!ees +ere no lon5er ad%itted bac to +or.

In the %eanti%e, b! Dece%ber /, /((9, Mencorp 3ransport S!ste%s,Inc. "Mencorp# had ac$uired o+nership over 3i%esU Certificates of PublicConvenience and a nu%ber of its bus units b! virtue of several deeds of sale.K7L Mencorp is controlled and operated b! Mrs. ir5inia MendoFa, dau5hter of

Santia5o Rondaris, the %aorit! stocholder of 3i%es.

n Ma! /, /((1, the N6RC rendered a decision K8Lin the cases certified toit b! the D6E, the dispositive portion of +hich readBRBFORB! the respondentsE first stri;e! conducted fro& March 7! 1""- to March

1,! 1""-! is here)* declared


95/175

1-! 1""-! is here)* declared I


96/175

,. respondents Ti&es Transit 4sic5 Co&pan*! Inc. andor Santia(o Rondaris and

Mencorp Transport S*ste&s Co&pan*! Inc. andor Vir(inia Mendo9a and Re*naldo

Mendo9a to cause the reinstate&ent therein of co&plainants to their for&er positions

without loss of seniorit* ri(hts and )enefits and to pa* 'ointl* and severall* said

co&plainants full )ac; wa(es rec;oned fro& their respective dates of ille(al dis&issal

as a)ove/indicated! until actuall* reinstated or in lieuof such reinstate&ent! at the

option of said co&plainants! pa*&ent of their separation pa* of one 415 &onth pa* per

*ear of service! rec;oned fro& their date of hire as a)ove/indicated! until actual

pa*&ent andor finalit* of this decision

7. and finall* for respondents Ti&es Transit 4sic5 Co&pan*! Inc. andor Santia(o

Rondaris to pa* 'ointl* and severall* said co&plainants as &oral and e=e&plar*

da&a(es the co&)ined a&ount of 3-!???.?? and of the total award as attorne*Es

fees.

All other clai&s of co&plainants are dis&issed for lac; of &erit.

P.

SO ORDBRBD.K/)L

3he %onetar! a+ard a%ounted to P7*,*79,*7/.4(. n March 7, )),3i%es, Mencorp and the Spouses MendoFa sub%itted their respective%e%orandu% of appeal to the N6RC +ith %otions to reduce the bond.Mencorp posted a P8 %illion bond issued b! Securit! Pacific Assurance Corp.

"SPAC#. n April *), )), the N6RC issued an order disposin5 of the said%otion, thusBRBFORB! pre&ises considered! the r(ent Motion for Reduction of +ond is

denied for lac; of &erit. Respondents are here)* ordered to co&plete the )ond

e6uivalent to the &onetar* award in the


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n Septe%ber /9, )), the N6RC rendered its decision, statin5BRBFORB! the fore(oin( pre&ises dul* considered! the decision appealed fro& is

here)* VACATBD. The records of these consolidated cases are here)* ordered

RBMANDBD to the Ar)itration +ranch of ori(in for disposition and for the conduct

of appropriate proceedin(s for a decision to )e rendered with dispatch.

SO ORDBRBD.K/*L

Reconsideration thereof +as denied b! the N6RC on ctober *), )).3hus, the respondents appealed to the Court of Appeals b! +a! of a petitionfor certiorari, attributin5 5rave abuse of discretion on the N6RC for< "/# notdis%issin5 the appeals of 3i%es, Mencorp and the Spouses MendoFa despitetheir failure to post the re$uired bondG "# re%andin5 the case for furtherproceedin5s despite the sufficienc! of the evidence presented b! the partiesG

"*# not sustainin5 the labor arbiterUs rulin5 that the! +ere ille5all! dis%issedG"7# not affir%in5 the labor arbiterUs rulin5 that there +as no litis pendenciaG and"8# not rulin5 that 3i%es and Mencorp are one and the sa%e entit!.

n 0anuar! *), ))7, the Court of Appeals rendered the decision no+assailed in this petition, the decretal portion of +hich statesBRBFORB! )ased on the fore(oin(! the instant petition is here)* KRANTBD.

The assailed Decision and Resolution of the N


98/175

%anner contradictor! to e&istin5 applicable la+s and dispositions of this onorableCourt, and departed fro% the accepted and usual course of udicial proceedin5s +ithre5ard to ad%ittin5 evidence to sustain the application of such principle. K/8L

3he petition lacs %erit.

As to the first issue, 3i%es ar5ues that there e&ists an identit! of issues,ri5hts asserted, relief sou5ht and causes of action bet+een the present caseand the one concernin5 the le5alit! of the second strie, +hich is no+ pendin5+ith the 3hird Division of this Court. As such, the Court of Appeals erred innot dis%issin5 the case at bar on the 5round of litis pendencia.

'itis pendenciaas a 5round for dis%issal of an action refers to thatsituation +herein another action is pendin5 bet+een the sa%e parties for thesa%e cause of action and the second action beco%es unnecessar! andve&atious.K/4Le a5ree +ith the findin5s of the Court of Appeals that there isno litis pendenciaas the t+o cases involve dissi%ilar causes of action. 3hefirst case, no+ pendin5 +ith the 3hird Division, pertains to the alle5ed error ofthe N6RC in not upholdin5 the dis%issal of allthe striin5 e%plo!ees "not onl!of the * striers so declared to have lost their e%plo!%ent# in spite of thelatterUs rulin5 that the second strie +as ille5al. None of the respondentsherein +ere a%on5 those dee%ed ter%inated b! virtue of the N6RC decision.

In the instant case, the issue is the validit! of the retrench%enti%ple%ented b! 3i%esprior to the second stri&eand the subse$uentdis%issal of the striin5 e%plo!ees. As such, there can be no $uestion thatrespondents +ere still e%plo!ees of 3i%es +hen the! +ere retrenched. In

short, the outco%e of this case does not hin5e on the le5alit! of the secondstrie or the validit! of the dis%issal of the striin5 e%plo!ees, +hich issuesare !et to be resolved in :.R. Nos. /718))@)/. Conse$uentl!, litis

pendenciadoes not arise.

Anent the issue on +hether 3i%es perfected its appeal to the N6RC, theri5ht to appeal is a statutor! ri5ht and one +ho sees to avail of the ri5ht %ustco%pl! +ith the statute or rules. 3he rules for perfectin5 an appeal %ust bestrictl! follo+ed as the! are considered indispensable interdictions a5ainstneedless dela!s and for orderl! dischar5e of udicial business. K/9LSection *"a#,

Rule I of the N6RC Rules of Procedure outlines the re$uisites for perfectin5an appeal, to +itICO/NAQARIO!J.2

In this 3etition for Review on Certiorari$1%under Rule @ of the Rules of

Court! petitioners :illia& C. Hao! Sr.!


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3etitioners are incorporators and officers of MASAKANA KAS

COR3ORATION 4MASAKANA5! an entit* en(a(ed in the refillin(! sale and

distri)ution of


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Att*. +ienvenido I. So&era 0r. of Villara9a and An(an(co! on )ehalf of

a&on( others! $3etron Corporation 43BTRON5% and 3ilipinas Shell

3etroleu& Corporation 43S3C5! the authori9ed representative of Shell

International 3etroleu& Co&pan*


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Drive! +aran(a*


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8. $That% on ,- Fe)ruar* ,??7! I conducted another test/

)u* acco&panied )* Mr. +erna)e C. Ala'ar. = = = After choosin( the

c*linders! we were issued an order slip which we presented to the

cashier. pon pa*&ent! Cash Invoice No. #7"8 was issued coverin(

the cost of )oth KAS< and S>B


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latterEstradena&e as well as the &ar;s )elon(in( to Shell

International 3etroleu& Co&pan*!


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#.


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e. One 415 set of &otor co&pressor for fillin( s*ste&.

3ursuant to Search :arrant No. 7/,??7! the followin( articles were alsosei9ed2

a. Si= 4#5 filled 11 ;(.


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per'ur* when the* alle(ed in their sworn state&ents that

the* conducted a test/)u* on two occasions

7. The place to )e searched was not specified in the Search

:arrant as the place has an area of 1?!??? s6uare &eters

4one hectare5 &ore or less! for which reason the place to

)e searched &ust )e indicated with particularit*

@. The search warrant is characteri9ed as a (eneral warrant

as the ite&s to )e sei9ed as &entioned in the search

warrant are )ein( used in the conduct of the lawful

)usiness of respondents and the sa&e are not )ein( used

in refillin( Shellane and Kasul


111/175

conducted test/)u*s on MASAKANA that the search warrants in 6uestion are

not (eneral warrants )ecause the co&pound searched are solel* used and

occupied )* MASAKANA! and as such! there was no need to particulari9e the

areas within the co&pound that would )e searched and that the ite&s to )e

sei9ed in the su)'ect search warrants were sufficientl* descri)ed withparticularit* as the sa&e was li&ited to c*linder tan;s )earin( the trade&ar;s

KAS< and S>B


112/175

+ased on the fore(oin(! this Court finds no reason to distur) the

assailed Orders of the respondent 'ud(e. Krave a)use of discretion has

not )een proven to e=ist in this case.

:>BRBFORB! the petition is here)*D2M22>Dfor lac; of

&erit. The assailed orders )oth dated 0une ! ,??7 are here)*

AFFIRMBD.

3etitioners filed a Motion for Reconsideration $,1%of the Decision of the

Court of Appeals! )ut this was denied in its Resolution dated 1 0une ,?? for lac;

of &erit.$,,%

3etitioners filed the instant petition on the followin( (rounds2

I.

T>B >ONORA+AD

SFFICIBNT +ASIS IN DBCB BISTBNCB OF

3RO+A+B >ONORA+:IT>STANDINK >IS ORITH

III.

T>B >ONORA+


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T>B >ONORA+ :ARRANTS

T>BMSBO: NO AM+IKITH OF T>B ITBMS TO +B

SBIQBD

V.

T>B >ONORA+ ITS OFFICBRS AND

DIRBCTORS! >BNCB MASAKANA KAS COR3ORATION MAH

NOT +B CONSIDBRBD AS T>IRD 3ARTH COSB

RIK>TS :BRB VIOB


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that the findin(s of the +rand 3rotection Co&&ittee of 3ilipinas Shell were not

su)&itted nor presented to the RTC that althou(h

0ud(e Sadan( e=a&ined O)lanca and Ala'ar! the for&er did not as; e=haustive

6uestions and that the 6uestions 0ud(e Sadan( as;ed were &erel* rehash of the

contents of the affidavits of O)lanca and Ala'ar.$,%

These contentions are devoid of &erit.

Article III! Section ,! of the present Constitution states the re6uire&ents

)efore a search warrant &a* )e validl* issued! to wit2

Section . The ri(ht of the people to )e secure in their persons!

houses! papers! and effects a(ainst unreasona)le searches and sei9ures of

whatever nature and for an* purpose shall )e inviola)le! and no4-ar:arran3or warrant of arrest 4a77 44u- -;-3 uon ro


115/175

The facts and circu&stances )ein( referred thereto pertain to facts! data or

infor&ation personall* ;nown to the applicant and the witnesses he &a* present.$,-%The applicant or his witnesses &ust have personal ;nowled(e of the

circu&stances surroundin( the co&&ission of the offense )ein( co&plainedof. Relia)le infor&ationG is insufficient. Mere affidavits are not enou(h! and the

'ud(e &ust depose in writin( the co&plainant and his witnesses.$,8%

Section 1 of Repu)lic Act No. 8,"7 identifies the acts constitutin(

trade&ar; infrin(e&ent! thus2

SBC. 1.9emedie!0 n$rin"ement. An* person who shall!

without the consent of the owner of the re(istered &ar;2

1.1. se in co&&erce an* reproduction! counterfeit! cop*! or

colora)le i&itation of a re(istered &ar; or the sa&e container or a

do&inant feature thereof in connection with the sale! offerin( for sale!

distri)ution! advertisin( of an* (oods or services includin( other

preparator* steps necessar* to carr* out the sale of an* (oods or services

on or in connection with which such use is li;el* to cause confusion! or

to cause &ista;e! or to deceive or

1.,. Reproduce! counterfeit! cop* or colora)l* i&itate a

re(istered &ar; or a do&inant feature thereof and appl* such

reproduction! counterfeit! cop* or colora)le i&itation to la)els! si(ns!

prints! pac;a(es! wrappers! receptacles or advertise&ents intended to )e

used in co&&erce upon or in connection with the sale! offerin( for sale!

distri)ution! or advertisin( of (oods or services on or in connection with

which such use is li;el* to cause confusion! or to cause &ista;e! or to

deceive! shall )e lia)le in a civil action for infrin(e&ent )* the re(istrant

for the re&edies hereinafter set forth2Provided,That the infrin(e&ent

ta;es place at the &o&ent an* of the acts stated in Su)section 1.1 or

this su)section are co&&itted re(ardless of whether there is actual saleof (oods or services usin( the infrin(in( &aterial.

As can )e (leaned in Section 1.1! &ere unauthori9ed use of a container

)earin( a re(istered trade&ar; in connection with the sale! distri)ution or

advertisin( of (oods or services which is li+el%to cause confusion! &ista;e or
http://sc.judiciary.gov.ph/jurisprudence/2007/june2007/168306.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2007/june2007/168306.htm#_ftn28http://sc.judiciary.gov.ph/jurisprudence/2007/june2007/168306.htm#_ftn27http://sc.judiciary.gov.ph/jurisprudence/2007/june2007/168306.htm#_ftn28


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deception a&on( the )u*ersconsu&ers can )e considered as trade&ar;

infrin(e&ent.

In his sworn affidavits!$,"%O)lanca stated that )efore conductin( an

investi(ation on the alle(ed ille(al activities of MASAKANA! he reviewed thecertificates of trade&ar; re(istrations issued )* the 3hilippine Intellectual 3ropert*

Office in favor of 3etron and 3ilipinas Shell that he confir&ed

fro& 3etron and 3ilipinas Shell that MASAKANA is not authori9ed to sell! use!

refill or distri)ute KAS< and S>B


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. Certified true cop* of the Certificate of Re(istration No. 71@@7

for S>B


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B=tant fro& the fore(oin( testi&onial! docu&entar* and o)'ect evidence is

that O)lanca and Ala'ar have personal ;nowled(e of the fact that petitioners!

throu(h MASAKANA! have )een usin( the B


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difficult to )elieve that O)lanca and Ala'ar failed to &ention that the* used aliases

in enterin( the MASAKANA co&pound due to &ere oversi(ht.

It cannot )e (ainfull* said that O)lanca and Ala'ar are not co&petent to

testif* on the trade&ar;s infrin(ed )* the petitioners. As earlierdiscussed! O)lancadeclared under oath that )efore conductin( an investi(ation on

the alle(ed ille(al activities of MASAKANA! he reviewed the certificates of

trade&ar; re(istrations issued )* the 3hilippine Intellectual 3ropert* Office in

favor of 3etron and 3ilipinas Shell. These certifications of trade&ar; re(istrations

were attached )* O

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