Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-60502 July 16, 1991 PEDRO LOPEZ DEE, petitioner, vs. SECURITIES AND E C!ANGE COMMISSION, !EARING O""ICER EMMANUEL SISON, NAGA TELEP!ONE CO., INC., COMMUNICATION SER#ICES, INC., LUCIANO MAGGA$, AUGUSTO "EDERIS, NILDA RAMOS, "ELIPA JA#ALERA, DESIDERIO SAA#EDRA, respondents. G.R. No. L-6%922 July 16, 1991 JUSTINO DE JESUS, SR., PEDRO LOPEZ DEE, JULIO LOPEZ DEE, &'( #ICENTE TORDILLA, JR., petitioners, vs. INTERMEDIATE APPELLATE COURT, LUCIANO MAGGA$, NILDA I. RAMOS, DESIDERIO SAA#EDRA, AUGUSTO "EDERIS, ERNESTO MIGUEL, COMMUNICATION SER#ICES, INC., &'( NAGA TELEP!ONE COMPAN$, INC., respondents.

PARAS, J.:p These are petitions for certiorari with preliminar in!unction and"or restrainin# order which see$ to annul and set aside in% &'( ).R. No. *+,+-, the order ) of the hearin# officer dated Ma ., '/0-, settin# the date for the election of the directors to be held b the stoc$holders on Ma --, '/0-, in 1EC Case No. '2.0 entitled 3Pedro 4ope5 6ee v. Na#a Telephone Co., 7nc. et al.38 and &-( ).R. No. *9/--, the decision )) of the 7ntermediate Appellate Court dated April '., '/09 which annulled the !ud#ment of the trial court on the contempt char#e a#ainst the private respondents in ).R. No. 1P: '.0.*:R, entitled 34uciano Ma##a , et al. v. ;on. 6elfin <ir 1un#a, et al.3 As #athered from the records, the facts of these cases are as follows% Na#a Telephone Compan , 7nc. was or#ani5ed in '/,., the authori5ed capital was P'++,+++.++. 7n '/2. Na#a Telephone Co., 7nc. &Natelco for short( decided to increase its authori5ed capital to P9,+++,+++.++. As re=uired b the Public 1ervice Act, Natelco filed an application for the approval of the increased authori5ed capital with the then Board of Communications under B>C Case No. 2.: 0.. >n ?anuar 0, '/2,, a decision was rendered in said case, approvin# the said application sub!ect to certain conditions, amon# which was% 9. That the issuance of the shares of stoc$s will be for a period of one ear from the date hereof, 3after which no further issues will be made without previous authorit from this Board.3

Pursuant to the approval #iven b the then Board of Communications, Natelco filed its Amended Articles of 7ncorporation with the 1ecurities and E@chan#e Commission &1EC for short(. Ahen the amended articles were filed with the 1EC, the ori#inal authori5ed capital of P'++,+++.++ was alread paid. >f the increased capital of P-,/++,+++.++ the subscribers subscribed to P,0+,+++.++ of which P'.,,+++ was full paid. The capital stoc$ of Natelco was divided into -'9,+++ common shares and 02,+++ preferred shares, both at a par value of P'+.++ per shares. >n April '-, '/22, Natelco entered into a contract with Communication 1ervices, 7nc. &C17 for short( for the 3manufacture, suppl , deliver and installation3 of telephone e=uipment. 7n accordance with this contract, Natelco issued -.,+++ shares of common stoc$s to C17 on the same date as part of the downpa ment. >n Ma ,, '/2/, another '-,+++ shares of common stoc$s were issued to C17. 7n both instances, no prior authori5ation from the Board of Communications, now the National Telecommunications Commission, was secured pursuant to the conditions imposed b the decision in B>C Case N>. 2.:0. aforecited &Rollo, <ol. 777, Memorandum for private respondent Natelco, pp. 0'.:0'*(. >n Ma '/, '/2/, the stoc$holders of the Natelco held their annual stoc$holdersB meetin# to elect their seven directors to their Board of 6irectors, for the ear '/2/:'/0+. 7n this election Pedro 4ope5 6ee &6ee for short( was unseated as Chairman of the Board and President of the Corporation, but was elected as one of the directors, to#ether with his wife, Amelia 4ope5 6ee & Rollo, <ol. 777, Memorandum for private respondents, p. /0,8 p. -(. 7n the election C17 was able to #ain control of Natelco when the latterBs le#al counsel, Att . 4uciano Ma##a &Ma##a for short( won a seat in the Board with the help of C17. 7n the reor#ani5ation Att . Ma##a became president &Ibid., Memorandum for Private Respondent Natelco, p. 0''(. The followin# were elected in the Ma '/, '/2/ election% Att . 4uciano Ma##a , Mr. Au#usto Cederis, Mrs. Nilda Ramos, Ms. Celipa ?avalera, Mr. ?ustino de ?esus, 1r., Mr. Pedro 4ope5 6ee and Mrs Amelia C. 4ope5 6ee. The last three named directors never attended the meetin#s of the Ma##a Board. The members of the Ma##a Board who attended its meetin#s were Ma##a . Cederis, Ramos and ?avalera. The last two were and are C17 representatives & Ibid., p. 0'-(. Petitioner 6ee havin# been unseated in the election, filed a petition in the 1EC doc$eted as 1EC Case No. '2.0, =uestionin# the validit of the elections of Ma '/, '/2/ upon the main #round that there was no valid list of stoc$holders throu#h which the ri#ht to vote could be determined & Rollo, <ol. 7, pp. -,.:-*-:A(. As pra ed for in the petition &Ibid., p. -*-(, a restrainin# order was issued b the 1EC placin# petitioner and the other officers of the '/20:'/2/ Natelco Board in hold:over capacit &Rollo, <ol. 77, Repl , p. **2(. The 1EC restrainin# order was elevated to the 1upreme Court in ).R. No. ,+00, where the enforcement of the 1EC restrainin# order was restrained. Private respondents therefore, replaced the hold:over officers &Rollo, <ol. '', p. 0/2(. 6urin# the tenure of the Ma##a Board, from ?une --, '/2/ to March '+, '/0+, it did not reform the contract of April '-, '/22, and entered into another contract with C17 for the suppl and installation of additional e=uipment but also issued to C17 ''9,0++ shares of common stoc$ & Ibid., p. 0'-(. The shares of common stoc$ issued to C17 are as follows%

NO. OF SHARES DATE ISSUED

-.,+++ shares April '-, '/22

'-,+++ shares Ma ,, '/2/ -0,+++ shares >ctober -, '/2/ -0,,++ shares November ,, '/2/ -+,+++ shares November '., '/2/ -+,+++ shares ?anuar 2, '/0+ '*,,++ shares ?anuar -*, '/0+ './,+++ shares &Ibid., pp. 0'*:0'2(. 1ubse=uentl , the 1upreme Court dismissed the petition in ).R. No. ,+00, upon the #round that the same was premature and the Commission should be allowed to conduct its hearin# on the controvers . The dismissal of the petition resulted in the unseatin# of the Ma##a #roup from the board of directors of Natelco in a 3hold:over3 capacit &Rollo, <ol. 77, p. ,99(. 7n the course of the proceedin#s in 1EC Case No. '2.0, respondent hearin# officer issued an order on ?une -9, '/0', declarin#% &'( that C17 is a stoc$holder of Natelco and, therefore, entitled to vote8 &-( that une@plained '*,0,0 shares of Natelco appear to have been issued in e@cess to C17 which should not be allowed to vote8 &9( that 0- shareholders with their correspondin# number of shares shall be allowed to vote8 and &.( conse=uentl , orderin# the holdin# of special stoc$holderB meetin# to elect the new members of the Board of 6irectors for Natelco based on the findin#s made in the order as to who are entitled to vote &Rollo, <ol. ', pp. -00:-//(. Crom the fore#oin# order dated ?une -9, '/0', petitioner 6ee filed a petition for certiorari"appeal with the 1EC en banc. The petition"appeal was doc$eted as 1EC:AC N>. +9*. Thereafter, the Commission en banc rendered a decision on April ,, '/0-, the dispositive part of which leads% Now therefore, the Commission en banc resolves to sustain the order of the ;earin# >fficer8 to dismiss the petition"appeal for lac$ of merit8 and order new elections as the ;earin# >fficer shall set after consultations with Natelco officers. Cor the protection of minorit stoc$holders and in the interest of fair pla and !ustice, the ;earin# >fficer shall order the formation of a special committee of three, one from the respondents &other than Natelco(, one from petitioner, and the ;earin# >fficer as Chairman to supervise the election. 7t remains to state that the Commission en banc cannot pass upon motions belatedl filed b petitioner and respondent Natelco to introduce newl discovered evidence D an such evidence ma be introduced at hearin#s on the merits of 1EC Case No. '2.0. 1> >R6ERE6. &Rollo, <ol. 7, p. -.(.

>n April -', '/0-, petitioner filed a motion for reconsideration &Rollo, <ol. 7, pp. -,:9+(. 4i$ewise, private respondent Natelco filed its motion for reconsideration dated April -', '/0- & Ibid., pp. 9-:,'(. Pendin# resolution of the motions for reconsideration, on Ma ., '/0-, respondent healin# officer without waitin# for the decision of the commission en banc to become final and e@ecutor rendered an order statin# that the election for directors would be held on Ma --, '/0- & Ibid., pp. 9++:9+'(. >n Ma -+, '/0-, the 1EC en banc denied the motions for reconsideration &Rollo, <ol. 77, pp. 2*9: 2*,(. Meanwhile on Ma -+, '/0- &).R. No. *9/--(, petitioner Antonio <illasenor &as plaintiff( filed Civil Case No. ',+2 with the Court of Cirst 7nstance of Camarines 1ur, Na#a Cit , a#ainst private respondents and co:petitioners, de ?esus, Tordilla and the 6eeBs all defendants therein, which was raffled to Branch 7, presided over b ?ud#e 6elfin <ir 1un#a &Rollo, ).R. No. *9/--8 pp. -,:9+(. <illasenor claimed that he was an assi#nee of an option to repurchase 9*,+++ shares of common stoc$s of Natelco under a 6eed of Assi#nment e@ecuted in his favor & Rollo, p. 9'(. The defendants therein &now private respondents(, principall the Ma##a #roup, alle#edl refused to allow the repurchase of said stoc$s when petitioner <illasenor offered to defendant C17 the repurchase of said stoc$s b tenderin# pa ment of its price &Rollo, p. -* and p. 20(. The complaint therefore, pra ed for the allowance to repurchase the aforesaid stoc$s and that the holdin# of the Ma --, '/0- election of directors and officers of Natelco be en!oined &Rollo, pp. -0:-/(. A restrainin# order dated Ma -', '/0- was issued b the lower court commandin# desistance from the scheduled election until further orders &Rollo, p. 9-(. Nevertheless, on Ma --, '/0-, as scheduled, the controllin# ma!orit of the stoc$holders of the Natelco defied the restrainin# order, and proceeded with the elections, under the supervision of the 1EC representatives &Rollo, <ol. 777, p. /0,(8 p. '+8 ).R. No. *+,+-(. >n Ma -,, '/0-, the 1EC reco#ni5ed the fact that elections were dul held, and proclaimed that the followin# are the 3dul elected directors3 of the Natelco for the term '/0-:'/09% '. Celipa T. ?avalera -. Nilda 7. Ramos 9. 4uciano Ma##a .. Au#usto Cederis ,. 6aniel ?. 7lano *. Nelin ?. 7lano 1r. 2. Ernesto A. Mi#uel And, the followin# are the reco#ni5ed officers to wit% '. President 4uciano Ma##a -. <ice:President Nilda 7. Ramos

9. 1ecretar 6esiderio 1aavedra .. Treasurer Celipa ?avalera ,. Auditor 6aniel 7lano &Rollo, <ol. ', pp. 9+-:9+9( 6espite service of the order of Ma -,, '/0-, the 4ope5 6ee #roup headed b Messrs. ?ustino 6e ?esus and ?ulio 4ope5 6ee $ept insistin# no elections were held and refused to vacate their positions &Rollo, <ol. 777, p. /0,8 p. ''(. >n Ma -0, '/0-, the 1EC issued another order directin# the hold:over directors and officers to turn over their respective posts to the newl elected directors and officers and directin# the 1heriff of Na#a Cit , with the assistance of PC and 7NP of Na#a Cit , and other law enforcement a#encies of the Cit or of the Province of Camarines 1ur, to enforce the aforesaid order & Rollo, <ol. '', pp. ,22: ,20(. >n Ma -/, '/0-, the 1heriff of Na#a Cit , assisted b law enforcement a#encies, installed the newl elected directors and officers of the Natelco, and the hold:over officers peacefull vacated their respective offices and turned:over their functions to the new officers & Rollo, <ol. 777, p. /0,8 pp. '-:'9(. >n ?une -, '/0-, a char#e for contempt was filed b petitioner <illasenor alle#in# that private respondents have been claimin# in press conferences and over the radio airlanes that the actuall held and conducted elections on Ma --, '/0- in the Cit of Na#a and that the have a new set of officers, and that such acts of herein private respondents constitute contempt of court &).R. *9/--8 Rollo, pp. 9,:92(. >n 1eptember 2, '/0-, the lower court rendered !ud#ment on the contempt char#e, the dispositive portion of which reads% A;EREC>RE, !ud#ment is hereb rendered% '. 6eclarin# respondents, C17 Nilda Ramos, 4uciano Ma##a , 6esiderio 1aavedra, Au#usto Cederis and Ernesto Mi#uel, #uilt of contempt of court, and accordin#l punished with imprisonment of si@ &*( months and to pa fine of P',+++.++ each8 and -. >rderin# respondents, C17 Nilda Ramos, 4uciano Ma##a , 6esiderio 1aavedra, Au#usto Cederis and Ernesto Mi#uel, and those now occup in# the positions of directors and officers of NATE4C> to vacate their respective positions therein, and orderin# them to reinstate the hold:over directors and officers of NATE4C>, such as Pedro 4ope5 6ee as President, ?ustino de ?esus, 1r., as <ice President, ?ulio 4ope5 6ee as Treasurer and <icente Tordilla, ?r. as 1ecretar , and others referred to as hold:over directors and officers of NATE4C> in the order dated Ma -0, '/0- of 1EC ;earin# >fficer Emmanuel 1ison, in 1EC Case No. '2.0 &E@h. *(, b wa of RE1T7TET7>N, and conse=uentl , orderin# said respondents to turn over all records, propert and assets of NATE4C> to said hold:over directors and officers. &Ibid., Rollo, p. ./(.

The trial !ud#e issued an order dated 1eptember '+, '/0- directin# the respondents in the contempt char#e to 3compl strictl , under pain of bein# sub!ected to imprisonment until the do so3 & Ibid., p. ,+(. The order also commanded the 6eput Provincial 1heriff, with the aid of the PC Provincial Commander of Camarines 1ur and the 7NP 1tation Commander of Na#a Cit to 3ph sicall remove or oust from the offices or positions of directors and officers of NATE4C>, the aforesaid respondents &herein private respondents( . . . and to reinstate and maintain, the hold:over directors and officers of NATE4C> referred to in the order dated Ma -0, '/0- of 1EC ;earin# >fficer Emmanuel 1ison.3 &Ibid.(. Private respondents filed on 1eptember '2, '/0-, a petition for certiorari and prohibition with preliminar in!unction or restrainin# order a#ainst the CC7 ?ud#e of Camarines 1ur, Na#a Cit and herein petitioners, with the then 7ntermediate Appellate Court which issued a resolution orderin# herein petitioners to comment on the petition, which was complied with, and at the same time temporaril refrained from implementin# and"or enforcin# the =uestioned !ud#ment and order of the lower court &Rollo, p. 22(, 6ecision of CA, p. -(. >n April '., '/09, the then 7ntermediate Appellate Court, rendered a decision, the dispositive portion of which reads% A;EREC>RE, !ud#ment is hereb rendered as follows% '. Annulin# the !ud#ment dated 1eptember 2, '/0- rendered b respondent !ud#e on the contempt char#e, and his order dated 1eptember '+, '/0-, implementin# said !ud#ment8 -. >rderin# the 3hold:over3 directors and officers of NATE4C> to vacate their respective offices8 9. 6irectin# respondents to restore or re:establish petitioners &private respondents in this case( who were e!ected on Ma --, '/0- to their respective offices in the NATE4C>, . . .8 .. Prohibitin# whoever ma be the successor of respondent ?ud#e from interferin# with the proceedin#s of the 1ecurities and E@chan#e Commission in 1E:CAC No. +9*8 @@@ @@@ @@@ &Rollo, p. 00(. The order of re:implementation was issued, and, finall , the Ma##a #roup has been restored as the officers of the Natelco &Rollo, ).R. No. *+,+-, p. /0,8 p. 92(. ;ence, these petitions involve the same parties and practicall the same issues. Conse=uentl , in the resolution of the Court En Banc dated Au#ust -9, '/09, ).R. No. *9/-- was consolidated with ).R. No. *+,+-. 7n ).R. No. *+,+- D 7n a resolution issued b the Court En Banc dated March --, '/09, the Court #ave due course to the petition and re=uired the parties to submit their respective memoranda &Rollo, Resolution, p. *90:A8 <ol. 77(.

In G.R. No. 6050 The main issues in this case are% &'( Ahether or not the 1ecurities and E@chan#e Commission has the power and !urisdiction to declare null and void shares of stoc$ issued b NATE4C> to C17 for violation of 1ec. -+ &h( of the Public 1ervice Act8 &-( Ahether or not the issuance of ''9,0++ shares of Natelco to C17 made durin# the pendenc of 1EC Case No. '2.0 in the 1ecurities and E@chan#e Commission was valid8 &9( Ahether or not Natelco stoc$holders have a ri#ht of preemption to the ''9,0++ shares in =uestion8 and &.( Ahether or not the private respondents were dul elected to the Board of 6irectors of Natelco at an election held on Ma --, '/0-. In G.R. No. 6!" The crucial issue to be resolved is whether or not the trial !ud#e has !urisdiction to restrain the holdin# of an election of officers and directors of a corporation. The petitions are devoid of merit. In G.R. No. 6050 7 7t is the contention of petitioner that the 1ecurities and E@chan#e Commission En Banc committed #rave abuse of discretion when, in its decision dated April ,, '/0-, in 1EC:AC No. +9*, it refused to declare void the shares of stoc$ issued b Natelco to C17 alle#edl in violation of 1ec. -+ &h( of the Public 1ervice Act. This section re=uires prior administrative approval of an transfer or sale of shares of stoc$ of an public service which vest in the transferee more than fort #ercent$% of the subscribed capital of the said public service. 1ection , of P.6. No. /+-:A, as amended, enumerates the !urisdiction of the 1ecurities and E@chan#e Commission% 1ec. ,. 7n addition to the re#ulator and ad!udicative functions of the 1ecurities and E@chan#e Commission over Corporations, partnerships and other forms of associations, re#istered with it as e@pressl #ranted under the e@istin# laws and decrees, it shall have ori#inal and e@clusive !urisdiction to hear and decide cases involvin#% a( 6evices or schemes emplo ed b or an acts, of the board of directors, business associates, its officers or partners, amountin# to fraud and misrepresentation which ma be detrimental to the interest of the public and"or of the stoc$holders, partners, members of associations or or#ani5ations re#istered with the Commission. &b( Controversies arisin# out of intra:corporate or partnership relations, between and amon# stoc$holders, members, or associates8 between an or all of them and the corporation, partnership or association of which the are stoc$holders, members or associates, respectivel 8 and between such corporation, partnership or association

and the state insofar as it concerns their individual franchise or ri#ht to e@ist as such entit 8 c( Controversies in the election or appointments of directors, trustees, officers or mana#ers of such corporations, partnerships or associations. d( Petitions of corporations, partnerships or associations to be declared in the state of suspension of pa ments in cases where the corporation, partnership or association possesses sufficient propert to cover all its debts but foresees the impossibilit of meetin# them when the respectivel fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the mana#ement of a Rehabilitation Receiver or Mana#ement Committee created pursuant to this 6ecree, &As added b P6 '2,0( 7n other words, in order that the 1EC can ta$e co#ni5ance of a case, the controvers must pertain to an of the followin# relationships% &a( between corporation, partnership or association and the public8 &b( between the corporation, partnership, or association and its stoc$holders, partners, members or officers8 &c( between the corporation, partnership or association and the state insofar as its franchise, permit or license to operate is concerned8 and &d( amon# the stoc$holders, partners, or associates themselves &Enion )lass F Container Corp. vs. 1EC, '-* 1CRA 9' G'/09H(. The !urisdiction of the 1EC is limited to matters intrinsicall connected with the re#ulation of corporations, partnerships and associations and those dealin# with internal affairs of such entities8 P.6. /+-:A does not confer !urisdiction to 1EC over all matters affectin# corporations &Pere ra vs. 7AC, '0' 1CRA -.. G'//+H8 1ales vs. 1EC, '*/ 1CRA '-' G'/0/H(. The !urisdiction of the 1EC in 1EC Case No. '2.0 is limited to decidin# the controvers in the election of the directors and officers of Natelco. Thus, the 1EC was correct when it refused to rule on whether the issuance of the shares of Natelco stoc$s to C17 violated 1ec. -+ &h( of the Public 1ervice Act. The 1EC rulin# as to the issue involvin# the Public 1ervice Act, 1ection -+ &h(, asserts that the Commission En Banc is not empowered to #rant much less cancel franchise for telephone and communications, and therefore has no authorit to rule that the issuance and sale of shares would in effect constitute a violation of NatelcoBs secondar franchise. 7t would be in e@cess of !urisdiction on our part to decide that a violation of our public service laws has been committed. The matter is better brou#ht to the attention of the appropriate bod for determination. Neither can the 1EC #ro&i'ionall( decide the issue because it is onl vested with the power to #rant or revo$e the primar corporate franchise. The 1EC is empowered b P.6. /+-:A to decide intra:corporate controversies and that is precisel the onl issue in this case. 77 The issuance of ''9,0++ shares of Natelco stoc$ to C17 made durin# the pendenc of 1EC Case No. '2.0 in the 1ecurities and E@chan#e Commission was valid. The findin#s of the 1EC En Banc as to the issuance of the ''9,0++ shares of stoc$ was stated as follows% B$t t)e i''$ance o* ++!,,00 ')are' -ere .'ic/ #$r'$ant to a Board Re'ol$tion and 'toc0)older'1 a##ro&al #rior to 2a( +", +"3" -)en 4SI -a' not (et in control o* t)e Board or o* t)e &otin5 ')are'. There is distinction between an order to i''$e shares on or before Ma '/, '/2/ and act$al i''$anceof the shares after Ma '/, '/2/. The actual issuance, it is true, came durin# the period when C17 was in control of votin#

shares and the Board &if the were in fact in control but onl pursuant to the ori#inal Board and stoc$holdersB orders, not on the initiative to the new Board, elected Ma '/, '/2/, which petitioners are =uestionin#. The Commission en banc finds it difficult to see how the one who #ave the orders can turn around and impu#n the implementation of the orders lie had previousl #iven. The reformation of the contract is understandable for Natelco lac$ed the corporate funds to purchase the C17 e=uipment. @@@ @@@ @@@ Appellant had raise the issue whether the issuance of ''9,0++ shares of stoc$ durin# the incumbenc of the Ma##a Board which was alle#edl C17 controlled, and while the case was '$b 6$dice, amounted to unfair and undue advanta#e. This does not merit consideration in the absence of additional evidence to support the proposition. 7n effect, therefore, the stoc$holders of Natelco approved the issuance of stoc$ to C17 777 Ahile the #roup of 4uciano Ma##a was in control of Natelco b virtue of the restrainin# order issued in ).R. No. ,+00,, the Ma##a Board issued ''9,0++ shares of stoc$ to C17 Petitioner said that the Ma##a Board, in issuin# said shares without notif in# Natelco stoc$holders, violated their ri#ht of pre:emption to the unissued shares. This Court in Benito &'. SE4, et al., has ruled that% Petitioner bewails the fact that in view of the lac$ of notice to him of such subse=uent issuance, he was not able to e@ercise his ri#ht of pre:emption over the unissued shares. ;owever, the #eneral rule is that pre:emptive ri#ht is reco#ni5ed onl with respect to new issues of shares, and not with respect to additional issues of ori#inall authori5ed shares. This is on the theor that when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authori5ed to issue. An ori#inal subscriber is deemed to have ta$en his shares $nowin# that the form a definite proportionate part of the whole number of authori5ed shares. Ahen the shares left unsubscribed are later re:offered, he cannot therefore & 'ic( claim a dilution of interest &Benito vs. 1EC, et al., '-9 1CRA 2--(. The =uestioned issuance of the ''9,0++ stoc$s is not invalid even assumin# that it was made without notice to the stoc$holders as claimed b the petitioner. The power to issue shares of stoc$s in a corporation is lod#ed in the board of directors and no stoc$holders meetin# is re=uired to consider it because additional issuance of shares of stoc$s does not need approval of the stoc$holders. Conse=uentl , no pre:emptive ri#ht of Natelco stoc$holders was violated b the issuance of the ''9,0++ shares to C17. 7< Petitioner insists that no meetin# and election were held in Na#a Cit on Ma --, '/0- as directed b respondent ;earin# >fficer. This fact is shown b the 1heriffs return of a restrainin# order issued b the Court of Cirst 7nstance of Camarines 1ur in Case No. ',+, entitled 3Antonio <illasenor v. Communications 1ervice 7nc, et al.3 &Rollo, <ol. ', p. 9+/(.

There is evidence of the fact that the Natelco special stoc$holdersB meetin# and election of members of the Board of 6irectors of the corporation were held at its office in Na#a Cit on Ma --, '/0- as shown when the ;earin# >fficer issued an order on Ma -,, '/0-, declarin# the stoc$holders named therein as corporate officers dul elected for the term '/0-:'/09. More than that, private respondents were in fact char#ed with contempt of court and found #uilt for holdin# the election on Ma --, '/0-, in defiance of the restrainin# order issued b ?ud#e 1un#a &Rollo, <ol. 77, p. 2,+(. 7t is, therefore, ver clear from the records that an election was held on Ma --, '/0- at the Natelco >ffices in Na#a Cit and its officers were dul elected, thereb renderin# the issue of election moot and academic, not to mention the fact that the election of the Board of 6irectors">fficers has been held annuall , while this case was dra##in# for almost a decade. The contempt char#e a#ainst herein private respondents was predicated on their failure to compl with the restrainin# order issued b the lower court on Ma -', '/0-, en!oinin# them from holdin# the election of officers and directors of Natelco scheduled on Ma --, '/0-. The 1EC en banc, in its decision of April ,, '/0-, directed the holdin# of a new election which, throu#h a conference attended b the hold:over directors of Natelco accompanied b their law ers and presided b a 1EC hearin# officer, was scheduled on Ma --, '/0- &Rollo, p. ,/(. Contrar to the claim of petitioners that the case is within the !urisdiction of the lower court as it does not involve an intra:corporate matter but merel a claim of a private part of the ri#ht to repurchase common shares of stoc$ of Natelco and that the restrainin# order was not meant to stop the election dul called for b the 1EC, it is undisputed that the main ob!ective of the lower courtBs order of Ma -', '/0- was precisel to restrain or stop the holdin# of said election of officers and directors of Natelco, a matter purel within the e@clusive !urisdiction of the 1EC &P.6. No. /+-:A, 1ection ,(. The said restrainin# order reads in part% . . . A temporar restrainin# order is hereb issued, directin5 de*endant' &herein respondents(, their a#ents, attorne s a' -ell a' an( and all #er'on', -)et)er #$blic o**icer' or private individuals to de'i't from conductin# and holdin#, in an manner whatsoever, an election of the directors and officers of the Na#a Telephone Co. &Natelco(. . . . &Rollo, P. 9-(. 7ndubitabl , the aforesaid restrainin# order, aimed not onl to prevent the stoc$holders of Natelco from conductin# the election of its directors and officers, but it also amounted to an in!unctive relief a#ainst the 1EC, since it is clear that even 3public officers3 &such as the ;earin# >fficer of the 1EC( are commanded to desist from conductin# or holdin# the election 3under pain of punishment of contempt of court3 &Ibid.( The fact that the 1EC or an of its officers has not been cited for contempt, alon# with the stoc$holders of Natelco, who chose to heed the lawful order of the 1EC to #o on with the election as scheduled b the latter, is of no moment, since it was precisel the acts of herein private respondents done pursuant to an order lawfull issued b an administrative bod that have been considered as contemptuous b the lower court promptin# the latter to cite and punish them for contempt &Rollo, p. .0(. Noteworth is the pertinent portion of the !ud#ment of the lower court which states% Certainl , this Court will not tolerate, or much less countenance, a mere ;earin# >fficer of the 1ecurities and E@chan#e Commission, to render a restrainin# order issued b it &said Court( within its !urisdiction, nu#ator and ineffectual and abet disobedience and even defiance b individuals and entities of the same. . . . & Rollo, p. .0(.

Cinall , in the case of Philippine Pacific Cishin# Co., 7nc. vs. 4una, '- 1CRA *+., *'9 G'/09H, this Tribunal stated clearl the followin# rule% No-)ere doe' t)e la- &P.6. No. /+-:A( e%#o-er an Court of Cirst 7nstance to interfere with the orders of the Commission &1EC(. Not e&en on 5ro$nd' o* d$e #roce'' or 6$ri'diction. The Commission is, concedin# ar#uendo a possible claim of respondents, at the ver least, a co7e8$al bod( with the Courts of Cirst 7nstance. Even a' '$c) co7e8$al, one -o$ld )a&e no #o-er to control t)e ot)er . But the truth of the matter is that onl the 1upreme Court can en!oin and correct an actuation of the Commission. Accordin#l , it is clear that since the trial !ud#e in the lower court &CC7 of Camarines 1ur( did not have !urisdiction in issuin# the =uestioned restrainin# order, disobedience thereto did not constitute contempt, as it is necessar that the order be a valid and le#al one. 7t is an established rule that the court has no authorit to punish for disobedience of an order issued without authorit &Chanco v. Madrile!os, / Phil. 9,*8 An#el ?ose Realt Corp. v. )alao, et al., 2* Phil. -+'(. Cinall , it is well:settled that the power to punish for contempt of court should be e@ercised on the preservative and not on the vindictive principle. >nl occasionall should the court invo$e its inherent power in order to retain that respect without which the administration of !ustice must falter or fail &Rivera v. Clorendo, '.. 1CRA *.9, **-:**9 G'/0*H8 4ipata v. Tutaan, '-. 1CRA 00+ G'/09H(. PREM71E1 C>N176ERE6, both petitioners are hereb 671M711E6 for lac$ of merit. 1> >R6ERE6.

Republic of the Philippines SUPREME COURT Manila 1EC>N6 67<717>N G.R. No. 1*666+ J&'u&,y 2%, 200+

JO!N ". M-LEOD, Petitioner, vs. NATIONAL LA.OR RELATIONS COMMISSION /"0,12 D03010o'4, "ILIPINAS S$NT!ETIC "I.ER CORPORATION /"ILS$N4, "AR EASTERN TE TILE MILLS, INC., STA. ROSA TE TILES, INC., /PEGG$ MILLS, INC.4, PATRICIO L. LIM, &'( ERIC !U, Respondents. 6EC717>N CARPIO, J.: The Case This is a petition for review' to set aside the 6ecision- dated ', ?une -+++ and the Resolution9 dated -2 6ecember -+++ of the Court of Appeals in CA:).R. 1P No. ,,'9+. The Court of Appeals affirmed

with modification the -/ 6ecember '//0 6ecision. of the National 4abor Relations Commission &N4RC( in N4RC NCR +-:++/./:/,. The Cacts The facts, as summari5ed b the 4abor Arbiter and adopted b the N4RC and the Court of Appeals, are as follows% >n Cebruar -, '//,, ?ohn C. Mc4eod filed a complaint for retirement benefits, vacation and sic$ leave benefits, non:pa ment of unused airline tic$ets, holida pa , underpa ment of salar and '9th month pa , moral and e@emplar dama#es, attorne Is fees plus interest a#ainst Cilipinas 1 nthetic Corporation &Cils n(, Car Eastern Te@tile Mills, 7nc., 1ta. Rosa Te@tiles, 7nc., Patricio 4im and Eric ;u. 7n his Position Paper, complainant alle#ed that he is an e@pert in te@tile manufacturin# process8 that as earl as '/,* he was hired as the Assistant 1pinnin# Mana#er of Eniversal Te@tiles, 7nc. &ETEJ(8 that he was promoted to 1enior Mana#er and wor$ed for ETEJ till '/0+ under its President, respondent Patricio 4im8 that in '/20 Patricio 4im formed Pe## Mills, 7nc. with respondent Cils n havin# controllin# interest8 that complainant was absorbed b Pe## Mills as its <ice President and Plant Mana#er of the plant at 1ta. Rosa, 4a#una8 that at the time of his retirement complainant was receivin# P*+,+++.++ monthl with vacation and sic$ leave benefits8 '9th month pa , holida pa and two round trip business class tic$ets on a Manila:4ondon:Manila itinerar ever three ears which is convertible to casGhH if unused8 that in ?anuar '/0*, respondents failed to pa vacation and leave credits and re=uested complainant to wait as it was short of funds but the same remain unpaid at present8 that complainant is entitled to such benefit as per CBA provision &Anne@ 3A3(8 that respondents li$ewise failed to pa complainantIs holida pa up to the present8 that complainant is entitled to such benefits as per CBA provision &Anne@ 3B3(8 that in '/0/ the plant union sta#ed a stri$e and in '//9 was found #uilt of sta#in# an ille#al stri$e8 that from '/0/ to '//- complainant was entitled to . round trip business class plane tic$ets on a Manila:4ondon:Manila itinerar but this benefit not &sic( its monetar e=uivalent was not #iven8 that on Au#ust '//+ the respondents reduced complainantIs monthl salar of P*+,+++.++ b P/,/++.++ till November '//9 or a period of 9/ months8 that in '//' Cils n sold Pe## Mills, 7nc. to Car Eastern Te@tile Mills, 7nc. as per a#reement &Anne@ 363( and this was renamed as 1ta. Rosa Te@tile with Patricio 4im as Chairman and President8 that complainant wor$ed for 1ta. Rosa until November 9+ that from time to time the owners of Car Eastern consulted with complainant on technical aspects of reoperation of the plant as per correspondence &Anne@es 36:'3 and 36:-3(8 that when complainant reached and applied retirement a#e at the end of '//9, he was onl #iven a reduced '9th month pa ofP..,'09.*9, leavin# a balance of P',,0'*.028 that thereafter the owners of Car Eastern Te@tiles decided for cessation of operations of 1ta. Rosa Te@tiles8 that on two occasions, complainant wrote letters &Anne@es 3E:'3 to 3E:-3( to Patricio 4im re=uestin# for his retirement and other benefits8 that in the last =uarter of '//. respondents offered complainant compromise settlement of onl P9++,+++.++ which complainant re!ected8 that a#ain complainant wrote a letter &Anne@ 3C3( reiteratin# his demand for full pa ment of all benefits and to no avail, hence this complaint8 and that he is entitled to all his mone claims pursuant to law. >n the other hand, respondents in their Position Paper alle#ed that complainant was the former <ice:President and Plant Mana#er of Pe## Mills, 7nc.8 that he was hired in ?une '/0+ and Pe## Mills closed operations due to irreversible losses at the end of ?ul '//- but the corporation still e@ists at present8 that its assets were ac=uired b 1ta. Rosa Te@tile Corporation which was established in April '//- but still remains non:operational at present8 that complainant was hired as consultant b 1ta. Rosa Te@tile in November '//- but he resi#ned on November 9+, '//98 that Cils n and Car Eastern Te@tiles are separate le#al entities and have no emplo er relationship with

complainant8 that respondent Patricio 4im is the President and Board Chairman of 1ta. Rosa Te@tile Corporation8 that respondent Eric ;u is a Taiwanese and is 6irector of 1ta. Rosa Te@tiles, 7nc.8 that complainant has no cause of action a#ainst Cils n, Car Eastern Te@tile 4td., 1ta. Rosa Te@tile Corporation and Eric ;u8 that 1ta. Rosa onl ac=uired the assets and not the liabilities of Pe## Mills, 7nc.8 that Patricio 4im was onl impleaded as Board Chairman of 1ta. Rosa Te@tile and not as private individual8 that while complainant was <ice President and Plant Mana#er of Pe## Mills, the union sta#ed a stri$e up to ?ul '//- resultin# in closure of operations due to irreversible losses as per Notice &Anne@ 3'3(8 that complainant was relied upon to settle the labor problem but due to his lac$ of attention and absence the stri$e continued resultin# in closure of the compan 8 and losses to 1ta. Rosa which ac=uired its assets as per their financial statements &Anne@es 3-3 and 393(8 that the attendance records of complainant from April '//- to November '//9 &Anne@es 3.3 and 3,3( show that he was either absent or wor$ed at most two hours a da 8 that 1ta. Rosa and Pe## Mills are interposin# counterclaims for dama#es in the total amount of P9*,2,2.++ a#ainst complainant8 that complainantIs monthl salar at Pe## Mills was P,+,./,.++ and not P*+,+++.++8 that Pe## Mills, does not have a retirement pro#ram8 that whatever amount complainant is entitled should be offset with the counterclaims8 that complainant wor$ed onl for '- ears from '/0+ to '//-8 that complainant was onl hired as a consultant and not an emplo ee b 1ta. Rosa Te@tile8 that complainantIs attendance record of absence and two hours dail wor$ durin# the period of the stri$e wipes out an vacation"sic$ leave he ma have accumulated8 that there is no basis for complainantIs claim of two &-( business class airline tic$ets8 that complainantIs pa alread included the holida pa 8 that he is entitled to holida pa as consultant b 1ta. Rosa8 that he has waived this benefit in his '- ears of wor$ with Pe## Mills8 that he is not entitled to '9th month pa as consultant8 and that he is not entitled to moral and e@emplar dama#es and attorne Is fees. 7n his Repl , complainant alle#ed that all respondents bein# one and the same entities are solidaril liable for all salaries and benefits and complainant is entitled to8 that all respondents have the same address at '-"C B.A. 4epanto Buildin#, Ma$ati Cit 8 that their counsel holds office in the same address8 that all respondents have the same offices and $e personnel such as Patricio 4im and Eric ;u8 that respondentsI Position Paper is verified b Marialen C. Corpu5 who $nows all the corporate officers of all respondents8 that the veil of corporate fiction ma be pierced if it is used as a shield to perpetuate fraud and confuse le#itimate issues8 that complainant never accepted the chan#e in his position from <ice:President and Plant Man#er to consultant and it is incumbent upon respondents to prove that he was onl a consultant8 that the 6eed of 6ation in Pa ment with 4ease &Anne@ 3C3( proves that 1ta. Rosa too$ over the assets of Pe## Mills as earl as ?une ',, '//- and not '//, as alle#ed b respondents8 that complainant never resi#ned from his !ob but applied for retirement as per letters &Anne@es 3E:'3, 3E:-3 and 3C3(8 that documents 3)3, 3;3 and 373 show that Eric ;u is a top official of Pe## Mills that the closure of Pe## Mills cannot be the fault of complainant8 that the stri$e was sta#ed on the issue of CBA ne#otiations which is not part of the usual duties and responsibilities as Plant Mana#er8 that complainant is a British national and is prohibited b law in en#a#in# in union activities8 that as per Resolution &Anne@ 393( of the N4RC in the proper case, complainant testified in favor of mana#ement8 that the alle#ed attendance record of complainant was lifted from the lo#boo$ of a securit a#enc and is hearsa evidence8 that in the other attendance record it shows that complainant was reportin# dail and even on 1aturda s8 that his limited hours was due to the stri$e and cessation of operations8 that as plant mana#er complainant was on call -. hours a da 8 that respondents must pa complainant the unpaid portion of his salaries and his retirement benefits that cash voucher No. '2+', &Anne@ 3K3( shows that complainant drew the monthl salar of P*+,+++.++ which was reduced to P,+,./,.++ in Au#ust '//+ and therefore without the consent of complainant8 that complainant was assured that he will be paid the deduction as soon as the compan improved its financial standin# but this assurance was never fulfilled8 that Patricio 4im promised complainant his retirement pa as per the latterIs letters &Anne@es 3E:'3, 3E:-3 and 3C3(8 that the law itself provides for retirement benefits8 that Patricio 4im b wa of Memorandum &Anne@ 3M3( approved vacation and sic$ leave benefits of -- da s per ear effective '/0*8 that Pe## Mills re=uired monthl paid emplo ees to si#n an ac$nowled#ement that their monthl

compensation includes holida pa 8 that complainant was not made to si#n this underta$in# precisel because he is entitled to holida pa over and above his monthl pa 8 that the compan paid for complainantIs two &-( round trip tic$ets to 4ondon in '/09 and '/0* as reflected in the complainantIs passport &Anne@ 3N3(8 that respondents claim that complainant is not entitled to '9th month pa but paid in '//9 and all the past '9 ears8 that complainant is entitled to moral and e@emplar dama#es and attorne Is fees8 that all doubts must be resolved in favor of complainant8 and that complainant reserved the ri#ht to file per!ur cases a#ainst those concerned. 7n their Repl , respondents alle#ed that e@cept for Pe## Mills, the other respondents are not proper persons in interest due to the lac$ of emplo er:emplo ee relationship between them and complainant8 that undersi#ned counsel does not represent Pe## Mills, 7nc. 7n a separate Position Paper, respondent Pe## Mills alle#ed that complainant was hired on Cebruar '+, '//' as per Board Minutes &Anne@ 3A3(8 that on Au#ust '/, '/02, the wor$ers sta#ed an ille#al stri$e causin# cessation of operations on ?ul -', '//-8 that respondent filed a Notice of Closure with the 6>4E &Anne@ 3B3(8 that all emplo ees were #iven separation pa e@cept for complainant whose tas$ was e@tended to 6ecember 9', '//- to wind up the affairs of the compan as per vouchers &Anne@es 3C3 and 3C:'3(8 that respondent offered complainant his retirement benefits under RA 2*.' but complainant refused8 that the re#ular salaries of complainant from closure up to 6ecember 9', '//- have offset whatever vacation and sic$ leaves he accumulated8 that his claim for unused plane tic$ets from '/0/ to '//- has no polic basis, the compan Is formula of emplo ees monthl rate @ 9'. da s over '- months alread included holida pa 8 that complainantIs unpaid portion of the '9th month pa in '//9 has no basis because he was onl an emplo ee up to 6ecember 9', '//-8 that the '9th month pa was based on his last salar 8 and that complainant is not entitled to dama#es., >n 9 April '//0, the 4abor Arbiter rendered his decision with the followin# dispositive portion% A;EREC>RE, premises considered, Ae hold all respondents as !ointl and solidaril liable for complainantIs mone claims as ad!udicated above and computed below as follows% Retirement Benefits &one month salar for ever *"0+ : ''"9+"/9 L '. ears P*+,+++ @ '..+ mos. MMMMMMMM P0.+,+++.++ <acation and 1ic$ 4eave &9 rs.( P-,+++.++ @ -- da s @ 9 rs. MMMMM '9-,+++.++ Enderpa ment of 1alaries &9 rs.( P*+,+++ : P,+,./, L P/,,+, P /,,+, @ 9*.+ mos. MMMMMMM... 9.-,'0+.++ ;olida Pa &9 rs.( P-,+++ @ 9+ da s MMMMMMMMM. *+,+++.++ ear of service(

Enderpa ment of '9th month pa &'//9( MM... ',,0'*.02 Moral 6ama#es MMMMMMMMMMMM.. 9,+++,+++.++ E@emplar 6ama#es MMMMMMMMMM.. ',+++,+++.++ '+N Attorne Is Cees MMMMMMMMMM. '90,///.*0 T>TA4 P,,,-0,//*.,, Enused Airline Tic$ets &9 rs.( &To be converted in Peso upon pa ment( O-,.,+.++ @ 9.+ G rs.H..MMMMMM O2,9,+.++ 1> >R6ERE6.* Cilipinas 1 nthetic Ciber Corporation &Cils n(, Car Eastern Te@tile Mills, 7nc. &CETM7(, 1ta. Rosa Te@tiles, 7nc. &1RT7(, Patricio 4. 4im &Patricio(, and Eric ;u appealed to the N4RC. The N4RC rendered its decision on -/ 6ecember '//0, thus% A;EREC>RE, the 6ecision dated 9 April '//0 is hereb RE<ER1E6 and 1ET A176E and a new one is entered >R6ER7N) respondent Pe## Mills, 7nc. to pa complainant his retirement pa e=uivalent to --., da s for ever ear of service for his twelve &'-( ears of service from '/0+ to '//- based on a salar rate of P,+,./,.++ a month. All other claims are 671M711E6 for lac$ of merit. 1> >R6ERE6.2 ?ohn C. Mc4eod &Mc4eod( filed a motion for reconsideration which the N4RC denied in its Resolution of 9+ ?une '///.0 Mc4eod thus filed a petition for certiorari before the Court of Appeals assailin# the decision and resolution of the N4RC./ The Rulin# of the Court of Appeals >n ', ?une -+++, the Court of Appeals rendered !ud#ment as follows% A;EREC>RE, the decision dated 6ecember -/, '//0 of the N4RC is hereb ACC7RME6 with the M>67C7CAT7>N that respondent Patricio 4im is !ointl and solidaril liable with Pe## Mills, 7nc., to pa the followin# amounts to petitioner ?ohn C. Mc4eod% '. retirement pa e=uivalent to --., da s for ever ear of service for his twelve &'-( ears of service from '/0+ to '//- based on a salar rate of P,+,./,, a month8 -. moral dama#es in the amount of one hundred thousand &P'++,+++.++( Pesos8 9. e@emplar dama#es in the amount of fift thousand &P,+,+++.++( Pesos8 and

.. attorne Is fees e=uivalent to '+N of the total award. No costs is awarded. 1> >R6ERE6.'+ The Court of Appeals re!ected Mc4eodIs theor that all respondent corporations are the same corporate entit which should be held solidaril liable for the pa ment of his monetar claims. The Court of Appeals ruled that the fact that &'( all respondent corporations have the same address8 &-( all were represented b the same counsel, Att . 7sidro 1. Escano8 &9( Att . Escano holds office at respondent corporationsI address8 and &.( all respondent corporations have common officers and $e personnel, would not !ustif the application of the doctrine of piercin# the veil of corporate fiction. The Court of Appeals held that there should be clear and convincin# evidence that 1RT7, CETM7, and Cils n were bein# used as alter e#o, ad!unct or business conduit for the sole benefit of Pe## Mills, 7nc. &PM7(, otherwise, said corporations should be treated as distinct and separate from each other. The Court of Appeals pointed out that the Articles of 7ncorporation of PM7 show that it has si@ incorporators, namel , Patricio, ?ose Pulo, ?r., Carlos Palanca, ?r., Cesar R. Concio, ?r., E. A. Picasso, and Aalter Eu an#. >n the other hand, the Articles of 7ncorporation of Cils n show that it has '+ incorporators, namel , ?esus P. Pu!uico, Carlos Palanca, ?r., Patricio, An# Ben# Eh, Ramon A. Pulo, ;onorio Poblador, ?r., Cipriano A5ada, Manuel Tomacru5, 7smael Manin#as, and Beni#no Qialcita, ?r. The Court of Appeals pointed out that PM7 and Cils n have onl two interloc$in# incorporators and directors, namel , Patricio and Carlos Palanca, ?r. Reiteratin# the rulin# of this Court in 4a#uio v. N4RC,'' the Court of Appeals held that mere substantial identit of the incorporators of two corporations does not necessaril impl fraud, nor warrant the piercin# of the veil of corporate fiction. The Court of Appeals also pointed out that when 1RT7 and PM7 e@ecuted the 6ation in Pa ment with 4ease, it was clear that 1RT7 did not assume the liabilities PM7 incurred before the e@ecution of the contract. The Court of Appeals held that Mc4eod failed to substantiate his claim that all respondent corporations should be treated as one corporate entit . The Court of Appeals thus upheld the N4RCIs findin# that no emplo er:emplo ee relationship e@isted between Mc4eod and respondent corporations e@cept PM7. The Court of Appeals ruled that Eric ;u, as an officer of PM7, should be e@onerated from an liabilit , there bein# no proof of malice or bad faith on his part. The Court of Appeals, however, ruled that Mc4eod was entitled to recover from PM7 and Patricio, the compan Is Chairman and President. The Court of Appeals pointed out that Patricio deliberatel and maliciousl evaded PM7Is financial obli#ation to Mc4eod. The Court of Appeals stated that, on several occasions, despite his approval, Patricio refused and i#nored to pa Mc4eodIs retirement benefits. The Court of Appeals stated that the dela lasted for one ear promptin# Mc4eod to initiate le#al action. The Court of Appeals stated

that althou#h PM7 offered to pa Mc4eod his retirement benefits, this offer for P9++,+++ was still below the 3floor limits3 provided b law. The Court of Appeals held that an emplo ee could demand pa ment of retirement benefits as a matter of ri#ht. The Court of Appeals stated that considerin# that PM7 was no lon#er in operation, its 3officer should be held liable for actin# on behalf of the corporation.3 The Court of Appeals also ruled that since PM7 did not have a retirement pro#ram providin# for retirement benefits of its emplo ees, Article -02 of the 4abor Code must be followed. The Court of Appeals thus upheld the N4RCIs findin# that Mc4eod was entitled to retirement pa e=uivalent to --., da s for ever ear of service from '/0+ to '//- based on a salar rate of P,+,./, a month. The Court of Appeals held that Mc4eod was not entitled to pa ment of vacation, sic$ leave and holida pa because as <ice President and Plant Mana#er, Mc4eod is a mana#erial emplo ee who, under Article 0- of the 4abor Code, is not entitled to these benefits. The Court of Appeals stated that for Mc4eod to be entitled to pa ment of service incentive leave and holida s, there must be an a#reement to that effect between him and his emplo er. Moreover, the Court of Appeals re!ected Mc4eodIs ar#ument that since PM7 paid for his two round: trip tic$ets Manila:4ondon in '/09 and '/0*, he was also 3entitled to unused airline tic$ets.3 The Court of Appeals stated that the fact that PM7 #ranted Mc4eod 3free transport to and from Manila and 4ondon for the ear '/09 and '/0* does not ipso facto characteri5e it as re#ular that would establish a prevailin# compan polic .3 The Court of Appeals also denied Mc4eodIs claims for underpa ment of salaries and his '9th month pa for the ear '//.. The Court of Appeals upheld the N4RCIs rulin# that it could be deduced from Mc4eodIs own narration of facts that he a#reed to the reduction of his compensation from P*+,+++ to P,+,./, in Au#ust '//+ to November '//9. The Court of Appeals found the award of moral dama#es for P,+,+++ in order because of the 3stubborn refusal3 of PM7 and Patricio to respect Mc4eodIs valid claims. The Court of Appeals also ruled that attorne Is fees e=uivalent to '+N of the total award should be #iven to Mc4eod under Article --+0, para#raph - of the Civil Code. ';ence, this petition. The 7ssues Mc4eod submits the followin# issues for our consideration% '. Ahether the challen#ed 6ecision and Resolution of the '.th 6ivision of the Court of Appeals promul#ated on ', ?une -+++ and -2 6ecember -+++, respectivel , in CA:).R. 1P No. ,,'9+ are in accord with law and !urisprudence8 -. Ahether an emplo er:emplo ee relationship e@ists between the private respondents and the petitioner for purposes of determinin# emplo er liabilit to the petitioner8 9. Ahether the private respondents ma avoid their financial obli#ations to the petitioner b invo$in# the veil of corporate fiction8

.. Ahether petitioner is entitled to the relief he see$s a#ainst the private respondents8 ,. Ahether the rulin# of GthisH Court in 1pecial Police and Aatchman Association &P4EM( Cederation v. National 4abor Relations Commission cited b the >ffice of the 1olicitor )eneral is applicable to the case of petitioner8 and *. Ahether the appeal ta$en b the private respondents from the 6ecision of the labor arbiter meets the mandator re=uirements recited in the 4abor Code of the Philippines, as amended.'9 The CourtIs Rulin# The petition must fail. Mc4eod asserts that the Court of Appeals should not have upheld the N4RCIs findin#s that he was a mana#erial emplo ee of PM7 from -+ ?une '/0+ to 9' 6ecember '//-, and then a consultant of 1RT7 up to 9+ November '//9. Mc4eod asserts that if onl for this 3bra5en assumption,3 the Court of Appeals should not have sustained the N4RCIs rulin# that his cause of action was onl a#ainst PM7. These assertions do not deserve serious consideration. Records disclose that Mc4eod was an emplo ee onl of PM7.'. PM7 hired Mc4eod as its actin# <ice President and )eneral Mana#er on -+ ?une '/0+. ', PM7 confirmed Mc4eodIs appointment as <ice President"Plant Mana#er in the 1pecial Meetin# of its Board of 6irectors on '+ Cebruar '/0'.'* Mc4eod himself testified durin# the hearin# before the 4abor Arbiter that his 3re#ular emplo ment3 was with PM7.'2 Ahen PM7Is ran$:and:file emplo ees sta#ed a stri$e on '/ Au#ust '/0/ to ?ul '//-, PM7 incurred serious business losses.'0 This prompted PM7 to stop permanentl plant operations and to send a notice of closure to the 6epartment of 4abor and Emplo ment on -' ?ul '//-. '/ PM7 informed its emplo ees, includin# Mc4eod, of the closure. -+ PM7 paid its emplo ees, includin# mana#erial emplo ees, e@cept Mc4eod, their unpaid wa#es, sic$ leave, vacation leave, prorated '9th month pa , and separation pa . Ender the compromise a#reement between PM7 and its emplo ees, the emplo er:emplo ee relationship between them ended on -, November '//-. -' Records also disclose that PM7 e@tended Mc4eodIs service up to 9' 6ecember '//- 3to wind up some affairs3 of the compan .-- Mc4eod testified on cross:e@amination that he received his last salar from PM7 in 6ecember '//-.-9 7t is thus clear that Mc4eod was a mana#erial emplo ee of PM7 from -+ ?une '/0+ to 9' 6ecember '//-. ;owever, Mc4eod claims that after CETM7 purchased PM7 in ?anuar '//9, he 3continued to wor$ at the same plant with the same responsibilities3 until 9+ November '//9. Mc4eod claims that CETM7 merel renamed PM7 as 1RT7. Mc4eod asserts that it was for this reason that when he reached the retirement a#e in '//9, he as$ed all the respondents for the pa ment of his benefits. -. These assertions deserve scant consideration.

Ahat too$ place between PM7 and 1RT7 was dation in pa ment with lease. Pertinent portions of the contract that PM7 and 1RT7 e@ecuted on ', ?une '//- read% A;EREA1, PM7 is indebted to the 6evelopment Ban$ of the Philippines &36BP3( and as securit for such debts &the 3>bli#ations3( has mort#a#ed its real properties covered b TCT Nos. T:90*.2, T: 92'9*, and T:92'9,, to#ether with all machineries and improvements found thereat, a complete listin# of which is hereto attached as Anne@ 3A3 &the 3Assets3(8 A;EREA1, b virtue of an inter:#overnmental a#enc arran#ement, 6BP transferred the >bli#ations, includin# the Assets, to the Asset Privati5ation Trust &3APT3( and the latter has received pa ment for the >bli#ations from PM7, under APTIs 6irect 6ebt Bu :>ut &366B>3( pro#ram thereb causin# APT to completel dischar#e and cancel the mort#a#e in the Assets and to release the titles of the Assets bac$ to PM78 A;EREA1, PM7 obtained cash advances from 1RTC in the total amount of TA> ;EN6RE6 TEN M7447>N PE1>1 &P-'+,+++,+++.++( &the 3Advances3( to enable PM7 to consummate the 66B> with APT, with 1RTC subro#atin# APT as PM7Is creditor thereb 8 A;EREA1, in pa ment to 1RTC for PM7Is liabilit , PM7 has a#reed to transfer all its ri#hts, title and interests in the Assets b wa of a dation in pa ment to 1RTC, provided that simultaneous with the dation in pa ment, 1RTC shall #rant unto PM7 the ri#ht to lease the Assets under terms and conditions stated hereunder8 @@@@ N>A T;EREC>RE, for and in consideration of the fore#oin# premises, and of the terms and conditions hereinafter set forth, the parties hereb a#ree as follows% '. CE117>N. 7n consideration of the amount of TA> ;EN6RE6 TEN M7447>N PE1>1 &P-'+,+++,+++.++(, PM7 hereb cedes, conve s and transfers to 1RTC all of its ri#hts, title and interest in and to the Assets b wa of a dation in pa ment. -, &Emphasis supplied( As a rule, a corporation that purchases the assets of another will not be liable for the debts of the sellin# corporation, provided the former acted in #ood faith and paid ade=uate consideration for such assets, e@cept when an of the followin# circumstances is present% &'( where the purchaser e@pressl or impliedl a#rees to assume the debts, &-( where the transaction amounts to a consolidation or mer#er of the corporations, &9( where the purchasin# corporation is merel a continuation of the sellin# corporation, and &.( where the sellin# corporation fraudulentl enters into the transaction to escape liabilit for those debts. -* None of the fore#oin# e@ceptions is present in this case. ;ere, PM7 transferred its assets to 1RT7 to settle its obli#ation to 1RT7 in the sum of P-'+,+++,+++. Ae are not convinced that PM7 fraudulentl transferred these assets to escape its liabilit for an of its debts. PM7 had alread paid its emplo ees, e@cept Mc4eod, their mone claims. There was also no mer#er or consolidation of PM7 and 1RT7. Consolidation is the union of two or more e@istin# corporations to form a new corporation called the consolidated corporation. 7t is a combination b a#reement between two or more corporations b which their ri#hts, franchises, and propert are united and become those of a sin#le, new

corporation, composed #enerall , althou#h not necessaril , of the stoc$holders of the ori#inal corporations. Mer#er, on the other hand, is a union whereb one corporation absorbs one or more e@istin# corporations, and the absorbin# corporation survives and continues the combined business. The parties to a mer#er or consolidation are called constituent corporations. 7n consolidation, all the constituents are dissolved and absorbed b the new consolidated enterprise. 7n mer#er, all constituents, e@cept the survivin# corporation, are dissolved. 7n both cases, however, there is no li=uidation of the assets of the dissolved corporations, and the survivin# or consolidated corporation ac=uires all their properties, ri#hts and franchises and their stoc$holders usuall become its stoc$holders. The survivin# or consolidated corporation assumes automaticall the liabilities of the dissolved corporations, re#ardless of whether the creditors have consented or not to such mer#er or consolidation.-2 7n the present case, there is no showin# that the sub!ect dation in pa ment involved an corporate mer#er or consolidation. Neither is there an showin# of those indicative factors that 1RT7 is a mere instrumentalit of PM7. Moreover, 1RT7 did not e@pressl or impliedl a#ree to assume an of PM7Is debts. Pertinent portions of the sub!ect 6eed of 6ation in Pa ment with 4ease provide, thus% -. AARRANT7E1 AN6 REPRE1ENTAT7>N1. PM7 hereb warrants and represents the followin#% @@@@ &e( PM7 shall warrant that it will hold 1RTC or its assi#ns, free and harmless from an liabilit for claims of PM7Is creditors, laborers, and wor$ers and for ph sical in!ur or in!ur to propert arisin# from PM7Is custod , possession, care, repairs, maintenance, use or operation of the Assets e@cept ordinar wear and tear8-0&Emphasis supplied( Also, Mc4eod did not present an evidence to show the alle#ed renamin# of 3Pe## Mills, 7nc.3 to 31ta. Rosa Te@tiles, 7nc.3 ;ence, it is not correct for Mc4eod to treat PM7 and 1RT7 as the same entit . Respondent corporations assert that 1RT7 hired Mc4eod as consultant after PM7 stopped operations.-/ >n the other hand, Mc4eod asserts that he was respondent corporationsI emplo ee from '/0+ to 9+ November '//9. 9+;owever, Mc4eod failed to present an proof of emplo er: emplo ee relationship between him and Cils n, 1RT7, or CETM7. Mc4eod testified, thus% ATTP. E1CAN>% 6o ou have an emplo ment contract with Car Eastern Te@tileR A7TNE11% 7t is m belief up the present time.

ATTP. A<EC744A% Ma 7 re=uest that the witness be allowed to #o throu#h his Anne@es, Pour ;onor. ATTP. E1CAN>% Pes, but 7 want a precise answer to that =uestion. 7f he has an emplo ment contract with Car Eastern Te@tileR A7TNE11% Can 7 answer it this wa , sirR There is not a valid contract but 7 was under the impression ta$in# into consideration that the closeness that 7 had at Car Eastern Te@tile is enou#h durin# that period of time of the development of Pe## Mills to reor#ani5e a staff. 7 was under the basic impression that the mi#ht still retain m status as <ice President and Plant Mana#er of the compan . ATTP. E1CAN>% But the answer is still, there is no emplo ment contract in our possession appointin# ou in an capacit b Car EasternR A7TNE11% There was no written contract, sir. @@@@ ATTP. E1CAN>% 1o, there is proof that ou were in fact reall emplo ed b Pe## MillsR A7TNE11% Pes, sir. ATTP. E1CAN>% >f course, m interest now is to whether or not there is a similar document to present that ou were emplo ed b the other respondents li$e Cils n CorporationR A7TNE11% 7 have no document, sir. ATTP. E1CAN>% Ahat about Car Eastern Te@tile MillsR A7TNE11%

7 have no document, sir. ATTP. E1CAN>% And 1ta. Rosa Te@tile MillsR A7TNE11% There is no document, sir.9' @@@@ ATTP. E1CAN>% S Pes. 4et me be more specific, Mr. Mc4eod. 6o ou have a contract of emplo ment from Car Eastern Te@tiles, 7nc.R A No, sir. S Ahat about 1ta. Rosa Te@tile Mills, do ou have an emplo ment contract from this compan R A No, sir. @@@@ S And what about respondent Eric ;u. ;ave ou had an contract of emplo ment from Mr. Eric ;uR A Not a direct contract but 7 was ta$en in and 7 told to ta$e over this from Mr. Eric ;u. Automaticall , it confirms that Mr. Eric ;u, in other words, was under the control of Mr. Patricio 4im at that period of time. S No documents to show, Mr. Mc4eodR A No. No documents, sir.9Mc4eod could have presented evidence to support his alle#ation of emplo er:emplo ee relationship between him and an of Cils n, 1RT7, and CETM7, but he did not. Appointment letters or emplo ment contracts, pa rolls, or#ani5ation charts, 111 re#istration, personnel list, as well as testimon of co: emplo ees, ma serve as evidence of emplo ee status.99 7t is a basic rule in evidence that parties must prove their affirmative alle#ations. Ahile technical rules are not strictl followed in the N4RC, this does not mean that the rules on provin# alle#ations are entirel i#nored. Bare alle#ations are not enou#h. The must be supported b substantial evidence at the ver least.9. ;owever, Mc4eod claims that 3for purposes of determinin# emplo er liabilit , all private respondents are one and the same emplo er3 because% &'( the have the same address8 &-( the are all en#a#ed in the same business8 and &9( the have interloc$in# directors and officers. 9, This assertion is untenable.

A corporation is an artificial bein# invested b law with a personalit separate and distinct from that of its stoc$holders and from that of other corporations to which it ma be connected. 9* Ahile a corporation ma e@ist for an lawful purpose, the law will re#ard it as an association of persons or, in case of two corporations, mer#e them into one, when its corporate le#al entit is used as a cloa$ for fraud or ille#alit . This is the doctrine of piercin# the veil of corporate fiction. The doctrine applies onl when such corporate fiction is used to defeat public convenience, !ustif wron#, protect fraud, or defend crime,92 or when it is made as a shield to confuse the le#itimate issues, or where a corporation is the mere alter e#o or business conduit of a person, or where the corporation is so or#ani5ed and controlled and its affairs are so conducted as to ma$e it merel an instrumentalit , a#enc , conduit or ad!unct of another corporation. 90 To disre#ard the separate !uridical personalit of a corporation, the wron#doin# must be established clearl and convincin#l . 7t cannot be presumed.9/ ;ere, we do not find an of the evils sou#ht to be prevented b the doctrine of piercin# the corporate veil. Respondent corporations ma be en#a#ed in the same business as that of PM7, but this fact alone is not enou#h reason to pierce the veil of corporate fiction. .+ 7n 7ndophil Te@tile Mill Aor$ers Enion v. Calica,.' the Court ruled, thus% 7n the case at bar, petitioner see$s to pierce the veil of corporate entit of Acr lic, alle#in# that the creation of the corporation is a devise to evade the application of the CBA between petitioner Enion and private respondent Compan . Ahile we do not discount the possibilit of the similarities of the businesses of private respondent and Acr lic, neither are we inclined to appl the doctrine invo$ed b petitioner in #rantin# the relief sou#ht. The fact that the businesses of private respondent and Acr lic are related, that some of the emplo ees of the private respondent are the same persons mannin# and providin# for au@iliar services to the units of Acr lic, and that the ph sical plants, offices and facilities are situated in the same compound, it is our considered opinion that these facts are not sufficient to !ustif the piercin# of the corporate veil of Acr lic. .- &Emphasis supplied( Also, the fact that 1RT7 and PM7 shared the same address, i.e., ''"C BA:4epanto Bld#., Paseo de Ro@as, Ma$ati Cit ,.9 can be e@plained b the two companiesI stipulation in their 6eed of 6ation in Pa ment with 4ease that 3simultaneous with the dation in pa ment, 1RTC shall #rant unto PM7 the ri#ht to lease the Assets under terms and conditions stated hereunder.3 .. As for the addresses of Cils n and CETM7, Cils n held office at '-th Cloor, BA:4epanto Bld#., Paseo de Ro@as, Ma$ati Cit ,., while CETM7 held office at '0C, Tun Nan Commercial Buildin#, 999 Tun ;wa 1outh Road, 1ec. -, Taipei, Taiwan, R.>.C..* ;ence, the did not have the same address as that of PM7. That respondent corporations have interloc$in# incorporators, directors, and officers is of no moment. The onl interloc$in# incorporators of PM7 and Cils n were Patricio and Carlos Palanca, ?r. .2 Ahile Patricio was 6irector and Board Chairman of Cils n, 1RT7, and PM7, .0 he was never an officer of CETM7. Eric ;u, on the other hand, was 6irector of Cils n and 1RT7../ ;e was never an officer of PM7.

Marialen C. Corpu5, Cils nIs Cinance >fficer,,+ testified on cross:e@amination that &'( amon# all of Cils nIs officers, onl she was the one involved in the mana#ement of PM78 &-( onl she and Patricio were the common officers between Cils n and PM78 and &9( Cils n and PM7 are 3two separate companies.3,' Apolinario 4. Posio, PM7Is Chief Accountant, testified that 31RT7 is a different corporation from PM7.3,At an rate, the e@istence of interloc$in# incorporators, directors, and officers is not enou#h !ustification to pierce the veil of corporate fiction, in the absence of fraud or other public polic considerations.,9 7n 6el Rosario v. N4RC,,. the Court ruled that substantial identit of the incorporators of corporations does not necessaril impl fraud. 7n li#ht of the fore#oin#, and there bein# no proof of emplo er:emplo ee relationship between Mc4eod and respondent corporations and Eric ;u, Mc4eodIs cause of action is onl a#ainst his former emplo er, PM7. >n PatricioIs personal liabilit , it is settled that in the absence of malice, bad faith, or specific provision of law, a stoc$holder or an officer of a corporation cannot be made personall liable for corporate liabilities.,, To reiterate, a corporation is a !uridical entit with le#al personalit separate and distinct from those actin# for and in its behalf and, in #eneral, from the people comprisin# it. The rule is that obli#ations incurred b the corporation, actin# throu#h its directors, officers, and emplo ees, are its sole liabilities.,* Personal liabilit of corporate directors, trustees or officers attaches onl when &'( the assent to a patentl unlawful act of the corporation, or when the are #uilt of bad faith or #ross ne#li#ence in directin# its affairs, or when there is a conflict of interest resultin# in dama#es to the corporation, its stoc$holders or other persons8 &-( the consent to the issuance of watered down stoc$s or when, havin# $nowled#e of such issuance, do not forthwith file with the corporate secretar their written ob!ection8 &9( the a#ree to hold themselves personall and solidaril liable with the corporation8 or &.( the are made b specific provision of law personall answerable for their corporate action. ,2 Considerin# that Mc4eod failed to prove an of the fore#oin# e@ceptions in the present case, Mc4eod cannot hold Patricio solidaril liable with PM7. The records are bereft of an evidence that Patricio acted with malice or bad faith. Bad faith is a =uestion of fact and is evidentiar . Bad faith does not connote bad !ud#ment or ne#li#ence. 7t imports a dishonest purpose or some moral obli=uit and conscious wron#doin#. 7t means breach of a $nown dut throu#h some ill motive or interest. 7t parta$es of the nature of fraud. ,0 7n the present case, there is nothin# substantial on record to show that Patricio acted in bad faith in terminatin# Mc4eodIs services to warrant PatricioIs personal liabilit . PM7 had no other choice but to stop plant operations. The wor$ stoppa#e therefore was b necessit . The compan could no lon#er continue with its plant operations because of the serious business losses that it had suffered. The mere fact that Patricio was president and director of PM7 is not a #round to conclude that he should be held solidaril liable with PM7 for Mc4eodIs mone claims.

The rulin# in A.C. Ransom 4abor Enion:CC4E v. N4RC,,/ which the Court of Appeals cited, does not appl to this case. Ae =uote pertinent portions of the rulin#, thus% &a( Article -*, of the 4abor Code, in part, e@pressl provides% 3An wor$er whose emplo ment has been terminated as a conse=uence of an unlawful loc$out shall be entitled to reinstatement with full bac$wa#es.3 Article -29 of the Code provides that% 3An person violatin# an of the provisions of Article -*, of this Code shall be punished b a fine of not e@ceedin# five hundred pesos and"or imprisonment for not less than one &'( da nor more than si@ &*( months.3 &b( ;ow can the fore#oin# provisions be implemented when the emplo er is a corporationR The answer is found in Article -'- &c( of the 4abor Code which provides% 3&c( TEmplo erI includes an person actin# in the interest of an emplo er, directl or indirectl . The term shall not include an labor or#ani5ation or an of its officers or a#ents e@cept when actin# as emplo er.3. The fore#oin# was culled from 1ection - of RA *+-, the Minimum Aa#e 4aw. 1ince RAN1>M is an artificial person, it must have an officer who can be presumed to be the emplo er, bein# the 3person actin# in the interest of &the( emplo er3 RAN1>M. The corporation, onl in the technical sense, is the emplo er. The responsible officer of an emplo er corporation can be held personall , not to sa even criminall , liable for non:pa ment of bac$ wa#es. That is the polic of the law. @@@@ &c( 7f the polic of the law were otherwise, the corporation emplo er can have devious wa s for evadin# pa ment of bac$ wa#es. I' 256 0'12&'2 -&16, 02 7oul( &886&, 25&2 RANSOM, 0' 1969, 9o,61660': 256 8o110;0l02y o, 8,o;&;0l02y o9 8&y<6'2 o9 ;&-= 7&:61 2o 256 22 12,0=6,1, o,:&'0>6( ROSARIO 2o ,68l&-6 RANSOM, 7025 256 l&226, 2o ;6 636'2u&lly 85&16( ou2 09 256 22 12,0=6,1 70' 2560, -&16. RAN1>M actuall ceased operations on Ma ', '/29, after the 6ecember '/, '/2- 6ecision of the Court of 7ndustrial Relations was promul#ated a#ainst RAN1>M.*+ &Emphasis supplied( Clearl , in A.C. Ransom, RAN1>M, throu#h its President, or#ani5ed R>1AR7> to evade pa ment of bac$wa#es to the -- stri$ers. This situation, or an thin# similar showin# malice or bad faith on the part of Patricio, does not obtain in the present case. 7n Santo' &. N9R4,*' the Court held, thus% 7t is true, there were various cases when corporate officers were themselves held b the Court to be personall accountable for the pa ment of wa#es and mone claims to its emplo ees. 7n A.C. Ransom Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under the Minimum Aa#e 4aw, the responsible officer of an emplo er corporation could be held personall liable for nonpa ment of bac$wa#es for 3&i(f the polic of the law were otherwise, the corporation emplo er &would( have devious wa s for evadin# pa ment of bac$wa#es.3 7n the absence of a clear identification of the officer directl responsible for failure to pa the bac$wa#es, the Court considered the President of the corporation as such officer. The case was cited in Chua vs. NLRC in holdin#

personall liable the vice:president of the compan , bein# the hi#hest and most ran$in# official of the corporation ne@t to the President who was dismissed for the latterIs claim for unpaid wa#es. A review of the above e@ceptional cases would readil disclose the attendance of facts and circumstances that could ri#htl sanction personal liabilit on the part of the compan officer. 7n A.C. Ransom, the corporate entit was a famil corporation and e@ecution a#ainst it could not be implemented because of the disposition posthaste of its leviable assets evidentl in order to evade its !ust and due obli#ations. The doctrine of 3piercin# the veil of corporate fiction3 was thus clearl appropriate. Chua li$ewise involved another famil corporation, and this time the conflict was between two brothers occup in# the hi#hest ran$in# positions in the compan . There were incontrovertible facts which pointed to e@treme personal animosit that resulted, evidentl in bad faith, in the easin# out from the compan of one of the brothers b the other. The basic rule is still that which can be deduced from the CourtIs pronouncement in Sunio vs. National Labor Relations Commission8 thus% Ae come now to the personal liabilit of petitioner, 1unio, who was made !ointl and severall responsible with petitioner compan and C7P7 for the pa ment of the bac$wa#es of private respondents. This is reversible error. The Assistant Re#ional 6irectorIs 6ecision failed to disclose the reason wh he was made personall liable. Respondents, however, alle#ed as #rounds thereof, his bein# the owner of one:half &U( interest of said corporation, and his alle#ed arbitrar dismissal of private respondents. Petitioner 1unio was impleaded in the Complaint in his capacit as )eneral Mana#er of petitioner corporation. There appears to be no evidence on record that he acted maliciousl or in bad faith in terminatin# the services of private respondents. ;is act, therefore, was within the scope of his authorit and was a corporate act. 7t is basic that a corporation is invested b law with a personalit separate and distinct from those of the persons composin# it as well as from that of an other le#al entit to which it ma be related. Mere ownership b a sin#le stoc$holder or b another corporation of all or nearl all of the capital stoc$ of a corporation is not of itself sufficient #round for disre#ardin# the separate corporate personalit . Petitioner 1unio, therefore, should not have been made personall answerable for the pa ment of private respondentsI bac$ salaries.*- &Emphasis supplied( Thus, the rule is still that the doctrine of piercin# the corporate veil applies onl when the corporate fiction is used to defeat public convenience, !ustif wron#, protect fraud, or defend crime. 7n the absence of malice, bad faith, or a specific provision of law ma$in# a corporate officer liable, such corporate officer cannot be made personall liable for corporate liabilities. Neither Article -'-&c( nor Article -29 &now -2-( of the 4abor Code e@pressl ma$es an corporate officer personall liable for the debts of the corporation. As this Court ruled in H.9. 4arlo' 4on'tr$ction, Inc. &. 2arina :ro#ertie' 4or#oration%*9 Ae concur with the CA that these two respondents are not liable. 1ection 9' of the Corporation Code &Batas Pambansa Bl#. *0( provides% 31ection 9'. 9iabilit( o* director', tr$'tee' or o**icer' . : 6irectors or trustees who willfull and $nowin#l vote for or assent to patentl unlawful acts of the corporation or who are #uilt of #ross ne#li#ence or bad faith ... shall be liable !ointl and severall for all dama#es resultin# therefrom suffered b the corporation, its stoc$holders and other persons.3

The personal liabilit of corporate officers validl attaches onl when &a( the assent to a patentl unlawful act of the corporation8 or &b( the are #uilt of bad faith or #ross ne#li#ence in directin# its affairs8 or &c( the incur conflict of interest, resultin# in dama#es to the corporation, its stoc$holders or other persons. The records are bereft of an evidence that T poco acted in bad faith with #ross or ine@cusable ne#li#ence, or that he acted outside the scope of his authorit as compan president. The unilateral termination of the Contract durin# the e@istence of the TR> was indeed contemptible V for which MPC should have merel been cited for contempt of court at the most V and a preliminar in!unction would have then stopped wor$ b the second contractor. Besides, there is no showin# that the unilateral termination of the Contract was null and void.*. Mc4eod is not entitled to pa ment of vacation leave and sic$ leave as well as to holida pa . Article 0-, Title 7, Boo$ Three of the 4abor Code, on Aor$in# Conditions and Rest Periods, provides% Covera#e. W The provisions of this title shall appl to emplo ees in all establishments and underta$in#s whether for profit or not, but not to #overnment emplo ees, mana#erial emplo ees, field personnel, members of the famil of the emplo er who are dependent on him for support, domestic helpers, persons in the personal service of another, and wor$ers who are paid b results as determined b the 1ecretar of 4abor in appropriate re#ulations. As used herein, 3mana#erial emplo ees3 refer to those whose primar dut consists of the mana#ement of the establishment in which the are emplo ed or of a department or subdivision thereof, and to other officers or members of the mana#erial staff. &Emphasis supplied( As <ice President"Plant Mana#er, Mc4eod is a mana#erial emplo ee who is e@cluded from the covera#e of Title 7, Boo$ Three of the 4abor Code. Mc4eod is entitled to pa ment of vacation leave and sic$ leave onl if he and PM7 had a#reed on it. The pa ment of vacation leave and sic$ leave depends on the polic of the emplo er or the a#reement between the emplo er and emplo ee. *, 7n the present case, there is no showin# that Mc4eod and PM7 had an a#reement concernin# pa ment of these benefits. Mc4eodIs assertion of underpa ment of his '9th month pa in 6ecember '//9 is unavailin#. ** As alread stated, PM7 stopped plant operations in '//-. Mc4eod himself testified that he received his last salar from PM7 in 6ecember '//-. After the termination of the emplo er:emplo ee relationship between Mc4eod and PM7, 1RT7 hired Mc4eod as consultant and not as emplo ee. 1ince Mc4eod was no lon#er an emplo ee, he was not entitled to the '9th month pa . *2 Besides, there is no evidence on record that Mc4eod indeed received his alle#ed 3reduced '9th month pa of P..,'09.*93 in 6ecember '//9. *0 Also unavailin# is Mc4eodIs claim that he was entitled to the 3unpaid monetar e=uivalent of unused plane tic$ets for the period coverin# '/0/ to '//- in the amount of P-2/,9++.++.3*/ PM7 has no compan polic #rantin# its officers and emplo ees e@penses for trips abroad. 2+ That at one time PM7 reimbursed Mc4eod for his and his wifeIs plane tic$ets in a vacation to 4ondon 2' could not be deemed as an established practice considerin# that it happened onl once. To be considered a 3re#ular practice,3 the #ivin# of the benefits should have been done over a lon# period, and must be shown to have been consistent and deliberate. 27n American Aire and Cable 6ail Rated Emplo ees Enion v. American Aire and Cable Co., 7nc.,29 the Court held that for a bonus to be enforceable, the emplo er must have promised it, and the parties must have e@pressl a#reed upon it, or it must have had a fi@ed amount and had been a lon# and re#ular practice on the part of the emplo er.

7n the present case, there is no showin# that PM7 ever promised Mc4eod that it would continue to #rant him the benefit in =uestion. Neither is there an proof that PM7 and Mc4eod had e@pressl a#reed upon the #ivin# of that benefit. Mc4eodIs reliance on Anne@ M2. can hardl carr the da for him. Anne@ M, which is Mc4eodIs letter addressed to 3Philip 4im, <P Administration,3 merel contains Mc4eodIs proposals for the #rant of some benefits to supervisor and confidential emplo ees. Contrar to Mc4eodIs alle#ation, Patricio did not si#n the letter. ;ence, the letter does not embod an a#reement between Mc4eod and the mana#ement that would entitle Mc4eod to his mone claims. Neither can Mc4eodIs assertions find support in Anne@ E.2, Anne@ E is the A#reement which Mc4eod and Eniversal Te@tile Mills, 7nc. e@ecuted in '/,/. The A#reement merel contains the renewal of the service a#reement which the parties si#ned in '/,*. Mc4eod cannot successfull pretend that his monthl salar of P*+,+++ was reduced without his consent. Mc4eod testified that in '//+, Philip 4im e@plained to him wh his salar would have to be reduced. Mc4eod said that Philip told him that 3the were short in finances8 that it would be repaid.3 2* Aere Mc4eod not amenable to that reduction in salar , he could have immediatel resi#ned from his wor$ in PM7. Mc4eod $new that PM7 was then sufferin# from serious business losses. 7n fact, Mc4eod testified that PM7 was not able to operate from Au#ust '/0/ to '//- because of the stri$e. Even before '/0/, as <ice President of PM7, Mc4eod was aware that the compan had incurred 3hu#e loans from 6BP.322 As it happened, Mc4eod continued to wor$ with PM7. Ae find it pertinent to =uote some portions of Apolinario PosioIs testimon , to wit% S Pou also stated that before the period of the stri$e as shown b anne@ 3K3 of the repl filed b the complainant which was 7 thin$ a voucher, the salar of Mr. Mc4eod was rou#hl P*+,+++.++ a monthR A Pes, sir. S And as shown b their anne@ 343 to their repl , that this was reduced to rou#hl P,+,+++.++ a monthR A Pes, sir. S Pou stated that this was indeed upon the instruction b the <ice:President of Pe## Mills at that time and that was Mr. Philip 4im, would ou notR A Pes, sir. S >f our own personal $nowled#e, can ou sa if this was, in fact, b a#reement between Mr. Philip 4im or an other officers of Pe## Mills and Mr. Mc4eodR A 7f 7 recall it correctl , 7 assume it was an a#reement, verbal a#reement with, between Mr. Philip 4im and Mr. Mc4eod, because the voucher that we prepared was actuall ac$nowled#ed b Mr. Mc4eod, the reduced amount was ac$nowled#ed b Mr. Mc4eod thru the voucher that we prepared.

S 7n other words, Mr. Aitness, ou mean to tell us that Mr. Mc4eod continuousl received the reduced amount ofP,+,+++.++ b si#nin# the voucher and receivin# the amount in =uestionR A Pes, sir. S As far as ou remember, Mr. Posio, was there an complaint b Mr. Mc4eod because of this reduced amount of his salar at that timeR A 7 donIt have an personal $nowled#e of an complaint, sir. S At least, that is in so far as ou were concerned, he said nothin# when he si#ned the voucher in =uestionR A Pes, sir. S Now, ou also stated that the reason for what appears to be an a#reement between Pe## Mills and Mr. Mc4eod in so far as the reduction of his salar from P*+,+++.++ to P,+,+++.++ a month was because he would have a reduced number of wor$in# da s in view of the stri$e at Pe## Mills, is that ri#htR A Pes, sir. S And that this was so because on account of the stri$e, there was no wor$ to be done in the compan R A Pes, sir.20 @@@@ S Now, ou also stated if ou remember durin# the first time that ou testified that in the be#innin#, the monthl salar of the complainant was P*+,+++.++, is that correctR A Pes, sir. S And because of the lon# period of the stri$e, when there was no wor$ to be done, b a#reement with the complainant, his monthl salar was ad!usted to onl P,+,./, because he would not have to report for wor$ on 1aturda . 6o ou remember havin# made that e@planationR A Pes, sir. S Pou also stated that the complainant continuousl received his monthl salar in the ad!usted amount ofP,+,./,.++ monthl si#nin# the necessar vouchers or pa slips for that without complainin#, is that not ri#ht, Mr. PosioR A Pes, sir.2/ 1ince the last salar that Mc4eod received from PM7 was P,+,./,, that amount should be the basis in computin# his retirement benefits. Mc4eod must be credited onl with his service to PM7 as it had a !uridical personalit separate and distinct from that of the other respondent corporations.

1ince PM7 has no retirement plan,0+ we appl 1ection ,, Rule 77 of the Rules 7mplementin# the New Retirement 4aw which provides% ,.' 7n the absence of an applicable a#reement or retirement plan, an emplo ee who retires pursuant to the Act shall be entitled to retirement pa e=uivalent to at least one:half &'"-( month salar for ever ear of service, a fraction of at least si@ &*( months bein# considered as one whole ear. ,.- Components of >ne:half &'"-( Month 1alar . W Cor the purpose of determinin# the minimum retirement pa due an emplo ee under this Rule, the term 3one:half month salar 3 shall include all of the followin#% &a( Cifteen &',( da s salar of the emplo ee based on his latest salar rate. @ @ @ Aith Mc4eod havin# wor$ed with PM7 for '- ears, from '/0+ to '//-, he is entitled to a retirement pa e=uivalent to U month salar for ever ear of service based on his latest salar rate of P,+,./, a month. There is no basis for the award of moral dama#es. Moral dama#es are recoverable onl if the defendant has acted fraudulentl or in bad faith, or is #uilt of #ross ne#li#ence amountin# to bad faith, or in wanton disre#ard of his contractual obli#ations. The breach must be wanton, rec$less, malicious, or in bad faith, oppressive or abusive.0' Crom the records of the case, the Court finds no ultimate facts to support a conclusion of bad faith on the part of PM7. Records disclose that PM7 had lon# offered to pa Mc4eod his mone claims. 7n their Comment, respondents assert that the offered to pa Mc4eod the sum of P0.+,+++, as 3separation benefits, and not P9++,+++, if onl to bu peace and to forestall an complaint3 that Mc4eod ma initiate before the N4RC. Mc4eod admitted at the hearin# before the 4abor Arbiter that PM7 has made this offer W ATTP. E1CAN>% @ @ @ Accordin# to our own statement in our Position Paper and 7 am referrin# to pa#e 0, our unpaid retirement benefit for fourteen &'.( ears of service at P*+,+++.++ per ear is P0.+,+++.++, is that correctR A7TNE11% That is correct, sir. ATTP. E1CAN>% And this amount is correct P0.+,+++.++, accordin# to our Position PaperR A7TNE11% That is correct, sir. ATTP. E1CAN>%

The =uestion 7 want to as$ is, are ou aware that this amount was offered to ou sometime last ear throu#h our own law er, m #ood friend, Att . Avecilla, who is ri#ht here with usR A7TNE11% 7 was aware, sir. ATTP. E1CAN>% 1o this was offered to ou, is that correctR A7TNE11% 7 was told that a fi@ed sum of P0.+,+++.++ was offered. ATTP. E1CAN>% And , of course, the reason, if 7 ma assume, that ou declined this offer was that, accordin# to ou, there are other claims which ou would li$e to raise a#ainst the Respondents which, b our impression, the were not willin# to pa in addition to this particular amountR A7TNE11% Pes, sir. ATTP. E1CAN>% The =uestion now is, if the same amount is offered to ou b wa of retirement which is e@actl what ou stated in our own Position Paper, would ou accept it or notR A7TNE11% Not on the concept without all the basic benefits due me, 7 will refuse. 0@@@@ ATTP. R>JA1% S Pou mentioned in the cross:e@amination of Att . Escano that ou were offered the separation pa in '//., is that correct, Mr. AitnessR A7TNE11% A 7 was offered a settlement of P9++,+++.++ for complete settlement and that was 7 thin$ in ?anuar or Cebruar '//., sir. ATTP. E1CAN>% No. Ahat was mentioned was the amount of P0.+,+++.++.

A7TNE11% Ahat did ou sa , Att . EscanoR ATTP. E1CAN>% The amount that 7 mentioned was P0.+,+++.++ correspondin# to the . . . . . . . A7TNE11% Ma 7 as$ that the =uestion be clarified, our ;onorR ATTP. R>JA1% S Pou mentioned that ou were offered for the settlement of our claims in '//. for P0.+,+++.++, is that ri#ht, Mr. AitnessR A 6urin# that period in time, while the petition in this case was on#oin#, we alread filed a case at that period of time, sir. There was a discussion. To the best of m $nowled#e, the are willin# to settle for P0.+,+++.++ and based on what the Attorne told me, 7 refused to accept because 7 believe that m position was not in an wa due to a compromise situation to the benefits 7 am entitled to.09 ;ence, the awards for e@emplar dama#es and attorne Is fees are not proper in the present case. 0. That respondent corporations, in their appeal to the N4RC, did not serve a cop of their memorandum of appeal upon PM7 is of no moment. 1ection 9&a(, Rule <7 of the N4RC New Rules of Procedure provides% Re=uisites for Perfection of Appeal. W &a( The appeal shall be filed within the re#lementar period as provided in 1ection ' of this Rule8 shall be under oath with proof of pa ment of the re=uired appeal fee and the postin# of a cash or suret bond as provided in 1ection , of this Rule8 shall be accompanied b a memorandum of appeal @ @ @ and proof of service on the other part of such appeal. &Emphasis supplied( The 3other part 3 mentioned in the Rule obviousl refers to the adverse part , in this case, Mc4eod. Besides, 1ection 9, Rule <7 of the Rules which re=uires, amon# others, proof of service of the memorandum of appeal on the other part , is merel a rundown of the contents of the re=uired memorandum of appeal to be submitted b the appellant. These are not !urisdictional re=uirements. 0, A;EREC>RE, we 6ENP the petition and ACC7RM the 6ecision of the Court of Appeals in CA:).R. 1P No. ,,'9+, with the followin# M>67C7CAT7>N1% &a( the retirement pa of ?ohn C. Mc4eod should be computed at U month salar for ever ear of service for '- ears based on his salar rate of P,+,./, a month8 &b( Patricio 4. 4im is absolved from personal liabilit 8 and &c( the awards for moral and e@emplar dama#es and attorne Is fees are deleted. No pronouncement as to costs. 1> >R6ERE6.

C7R1T 67<717>N

?G.R. No. 11+@9+. M&y 1*, 199+A

ISLAMIC DIRECTORATE O" T!E P!ILIPPINES, MANUEL ". PEREA &'( SECURITIES B E C!ANGE COMMISSION, petitioners, vs. COURT O" APPEALS &'( IGLESIA NI CRISTO, respondents. DECISION
!ERMOSISIMA, JR., J.C

The sub!ect of this petition for review is the 6ecision of the public respondent Court of Appeals, dated >ctober -0, '//., settin# aside the portion of the 6ecision of the 1ecurities and E@chan#e Commission &1EC, for short( in 1EC Case No. .+'- which declared null and void the sale of two &-( parcels of land in Sue5on Cit covered b the 6eed of Absolute 1ale entered into b and between private respondent 7#lesia Ni Cristo &7NC, for short( and the 7slamic 6irectorate of the Philippines, 7nc., Carpi5o )roup, &76P, for short(.
G'H

The followin# facts appear of record. Petitioner 76P:Tamano )roup alle#es that sometime in '/2', 7slamic leaders of all Muslim ma!or tribal #roups in the Philippines headed b 6ean Cesar Adib Ma!ul or#ani5ed and incorporated the 714AM7C 67RECT>RATE >C T;E P;747PP7NE1 &76P(, the primar purpose of which is to establish an 7slamic Center in Sue5on Cit for the construction of a XMos=ue &pra er place(, Madrasah &Arabic 1chool(, and other reli#ious infrastructuresY so as to facilitate the effective practice of 7slamic faith in the area.
G-H

Towards this end, that is, in the same ear, the 4ib an #overnment donated mone to the 76P to purchase land at Culiat, Tandan# 1ora, Sue5on Cit , to be used as a Center for the 7slamic populace. The land, with an area of ./,*,- s=uare meters, was covered b two titles% Transfer Certificate of Title Nos. RT:-*,-+ &'2**'*( and RT:-*,-' &'2+,*2(, both re#istered in the name of 76P.
G9H G.H

7t appears that in '/2', the Board of Trustees of the 76P was composed of the followin# per Article * of its Articles of 7ncorporation% Senator Mamintal Tamano
[5]

Congressman Ali Dimaporo Congressman Salipada Pendatun

Dean Cesar Adib Majul Sultan Harun Al-Rashid u!man Delegate Ahmad Alonto Commissioner Datu Mama Sinsuat Ma"or Amin#adra Abuba#ar
[$]

Accordin# to the petitioner, in '/2-, after the purchase of the land b the 4ib an #overnment in the name of 76P, Martial 4aw was declared b the late President Cerdinand Marcos. Most of the members of the '/2' Board of Trustees li$e 1enators Mamintal Tamano, 1alipada Pendatun, Ahmad Alonto, and Con#ressman Al:Rashid 4ucman flew to the Middle East to escape political persecution. Thereafter, two Muslim #roups sprun#, the Carpi5o )roup, headed b En#ineer Carou$ Carpi5o, and the Abbas )roup, led b Mrs. Qora da Tamano and Att . Cirdaussi Abbas. Both #roups claimed to be the le#itimate 76P. 1i#nificantl , on >ctober 9, '/0*, the 1EC, in a suit between these two contendin# #roups, came out with a 6ecision in 1EC Case No. -*02 declarin# the election of both the Carpi5o )roup and the Abbas )roup as 76P board members to be null and void. The dispositive portion of the 1EC 6ecision reads% %WHEREFORE, judgment is hereby rendered declaring the elections of both the petitioners and respondents as null and void for being violative of the Articles of Incorporation of petitioner corporation With the nullification of the election of the respondents, the approved by!la"s "hich they certified to this #ommission as members of the $oard of %rustees must necessarily be li&e"ise declared null and void Ho(e)er* be+ore an" ele!tion o+ the members o+ the ,oard o+ Trustees !ould be !ondu!ted* there must be an appro)ed b"-la(s to go)ern the internal go)ernment o+ the asso!iation in!luding the !ondu!t o+ ele!tion- And sin!e the ele!tion o+ both petitioners and respondents ha)e been de!lared null and )oid* a )a!uum is !reated as to (ho should adopt the b"-la(s and !erti+" its adoption- To remed" this un+ortunate situation that the asso!iation has +ound itsel+ in* the members o+ the petitioning !orporation are hereb" authori.ed to prepare and adopt their b"-la(s +or submission to the Commission- /n!e appro)ed* an ele!tion o+ the members o+ the ,oard o+ Trustees shall immediatel" be !alled pursuant to the appro)ed b"-la(s[&] [']

S/ /RD0R0D-1

[2]

Neither #roup, however, too$ the necessar steps prescribed b the 1EC in its >ctober 9, '/0* 6ecision, and, thus, no valid election of the members of the Board of Trustees of 76P was ever called. Althou#h the Carpi5o )roup attempted to submit a set of b :laws, the 1EC found that, aside from En#ineer Carou$ Carpi5o and Att . Musib Buat, those who prepared and adopted the b :laws were not bona *ide members of the 76P, thus renderin# the adoption of the b :laws li$ewise null and void.
G'+H

>n April -+, '/0/, without havin# been properl elected as new members of the Board of Trustees of 76P, the Carpi5o )roup caused to be si#ned an alle#ed Board Resolution of the 76P, authori5in# the sale of the sub!ect two parcels of land to the private respondent 7NC for a consideration of P--,9.9,.++.++, which sale was evidenced b a 6eed of Absolute 1ale dated April -+, '/0/.
G''H G'-H

>n Ma 9+, '//', the petitioner '/2' 76P Board of Trustees headed b former 1enator Mamintal Tamano, or the Tamano )roup, filed a petition before the 1EC, doc$eted as 1EC Case No. .+'-, see$in# to declare null and void the 6eed of Absolute 1ale si#ned b the Carpi5o )roup and the 7NC since the #roup of En#ineer Carpi5o was not the le#itimate Board of Trustees of the 76P. Meanwhile, private respondent 7NC, pursuant to the 6eed of Absolute 1ale e@ecuted in its favor, filed an action for 1pecific Performance with 6ama#es a#ainst the vendor, Carpi5o )roup, before Branch 0' of the Re#ional Trial Court of Sue5on Cit , doc$eted as Civil Case No. S:/+:*/92, to compel said #roup to clear the propert of s=uatters and deliver complete and full ph sical possession thereof to 7NC. 4i$ewise, 7NC filed a motion in the same case to compel one Mrs. 4eticia P. 4i#on to produce and surrender to the Re#ister of 6eeds of Sue5on Cit the ownerIs duplicate cop of TCT Nos. RT:-*,-' and RT:-*,-+ coverin# the aforementioned two parcels of land, so that the sale in 7NCIs favor ma be re#istered and new titles issued in the name of 7NC. Mrs. 4i#on was alle#ed to be the mort#a#ee of the two parcels of land e@ecuted in her favor b certain Abdulrahman R.T. 4in5a# and Rowaida Busran:1ampaco claimed to be in behalf of the Carpi5o )roup. The 76P:Tamano )roup, on ?une '', '//', sou#ht to intervene in Civil Case No. S:/+:*/92 averrin#, inter alia% %333 333 333

4- That the 5nter)enor has +iled a !ase be+ore the Se!urities and 03!hange Commission 6S0C7 against Mr- 8arou# Carpi.o* et, al-* (ho* through +alse s!hemes and ma!hinations* su!!eeded in e3e!uting the Deed o+ Sale bet(een the 5DP and the

5glesia 9i :risto 6plainti++ in the instant !ase7 and (hi!h Deed o+ Sale is the subje!t o+ the !ase at bar; <- That the said !ase be+ore the S0C is do!#eted as Case 9o- =>=?4* the main issue o+ (hi!h is (hether or not the a+oresaid Deed o+ Sale bet(een 5DP and the 5glesia ni :risto is null and )oid* hen!e* 5nter)enor@s legal interest in the instant !ase- A !op" o+ the said !ase is hereto atta!hed as Anne3 AA@; >- That* +urthermore* 5nter)enor herein is the dul" !onstituted bod" (hi!h !an la(+ull" and legall" represent the 5slami! Dire!torate o+ the Philippines; 333 333 333-1
[?<]

Private respondent 7NC opposed the motion ar#uin#, inter alia, that the issue sou#ht to be liti#ated b wa of intervention is an intra:corporate dispute which falls under the !urisdiction of the 1EC.
G'.H

?ud#e Celia 4ipana:Re es of Branch 0', Re#ional Trial Court of Sue5on Cit , denied petitionerIs motion to intervene on the #round of lac$ of !uridical personalit of the 76P:Tamano )roup and that the issues bein# raised b wa of intervention are intra:corporate in nature, !urisdiction thereto properl pertainin# to the 1EC.
G',H

Apprised of the pendenc of 1EC Case No. .+'- involvin# the controverted status of the 76P:Carpi5o )roup but without waitin# for the outcome of said case, ?ud#e Re es, on 1eptember '-, '//', rendered Partial ?ud#ment in Civil Case No. S:/+:*/92 orderin# the 76P:Carpi5o )roup to compl with its obli#ation under the 6eed of 1ale of clearin# the sub!ect lots of s=uatters and of deliverin# the actual possession thereof to 7NC.
G'*H

Thereupon, ?ud#e Re es in another >rder, dated March -, '//-, pertainin# also to Civil Case No. S:/+:*/92, treated 7NC as the ri#htful owner of the real properties and disposed as follows% %BH0R08/R0* eti!ia P- igon is hereb" ordered to produ!e andCor surrender to plainti++ the o(ner@s !op" o+ RT-4$54? 6?&=5$&7 and RT-4$54= 6?&$$?$7 in open !ourt +or the registration o+ the Deed o+ Absolute Sale in the latter@s name and the annotation o+ the mortgage e3e!uted in her +a)or b" herein de+endant 5slami! Dire!torate o+ the Philippines on the ne( trans+er !erti+i!ate o+ title to be issued to plainti++[?&]

S/ /RD0R0D-1

[?']

>n April *, '//-, the above >rder was amended b ?ud#e Re es directin# 4i#on Xto deliver the ownerIs duplicate copies of TCT Nos. RT: -*,-' &'2+,*2( and RT:-*,-+ &'2**'*( to the Re5i'ter o* Deed' o* ;$e<on 4it( for the purposes stated in the >rder of March -, '//-.Y
G'/H

Mort#a#ee 4i#on went to the Court of Appeals, thru a petition for certiorari, doc$eted as CA:).R. No. 1P:-2/29, assailin# the fore#oin# >rders of ?ud#e Re es. The appellate court dismissed her petition on >ctober -0, '//-.
G-+H

Endaunted, 4i#on filed a petition for review before the 1upreme Court which was doc$eted as ).R. No. '+22,'. 7n the meantime, the 1EC, on ?ul ,, '//9, finall 6ecision in 1EC Case No. .+'- in this wise%
[4?]

came out with a

%?- De!laring the b"-la(s submitted b" the respondents as unauthori.ed* and hen!e* null and )oid4- De!laring the sale o+ the t(o 647 par!els o+ land in Due.on Cit" !o)ered b" the Deed o+ Absolute Sale entered into b" 5glesia ni :risto and the 5slami! Dire!torate o+ the Philippines* 5n!- null and )oid[44]

<- De!laring the ele!tion o+ the ,oard o+ Dire!tors o+ the !orporation +rom ?2'$ to ?22? as null and )oid;
[4<]

>- De!laring the a!!eptan!e o+ the respondents* e3!ept 8arou# Carpi.o and Musnib ,uat* as members o+ the 5DP null and )oid9o pronoun!ement as to !ostS/ /RD0R0D-1
[4>]

Private respondent 7NC filed a Motion for 7ntervention, dated 1eptember 2, '//9, in 1EC Case No. .+'-, but the same was denied on account of the fact that the decision of the case had become final and e@ecutor , no appeal havin# been ta$en therefrom.
G-,H

7NC elevated 1EC Case No. .+'- to the public respondent Court of Appeals b wa of a special civil action for certiorari, doc$eted as CA:).R. 1P No. 99-/,. >n >ctober -0, '//., the court a 8$o promul#ated a 6ecision in CA:).R. 1P No. 99-/, #rantin# 7NCIs petition. The portion of the 1EC 6ecision in 1EC Case No. .+'- which declared the sale of the two &-( lots in =uestion to 7NC as void was ordered set aside b the Court of Appeals.

Thus, the 76P:Tamano )roup brou#ht the instant petition for review, dated 6ecember -', '//., submittin# that the Court of Appeals #ravel erred in% ?7 9ot upholding the jurisdi!tion o+ the S0C to de!lare the nullit" o+ the sale; 47 0n!ouraging multipli!it" o+ suits; and <7 9ot appl"ing the prin!iples o+ estoppel and la!hes[4$]

Ahile the above petition was pendin#, however, the 1upreme Court rendered !ud#ment in ).R. No. '+22,' on the petition filed b Mrs. 4eticia P. 4i#on. The 6ecision, dated ?une ', '//,, denied the 4i#on petition and affirmed the >ctober -0, '//- 6ecision of the Court of Appeals in CA:).R. No. 1P:-2/29 which sustained the >rder of ?ud#e Re es compellin# mort#a#ee 4i#on to surrender the ownerIs duplicate copies of TCT Nos. RT: -*,-' &'2+,*2( and RT:-*,-+ &'2**'*( to the Re#ister of 6eeds of Sue5on Cit so that the 6eed of Absolute 1ale in 7NCIs favor ma be properl re#istered. Before we rule upon the main issue posited in this petition, we would li$e to point out that our disposition in ).R. No. '+22,' entitled, X 9i5on &. 4o$rt o* A##eal',Y promul#ated on ?une ', '//,, in no wise constitutes re' 6$dicata such that the petition under consideration would be barred if it were the case. Suite the contrar , the re=uisites of re' 6$dicata do not obtain in the case at bench. 1ection ./, Rule 9/ of the Revised Rules of Court la s down the dual aspects of re' 6$dicata in actions in #er'ona%, to wit% %0++e!t o+ judgment- - The e++e!t o+ a judgment or +inal order rendered b" a !ourt or judge o+ the Philippines* ha)ing jurisdi!tion to pronoun!e the judgment or order* ma" be as +ollo(sE @@@ @@@ 6b7 5n other !ases the judgment or order is* (ith respe!t to the matter dire!tl" adjudged or as to an" other matter that !ould ha)e been raised in relation thereto* !on!lusi)e bet(een the parties and their su!!essors in interest b" title subseFuent to the !ommen!ement o+ the a!tion or spe!ial pro!eeding* litigating +or the same thing and under the same title and in the same !apa!it"; @@@

6!7 5n an" other litigation bet(een the same parties or their su!!essors in interest* that onl" is deemed to ha)e been adjudged in a +ormer judgment (hi!h appears upon its +a!e to ha)e been so adjudged* or (hi!h (as a!tuall" and ne!essaril" in!luded therein or ne!essar" thereto-1 1ection ./&b( enunciates the first concept of re' 6$dicata $nown as Xbar b prior !ud#ment,Y whereas, 1ection ./&c( is referred to as Xconclusiveness of !ud#ment.Y There is Xbar b former !ud#mentY when, between the first case where the !ud#ment was rendered, and the second case where such !ud#ment is invo$ed, there is identit of parties, sub!ect matter and cause of action. Ahen the three identities are present, the !ud#ment on the merits rendered in the first constitutes an absolute bar to the subse=uent action. But where between the first case wherein !ud#ment is rendered and the second case wherein such !ud#ment is invo$ed, there is onl identit of parties but there is no identit of cause of action, the !ud#ment is conclusive in the second case, onl as to those matters actuall and directl controverted and determined, and not as to matters merel involved therein. This is what is termed Xconclusiveness of !ud#ment.Y
G-2H

Neither of these concepts of re' 6$dicata find relevant application in the case at bench. Ahile there ma be identit of sub!ect matter &76P propert ( in both cases, there is no identit of parties. The principal parties in ).R. No. '+22,' were mort#a#ee 4eticia P. 4i#on, as petitioner, and the 7#lesia Ni Cristo, as private respondent. The 76P, as represented b the '/2' Board of Trustees or the Tamano )roup, was onl made an ancillar part in ).R. No. '+22,' as intervenor. 7t was never ori#inall a principal part thereto. 7t must be noted that intervention is not an independent action, but is merel collateral, accessor , or ancillar to the principal action. 7t is !ust an interlocutor proceedin# dependent on or subsidiar to the case between the ori#inal parties. 7ndeed, the 76P:Tamano )roup cannot be considered a principal part in ).R. No. '+22,' for purposes of appl in# the principle of re' 6$dicata since the contrar #oes a#ainst the true import of the action of intervention as a mere subsidiar proceedin# without an independent life apart from the principal action as well as the intrinsic character of the intervenor as a mere subordinate part in the main case whose ri#ht ma be said to be onl in aid of the ri#ht of the ori#inal part . 7t is onl in the present case, actuall , where the 76P:Tamano )roup became a principal part , as petitioner, with the 7#lesia Ni Cristo, as private respondent. Clearl , there is no identit of parties in both cases.
G-0H G-/H G9+H

7n this connection, althou#h it is true that Civil Case No. S:/+:*/92, which #ave rise to ).R. No. '+22,', was entitled, =I5le'ia Ni >ri'to, :lainti** &. I'la%ic Directorate o* t)e :)ili##ine', De*endant,? the 76P can not be considered essentiall a formal part thereto for the simple reason that it was not dul represented b a le#itimate Board of Trustees in that case. As a necessar conse=uence, Civil Case No. S:/+:*/92, a case for 1pecific Performance with 6ama#es, a mere action in #er'ona%, did not become final and e@ecutor insofar as the true 76P is concerned since petitioner corporation, for want of le#itimate representation, was effectivel deprived of its da in court in said case. Re' inter alio' 6$dicatae n$ll$% alii' #rae6$dici$% *aci$nt. Matters ad!ud#ed in a cause do not pre!udice those who were not parties to it. Elsewise put, no person &natural or !uridical( shall be affected b a proceedin# to which he is a stran#er.
G9'H G9-H G99H

)rantin# ar5$endo, that 76P ma be considered a principal part in 9i5on, re' 6$dicata as a Xbar b former !ud#mentY will still not set in on the #round that the cause of action in the two cases are different. The cause of action in ).R. No. '+22,' is the surrender of the ownerIs duplicate cop of the transfer certificates of title to the ri#htful possessor thereof, whereas the cause of action in the present case is the validit of the Carpi5o )roup:7NC 6eed of Absolute 1ale. Re' @$dicata in the form of Xconclusiveness of !ud#mentY cannot li$ewise appl for the reason that an mention at all in 9i5on as to the validit of the disputed Carpi5o Board:7NC sale ma onl be deemed incidental to the resolution of the primar issue posed in said case which is% Aho between 4i#on and 7NC has the better ri#ht of possession over the ownerIs duplicate cop of the TCTs coverin# the 76P propert R ).R. No. '+22,' cannot be considered determinative and conclusive on the matter of the validit of the sale for this particular issue was not the principal thrust of 9i5on. To rule otherwise would be to cause #rave and irreparable in!ustice to 76P which never #ave its consent to the sale, thru a le#itimate Board of Trustees. 7n an case, while it is true that the principle of re' 6$dicata is a fundamental component of our !udicial s stem, it should be disre#arded if its ri#id application would involve the sacrifice of !ustice to technicalit .
G9.H

The main =uestion thou#h in this petition is% 6id the Court of Appeals commit reversible error in settin# aside that portion of the 1ECIs 6ecision in 1EC Case No. .+'- which declared the sale of two &-( parcels of land in Sue5on Cit between the 76P:Carpi5o )roup and private respondent 7NC null and voidR Ae rule in the affirmative.

There can be no =uestion as to the authorit of the 1EC to pass upon the issue as to who amon# the different contendin# #roups is the le#itimate Board of Trustees of the 76P since this is a matter properl fallin# within the ori#inal and e@clusive !urisdiction of the 1EC b virtue of 1ections 9 and ,&c( of Presidential 6ecree No. /+-:A% %Se!tion <- %he #ommission shall have absolute jurisdiction, supervision and control over all corporations* partnerships or asso!iations* (ho are the grantees o+ primar" +ran!hises andCor a li!ense or permit issued b" the go)ernment to operate in the Philippines 333 333-1 @ @ @ @ @@@ @ @

Se!tion 5- 5n addition to the regulator" and adjudi!ati)e +un!tions o+ the Se!urities and 03!hange Commission o)er !orporations* partnerships and other +orms o+ asso!iations registered (ith it as e3pressl" granted under e3isting la(s and de!rees* it shall have original and e'clusive jurisdiction to hear and decide cases involving( @ @ @ @ @@@ @ @

!7 #ontroversies in the selection or appointment of directors, trustees, officers, or managers of such corporations, partnerships or associations 3 3 3-1 7f the 1EC can declare who is the le#itimate 76P Board, then b parit of reasonin#, it can also declare who is not the le#itimate 76P Board. This is precisel what the 1EC did in 1EC Case No. .+'- when it ad!ud#ed the election of the Carpi5o )roup to the 76P Board of Trustees to be null and void. B this rulin#, the 1EC in effect made the une=uivocal findin# that the 76P: Carpi5o )roup is a bo#us Board of Trustees. Conse=uentl , the Carpi5o )roup is bereft of an authorit whatsoever to bind 76P in an $ind of transaction includin# the sale or disposition of 76P propert .
G9,H

7t must be noted that 1EC Case No. .+'- is not the first case wherein the 1EC had the opportunit to pass upon the status of the Carpi5o )roup. As far bac$ as >ctober 9, '/0*, the 1EC, in Case No. -*02, in a suit between the Carpi5o )roup and the Abbas )roup, alread declared the election of the Carpi5o )roup &as well as the Abbas )roup( to the 76P Board as null and void for bein# violative of the Articles of 7ncorporation. Nothin# thus becomes more settled than that the 76P:Carpi5o )roup with whom private respondent 7NC contracted is a fa$e Board.
G9*H G92H

Premises considered, all acts carried out b the Carpi5o Board, particularl the sale of the Tandan# 1ora propert , alle#edl in the name of the 76P, have to be struc$ down for havin# been done without the consent of the 76P thru a le#itimate Board of Trustees. Article '9'0 of the New Civil Code la s down the essential re=uisites of contracts% %There is no contract unless the +ollo(ing reFuisites !on!urE 6?7 #onsent of the contracting parties) 647 /bje!t !ertain (hi!h is the subje!t matter o+ the !ontra!t; 6<7 Cause o+ the obligation (hi!h is established-1 All these elements must be present to constitute a valid contract. Cor, where even one is absent, the contract is void. As succinctl put b Tolentino, consent is essential for the e@istence of a contract, and where it is wantin#, the contract is non:e@istent. 7n this case, the 76P, owner of the sub!ect parcels of land, never #ave its consent, thru a le#itimate Board of Trustees, to the disputed 6eed of Absolute 1ale e@ecuted in favor of 7NC. This is, therefore, a case not onl of vitiated consent, but one where consent on the part of one of the supposed contractin# parties is totall wantin#. 7neluctabl , the sub!ect sale is void and produces no effect whatsoever.
G90H

The Carpi5o )roup:7NC sale is further deemed null and void ab initio because of the Carpi5o )roupIs failure to compl with 1ection .+ of the Corporation Code pertainin# to the disposition of all or substantiall all assets of the corporation% %Se!- >=- *ale or other disposition of assets ! Subje!t to the pro)isions o+ e3isting la(s on illegal !ombinations and monopolies* a corporation may, by a majority vote of its board of directors or trustees, sell, lease* e3!hange* mortgage* pledge or other"ise dispose of all or substantially all of its property and assets * in!luding its good(ill* upon terms and !onditions and +or su!h !onsideration* (hi!h ma" be mone"* sto!#s* bonds or other instruments +or the pa"ment o+ mone" or other propert" or !onsideration* as its board o+ dire!tors or trustees ma" deem e3pedient* "hen authori+ed by the vote of the stoc&holders representing at least t"o!thirds ,-./0 of the outstanding capital stoc&) or in case of non!stoc& corporation, by the vote of at least t"o!thirds ,-./0 of the members, in a stoc&holders1 or members1 meeting duly called for the purpose Britten noti!e o+ the proposed a!tion and o+ the time and pla!e o+ the meeting shall be addressed to ea!h sto!#holder or member at his pla!e o+ residen!e as sho(n on the boo#s o+ the !orporation and deposited to the addressee in the post

o++i!e (ith postage prepaid* or ser)ed personall"E 2rovided* That an" dissenting sto!#holder ma" e3er!ise his appraisal right under the !onditions pro)ided in this CodeA sale or other disposition shall be deemed to !o)er substantiall" all the !orporate propert" and assets i+ thereb" the !orporation (ould be rendered in!apable o+ !ontinuing the business or a!!omplishing the purpose +or (hi!h it (as in!orporated@ @ @ @ @ @ @.Y @ @

The Tandan# 1ora propert , it appears from the records, constitutes the onl propert of the 76P. ;ence, its sale to a third:part is a sale or disposition of all the corporate propert and assets of 76P fallin# s=uarel within the contemplation of the fore#oin# section. Cor the sale to be valid, the ma!orit vote of the le#itimate Board of Trustees, concurred in b the vote of at least -"9 of the bona *ide members of the corporation should have been obtained. These twin re=uirements were not met as the Carpi5o )roup which voted to sell the Tandan# 1ora propert was a fa$e Board of Trustees, and those whose names and si#natures were affi@ed b the Carpi5o )roup to#ether with the sham Board Resolution authori5in# the ne#otiation for the sale were, from all indications, not bona *ide members of the 76P as the were made to appear to be. Apparentl , there are onl fifteen &',( official members of the petitioner corporation includin# the ei#ht &0( members of the Board of Trustees.
G9/H

All told, the disputed 6eed of Absolute 1ale e@ecuted b the fa$e Carpi5o Board and private respondent 7NC was intrinsicall void ab initio. Private respondent 7NC nevertheless =uestions the authorit of the 1EC to nullif the sale for bein# made outside of its !urisdiction, the same not bein# an intra:corporate dispute. The resolution of the =uestion as to whether or not the 1EC had !urisdiction to declare the sub!ect sale null and void is rendered moot and academic b the inherent nullit of the hi#hl dubious sale due to lac$ of consent of the 76P, owner of the sub!ect propert . No end of substantial !ustice will be served if we reverse the 1ECIs conclusion on the matter, and remand the case to the re#ular courts for further liti#ation over an issue which is alread determinable based on what we have in the records. 7t is unfortunate that private respondent 7NC opposed the motion for intervention filed b the '/2' Board of Trustees in Civil Case No. S:/+:*/92, a case for 1pecific Performance with 6ama#es between 7NC and the Carpi5o

)roup on the sub!ect 6eed of Absolute 1ale. The le#itimate 76P Board could have been #ranted ample opportunit before the re#ional trial court to shed li#ht on the true status of the Carpi5o Board and settled the matter as to the validit of the sale then and there. But 7NC, wantin# to ac=uire the propert at all costs and threatened b the participation of the le#itimate 76P Board in the civil suit, ar#ued for the denial of the motion averrin#, inter alia, that the issue sou#ht to be liti#ated b the movant is intra:corporate in nature and outside the !urisdiction of the re#ional trial court. As a result, the motion for intervention was denied. Ahen the 6ecision in 1EC Case No. .+'-, came out nullif in# the sale, 7NC came forward, this time, =uibblin# over the issue that it is the re#ional trial court, and not the 1EC, which has !urisdiction to rule on the validit of the sale. 7NC is here triflin# with the courts. Ae cannot put a premium on this clever le#al maneuverin#s of private respondent which, if countenanced, would result in a failure of !ustice.
G.+H

Curthermore, the Court observed that the 7NC bou#ht the =uestioned propert from the Carpi5o )roup without even seein# the ownerIs duplicate cop of the titles coverin# the propert . This is ver stran#e considerin# that the sub!ect lot is a lar#e piece of real propert in Sue5on Cit worth millions, and that under the Torrens 1 stem of Re#istration, the minimum re=uirement for one to be a #ood faith bu er for value is that the vendee at least sees the ownerIs duplicate cop of the title and relies upon the same. The private respondent presumabl $nowled#eable on the aforesaid wor$in# of the Torrens 1 stem, did not ta$e heed of this and nevertheless went throu#h with the sale with undue haste. The une@plained ea#erness of 7NC to bu this valuable piece of land in Sue5on Cit without even bein# presented with the ownerIs cop of the titles casts ver serious doubt on the ri#htfulness of its position as vendee in the transaction.
G.'H

D!ERE"ORE, the petition is )RANTE6. The 6ecision of the public respondent Court of Appeals dated >ctober -0, '//. in CA:).R. 1P No. 99-/, is 1ET A176E. The 6ecision of the 1ecurities and E@chan#e Commission dated ?ul ,, '//9 in 1EC Case No. .+'- is RE7N1TATE6. The Re#ister of 6eeds of Sue5on Cit is hereb ordered to cancel the re#istration of the 6eed of Absolute 1ale in the name of respondent 7#lesia Ni Cristo, if one has alread been made. 7f new titles have been issued in the name of 7#lesia Ni Cristo, the re#ister of 6eeds is hereb ordered to cancel the same, and issue new ones in the name of petitioner 7slamic 6irectorate of the Philippines. Petitioner corporation is ordered to return to private respondent whatever amount has been initiall paid b 7NC as consideration for the propert with le#al interest, if the same was actuall received b

76P. >therwise, 7NC ma run after En#ineer Carou$ Carpi5o and his #roup for the amount of mone paid. SO ORDERED.

T;7R6 67<717>N

?G.R. No. 1*29%6. A8,0l 1+, 2002A

P!ILIPPINE NATIONAL .ANE B NATIONAL SUGAR DE#ELOPMENT CORPORATION, petitioners, vs. ANDRADA ELECTRIC B ENGINEERING COMPAN$, respondent. DECISION
PANGANI.AN, J.C

Basic is the rule that a corporation has a le#al personalit distinct and separate from the persons and entities ownin# it. The corporate veil ma be lifted onl if it has been used to shield fraud, defend crime, !ustif a wron#, defeat public convenience, insulate bad faith or perpetuate in!ustice. Thus, the mere fact that the Philippine National Ban$ &PNB( ac=uired ownership or mana#ement of some assets of the Pampan#a 1u#ar Mill &PA1EM74(, which had earlier been foreclosed and purchased at the resultin# public auction b the 6evelopment Ban$ of the Philippines &6BP(, will not ma$e PNB liable for the PA1EM74Is contractual debts to respondent. S2&26<6'2 o9 256 C&16 Before us is a Petition for Review assailin# the April '2, -+++ 6ecision of the Court of Appeals &CA( in CA:)R C< No. ,2*'+. The decretal portion of the challen#ed 6ecision reads as follows%
G'H

%BH0R08/R0* the judgment appealed +rom is hereb" A885RM0D-1 [4] T56 "&-21

The factual antecedents of the case are summari5ed b Appeals as follows%

the Court of

%5n its !omplaint* the plainti++ [herein respondent] alleged that it is a partnership dul" organi.ed* e3isting* and operating under the la(s o+ the Philippines* (ith o++i!e and prin!ipal pla!e o+ business at 9os- &2>-'?4 Del Monte [A])enue* Due.on Cit"* (hile the de+endant [herein petitioner] Philippine 9ational ,an# 6herein re+erred to as P9,7* is a semi-go)ernment !orporation dul" organi.ed* e3isting and operating under the la(s o+ the Philippines* (ith o++i!e and prin!ipal pla!e o+ business at 0s!olta Street* Sta- Cru.* Manila; (hereas* the other de+endant* the 9ational Sugar De)elopment Corporation 69ASGD0C/ in brie+7* is also a semi-go)ernment !orporation and the sugar arm o+ the P9,* (ith o++i!e and prin!ipal pla!e o+ business at the 4nd 8loor* Sampaguita ,uilding* Cubao* Due.on Cit"; and the de+endant Pampanga Sugar Mills 6PASGM5 in short7* is a !orporation organi.ed* e3isting and operating under the ?2&5 la(s o+ the Philippines* and had its business o++i!e be+ore ?2&5 at Del Carmen* 8loridablan!a* Pampanga; that the plainti++ is engaged in the business o+ general !onstru!tion +or the repairs andCor !onstru!tion o+ di++erent #inds o+ ma!hineries and buildings; that on August 4$* ?2&5* the de+endant P9, a!Fuired the assets o+ the de+endant PASGM5 that (ere earlier +ore!losed b" the De)elopment ,an# o+ the Philippines 6D,P7 under /5 9o- <??; that the de+endant P9, organi.ed the de+endant 9ASGD0C/ in September* ?2&5* to ta#e o(nership and possession o+ the assets and ultimatel" to nationali.e and !onsolidate its interest in other P9, !ontrolled sugar mills; that prior to /!tober 42* ?2&?* the de+endant PASGM5 engaged the ser)i!es o+ plainti++ +or ele!tri!al re(inding and repair* most o+ (hi!h (ere partiall" paid b" the de+endant PASGM5 * lea)ing se)eral unpaid a!!ounts (ith the plainti++; that +inall"* on /!tober 42* ?2&?* the plainti++ and the de+endant PASGM5 entered into a !ontra!t +or the plainti++ to per+orm the +ollo(ing* to (it H A6a7 A6b7 A6!7 A6d7 Constru!tion o+ one 6?7 po(er house building; Constru!tion o+ three 6<7 rein+or!ed !on!rete +oundation +or three 6<7 units <5= :B diesel engine generating set[s]; Constru!tion o+ three 6<7 rein+or!ed !on!rete +oundation +or the 5*=== :B and ?*45= :B turbo generator sets; Complete o)erhauling and re!onditioning tests sum +or three 6<7 <5= :B diesel engine generating set[s];

A6e7

5nstallation o+ turbine and diesel generating sets in!luding trans+ormer* s(it!hboard* ele!tri!al (irings and pipe pro)ided those stated units are !ompletel" supplied (ith their a!!essories; Relo!ating o+ 4*>== I transmission line* demolition o+ all e3isting !on!rete +oundation and drainage !anals* e3!a)ation* and earth +illings H all +or the total amount o+ P5><*5==-== as e)iden!ed b" a !ontra!t* [a] 3ero3 !op" o+ (hi!h is hereto atta!hed as Anne3 AA@ and made an integral part o+ this !omplaint;@

A6+7

that aside +rom the (or# !ontra!t mentioned-abo)e* the de+endant PASGM5 reFuired the plainti++ to per+orm e3tra (or#* and pro)ide ele!tri!al eFuipment and spare parts* su!h asE A6a7 A6b7 A6!7 A6d7 A6e7 A6+7 A6g7 A6h7 Suppl" o+ ele!tri!al de)i!es; 03tra me!hani!al (or#s; 03tra +abri!ation (or#s; Suppl" o+ materials and !onsumable items; 0le!tri!al shop repair; Suppl" o+ parts and related (or#s +or turbine generator; Suppl" o+ ele!tri!al eFuipment +or ma!hiner"; Suppl" o+ diesel engine parts and other related (or#s in!luding +abri!ation o+ parts-@

that out o+ the total obligation o+ P&&&*4$<-'=* the de+endant PASGM5 had paid onl" P45=*===-==* lea)ing an unpaid balan!e* as o+ June 4&* ?2&<* amounting toP54&*4$<-'=* as sho(n in the Certi+i!ation o+ the !hie+ a!!ountant o+ the P9,* a ma!hine !op" o+ (hi!h is appended as Anne3 AC@ o+ the !omplaint; that out o+ said unpaid balan!e o+ P54&*4$<-'=* the de+endant PASGM5 made a partial pa"ment to the plainti++ o+ P?>*===-==* in bro#en amounts* !o)ering the period +rom Januar" 5* ?2&> up to Ma" 4<* ?2&>* lea)ing an unpaid balan!e o+ P5?<*4$<-'=; that the de+endant PASGM5 and the de+endant P9,* and no( the de+endant 9ASGD0C/* +ailed and re+used to pa" the plainti++ their just* )alid and demandable obligation; that the President o+ the 9ASGD0C/ is also the Ii!e-President o+ the P9,* and this o++i!ial holds o++i!e at the ?= 8loor o+ the P9,* 0s!olta* Manila* and plainti++ besought this o++i!ial to pa" the outstanding obligation o+ the de+endant PASGM5 * inasmu!h as the de+endant P9, and 9ASGD0C/ no( o(ned and possessed the assets o+ the de+endant PASGM5 * and these
th

de+endants all bene+ited +rom the (or#s* and the ele!tri!al* as (ell as the engineering and repairs* per+ormed b" the plainti++; that be!ause o+ the +ailure and re+usal o+ the de+endants to pa" their just* )alid* and demandable obligations* plainti++ su++ered a!tual damages in the total amount o+ P5?<*4$<-'=; and that in order to re!o)er these sums* the plainti++ (as !ompelled to engage the pro+essional ser)i!es o+ !ounsel* to (hom the plainti++ agreed to pa" a sum eFui)alent to 45K o+ the amount o+ the obligation due b" (a" o+ attorne"@s +ees- A!!ordingl"* the plainti++ pra"ed that judgment be rendered against the de+endants P9,* 9ASGD0C/* and PASGM5 * jointl" and se)erall" to (itE

A6?7 Senten!ing the de+endants to pa" the plainti++s the sum o+ P5?<*4$<-'=* (ith annual interest o+ ?>K +rom the time the obligation +alls due and demandable; A647 Condemning the de+endants to pa" attorne"@s +ees amounting to 45K o+ the amount !laim; A6<7 /rdering the de+endants to pa" the !osts o+ the suit-@

%The de+endants P9, and 9ASGD0C/ +iled a joint motion to dismiss the !omplaint !hie+l" on the ground that the !omplaint +ailed to state su++i!ient allegations to establish a !ause o+ a!tion against both de+endants* inasmu!h as there is la!# or (ant o+ pri)it" o+ !ontra!t bet(een the plainti++ and the t(o de+endants* the P9, and 9ASGD0C/* said de+endants !iting Arti!le ?<?? o+ the 9e( Ci)il Code* and the !ase la( ruling in Salonga )- Barner ,arnes L Co-* '' Phil- ?45; and Manila Port Ser)i!e* et al- )- Court o+ Appeals* et al-* 4= SCRA ?4?>%The motion to dismiss (as b" the !ourt a Fuo denied in its /rder o+ 9o)ember 4&* ?2'=; in the same order* that !ourt dire!ted the de+endants to +ile their ans(er to the !omplaint (ithin ?5 da"s%5n their ans(er* the de+endant 9ASGD0C/ reiterated the grounds o+ its motion to dismiss* to (itE AThat the !omplaint does not state a su++i!ient !ause o+ a!tion against the de+endant 9ASGD0C/ be!auseE 6a7 9ASGD0C/ is not 3 3 3 pri)" to the )arious ele!tri!al !onstru!tion jobs being sued upon b" the plainti++ under the present !omplaint; 6b7 the ta#ing o)er b" 9ASGD0C/ o+ the assets o+ de+endant PASGM5 (as solel" +or the purpose o+ re!onditioning the sugar !entral o+ de+endant PASGM5 pursuant to martial la( po(ers o+ the President under the Constitution; 6!7 nothing in the /5 9o?'2-A 6as (ell as in /5 9o- <??7 authori.ed or !ommanded the P9, or its subsidiar" !orporation* the 9ASGD0C/* to assume the !orporate obligations o+ PASGM5 as that being in)ol)ed in the present !ase; and* 6d7 all that (as mentioned b" the said letter o+ instru!tion inso+ar as the PASGM5 liabilities [(ere] !on!erned

[(as] +or the P9,* or its subsidiar" !orporation the 9ASGD0C/* to ma#e a stud" o+* and submit [a] re!ommendation on the problems !on!erning the same-@ %," (a" o+ !ounter!laim* the 9ASGD0C/ a)erred that b" reason o+ the +iling b" the plainti++ o+ the present suit* (hi!h it [labeled] as un+ounded or baseless* the de+endant 9ASGD0C/ (as !onstrained to litigate and in!ur litigation e3penses in the amount o+ P5=*===-==* (hi!h plainti++ should be senten!ed to pa"- A!!ordingl"* 9ASGD0C/ pra"ed that the !omplaint be dismissed and on its !ounter!laim* that the plainti++ be !ondemned to pa" P5=*===-== in !on!ept o+ attorne"@s +ees as (ell as e3emplar" damages%5n its ans(er* the de+endant P9, li#e(ise reiterated the grounds o+ its motion to dismiss* namel"E 6?7 the !omplaint states no !ause o+ a!tion against the de+endant P9,; 647 that P9, is not a part" to the !ontra!t alleged in par- $ o+ the !omplaint and that the alleged ser)i!es rendered b" the plainti++ to the de+endant PASGM5 upon (hi!h plainti++@s suit is ere!ted* (as rendered long be+ore P9, too# possession o+ the assets o+ the de+endant PASGM5 under /5 9o- ?'2-A; 6<7 that the P9, ta#e-o)er o+ the assets o+ the de+endant PASGM5 under /5 ?'2-A (as solel" +or the purpose o+ re!onditioning the sugar !entral so that PASGM5 ma" resume its operations in time +or the ?2&>-&5 milling season* and that nothing in the said /5 9o- ?'2-A* as (ell as in /5 9o- <??* authori.ed or dire!ted P9, to assume the !orporate obligationCs o+ PASGM5 * let alone that +or (hi!h the present a!tion is brought; 6>7 that P9,@s management and operation under /5 9o- <?? did not re+er to an" asset o+ PASGM5 (hi!h the P9, had to a!Fuire and therea+ter [manage]* but onl" to those (hi!h (ere +ore!losed b" the D,P and (ere in turn redeemed b" the P9, +rom the D,P; 657 that !on+ormabl" to /5 9o- <??* on August ?5* ?2&5* the P9, and the De)elopment ,an# o+ the Philippines 6D,P7 entered into a ARedemption Agreement@ (hereb" D,P sold* trans+erred and !on)e"ed in +a)or o+ the P9,* b" (a" o+ redemption* all its 6D,P7 rights and interest in and o)er the +ore!losed real andCor personal properties o+ PASGM5 * as sho(n in Anne3 AC@ (hi!h is made an integral part o+ the ans(er; 6$7 that again* !on+ormabl" (ith /5 9o- <??* P9, pursuant to a Deed o+ Assignment dated /!tober 4?* ?2&5* !on)e"ed* trans+erred* and assigned +or )aluable !onsideration* in +a)or o+ 9ASGD0C/* a distin!t and independent !orporation* all its 6P9,7 rights and interest in and under the abo)e ARedemption Agreement-@ This is sho(n in Anne3 AD@ (hi!h is also made an integral part o+ the ans(er; [&] that as a !onseFuen!e o+ the said Deed o+ Assignment* P9, on /!tober 4?* ?2&5 !eased to managed and operate the abo)e-mentioned assets o+ PASGM5 * (hi!h +un!tion (as no( a!tuall" trans+erred to 9ASGD0C/- 5n other (ords* so asserted P9,* the !omplaint as to P9,* had be!ome moot and a!ademi! be!ause o+ the e3e!ution o+ the said Deed o+ Assignment; ['] that moreo)er* /5 9o- <?? did not authori.e or dire!t P9, to assume the !orporate obligations o+ PASGM5 * in!luding

the alleged obligation upon (hi!h this present suit (as brought; and [2] that* at most* (hat (as granted to P9, in this respe!t (as the authorit" to Ama#e a stud" o+ and submit re!ommendation on the problems !on!erning the !laims o+ PASGM5 !reditors*@ under sub-par- 5 /5 9o- <??%5n its !ounter!laim* the P9, a)erred that it (as unne!essaril" !onstrained to litigate and to in!ur e3penses in this !ase* hen!e it is entitled to !laim attorne"@s +ees in the amount o+ at least P5=*===-==- A!!ordingl"* P9, pra"ed that the !omplaint be dismissed; and that on its !ounter!laim* that the plainti++ be senten!ed to pa" de+endant P9, the sum o+ P5=*===-== as attorne"@s +ees* aside +rom e3emplar" damages in su!h amount that the !ourt ma" seem just and eFuitable in the premises%Summons b" publi!ation (as made )ia the Philippines Dail" 03press* a ne(spaper (ith editorial o++i!e at <&? ,oni+a!io Dri)e* Port Area* Manila* against the de+endant PASGM5 * (hi!h (as therea+ter de!lared in de+ault as sho(n in the August &* ?2'? /rder issued b" the Trial Court%A+ter due pro!eedings* the Trial Court rendered judgment* the de!retal portion o+ (hi!h readsE ABH0R08/R0* judgment is hereb" rendered in +a)or o+ plainti++ and against the de+endant Corporation* Philippine 9ational ,an# 6P9,7 9AT5/9A SGMAR D0I0 /PM09T C/RP/RAT5/9 69ASGD0C/7 and PAMPA9MA SGMAR M5 S 6PASGM5 7* ordering the latter to pa" jointl" and se)erall" the +ormer the +ollo(ingE A?A4A<The sum o+ P5?<*$4<-'= plus interest thereon at the rate o+ ?>K per annum as !laimed +rom September 45* ?2'= until +ull" paid; The sum o+ P?=4*&4>-&$ as attorne"@s +ees; and* Costs-

AS/ /RD0R0DAManila* Philippines* September >* ?2'$N6SMD7 0R90ST/ S- T09MC/ AJudge@1[<] Rul0': o9 256 Cou,2 o9 A886&l1

Affirmin# the trial court, the CA held that it was offensive to the basic tenets of !ustice and e=uit for a corporation to ta$e over and operate the business of another corporation, while disavowin# or repudiatin# an responsibilit , obli#ation or liabilit arisin# therefrom.
G.H

;ence, this Petition.

G,H

I11u61 7n their Memorandum, petitioners raise the followin# errors for the CourtIs consideration%
FI

The Court o+ Appeals gra)el" erred in la( in holding the herein petitioners liable +or the unpaid !orporate debts o+ PASGM5 * a !orporation (hose !orporate e3isten!e has not been legall" e3tinguished or terminated* simpl" be!ause o+ petitioners[@] ta#e-o)er o+ the management and operation o+ PASGM5 pursuant to the mandates o+ /5 9o- ?'2-A* as amended b" /5 9o- <??FII

The Court o+ Appeals gra)el" erred in la( in not appl"ing [to] the !ase at ben!h the ruling enun!iated in 0d(ard J- 9ell Co- )- Pa!i+i! 8arms* ?5 SCRA >?5-1 [$] 1uccinctl put, the aforesaid errors boil down to the principal issue of whether PNB is liable for the unpaid debts of PA1EM74 to respondent. T501 Cou,2G1 Rul0': The Petition is meritorious. M&0' I11u6C Liability for Corporate

ebts

As a #eneral rule, =uestions of fact ma not be raised in a petition for review under Rule ., of the Rules of Court. To this rule, however, there are some e@ceptions enumerated in F$ente' &. 4o$rt o* A##eal'. After a careful scrutin of the records and the pleadin#s submitted b the parties, we find that
G2H G0H

the lower courts misappreciated the evidence presented. >verloo$ed b the CA were certain relevant facts that would !ustif a conclusion different from that reached in the assailed 6ecision.
G/H G'+H

Petitioners posit that the should not be held liable for the corporate debts of PA1EM74, because their ta$eover of the latterIs foreclosed assets did not ma$e them assi#nees. >n the other hand, respondent asserts that petitioners and PA1EM74 should be treated as one entit and, as such, !ointl and severall held liable for PA1EM74Is unpaid obli#ation. As a rule, a corporation that purchases the assets of another will not be liable for the debts of the sellin# corporation, provided the former acted in #ood faith and paid ade=uate consideration for such assets, e@cept when an of the followin# circumstances is present% &'( where the purchaser e@pressl or impliedl a#rees to assume the debts, &-( where the transaction amounts to a consolidation or mer#er of the corporations, &9( where the purchasin# corporation is merel a continuation of the sellin# corporation, and &.( where the transaction is fraudulentl entered into in order to escape liabilit for those debts.
G''H

!ier"in# the Corporate $eil Not %arranted A corporation is an artificial bein# created b operation of law. 7t possesses the ri#ht of succession and such powers, attributes, and properties e@pressl authori5ed b law or incident to its e@istence. 7t has a personalit separate and distinct from the persons composin# it, as well as from an other le#al entit to which it ma be related. This is basic.
G'-H G'9H

E=uall well:settled is the principle that the corporate mas$ ma be removed or the corporate veil pierced when the corporation is !ust an alter e#o of a person or of another corporation. Cor reasons of public polic and in the interest of !ustice, the corporate veil will !ustifiabl be impaled onl when it becomes a shield for fraud, ille#alit or ine=uit committed a#ainst third persons.
G'.H G',H G'*H

;ence, an application of the doctrine of piercin# the corporate veil should be done with caution. A court should be mindful of the milieu where it is to be applied. 7t must be certain that the corporate fiction was misused to such an e@tent that in!ustice, fraud, or crime was committed a#ainst another, in disre#ard of its ri#hts. The wron#doin# must be clearl and convincin#l
G'2H G'0H G'/H

established8 it cannot be presumed. >therwise, an in!ustice that was never unintended ma result from an erroneous application.
G-+H G-'H

This Court has pierced the corporate veil to ward off a !ud#ment credit, to avoid inclusion of corporate assets as part of the estate of the decedent, to escape liabilit arisin# from a debt, or to perpetuate fraud and"or confuse le#itimate issues either to promote or to shield unfair ob!ectives or to cover up an otherwise blatant violation of the prohibition a#ainst forum:shoppin#. >nl in these and similar instances ma the veil be pierced and disre#arded.
G--H G-9H G-.H G-,H G-*H G-2H G-0H

The =uestion of whether a corporation is a mere alter e#o is one of fact. Piercin# the veil of corporate fiction ma be allowed onl if the followin# elements concur% &'( control :: not mere stoc$ control, but complete domination :: not onl of finances, but of polic and business practice in respect to the transaction attac$ed, must have been such that the corporate entit as to this transaction had at the time no separate mind, will or e@istence of its own8 &-( such control must have been used b the defendant to commit a fraud or a wron# to perpetuate the violation of a statutor or other positive le#al dut , or a dishonest and an un!ust act in contravention of plaintiffIs le#al ri#ht8 and &9( the said control and breach of dut must have pro@imatel caused the in!ur or un!ust loss complained of.
G-/H G9+H

Ae believe that the absence of the fore#oin# elements in the present case precludes the piercin# of the corporate veil. Fir't, other than the fact that petitioners ac=uired the assets of PA1EM74, there is no showin# that their control over it warrants the disre#ard of corporate personalities. Second, there is no evidence that their !uridical personalit was used to commit a fraud or to do a wron#8 or that the separate corporate entit was farcicall used as a mere alter e#o, business conduit or instrumentalit of another entit or person. T)ird, respondent was not defrauded or in!ured when petitioners ac=uired the assets of PA1EM74.
G9'H G9-H G99H

Bein# the part that as$ed for the piercin# of the corporate veil, respondent had the burden of presentin# clear and convincin# evidence to !ustif the settin# aside of the separate corporate personalit rule. ;owever, it utterl failed to dischar#e this burden8 it failed to establish b competent evidence that petitionerIs separate corporate veil had been used to conceal fraud, ille#alit or ine=uit .
G9.H G9,H G9*H

Ahile we a#ree with respondentIs claim that the assets of the National 1u#ar 6evelopment Corporation &NA1E6EC>( can be easil traced to PA1EM74, we are not convinced that the transfer of the latterIs assets to
G92H

petitioners was fraudulentl entered into in order to escape liabilit for its debt to respondent.
G90H

A careful review of the records reveals that 6BP foreclosed the mort#a#e e@ecuted b PA1EM74 and ac=uired the assets as the hi#hest bidder at the public auction conducted. The ban$ was !ustified in foreclosin# the mort#a#e, because the PA1EM74 account had incurred arreara#es of more than -+ percent of the total outstandin# obli#ation. Thus, 6BP had not onl a ri#ht, but also a dut under the law to foreclose the sub!ect properties.
G9/H G.+H G.'H

Pursuant to 4>7 No. '0/:A as amended b 4>7 No. 9'', PNB ac=uired PA1EM74Is assets that 6BP had foreclosed and purchased in the normal course. Petitioner ban$ was li$ewise tas$ed to mana#e temporaril the operation of such assets either b itself or throu#h a subsidiar corporation.
G.-H G.9H G..H

PNB, as the second mort#a#ee, redeemed from 6BP the foreclosed PA1EM74 assets pursuant to 1ection * of Act No. 9'9,. These assets were later conve ed to PNB for a consideration, the terms of which were embodied in the Redemption A#reement. PNB, as successor:in:interest, stepped into the shoes of 6BP as PA1EM74Is creditor. B wa of a 6eed of Assi#nment, PNB then transferred to NA1E6EC> all its ri#hts under the Redemption A#reement.
G.,H G.*H G.2H G.0H

7n De&elo#%ent Ban0 o* t)e :)ili##ine' &. 4o$rt o* A##eal', we had the occasion to resolve a similar issue. Ae ruled that PNB, 6BP and their transferees were not liable for Marindu=ue Minin#Is unpaid obli#ations to Remin#ton 7ndustrial 1ales Corporation &Remin#ton( after the two ban$s had foreclosed the assets of Marindu=ue Minin#. Ae li$ewise held that Remin#ton failed to dischar#e its burden of provin# bad faith on the part of Marindu=ue Minin# to !ustif the piercin# of the corporate veil.
G./H

7n the instant case, the CA erred in affirmin# the trial courtIs liftin# of the corporate mas$. The CA did not point to an fact evidencin# bad faith on the part of PNB and its transferee. The corporate fiction was not used to defeat public convenience, !ustif a wron#, protect fraud or defend crime. None of the fore#oin# e@ceptions was shown to e@ist in the present case. >n the contrar , the liftin# of the corporate veil would result in manifest in!ustice. This we cannot allow.
G,+H G,'H G,-H G,9H

No &er#er or Consolidation Respondent further claims that petitioners should be held liable for the unpaid obli#ations of PA1EM74 b virtue of 4>7 Nos. '0/:A and 9'', which

e@pressl authori5ed PA1EM74 and PNB to mer#e or consolidate. >n the other hand, petitioners contend that their ta$eover of the operations of PA1EM74 did not involve an corporate mer#er or consolidation, because the latter had never lost its separate identit as a corporation. A consolidation is the union of two or more e@istin# entities to form a new entit called the consolidated corporation. A mer#er, on the other hand, is a union whereb one or more e@istin# corporations are absorbed b another corporation that survives and continues the combined business.
G,.H

The mer#er, however, does not become effective upon the mere a#reement of the constituent corporations. 1ince a mer#er or consolidation involves fundamental chan#es in the corporation, as well as in the ri#hts of stoc$holders and creditors, there must be an e@press provision of law authori5in# them. Cor a valid mer#er or consolidation, the approval b the 1ecurities and E@chan#e Commission &1EC( of the articles of mer#er or consolidation is re=uired. These articles must li$ewise be dul approved b a ma!orit of the respective stoc$holders of the constituent corporations.
G,,H G,*H G,2H G,0H

7n the case at bar, we hold that there is no mer#er or consolidation with respect to PA1EM74 and PNB. The procedure prescribed under Title 7J of the Corporation Code was not followed.
G,/H

7n fact, PA1EM74Is corporate e@istence, as correctl found b the CA, had not been le#all e@tin#uished or terminated. Curther, prior to PNBIs ac=uisition of the foreclosed assets, PA1EM74 had previousl made partial pa ments to respondent for the formerIs obli#ation in the amount of P222,-*9.0+. As of ?une -2, '/29, PA1EM74 had paid P-,+,+++ to respondent and, from ?anuar ,, '/2. to Ma -9, '/2., anotherP'.,+++.
G*+H

Neither did petitioner e@pressl or impliedl a#ree to assume the debt of PA1EM74 to respondent. 4>7 No. '' e@plicitl provides that PNB shall stud and submit recommendations on the claims of PA1EM74Is creditors. Clearl , the corporate separateness between PA1EM74 and PNB remains, despite respondentIs insistence to the contrar .
G*'H G*-H G*9H

D!ERE"ORE, the Petition is hereb GRANTED and the 6ecision SET ASIDE. No pronouncement as to costs. SO ORDERED.

assailed

Republic of the Philippines SUPREME COURT Manila

EN BANC G.R. No. L-21601 D6-6<;6, 1+, 1966

NIELSON B COMPAN$, INC., plaintiff:appellant, vs. LEPANTO CONSOLIDATED MINING COMPAN$, defendant:appellee. A. H. ;$a')a and A''ociate' *or #lainti**7a##ellant. :once Enrile, Si5$ion7Re(na, 2ontecillo and Belo *or de*endant7a##ellee. ZALDI#AR, J.: >n Cebruar *, '/,0, plaintiff brou#ht this action a#ainst defendant before the Court of Cirst 7nstance of Manila to recover certain sums of mone representin# dama#es alle#edl suffered b the former in view of the refusal of the latter to compl with the terms of a mana#ement contract entered into between them on ?anuar 9+, '/92, includin# attorne Bs fees and costs. 6efendant in its answer denied the material alle#ations of the complaint and set up certain special defenses, amon# them, prescription and laches, as bars a#ainst the institution of the present action. After trial, durin# which the parties presented testimonial and numerous documentar evidence, the court a 8$orendered a decision dismissin# the complaint with costs. The court stated that it did not find sufficient evidence to establish defendantBs counterclaim and so it li$ewise dismissed the same. The present appeal was ta$en to this Court directl b the plaintiff in view of the amount involved in the case. The facts of this case, as stated in the decision appealed from, are hereunder =uoted for purposes of this decision% 7t appears that the suit involves an operatin# a#reement e@ecuted before Aorld Aar 77 between the plaintiff and the defendant whereb the former operated and mana#ed the minin# properties owned b the latter for a mana#ement fee of P-,,++.++ a month and a '+N participation in the net profits resultin# from the operation of the minin# properties. Cor brevit and convenience, hereafter the plaintiff shall be referred to as N7E41>N and the defendant, 4EPANT>. The antecedents of the case are% The contract in =uestion &E@hibit ZCB( was made b the parties on ?anuar 9+, '/92 for a period of five &,( ears. 7n the latter part of '/.', the parties a#reed to renew the contract for another period of five &,( ears, but in the meantime, the Pacific Aar bro$e out in 6ecember, '/.'. 7n ?anuar , '/.- operation of the minin# properties was disrupted on account of the war. 7n Cebruar of '/.-, the mill, power plant, supplies on hand, e=uipment, concentrates on hand and mines, were destro ed upon orders of the Enited 1tates Arm , to prevent their utili5ation b the invadin# ?apanese Arm . The ?apanese forces thereafter occupied the minin# properties, operated the mines durin# the continuance of the war, and who were ousted from the minin# properties onl in Au#ust of '/.,.

After the minin# properties were liberated from the ?apanese forces, 4EPANT> too$ possession thereof and embar$ed in rebuildin# and reconstructin# the mines and mill8 settin# up new or#ani5ation8 clearin# the mill site8 repairin# the mines8 erectin# staff =uarters and bode#as and repairin# e@istin# structures8 installin# new machiner and e=uipment8 repairin# roads and maintainin# the same8 salva#in# e=uipment and storin# the same within the bode#as8 doin# police wor$ necessar to ta$e care of the materials and e=uipment recovered8 repairin# and renewin# the water s stem8 and rememberin# &E@hibits 363 and 3E3(. The rehabilitation and reconstruction of the mine and mill was not completed until '/.0 &E@hibit 3C3(. >n ?une -*, '/.0 the mines resumed operation under the e@clusive mana#ement of 4EPANT> &E@hibit 3C:l3(. 1hortl after the mines were liberated from the ?apanese invaders in '/.,, a disa#reement arose between N7E41>N and 4EPANT> over the status of the operatin# contract in =uestion which as renewed e@pired in '/.2. Ender the terms thereof, the mana#ement contract shall remain in suspense in case fortuitous event or *orce %a6e$re, such as war or civil commotion, adversel affects the wor$ of minin# and millin#. 37n the event of inundations, floodin#s of mine, t phoon, earth=ua$e or an other force ma!eure, war, insurrection, civil commotion, or#ani5ed stri$e, riot, in!ur to the machiner or other event or cause reasonabl be ond the control of N7E41>N and which adversel affects the wor$ of minin# and millin#8 N7E41>N shall report such fact to 4EPANT> and without liabilit or breach of the terms of this A#reement, the same shall remain in suspense, wholl or partiall durin# the terms of such inabilit .3 &Clause 77 of E@hibit 3C3(. N7E41>N held the view that, on account of the war, the contract was suspended durin# the war8 hence the life of the contract should be considered e@tended for such time of the period of suspension. >n the other hand, 4EPANT> contended that the contract should e@pire in '/.2 as ori#inall a#reed upon because the period of suspension accorded b virtue of the war did not operate to e@tend further the life of the contract. No understandin# appeared from the record to have been bad b the parties to resolve the disa#reement. 7n the meantime, 4EPANT> rebuilt and reconstructed the mines and was able to brin# the propert into operation onl in ?une of '/.0, . . . . Appellant in its brief ma$es an alternative assi#nment of errors dependin# on whether or not the mana#ement contract basis of the action has been e@tended for a period e=uivalent to the period of suspension. 7f the a#reement is suspended our attention should be focused on the first set of errors claimed to have been committed b the court a 8$o8 but if the contrar is true, the discussion will then be switched to the alternative set that is claimed to have been committed. Ae will first ta$e up the =uestion whether the mana#ement a#reement has been e@tended as a result of the supervenin# war, and after this =uestion shall have been determined in the sense sustained b appellant, then the discussion of the defense of laches and prescription will follow as a conse=uence. The pertinent portion of the mana#ement contract &E@h. C( which refers to suspension should an event constitutin# *orce %a6e$re happen appears in Clause 77 thereof which we =uote hereunder% 7n the event of inundations, floodin#s of the mine, t phoon, earth=ua$e or an other force ma!eure, war, insurrection, civil commotion, or#ani5ed stri$e, riot, in!ur to the machiner or other event or cause reasonabl be ond the control of N7E41>N and which adversel affects the wor$ of minin# and millin#8 N7E41>N shall report such fact to 4EPANT> and

without liabilit or breach of the terms of this A#reement, the same shall remain in suspense, wholl or partiall durin# the terms of such inabilit . A careful scrutin of the clause above:=uoted will at once reveal that in order that the mana#ement contract ma be deemed suspended two events must ta$e place which must be brou#ht in a satisfactor manner to the attention of defendant within a reasonable time, to wit% &'( the event constitutin# the *orce %a6e$re must be reasonabl be ond the control of Nielson, and &-( it must adversel affect the wor$ of minin# and millin# the compan is called upon to underta$e. As lon# as these two condition e@ist the a#reement is deem suspended. 6oes the evidence on record show that these two conditions had e@isted which ma !ustif the conclusion that the mana#ement a#reement had been suspended in the sense entertained b appellantR 4et us #o to the evidence. 7t is a matter that this Court can ta$e !udicial notice of that war supervened in our countr and that the mines in the Philippines were either destro ed or ta$en over b the occupation forces with a view to their operation. The 4epanto mines were no e@ception for not was the mine itself destro ed but the mill, power plant, supplies on hand, e=uipment and the li$e that were bein# used there were destro ed as well. Thus, the followin# is what appears in the 4epanto Compan Minin# Report dated March '9, '/.* submitted b its President C. A. 6eAitt to the defendant% ' 37n Cebruar of '/.-, our mill, power plant, supplies on hand, e=uipment, concentrates on hand, and mine, were destro ed upon orders of the E.1. Arm to prevent their utili5ation b the enem .3 The report also mentions the report submitted b Mr. Blessin#, an official of Nielson, that 3the ori#inal mill was destro ed in '/.-3 and 3the ori#inal power plant and all the installed e=uipment were destro ed in '/.-.3 7t is then undeniable that be#innin# Cebruar , '/.- the operation of the 4epanto mines stopped or became suspended as a result of the destruction of the mill, power plant and other important e=uipment necessar for such operation in view of a cause which was clearl be ond the control of Nielson and that as a conse=uence such destruction adversel affected the wor$ of minin# and millin# which the latter was called upon to underta$e under the mana#ement contract. Conse=uentl , b virtue of the ver terms of said contract the same ma be deemed suspended from Cebruar , '/.- and as of that month the contract still had *+ months to #o. >n the other hand, the record shows that the defendant admitted that the occupation forces operated its minin# properties sub!ect of the mana#ement contract, - and from the ver report submitted b President 6eAitt it appears that the date of the liberation of the mine was Au#ust ', '/., althou#h at the time there were still man boob traps.9 1imilarl , in a report submitted b the defendant to its stoc$holders dated Au#ust -,, '/.0, the followin# appears% 3Pour 6irectors ta$e pleasure in reportin# that ?une -*, '/.0 mar$ed the official return to operations of this Compan of its properties in Man$a an, Mountain Province, Philippines.3 . 7t is, therefore, clear from the fore#oin# that the 4epanto mines were liberated on Au#ust ', '/.,, but because of the period of rehabilitation and reconstruction that had to be made as a result of the destruction of the mill, power plant and other necessar e=uipment for its operation it cannot be said that the suspension of the contract ended on that date. ;ence, the contract must still be deemed suspended durin# the succeedin# ears of reconstruction and rehabilitation, and this period can onl be said to have ended on ?une -*, '/.0 when, as reported b the defendant, the compan officiall resumed the minin# operations of the 4epanto. 7t should here be stated that this period of suspension from Cebruar , '/.- to ?une -*, '/.0 is the one ur#ed b plaintiff. , 7t havin# been shown that the operation of the 4epanto mines on the part of Nielson had been suspended durin# the period set out above within the purview of the mana#ement contract, the ne@t =uestion that needs to be determined is the effect of such suspension. 1tated in another wa , the

=uestion now to be determined is whether such suspension had the effect of e@tendin# the period of the mana#ement contract for the period of said suspension. To elucidate this matter, we a#ain need to resort to the evidence. Cor appellant Nielson two witnesses testified, declarin# that the suspension had the effect of e@tendin# the period of the contract, namel , )eor#e T. 1chole and Mar$ Nestle. 1chole was a minin# en#ineer since '/-/, an incorporator, #eneral mana#er and director of Nielson and Compan 8 and for some time he was also the vice:president and director of the 4epanto Compan durin# the pre:war da s and, as such, he was an officer of both appellant and appellee companies. As vice:president of 4epanto and #eneral mana#er of Nielson, 1chole participated in the ne#otiation of the mana#ement contract to the e@tent that he initialed the same both as witness and as an officer of both corporations. This witness testified in this case to the effect that the standard *orce %a6e$re clause embodied in the mana#ement contract was ta$en from similar minin# contracts re#ardin# minin# operations and the understandin# re#ardin# the nature and effect of said clause was that when there is suspension of the operation that suspension meant the e@tension of the contract. Thus, to the =uestion, 3Before the war, what was the understandin# of the people in the particular trend of business with respect to the *orce %a6e$re clauseR3, 1chole answered% 3That was our understandin# that the suspension meant the e@tension of time lost.3 * Mar$ Nestle, the other witness, testified alon# similar line. ;e had been connected with Nielson since '/92 until the time he too$ the witness stand and had been a director, mana#er, and president of the same compan . Ahen he was propounded the =uestion% 36o ou $now what was the custom or usa#e at that time in connection with *orce %a6e$re clauseR3, Nestle answered, 37n the minin# world the *orce %a6e$re clause is #enerall considered. Ahen a calamit comes up and stops the wor$ li$e in war, flood, inundation or fire, etc., the wor$ is suspended for the duration of the calamit , and the period of the contract is e@tended after the calamit is over to enable the person to do the bi# wor$ or recover his mone which he has invested, or accomplish what his obli#ation is to a third person .32 And the above testimonial evidence finds support in the ver minutes of the special meetin# of the Board of 6irectors of the 4epanto Compan issued on March '+, '/., which was then chairmaned b Att . C. A. 6eAitt. Ae read the followin# from said report% The Chairman also stated that the contract with Nielson and Compan would soon e@pire if the obli#ations were not suspended, in which case we should have to pa them the retainin# fee of P-,,++.++ a month. ;e believes however, that there is a provision in the contract suspendin# the effects thereof in cases li$e the present, and that even if it were not there, the law itself would suspend the operations of the contract on account of the war. An how, he stated, we shall have no difficult in solvin# satisfactoril an problem we ma have with Nielson and Compan .0 Thus, we can see from the above that even in the opinion of Mr. 6eAitt himself, who at the time was the chairman of the Board of 6irectors of the 4epanto Compan , the mana#ement contract would then e@pire unless the period therein rated is suspended but that, however, he e@pressed the belief that the period was e@tended because of the provision contained therein suspendin# the effects thereof should an of the case of force ma!eure happen li$e in the present case, and that even if such provision did not e@ist the law would have the effect of suspendin# it on account of the war. 7n substance, Att . 6eAitt e@pressed the opinion that as a result of the suspension of the minin# operation because of the effects of the war the period of the contract had been e@tended. Contrar to what appellantBs evidence reflects insofar as the interpretation of the *orce %a6e$re clause is concerned, however, appellee #ives Es an opposite interpretation invo$in# in

support thereof not onl a letter Att . 6eAitt sent to Nielson on >ctober -+, '/.,, / wherein he e@pressed for the first time an opinion contrar to what he reported to the Board of 6irectors of 4epanto Compan as stated in the portion of the minutes of its Board of 6irectors as =uoted above, but also the rulin# laid down b our 1upreme Court in some cases decided sometime a#o, to the effect that the war does not have the effect of e@tendin# the term of a contract that the parties ma enter into re#ardin# a particular transaction, citin# in this connection the cases of Bictoria' :lanter' A''ociation &. Bictoria' 2illin5 4o%#an( , ,' >.). .+'+8 Ro'ario S. Bda. de 9ac'on, et al. &. Abelardo G. Dia<, 02 Phil. ',+8 and9o 4)in5 ( So Co$n5 4)on5 4o. &. 4o$rt o* A##eal', et al., 0' Phil. *+'. To bolster up its theor , appellee also contends that the evidence re#ardin# the alle#ed custom or usa#e in minin# contract that appellantBs witnesses tried to introduce was incompetent because &a( said custom was not specificall pleaded8 &b( 4epanto made timel and repeated ob!ections to the introduction of said evidence8 &c( Nielson failed to show the essential elements of usa#e which must be shown to e@ist before an proof thereof can be #iven to affect the contract8 and &d( the testimon of its witnesses cannot prevail over the ver terms of the mana#ement contract which, as a rule, is supposed to contain all the terms and conditions b which the parties intended to be bound. 7t is here necessar to anal 5e the contradictor evidence which the parties have presented re#ardin# the interpretation of the *orce %a6e$re clause in the mana#ement contract. At the outset, it should be stated that, as a rule, in the construction and interpretation of a document the intention of the parties must be sou#ht &Rule '9+, 1ection '+, Rules of Court(. This is the basic rule in the interpretation of contracts because all other rules are but ancilliar to the ascertainment of the meanin# intended b the parties. And once this intention has been ascertained it becomes an inte#ral part of the contract as thou#h it had been ori#inall e@pressed therein in une=uivocal terms &1horeline >il Corp. v. )u , App. '0/, 1o., 9.0, cited in '2A C.?.1., p. .2(. ;ow is this intention determinedR >ne pattern is to ascertain the contemporaneous and subse=uent acts of the contractin# parties in relation to the transaction under consideration &Article '92', Civil Code(. 7n this particular case, it is worth of note what Att . C. A. 6eAitt has stated in the special meetin# of the Board of 6irectors of 4epanto in the portion of the minutes alread =uoted above wherein, as alread stated, he e@pressed the opinion that the life of the contract, if not e@tended, would last onl until ?anuar , '/.2 and et he said that there is a provision in the contract that the war had the effect of suspendin# the a#reement and that the effect of that suspension was that the a#reement would have to continue with the result that 4epanto would have to pa the monthl retainin# fee of P-,,++.++. And this belief that the war suspended the a#reement and that the suspension meant its e@tension was so firm that he went to the e@tent that even if there was no provision for suspension in the a#reement the law itself would suspend it. 7t is true that Mr. 6eAitt later sent a letter to Nielson dated >ctober -+, '/., wherein apparentl he chan#ed his mind because there he stated that the contract was merel suspended, but not e@tended, b reason of the war, contrar to the opinion he e@pressed in the meetin# of the Board of 6irectors alread adverted to, but between the two opinions of Att . 6eAitt Ae are inclined to #ive more wei#ht and validit to the former not onl because such was #iven b him a#ainst his own interest but also because it was #iven before the Board of 6irectors of 4epanto and in the presence, of some Nielson officials '+ who, on that occasion were naturall led to believe that that was the true meanin# of the suspension clause, while the second opinion was merel self:servin# and was #iven as a mere afterthou#ht.

Appellee also claims that the issue of true intent of the parties was not brou#ht out in the complaint, but anent this matter suffice it to state that in para#raph No. '/ of the complaint appellant pleaded that the contract was e@tended. '' This is a sufficient alle#ation considerin# that the rules on pleadin#s must as a rule be liberall construed. 7t is li$ewise noteworth that in this issue of the intention of the parties re#ardin# the meanin# and usa#e concernin# the *orce %a6e$re clause, the testimon adduced b appellant is uncontradicted. 7f such were not true, appellee should have at least attempted to offer contradictor evidence. This it did not do. Not even 4epantoBs President, Mr. <. E. 4ednic$ who too$ the witness stand, contradicted said evidence. 7n holdin# that the suspension of the a#reement meant the e@tension of the same for a period e=uivalent to the suspension, Ae do not have the least intention of overrulin# the cases cited b appellee. Ae simpl want to sa that the rulin# laid down in said cases does not appl here because the material facts involved therein are not the same as those obtainin# in the present. The rule of 'tare deci'i' cannot be invo$ed where there is no analo# between the material facts of the decision relied upon and those of the instant case. Thus, in Bictoria' :lanter' A''ociation &'. Bictoria' 2illin5 4o%#an( , ,' >.). .+'+, there was no evidence at all re#ardin# the intention of the parties to e@tend the contract e=uivalent to the period of suspension caused b the war. Neither was there evidence that the parties understood the suspension to mean e@tension8 nor was there evidence of usa#e and custom in the industr that the suspension meant the e@tension of the a#reement. All these matters, however, obtain in the instant case. A#ain, in the case of Ro'ario S. Bda. de 9ac'on &'. Abelardo G. Dia<, 02 Phil. ',+, the issue referred to the interpretation of a pre:war contract of lease of su#ar cane lands and the liabilit of the lessee to pa rent durin# and immediatel followin# the ?apanese occupation and where the defendant claimed the ri#ht of an e@tension of the lease to ma$e up for the time when no cane was planted. This Court, in holdin# that the ears which the lessee could not use the land because of the war could not be discounted from the period a#reed upon, held that 3Nowhere is there an insinuation that the defendant:lessee was to have possession of lands for seven ears e@cludin# ears on which he could not harvest su#ar.3 Clearl , this ratio decidendi is not applicable to the case at bar wherein there is evidence that the parties understood the 3suspension clause b force ma!eure3 to mean the e@tension of the period of a#reement. 4astl , in the case of 9o 4)in5 ( So Co$n5 4)on5 4o. &'. 4o$rt o* A##eal', et al., 0' Phil. *+', appellant leased a buildin# from appellee be#innin# 1eptember '9, '/.+ for three ears, renewable for two ears. The lesseeBs possession was interrupted in Cebruar , '/.- when he was ousted b the ?apanese who turned the same over to )erman >tto 1chul5e, the latter occup in# the same until ?anuar , '/., upon the arrival of the liberation forces. Appellant contended that the period durin# which he did not en!o the leased premises because of his dispossession b the ?apanese had to be deducted from the period of the lease, but this was overruled b this Court, reasonin# that such dispossession was merel a simple 3perturbacion de merohecho de la cual no responde el arrendador3 under Article ',*+ of the old Civil Code Art. '**.(. This rulin# is also not applicable in the instant case because in that case there was no evidence of the intention of the parties that an suspension of the lease b *orce %a6e$re would be understood to e@tend the period of the a#reement. In re'$%e, there is sufficient !ustification for Es to conclude that the cases cited b appellee are inapplicable because the facts therein involved do not run parallel to those obtainin# in the present case.

Ae shall now consider appelleeBs defense of laches. Appellee is correct in its contention that the defense of laches applies independentl of prescription. 4aches is different from the statute of limitations. Prescription is concerned with the fact of dela , whereas laches is concerned with the effect of dela . Prescription is a matter of time8 laches is principall a =uestion of ine=uit of permittin# a claim to be enforced, this ine=uit bein# founded on some chan#e in the condition of the propert or the relation of the parties. Prescription is statutor 8 laches is not. 4aches applies in e=uit , whereas prescription applies at law. Prescription is based on fi@ed time, laches is not. &9+ C.?.1., p. ,--8 See al'o Pomero Bs E=uit ?urisprudence, <ol. -, ,th ed., p. '22(. The =uestion to determine is whether appellant Nielson is #uilt of laches within the meanin# contemplated b the authorities on the matter. 7n the leadin# case of )o Chi )un, et al. vs. )o Cho, et al., /* Phil. *--, this Court enumerated the essential elements of laches as follows% &'( conduct on the part of the defendant, or of one under whom he claims, #ivin# rise to the situation of which complaint is made and for which the complaint see$s a remed 8 &-( dela in assertin# the complainantBs ri#hts, the complainant havin# had $nowled#e or notice of the defendantBs conduct and havin# been afforded an opportunit to institute a suit8 &9( lac$ of $nowled#e or notice on the part of the defendant that the complainant would assert the ri#ht on which he bases his suit8 and &.( in!ur or pre!udice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. Are these re=uisites present in the case at barR The first element is conceded b appellant Nielson when it claimed that defendant refused to pa its mana#ement fees, its percenta#e of profits and refused to allow it to resume the mana#ement operation. Anent the second element, while it is true that appellant Nielson $new since '/., that appellee 4epanto has refused to permit it to resume mana#ement and that since '/.0 appellee has resumed operation of the mines and it filed its complaint onl on Cebruar *, '/,0, there bein# apparent dela in filin# the present action, Ae find the dela !ustified and as such cannot constitute laches. 7t appears that appellant had not abandoned its ri#ht to operate the mines for even before the termination of the suspension of the a#reement as earl as ?anuar -+, '/.* '- and even before March '+, '/.,, it alread claimed its ri#ht to the e@tension of the contract, '9 and it pressed its claim for the balance of its share in the profits from the '/.' operation '. b reason of which ne#otiations had ta$en place for the settlement of the claim ', and it was onl on ?une -,, '/,2 that appellee finall denied the claim. There is, therefore, onl a period of less than one ear that had elapsed from the date of the final denial of the claim to the date of the filin# of the complaint, which certainl cannot be considered as unreasonable dela . The third element of laches is absent in this case. 7t cannot be said that appellee 4epanto did not $now that appellant would assert its ri#hts on which it based suit. The evidence shows that Nielson had been claimin# for some time its ri#hts under the contract, as alread shown above. Neither is the fourth element present, for if there has been some dela in brin#in# the case to court it was mainl due to the attempts at arbitration and ne#otiation made b both parties. 7f 4epantoBs documents were lost, it was not caused b the dela of the filin# of the suit but because of the war. Another reason wh appellant Nielson cannot be held #uilt of laches is that the dela in the filin# of the complaint in the present case was the inevitable of the protracted ne#otiations between the parties concernin# the settlement of their differences. 7t appears that Nielson as$ed for arbitration'* which was #ranted. A committee consistin# of Messrs. 6eAitt, Carnell and Blessin# was

appointed to act on said differences but Mr. 6eAitt alwa s tried to evade the issue '2 until he was ta$en ill and died. Mr. Carnell offered to Nielson the sum of P'9,+++.,0 b wa of compromise of all its claim arisin# from the mana#ement contract'0 but apparentl the offer was refused. Ne#otiations continued with the e@chan#e of letters between the parties but with no satisfactor result. '/ 7t can be said that the dela due to protracted ne#otiations was caused b both parties. 4epanto, therefore, cannot be permitted to ta$e advanta#e of such dela or to =uestion the propriet of the action ta$en b Nielson. The defense of laches is an e=uitable one and e=uit should be applied with an even hand. A person will not be permitted to ta$e advanta#e of, or to =uestion the validit , or propriet of, an act or omission of another which was committed or omitted upon his own re=uest or was caused b his conduct &R. ;. 1tearns Co. vs. Enited 1tates, -/' E.1. ,., 20 4. Ed. *.2, ,. 1. Ct., 9-,8 Enited 1tates vs. ;enr Prentiss F Co., -00 E.1. 29, 22 4. Ed., *-*, ,9 1. Ct., -09(. ;ad the action of Nielson prescribedR The court a 8$o held that the action of Nielson is alread barred b the statute of limitations, and that rulin# is now assailed b the appellant in this appeal. 7n ur#in# that the court a 8$oerred in reachin# that conclusion the appellant has discussed the issue with reference to particular claims. The first claim is with re#ard to the '+N share in profits of '/.' operations. 7nasmuch as appellee 4epanto alle#es that the correct basis of the computation of the sharin# in the net profits shall be as provided for in Clause < of the Mana#ement Contract, while appellant Nielson maintains that the basis should be what is contained in the minutes of the special meetin# of the Board of 6irectors of 4epanto on Au#ust -', '/.+, this =uestion must first be elucidated before the main issue is discussed. The facts relative to the matter of profit sharin# follow% 7n the mana#ement contract entered into between the parties on ?anuar 9+, '/92, which was renewed for another five ears, it was stipulated that Nielson would receive a compensation of P-,,++.++ a month plus '+N of the net profits from the operation of the properties for the precedin# month. 7n '/.+, a dispute arose re#ardin# the computation of the '+N share of Nielson in the profits. The Board of 6irectors of 4epanto, reali5in# that the mechanics of the contract was unfair to Nielson, authori5ed its President to enter into an a#reement with Nielson modif in# the pertinent provision of the contract effective ?anuar ', '/.+ in such a wa that Nielson shall receive &'( '+N of the dividends declared and paid, when and as paid, durin# the period of the contract and at the end of each ear, &-( '+N of an depletion reserve that ma be set up, and &9( '+N of an amount e@pended durin# the ear out of surplus earnin#s for capital account. -+ Counsel for the appellee admitted durin# the trial that the e@tract of the minutes as found in E@hibit B is a faithful cop from the ori#inal. -' Mr. )eor#e 1chole testified that the fore#oin# modification was a#reed upon. -4epanto claims that this new basis of computation should be re!ected &'( because the contract was clear on the point of the '+N share and it was so alle#ed b Nielson in its complaint, and &-( the minutes of the special meetin# held on Au#ust -', '/.+ was not si#ned. 7t appearin# that the issue concernin# the sharin# of the profits had been raised in appellantBs complaint and evidence on the matter was introduced -9 the same can be ta$en into account even if no amendment of the pleadin# to ma$e it conform to the evidence has been made, for the same is authori5ed b 1ection ., Rule '2, of the old Rules of Court &now 1ection ,, Rule '+, of the new Rules of Court(. Comin# now to the =uestion of prescription raised b defendant 4epanto, it is contended b the latter that the period to be considered for the prescription of the claim re#ardin# participation in the profits is onl four ears, because the modification of the sharin# embodied in the mana#ement contract is merel verbal, no written document to that effect havin# been presented. This contention is

untenable. The modification appears in the minutes of the special meetin# of the Board of 6irectors of 4epanto held on Au#ust -', '/.+, it havin# been made upon the authorit of its President, and in said minutes the terms of the modification had been specified. This is sufficient to have the a#reement considered, for the purpose of appl in# the statute of limitations, as a written contract even if the minutes were not si#ned b the parties &9 A.4.R., -d, p. 09'(. 7t has been held that a writin# containin# the terms of a contract if adopted b two persons ma constitute a contract in writin# even if the same is not si#ned b either of the parties &9 A.4.R., -d, pp. 0'-:0'9(. Another authorit sa s that an unsi#ned a#reement the terms of which are embodied in a document unconditionall accepted b both parties is a written contract &Corbin on Contracts, <ol. ', p. 0,( The modification, therefore, made in the mana#ement contract relative to the participation in the profits b appellant, as contained in the minutes of the special meetin# of the Board of 6irectors of 4epanto held on Au#ust -', '/.+, should be considered as a written contract insofar as the application of the statutes of limitations is concerned. ;ence, the action thereon prescribes within ten &'+( ears pursuant to 1ection .9 of Act '/+. Comin# now to the facts, Ae find that the ri#ht of Nielson to its '+N participation in the '/.' operations accrued on 6ecember -', '/.' and the ri#ht to commence an action thereon be#an on ?anuar ', '/.- so that the action must be brou#ht within ten &'+( ears from the latter date. 7t is true that the complaint was filed onl on Cebruar *, '/,0, that is si@teen &'*( ears, one &'( month and five &,( da s after the ri#ht of action accrued, but the action has not et prescribed for various reasons which Ae will hereafter discuss. The first reason is the operation of the Moratorium 4aw, for appellantBs claim is undeniabl a claim for mone . 1aid claim accrued on 6ecember 9', '/.', and 4epanto is a war sufferer. ;ence the claim was covered b E@ecutive >rder No. 9- of March '+, '/.,. 7t is well settled that the operation of the Moratorium 4aw suspends the runnin# of the statue of limitations &Pacific Commercial Co. vs. A=uino, ).R. No. 4:'+-2., Cebruar -2, '/,2(. This Court has held that the Moratorium 4aw had been enforced for ei#ht &0( ears, two &-( months and ei#ht &0( da s &Tioseco vs. 6a , et al., 4://.., April 9+, '/,28 4ev ;ermanos, 7nc. vs. Pere5, 4: '..02, April -/, '/*+(, and deductin# this period from the time that had elapsed since the accrual of the ri#ht of action to the date of the filin# of the complaint, the e@tent of which is si@teen &'*( ears, one &'( month and five &,( da s, we would have less than ei#ht &0( ears to be counted for purposes of prescription. ;ence appellantBs action on its claim of '+N on the '/.' profits had not et prescribed. Another reason that ma be ta$en into account in support of the no:bar theor of appellant is the arbitration clause embodied in the mana#ement contract which re=uires that an disa#reement as to an amount of profits before an action ma be ta$en to court shall be sub!ect to arbitration. -. This a#reement to arbitrate is valid and bindin#. -, 7t cannot be i#nored b 4epanto. ;ence Nielson could not brin# an action on its participation in the '/.' operations:profits until the condition relative to arbitration had been first complied with. -* The evidence shows that an arbitration committee was constituted but it failed to accomplish its purpose on ?une -,, '/,2. -2Crom this date to the filin# of the complaint the re=uired period for prescription has not et elapsed. Nielson claims the followin#% &'( '+N share in the dividends declared in '/.', e@clusive of interest, amountin# to P'2,,++.++8 &-( '+N in the depletion reserves for '/.'8 and &9( '+N in the profits for ears prior to '/.0 amountin# to P'/,2*..2+. Aith re#ard to the first claim, the 4epantoBs report for the calendar ear of '/,. -0 shows that it declared a '+N cash dividend in 6ecember, '/.', the amount of which is P'2,,+++.++. The

evidence in this connection &E@hibits 4 and >( was admitted without ob!ection b counsel for 4epanto. -/ Nielson claims '+N share in said amount with interest thereon at *N per annum. The document &E@hibit 4( was even reco#ni5ed b 4epantoBs President <. 4. 4ednic$ , 9+ and this claim is predicated on the provision of para#raph < of the mana#ement contract as modified pursuant to the proposal of 4epanto at the special meetin# of the Board of 6irectors on Au#ust -', '/.+ &E@h. B(, whereb it was provided that Nielson would be entitled to '+N of an dividends to be declared and paid durin# the period of the contract. Aith re#ard to the second claim, Nielson admits that there is no evidence re#ardin# the amount set aside b 4epanto for depletion reserve for '/.' 9' and so the '+N participation claimed thereon cannot be assessed. Anent the third claim relative to the '+N participation of Nielson on the sum of P'/2,*.2.+0, which appears in 4epantoBs annual report for '/.0 9- and entered as profit for prior ears in the statement of income and surplus, which amount consisted 3almost in its entiret of proceeds of copper concentrates shipped to the Enited 1tates durin# '/.2,3 this claim should to denied because the amount is not 3dividend declared and paid3 within the purview of the mana#ement contract. The fifth assi#nment of error of appellant refers to the failure of the lower court to order 4epanto to pa its mana#ement fees for ?anuar , '/.-, and for the full period of e@tension amountin# to P',+,+++.++, or P-,,++.++ a month for si@t &*+( months, D a total of P',-,,++.++ D with interest thereon from the date of !udicial demand. 7t is true that the claim of mana#ement fee for ?anuar , '/.- was not amon# the causes of action in the complaint, but inasmuch as the contract was suspended in Cebruar , '/.- and the mana#ement fees as$ed for included that of ?anuar , '/.-, the fact that such claim was not included in a specific manner in the complaint is of no moment because an appellate court ma treat the pleadin# as amended to conform to the evidence where the facts show that the plaintiff is entitled to relief other than what is as$ed for in the complaint &Alon5o vs. <illamor, '* Phil. 9',(. The evidence shows that the last pa ment made b 4epanto for mana#ement fee was for November and 6ecember, '/.'. 99 7f, as Ae have declared, the mana#ement contract was suspended be#innin# Cebruar '/.-, it follows that Nielson is entitled to the mana#ement fee for ?anuar , '/.-. 4et us now come to the mana#ement fees claimed b Nielson for the #eriod o* eDten'ion. 7n this respect, it has been shown that the mana#ement contract was e@tended from ?une -2, '/.0 to ?une -*, '/,9, or for a period of si@t &*+( months. 6urin# this period Nielson had a ri#ht to continue in the mana#ement of the minin# properties of 4epanto and 4epanto was under obli#ation to let Nielson do it and to pa the correspondin# mana#ement fees. Appellant Nielson insisted in performin# its part of the contract but 4epanto prevented it from doin# so. ;ence, b virtue of Article ''0* of the Civil Code, there was a constructive fulfillment an the part of Nielson of its obli#ation to mana#e said minin# properties in accordance with the contract and 4epanto had the reciprocal obli#ation to pa the correspondin# mana#ement fees and other benefits that would have accrued to Nielson if 4epanto allowed it &Nielson( to continue in the mana#ement of the mines durin# the e@tended period of five &,( ears. Ae find that the preponderance of evidence is to the effect that Nielson had insisted in mana#in# the minin# properties soon after liberation. 7n the report 9. of 4epanto, submitted to its stoc$holders for the period from '/.' to March '9, '/.*, are stated the activities of NielsonBs officials in relation to NielsonBs insistence in continuin# the mana#ement. This report was admitted in evidence without ob!ection. Ae find the followin# in the report%

Mr. Blessin#, in Ma , '/.,, accompanied Clar$ and 1tanford to 1an Cernando &4a Enion( to await the liberation of the mines. &Mr. Blessin# was the Treasurer and Metallur#ist of Nielson(. Blessin# with Clar$ and 1tanford went to the propert on ?ul '* and found that while the mill site had been cleared of the enem the latter was still holdin# the area around the staff houses and puttin# up a stron# defense. As a result, the returned to 1an Cernando and later went bac$ to the mines on ?ul -*. Mr. Blessin# made the report, dated Au#ust *, recommendin# a pro#ram of operation. Mr. Nielson himself spent a da in the mine earl in 6ecember, '/., and reiterated the pro#ram which Mr. Blessin# had outlined. Two or three wee$s before the date of the report, Mr. Coldren of the Nielson or#ani5ation also visited the mine and told President C. A. 6eAitt of 4epanto that he thou#ht that the mine could be put in condition for the deliver of the ore within ten &'+( da s. And accordin# to Mar$ Nestle, a witness of appellant, Nielson had several men includin# en#ineers to do the !ob in the mines and to resume the wor$. These en#ineers were in fact sent to the mine site and submitted reports of what the had done. 9, >n the other hand, appellee claims that Nielson was not read and able to resume the wor$ in the mines, rel in# mainl on the testimon of 6r. ?uan Nabon#, former secretar of both Nielson and 4epanto, #iven in the separate case of Nanc 7rvin# Romero vs. 4epanto Consolidated Minin# Compan &Civil Case No. *,-, CC7, Ba#uio(, to the effect that as far as he $new 3Nielson and Compan had not attempted to operate the 4epanto Consolidated Minin# Compan because Mr. Nielson was not here in the Philippines after the last war. ;e came bac$ later,3 and that Nielson and Compan had no mone nor stoc$s with which to start the operation. ;e was as$ed b counsel for the appellee if he had testified that wa in Civil Case No. *,- of the Court of Cirst 7nstance of Ba#uio, and he answered that he did not confirm it full . Ahen this witness was as$ed b the same counsel whether he confirmed that testimon , he said that when he testified in that case he was not full aware of what happened and that after he learned more about the officials of the corporation it was onl then that he became aware that Nielson had reall sent his men to the mines alon# with Mr. Blessin# and that he was aware of this fact personall . ;e further said that Mr. Nielson was here in '/., and 3he was #oin# out and contactin# his people.3 9* 4epanto admits, in its own brief, that Nielson had reall insisted in ta$in# over the mana#ement and operation of the mines but that it &4epanto( une=uivocall refuse to allow it. The followin# is what appears in the brief of the appellee% 7t was while defendant was in the midst of the rehabilitation wor$ which was full described earlier, still reelin# under the terrible devastation and destruction wrou#ht b war on its mine that Nielson insisted in ta$in# over the mana#ement and operation of the mine. Nielson thus put 4epanto in a position where defendant, under the circumstances, had to refuse, as in fact it did, NielsonBs insistence in ta$in# over the mana#ement and operation because, as was obvious, it was impossible, as a result of the destruction of the mine, for the plaintiff to mana#e and operate the same and because, as provided in the a#reement, the contract was suspended b reason of the war. The stand of 4epanto in disallowin# Nielson to assume a#ain the mana#ement of the mine in '/., was une=uivocal and cannot be misinterpreted, in*ra.92 Based on the fore#oin# facts and circumstances, and >ur conclusion that the mana#ement contract was e@tended, Ae believe that Nielson is entitled to the mana#ement fees for the period of e@tension. Nielson should be awarded on this claim si@t times its monthl pa of P-,,++.++, or a total of P',+,+++.++. 7n its si@th assi#nment of error Nielson contends that the lower court erred in not orderin# 4epanto to pa it &Nielson( the '+N share in the profits of operation reali5ed durin# the period of five &,( ears from the resumption of its post:war operations of the Man$a an mines, in the total sum of

P-,.+9,+,9.-+ with interest thereon at the rate of *N per annum from Cebruar *, '/,0 until full pa ment. 90 The above claim of Nielson refers to four cate#ories, namel % &'( cash dividends8 &-( stoc$ dividends8 &9( depletion reserves8 and &.( amount e@pended on capital investment. Anent the first cate#or , 4epantoBs report for the calendar ear '/,. 9/ contains a record of the cash dividends it paid up to the date of said report, and the post:war dividends paid b it correspondin# to the ears included in the period of e@tension of the mana#ement contract are as follows% P>1T:AAR 0 / '+ '' ''9 '. ', '* '2 '0 '/ -+ -' -'+N '+N '+N -+N -+N -+N -+N .+N -+N -+N -+N -+N -+N -+N -+N November ?ul >ctober 6ecember March ?une 1eptember 6ecember March Ma ?ul 1eptember 6ecember March ?une T>TA4 '/./ '/,+ '/,+ '/,+ '/,' '/,' '/,' '/,' '/,'/,'/,'/,'/,'/,9 '/,9 P -++,+++.++ 9++,+++.++ ,++,+++.++ ',+++,+++.++ ',+++,+++.++ ',+++,+++.++ ',+++,+++.++ -,+++,+++.++ ',+++,+++.++ ',+++,+++.++ ',+++,+++.++ ',+++,+++.++ ',+++,+++.++ ',+++,+++.++ ',+++,+++.++ P'.,+++,+++.++

Accordin# to the terms of the mana#ement contract as modified, appellant is entitled to '+N of the P'.,+++,+++.++ cash dividends that had been distributed, as stated in the above:mentioned report, or the sum of P',.++,+++.++. Aith re#ard to the second cate#or , the stoc$ dividends declared b 4epanto durin# the period of e@tension of the contract are% >n November -0, '/./, the stoc$ dividend declared was ,+N of the outstandin# authori5ed capital of P-,+++,+++.++ of the compan , or stoc$ dividends worth P',+++,+++.++8 and on Au#ust --, '/,+, the stoc$ dividends declared was **:-"9N of the standin# authori5ed capital of P9,+++,+++.++ of the compan , or stoc$ dividends worth P-,+++,+++.++. .+

AppellantBs claim that it should be #iven '+N of the cash value of said stoc$ dividends with interest thereon at *N from Cebruar *, '/,0 cannot be #ranted for that would not be in accordance with the mana#ement contract which entitles Nielson to '+N of an dividends declared paid, -)en and as paid. Nielson, therefore, is entitled to '+N of the stoc$ dividends and to the fruits that ma have accrued to said stoc$ dividends pursuant to Article ''*. of the Civil Code. ;ence to Nielson is due shares of stoc$ worth P'++,+++.++, as per stoc$ dividends declared on November -0, '/./ and all the fruits accruin# to said shares after said date8 and also shares of stoc$ worth P-++,+++.++ as per stoc$ dividends declared on Au#ust -+, '/,+ and all fruits accruin# thereto after said date. Anent the third cate#or , the depletion reserve appearin# in the statement of income and surplus submitted b 4epanto correspondin# to the ears covered b the period of e@tension of the contract, ma be itemi5ed as follows% 7n '/.0, as per E@h. C, p. 9* and E@h. S, p. ,, the depletion reserve set up was P'',*+-.0+. 7n '/./, as per E@h. ), p. ./ and E@h. S, p. ,, the depletion reserve set up was P99,,,*.+2. 7n '/,+, as per E@h. ;, p. 92, E@h. S, p. * and E@h. 7, p. 92, the depletion reserve set up was P0.,/*9.9+. 7n '/,', as per E@h. 7, p. .,, E@h. S, p. *, and E@h. ?, p. .,, the depletion reserve set up was P'-/,+0/.00. 7n '/,-, as per E@h. ?, p. .,, E@h. S, p. * and E@h. K p. .', the depletion reserve was P'.2,'.'.,.. 7n '/,9, as per E@h. K, p. .', and E@h. S, p. *, the depletion reserve set up as P-22,./9.-,. Re#ardin# the depletion reserve set up in '/.0 it should be noted that the amount #iven was for the whole ear. 7nasmuch as the contract was e@tended onl for the last half of the ear '/.0, said amount of P'',*+-.0+ should be divided b two, and so Nielson is onl entitled to '+N of the half amountin# to P,,0+'..+. 4i$ewise, the amount of depletion reserve for the ear '/,9 was for the whole ear and since the contract was e@tended onl until the first half of the ear, said amount of P-22,./9.-, should be divided b two, and so Nielson is onl entitled to '+N of the half amountin# to P'90,2.*.*-. 1ummin# up the entire depletion reserves, from the middle of '/.0 to the middle of '/,9, we would have a total of P,9/,-/0.0', of which Nielson is entitled to '+N, or to the sum of P,9,/-0.00. Cinall , with re#ard to the fourth cate#or , there is no fi#ure in the record representin# the value of the fi@ed assets as of the be#innin# of the period of e@tension on ?une -2, '/.0. 7t is possible, however, to arrive at the amount needed b addin# to the value of the fi@ed assets as of 6ecember 9', '/.2 one:half of the amount spent for capital account in the ear '/.0. As of 6ecember 9', '/.2, the value of the fi@ed assets was P',+*',020.00 .'and as of 6ecember 9', '/.0, the value of the fi@ed assets was P9,-2+,.+0.+2. .- ;ence, the increase in the value of the fi@ed assets for the ear '/.0 was P-,-+0,,-/.'/, one:half of which is P','+.,-*..,/, which amount represents the e@penses for capital account for the first half of the ear '/.0. 7f to this amount we add the fi@ed assets as of 6ecember 9', '/.2 amountin# to P',+*',020.00, we would have a total of P-,'**,'.9..2 which represents the fi@ed assets at the be#innin# of the second half of the ear '/.0.

There is also no fi#ure representin# the value of the fi@ed assets when the contract, as eDtended, ended on ?une -*, '/,98 but this ma be computed b #ettin# one:half of the e@penses for capital account made in '/,9 and addin# the same to the value of the fi@ed assets as of 6ecember 9', '/,9 is P/,2,,,0.+..' .9 which the value of the fi@ed assets as of 6ecember 9', '/,- is P0,.*9,2.'.0-, the difference bein# P',-/-,+/0.*/. >ne:half of this amount is P*.*,+./.9. which would represent the e@penses for capital account up to ?une, '/,9. This amount added to the value of the fi@ed assets as of 6ecember 9', '/,- would #ive a total of P/,'+/,2/'.'* which would be the value of fi@ed assets at the end of ?une, '/,9. The increase, therefore, of the value of the fi@ed assets of 4epanto from ?une, '/.0 to ?une, '/,9 is P*,/.9,*.2.*/, which amount represents the difference between the value of the fi@ed assets of 4epanto in the ear '/.0 and in the ear '/,9, as stated above. >n this amount Nielson is entitled to a share of '+N or to the amount of P*/.,9*..2*. Considerin# that most of the claims of appellant have been entertained, as pointed out in this decision, Ae believe that appellant is entitled to be awarded attorne Bs fees, especiall when, accordin# to the undisputed testimon of Mr. Mar$ Nestle, Nielson obli#ed himself to pa attorne Bs fees in connection with the institution of the present case. 7n this respect, Ae believe, considerin# the intricate nature of the case, an award of fift thousand &P,+,+++.++( pesos for attorne Bs fees would be reasonable. 7N <7EA >C T;E C>RE)>7N) C>N176ERAT7>N1, Ae hereb reverse the decision of the court a 8$o and enter in lieu thereof another, orderin# the appellee 4epanto to pa appellant Nielson the different amounts as specified hereinbelow% &'( '+N share of cash dividends of 6ecember, '/.' in the amount of P'2,,++.++, with le#al interest thereon from the date of the filin# of the complaint8 &-( mana#ement fee for ?anuar , '/.- in the amount of P-,,++.++, with le#al interest thereon from the date of the filin# of the complaint8 &9( mana#ement fees for the si@t :month period of e@tension of the mana#ement contract, amountin# to P',+,+++.++, with le#al interest from the date of the filin# of the complaint8 &.( '+N share in the cash dividends durin# the period of e@tension of the mana#ement contract, amountin# to P',.++,+++.++, with le#al interest thereon from the date of the filin# of the complaint8 &,( '+N of the depletion reserve set up durin# the period of e@tension, amountin# to P,9,/-0.00, with le#al interest thereon from the date of the filin# of the complaint8 &*( '+N of the e@penses for capital account durin# the period of e@tension, amountin# to P*/.,9*..2*, with le#al interest thereon from the date of the filin# of the complaint8 &2( to issue and deliver to Nielson and Co., 7nc. shares of stoc$ of 4epanto Consolidated Minin# Co. at par value e=uivalent to the total of NielsonBs l+N share in the stoc$ dividends declared on November -0, '/./ and Au#ust --, '/,+, to#ether with all cash and stoc$ dividends, if an , as ma have been declared and issued subse=uent to November -0, '/./ and Au#ust --, '/,+, as fruits that accrued to said shares8 7f sufficient shares of stoc$ of 4epantoBs are not available to satisf this !ud#ment, defendant: appellee shall pa plaintiff:appellant an amount in cash e=uivalent to the mar$et value of said shares

at the time of default &'- C.?.1., p. '9+(, that is, all shares of the stoc$ that should have been delivered to Nielson before the filin# of the complaint must be paid at their mar$et value as of the date of the filin# of the complaint8 and all shares, if an , that should have been delivered after the filin# of the complaint at the mar$et value of the shares at the time 4epanto disposed of all its available shares, for it is onl then that 4epanto placed itself in condition of not bein# able to perform its obli#ation &Article ''*+, Civil Code(8 &0( the sum of P,+,+++.++ as attorne Bs fees8 and &/( the costs. 7t is so ordered. 4once#cion, 4.@., Re5ala, 2a0alintal, Ben5<on, @.:., Sanc)e< and 4a'tro, @@., concur. Re(e', @.B.9. and Barrera, @@., too$ no part.

C7R1T 67<717>N

?G.R. No. 160215. No36<;6, 10, 200*A

!$DRO RESOURCES CONTRACTORS CORPORATION, petitioner, vs. NATIONAL IRRIGATION ADMINISTRATION, respondent. DECISION
$NARES-SANTIAGO, J.C

Challen#ed in this petition for review on certiorari under Rule ., is the 6ecision of the Court of Appeals dated >ctober -/, -++- and its Resolution dated 1eptember -., -++9 in CA:).R. 1P No. ..,-2, reversin# the !ud#ment of the Construction 7ndustr Arbitration Commission &C7AC( dated ?une '+, '//2 in C7AC Case No. '.:/0 in favor of petitioner ; dro Resources Contractors Corporation.
G'H G-H G9H G.H

The facts are undisputed and are matters of record. 7n a competitive biddin# conducted b the National 7rri#ation Administration &N7A( sometime in Au#ust '/20, ; dro Resources Contractors Corporation &; dro( was awarded Contract MP7:C:- involvin# the main civil wor$ of the Ma#at River Multi:Purpose Pro!ect. The contract price for the wor$ was pe##ed at P',.0/,'.*,.29.2- with the peso component thereof amountin# to P',+.',00.,2**.// and the E1O component valued at
G,H

O*+,*,2,//-.92 at the e@chan#e rate of P2.929, to the dollar or P..2,9*',2+*.29. >n November *, '/20, the parties si#ned Amendment No. ' of the contract whereb N7A a#reed to increase the forei#n currenc allocation for e=uipment financin# from E1O-0,+++,+++.++ for the first and second ears of the contract to E1O90,+++,+++.++, to be made available in full durin# the first ear of the contract to enable the contractor to purchase the needed e=uipment and spare parts, as approved b N7A, for the construction of the pro!ect. >n April /, '/0+, the parties entered into a Memorandum of A#reement &M>A( whereb the a#reed that ; dro ma directl avail of the forei#n currenc component of the contract for the sole purpose of purchasin# necessar spare parts and e=uipment for the pro!ect. This was made in order for the contractor to avoid further dela s in the procurement of the said spare parts and e=uipment.
G*H G2H

A few months after the M>A was si#ned, N7A and ; dro entered into a 1upplemental Memorandum of A#reement &1upplemental M>A( to include amon# the items to be financed out of the forei#n currenc portion of the Contract Xconstruction materials, supplies and services as well as e=uipment and materials for incorporation in the permanent wor$s of the Pro!ect.Y
G0H

Aor$ on the pro!ect pro#ressed steadil until ; dro substantiall completed the pro!ect in '/0- and the final acceptance was made b N7A on Cebruar '., '/0..
G/H

6urin# the period of the e@ecution of the contract, the forei#n e@chan#e value of the peso a#ainst the E1 dollar declined and steadil deteriorated. Ahenever ; droIs availment of the forei#n currenc component e@ceeded the amount of the forei#n currenc pa able to ; dro for a particular period, N7A char#ed interest in dollars based on the prevailin# e@chan#e rate instead of the fi@ed e@chan#e rate of P2.929, to the dollar. Pet when ; dro received pa ments from N7A in Philippine Pesos, N7A made deductions from ; droIs forei#n currenc component at the fi@ed e@chan#e rate of P2.929, to E1O'.++ instead of the prevailin# e@chan#e rate. Epon completion of the pro!ect, a final reconciliation of the total entitlement of ; dro to the forei#n currenc component of the contract was made. The result of this final reconciliation showed that the total entitlement of ; dro to the forei#n currenc component of the contract e@ceeded the amount of E1 dollars re=uired b ; dro to repa the advances made b N7A for its account in the importation of new e=uipment, spare parts and tools. ; dro then re=uested a full and final pa ment due to the underpa ment of the forei#n e@chan#e portion caused b price escalations and e@tra wor$ orders. 7n '/09,

N7A and ; dro prepared a !oint computation denominated as the XMP7:C:6ollar Rate 6ifferential on Corei#n Component of Escalation.Y Based on said !oint computation, ; dro was still entitled to a forei#n e@chan#e differential of E1O',9,9,22'.2/ e=uivalent to P'+,0/0,9/'.'2.
G'+H

; dro then presented its claim for said forei#n e@chan#e differential to N7A on Au#ust '-, '/09 but the latter refused to honor the same. ; dro made several demands to recover its claim until the same was turned down with finalit b then N7A Administrator Cederico N. Alda , ?r. on ?anuar *, '/02.
G''H G'-H G'9H

>n 6ecember 2, '//., ; dro filed a re=uest for arbitration with the Construction 7ndustr Arbitration Commission &C7AC(. 7n the said re=uest, ; dro nominated si@ &*( arbitrators. The case was doc$eted as C7AC Case No. '0:/..
G'.H

N7A filed its Answer with Compulsor Counterclaim raisin# laches, estoppel and lac$ of !urisdiction b C7AC as its special defenses. N7A also submitted its si@ &*( nominees to the panel of arbitrators. After appointment of the arbitrators, both parties a#reed on the Terms of Reference as well as the issues submitted for arbitration.
G',H G'*H

>n March '9, '//,, N7A filed a Motion to 6ismiss =uestionin# C7ACIs !urisdiction to ta$e co#ni5ance of the case. The latter, however, deferred resolution of the motion and set the case for hearin# for the reception of evidence. N7A moved for reconsideration but the same was denied b C7AC in an >rder dated April -,, '//,.
G'2H G'0H G'/H G-+H

6issatisfied, N7A filed a petition for certiorari and prohibition with the Court of Appeals where the same was doc$eted as CA:).R. 1P No. 92'0+, which dismissed the petition in a Resolution dated ?une -0, '//*.
G-'H G--H

N7A challen#ed the resolution of the Court of Appeals before this Court in a special civil action for certiorari, doc$eted as ).R. No. '-/'*/.
G-9H

Meanwhile, on ?une '+, '//2, the C7AC promul#ated a decision in favor of ; dro. N7A filed a Petition for Review on Appeal before the Court of Appeals, which was doc$eted as CA:).R. 1P No. ..,-2.
G-.H G-,H

6urin# the pendenc of CA:).R. 1P No. ..,-2 before the Court of Appeals, this Court dismissed special civil action for certiorari doc$eted as ).R. No. '-/'*/ on the #round that C7AC had !urisdiction over the dispute and directed the Court of Appeals to proceed with reasonable dispatch in the disposition of CA:).R. 1P No. ..,-2. N7A did not move for reconsideration of the said decision, hence, the same became final and e@ecutor on 6ecember ',, '///.
G-*H

Thereafter, the Court of Appeals rendered the challen#ed decision in CA: ).R. 1P No. ..,-2, reversin# the !ud#ment of the C7AC on the #rounds that% &'( ; droIs claim has prescribed8 &-( assumin# that ; dro was entitled to its claim, the rate of e@chan#e should be based on a fi@ed rate8 &9( ; droIs claim is contrar to R.A. No. ,-/8 &.( N7AIs Certification of Non:Corum:1hoppin# was proper even if the same was si#ned onl b counsel and not b N7AIs authori5ed representative8 and &,( N7A did not en#a#e in forum:shoppin#.
G-2H

; droIs Motion for Reconsideration was denied in Resolution of 1eptember -., -++9. ;ence, this petition. Addressin# first the issue of prescription, the Court of Appeals, in rulin# that ; droIs claim had prescribed, reasoned thus% 9e)ertheless* Be +ind good reason to appl" the prin!iple o+ pres!ription against HRCC- 5t is (ell to note that Se!tion 45 o+ the Meneral Conditions o+ the subje!t !ontra!t pro)ides 6#IA# 3ecision, p 45, Rollo, p 567E An" !ontro)ers" or dispute arising out o+ or relating to this Contra!t (hi!h !annot be resol)ed b" mutual agreement shall be de!ided b" the Administrator (ithin thirt" 6<=7 !alendar da"s +rom re!eipt o+ a (ritten noti!e +rom Contra!tor and (ho shall +urnish Contra!tor a (ritten !op" o+ this de!ision- *uch decision shall be final and conclusive unless "ithin thirty ,/70 calendar days from the date of receipt thereof, #ontractor shall deliver to 8IA a "ritten notice addressed to the Administrator that he desires that the dispute be submitted to arbitration 2ending decision from arbitration, #ontractor shall proceed diligently "ith the performance of the #ontract and in accordance "ith the decision of the Administrator ,Emphasis and 9nderscoring Ours0 ,oth parties admit the e3isten!e o+ this pro)ision in the Contra!t 6 2etition, p :) #omment, p 4;) Rollo, pp 4- and 4/47- Apropos* the +ollo(ing matters are !learE 6?7 an" !ontro)ers" or dispute bet(een the parties arising +rom the subje!t !ontra!t shall be go)erned b" the pro)isions o+ the !ontra!t; 647 upon the +ailure to arri)e at a mutual agreement* the !ontra!tor shall submit the dispute to the Administrator o+ 95A +or determination; and 6<7 the de!ision o+ the Administrator shall be!ome +inal and !on!lusi)e* unless (ithin thirt" 6<=7 !alendar da"s +rom the date o+ re!eipt thereo+* the Contra!tor shall deli)er to 95A a (ritten noti!e addressed to the Administrator that he desires that the dispute be submitted +or arbitrationPres!inding +rom the +oregoing matters* Be +ind that the C5AC erred in granting HRCC@s !laim !onsidering that the latter@s right to ma#e su!h demand had !learl"

pres!ribed- To begin (ith* on Januar" &* ?2'$* Cesar - Te!h 695A@s Administrator at the time7 in+ormed HRCC in (riting that a+ter a re)ie( o+ the additional points raised b" the latter* 95A !on+irms its original re!ommendation not to allo( the said !laim 6Anne' <F=) Rollo, p '?; #IA# 3ecision, p 44) Rollo, p 5/7- This should ha)e propelled pri)ate respondent to noti+" and signi+" to 95A o+ intention to submit the dispute to arbitration pursuant to the pro)ision o+ the !ontra!t- Oet* it did not- 5nstead it persisted to send se)eral letters to 95A reiterating the reason +or its reje!ted !laim 6#IA# 3ecision, p 44) Rollo, p 5/7G-0H

Ae disa#ree for the followin# reasons% Fir't, the appellate court clearl overloo$ed the fact that N7A, throu#h then Administrator Cedrico N. Alda , ?r., denied Xwith finalit Y ; droIs claim onl on ?anuar *, '/02 in a letter bearin# the same date which reads%
G-/H

This re+ers to "our letter dated 9o)ember &* ?2'$ reFuesting re!onsideration on "our !laim +or pa"ment o+ the Dollar Rate Di++erential o+ Pri!e 0s!alation in Contra!t 9oMP5-C-4Be ha)e re)ie(ed the rele)ant +a!ts and issues as presented and the additional points raised in the abo)ementioned letter in the !onte3t o+ the Contra!t Do!uments and (e +ind no strong and )alid reason to re)erse the earlier de!ision o+ 95A@s pre)ious management den"ing "our !laim- There+ore* (e regret that (e ha)e to reiterate the earlier o++i!ial stand o+ 95A under its letter dated Januar" &* ?2'$* that !on+irms the original re!ommendation (hi!h had earlier been presented in our > th5ndorsement dated 8ebruar" 5* ?2'5 to "our o++i!e5n )ie( hereo+* we regret to say with finality that the claim cannot be given favorable consideration- 60mphasis and itali!s supplied7 ; dro received the above:mentioned letter on ?anuar -2, '/02. Pursuant to 1ection -, of the ContractIs )eneral Conditions &)C:-,(, ; dro had thirt &9+( da s from receipt of said denial, or until Cebruar -*, '/02, within which to notif N7A of its desire to submit the dispute to arbitration.
G9+H

>n Cebruar '0, '/02, ; dro sent a letter to N7A, addressed to then N7A Administrator Cederico N. Alda , ?r., manifestin# its desire to submit the dispute to arbitration. The letter was received b N7A on Cebruar '/, '/02, which was -it)in the thirt :da prescriptive period.
G9'H

Moreover, a circumspect scrutin of the wordin# of )C:-, with re#ard to the thirt :da prescriptive period shows that said proviso is intended to appl to disputes which arose d$rin5 the act$al construction of the pro!ect and not

for controversies which occured a*ter the pro!ect is completed. The rationale for such a stipulation was aptl e@plained thus b the C7AC in its 6ecision in C7AC Case No. '0:/.% 5n !onstru!tion !ontra!ts* there is in)ariabl" a pro)ision +or interim settlement o+ disputes- The right to settle disputes is gi)en to the o(ner or his representati)e* either an ar!hite!t or engineer* designated as %o(ner@s representati)e*1 onl" +or the purpose o+ a)oiding dela" in the !ompletion o+ the proje!t- 5n this parti!ular !ontra!t* that right (as reser)ed to the 95A Administrator- The t"pes o+ disputes !ontemplated (ere those (hi!h ma" ha)e other(ise a++e!ted the progress o+ the (or#- 5t is )er" !lear that this is the purpose o+ the limiting periods in this !lause that the dispute shall be resol)ed b" the Administrator (ithin <= da"s +rom re!eipt o+ a (ritten noti!e +rom the Contra!tor and that the Contra!tor ma" submit to arbitration this dispute i+ it does not agree (ith the de!ision o+ the Administrator* and %Pending de!ision +rom arbitration* Contra!tor shall pro!eed diligentl" (ith the per+orman!e o+ the Contra!t and in a!!ordan!e (ith the de!ision o+ the Administrator-1 5n this !ase* the dispute had arisen a+ter !ompletion o+ the Proje!t- The reason +or the <=-da" limitation no longer applies* and (e +ind no legal basis +or appl"ing itMoreo)er* in 03hibit %,*1 95A Administrator Cesar - Te!h had* instead o+ rendering an ad)erse de!ision* b" signing the do!ument (ith HRCC@s /no+re ,- ,anson* impli!itl" appro)ed the pa"ment o+ the +oreign e3!hange di++erential* but this pa"ment !ould not be made be!ause o+ the opinion o+ Auditor Saldua and later o+ the Commission on AuditG9-H

Second, as earl as April '/09, ; dro and N7A, throu#h its Administrator Cesar 4. Tech, prepared the ?oint Computation which shows that ; dro is entitled to the forei#n currenc differential. As correctl found b the C7AC, this computation constitutes a written ac$nowled#ment of the debt b the debtor under Article '',, of the Civil Code, which states%
G99H

ART- ??55- The pres!ription o+ a!tions is interrupted (hen the" are +iled be+ore the !ourt* (hen there is a (ritten e3trajudi!ial demand b" the !reditors* and when there is any written acknowledgment of the debt by the debtor. 60mphasis and itali!s supplied7 7nstead of upholdin# the C7ACIs findin#s on this point, the Court of Appeals ruled that Cesar 4. TechIs act of si#nin# the ?oint Computation was an $ltra &ire' act. This a#ain is patent error. 7t must be noted that the Administrator is the hi#hest officer of the N7A. Curthermore, ; dro has been dealin# with N7A throu#h its Administrator in all of its transactions with respect to the contract and subse=uentl the forei#n currenc differential claim. The

N7A Administrator is empowered b the Contract to #rant or den forei#n currenc differential claims. 7t would be preposterous for the N7A Administrator to have the power of #rantin# claims without the authorit to verif the computation of such claims. Cinall , the records of the case will show that N7A itself ne&er disputed its AdministratorIs capacit to si#n the ?oint Computation because it $new that the Administrator, in fact, had such capacit . Even assumin# for the sa$e of ar#ument that the Administrator had no authorit to bind N7A, the latter is alread estopped after repeatedl representin# to ; dro that the Administrator had such authorit . A corporation ma be held in estoppel from den in# as a#ainst third persons the authorit of its officers or a#ents who have been clothed b it with ostensible or apparent authorit . 7ndeed V
G9.H

- - - The rule is o+ !ourse settled that %[a]lthough an o++i!er or agent a!ts (ithout* or in e3!ess o+* his a!tual authorit" i+ he a!ts (ithin the s!ope o+ an apparent authorit" (ith (hi!h the !orporation has !lothed him b" holding him out or permitting him to appear as ha)ing su!h authorit"* the corporation is bound thereby in favor of a person "ho deals "ith him in good faith in reliance on such apparent authority, as (here an o++i!er is allo(ed to e3er!ise a parti!ular authorit" (ith respe!t to the business* or a parti!ular bran!h o+ it* !ontinuousl" and publi!l"* +or a !onsiderable time-1- - G9,H

T)ird, N7A has clearl waived the prescriptive period when it continued to entertain ; droIs claim re#ardin# new matters raised b the latter in its letters to N7A and then issuin# rulin#s thereon. 7n this re#ard, Article '''- of the Civil Code provides that% ART- ???4- Persons (ith !apa!it" to alienate propert" ma" renoun!e pres!ription alread" obtained* but not the right to pres!ribe in the +uturePrescription is deemed to have been tacitly renounced when the renunciation results from acts which imply the abandonment of the right acquired - 60mphasis and itali!s supplied7 Certainl , when a part has renounced a ri#ht ac=uired b prescription throu#h its actions, it can no lon#er claim prescription as a defense.
G9*H

Fo$rt), even assumin# that N7A did not waive the thirt :da prescriptive period, it clearl waived the effects of such period when it activel participated in arbitration proceedin#s throu#h the followin# acts%

a7 /n Januar" $* ?225* 95A )oluntaril" +iled its (ritten appearan!e* readil" submitted its Ans(er and asserted its o(n Counter!laims; b7 5n the Complian!e (hi!h a!!ompanied the Ans(er* 95A also submitted its si3 nominees to the Arbitral Tribunal to be !onstituted* among o+ (hi!h one (as e)entuall" appointed to the tribunal; !7 95A also a!ti)el" parti!ipated in the deliberations +or and the +ormulation o+ the Terms o+ Re+eren!e during the preliminar" !on+eren!e set b" C5AC; and d7 8or the purpose o+ ob)iating the introdu!tion o+ testimonial e)iden!e on the authenti!it" and due e3e!ution o+ its do!umentar" e)iden!e* 95A e)en had e3amined* upon prior reFuest to H"dro* all o+ the do!uments (hi!h the latter intended to present as e)identiar" e3hibits +or the said arbitration !aseAe now come to the issue of whether or not the provisions of R.A. No. ,-/, otherwise $nown as an Act To A''$re Uni*or% Bal$e to :)ili##ine 4oin And 4$rrenc(, is applicable to ; droIs claim. The Contract between N7A and ; dro is an internationall( tendered contract considerin# that it was funded b the 7nternational Ban$ for Reconstruction and 6evelopment &7BR6(. As a contract funded b an international or#ani5ation, particularl one reco#ni5ed b the Philippines, the contract is eDe%#t from the provisions of R.A. No. ,-/. R.A. No. .'++ amended the provisions of R.A. ,-/ thus%
G92H

S0CT5/9 ?Se!tion one o+ Republi! A!t 9umbered 8i)e hundred and t(ent"-nine* entitled %An A!t to Assure Gni+orm Ialue o+ Philippine Coin and Curren!"*1 is hereb" amended to read as +ollo(sE Se!- ?- 0)er" pro)ision !ontained in* or made (ith respe!t to* an" domesti! obligation to (it* an" obligation !ontra!ted in the Philippines (hi!h pro)isions purports to gi)e the obligee the right to reFuire pa"ment in gold or in a parti!ular #ind o+ !oin or !urren!" other than Philippine !urren!" or in an amount o+ mone" o+ the Philippines measured thereb"* be as it is hereb" de!lared against publi! poli!"* and null* )oid* and o+ no e++e!t* and no su!h pro)ision shall be !ontained in* or made (ith respe!t to* an" obligation herea+ter in!urred- %he above prohibition shall not apply to ,a0 transactions where the funds involved are the proceeds of loans or investments made directly or indirectly, through bona fide intermediaries or agents , by foreign governments, their agencies and instrumentalities, and international financial and banking institutions so long as the funds are identifiable, as having emanated from the sources enumerated above) 6b7 transa!tions a++e!ting high-priorit" e!onomi!

proje!ts +or agri!ultural* industrial and po(er de)elopment as ma" be determined b" the 9ational 0!onomi! Coun!il (hi!h are +inan!ed b" or through +oreign +unds; 6!7 +or(ard e3!hange transa!tion entered into bet(een ban#s or bet(een ban#s and indi)iduals or juridi!al persons; 6d7 import-e3port and other international ban#ing* +inan!ial in)estment and industrial transa!tions- Bith the e3!eption o+ the !ases enumerated in items 6a7* 6b7* 6!7 and 6d7 in the +oregoing pro)isions* in (hi!h bases the terms o+ the parties@ agreement shall appl"* e)er" other domesti! obligation hereto+ore or herea+ter in!urred* (hether or not an" su!h pro)ision as to pa"ment is !ontained therein or made (ith respe!t thereto* shall be dis!harged upon pa"ment in an" !oin or !urren!" (hi!h at the time o+ pa"ment is legal tender +or publi! and pri)ate debtsE 2rovided, That i+ the obligation (as in!urred prior to the ena!tment o+ this A!t and reFuired pa"ment in a parti!ular #ind o+ !oin or !urren!" other than Philippine !urren!"* it shall be dis!harged in Philippine !urren!" measured at the pre)ailing rates o+ e3!hange at the time the obligation (as in!urred* e3!ept in !ase o+ a loan made in a +oreign !urren!" stipulated to be pa"able in the same !urren!" in (hi!h !ase the rate o+ e3!hange pre)ailing at the time o+ the stipulated date o+ pa"ment shall pre)ail- All !oin and !urren!"* in!luding Central ,an# notes* hereto+ore and herea+ter issued and de!lared b" the Mo)ernment o+ the Philippines shall be legal tender +or all debts* publi! and pri)ateS0CT5/9 4- This A!t shall ta#e e++e!t upon its appro)al- 60mphasis and itali!s supplied7 Even assumin# eD 5ratia ar5$%enti that R.A. No. ,-/ is applicable, it is still erroneous for the Court of Appeals to den ; droIs claim because 1ection ' of R.A. No. ,-/ states that onl the stipulation re=uirin# pa ment in forei#n currenc is void, but not the obli5ation to ma$e pa ment. This can be #leaned from the provision that Xever other domestic obli#ation heretofore or hereafter incurredY shall be Xdischar#ed upon pa ment in an coin and currenc which at the time is le#al tender for public and private debts.Y 7n Re#$blic Re'o$rce' and De&elo#%ent 4or#oration &. 4o$rt o* A##eal', it was held%
G90H

- - - it is !lear +rom Se!tion ? o+ R-A- 9o- 542 that (hat is de!lared null and )oid is the %pro)ision !ontained in* or made (ith respe!t to* an" domesti! obligation to (it* an" obligation !ontra!ted in the Philippines (hi!h pro)ision purports to gi)e the obligee the right to reFuire pa"ment in gold or in a parti!ular #ind o+ !oin or !urren!" other than Philippine !urren!" or in an amount o+ mone" o+ the Philippines measured thereb"1 and not the contract or agreement which contains such proscribed provision 60mphasis supplied7 More succinctl , we held in 1an Buenaventura v. Court of Appeals that V
G9/H

5t is to be noted under the +oregoing pro)ision that (hile an agreement to pa" an obligation in a !urren!" other than Philippine !urren!" is null and )oid as !ontrar" to publi! poli!"* what the law specifically prohibits is payment in currency other than legal tender but does not defeat a creditors claim for payment. A !ontrar" rule (ould allo( a person to pro+it or enri!h himsel+ ineFuitabl" at another@s e3pense60mphasis supplied7 7t is thus erroneous for the Court of Appeals to disallow petitionerIs claim for forei#n currenc differential because N7AIs obli#ation should be converted to Philippine Pesos which was le#al tender at the time.
G.+H

The ne@t issue to be resolved is whether or not ; droIs claim should be computed at the fi@ed rate of e@chan#e. Ahen the M>A and the 1upplemental M>A were in effect, there were instances when the forei#n currenc availed of b ; dro e@ceeded the forei#n currenc pa able to it for that particular Pro#ress Pa ment. 7n instances li$e these, N7A actuall char#ed ; dro interest in forei#n currenc computed at the #re&ailin5 e@chan#e rate and not at the fi@ed rate. N7A now insists that the e@chan#e rate should be computed accordin# to the *iDed rate and not the escalatin# rate it actuall char#ed ; dro.
G.'H G.-H

1uffice it to state that this flip:floppin# stance of N7A of adoptin# and discardin# positions to suit its convenience cannot be countenanced. A person who, b his deed or conduct has induced another to act in a particular manner, is barred from adoptin# an inconsistent position, attitude or course of conduct that thereb causes loss or in!ur to another. 7ndeed, the application of the principle of estoppel is proper and timel in headin# off N7AIs efforts at renouncin# its previous acts to the pre!udice of ; dro which had dealt with it honestl and in #ood faith.
G.9H

- - - A prin!iple o+ eFuit" and natural justi!e* this is e3pressl" adopted under Arti!le ?><? o+ the Ci)il Code* and pronoun!ed as one o+ the !on!lusi)e presumptions under Rule ?<?* Se!tion <6a7 o+ the Rules o+ Court* as +ollo(sE Bhene)er a part" has* b" his o(n de!laration* a!t or omission* intentionall" and deliberatel" led another to belie)e a parti!ular thing to be true* and to a!t upon su!h a belie+ he !annot* in an" litigation arising out o+ su!h de!laration* a!t or omission* be permitted to +alsi+" itPetitioner* ha)ing per+ormed a++irmati)e a!ts upon (hi!h the respondents based their subseFuent a!tions* !annot therea+ter re+ute his a!ts or renege on the e++e!ts o+ the same* to the prejudi!e o+ the latter- To allo( him to do so (ould be tantamount to

!on+erring upon him the libert" to limit his liabilit" at his (him and !apri!e* (hi!h is against the )er" prin!iples o+ eFuit" and natural justi!eP
G..H

N7A is, therefore, estopped from invo$in# the contractual stipulation providin# for the fi@ed rate to !ustif a lower computation than that claimed b ; dro. 7t cannot be allowed to hide behind the ver provision which it itself continuousl violated. An admission or representation is rendered conclusive upon the person ma$in# it and cannot be denied or disproved as a#ainst the person rel in# thereon. A part ma not #o bac$ on his own acts and representations to the pre!udice of the other part who relied upon them.
G.,H G.*H G.2H

N7A was #uilt of forum:shoppin#. Corum:shoppin# refers to the act of availin# oneself of several !udicial remedies in different courts, either simultaneousl or successivel , substantiall founded on the same transaction and identical material facts and circumstances, raisin# basicall the li$e issues either pendin# in, or alread resolved b , some other court.
G.0H

7t has been characteri5ed as an act of malpractice that is prohibited and condemned as triflin# with the courts and abusin# their processes. 7t constitutes improper conduct which tends to de#rade the administration of !ustice. 7t has also been described as deplorable because it adds to the con#estion of the heavil burdened doc$ets of the courts. The test in determinin# the presence of this pernicious practice is whether in the two or more cases pendin#, there is identit of% &a( parties8 &b( ri#hts or causes of action8 and &c( reliefs sou#ht.
G./H G,+H

Appl in# the fore#oin# ardstic$ to the instant case, it is clear that N7A violated the prohibition a#ainst forum:shoppin#. Besides filin# CA:).R. 1P No. ..,-2 wherein the Court of AppealsI decision is the sub!ect of appeal in this proceedin#, N7A previousl filed CA:).R. 1P No. 92'0+ and ).R. No. '-/'*/ which is a special civil action for certiorari. 7n all three cases, the parties are invariabl ; dro and N7A. 7n all three petitions, N7A raised practicall the same issues and in all of them, N7AIs pra er was the same% to nullif the proceedin#s commenced at the C7AC.
G,'H

7t must be pointed out in this re#ard that the first two petitions namel , CA: ).R. 1P No. 92'0+ and ).R. No. '-/'*/ are both ori5inalactions. 1ince N7A failed to file a petition for review on certiorari under Rule ., of the Rules of Court challen#in# the decision of the appellate court in CA:).R. 1P No. 92'0+ dismissin# its petition, it opted to file an ori#inal action for certiorari under Rule *, with this Court where the same was doc$eted as ).R. No. '-/'*/. Cor its failure to appeal the !ud#ments in CA:).R. 1P No. 92'0+ and ).R. No. '-/'*/, N7A is necessaril bound b the effects of those decisions. The filin#

of CA:).R. 1P No. ..,-2, which raises the issues alread passed upon in both cases is a clear case of forum:shoppin# which merits outri#ht dismissal. The issue of whether or not the Certification of Non:Corum 1hoppin# is valid despite that it was si#ned b N7AIs counsel must be answered in the ne#ative. Applicable is the rulin# in 2ari&ele' S)i#(ard 4or#. &. 4o$rt o* A##eal', et al.%
G,-H

It is settled that the re>uirement in the Rules that the certification of non!forum shopping should be e'ecuted and signed by the plaintiff or the principal means that counsel cannot sign said certification unless clothed "ith special authority to do so The reason +or this is that the plainti++ or prin!ipal #no(s better than an"one else (hether a petition has pre)iousl" been +iled in)ol)ing the same !ase or substantiall" the same issues- Hence, a certification signed by counsel alone is defective and constitutes a valid cause for dismissal of the petition- 5n the !ase o+ natural persons* the Rule reFuires the parties themsel)es to sign the !erti+i!ate o+ non-+orum shopping- Ho"ever, in the case of the corporations, the physical act of signing may be performed, on behalf of the corporate entity, only by specifically authorized individuals +or the simple reason that !orporations* as arti+i!ial persons* !annot personall" do the tas# themsel)es- - - It cannot be gainsaid that obedience to the requirements of procedural rule[s is needed if we are to e!pect fair results therefrom. "tter disregard of the rules cannot #ustly be rationalized by harking on the policy of liberal construction. 60mphasis and itali!s supplied7 7n this connection, the law er must be Xspecificall authori5edY in order to validl si#n the certification.
G,9H

7n closin#, we restate the rule that the courts will not interfere in matters which are addressed to the sound discretion of #overnment a#encies entrusted with the re#ulation of activities comin# under the special technical $nowled#e and trainin# of such a#encies.
G,.H

An action b an administrative a#enc ma be set aside b the !udicial department onl if there is an error of law, abuse of power, lac$ of !urisdiction or #rave abuse of discretion clearl conflictin# with the letter and spirit of the law. 7n the case at bar, there is no co#ent reason to depart from the #eneral rule because the action of the C7AC conforms rather than conflicts with the #overnin# statutes and controllin# case law on the matter.
G,,H

D!ERE"ORE, the petition is )RANTE6. The 6ecision of the Court of Appeals in CA:).R. 1P No. ..,-2 dated >ctober -/, -++- and the Resolution dated 1eptember -., -++9 are RE<ER1E6 and 1ET A176E. The 6ecision of the Construction 7ndustr Arbitration Commission dated ?une '+, '//2 in C7AC Case No. '0:/. is RE7N1TATE6.

SO ORDERED.