FIRST DIVISION

[G.R. No. 116781. September 5, 1997.]

TOMAS LAO CONSTRUCTION, LVM CONSTRUCTION CORPORATION, THOMAS and JAMES
DEVELOPERS (PHIL.), INC., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, MARIO
O. LABENDIA, SR., ROBERTO LABENDIA, NARCISO ADAN, FLORENCIO GOMEZ, ERNESTO
BAGATSOLON, SALVADOR BABON, PATERNO BISNAR, CIPRIANO BERNALES, ANGEL MABULAY,
SR., LEO SURIGAO, and ROQUE MORILLO, respondents.
SYNOPSIS
Petitioners are three companies engaged in the construction of public roads and bridges. These companies
are exclusively controlled and managed by the members of Lao family. Private respondents were
construction workers of the petitioners. Controversy arose when the private respondents refused to sign an
antedated employment contract describing them as project employees, as a result of which their services
were terminated. Private respondents filed complaints for illegal dismissal against the petitioners. The
Labor Arbiter dismissed the complaints finding that private respondents were project employees. But the
NLRC found that private respondents were regular employees who were dismissed without just cause and
denied due process. In granting monetary awards to the private respondents, the NLRC disregarded the
veil of corporate fiction and treated petitioners as one entity. Cdpr
The Supreme Court denied herein petition and affirmed the decision of the NLRC. It held that the NLRC was
correct in finding that the workers were illegally dismissed. Wanting in this case is the strict compliance of
the mandatory requirements of substantive and procedural due process to effect a valid dismissal of
employees.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; PROJECT EMPLOYEES; DISTINGUISHED FROM
REGULAR EMPLOYEES; CASE AT BAR. The principal test in determining whether particular employees are
"project employees" distinguished from "regular employees" is whether the "project employees" are
assigned to carry out "specific project or undertaking," the duration (and scope) of which are specified at
the time the employees are engaged for the project. "Project" in the realm of business and industry refers
to a particular job or undertaking that is within the regular or usual business of employer, but which is
distinct and separate and identifiable as such from the undertakings of the company. Such job or
undertaking begins and ends at determined or determinable times. While it may be allowed that in the
instant case the workers were initially hired for specific projects or undertakings of the company and hence
can be classified as project employees, the repeated re-hiring and the continuing need for their services
over a long span of time (the shortest at seven [7] years) have undeniably made them regular employees.
Thus, we held that where the employment of project employees is extended long after the supposed
project has been finished, the employees are removed from the scope of project employees and
considered regular employees. While length of time may not be a controlling test for project employment,
it can be a strong factor in determining whether the employee was hired for a specific undertaking or in
fact tasked to perform functions which are vital, necessary and indispensable to the usual business or
trade of the employer. In the case at bar, private respondents had already gone through the status of
project employees. But their employments became non-coterminous with specific projects when they
started to be continuously re-hired due to the demands of petitioners' business and were re-engaged for
many more projects without interruption. cdll
2. ID.; ID.; ID.; WORK POOL, CONSTRUED; PRESENT IN CASE AT BAR. A work pool may exist although the
workers in the pool do not receive salaries and are free to seek other employment during temporary
breaks in the business, provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation "coddling labor at the expense of capital" and
at the same time enables the workers to attain the status of regular employees. Clearly, the continuous
rehiring of the same set of employees within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work pool from which petitioners drew its
workers for its various projects. HCSDca
3. ID.; ID.; ID.; REPORTORIAL REQUIREMENT THEREOF; NOT COMPLIED WITH IN CASE AT BAR. If private
respondents were indeed employed as "project employees," petitioners should have submitted a report of
termination to the nearest public employment office every time their employment was terminated due to
completion of each construction project. The records show that they did not. Policy Instruction No. 20 is
explicit that employers of project employees are exempted from the clearance requirement but not from
the submission of termination report. We have consistently held that failure of the employer to file
termination reports after every project completion proves that the employees are not project employees.
Nowhere in the New Labor Code is it provided that the reportorial requirement is dispensed with. The fact
is that Department Order No. 19 superseding Policy Instruction No. 20 expressly provides that the report of
termination is one of the indicators of project employment.

4. ID.; ID.; REGULAR SEASONAL EMPLOYEES, CONSTRUED; APPLICATION THEREOF BY ANALOGY IN CASE AT
BAR. In a final attempt to convince the Court that private respondents were indeed project employees,
petitioners point out that the workers were not regularly maintained in the payroll and were free to offer
their services to other companies when there were no on-going projects. This argument however cannot
defeat the workers' status of regularity. This Court applies by analogy the case of Industrial-CommercialAgricultural Workers Organization vs. CIR, No. L-21465, 31 March 1966, 16 SCRA 562, 567-568, which deals
with regular seasonal employees. There it was held That during the temporary layoff the laborers are
free to seek other employment is natural, since the laborers are not being paid, yet must find means of
support. A period during which the Central is forced to suspend or cease operation for a time . . . should
not mean starvation for employees and their families. Truly, the cessation of construction activities at the
end of every project is a foreseeable suspension of work. Of course, no compensation can be demanded
from the employer because the stoppage of operations at the end of a project and before the start of a
new one is regular and expected by both parties to the labor relations. Similar to the case of regular
seasonal employees, the employment relation is not severed by merely being suspended. The employees
are, strictly speaking, not separated from services but merely on leave of absence without pay until they
are reemployed. Thus we cannot affirm the argument that non-payment of salary or non-inclusion in the
payroll and the opportunity to seek other employment denote project employment.
5. ID.; ID.; EXECUTION OF PROJECT EMPLOYMENT CONTRACT; AN ATTEMPT TO CIRCUMVENT LABOR LAWS
ON TENURIAL SECURITY. The execution of the project employment contracts was "farcical." Obviously,
the contracts were a scheme of petitioners to prevent respondents from being considered as regular
employees. It imposed time frames into an otherwise flexible employment period of private respondents
some of whom were employed as far back as 1969. Clearly, here was an attempt to circumvent labor laws
on tenurial security. Settled is the rule that when periods have been imposed to preclude the acquisition of
tenurial security by the employee, they should be struck down as contrary to public morals, good customs
or public order. Worth noting is that petitioners had engaged in various joint venture agreements in the
past without having to draft project employment contracts. That they would require execution of
employment contracts and waivers at this point, ostensibly to be used for audit purposes, is a suspect
excuse, considering that petitioners enforced the directive by withholding the salary of any employee who
spurned the order. prcd
6. ID.; ID.; TERMINATION OF EMPLOYMENT; REQUIREMENTS FOR VALID DISMISSAL; NOT PRESENT IN CASE
AT BAR. The rule is that in effecting a valid dismissal, the mandatory requirements of substantive and
procedural due process must be strictly complied with. These were wanting in the present case. Private
respondents were dismissed allegedly because of insubordination or blatant refusal to comply with a lawful
directive of their employer. But willful disobedience of the employer's lawful orders as a just cause for the
dismissal of the employees envisages the concurrence of at least two (2) requisites: (a) the employee's
assailed conduct must have been willful or intentional, the willfulness being characterized by a wrongful
and perverse attitude; and, (b) the order violated must have been reasonable, lawful, made known to the
employee and must pertain to the duties which he has been engaged to discharge. The refusal of private
respondents was willful but not in the sense of plain and perverse insubordination. It was dictated by
necessity and justifiable reasons for what appeared to be an innocent memorandum was actually a
veiled attempt to deny them their rightful status as regular employees. The workers therefore had no
option but to disobey the directive which they deemed unreasonable and unlawful because it would result
in their being downsized to mere project workers. This act of self-preservation should not merit them the
extreme penalty of dismissal.
7. ID.; ID.; ID.; ABANDONMENT OF WORK; ELEMENTS. The elements of abandonment are: (a) failure to
report for work or absence without valid or justifiable reason, and, (b) a clear intention to sever the
employer-employee relationship, with the second element as the more determinative factor manifested by
some overt acts. aCSEcA
8. ID.; ID.; ID.; BURDEN OF PROVING LAWFUL DISMISSAL LIES WITH THE EMPLOYER. In Archbuild Masters
and Construction, Inc. vs. NLRC, G.R. No. 108142, 26 December 1995, 251 SCRA 491, 492, we held . . . a
project employee hired for a specific task also enjoys security of tenure. A termination of his employment
must be for a lawful cause and must be done in a manner which affords him the proper notice and
hearing . . . To allow employers to exercise their prerogative to terminate a project worker's employment
based on gratuitous assertions of project completion would destroy the constitutionally protected right of
labor to security of tenure. The burden of proving that an employee has been lawfully dismissed therefore
lies with the employer. In the case at bar, the assertions of petitioners were self-serving and insufficient to
substantiate their claim of proximate project completion. The services of the employees were terminated
not because of contract expiration but as sanction for their refusal to sign the project employment forms
and quitclaims. prcd
9. ID.; ID.; ID.; ILLEGAL DISMISSAL; RIGHTS OF EMPLOYEE UNDER THE AMENDATORY PROVISION OF RA NO.
6715. Since the illegal dismissal was made in 1990 or after the effectivity of the amendatory provision of
RA No. 6715 on 21 March 1989, private respondents' back wages should be computed on the basis of Art.
279 of the Labor Code which states that "(a)n employee who is unjustly dismissed from work shall be

entitled to reinstatement without loss of seniority rights and other privileges and to his full back wages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement." Conformably with our
ruling in Bustamante vs. NLRC, G.R. No. 111651, 28 November 1996, the illegally dismissed employees are
entitled to full back wages, undiminished by earnings derived elsewhere during the period of their illegal
dismissal. In the event that reinstatement is no longer feasible, back wages shall be computed from the
time of illegal termination until the time of the finality of the decision. The award shall be based on the
documents submitted by private respondents, i.e. affidavits, SSS and Medicare documents, since
petitioners failed to adduce competent evidence to the contrary. The separation pay shall be equivalent to
"at least one (1) month salary or to one (1) month salary for every year of service, whichever is higher, a
fraction of at least six (6) months being considered as one whole year."
10. COMMERCIAL LAW; CORPORATION CODE; DISREGARDING THE VEIL OF SEPARATE CORPORATE
PERSONALITY, WHEN PROPER; CASE AT BAR. Public respondent NLRC did not err in disregarding the veil
of separate corporate personality. Petitioners are engaged in the same line of business under one
management and use the same equipment including manpower services. Where it appears that [three]
business enterprises are owned, conducted and controlled by the same parties, both law and equity will,
when necessary to protect the rights of third persons, disregard the legal fiction that the [three]
corporations are distinct entities, and treat them as identical.
11. ID.; ID.; WHEN LIABILITY FOR BACK WAGES AND SEPARATION PAY EXTENDS TO RESPONSIBLE OFFICERS
ACTING IN THE INTEREST OF CORPORATION; CASE AT BAR. Likewise, NLRC did not err in holding
petitioners jointly and severally liable for private respondents' back wages and separation pay. The liability
of petitioners extends to the responsible officers acting in the interest of the corporations. In view of the
peculiar circumstances of this case, we disregard the separate personalities of the three (3) corporations
and at the same time declare the members of the corporations jointly and severally liable with the
corporations for the monetary awards due to private respondents. It should always be borne in mind that
the fiction of law that a corporation as a juridical entity has a distinct and separate personality was
envisaged for convenience and to serve justice; therefore it should not be used as a subterfuge to commit
injustice and circumvent labor laws. cdasia
DECISION
BELLOSILLO, J p:
From October to December 1990 private respondents individually filed complaints for illegal dismissal
against petitioners with the National Labor Relations Commission Regional Arbitration Branch No. VIII
(NLRC-RAB VIII), Tacloban City. Alleging that they were hired for various periods as construction workers in
different capacities they described their contractual terms as follows: (a) Roberto Labendia, general
construction foreman, from 1971 to 17 October 1990 at P3,700/month; (b) Narciso Adan, tireman, from
October 1981 to November 1990 at P75.00/day; (c) Florencio Gomez, welder, from July 1983 to July 1990
at P60.00/day; (d) Ernesto Bagatsolon, leadman/checker, from June 1982 to October 1990 at
P2,800/month; (e) Salvador Babon, clerk/timekeeper/paymaster, from June 1982 to October 1990 at
P3,200/month; (f) Paterno Bisnar, road grader operator, from January 1979 to October 1990 at P105/day;
(g) Cipriano Bernales, instrument man, from February 1980 to November 1990 at P3,200/month; (h) Angel
Mabulay, Sr., dump truck driver, from August 1974 to October 1990 at P90/day; (i) Leo Surigao, payloader
operator, from March 1975 to January 1978 at P100/day; (j) Mario Labendia, Sr. surveyor/foreman, from
August 1971 to July 1990 at P2,900/month; and, (k) Roque Morillo, company watchman, from August 1983
to October 1990 at P3,200/month. 1
Within the periods of their respective employment, they alternately worked for petitioners Tomas Lao
Corporation (TLC), Thomas and James Developers (T&J) and LVM Construction Corporation (LVM),
altogether informally referred to as the "Lao Group of Companies," the three (3) entities comprising a
business conglomerate exclusively controlled and managed by members of the Lao family. cdrep
TLC, T&J and LVM are engaged in the construction of public roads and bridges. Under joint venture
agreements they entered into among each other, they would undertake their projects either
simultaneously or successively so that, whenever necessary, they would lease tools and equipment to one
another. Each one would also allow the utilization of their employees by the other two (2). With this
arrangement, workers were transferred whenever necessary to on-going projects of the same company or
of the others, or were rehired after the completion of the project or project phase to which they were
assigned. Soon after, however, TLC ceased its operations 2 while T&J and LVM stayed on.
Sometime in 1989 Andres Lao, Managing Director of LVM and President of T&J, 3 issued a memorandum 4
requiring all workers and company personnel to sign employment contract forms and clearances which
were issued on 1 July 1989 but antedated 10 January 1989. These were to be used allegedly for audit
purposes pursuant to a joint venture agreement between LVM and T&J. To ensure compliance with the
directive, the company ordered the withholding of the salary of any employee who refused to sign. Quite
notably, the contracts expressly described the construction workers as project employees whose

employments were for a definite period, i.e., upon the expiration of the contract period or the completion
of the project for which the workers was hired.
Except for Florencio Gomez 5 all private respondents refused to sign contending that this scheme was
designed by their employer to downgrade their status from regular employees to mere project employees.
Resultantly, their salaries were withheld. They were also required to explain why their services should not
be terminated for violating company rules and warned that failure to satisfactorily explain would be
construed as "disinterest" in continued employment with the company. Since the workers stood firm in
their refusal to comply with the directives their services were terminated.
NLRC RAB VIII dismissed the complaints lodged before it, finding that private respondents were project
employees whose employments could be terminated upon completion of the projects or project phase for
which they were hired. It upheld petitioners' contention that the execution of their employment contracts
was to forestall the eventuality of being compelled to pay the workers their salaries even if there was no
more work to be done due to the completion of the projects or project phases. The labor court however
granted each employee a separation pay of P6,435.00 computed at one-half (1/2) month salary for every
year of service, uniformly rounded at five (5) years. 6
The decision of Labor Arbiter Gabino A. Velasquez, Jr., was reversed on appeal by the Fourth Division of the
National Labor Relations Commission (NLRC) of Cebu City which found that private respondents were
regular employees who were dismissed without just cause and denied due process. The NLRC also
overruled the fixing by the Labor Arbiter of the term of employment of complainants uniformly at five (5)
years since the periods of employment of the construction workers as alleged in their complaints were
never refuted by petitioners. In granting monetary awards to complainants, NLRC disregarded the veil of
corporate fiction and treated the three (3) corporations as forming only one entity on the basis of the
admission of petitioners that "the three (3) operated as one (1), intermingling and commingling all its
resources, including manpower facility." 7
Petitioners now lay their cause before us and assign the following errors: (a) NLRC erred in classifying the
employees as regular instead of project employees; (b) assuming that the workers were regular
employees, NLRC failed to consider that they were terminated for cause; (c) assuming further that the
employees were illegally dismissed, NLRC erred in awarding back wages in excess of three (3) years; and,
(d) assuming finally that the decision is correct, NLRC erred when it pierced the veil of corporate
personality of petitioner-corporations.
The main thrust of petitioners' expostulation is that respondents have no valid cause to complain about
their employment contracts since these documents merely formalized their status as project employees.
They cite Policy Instruction No. 20 of the Department of Labor which defines project employees as those
employed in connection with a particular construction project, adding that the ruling in Sandoval
Shipyards, Inc. v. NLRC 8 applies squarely to the instant case because there the Court declared that the
employment of project employees is co-terminous with the completion of the project regardless of the
number of projects in which they have worked. And as their employment is one for a definite period, they
are not entitled to separation pay nor is their employer required to obtain clearance from the Secretary of
Labor in connection with their termination. Petitioners thus argue that their dismissal from the service of
private respondents was legal since the projects for which they were hired had already been completed. As
additional ground, they claim that Mario Labendia and Roberto Labendia had absented themselves without
leave giving management no choice but to sever their employment.
We are not convinced. The principal test in determining whether particular employees are "project
employees" distinguished from "regular employees" is whether the "project employees" are assigned to
carry out "specific project or undertaking," the duration (and scope) of which are specified at the time the
employees are engaged for the project. "Project" in the realm of business and industry refers to a
particular job or undertaking that is within the regular or usual business of employer, but which is distinct
and separate and identifiable as such from the undertakings of the company. Such job or undertaking
begins and ends at determined or determinable times. 9
While it may be allowed that in the instant case the workers were initially hired for specific projects or
undertakings of the company and hence can be classified as project employees. the repeated re-hiring and
the continuing need for their services over a long span of time (the shortest, at seven [7] years) have
undeniably made them regular employees. Thus, we held that where the employment of project
employees is extended long after the supposed project has been finished, the employees are removed
from the scope of project employees and considered regular employees. 10
While length of time may not be a controlling test for project employment, it can be a strong factor in
determining whether the employee was hired for a specific undertaking or in fact tasked to perform
functions which are vital, necessary and indispensable to the usual business or trade of the employer. In
the case at bar, private respondents had already gone through the status of project employees. But their
employments became non-coterminous with specific projects when they started to be continuously re-

hired due to the demands of petitioners' business and were re-engaged for many more projects without
interruption. We note petitioners' own admission
[t]hese construction projects have been prosecuted by either of the three petitioners, either individually or
in a joint venture with one another. Likewise, these construction projects have been prosecuted by either of
the three petitioners, either simultaneously, one construction project overlapping another and/or one
project commencing immediately after another project has been completed or terminated. Perhaps
because of their capacity to prosecute government projects and their good record and performance, at
least one of the three petitioners had an on-going construction project and/or one of the three petitioners'
construction project overlapped that of another. 11
The denial by petitioners of the existence of a work pool in the company because their projects were not
continuous is amply belied by petitioners themselves who admit that
All the employees of either of the three petitioners were actually assigned to a particular project to remain
in said project until the completion or termination of that project. However, after the completion of that
particular project or when their services are no longer needed in the project or particular phase of the
project where they were assigned, they were transferred and rehired in another on-going project. 12
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other
employment during temporary breaks in the business, provided that the worker shall be available when
called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can
likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned.
This is beneficial to both the employer and employee for it prevents the unjust situation of "coddling labor
at the expense of capital" and at the same time enables the workers to attain the status of regular
employees. Clearly, the continuous rehiring of the same set of employees within the framework of the Lao
Group of Companies is strongly indicative that private respondents were an integral part of a work pool
from which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed project employees,
petitioners point out that the workers were not regularly maintained in the payroll and were free to offer
their services to other companies when there were no on-going projects. This argument however cannot
defeat the workers' status of regularity. We apply by analogy the case of Industrial-Commercial-Agricultural
Workers Organization v. CIR 13 which deals with regular seasonal employees. There we held
That during the temporary layoff the laborers are free to seek other employment is natural, since the
laborers are not being paid, yet must find means of support. A period during which the Central is forced to
suspend or cease operation for a time . . . should not mean starvation for employees and their families
(emphasis supplied).
Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of
work. Of course, no compensation can be demanded from the employer because the stoppage of
operations at the end of a project and before the start of a new one is regular and expected by both parties
to the labor relations. Similar to the case of regular seasonal employees, the employment relation is not
severed by merely being suspended. 14 The employees are, strictly speaking, not separated from services
but merely on leave of absence without pay until they are reemployed. 15 Thus we cannot affirm the
argument that non-payment of salary or non-inclusion in the payroll and the opportunity to seek other
employment denote project employment.
Contrary to petitioners' assertion, our ruling in Sandoval Shipyards is inapplicable considering the special
circumstances attendant to the present case. In Sandoval, the hiring of construction workers, unlike in the
instant case, was intermittent and not continuous for the "shipyard merely accepts contracts for
shipbuilding or for repair of vessels from third parties and, only on occasions when it has work contract of
this nature that it hires workers to do the job which, needless to say, lasts only for less than a year or
longer." 16
Moreover, if private respondents were indeed employed as "project employees," petitioners should have
submitted a report of termination to the nearest public employment office every time their employment
was terminated due to completion of each construction project. 17 The records show that they did not.
Policy Instruction No. 20 is explicit that employers of project employees are exempted from the clearance
requirement but not from the submission of termination report. We have consistently held that failure of
the employer to file termination reports after every project completion proves that the employees are not
project employees. 18 Nowhere in the New Labor Code is it provided that the reportorial requirement is
dispensed with. The fact is that Department Order No. 19 superseding Policy Instruction No. 20 expressly
provides that the report of termination is one of the indicators of project employment. 19
We agree with the NLRC that the execution of the project employment contracts was "farcical." 20
Obviously, the contracts were a scheme of petitioners to prevent respondents from being considered as
regular employees. It imposed time frames into an otherwise flexible employment period of private

respondents some of whom were employed as far back as 1969. Clearly, here was an attempt to
circumvent labor laws on tenurial security. Settled is the rule that when periods have been imposed to
preclude the acquisition of tenurial security by the employee, they should be struck down as contrary to
public morals, good customs or public order. 21 Worth noting is that petitioners had engaged in various
joint venture agreements in the past without having to draft project employment contracts. That they
would require execution of employment contracts and waivers at this point, ostensibly to be used for audit
purposes, is a suspect excuse, considering that petitioners enforced the directive by withholding the salary
of any employee who spurned the order.
We likewise reject petitioners' justification in re-hiring private respondents i.e., that it is much cheaper and
economical to re-hire or re-employ the same workers than to train a new set of employees. It is precisely
because of this cost-saving benefit to the employer that the law deems it fair that the employees be given
a regular status. We need not belabor this point.
The NLRC was correct in finding that the workers were illegally dismissed. The rule is that in effecting a
valid dismissal, the mandatory requirements of substantive and procedural due process must be strictly
complied with. These were wanting in the present case. Private respondents were dismissed allegedly
because of insubordination or blatant refusal to comply with a lawful directive of their employer. But willful
disobedience of the employer's lawful orders as a just cause for the dismissal of the employees envisages
the concurrence of at least two (2) requisites: (a) the employee's assailed conduct must have been willful
or intentional, the willfulness being characterized by a wrongful and perverse attitude; and, (b) the order
violated must have been reasonable, lawful, made known to the employee and must pertain to the duties
which he has been engaged to discharge. 22 The refusal of private respondents was willful but not in the
sense of plain and perverse insubordination. It was dictated by necessity and justifiable reasons for what
appeared to be an innocent memorandum was actually a veiled attempt to deny them their rightful status
as regular employees. The workers therefore had no option but to disobey the directive which they
deemed unreasonable and unlawful because it would result in their being downsized to mere project
workers. This act of self-preservation should not merit them the extreme penalty of dismissal.
The allegation of petitioners that private respondents are guilty of abandonment of duty is without merit.
The elements of abandonment are: (a) failure to report for work or absence without valid or justifiable
reason, and, (b) a clear intention to sever the employer-employee relationship, with the second element as
the more determinative factor manifested by some overt acts. 23 In this case, private respondents Roberto
Labendia and Mario Labendia were forced to leave their respective duties because their salaries were
withheld. They could not simply sit idly and allow their families to starve. They had to seek employment
elsewhere, albeit temporarily, in order to survive. On the other hand, it would be the height of injustice to
validate abandonment in this particular case as a ground for dismissal of respondents thereby making
petitioners benefit from a gross and unjust situation which they themselves created. 24 Private
respondents did not intend to sever ties with petitioner and permanently abandon their jobs; otherwise,
they would not have filed this complaint for illegal dismissal. 25
Petitioners submit that since private respondents were only project employees, they are not entitled to
security of tenure. This is incorrect. In Archbuild Masters and Construction, Inc. v. NLRC 26 we held
. . . a project employee hired for a specific task also enjoys security of tenure. A termination of his
employment must be for a lawful cause and must be done in a manner which affords him the proper notice
and hearing . . . To allow employers to exercise their prerogative to terminate a project worker's
employment based on gratuitous assertions of project completion would destroy the constitutionally
protected right of labor to security of tenure (emphasis supplied).
The burden of proving that an employee has been lawfully dismissed therefore lies with the employer. In
the case at bar, the assertions of petitioners were self-serving and insufficient to substantiate their claim of
proximate project completion. The services of the employees were terminated not because of contract
expiration but as sanction for their refusal to sign the project employment forms and quitclaims.
Finding that the dismissal was without just cause, we find it unnecessary to dwell on the non-observance of
procedural due process. Suffice it to state that private respondents were not priorly notified of their
impending dismissal and that they were not provided ample opportunity to defend themselves.
Petitioners charge as erroneous the grant to private respondents by NLRC of back wages in excess of three
(3) years or, in the alternative, to an award of separation pay if reinstatement is no longer feasible.
We disagree. Since the illegal dismissal was made in 1990 or after the effectivity of the amendatory
provision of RA No. 6715 on 21 March 1989, private respondents' back wages should be computed on the
basis of Art. 279 of the Labor Code which states that "(a)n employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full back
wages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement." cd asia

Conformably with our ruling in Bustamante v. NLRC 27 the illegally dismissed employees are entitled to full
back wages, undiminished by earnings derived elsewhere during the period of their illegal dismissal. In the
event that reinstatement is no longer feasible, back wages shall be computed from the time of illegal
termination until the time of the finality of the decision. 28 The award shall be based on the documents
submitted by private respondents, i.e. affidavits, SSS and Medicare documents, since petitioners failed to
adduce competent evidence to the contrary. The separation pay shall be equivalent to "at least one (1)
month salary or to one (1) month salary for every year of service, whichever is higher, a fraction of at least
six (6) months being considered as one whole year." 29
Finally, public respondent NLRC did not err in disregarding the veil of separate corporate personality and
holding petitioners jointly and severally liable for private respondents' back wages and separation pay. The
records disclose that the three (3) corporations were in fact substantially owned and controlled by
members of the Lao family composed of Lao Hian Beng alias Tomas Lao, Chiu Siok Lian (wife of Tomas
Lao), Andrew C. Lao, Lao Y. Heng, Vicente Lao Chua, Lao E. Tin, Emmanuel Lao and Ismaelita Maluto. A
majority of the outstanding shares of stock in LVM and T&J is owned by the Lao family. T&J is 100% owned
by the Laos as reflected in its Articles of Incorporation. The Lao Group of Companies therefore is a closed
corporation where the incorporators and directors belong to a single family. Lao Hian Beng is the same
Tomas Lao who owns Tomas Lao Corporation and is the majority stockholder of T&J. Andrew C. Lao is the
Managing Director of LVM Construction, and President and Managing Director of the Lao Group of
Companies. Petitioners are engaged in the same line of business under one management and use the
same equipment including manpower services. Where it appears that [three] business enterprises are
owned, conducted and controlled by the same parties, both law and equity will, when necessary to protect
the rights of third persons, disregard the legal fiction that the [three] corporations are distinct entities, and
treat them as identical. 30
Consonant with our earlier ruling, 31 we hold that the liability of petitioners extends to the responsible
officers acting in the interest of the corporations. In view of the peculiar circumstances of this case, we
disregard the separate personalities of the three (3) corporations and at the same time declare the
members of the corporations jointly and severally liable with the corporations for the monetary awards due
to private respondents. It should always be borne in mind that the fiction of law that a corporation as a
juridical entity has a distinct and separate personality was envisaged for convenience and to serve justice;
therefore it should not be used as a subterfuge to commit injustice and circumvent labor laws.
WHEREFORE, the petition is DENIED and the decision of the National Labor Relations Commission dated 05
August 1994 is AFFIRMED. Petitioners are ordered to reinstate private respondents to their former positions
without loss of seniority rights and other privileges with full back wages, inclusive of allowances, computed
from the time compensation was withheld up to the time of actual reinstatement. In the event that
reinstatement is no longer feasible, petitioners are directed to pay private respondents separation pay
equivalent to one month salary for every year of service, a fraction of at least six (6) months being
considered one (1) year in the computation thereof, and full back wages computed from the time
compensation was withheld until the finality of this decision. All other claims of the parties are DISMISSED
for lack of merit. Costs against petitioners. llcd
SO ORDERED.
THIRD DIVISION
[G.R. Nos. 111810-11. June 16, 1995.]
JAMES YU and WILSON YOUNG, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER DANIEL C. CUETO, TANDUAY DISTILLERY INC., FERNANDO DURAN, EDUARDO
PALIWAN, ROQUE ESTOCE AND RODRIGO SANTOS, respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR ARBITER; FINAL AND EXECUTORY DECISIONS THEREOF; RULE
AND EXCEPTION. The decision dated May 24, 1989 is now final and executory, as only respondent TDI
appealed said decision and its appeal was later dismissed by respondent NLRC. It is fundamental that a
final and executory decision cannot be amended or corrected (First Integrated Bonding and Insurance
Company, Inc. vs. Hernando, 199 SCRA 796 [1991]) except for clerical errors or mistakes (Maramba vs.
Lozano, 20 SCRA 474 [1967]); Reyes vs. Court of Appeals, 189 SCRA 46 [1990]). A definitive judgment is no
longer subject to change, revision, amendment, or reversal (Miranda vs. Court of Appeals, 71 SCRA 295 l
1976]), and the court loses jurisdiction over it, except to order its execution (PY Eng Chong vs. Herrera, 70
SCRA 130 [1976]).
2. ID.; ID.; ID.; WRIT OF EXECUTIONS MUST NOT GO BEYOND THE SCOPE OF THE JUDGMENT; NOT
COMPLIED WITH IN CASE AT BAR. An examination of the dispositive portion of the decision shows that
the same does not in any manner obligate Tanduay Distillers, or even petitioners Yu and Young for that
matter, to reinstate respondents. Only TDI was held liable to reinstate respondents up to the time of
change of ownership, and for separation benefits. However, Labor Arbiter Cueto went beyond what was
disposed by the decision and issued an order dated November 17, 1992 which required . . . Tanduay

Distillers, Inc., Wilson Young and James Yu to immediately reinstate complainants Fernando Duran, Rodrigo
Santos, Roque Estoce and Eduardo Daliwan to their respective positions. Subsequently, a writ of execution
was issued on December 16, 1992 pursuant to the order of November 17, 1992. The order of execution
dated November 17, 1992 in effect amended the decision dated May 24, 1989 for the former orders
petitioners and Tanduay Distillers to reinstate private respondents employees whereas the decision dated
May 24, 1989, as we have discussed above, does not so decree. This cannot be done. It is beyond the
power and competence of Labor Arbiter Cueto to amend a final decision. The writ of execution must not go
beyond the scope of the judgment. As Chief Justice Moran opined: "The writ of execution must conform to
the judgment which is to be executed, as it may not vary the terms of the judgment it seeks to enforce.
Nor may it go beyond the terms of the judgment, sought to be executed. Where the execution is not in
harmony with the judgment which gives it life and exceeds it, it has pro tanto no validity. To maintain
otherwise would be to ignore the constitutional provision against depriving a person of his property without
due process of law" (Moran, Comments on the Rules of Court, Vol. I, 1952 Ed., p. 809; cited in Villoria vs.
Piccio, supra). (Gamboa's Incorporated vs. Court of Appeals, 72 SCRA 131, 137-138 [1976].) The order of
execution and the writ of execution ordering petitioners and Tanduay Distillers to reinstate private
respondents employees are, therefore, null and void. Neither may be said that petitioners and Tanduay
Distillers and the same as TDI, as seems to be the impression of respondents when they impleaded
petitioners as party respondents in their complaint for unfair labor practice, illegal lay off, and separation
benefits. Such a stance is not supported by the facts. The name of the company for whom the petitioners
are working is Twin Ace Holdings Corporation. As stated by the Solicitor General, Twin Ace is part of the
Allied Bank Group although it conducts the rum business under the name of Tanduay Distillers. The use of
a similar sounding or almost identical name is an obvious device to capitalize on the goodwill which
Tanduay Rum has built over the years. Twin Ace or Tanduay Distillers, on one hand, and Tanduay Distillery,
Inc. (TDI), on the other, are distinct and separate corporations. There is nothing to suggest that the owners
of TDI, have any common relationship as to identify it with Allied Bank Group which runs Tanduay
Distillers .
3. ID.; REINSTATEMENT; CANNOT BE COMPELLED AGAINST THE BUYING CORPORATION; CASE AT BAR.
Labor Arbiter Cauton-Barcelona found the retrenchment effected by TDI illegal and ordered TDI to reinstate
the complainants and that if there is a change of management, then separation benefits would be paid.
There is, however, no order in the decision directing Twin Ace or Tanduay Distillers to hire or reinstate
herein four individual respondents. The letter of James Yu does not mention any reinstatement. It assures
the president of the labor union that Tanduay Distillers stood firm on its decision to hire employees with a
clean slate on a probationary basis. The fact that the employees of the former employer (TDI) would be
hired on a probationary basis shows that there was no employer-employee relationship between individual
respondents and Twin Ace. Any one who joins the buyer corporation comes in as an outsider who is newly
hired and who starts on a probationary basis until he proves he deserves to be on a permanent status. His
application can be rejected in the exercise of the hiring authority's discretion. There is thus no legal basis
for Labor Arbiter Cueto or the NLRC to compel Twin Ace or Tanduay Distillers, or petitioners to "reinstate"
the four individual respondents. The letter of James Yu to the union president was a unilateral and
gratuitous offer with no consideration. It refers to people who still have to be hired. New hires had to be
investigated or evaluated if they have "clean slates." Twin Ace or Tanduay Distillers and petitioners are
being compelled by public respondents to reinstate workers who were never their employees. There is no
showing that the sale of assets by TDI to Tanduay Distillers included a condition that employees of the
former would be absorbed by the latter. Employees of TDI had been terminated in their employment as of
April 28, 1988. Petitioners state that Twin Ace bought the assets of TDI after the employment of the
individual respondents had been terminated. True, Labor Arbiter Cauton-Barcelona declared the
retrenchment program of TDI as illegal. This decision, however, did not convert the individual respondents
into employees of the firm which purchased the assets of the former employer. It merely held TDI liable for
the consequences of the illegal retrenchment. Labor Arbiter Cueto and the NLRC, therefore, committed
grave abuse of discretion when they read into the decision of Labor Arbiter Cauton-Barcelona something
which did not appear therein. And even assuming that Labor Arbiter Cauton-Barcelona formally included an
order for the petitioners to hire the individual respondents, there would be no factual or legal basis for such
an order. An employer-employee relation is created by contract, and cannot be forced upon either party
simply upon order of a labor arbiter. The hiring of employees is one of the recognized prerogatives of
management.
4. ID.; ID.; RECEIPT OF SEPARATION PAY MILITATES AGAINST CLAIM THEREOF; CASE AT BAR. Another
factor which militates against the claim for reinstatement of the individual respondents is their having
received separation pay as part of a compromise agreement in the course of their litigation with TDI.
Rodrigo F. Santos received P20,282.03, Roque Estoce, P20,092.50; Eduardo Daliwan, P19,973.40, and
Fernando A. Duran, P25,702.00. These amounts correspond to their entitlement to separation benefits.
Having received separation pay from a former employer, how can they compel, as a matter of right,
another company to hire them on a supposed "reinstatement" basis? The orders executing the earlier
decision of Labor Arbiter Cauton-Barcelona and directing petitioners to immediately reinstate the four
individual respondents to their former positions are, thus, characterized by grave abuse of discretion.
There are no "former positions" to which individual respondents may be reinstated because they were
never hired by Twin Ace/Tanduay Distillers and had never worked for it.

5. COMMERCIAL LAW; CORPORATION; DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY; WHEN
APPLICABLE. It is basic that a corporation is invested by law with a personality separate and distinct
from those of the persons composing it as well as from that of any other legal entity to which it may be
related (Palay, Inc. et al. vs. Clave, et al., 124 SCRA 641 [1983]). The genuine nature of the sale to Twin
Ace is evidenced by the fact that Twin Ace was only a subsequent interested buyer. At the time when
termination notices were sent to its employees, TDI was negotiating with the First Pacific Metro Corporation
for the sale of its assets. Only after First Pacific gave up its efforts to acquire the assets did Twin Ace or
Tanduay Distillers come into the picture. Respondents-employees have not presented any proof as to
communality of ownership and management to support their contention that the two companies are one
firm or closely related. The doctrine of piercing the veil of corporate entity applies when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime or where a
corporation is the mere alter ego or business conduit of a person (Indophil Textile Mill Workers Union vs.
Calica, 205 SCRA 697, 703 [1992]). To disregard the separate juridical personality of a corporation, the
wrong-doing must be clearly and convincingly established. It cannot be presumed (Del Rosario vs. NLRC,
187 SCRA 777, 780 [1990]).
6. ID.; ID.; ID.; ID.; CASE AT BAR, A CASE OF. The complaint for unfair labor practice, illegal lay off, and
separation benefits was filed against TDI. Only later when the manufacture and sale of Tanduay products
was taken over by Twin Ace or Tanduay Distillers were James Yu and Wilson Young impleaded. The
corporation itself Twin Ace or Tanduay Distillers was never made a party to the case. Another factor to
consider is that TDI as a corporation or its shares of stock were not purchased by Twin Ace. The buyer
limited itself to purchasing most of the assets, equipment, and machinery of TDI. Thus, Twin Ace or
Tanduay Distillers did not take over the corporate personality of TDI although they manufacture the same
product at the same plant with the same equipment and machinery. Obviously, the trade name "Tanduay"
went with the sale because the new firm does business as Tanduay Distillers and its main product of rum is
sold as Tanduay Rum. There is no showing, however, that TDI itself was absorbed by Twin Ace or that it
ceased to exist as a separate corporation. In point of fact TDI is now herein a party respondent represented
by its own counsel. Significantly, TDI in the petition at hand has taken the side of its former employees and
argues against Tanduay Distillers. In its memorandum filed on January 9, 1995, TDI argues that it was not
alone its liability which the arbiter recognized "but also of James Yu and Wilson Young, representatives of
Twin Ace and/or the Allied Bank Group doing business under the name 'TANDUAY DISTILLERS,' to whom the
business and assets of TDI were sold." If TDI and Tanduay Distillers are one and the same group or one is a
continuation of the other, the two would not be fighting each other in this case. TDI would not argue
strongly "that the petition for certiorari filed by James Yu and Wilson Young be dismissed for lack for merit."
It is thus obvious that the second corporation, Twin Ace or Tanduay Distillers, is an entity separate and
distinct, from the first corporation, TDI. The circumstances of this case are different from the earlier
decisions of the Court in labor cases where the veil of corporate fiction was pierced. In fine, the fiction of
separate and distinct corporate entities cannot, in the instant case, be disregarded and brushed aside,
there being not the least indication that the second corporation is a dummy or serves as a client of the first
corporate entity. In the case at bench, since TDI and Twin Ace or Tanduay Distillers are two separate and
distinct entities, the order for Tanduay Distillers (and petitioners) to reinstate respondents-employees is
obviously without legal and factual basis.

DECISION
MELO, J p:
Before us is a petition for certiorari assailing the decision of public respondent National Labor Relations
Commission (NLRC) promulgated on August 25, 1993 in the cases of Fernando Duran, et al. vs. Tanduay
Distillery, Inc., docketed as NLRC NCR Case No. 00-04-01737-88, and Rodrigo Santos vs. Tanduay Distillery,
Inc., docketed as NLRC NCR Case No. 00-06-02546-88.
The relevant antecedent facts as gathered from the record are as follows:
Private respondents-employees Fernando Duran, Eduardo Paliwan, Roque Estoce, and Rodrigo Santos were
employees of respondent corporation Tanduay Distillery, Inc. (TDI).
On March 29, 1988, 22 employees of TDI, including private respondents employees, received a
memorandum from TDI terminating their services, for reason of retrenchment, effective 30 days from
receipt thereof or not later than the close of business hours on April 28, 1988.
On April 26, 1988, all 22 employees of TDI filed an application for the issuance of a temporary restraining
order against their retrenchment. The labor arbiter issued the restraining order the following day. However,
due to the 20-day lifetime of the temporary restraining order, and because of the on-going negotiations for
the sale of TDI to the First Pacific Metro Corporation, the retrenchment pushed through. Parenthetically, it
should be mentioned that although all 22 employees were retrenched, the instant petition involves only
the 4 individual respondents herein, namely, Fernando Duran, Eduardo Paliwan, Roque Estoce, and Rodrigo
Santos.
On June 14, 1988, the First Pacific Metro Corporation moved that it be dropped as a party to the case on
the ground that its projected purchase of the assets of TDI was not consummated. The participation of First

Pacific was later in effect held to be irrelevant (decision dated May 24, 1989; Annex G, pp. 50-58, Rollo).
On June 1, 1988, or after respondents-employees had ceased as such employees, a new buyer of TDI's
assets, Twin Ace Holdings, Inc. took over the business. Twin Ace assumed the business name Tanduay
Distillers.
On August 8, 1988, the employees filed a motion to implead herein petitioners James Yu and Wilson Young,
doing business under the name and style of Tanduay Distillers, as party respondents in said cases.
Petitioners filed an opposition thereto, asserting that they are representatives of Tanduay Distillers an
entity distinct and separate from TDI, the previous owner, and that there is no employer-employee
relationship between Tanduay Distillers and private respondents. Respondents-employees filed a reply to
the opposition stating that petitioner James Yu as officer-in-charge of Tanduay Distillers had informed the
president of TDI labor union of Tanduay Distillers' decision to hire everybody with a clean slate on a
probation basis.
On November 16, 1988, private respondents filed a motion for leave to file an amended complaint
impleading petitioners as respondents. Petitioners filed an opposition thereto reiterating the grounds they
relied upon in their opposition to private respondents' motion to implead. A reply was filed by private
respondents, and a rejoinder was then filed by petitioners. In turn, private respondents filed a subrejoinder.
Subsequently, an amended complaint was filed by private respondents against TDI and petitioners Yu and
Young "doing business under the name and style of Tanduay Distillers."
In her decision dated May 24, 1989, Labor Arbiter Daisy Cauton-Barcelona held:
In treating the motion to implied a motion to admit amended complaint with leave, the same [is] hereby
given due course and all pleadings filed by respondents James Yu and Wilson Young are hereby treated as
their responsive pleadings in the light of speedy disposition of justice and the basic rule that administrative
for a, such as this office are not governed by technical rules of proceedings.
(p. 52, Rollo).
In the same decision, it was disposed:
WHEREFORE, judgment is hereby rendered declaring that the retrenchment is illegal thereby ordering
respondent Tanduay Distillery, Inc., to reinstate the complainants to their former position with backwages
up to the time of the change of ownership, if one has taken place.
That in the event of change in management it (Tanduay Distillery, Inc.) is hereby ordered to pay the
complainants their respective separation benefits computed at the rate of one (1) month for every year of
service. This is without prejudice to the letter of Mr. James Yu as officer-in-charge of Tanduay Distillers
dated June 17, 1988 to the President of the Tanduay Distillery, Inc., Labor Union.
(pp. 57-58, Rollo.)
Only TDI appealed said decision to the National Labor Relations Commissions, but on June 18, 1991, said
commission promulgated an affirmance decision (p. 102, Rollo). TDI filed a motion for reconsideration, but
the same was denied on August 15, 1991.
Thereupon, private respondents-employees on September 16, 1991 filed a motion for execution (Annex Q,
pp. 103-106, Rollo) praying that NLRC, through the labor arbiter, " [i]ssue the necessary writ for the
execution of the entire decision dated May 24, 1989, including the actual reinstatement of the
complainants to their former position without loss of seniority and benefits against Tanduay Distillery, Inc.,
and/or Tanduay Distillers, Inc., and/or Tanduay Distillers, James Yu and Wilson Young."
On September 24, 1993, petitioners filed an opposition (Annex R, pp. 108-110, Rollo) to the motion for
execution on the ground that "the Motion for Execution is without any basis in so far as it prays for the
issuance of a writ of execution against respondent Tanduay Distillers, Inc., and respondents James Yu and
Wilson Young." Respondents-employees filed their reply thereto (Annex S, pp. 111-115, Rollo). and in turn
petitioners filed their rejoinder (Annex T, pp. 116-118, Rollo), to which private respondents filed their surrejoinder (Annex U, pp. 119-122, Rollo). On December 18, 1991, respondent TDI filed its comment on the
motion for execution (Annex V, pp. 124-129, Rollo), while petitioners on January 10, 1992, filed a joint
comment (Annex W, pp. 130-132, Rollo) to private respondents' sur-rejoinder as well to the comment filed
by respondent TDI.
Subsequently, TDI filed a manifestation dated April 24, 1992 (Annex X, pp. 133-135, Rollo), stating
2. At the hearing held on March 23, 1992, individual complainants, assisted by their counsel, Atty. Noel
Cruz, agreed to be paid the total amount of P86,049.83, in full satisfaction of the Company's liability as
stated in the dispositive portion of Labor Arbiter Barcelona's decision promulgated on May 24, 1989 and
affirmed by the Second Division of the NLRC on June 18, 1991, which reads as follows:
WHEREFORE, judgment is hereby rendered declaring that the retrenchment is illegal thereby ordering
respondent Tanduay Distillery, Inc. to reinstate the complainants to their former position with backwages
up to the time of the change of ownership, if one has taken place.
That in the event of change in management it (Tanduay Distillery, Inc.) is hereby ordered to pay the
complainants their respective separation benefits computed at the rate of one (1) month for every year of
service. This is without prejudice to the letter of Mr. James Yu as officer-in-charge of Tanduay Distillers
dated June 17, 1988 to the president of the Tanduay Distillery, Inc., Labor Union.

No costs.
SO ORDERED.
3. In accordance with the aforequoted decision, complainants shall be paid the amounts appearing
opposite their respective names:
Rodrigo F. Santos P20,282.03
Roque Estoce 20,092.50
Eduardo Daliwan 19,973.40
Fernando A. Duran 25,702.00

Total P86,049.83
========
4. The foregoing amounts shall be satisfied out of the cash bond deposited by the Company with the
Cashier of the NLRC. The excess amounting to P7,076.44 must revert to the Company.
(pp. 134-135, Rollo.)
On November 17, 1992, respondent NLRC, through Labor Arbiter Daniel C. Cueto, issued an order (Annex
Z, pp. 139-145, Rollo), resolving the motion for execution as follows:
Based on the foregoing considerations, this Branch finds the Motion for Writ of Execution filed by the
complainants meritorious and in order. Accordingly, let a Writ of Execution be issued against Tanduay
Distillers, Inc., Wilson Young and James Yu to immediately reinstate complainants Fernando Duran, Rodrigo
Santos, Roque Estoce and Eduardo Daliwan to their respective positions.
(p. 145, Rollo.)
Consequently, a writ of execution was issued by Labor Arbiter Cueto on December 16, 1992.
To stop the implementation of the writ of execution, petitioners filed a petition for certiorari (Annex AA, pp.
146-158, Rollo) before respondent NLRC, praying that
1. Immediately upon filing of the instant case, a temporary restraining order be issued, to wit:
a.) Enjoining and restraining the respondents from implementing the Order dated November 17, 1992;
b.) Commanding the public respondent to desist from acting on the Order;
c.) Commanding the respondents to desist from committing any other act prejudicial to the
petitioners/appellants.
2. After the appropriate proceedings, a writ of preliminary injunction be issued so enjoining the
respondents;
3. After hearing on the merits, the Order dated November 17, 1992 be set aside and an injunction be
issued permanently enjoining the respondents from committing the aforesaid acts and to comply strictly
with the terms of the Decision and the NLRC;
4. Ordering the respondents, jointly and severally, to pay petitioner's fees in the amount of P100,000.00
and to pay the costs of suit.
On August 25, 1993, respondent NLRC promulgated its decision, the dispositive portion of which reads:
In view of the foregoing premises, the petition/appeal with prayer for preliminary injunction is hereby
dismissed for lack of merit.
The petitioners-respondents are hereby
immediately upon receipt of this decision.

directed

to

re-employ/re-hire

respondents-complainants

(p. 36, Rollo.)

Thus the present petition where petitioners pray that
1. Immediately upon filing of the instant case, a temporary restraining order be issued, to wit:
a.) Restraining and prohibiting the respondents from implementing the ORDER dated November 17, 1992
and the NLRC Certiorari Decision.
b.) Commanding the respondents to desist from committing any other act prejudicial to the petitioners.
2. After the appropriate proceedings, a writ of preliminary injunction be issued so enjoining the
respondents;

3. After appropriate proceedings, the ORDER dated November 17, 1992 and the injunction be issued
permanently enjoining the respondents from committing the aforesaid acts and to comply strictly with the
terms of the Arbiter Decision and the NLRC Decision;
4. Ordering the respondents, jointly and severally, to pay petitioners' attorney's fees in the amount of
P100,000.00 and to pay the costs of suit.
(pp. 26-27, Rollo.)
The issue posed by the present petition is whether respondent NLRC committed grave abuse of discretion
in holding petitioners Yu and Young liable under the decision dated May 24, 1989 which decreed that:
WHEREFORE, judgment is hereby rendered declaring that the retrenchment is illegal thereby ordering
respondent Tanduay Distillery, Inc., to reinstate the complainants to their former position with backwages
up to the time of the change of ownership, if one has taken place.
That in the event of change in management it (Tanduay Distillery, Inc.) is hereby ordered to pay the
complaints their respective separation benefits computed at the rate of one (1) month for every year of
service. This is without prejudice to the letter of Mr. James Yu as officer-in-charge of Tanduay Distillers
dated June 17, 1988 to the President of the Tanduay Distillery, Inc., Labor Union.
(pp. 57-58, Rollo.)
We hold that petitioners, for a number of reasons which we shall discuss below, may not be held
answerable and liable under the final judgment of Labor Arbiter Cauton-Barcelona.
1. Admittedly, the decision dated May 24, 1989 is now final and executory, as only respondent TDI
appealed said decision and its appeal was later dismissed by respondent NLRC. It is fundamental that a
final and executory decision cannot be amended or corrected (First Integrated Bonding and Insurance
Company, Inc. vs. Hernando, 199 SCRA 796 [1991]) except for clerical errors or mistakes (Maramba vs.
Lozano, 20 SCRA 474 [1967]); Reyes vs. Court of Appeals, 189 SCRA 46 [1990]). A definitive judgment is no
longer subject to change, revision, amendment, or reversal (Miranda vs. Court of Appeals, 71 SCRA 295
[1976]), and the court loses jurisdiction over it, except to order its execution (PY Eng Chong vs. Herrera, 70
SCRA 130 [1976]).
An examination of the aforequoted dispositive portion of the decision shows that the same does not in any
manner obligate Tanduay Distillers, or even petitioners Yu and Young for that matter, to reinstate
respondents. Only TDI was held liable to reinstate respondents up to the time of change of ownership, and
for separation benefits.
However, Labor Arbiter Cueto went beyond what was disposed by the decision and issued an order dated
November 17, 1992 (Annex Z, petition, pp. 139-145, Rollo) which required
. . . Tanduay Distillers, Inc., Wilson Young and James Yu to immediately reinstate complainants Fernando
Duran, Rodrigo Santos, Roque Estoce and Eduardo Daliwan to their respective positions.
(p. 145, Rollo.)
Subsequently, a writ of execution was issued on December 16, 1992 pursuant to the order of November
17, 1992.
The order of execution dated November 17, 1992 in effect amended the decision dated May 24, 1989 for
the former orders petitioners and Tanduay Distillers to reinstate private respondents employees whereas
the decision dated May 24, 1989, as we have discussed above, does not so decree. This cannot be done. It
is beyond the power and competence of Labor Arbiter Cueto to amend a final decision. The writ of
execution must not go beyond the scope of the judgment.
As chief Justice Moran opined: "The writ of execution must conform to the judgment which is to be
executed, as it may not vary the terms of the judgment it seeks to enforce. Nor may it go beyond the
terms of the judgment sought to be executed. Where the execution is not in harmony with the judgment
which gives it life and exceeds it, it has pro tanto no validity. To maintain otherwise would be to ignore the
constitutional provision against depriving a person of his property without due process of law" (Moran,
Comments on the Rules of Court, Vol. I, 1952 Ed., p. 809; cited in Villoria vs. Piccio, supra).
(Gamboa's Incorporated vs. Court of Appeals, 72 SCRA 131, 137-138 [1976].)
The order of execution and the writ of execution ordering petitioners and Tanduay Distillers to reinstate
private respondents employees are, therefore, null and void.
2. Neither may be said that petitioners and Tanduay Distillers are one and the same as TDI, as seems to be
the impression of respondents when they impleaded petitioners as party respondents in their complaint for
unfair labor practice, illegal lay off, and separation benefits.
Such a stance is not supported by the facts. The name of the company for whom the petitioners are
working is Twin Ace Holdings Corporation. As stated by the Solicitor General, Twin Ace is part of the Allied
Bank Group although it conducts the rum business under the name of Tanduay Distillers. The use of a
similar sounding or almost identical name is an obvious device to capitalize on the goodwill which Tanduay
Rum has built over the years. Twin Ace or Tanduay Distillers, on one hand, and Tanduay Distillery, Inc.
(TDI), on the other, are distinct and separate corporations. There is nothing to suggest that the owners of
TDI, have any common relationship as to identify it with Allied Bank Group which runs Tanduay Distillers.
The dissertation of the court in Diatagon Labor Federation Local 110 of the ULGWP vs. Ople, et al. (101

SCRA 534 [1980]) is worthy of restatement, thusly:

We hold that the director of Labor Relations acted with grave abuse of discretion in treating the two
companies as a single bargaining unit. That ruling is arbitrary and untenable because the two companies
are indubitably distinct with separate juridical personalities.
The fact that their businesses are related and that the 236 employees of Georgia Pacific International
Corporation were originally employees of Lianga Bay Logging Co., Inc. is not a justification for disregarding
their separate personalities. Hence, the 236 employees, who are now attached to Georgia Pacific
International Corporation, should not be allowed to vote in the certification election at the Lianga Bay
Logging Co., Inc. They should vote at a separate certification election to determine the collective
bargaining representative of the employees of Georgia Pacific International Corporation.
(at pp. 540-541.)
It is basic that a corporation is invested by law with a personality separate and distinct from those of the
persons composing it as well as from that of any other legal entity to which it may be related (Palay, Inc.,
et al. vs. Clave, et al., 124 SCRA 641 [1983])
The genuine nature of the sale to Twin Ace is evidenced by the fact that Twin Ace was only a subsequent
interested buyer. At the time when termination notices were sent to its employees, TDI was negotiating
with the First Pacific Metro Corporations for the sale of its assets. Only after First Pacific gave up its efforts
to acquire the assets did Twin Ace or Tanduay Distillers come into the picture. Respondents-employees
have not presented any proof as to communality of ownership and management to support their
contention that the two companies are one firm or closely related. The doctrine of piercing the veil of
corporate entity applies when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime or where a corporation is the mere alter ego or business conduit of a person
(Indophil Textile Mill Workers Union vs. Calica, 205 SCRA 697, 703 [1992]). To disregard the separate
juridical personality of a corporation, the wrong-doing must be clearly and convincingly established. It
cannot be presumed (Del Rosario vs. NLRC, 187 SCRA 777, 780 [1990]).
The complaint for unfair labor practice, illegal lay off, and separation benefits was filed against TDI. Only
later when the manufacture and sale of Tanduay products was taken over by Twin Ace or Tanduay Distillers
were James Yu and Wilson Young impleaded.
The corporation itself Twin Ace or Tanduay Distillers was never made a party to the case.
Another factor to consider is that TDI as a corporation or its shares of stock were not purchased by Twin
Ace. The buyer limited itself to purchasing most of the assets, equipment, and machinery of TDI. Thus,
Twin Ace or Tanduay Distillers did not take over the corporate personality of TDI although they manufacture
the same product at the same plant with the same equipment and machinery. Obviously, the trade name
"Tanduay" went with the sale because the new firm does business as Tanduay Distillers and its main
product of rum is sold as Tanduay Rum. There is no showing, however, that TDI itself was absorbed by Twin
Ace or that it ceased to exist as a separate corporation. In point of fact TDI is now herein a party
respondent represented by its own counsel.
Significantly, TDI in the petition at hand has taken the side of its former employees and argues against
Tanduay Distillers. In its memorandum filed on January 9, 1995, TDI argues that it was not alone its liability
which the arbiter recognized "but also of James Yu and Wilson Young, representatives of Twin Ace and/or
the Allied Bank Group doing business under the name 'TANDUAY DISTILLERS,' to whom the business and
assets of DTI were sold." If TDI and Tanduay Distillers are one and the same group or one is a continuation
of the other, the two would not be fighting each other in this case. TDI would not argue strongly "that the
petition for certiorari filed by James Yu and Wilson Young be dismissed for lack for merit." It is thus obvious
that the second corporation, Twin Ace or Tanduay Distillers, is an entity separate and distinct, from the first
corporation, TDI. The circumstances of this case are different from the earlier decisions of the Court in
labor cases where the veil of corporate fiction was pierced.
In La Campana Coffee Factory, Inc. vs. Kaisahan ng Manggagawa sa La Campana (KKM), (93 Phil. 160
[1953], La Campana Coffee Factory, Inc. and La Campana Gaugau Packing were substantially owned by the
same person. They had one office, one management, and a single payroll for both business. The laborers
of the gaugau factory and the coffee factory were also interchangeable, the workers in one factory worked
also in the other factory.
In Claparols vs. Court of Industrial Relations (65 SCRA 613 [1975], the Claparols Steel and Nail Plant, which
was ordered to pay its workers backwages, ceased operations on June 30, 1956 and was succeeded on the
very next day, July 1, 1957, by the Clarapols Steel Corporation. Both corporations were substantially owned
and controlled by the same person and there was no break or cessation in operations. Moreover, all the
assets of the steel and nail plant were transferred to the new corporation.
In fine, the friction of separate and distinct corporate entities cannot, in the instant case, be disregarded
and brushed aside, there being not the least indication that the second corporation is a dummy or serves
as a client of the first corporate entity.
In the case at bench, since TDI and Twin Ace or Tanduay Distillers are two separate and distinct entities,
the order for Tanduay Distillers (and petitioners) to reinstate respondents-employees is obviously without
legal and factual basis.
3. Nor could the order and writ to reinstate be anchored on the vague and seemingly uncalled for
alternative disposition in the Barcelona decision that

. . . This is without prejudice to the letter of Mr. James Yu as officer-in-charge of Tanduay Distillers dated
June 16, 1988 to the President of the Tanduay Distillery, Inc. Labor Union.
The June 11, 1988 letter referred to was addressed to Benjamin C. Agaloos, president of the Tanduay
Distillery Labor Union by James Yu in his capacity as officer-in-charge of Tanduay Distillers.
It pertinently reads:
Please be informed that our company stands firm on its decision to hire everybody with a clean slate
effective June 1, 1988 on a probationary basis while those currently casual or contractual employees shall
retain the same employment status. In the same manner that the new company stood firm on its decision
to grant a 10% across-the-board increase to all employees, which in fact has been received by employees
concerned.
(p. 88, Rollo.)
We do not find in the decision of Labor Arbiter Cauton Barcelona or in the letter of James Yu what
respondents are trying to read into it. Labor Arbiter Cauton-Barcelona found the retrenchment effected by
TDI illegal and ordered TDI to reinstate the complainants and that if there is a change of management,
then separation benefits would be paid. There is, however, no order in the decision directing Twin Ace or
Tanduay Distillers to hire or reinstate herein four individual respondents.
The letter of James Yu does not mention any reinstatement. It assures the president of the labor union that
Tanduay Distillers stood firm on its decision to hire employees with a clean slate on a probationary basis.
The fact that the employees of the former employer (TDI) would be hired on a probationary basis shows
that there was no employer-employee relationship between individual respondents and Twin Ace. Any one
who joins the buyer corporation comes in as an outsider who is newly hired and who starts on a
probationary basis until he proves he deserves to be on a permanent status. His application can be
rejected in the exercise of the hiring authority's discretion.
There is thus no legal basis for Labor Arbiter Cueto or the NLRC to compel Twin Ace or Tanduay Distillers, or
petitioners to "reinstate" the four individuals respondents. The letter of James Yu to the union president
was a unilateral and gratuitous offer with no consideration. It refers to people who still have to be hired.
New hires had to be investigated or evaluated if they have "clean slates." Twin Ace or Tanduay Distillers
and petitioners are being compelled by public respondents to reinstate workers who were never their
employees. There is no showing that the sale of assets by TDI to Tanduay Distillers included a condition
that employees of the former would be absorbed by the latter.
Employees of TDI had been terminated in their employment as of April 28, 1988. Petitioners state that Twin
Ace bought the assets of TDI after the employment of the individual respondents had been terminated.
True, Labor Arbiter Cauton-Barcelona declared the retrenchment program of TDI as illegal. This decision,
however, did not convert the individual respondents into employees of the firm which purchased the assets
of the former employer. It merely held TDI liable for the consequences of the illegal retrenchment.
Labor Arbiter Cueto and the NLRC, therefore, committed grave abuse of discretion when they read into the
decision of Labor Arbiter Cauton-Barcelona something which did not appear there. And even assuming that
Labor Arbiter Cauton-Barcelona formally included an order for the petitioners to hire the individual
respondents, there would be no factual or legal basis for such an order. An employer-employee relation is
created by contract, and cannot be forced upon either party simply upon order of a labor arbiter. The hiring
of employees is one of the recognized prerogatives of management.
4. Another factor which militates against the claim for reinstatement of the individual respondents is their
having received separation pay as part of a compromise agreement in the course of their litigation with
TDI. Rodrigo F. Santos received P20,282.03; Roque Estoce, P20,092.50; Eduardo Daliwan, P19,973.40; and
Fernando A. Duran, P25,702.00. These amounts correspond to their entitlement to separation benefits.
Having received separation pay from a former employer, how can they compel, as a matter of right,
another company to hire them on a supposed "reinstatement" basis? The orders executing the earlier
decision of Labor Arbiter Cauton-Barcelona and directing petitioners to immediately reinstate the four
individual respondents to their former positions are, thus, characterized by grave abuse of discretion.
There are no "former positions" to which individual respondents may be reinstated because they were
never hired by Twin Ace/Tanduay Distillers and had never worked for it.
WHEREFORE, the petition is hereby GRANTED. The questioned Order of the Labor Arbiter Daniel C. Cueto
dated November 17, 1992 and the decision of the National Labor Relations Commission upholding said
order are set aside as null and void. No special pronouncement is made as to costs.
SO ORDERED.
SECOND DIVISION
[G.R. Nos. L-44493-94. December 3, 1980.]
DIATAGON LABOR FEDERATION LOCAL 110 OF THE ULGWP, petitioner, vs. HON. BLAS F. OPLE,
Secretary of Labor, CARMELO C. NORIEL, Director of Labor Relations, MINDANAO ASSOCIATION
OF TRADE UNIONS (MATU), LIANGA BAY LOGGING CO., INC. and GEORGIA PACIFIC
INTERNATIONAL CORPORATION, respondents.
SYNOPSIS
Diatagon Labor Federation was the exclusive bargaining unit of Lianga Bay Logging Company (Lianga Bay
for short). Before the expiration of its collective bargaining agreement with Lianga Bay on March 31, 1975,

it was able to negotiate a CBA for a term of three years, with Georgia Pacific International Corporation
(Georgia Pacific for short), another corporation with 400 workers, 236 of whom were former employees of
Lianga Bay, but who, despite their transfer, continued using the pay envelopes and ID cards of Lianga Bay.
Upon petition of Mindanao Association of Trade Unions (MATU), a rival union, a certification election was
held in Lianga Bay where MATU lost to Diatagon Labor Federation as a result of which MATU filed, first, an
election protest on the ground that the 236 employees of Georgia Pacific were not allowed to vote; then, a
petition for decertification of the CBA with Georgia Pacific; and lastly, a petition for certification election in
Georgia Pacific, all of which were dismissed by the Med-Arbiter. On appeal, the Director of Labor Relations
in separate orders sustained the dismissal orders with the exception of that of the election protest of
MATU, ruling that Lianga Bay and Georgia Pacific should be treated as one bargaining unit because they
have a common interest, and that the 236 employees of Georgia Pacific should be allowed to vote in the
certification election in Lianga Bay. Diatagon Labor Federation appealed the Director's order to the
Secretary of Labor who, however, referred the appeals to the Director, and treated as motions for
reconsideration, were denied. Hence, this petition.
The Supreme Court held, that the Director of Labor Relations acted with grave abuse of discretion in
treating the two corporations as a single bargaining unit because they were indubitably distinct entities
with separate jurisdictional personalities; and, that the refusal of the Secretary of Labor to entertain the
appeals from the orders of the Director of Labor Relations is based on the rules laid down in
implementation of the Labor Code and Presidential Decree No. 1391.
SYLLABUS
1. MERCANTILE LAW; CORPORATION LAW; CORPORATIONS; JURIDICAL PERSONALITY; TWO COMPANIES IN
CASE AT BAR HAVE SEPARATE JURIDICAL PERSONALITIES AND MUST BE TREATED AS SEPARATE
BARGAINING UNITS. The Director of Labor Relations acted with grave abuse of discretion in treating the
two companies as a single bargaining unit. That ruling is arbitrary and untenable because the two
companies are indubitably distinct entities with separate juridical personalities. The fact that their business
are related and that the 236 employees of Georgia Pacific International Corporation were originally
employees of Lianga Bay Logging Co., Inc. is not a justification for disregarding their separate
personalities. Hence, the 236 employees, who are now attached to Georgia Pacific International
Corporation, should not be allowed to vote in the certification election at Lianga Bay Logging Co., Inc. They
should vote at a separate certification election to determine the collective bargaining representative of the
employees of Georgia Pacific International Corporation.
2. ADMINISTRATIVE LAW; MINISTRY OF LABOR; DECISIONS OF DIRECTOR OF LABOR FINAL AND
UNAPPEALABLE. With respect to the refusal of the Secretary of Labor (now Minister of Labor and
Employment) to entertain appeals from the orders of the Director of Labor Relations, that norm of conduct
is based on the rule laid down by the Secretary himself in section 10 Rule V (Certification Cases and IntraUnion Conflicts of Book Five (Labor Relations) of the Rules and Regulations Implementing the Labor Code
dated February 16, 1976.
DECISION
AQUINO, J p:
The issue in this case, which involves a 1975 certification election, is whether two companies should be
regarded as a single collective bargaining unit. The factual background is as follows: cdrep
1. Lianga Bay Logging Co., Inc. is a domestic corporation which was organized in 1954. It has offices in
Diatagon, Lianga, Surigao del Sur and Filipinas Life Bldg., Ayala Avenue, Makati, Metro Manila. It is engaged
in logging and manufacturing plywood (p. 195, Rollo).
2. Georgia Pacific International Corporation is a Delaware corporation licensed to do business in the
Philippines on March 31, 1967. It has an office at Lianga. It employs around 400 workers (pp. 107, 114-123,
185-6, Rollo).
3. The Diatagon Labor Federation Local 110 of ULGWP (United Lumber and General Workers of the
Philippines) had a collective bargaining agreement with the Lianga Bay Logging Co., Inc. which was due to
expire on March 31, 1975. On February 3, 1975, or before the expiration of that CBA, a rival union, the
Mindanao Association of Trade Unions, filed with the Bureau of Labor Relations a petition for the holding of
a certification election at Lianga Bay Logging Co., Inc., BLR Case No. 0399. The union assumed that Lianga
Bay Logging Co., Inc. had approximately 900 employees (pp. 31-32, Rollo).
4. Before that petition could be acted upon, the Diatagon Labor Federation was able to negotiate on March
17, 1975 with Georgia Pacific International Corporation a CBA for a term of three years expiring on March
31, 1978 (p. 355, Rollo). That CBA was certified by the Bureau of Labor Relations on July 10, 1975 (p. 124,
Rollo).
5. At this juncture, it should be stressed that the said CBA included 236 employees working at the veneer
plant and electrical department of Georgia Pacific International Corporation in Lianga. Those 236
employees were formerly employees of Lianga Bay Logging Co., Inc. After July, 1974, they were transferred
to Georgia Pacific International Corporation and became employees of the latter (p. 131, Rollo).

6. That transfer is not clearly brought out in the pleadings of the parties. The obscuration of that fact is one
reason for the delay in the disposition of this case because if the consequences of that transfer are not
taken into account, the case remains unclear and controversial. By reason of that transfer, the employees
of Lianga Bay Logging Co., Inc. were reduced to 653 (p. 87, Rollo). Georgia Pacific International Corporation
has around-400 employees. The Diatagon Labor Federation claims to have 328 members among the
employees of Georgia Pacific International Corporation (pp. 114-123, Rollo).
7. Another fact that should be underscored is that, in spite of the transfer, the 236 employees continued to
use in 1975 the pay envelopes and identification cards of their former employer, Lianga Bay Logging Co.,
Inc. That confusing circumstance spawned the controversy in this case because the Mindanao Association
of Trade Unions and the Director of Labor Relations used that circumstance to support their conclusion that
the 236 employees should still be regarded as employees of Lianga Bay Logging Co., Inc. and not of
Georgia Pacific International Corporation or that the two companies should be regarded as only one
bargaining unit.
8. It is the contention of the Mindanao Association of Trade Unions that the said CBA was negotiated
between Georgia Pacific International Corporation and the Diatagon Labor Federation in order to frustrate
the petition for certification election at Lianga Bay Logging Co., Inc. which, as above stated, was filed by
the Mindanao Association of Trade Unions on February 3, 1975 (p. 248, Rollo).
9. Pursuant to the order of the Med-Arbiter dated May 14, 1975 in BLR Case No. 0399, a certification
election was held in the premises of Lianga Bay Logging Co., Inc. at Diatagon on July 20, 1975. The
Diatagon Labor Federation won the election with 290 votes as against 227 votes for the Mindanao
Association of Trade Unions (p. 65, Rollo). The Mindanao Association of Trade Unions wanted the
aforementioned 236 employees of Georgia Pacific International Corporation to take part in the election
because they were using the pay envelopes and identification cards of Lianga Bay Logging Co., Inc. but
they were not allowed to vote because they were not included in the payrolls of Lianga Logging Co., Inc. (p.
12, Rollo).
10. The Mindanao Association of Trade Unions filed an election protest dated July 23, 1975 on the ground,
inter alia, that around four hundred workers were disenfranchised because of the inaccuracy of the official
voting lists (p. 74, Rollo).
11. Because the Mindanao Association of Trade Unions was confronted by the undeniable fact that the said
236 employees were already included in the CBA entered into between Georgia Pacific International
Corporation and Diatagon Labor Federation on March 17, 1975, the Mindanao Association of Trade Unions
resorted to the expedient of filing on August 1, 1975 with the Bureau of Labor Relations a petition for
decertification of the aforementioned CBA (BLR Case No. 0981; pp. 135-37, Rollo). That petition was
dismissed by the Med-Arbiter in his order of February 4, 1976 on the ground that it was a reiteration of the
election protest of the same union in BLR Case No. 0399 (p. 145, Rollo).
12. In the meantime, or on September 8, 1975, the Med-Arbiter dismissed the election protest of the
Mindanao Association of Trade Unions and certified the Diatagon Labor Federation as the exclusive
bargaining agent of the employees of Lianga Bay Logging Co., Inc. (p. 89, Rollo).
13. From that order, the Mindanao Association of Trade Unions appealed on September 15, 1975 to the
Director of Labor Relations. Its appeal was based on the fact that the oft mentioned 236 employees were
not allowed to vote at the certification election since the Med-Arbiter regarded them as employees of
Georgia Pacific International Corporation, having been included in its payrolls, although they still used the
pay enveloped and identification cards of Lianga Bay Logging Co., Inc. (pp. 91-101, Rollo).
14. The Mindanao Association of Trade Unions adopted another remedy in its unrelenting effort to attain its
objective of becoming the collective bargaining agent of the workers of the two companies alleged to have
a common management and represented by the same lawyers. It filed with the Bureau of Labor Relations
on October 10, 1975 a petition for a certification election in Georgia Pacific International Corporation (its
prior petition was for decertification of the existing CBA). It alleged that there had not been any
certification election in that corporation (BLR Case No. 2033; pp. 107-108, Rollo).
15. That petition was dismissed by the Med-Arbiter in his order of December 22, 1975 but, upon appeal,
the Director of Labor Relations called the attention of the parties to his order in BLR Case No. 0399 (p. 166,
Rollo). In that petition, the Mindanao Association of Trade Unions assumed that the 236 employees were
employees of Georgia Pacific International Corporation.
16. About three weeks later, or on October 29, 1975, the Mindanao Association of Trade Unions scored a
notable victory. The Director of Labor Relations issued on that date in BLR Case No. 0399 an order
reversing the order of the Med-Arbiter and sustaining the appeal of the Mindanao Association of Trade
Unions. The Director held that the aforementioned 236 employees should be allowed to vote in the
certification election at Lianga Bay Logging Co., Inc. because they used the company's pay envelopes and
identification cards. The Director ignored the fact that those 236 employees were included in the payrolls
of Georgia Pacific International Corporation and were already covered by the existing CBA. The Director
ordered the holding of a new certification election at Lianga Bay Logging Co. Inc. wherein the 236
employees would be allowed to vote (pp. 127-9, Rollo).
17. The Diatagon Labor Federation filed a motion for the reconsideration of that order (p. 130, Rollo).
Lianga Bay Logging Co., Inc. filed a manifestation dated November 17, 1975 categorically alleging that the
236 workers were not its employees but employees of Georgia Pacific International Corporation (pp. 11113, Rollo).
18. The Director denied the motion in his order of December 17, 1975 wherein it was intimated that the

Bureau's Labor Organization Division would thresh out at the pre-election conference whether the said 236
employees should be allowed to take part in the election (pp. 146-7. Rollo).
19. The Diatagon Labor Federation appealed to the Secretary of Labor but he refused to rule on the appeal
and instead, referred it to the Director of Labor Relations. The Director in his order of March 15, 1976
dismissed the appeal. He ruled that Lianga Bay Logging Co., Inc. and Georgia Pacific International
Corporation have a common interest and that the 236 employees should be regarded as employees of
Lianga Bay Logging Co., Inc. The Director held that the transfer of the 236 employees to Georgia Pacific
International Corporation was designed to prejudice the Mindanao Association of Trade Unions and to favor
Diatagon Labor Federation, and that such an eventuality should not be tolerated (pp. 163-167, Rollo).
20. Again, the Diatagon Labor Federation appealed to the Secretary of Labor from the Director's order of
March 16, 1976 and again the Secretary referred the appeal to the Director who, treating the appeal as
another motion for reconsideration, denied it in his resolution of April 29, 1976 in BLR Case No. 0399 (p.
164, Rollo).
21. The Diatagon Labor Federation moved for the clarification of the resolution of April 27, 1976 in BLR
Case No. 2033 wherein the Director impliedly allowed one certification election for the employees of the
two companies. It wanted to know whether there should be two bargaining units and whether the 236
employees should be allowed to vote twice. Georgia Pacific International Corporation filed its own motion
for reconsideration (pp. 167-173, Rollo).
22. The Director in his order of May 29, 1976 in BLR Cases Nos. 0399 and 2033 (a consolidation of the two
certification cases) ruled that the two companies should be treated as one bargaining unit because they
have a common interest and that the 236 employees should be allowed to vote (pp. 174-6, Rollo).
23. From the order of May 29, 1976, the Diatagon Labor Federation appealed to the Secretary of Labor but
the appeal was referred to the Director of Labor Relations to be regarded as a motion for reconsideration
(p. 219, Rollo). As was to be expected, the Director denied the appeal or motion for reconsideration in his
order of August 18, 1976. He held that there existed no distinction between the employees of the two
companies and, consequently, they should belong to only one bargaining unit ( p. 221, Rollo).
24. On September 9, 1976, the Diatagon Labor Federation filed thus certiorari case wherein it prayed for
the annulment of the aforementioned orders of the Director of Labor Relations. The two companies were
impleaded as respondents. They adopted the stand of the petitioner. On September 16, 1976, this Court
issued a restraining order to enjoin the holding of a new certification election.
25. But before that restraining order was issued, or on September 12, 1976, a Sunday, a certification
election was held among the employees of the two companies. The Diatagon Labor Federation opposed
the holding of the election. There were 944 eligible voters. The Mindanao Association of Trade Unions
obtained 456 votes. The Diatagon Labor Federation obtained 63 votes. Only 555 voters took part in the
election. It turned out that the election was transferred by the Director of Labor Relations to September 15,
1976 (p. 224, Rollo). The pro test of the Diatagon Labor Federation against- that election was not acted
upon by the Director of Labor Relations in view of the pendency of this case (p. 347, Rollo).
The issues are (a) whether the Director of Labor Relations gravely abused his discretion in treating the
employees of the two companies as one bargaining unit and (b) whether the Secretary of Labor gravely
abused his discretion in not entertaining the appeals of the petitioner from the orders of the Director of
Labor Relations.
We hold that the Director of Labor Relations acted with grave abuse of discretion in treating the two
companies as a single bargaining unit. That ruling is arbitrary and untenable because the two companies
are indubitably distinct entities with separate juridical personalities.
The fact that their businesses are related and that the 236 employees of Georgia Pacific International
Corporation were originally employees of Lianga Bay Logging Co., Inc. is not a justification for disregarding
their separate personalities. Hence, the 236 employees, who are now attached to Georgia Pacific
International Corporation, should not be allowed to vote in the certification election at the Lianga Bay
Logging Co., Inc. They should vote at a separate certification election to determine the collective
bargaining representative of the employees of Georgia Pacific International Corporation.
However, at this late hour, or after the lapse of more than five years, the result of the 1975 certification
election should not be implemented. A new certification election should be held at Lianga Bay Logging Co.,
Inc. but the 236 employees should not be allowed to vote in that election.
With respect to the refusal of the Secretary of Labor (now Minister of Labor and Employment) to entertain
appeals from the orders of the Director of Labor Relations, that norm of conduct is based on the rule laid
down by the Secretary himself in Rule V (Certification Cases and Intra-Union Conflicts of Book Five [Labor
Relations] of the Rules and Regulations Implementing the Labor Code dated February 16, 1976, which Rule
V provides:
"SECTION 10. Decision of the Bureau is final and inappealable. The Bureau shall have twenty (20)
working days from receipt of the records of the case within which to decide the appeal (from the MedArbiter). The decision of the Bureau in all cases shall be final and inappealable." (sic)
That rule is in consonance with the policy of insuring speedy labor justice. It is noteworthy that pursuant to
that policy Presidential Decree No. 1391, which took effect on May 29, 1978, eliminated appeals to the

Secretary of Labor from the decisions of the National Labor Relations Commission.
Rule III (Representation Issues, Interventions, Affiliations and Disaffiliation's) of the Rules Implementing
Presidential Decree No. 1391, which rules took effect on September 15, 1978) reaffirms the above-quoted
section 10 of Rule Five in the following provisions which also recognize this Court's power to review the
orders of the Director of Labor Relations:
"SEC. 8. Decision of the Bureau Director Final and Inappealable. The Director of Labor Relations shall
have twenty (20) working days from receipt of the records of the case within which to decide cases on
appeal from the Med-Arbiters in the Regional Offices. The decision of the Director, as representative of the
Minister of Labor, shall in all cases be final and inappealable. (sic)
"SEC. 9. Petition for Certiorari, Prohibition etc. to the Supreme Court. The filing with the Supreme Court
of a petition for certiorari or prohibition shall not stay the execution of the order of the Bureau unless
otherwise ordered by the Supreme Court."
Moreover, under article 226 of the Labor Code, the Bureau of Labor Relations and the labor relations
divisions in the regional offices of the Department of Labor have "original and exclusive authority to act, at
their own initiative or upon request of either or both parties, on ail inter-union and intraunion conflicts, and
all disputes, grievances or problems arising from or affecting labor-management relations in all
workplaces". LexLib
On the other hand, the petitioner and the two companies cite section 3, Rule XVIII of the Rules of Procedure
of the Bureau of Labor Relations dated September 13, 1975 which provide that "decisions of the Bureau of
Labor Relations may be appealed to the Secretary of Labor whose decisions shall be final and
unappealable". Evidently, that rule was abrogated by the 1976 and 1978 implementing rules quoted
above.

WHEREFORE, the orders of the Director of Labor Relations holding that the employees of Lianga Bay
Logging Co., Inc. and Georgia Pacific International Corporation should be treated as one bargaining unit are
reversed and set aside. A new certification election should be held at Lianga Bay Logging Co., Inc. The 236
employees of Georgia Pacific International Corporation should not be allowed to vote in that election. No
costs.

FIRST DIVISION
[G.R. No. 84096. January 26, 1995.]
RAUL H. SESBRENO, petitioner, vs. HONORABLE COURT OF APPEALS and HERMILO RODIS, SR.,
respondents.
SYLLABUS
1. REMEDIAL LAW; ACTIONS; APPEAL; QUESTION OF LAW, DISTINGUISHED FROM QUESTION OF FACTS. In
Bernardo v. Court of Appeals, 216 SCRA 224 (1992), this Court clarified the distinction between a question
of law and a question of fact in this wise: ". . . As distinguished from a question of law which exists 'when
the doubt or difference arises as to what the law is on certain state of facts' 'there is a question of fact
when the doubt or difference arises as to the truth or the falsehood of alleged facts;' or when the 'query
necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses,
existence and relevancy of specific surrounding circumstances, their relation to each other and to the
whole and the probabilities of the situation.'"
2. ID.; ID.; ID.; ISSUE AS TO WHETHER ONE CAN BE HELD LIABLE FOR ESTAFA FOR FAILURE, DESPITE
REPEATED DEMANDS, TO ACCOUNT AND TURN OVER AMOUNT INVESTED IN A MONEY MARKET
PLACEMENT, A QUESTION OF LAW WHICH FALLS WITHIN THE JURISDICTION OF THE SUPREME COURT; CASE
AT BENCH. An examination of the petition filed before the Court of Appeals disclosed that indeed no
question of fact was raised. What private respondent asserted therein was that the facts as alleged and
proved by petitioner did not constitute a criminal offense. Clearly then, the only issue to be resolved by the
Court of Appeals, which it did resolve, was whether private respondent could be held liable for estafa under
the facts obtaining in the criminal case. This certainly is a question of law that should fall within the

jurisdiction of this Court.

3. ID.; ID.; ID.; ESTOPPEL; A PARTY IS ESTOPPED FROM RAISING THE QUESTION OF JURISDICTION FOR THE
FIRST TIME BEFORE THE SUPREME COURT. Petitioner did not assail the jurisdiction of the Court of
Appeals during the pendency of his petition in AC-G.R. SP No. 63151. As a matter of fact, he actively
participated in the proceedings before said appellate court. While it is true that jurisdiction over the subject
matter of a case may be raised at any time of the proceedings, this rule presupposes that laches or
estoppel has not supervened. In this regard, Banaga v. Commission on the Settlement of Land Problems,
181 SCRA 599, 608-609 (1990) is most enlightening. The Court therein stated: "This Court has time and
again frowned upon the undesirable practice of party submitting his case for decision and then accepting
the judgment, only if favorable, and attacking it for lack of jurisdiction when adverse. Here, a party may be
estopped or barred from raising the question of jurisdiction for the first time in a petition before the
Supreme Court when it failed to do so in the early stages of the proceedings. This principle should deter
those who are disposed to trifle with the courts by taking inconsistent positions contrary to the elementary
principles of right dealing and good faith (Marquez v. Secretary of Labor, G.R. 80685, March 16, 1989 and
other cases cited)."
4. COMMERCIAL LAW; MONEY MARKET TRANSACTION; LIABILITY THERETO IS ONLY CIVIL, NOT CRIMINAL.
On the pivotal issue of whether or not private respondent may be held liable for estafa under the facts
obtaining in the trial court, respondent court held that private respondent's liability, if any, is only civil. The
nature of a money market transaction is explained by the Court in Perez v. Court of Appeal, 127 SCRA 636
(1984). The Court of Appeals, therefore, correctly ruled that a money market transaction partakes of the
nature of a loan and therefore "nonpayment thereof would not give rise to criminal liability for estafa
through misappropriation or conversion." Citing Yam v. Malik, 94 SCRA 30 (1979), the Court of Appeals
noted that private respondent or Philfinance was not obliged under the money market transaction to return
the same money he or the corporation had received from petitioner. In fact, the Court of Appeals noted
that petitioner admitted on the witness stand that he had "invested" his money; that "he was not
concerned about the same money because what is important is the same amount will be returned to me
plus its earnings, because naturally when you give the money with the same serial numbers and you
entrust it for investment purposes, when it is invested and there are returns, the same money with the
same serial numbers will not be returned to you;" and that private respondent would be "held liable to me
in case of their failure to account" for the investment.
5. ID.; ID.; ID.; CASE AT BENCH. In money market placement, the investor is a lender who loans his
money to a borrower through a middleman or dealer. Petitioner here loaned his money to a borrower
through Philfinance. When the latter failed to deliver back petitioner's placement with the corresponding
interest earned at the maturity date, the liability incurred by Philfinance was a civil one. As such, petitioner
could have instituted against Philfinance before the ordinary courts a simple action for recovery of the
amount he had invested and he could have prayed therein for damages (Lim Sio v. Court of Appeals, 221
SCRA 307 [1993]; Orosa, Jr., v. Court of Appeals, 193 SCRA 391 [1991]; Manila Electric Company v.
Genbancor Development Corporation, 72 SCRA 249 [1976]). However, since petitioner also alleged fraud,
the proper forum should have been the Securities and Exchange Commission (Araneta v. Court of Appeals,
211 SCRA 390 [1992]).
6. ID.; ID.; FAILURE OF CUSTODIAN-DEPOSITARY OF PROMISSORY NOTE TO PAY INVESTMENT ON MATURITY
CONSTITUTES BREACH OF DUTY; DAMAGES, RECOVERABLE. It appears, however, that petitioner did not
even implead Philfinance in the complaint for damages arising from the nonreturn of investment with
respect to the same money market placement involved herein, which he eventually filed against Delta
Motors Corporation and Pilipinas Bank before the Regional Trial Court of Cebu City on September 28, 1982.
The said complaint having been dismissed for lack of merit, petitioner appealed to the Court of Appeals
which, on March 21, 1989, affirmed the dismissal order. The Court of Appeals held that Philfinance is
"solely and legally obligated to return the investment of plaintiff, together with its earnings, and to answer
all the damages plaintiff has suffered incident thereto." Petitioner thereafter filed a petition for review on
certiorari, which this Court docketed as G.R. No. 89252. On May 24, 1993, the Court, through Associate
Justice Feliciano, rendered a decision in G.R. No. 89252 ordering Pilipinas Bank to pay petitioner the
amount of P304,533.33 in damages plus legal interest thereon at the rate of six percent (6%) per annum
counted from April 2, 1981. Pilipinas Bank was the custodian-depositary of DMC PN No. 2731 evidencing
petitioner's money market placement. In holding Pilipinas Bank liable for damages for breach of duty, the
Court said: ". . . . By failing to deliver the Note to the petitioner as depositor-beneficiary of the thing
deposited, Pilipinas effectively and unlawfully deprived petitioner of the Note deposited with it. Whether or
not Pilipinas itself benefited from such conversion or unlawful deprivation inflicted upon petitioner, is of no
moment for present purposes. Prima facie, the damages suffered by petitioner consisted of P304,533.33,
the portion of the DMC PN No. 2731 assigned to petitioner but lost by him by reason of discharge of the
Note by compensation, plus legal interest of six percent (6%) per annum counting from 14 March 1981.
"The conclusion we have here reached is, of course, without to such right of reimbursement as Pilipinas
may have vis-a-vis Philfinance."
7. ID.; ID.; LIABILITY THERETO IS ONLY CIVIL NOT CRIMINAL; INVESTOR MAY FILE A SEPARATE CIVIL ACTION
TO RECOVER INVESTMENT. Petitioner's recovery of his investment and the dismissal of the criminal
aspect of the case he had filed against private respondent as a consequence of this decision
notwithstanding, he still has an opportunity to hold private respondent civilly liable in Criminal Case No.
CU-10568. In People v. Tugbang, 196 SCRA 341 (1991), the Court categorically pronounced that ". . . an
accused acquitted of a criminal charge may nevertheless be held in the same case civilly liable where the
facts established by the evidence so warrants."

DECISION
QUIASON, J p:
Private respondents Hermilo Rodis, Sr., together with Douglas Sandiego and Ricardo Silverio, Sr., was
charged with estafa before the Regional Trial Court, Branch 20, Cebu, in an information docketed as
Criminal Case No. CU-10568, which reads as follows:
"That on or about the 9th day of February, 1981, and for sometime prior and subsequent thereto, in the
City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, conniving
and confederating together and mutually helping one another, having received from Atty. Raul H. Sesbreno
the sum of P300,000.00 as money market placement for 32 days at 20% interest with said corporation or a
maturity date of March 13, 1981, with the obligation on their part to immediately account for and turn over
to said Atty. Raul H. Sesbreno the aforesaid sum of money including the 20% interest upon maturity, or the
total sum of P305,333.33, the said accused, once in possession of said sum of money, far from complying
with their obligation, with deliberate intent, with intent of gain and of defrauding the herein complainant,
did then and there misappropriate, misapply and convert into their own personal use and benefit the
same, and despite repeated demands made upon them by Atty. Raul H. Sesbreno, they have failed and
refused and up to the present time still fail and refuse to comply with their obligation, to the damage and
prejudice of Atty. Raul H. Sesbreno, in the aforementioned sum of P300,000.00 Philippine Currency" (Rollo,
p. 80).cdasia

Respondent Rodis moved to quash the information on the ground that the Securities and Exchange
Commission (SEC), not the regular courts, had jurisdiction over the offense charged and that the facts
stated herein did not constitute an offense (Record [Folio No. I], p. 309). The trial court denied the motion
and private respondent elevated the case to the then Intermediate Appellate Court on a petition for
certiorari docketed as AC-G.R. SP No. 15448.
On August 16, 1983, the appellate court dismissed the petition after finding no grave abuse of discretion
on the part of the trial court in denying the motion to quash (Record [Folio No. I], p. 633). The motion for
reconsideration was, likewise, denied. Thus, private respondent filed a petition for review on certiorari with
this Court, docketed as G.R. No. 65477. On February 6, 1984, the petition was denied. LLpr
Hence, trial ensued in the criminal case. However, after the prosecution had rested its case, private
respondent filed a motion to dismiss on demurrer to evidence based on the core proposition that there was
no criminal offense of estafa from the non-payment of a money market placement (Record [Folio No. II], p.
210). The motion alleged that herein petitioner had also filed a similar complaint against Elizabeth de Villa
involving the same money market placement before the City Fiscal of Cebu; but, upon review of the
complaint, then Minister of Justice Estelito Mendoza directed the dismissal of the complaint on the ground
that a money market placement partook of the nature of a loan and therefore no criminal liability for estafa
could arise from non-payment thereof.
On March 13, 1985, the trial court denied the motion to dismiss (Record [Folio No. II], p. 310). On June 21,
1985, it issued an order stating that private respondent had waived his right to present evidence by his
dilatory motions to postpone the trial of the case (Ibid., p. 329).
Private respondent then filed a petition for certiorari and prohibition before the Intermediate Appellate
Court under Docket No. AC-G.R. SP No. 6315 (Ibid., p. 365) assailing the Order of March 13, 1985 as tainted
with grave abuse of discretion amounting to lack or excess of jurisdiction.
On December 29, 1987, the appellate court rendered a decision based on Perez v. Court of Appeals, 127
SCRA 636 (1984), upholding private respondent's contention that a money market placement is in the
nature of a loan which entails the transfer of ownership of the money so invested and therefore the liability
for its return is civil in nature (Rollo, p. 79). The dispositive portion of the decision reads:cdasia
"WHEREFORE, finding the present petition to be impressed with merit, the same is accordingly GRANTED,
and the Order of March 13, 1985, as well as that of June 21, 1985 in Criminal Case No. CU-10568, are (sic)
hereby set aside. The respondent Judge is directed to issue in lieu thereof an appropriate order (i) granting
petitioner's motion to dismiss on demurrer to evidence; (ii) dismissing Criminal Case No. CU-10568 in due
course; and (iii) declaring mooted all acts, orders and processes made and done therein during the
pendency of this petition" (Rollo, p. 86).
Upon a motion for the reconsideration of said decision, the Court of Appeals modified the dispositive
portion of the decision as follows:
"WHEREFORE, finding the present petition to be impressed with merit, the same is accordingly GRANTED,
and the Order of March 13, 1985 in Criminal Case No. CU-10568, is hereby set aside. The respondent Judge
is directed to issue in lieu thereof an appropriate order (i) granting petitioner's motion to dismiss on
demurrer to evidence; (ii) dismissing Criminal Case No. CU-10568 as against petitioner Hermilo Rodis, Sr.
only; and (iii) directing respondent judge to determine the civil liability, if any, of petitioner Hermilo Rodis,
Sr. to private respondent Raul H. Sesbreno from the evidence extant in the record of said case (CU-10568)"
(Rollo, p. 117).
Consequently, petitioner interposed the instant petition alleging that the Court of Appeals gravely erred in:
"a. Taking cognizance over CA-GR SP No. 06315 even if it has NO JURISDICTION over the issue raised by

the petition for certiorari filed therein;

"b. Deciding CA-GR SP No. 06315 in a way probably not in accord with law or with the applicable decisions
of this Honorable Supreme Court" (Rollo, p. 10).cdasia
On the issue of jurisdiction, petitioner contends that by the filing of a motion to dismiss on demurrer to
evidence, private respondent, in effect, admitted the truth of the allegations in the information, as well as
the evidence presented by the prosecution to support said allegations. Therefore, the only issue raised by
private respondent before the Court of Appeals, i.e., whether or not he can be held liable for estafa under
the facts obtaining in the case, is purely a question of law for which said appellate court had no jurisdiction
(Rollo, pp. 12-13).
In Bernardo v. Court of Appeals, 216 SCRA 224 (1992), this Court clarified the distinction between a
question of law and a question of fact in this wise:
". . . . As distinguished from a question of law which exists 'when the doubt or difference arises as to what
the law is on certain state of facts' 'there is a question of fact when the doubt or difference arises as to
the truth or the falsehood of alleged facts;' or when the 'query necessarily invites calibration of the whole
evidence considering mainly the credibility of witnesses, existence and relevancy of specific surrounding
circumstances, their relation to each other and to the whole and the probabilities of the situation.'"
An examination of the petition filed before the Court of Appeals disclosed that indeed no question of fact
was raised. What private respondent asserted therein was that the facts as alleged and proved by
petitioner did not constitute a criminal offense. Clearly then, the only issue to be resolved by the Court of
Appeals, which it did resolve, was whether private respondent could be held liable for estafa under the
facts obtaining in the criminal case. This certainly is a question of law that should fall within the jurisdiction
of this Court.
Petitioner did not assail the jurisdiction of the Court of Appeals during the pendency of his petition in ACG.R. SP No. 63151. As a matter of fact, he actively participated in the proceedings before said appellate
court. While it is true that jurisdiction over the subject matter of a case may be raised at any time of the
proceedings, this rule presupposes that laches or estoppel has not supervened. In this regard, Banaga v.
Commission on the Settlement of Land Problems, 181 SCRA 599, 608-609 (1990) is most enlightening. The
Court therein stated:cdasia
"This Court has time and again frowned upon the undesirable practice of party submitting his case for
decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction when
adverse. Here, the principle of estoppel applies. Hence, a party may be estopped or barred from raising the
question of jurisdiction for the first time in a petition before the Supreme Court when it failed to do so in
the early stages of the proceedings. This principle should deter those who are disposed to trifle with the
courts by taking inconsistent positions contrary to the elementary principles of right dealing and good faith
(Tijam v. Sibonghanoy, No. L-21450, April 15, 1968, 23 SCRA 29; Capilitan v. dela Cruz, Nos. L-29536-37,
February 28, 1974, 55 SCRA 706; Marquez v. Secretary of Labor, G.R. 80685, March 16, 1989). . . ."
On the pivotal issue of whether or not private respondent may be held liable for estafa under the facts
obtaining in the trial court, respondent court held that private respondent's liability, if any, is only civil. The
nature of a money market transaction is explained by the Court in Perez v. Court of Appeals (supra, pp.
645-646) as follows:
". . . What is involved here in a money market transaction. As defined by Lawrence Smith, 'the money
market is a market dealing in standardized short-term credit instruments (involving large amounts) where
lenders and borrowers do not deal directly with each other but through a middle man or dealer in the open
market.' It involves 'commercial papers' which are instruments 'evidencing indebtedness of any person or
entity . . . which are issued, endorsed, sold or transferred or in any manner conveyed to another person or
entity, with or without recourse.' The fundamental function of the money market device in its operation is
to match and bring together in a most impersonal manner both the 'fund users' and the 'fund suppliers.'
The money market is an 'impersonal market', free from personal considerations. The market mechanism is
intended 'to provide quick mobility of money and securities.'cdasia
"The impersonal character of the money market device overlooks the individuals or entities concerned. The
issuer of a commercial paper in the money market necessarily knows in advance that it would be
expeditiously transacted and transferred to any investor/lender without need of notice to said issuer. In
practice, no notification is given to the borrower or issuer of commercial paper of the sale or transfer to the
investor."
The Court of Appeals, therefore, correctly ruled that a money market transaction partakes of the nature of
a loan and therefore "nonpayment thereof would not give rise to criminal liability for estafa through
misappropriation or conversion." Citing Yam v. Malik, 94 SCRA 30 (1979), the Court of Appeals noted that
private respondent or Philfinance was not obliged under the money market transaction to return the same
money he or the corporation had received from petitioner. In fact, the Court of Appeals noted that
petitioner admitted on the witness stand that he had "invested" his money; that "he was not concerned
about the same money because what is important is the same amount will be returned to me plus its
earnings, because naturally when you give the money with the same serial numbers and you entrust it for
investment purposes, when it is invested and there are returns, the same money with the same serial

numbers will not be returned to you;" and that private respondent would be "held liable to me in case of
their failure to account" for the investment (Rollo, p. 83).cdasia
In money market placement, the investor is a lender who loans his money to a borrower through a
middleman or dealer. Petitioner here loaned his money to a borrower through Philfinance. When the latter
failed to deliver back petitioner's placement with the corresponding interest earned at the maturity date,
the liability incurred by Philfinance was a civil one. As such, petitioner could have instituted against
Philfinance before the ordinary courts a simple action for recovery of the amount he had invested and he
could have prayed therein for damages (Lim Sio Bio v. Court of Appeals, 221 SCRA 307 [1993]; Orosa, Jr., v.
Court of Appeals, 193 SCRA 391 [1991]; Manila Electric Company v. Genbancor Development Corporation,
72 SCRA 249 [1976]). However, since the petitioner also alleged fraud, the proper forum should have been
the Securities and Exchange Commission (Araneta v. Court of Appeals, 211 SCRA 390 [1992]).
It appears, however, that petitioner did not even implead Philfinance in the complaint for damages arising
from the nonreturn of investment with respect to the same money market placement involved herein,
which he eventually filed against Delta Motors Corporation and Pilipinas Bank before the Regional Trial
Court of Cebu City on September 28, 1982. The said complaint having been dismissed for lack of merit,
petitioner appealed to the Court of Appeals which, on March 21, 1989, affirmed the dismissal order. The
Court of Appeals held that Philfinance is "solely and legally obligated to return the investment of plaintiff,
together with its earnings, and to answer all the damages plaintiff has suffered incident thereto." Petitioner
thereafter filed a petition for review on certiorari, which this Court docketed as G.R. No. 89252. cdasia
On May 24, 1993, the Court, through Associate Justice Feliciano, rendered a decision in G.R. No. 89252
ordering Pilipinas Bank to pay petitioner the amount of P304,533.33 in damages plus legal interest thereon
at the rate of six percent (6%) per annum counted from April 2, 1981. Pilipinas Bank was the custodiandepositary of DMC PN No. 2731 evidencing petitioner's money market placement. In holding Pilipinas Bank
liable for damages for breach of duty, the Court said:
". . . . By failing to deliver the Note to the petitioner as depositor-beneficiary of the thing deposited,
Pilipinas effectively and unlawfully deprived petitioner of the Note deposited with it. Whether or not
Pilipinas itself benefited from such conversion or unlawful deprivation inflicted upon petitioner, is of no
moment for present purposes. Prima facie, the damages suffered by petitioner consisted of P304,533.33,
the portion of the DMC PN No. 2731 assigned to petitioner but lost by him by reason of discharge of the
Note by compensation, plus legal interest of six percent (6%) per annum counting from 14 March 1981.
"The conclusion we have here reached is, of course, without prejudice to such right of reimbursement as
Pilipinas may have vis-a-vis Philfinance" (G.R. No. 89252, Rollo, pp. 295-296).cdasia
Petitioner's recovery of his investment and the dismissal of the criminal aspect of the case he had filed
against private respondent as a consequence of this decision notwithstanding, he still has an opportunity
to hold private respondent liable in Criminal Case No. CU-10568. In People v. Tugbang, 196 SCRA 341
(1991), the Court categorically pronounced that ". . . an accused acquitted of a criminal charge may
nevertheless be held in the same case civilly liable where the facts established by the evidence so
warrants."
WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals, as modified by its Resolution
of May 27, 1988, is AFFIRMED in toto.
SO ORDERED.
FIRST DIVISION
[G.R. No. 98185. December 11, 1992.]
SIBAGAT TIMBER CORPORATION, petitioner, vs. ADOLFO B. GARCIA, USIPHIL, INC. and
STRONGHOLD INSURANCE CO., INC., respondents.
SYLLABUS
1. COMMERCIAL LAW; CORPORATION; VEIL OF CORPORATE FICTION THEREOF MAY BE PIERCED WHEN MADE
AS A SHIELD TO PERPETRATE FRAUD AND/OR CONFUSE LEGITIMATE ISSUES; CASE AT BAR. The
circumstances that: (1) petitioner and Del Rosario & Sons Logging Enterprises, Inc. hold office in the same
building; (2) the officers and directors of both corporations are practically the same; and (3) the Del
Rosarios assumed management and control of Sibagat and have been acting for and managing its
business, bolster the conclusion that petitioner is an alter ego of the Del Rosario & Sons Logging
Enterprises, Inc. The rule is that the veil of corporate fiction may be pierced when made as a shield to
perpetrate fraud and/or confuse legitimate issues (Jacinto vs. CA, 198 SCRA 211). The theory of corporate
entity was not meant to promote unfair objectives or otherwise, to shield them (Villanueva vs. Adre, 172
SCRA 876). Likewise, where it appears that two business enterprises are owned, conducted, and controlled
by the same parties, both law and equity will, when necessary to protect the rights of third persons,
disregard the legal fiction that two corporations are distinct entities, and treat them as identical (Phil.
Veterans Investment Development Corp. vs. CA, 181 SCRA 669).
2. ID.; ID.; ID.; QUESTION OF REAL OWNERSHIP MAY BE DISREGARDED WHEN A CORPORATION IS JUST A

CONDUIT OF ANOTHER CORPORATION. Assuming arguendo that this Court in G.R. No. 84497 held that
petitioner is the owner of the properties levied under execution, that circumstance will not be a legal
obstacle to the piercing of the corporate fiction. As found by both the trial and appellate courts, petitioner
is just a conduit, if not an adjunct of Del Rosario & Sons Logging Enterprises, Inc. In such a case, the real
ownership becomes unimportant and may be disregard for the two entities may/can be treated as only one
agency or instrumentality. "The corporate entity is disregarded where a corporation is the mere alter ego,
or business conduit of a person or where the corporation is so organized and controlled and its affairs are
so conducted, as to make it merely an instrumentality, agency, conduit or adjunct of another corporation."
(Aguedo F. Agbayani Commercial Laws of the Philippines, Vol. 3, 1984 Ed., p. 30, citing decided cases.)
3. REMEDIAL LAW; SUPREME COURT; NOT A TRIER OF FACTS. The petitioner further contends that the
Court of Appeals erroneously disregarded the decision of this Court in G.R. No. 84497 entitled, "Alfonso
Escovilla, Jr., Cecilio M. Meris and Cuison Engineering and Machinery Co., Inc., Petitioner vs. The Hon. Court
of Appeals, Sibagat Timber Corporation and Conchita del Rosario, Respondents," wherein this Court held
that private respondents (herein petitioner) are the actual owners of the properties subject of execution by
virtue of a sale in their favor by Del Rosario & Sons Logging Enterprises, Inc. That allegation has no merit.
The issue raised in that case was "whether or not an action for prohibition will prosper as a remedy for acts
already accomplished." It was a procedural question, not the ownership of the properties subject of the
execution. The issue of ownership being raised now by the petitioner involves a factual question requiring
an assessment of the evidence. This may not be done in a petition for review under Rule 45 for it is not the
function of this Court to examine and weigh evidence already considered in the proceedings below. Our
jurisdiction is limited to reviewing only errors of law that may have been committed by the lower courts
(Navarra vs. CA, 204 SCRA 850).
DECISION
GRIO-AQUINO, J p:
This is a petition for review on certiorari of the decision of the Court of Appeals dated February 15, 1991 in
CA-G.R. No. 20799 entitled, "Sibagat Timber Corp. vs. Adolfo B. Garcia, et al.," affirming the decision of the
Regional Trial Court which dismissed the petitioner's petition for certiorari, prohibition and injunction with
restraining order and writ of preliminary injunction and damages (Spl. Case No. 548, RTC, Branch I, Butuan
City).
On August 30, 1988, respondent Sheriff Adolfo B. Garcia, who was entrusted with the implementation of
the writ of execution issued by the Regional Trial Court, Branch 147, Makati, Metro Manila in Civil Case No.
7180 entitled, "USIPHIL, INC. vs. Del Rosario and Sons Logging Enterprises, Inc.," levied on the following
personal properties of Del Rosario & Sons, Inc.:
One (1) Unit CAT Grader with SN 99E-5016
One (1) Unit Generating Set with Cummins Engine No. 1074304 Model V-855QC and Generator 125 KVA
No. HA-90071 1720-1 and Panel Switch Board
One (1) Generating Set with CAT D-311 Series H No. 51B4241 w/ Generator No. 30TH 211 1800 RPM, 60
Cycles, 30KVA
One (1) pc. Engine Block CAT D-4600
One TD-25B w/ Hyster D988, Triple Drum Model BY B14 SN-9PI55E
One TD-25A w/ No. Engine Number, w/ Radiator and X-2 Triple Drum Model 149 Yarder and blade
which he scheduled for sale at public auction on September 7, 1988 at 10:00 o'clock in the morning. He
also levied on: LLphil
One (1) Unit Reo Logging Truck (5) tonner not in running condition; and
One (1) Unit White Logging (5) tonner not in running condition
which he scheduled for sale at public auction on September 8, 1988.
On the same date (August 30, 1988) that levy was made by the sheriff, the petitioner herein, through
Mariano Rana, filed a third-party claim alleging that it is the lawful owner of the levied machinery and
equipment, by virtue of deeds of sale executed in its favor by Del Rosario & Sons Logging Enterprises, Inc.
Pursuant to Section 17, Rule 39 of the Rules of Court, an indemnity bond was posted by the judgment
creditor, USIPHIL, Inc., to indemnify the respondent sheriff against the claim of the third-party claimant.
On September 6, 1988, at 2:00 P.M., petitioner filed in the Regional Trial Court of Butuan City, a petition for
"Certiorari, Prohibition and Injunction with Restraining Order & Writ of Preliminary Injunction and Damages"

in Special Civil Case No. 548. A temporary restraining order was issued on September 6, 1988 by the
Executive Judge of that court.
On September 7, 1988, at 11:10 A.M., the court employees who were deputized to serve the restraining
order arrived at the place where the auction sale was to be held. However, they were told by sheriff Garcia
that the auction sale was finished at 10:30 A.M. yet, and that a certificate of sale for each of the personal
properties to be auctioned on that day had already been issued to USIPHIL, INC., the judgment creditor, as
the only bidder and purchaser.
After the hearing on the application for preliminary injunction was held on September 15, 1988, the parties
were directed to submit simultaneous memoranda. Thereafter the case was deemed submitted for
resolution. In the meantime, respondent USIPHIL, INC. filed a formal motion to dismiss the petition which
the trial court granted on February 28, 1990.
On March 9, 1990, the petitioner appealed the order of dismissal to the Court of Appeals (CA G.R. No.
20799). On February 15, 1991, the Court of Appeals dismissed the appeal.
Petitioner's motion for reconsideration was denied by the Court of Appeals. Hence, this petition for review
under Rule 45 of the Rules of Court.
The main issue raised by the petitioner is the supposed error of the Court of Appeals in piercing the veil of
corporate entity and in holding that the third-party claimant, herein petitioner Sibagat Corporation, is not a
separate and distinct entity from the judgment debtor, Del Rosario & Sons Logging Enterprises, Inc. cdphil
As pointed out by the Court of Appeals in its decision:
"Gleaned from the records of this case, Mariano Rana, the third-party claimant for and in behalf of
petitioner testified, among others, that he is the office manager of Sibagat Timber Corporation (p. 58,
Record); that he is the administrative manager of Del Rosario and Sons Logging Enterprises, Inc. in a
concurrent capacity (p. 60 id.); that the officers of the Sibagat Timber Corporation are: Mr. Policarpio C. Del
Rosario, President and General Manager; Miss Conchita C. Del Rosario, Vice-President and General Manager
(p. 60, id.); and the Directors are: Policarpio del Rosario, Jr., Cristina del Rosario, Mrs. Jasmin del Rosario,
and Vicente C. del Rosario (pp. 61-63, id.). On the part of Del Rosario and Sons Logging Enterprises, Inc.,
the officers of the company are: Mr. Policarpio C. del Rosario, President; Miss Conchita del Rosario, VicePresident/General Manager/Director and Treasurer; Mrs. Jasmin A. del Rosario, Querubin del Rosario, and
Cristeta del Rosario, respectively." (p. 29, Rollo.).
The circumstances that: (1) petitioner and Del Rosario & Sons Logging Enterprises, Inc. hold office in the
same building; (2) the officers and directors of both corporations are practically the same; and (3) the Del
Rosarios assumed management and control of Sibagat and have been acting for and managing its
business (p. 30, Rollo), bolster the conclusion that petitioner is an alter ego of the Del Rosario & Sons
Logging Enterprises, Inc.
The rule is that the veil of corporate fiction may be pierced when made as a shield to perpetrate fraud
and/or confuse legitimate issues (Jacinto vs. CA, 198 SCRA 211). The theory of corporate entity was not
meant to promote unfair objectives or otherwise, to shield them (Villanueva vs. Adre, 172 SCRA 876).
Likewise, where it appears that two business enterprises are owned, conducted, and controlled by the
same parties, both law and equity will, when necessary to protect the rights of third persons, disregard the
legal fiction that two corporations are distinct entities, and treat them as identical (Phil. Veterans
Investment Development Corp. vs. CA, 181 SCRA 669).

The petitioner further contends that the Court of Appeals erroneously disregarded the decision of this
Court in G.R. No. 84497 entitled, "Alfonso Escovilla, Jr., Cecilio M. Meris and Cuison Engineering and
Machinery Co., Inc., Petitioner vs. The Hon. Court of Appeals, Sibagat Timber Corporation and Conchita del
Rosario, Respondents," wherein this Court held that private respondents (herein petitioner) are the actual
owners of the properties subject of execution by virtue of a sale in their favor by Del Rosario & Sons
Logging Enterprises, Inc.
That allegation has no merit. The issue raised in that case was "whether or not an action for prohibition will
prosper as a remedy for acts already accomplished." It was a procedural question, not the ownership of the
properties subject of the execution.
The issue of ownership being raised now by the petitioner involves a factual question requiring an
assessment of the evidence. This may not be done in a petition for review under Rule 45 for it is not the
function of this Court to examine and weigh evidence already considered in the proceedings below. Our
jurisdiction is limited to reviewing only errors of law that may have been committed by the lower courts

(Navarra vs. CA, 204 SCRA 850).

Assuming arguendo that this Court in G.R. No. 84497 held that petitioner is the owner of the properties
levied under execution, that circumstance will not be a legal obstacle to the piercing of the corporate
fiction. As found by both the trial and appellate courts, petitioner is just a conduit, if not an adjunct of Del
Rosario & Sons Logging Enterprises, Inc. In such a case, the real ownership becomes unimportant and may
be disregard for the two entities may/can be treated as only one agency or instrumentality.
"The corporate entity is disregarded where a corporation is the mere alter ego, or business conduit of a
person or where the corporation is so organized and controlled and its affairs are so conducted, as to make
it merely an instrumentality, agency, conduit or adjunct of another corporation." (Aguedo F. Agbayani
Commercial Laws of the Philippines, Vol. 3, 1984 Ed., p. 30, citing decided cases.)
WHEREFORE, the petition for review is DENIED and the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
FIRST DIVISION
[G.R. No. 124950. May 19, 1998.]
ASIONICS PHILIPPINES, INC. and/or FRANK YIH, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, YOLANDA BOAQUINA, and JUANA GAYOLA, respondents.
Go Cofuangco Mendoza Ligon & Castro for petitioners.
The Solicitor General for public respondent.
Julio F. Andres, Jr. for private respondents.
SYNOPSIS
In this special civil action of certiorari, petitioners seek to annul and set aside the decision of the NLRC
which has ordered that they grant separation pay to private respondents Boaquina and Gayola. It appears
that, during the third quarter of 1992, petitioner API's operations were disturbed by a notice of strike filed
by the union due to a bargaining deadlock. And even after resolution of the deadlock, API's business
activity remained critical. Thus, API was constrained to implement a company-wide retrenchment.
Boaquina was one of those affected by the retrenchment. Gayola's services, on the other hand, were
considered to have been ended on 04 September 1992 when she was ordered to take an indefinite leave of
absence. She had not since been recalled. Dissatisfied with their Union (FFW), Boaquina and Gayola joined
the 'Lakas Union' where they eventually became members of its Board of Directors. Then, the Lakas Union
filed a notice of strike against API on the ground of unfair labor practice, specifically, for union busting,
termination of union officers/members, harassment and discrimination. When the Lakas Union eventually
staged the strike, API brought before the NLRC Arbitration Branch a petition for declaration of illegality of
the strike. The Labor Arbiter declared the strike illegal. Meanwhile, at the instance of several employees
including Boaquina and Gayola, a complaint for illegal dismissal, violation of labor standards and
separation pay, as well as for recovery of moral and exemplary damages, was filed against API and/or
Frank Yih before the NLRC Arbitration Branch. The Labor Arbiter declared the dismissal of private
respondents as illegal. The NLRC affirmed the Labor Arbiter's decision declaring the strike staged by the
Lakas Union as illegal. But in the illegal dismissal case, the NLRC rendered a decision modifying the
decision of the Labor Arbiter by declaring that private respondents were not illegally dismissed but were
validly terminated due to retrenchment. Hence, this recourse. HDTSIE
The Supreme Court held that the termination of employment of private respondents was due to the
retrenchment policy adopted by API and not because of the former's union activities. Furthermore, nothing
on record is shown to indicate that Frank Yih has acted in bad faith or with malice in carrying out the
retrenchment program of the company. Hence, his having been held by the NLRC to be solidarily and
personally liable with API is legally unjustified.
SYLLABUS
COMMERCIAL LAW; CORPORATION; SEPARATE PERSONALITY; MAJORITY STOCKHOLDER CANNOT BE MADE
PERSONALLY LIABLE ABSENT BAD FAITH. On the issue of joint and solidary liability of petitioner Frank Yih
with API, the court cannot agree with the Solicitor-General in suggesting that even if Frank Yih had no
direct hand in the dismissal of the respondents he should be personally liable therefor on account alone of
his being the President and majority stockholder of the company. The disquisition by the Court in Santos
vs. NLRC is quite succinct and clear. "The basic rule is still that which can be deduced from the Court's
pronouncement in Sunio vs. National Labor Relations Commission, thus: . . . It is basic that a corporation is
invested by law with a personality separate and distinct from those of the persons composing it as well as
from that of any other legal entity to which it may be related. Mere ownership by a single stockholder or
by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality. . . .' Here, nothing on record is shown to
indicate that Frank Yih has acted in bad faith or with malice in carrying out the retrenchment program of
the company. Hence, his having been held by the NLRC to be solidarily and personally liable with API is
legally unjustified.
RESOLUTION
VITUG, J p:
In this special civil action of certiorari, petitioners Asionics Philippines, Inc. ("API"'), and its President and
majority stockholder, Frank Yih, seek to annul and set aside the decision, 1 dated 19 May 1996, of the
National Labor Relations Commission ("NLRC") which has ordered, inter alia, that they grant separation

pay, computed at one-half () month per year of service, to private respondent Yolanda Boaquina and
Juana Gayola. Concomitantly being contested is the subsequent 16th April 1996 resolution 2 of the NLRC
denying petitioners' motion for reconsideration. aisadc
API is a domestic corporation engaged in the business of assembling semi-conductor chips and other
electronic products mainly for export. Yolanda Boaquina and Juana Gayola started working for API in 1979
and 1988, respectively, as material control clerk and as production operator. During the third quarter of
1992, API commenced negotiations with the duly recognized bargaining agent of its employees, the
Federation Free Workers ("FFW"), for a Collective Bargaining Agreement ("CBA") A deadlock, however,
ensued and the union decided to file a notice of strike. This event prompted the two customers of API,
Indala and CP Clare Theta J, to thereupon refrain from sending to API additional kits or materials for
assembly. API, given the circumstance that its assembly line had to thereby grind to a halt, was forced to
suspend operations pursuant to Article 286 3 of the Labor Code. Private respondents Boaquina and Gayola
were among the employee asked to take a leave from work.
Upon the resolution of the bargaining deadlock in October of 1992, a CBA was concluded between API and
FFW. The contract was signed on 30 October 1992 by the parties. Respondent Boaquina was directed to
report back since her previous assignment pertained to the issuance of raw materials needed for the
production of electronic items being ordered by Indala, one of API's client which promptly resumed its
business with API. On the other hand, Juana Gayola, among other employees, could not be recalled
forthwith because the CP Clare/Theta J account, where she was assigned as the production operator, had
yet to renew its production orders.
Inasmuch as its business activity remained critical, API was constrained to implement a company-wide
retrenchment affecting one hundred five (105) employees from a work force that otherwise totalled three
hundred four(304) The selection was based on productivity/performance standards pursuant to the CBA.
Yolanda Boaquina was one of those affected by the retrenchment and API, through its Personnel Manager
Beatriz G. Torro, advised her of such fact in its letter of 29 December 1992. In that letter, Boaquina was
informed that her services were to be dispensed with effective 31 January 1993 4 although she did not
have to render any service for the month of January she being by then already considered to be on leave
with pay. While Juana Gayola was not supposed to be affected by the retrenchment in view of her high
performance rating, her services, nevertheless, were considered to have been ended on 04 September
1992 5 when she was ordered by API to take an indefinite leave of absence. She had not since been
recalled.
Dissatisfied with their union (FFW), Boaquina and Gayola, together with some of other co-employees,
joined the Lakas ng Manggagawa sa Pilipinas Labor Union ("Lakas Union"') where they eventually became
members of its Board of Directors.
On 06 January 1993, Lakas Union filed a notice of strike against API on the ground of unfair labor practice
"(ULP") allegedly committed by the latter, specifically, for union busting, termination of union
officers/members, harassment and discrimination. 6 A conciliation meeting was scheduled for 08 January
1993 by the National Conciliation and Mediation Board ("NCMB") to address the problem which meeting,
however, was reset to 14 January 1993 for failure of any representative of member of Lakas Union to
appear. On 10 January 1993, Lakas Union staged a strike.
Claiming that the strike staged by Lakas Union was illegal, API on 11 1993, brought before the NLRC
National Capital Region Arbitration a petition, docketed NLRC NCR Case No. 00-01-00402-93, for
declaration of illegality of the strike. Lakas Union countered that their strike was valid and staged as a
measure of self-preservation and as self-defense against the illegal dismissal of petitioners aimed at union
busting in the guise of a retrenchment program.
On 23 June 1994, Labor Arbiter Villarente, Jr., to whose sala the case was raffled, promulgated a decision 7
declaring the strike staged by Lakas Union to be illegal. He declared.
"WHEREFORE, judgment is hereby rendered declaring that the strike staged by respondents
Federation of Free Workers and the Lakas Manggagawa ng Pilipinas on January
10, 1993 and thereafter, was ILLEGAL.
"Accordingly, all the registered officers of the two respondent-Unions at the time of the strike
are hereby declared to have lost their employment status (aside from the fact
that ten of them earlier mentioned had settled their cases amicably with
petitioner).
"Insofar as the striking members are concerned and who did not settle their cases amicably,
their separation from the service of petitioner API is hereby declared VALID
under the company-wide retrenchment program which was earlier made known
to proper authorities.
"SO ORDERED." 8
Meanwhile, at the instance of several employees which included private respondents Boaquina and Gayola
complaint for illegal dismissal, violation of labor standards and separation pay, as well as for recovery of
moral and exemplary damages, was filed against, API and/or Frank Yih before the NLRC National Capital
Region Arbitration Branch. The illegal dismissal case, docketed NLRC NCR Case No. 00-05-03326 and No.
00-03-01952-93, was assigned to Labor Arbiter Potenciano S. Canizares, Jr.
On 22 June 1994, Labor Arbiter Canizares rendered his decisions 9 holding petitioners guilty of illegal
dismissal. He ordered petitioners to pay private respondent Yolanda Boaquina separation pay of one-half
() month pay for every year of service, plus overtime pay, and to reinstate private respondent Juana
Gayola with full backwages from the time her salaries were withheld from her until her actual

reinstatement.
The decision of Labor Arbiter Villarente, Jr., and that of Labor Arbiter Canizares were both appealed to the
NLRC.
On 20 April 1995, the Third Division of NLRC promulgated its resolution 10 which affirmed the finding of
Labor Arbiter Villarente, Jr., that. the strike staged by Lakas Union was illegal. On 19 March 1996, the same
Third Division of NLRC, in the illegal dismissal case, rendered a decision 11 modifying the decision of Labor
Canizares by declaring that private respondents were not illegally dismissed but were validly terminated
due to the retrenchment policy implemented by API. Accordingly, private respondents were awarded
separation pay and an additional one (1) month salary in favor of Juana Gayola by way of indemnity for
petitioner API's failure to properly inform her of the retrenchment. The NLRC dismissed the claim of
petitioners that private respondents should not be entitled to separation pay because of their involvement
in the strike which was declared illegal.
On 01 April 1996, petitioners moved for a reconsideration of the 19th March 1996 NLRC decision; the
motion, however, was denied by the NLRC in its resolution of 16 April 1996.
In this recourse, the following issues have been raised by petitioners; to wit:
"WHETHER OR NOT PRIVATE RESPONDENTS WHO ARE OFFICERS OF THE UNION ARE STILL
ENTITLED TO SEPARATION PAY AND INDEMNITY DESPITE HAVING PARTICIPATED
IN A STRIKE THAT HAS BEEN DECLARED ILLEGAL?
"WHETHER OR NOT A STOCKHOLDER/DIRECTOR/OFFICER OF A CORPORATION CAN BE HELD
LIABLE FOR THE OBLIGATION OF THE CORPORATION ABSENT ANY PROOF AND
FINDING OF BAD FAITH.?" 12
The position advanced by petitioners on the first issue is bereft of merit. It is quite evident that the
termination of employment of private respondents was due to the retrenchment policy adopted by API and
not because of the former's union activities. In a letter, dated 29 December 1992, API itself advised
respondent Boaquina that she was one of those affected by the retrenchment program of the company and
that her services were to be terminated effective 31 January 1993. In there pleadings submitted to Labor
Arbiter Canizares, Jr., in connection with the illegal dismissal case, petitioners firmly averred that the
services of private respondents were being dispensed with not by reason of their union activities but in
view of the retrenchment policy of the company. The Solicitor-General correctly pointed out the admissions
made by petitioners; thus:
"The fact is, complainant Boaquina was in fact part of the first batch of retrenches. She was
duly notified of her retrenchment, as well as the proper labor authorities. Ms.
Boaquina alleged in her position paper/affidavit that: aisadc
"[O]n September 12, 1992, I was illegally laid-off for no reason that I know other than my union
activities. I was recalled on October 6, 1992 and again, I was laid-off
in a memorandum of January 4, 1993 effective the end of said
month.
"Complainant Boaquina of course failed, obvious wittingly, to tell her story truthfully. In the
first place, she was never terminated for her union activities. Asionics just
concluded its CBA with the employees' bargaining representative. Asionics were
also too preoccupied with more earthshaking and exigent problems, principally
that of getting the business back on its feet, to concern themselves with
potential (whether real or imagined) entanglements/complication with the
union, much less of one individual member. Moreover, for academic discussion,
let us say that indeed complainant Boaquina was targeted for termination due
to union activities. Under the circumstances, she would have just been
terminated outright, without recall. The truth of the matter is, Boaquina was
made to go on leave in September 1992 precisely because of the pull-out of CP
Clare Theta-J which resulted in work shortage. If she was recalled before she
was finally retrenched, it only shows that the company had been trying its best
to accommodate the most possible number of employees in its payroll, even
given that it was in dire financial straits. Of course, the company cannot just let
the workers go to work and pay them their dues even though there is nothing to
do.
"Complainant Gayola on the other hand was separated from service owing to the fact that
production totally ceased by virtue of the blockade caused by the strike and the
pull-out of Asionic's last customer. In short, the strike aggravated a bad
situation by making it worse and eventually, the worst possible nightmare for
any business enterprise. There being no work whatsoever to do, complainant
Gayola, like the other employees had to be terminated from work." 13
(underlined portions found in the text)
The decision of Labor Arbiter Villarente, Jr., declaring private respondents to have lost their employment
status due to their participation in an illegal strike is of no really significance to petitioners. It should suffice
to say, as so aptly observed by the NLRC, that the retrenchment of private respondents has, in fact,
preceded the declaration of strike.
It is, instead, on the issue of joint and solidary liability of petitioner Frank Yih with API that the Court has
decided to give due course to the instant petition. The court cannot agree with the Solicitor-General in
suggesting that even if Frank Yih had no direct hand in the dismissal of the respondents he should be
personally liable therefor on account alone of his being the President and majority stockholder of the

company. The disquisition by the Court in Santos vs. NLRC 14 is quite succinct and clear. Thus
"A corporation is a juridical entity with legal personality separate and distinct from those acting
for and in its behalf and, in general, from the people comprising it. The rule is
that obligations incurred by the corporation, acting through its directors, officers
and employees, are its sole liabilities. Nevertheless, being a mere fiction of law,
peculiar situations or valid grounds can exist to warrant, albeit done sparingly,
the disregard of its independent being and the lifting of the corporate veil. As a
rule, this situation might arise when a corporation is used to evade a just and
due obligation or to justify a wrong, to shield or perpetrate fraud, to carry out
similar unjustifiable aims or intentions, or as a subterfuge to commit injustice
and so circumvent the law."
"xxx xxx xxx"
"It is true, there were various cases when corporate officers were themselves held by the Court
to be personally accountable for the payment of wages and money claims to its
employees. In A.C. Ransom Labor Union-CCLU vs. NLRC, for instance, the Court
ruled that under the Minimum Wage Law, the responsible officer of an employer
corporation could be, held personally liable for nonpayment of backwages for
'(i)f the policy of the law were otherwise, the corporation employer (would) have
devious ways for evading payment of backwages.' In the absence of a clear
identification of the officer directly responsible for failure to pay the backwages,
the Court considered the President of the corporation as such officer. The case
was cited in Chua vs. NLRC in holding personally liable the vice-president of the
company, being the highest and most ranking official of the corporation next to
the President who was dismissed, for the latter's claim for unpaid wages.
"A review of the above exceptional cases would readily disclose the attendance of facts and
circumstances that could rightly sanction personal liability on the part of the
company officer. In A.C. Ransom, the corporate entity was a family corporation
and execution against it could not be implemented because of the disposition
posthaste of its leviable assets evidently in order to evade its just and due
obligations. The doctrine of piercing the veil of corporate fiction' was this clearly
appropriate. Chua likewise involved another family corporation, and this time
the conflict was between two brothers occupying the highest ranking positions
in the company. There were incontrovertible facts which pointed to extreme
personal animosity that resulted, evidently in bad faith, in the easing out from
the company of one of the brothers by the other.
"The basic rule is still that which can deduced from the Court's pronouncement in Sunio vs.
National Labor Relations Commission (127 SCRA 390), thus:
'We come now to the personal liability of petitioner, Sunio, who was made jointly and severally
responsible with petitioner company and CIPI for the payment of the
backwages of private respondents. This is reversible error. The
Assistant Regional Director's Decision failed to disclose the reason
why he was made personally liable. Respondents, however, alleged
as grounds thereof, his being the owner of one-half () interest of
said corporation, and his alleged arbitrary dismissal of private
respondents.
Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of
petitioner corporation. There appears to be no evidence on record
that he acted maliciously or in bad faith in terminating the services
of private respondents. His act, therefore, was within the scope of
his authority and was a corporate act.
'It is basic that a corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other
legal entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personality. Petitioner Sunio,
therefore, should not have been made personally answerable for the
payment of private respondent's back salaries.'
"The Court, to be sure, did appear to have deviated somewhat in Gudez vs. NLRC (183 SCRA
644), however, it should be clear from our recent pronouncement in Mam Realty
Development Corporation and Manuel Centeno vs. NLRC (244 SCRA 797), that
the Sunio doctrine still prevails." 15
Nothing on record is shown to indicate that Frank Yih has acted in bad faith or with malice in carrying out
the retrenchment program of the company. His having been held by the NLRC to be solidarily and
personally liable with API is thus legally unjustified.
WHEREFORE, the questioned decision of the NLRC is MODIFIED insofar as it holds herein petitioner Frank
Yih personally liable with Asionics Philippines, Inc., which portion of the decision is SET ASIDE; in all other
respects, however, the questions decision is AFFIRMED and remains unaffected. No costs.

SO ORDERED. aisadc
FIRST DIVISION
[G.R. No. L-33172. October 18, 1979.]
ERNESTO CEASE, CECILIA CEASE, MARION CEASE, TERESA CEASE-LACEBAL, and the F.L. CEASE
PLANTATION CO., INC. as Trustee of properties of the defunct TIAONG MILLING & PLANTATION
CO., petitioners, vs. HONORABLE COURT OF APPEALS, (Special Seventh Division), HON.
MANOLO L. MADDELA, Presiding Judge, Court of First Instance of Quezon, BENJAMIN CEASE and
FLORENCE CEASE, respondents.
DECISION
GUERRERO, J p:
Appeal by certiorari from the decision of the Court of Appeals in CA-G.R. No.
45474, entitled "Ernesto Cease, et al. vs. Hon. Manolo L. Maddela, Judge of the Court of First
Instance of Quezon, et al." 1 which dismissed the petition for certiorari, mandamus, and
prohibition instituted by the petitioners against the respondent judge and the private
respondents. cdll
The antecedents of the case, as found by the appellate court, are as follows:
"IT RESULTING: That the antecedents are not difficult to
understand; sometime in June 1908, one Forrest L. Cease common
predecessor in interest of the parties together with five (5) other
American citizens organized the Tiaong Milling and Plantation
Company and in the course of its corporate existence the company
acquired various properties but at the same time all the other original
incorporates were bought out by Forrest L. Cease together with his
children namely Ernest, Cecilia, Teresita, Benjamin, Florence and one
Bonifacia Tirante also considered a member of the family; the charter
of the company lapsed in June 1958; but whether there were steps to
liquidate it, the record is silent; on 13 August 1959, Forrest L. Cease
died and by extrajudicial partition of his shares, among the children,
this was disposed of on 19 October 1959; it was here where the
trouble among them came to arise because it would appear that
Benjamin and Florence wanted an actual division while the other
children wanted reincorporation; and proceeding on that, these other
children Ernesto, Teresita and Cecilia and aforementioned other
stockholder Bonifacia Tirante proceeded to incorporate themselves
into the FL Cease Plantation Company and registered it with the
Securities and Exchange Commission on 9 December, 1959;
apparently in view of that, Benjamin and Florence for their part
initiated a Special Proceeding No. 3893 of the Court of First Instance of
Tayabas for the settlement of the estate of Forest L. Cease on 21 April,
1960 and one month afterwards on 19 May, 1960 they filed Civil Case
No. 6326 against Ernesto, Teresita and Cecilia Cease together with
Bonifacia Tirante asking that the Tiaong Milling and Plantation
Corporation be declared identical to FL Cease and that its properties
be divided among his children as his intestate heirs; this Civil Case was
resisted by aforestated defendants and notwithstanding efforts of the
plaintiffs to have the properties placed under receivership, they were
not able to succeed because defendants filed a bond to remain as they
have remained in possession; after that and already during the
pendency of Civil Case No. 6326 specifically on 21 May, 1961
apparently on the eve of the expiry of the three (3) year period
provided by the law for the liquidation of corporations, the board of
liquidators of Tiaong Milling executed an assignment and conveyance
of properties and trust agreement in favor of FL Cease Plantation Co.
Inc. as trustee of the Tiaong Milling and Plantation Co. so that upon
motion of the plaintiffs trial Judge ordered that this alleged trustee be
also included as party defendant; now this being the situation, it will
be remembered that there were thus two (2) proceedings pending in
the Court of First Instance of Quezon namely Civil Case No. 6326 and
Special Proceeding No. 3893 but both of these were assigned to the
Honorable Respondent Judge Manolo L. Maddela, p. 43 and the case
was finally heard and submitted upon stipulation of facts pp. 34-110,
rollo; and trial Judge by decision dated 27 December 1969 held for the
plaintiffs Benjamin and Florence, the decision containing the following
dispositive part:
"VIEWED IN THE LIGHT OF ALL THE FOREGOING, judgment
is hereby rendered in favor of plaintiffs and against the defendants
declaring that:
1)The assets or properties of the defunct Tiaong Milling

and Plantation Company now appearing under the name of F.L. Cease
Plantation Company as Trustee, is the estate also of the deceased
Forrest L. Cease and ordered divided share and share alike, among his
six children the plaintiffs and the defendants in accordance with Rule
69, Rules of Court;
2)The Resolution to Sell dated October 12, 1959 and the
Transfer and Conveyance with Trust Agreement is hereby set aside as
improper and illegal for the purposes and effect that it was intended
and, therefore, null and void;
3)That F.L. Cease Plantation Company is removed as
Trustee for interest against the estate and essential to the protection
of plaintiffs' rights and is hereby ordered to deliver and convey all the
properties and assets of the defunct Tiaong Milling now under its
name, custody and control to whomsoever be appointed as Receiver
disqualifying any of the parties herein the latter to act accordingly
upon proper assumption of office; and
4)Special Proceedings No. 3893 for administration is
terminated and dismissed; the instant case to proceed but on issues of
damages only and for such action inherently essential for partition.
SO ORDERED.
Lucena City, December 27, 1969, pp. 122-a-123, rollo;"
upon receipt of that, defendants there filed a notice of appeal p. 129, rollo together
with an appeal bond and a record on appeal but the plaintiffs moved to
dismiss the appeal on the ground that the judgment was in fact
interlocutory and not appealable p. 168 rollo and this position of
defendants was sustained by trial Judge, His Honor ruling that.
"IN VIEW OF THE FOREGOING, the appeal interposed by
plaintiffs is hereby dismissed as premature and the Record on Appeal
is necessarily disapproved as improper at this stage of the
proceedings.
SO ORDERED.
Lucena City, April 27, 1970."
and so it was said defendants brought the matter first to the Supreme Court, on
mandamus on 20 May, 1970 to compel the appeal and certiorari and
prohibition to annul the order of 27 April, 1970 on the ground that the
decision was "patently erroneous" p. 16, rollo; but the Supreme Court
remanded the case to this Court of Appeals by resolution of 27 May
1970, p. 173, and this Court of Appeals on 1 July, 1970 p. 175
dismissed the petition so far as the mandamus was concerned taking
the view that the decision sought to be appealed dated 27 December,
1969 was interlocutory and not appealable but on motion for
reconsideration of petitioners and since there was possible merit so far
as its prayer for certiorari and prohibition was concerned, by resolution
of the Court on 19 August, 1970, p. 232, the petition was permitted to
go ahead in that capacity; and it is the position of petitioners that the
decision of 27 December, 1969 as well as the order of 27 April, 1970
suffered of certain fatal defects, which respondents deny and on their
part raise the preliminary point that this Court of Appeals has no
authority to give relief to petitioners because not.
"in aid of its appellate jurisdiction,"
and that the questions presented cannot be raised for the first time before this Court
of Appeals;"
Respondent Court of Appeals in its decision promulgated December 9, 1970
dismissed the petition with costs against petitioners, hence the present petition to this
Court on the following assignment of errors:
THE COURT OF APPEALS ERRED
I.IN SANCTIONING THE WRONGFUL EXERCISE OF
JURISDICTION BEYOND THE LIMITS OF AUTHORITY CONFERRED BY LAW
UPON THE LOWER COURT, WHEN IT PROCEEDED TO HEAR, ADJUDGE
AND ADJUDICATE
(a)Special Proceedings No. 3893 for the
settlement of the Estate of Forrest L. Cease, simultaneously
and concurrently with
(b)Civil Case No. 6326, wherein the lower Court
ordered Partition under Rule 69, Rules of Court
THE ISSUE OF LEGAL OWNERSHIP OF THE PROPERTIES COMMONLY INVOLVED IN BOTH
ACTIONS HAVING BEEN RAISED AT THE OUTSET BY THE TIAONG
MILLING AND PLANTATION COMPANY, AS THE REGISTERED OWNER OF
SUCH PROPERTIES UNDER ACT 496.

II.IN AFFIRMING UNSUPPORTED BY ANY EVIDENCE

WHATSOEVER NOR CITATION OF ANY LAW TO JUSTIFY THE
UNWARRANTED CONCLUSION THAT SUBJECT PROPERTIES, FOUND BY
THE LOWER COURT AND THE COURT OF APPEALS AS ACTUALLY
REGISTERED IN THE NAME OF PETITIONER CORPORATION AND/OR ITS
PREDECESSOR IN INTEREST, THE TIAONG MILLING AND PLANTATION
COMPANY, DURING ALL THE 50 YEARS OF ITS CORPORATE EXISTENCE,
"ARE ALSO PROPERTIES OF THE ESTATE OF FOREST L. CEASE."
III.IN AFFIRMING THE ARBITRARY CONCLUSION OF THE
LOWER COURT THAT ITS DECISION OF DECEMBER 27, 1969 IS AN
"INTERLOCUTORY DECISION." IN DISMISSING THE PETITION FOR WRIT
OF MANDAMUS, AND IN AFFIRMING THE MANIFESTLY UNJUST
JUDGMENT RENDERED WHICH CONTRADICTS THE FINDINGS OF
ULTIMATE FACTS THEREIN CONTAINED.
During the period that ensued after the filing in this Court of the respective
briefs and the subsequent submission of the case for decision, some incidents had
transpired, the summary of which may be stated as follows:
1.Separate from this present appeal, petitioners filed a petition for certiorari
and prohibition in this Court, docketed as G.R. No. L-35629 (Ernesto Cease, et al. vs. Hon.
Manolo L. Maddela, et al.) which challenged the order of respondent judge dated
September 27, 1972 appointing his Branch Clerk of Court, Mr. Eleno M. Joyas, as receiver of
the properties subject of the appealed civil case, which order, petitioners saw as a virtual
execution of the lower court's judgment (p. 92, rollo). In Our resolution of November 13,
1972, issued in G.R. No. L-35629, the petition was denied since respondent judge merely
appointed an auxilliary receiver for the preservation of the properties as well as for the
protection of the interests of all parties in Civil Case No. 6326; but at the same time, We
expressed Our displeasure in the appointment of the branch clerk of court or any other
court personnel for that matter as receiver. (p. 102, rollo) LLjur
2.Meanwhile, sensing that the appointed receiver was making some attempts to
take possession of the properties, petitioners filed in this present appeal an urgent petition
to restrain proceedings in the lower court. We resolved the petition on January 29, 1975 by
issuing a corresponding temporary restraining order enjoining the court a quo from
implementing its decision of December 27, 1969, more particularly, the taking over by a
receiver of the properties subject of the litigation, and private respondents Benjamin and
Florence Cease from proceeding or taking any action on the matter until further orders from
this Court (pp. 99-100, rollo). Private respondents filed a motion for reconsideration of Our
resolution of January 29, 1975. After weighing the arguments of the parties and taking note
of Our resolution in G.R. No. L-35629 which upheld the appointment of a receiver, We
issued another resolution dated April 11, 1975 lifting effective immediately Our previous
temporary restraining order which enforced the earlier resolution of January 29, 1975 (pp.
140-141, rollo)
3.On February 6, 1976, private respondents filed an urgent petition to restrain
proceedings below in view of the precipitate replacement of the court appointed receiver
Mayor Francisco Escueta (vice Mr. Eleno M. Joyas) and the appointment of Mr. Guillermo
Lagrosa on the eve of respondent Judge Maddela's retirement (p. 166, rollo). The urgent
petition was denied in Our resolution of February 18, 1976 (p. 176, rollo)
4.Several attempts at a compromise agreement failed to materialize. A
Tentative Compromise Agreement dated July 30, 1975 was presented to the Court on
August 6, 1976 for the signature of the parties, but respondents "unceremoniously"
repudiated the same by leaving the courtroom without the permission of the court (Court of
First Instance of Quezon, Branch II) as a result of which respondents and their counsel were
cited for contempt (p. 195, 197, rollo); that respondents' reason for the repudiation appears
to be petitioners' failure to render an audited account of their administration covering the
period from May 31, 1961 up to January 29, 1974, plus the inclusion of a provision on
waiver and relinquishment by respondents of whatever rights that may have accrued to
their favor by virtue of the lower court's decision and the affirmative decision of the
appellate court.
We go now to the alleged errors committed by the respondent Court of Appeals.
As can be gleaned from petitioners' brief and the petition itself, two contentions
underlie the first assigned error. First, petitioners argue that there was an irregular and
arbitrary termination and dismissal of the special proceedings for judicial administration
simultaneously ordered in the lower court's decision in Civil Case No. 6326 adjudicating the
partition of the estate, without categorically resolving the opposition to the petition for
administration. Second, that the issue of ownership had been raised in the lower court
when Tiaong Milling asserted title over the properties registered in its corporate name
adverse to Forrest L. Cease or his estate, and that the said issue was erroneously disposed
of by the trial court in the partition proceedings when it concluded that the assets or
properties of the defunct company is also the estate of the deceased proprietor.

The propriety of the dismissal and termination of the special proceedings for
judicial administration must be affirmed in spite of its rendition in another related case in
view of the established jurisprudence which favors partition when judicial administration
becomes unnecessary. As observed by the Court of Appeals, the dismissal at first glance is
wrong, for the reason that what was actually heard was Civil Case No. 6326. The technical
consistency, however, if far less an importance than the reason behind the doctrinal rule
against placing an estate under administration. Judicial rulings consistently hold the view
that where partition is possible, either judicial or extrajudicial, the estate should not be
burdened with an administration proceeding without good and compelling reason. When
the estate has no creditors or pending obligations to be paid, the beneficiaries in interest
are not bound to submit the property to judicial administration which is always long and
costly, or to apply for the appointment of an administrator by the court, especially when
judicial administration is unnecessary and superfluous. Thus
"When a person dies without leaving pending obligations
to be paid, his heirs, whether of age or not, are bound to submit the
property to a judicial administration, which is always long and costly,
or to apply for the appointment of an administrator by the court. It has
been uniformly held that in such case the judicial administration and
the appointment of an administrator are superfluous and unnecessary
proceedings (Ilustre vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs.
Ignacio, 19 Phil, 434; Bondad vs. Bondad, 34 Phil., 232; Baldemor vs.
Malangyaon, 34 Phil., 367; Fule vs. Fule, 46 Phil., 317)." Syllabus,
Intestate estate of the deceased Luz Garcia. Pablo G. Utulo vs. Leona
Pasion Viuda de Garcia, 66 Phil. 302.
"Where the estate has no debts, recourse may be had to
an administration proceeding only if the heirs have good reasons for
not resorting to an action for partition. Where partition is possible,
either in or out of court, the estate should not be burdened with an
administration proceeding without good and compelling reasons."
(Intestate Estate of Mercado vs. Magtibay, 96 Phil. 383)
In the records of this case, We find no indication of any indebtedness of the
estate. No creditor has come up to charge the estate within the two-year period after the
death of Forrest L. Cease, hence, the presumption under Section 1, Rule 74 that the estate
is free from creditors must apply. Neither has the status of the parties as legal heirs, much
less that of respondents, been raised as an issue. Besides, extant in the records is the
stipulation of the parties to submit the pleadings and contents of the administration
proceedings for the cognizance of the trial judge in adjudicating the civil case for partition
(Respondents' Brief, p. 20, rollo). As respondents observe, the parties in both cases are the
same, so are the properties involved; that actual division is the primary objective in both
actions; the theory and defense of the respective parties are likewise common; and that
both cases have been assigned to the same respondent judge. We feel that the unifying
effect of the foregoing circumstances invites the wholesome exception to the structures of
procedural rule, thus allowing, instead, room for judicial flexibility. Respondent judge's
dismissal of the administration proceedings then, is a judicious move, appreciable in
today's need for effective and speedy administration of justice. There being ample reason
to support the dismissal of the special proceedings in this appealed case, We cannot see in
the records any compelling reason why it may not be dismissed just the same even if
considered in a separate action. This is inevitably certain specially when the subject
property has already been found appropriate for partition, thus reducing the petition for
administration to a mere unnecessary solicitation.
The second point raised by petitioners in their first assigned error is equally
untenable. In effect, petitioners argue that the action for partition should not have
prospered in view of the repudiation of the co-ownership by Tiaong Milling and Plantation
Company when, as early in the trial court, it already asserted ownership and corporate title
over the properties adverse to the right of ownership of Forrest L. Cease or his estate. We
are not unmindful of the doctrine relied upon by petitioners in Rodriguez vs. Ravilan, 17
Phil. 63 wherein this Court held that in an action for partition, it is assumed that the parties
by whom it is prosecuted are all co-owners or co-proprietors of the property to be divided,
and that the question of common ownership is not to be argued, not the fact as to whether
the intended parties are or are not the owners of the property in question, but only as to
how and in what manner and proportion the said property of common ownership shall be
distributed among the interested parties by order of the Court. Consistent with this dictum,
it has been held that if any party to a suit for partition denies the pro-indiviso character of
the estate whose partition is sought, and claims instead, exclusive title thereto, the action
becomes one for recovery of property cognizable in the courts of ordinary jurisdiction. 2
Petitioners' argument has only theoretical persuasion, to say the least, rather
apparent than real. It must be remembered that when Tiaong Milling adduced its defense
and raised the issue of ownership, its corporate existence already terminated through the
expiration of its charter. It is clear in Section 77 of Act No. 1459 (Corporation Law) that upon

the expiration of the charter period, the corporation ceases to exist and is dissolved ipso
facto except for purposes connected with the winding up and liquidation. The provision
allows a three-year period from expiration of the charter within which the entity gradually
settles and closes its affairs, disposes and convey its property and to divide its capital
stock, but not for the purpose of continuing the business for which it was established. At
this terminal stage of its existence, Tiaong Milling may no longer persist to maintain
adverse title and ownership of the corporate assets as against the prospective distributees
when at this time it merely holds the property in trust, its assertion of ownership is not only
a legal contradiction, but more so, to allow it to maintain adverse interest would certainly
thwart the very purpose of liquidation and the final distribution of the assets to the proper
parties. llcd
We agree with the Court of Appeals in its reasoning that substance is more
important than form when it sustained the dismissal of Special Proceedings No. 3893, thus

"a)As to the dismissal of Special Proceedings No. 3893, of

course, at first glance, this was wrong, for the reason that the case
that had been heard was Civil Case No. 6326; but what should not be
overlooked either is that respondent Judge was the same judge that
had before him in his own sala, said Special Proceedings No. 3893, p.
43 rollo, and the parties to the present Civil Case No. 6326 had
themselves asked respondent Judge to take judicial notice of the same
and its contents page 34, rollo; it is not difficult to see that when
respondent Judge in par. 4 of the dispositive part of his decision
complained of, ordered that,
'4)Special
Proceedings
No.
3893
for
administration is terminated and dismissed; the instant case
to proceed but on issues of damages only and for such action
inherently essential or partition. p. 123, rollo,
in truth and in fact, His Honor was issuing that order also within Civil Case No. 6326
but in connection with Special Proceedings No. 3893; for substance is
more important than form, the contending parties in both proceedings
being exactly the same, but not only this, let it not be forgotten that
when His Honor dismissed Special Proceedings No. 3893, that
dismissal precisely was a dismissal that petitioners herein had
themselves sought and solicited from respondent Judge as petitioners
themselves aver in their present petition pp. 5-6, rollo: this Court must
find difficulty in reconciling petitioners' attack with the fact that it was
they themselves that had insisted on that dismissal; on the principle
that not he who is favored but he who is hurt by a judicial order is he
only who should be heard to complain and especially since
extraordinary legal remedies are remedies in extremis granted to
parties who have been the victims not merely of errors but of grave
wrongs, and it cannot be seen how one who got what he had asked
could be heard to claim that he had been the victim of a wrong,
petitioners should not now complain of an order they had themselves
asked in order to attack such an order afterwards; if at all, perhaps,
third parties, creditors, the Bureau of Internal Revenue, might have
been prejudiced, and could have had the personality to attack that
dismissal of Special Proceedings No. 3893, but not petitioners herein,
and it is not now for this Court of Appeals to protect said third persons
who have not come to the Court below or sought to intervene herein;"
On the second assigned error, petitioners argue that no evidence has been
found to support the conclusion that the registered properties of Tiaong Milling are also
properties of the estate of Forrest L. Cease; that on the contrary, said properties are
registered under Act No. 496 in the name of Tiaong Milling as lawful owner and possessor
for the last 50 years of its corporate existence.
We do not agree. In reposing ownership to the estate of Forrest L. Cease, the
trial court indeed found strong support, one that is based on a well-entrenched principle of
law. In sustaining respondents' theory of "merger of Forrest L. Cease and the Tiaong Milling
as one personality", or that "the company is only the business conduit and alter ego of the
deceased Forrest L. Cease and the registered properties of Tiaong Milling are actually
properties of Forrest L. Cease and should be divided equally, share and share alike among
his six children, . . .", the trial court did aptly apply the familiar exception to the general rule
by disregarding the legal fiction of distinct and separate corporate personality and
regarding the corporation and the individual member one and the same. In shredding the
fictitious corporate veil, the trial judge narrated the undisputed factual premise, thus:
"While the records showed that originally its incorporates
were aliens, friends or third-parties in relation of one to another, in the

course of its existence, it developed into a close family corporation.

The Board of Directors and stockholders belong to one family the head
of which Forrest L. Cease always retained the majority stocks and
hence the control and management of its affairs. In fact, during the
reconstruction of its records in 1947 before the Security and Exchange
Commission only 9 nominal shares out of 300 appears in the name of
his 3 eldest children then and another person close to them. It is
likewise noteworthy to observe that as his children increase or perhaps
become of age, he continued distributing his shares among them
adding Florence, Teresa and Marion until at the time of his death only
190 were left to his name. Definitely, only the members of his family
benefited from the Corporation.
"The accounts of the corporation and therefore its
operation, as well as that of the family appears to be instinguisable
and apparently joined together. As admitted by the defendants
(Manifestation of Compliance with order of March 7, 1963 [Exhibit
"21"] the corporation 'never' had any account with any banking
institution or if any account was carried in a bank on its behalf, it was
in the name of Mr. Forrest L. Cease. In brief, the operation of the
Corporation is merged with those of the majority stockholders, the
latter using the former as his instrumentality and for the exclusive
benefits of all his family. From the foregoing indication, therefore, there
is truth in plaintiff's allegation that the corporation is only a business
conduit of his father and an extension of his personality, they are one
and the same thing. Thus, the assets of the corporation are also the
estate of Forrest L. Cease, the father of the parties herein who are all
legitimate children of full blood."
A rich store of jurisprudence has established the rule known as the doctrine of
disregarding or piercing the veil of corporate fiction. Generally, a corporation is invested by
law with a personality separate and distinct from that of the persons composing it as well
as from that of any other legal entity to which it may be related. By virtue of this attribute,
a corporation may not, generally, be made to answer for acts or liabilities of its
stockholders or those of the legal entities to which it may be connected, and vice versa.
This separate and distinct personality is, however, merely a fiction created by law for
convenience and to promote the ends of justice (Laguna Transportation Company vs. Social
Security System, L-14606, April 28, 1960; La Campana Coffee Factory, Inc. vs. Kaisahan ng
mga Manggagawa sa La Campana, L-5677, May 25, 1953). For this reason, it may not be
used or invoked for ends subversive of the policy and purpose behind its creation (Emiliano
Cano Enterprises, Inc. vs. CIR, L-20502, Feb. 26, 1965) or which could not have been
intended by law to which it owes its being McConnel vs. Court of Appeals, L-10510, March
17, 1961, 1 SCRA 722). This is particularly true where the fiction is used to defeat public
convenience, justify wrong, protect fraud, defend crime (Yutivo Sons Hardware Company vs.
Court of Tax Appeals, L-13203, Jan. 28, 1961, 1 SCRA 160), confuse legitimate legal or
judicial issues (R.F. Sugay & Co. vs. Reyes, L-20451, Dec. 28, 1964), perpetrate deception or
otherwise circumvent the law (Gregorio Araneta, Inc. vs. Tuason de Paterno, L-2886, Aug.
22, 1952, 49 O.G. 721). This is likewise true where the corporate entity is being used as an
alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another
corporate entity (McConnel vs. Court of Appeals, supra; Commissioner of Internal Revenue
vs. Norton Harrison Co., L-7618, Aug. 31, 1964). cdrep
In any of these cases, the notion of corporate entity will be pierced or
disregarded, and the corporation will be treated merely as an association of persons or,
where there are two corporations, they will be merged as one, the one being merely
regarded as part or the instrumentality of the other (Koppel [Phil.], Inc. vs. Yatco, 77 Phil.
496; Yutivo Sons Hardware Company vs. Court of Tax Appeals, supra).
So must the case at bar add to this jurisprudence. An indubitable deduction
from the findings of the trial court cannot but lead to the conclusion that the business of the
corporation is largely, if not wholly, the personal venture of Forrest L. Cease. There is not
even a shadow of a showing that his children were subscribers or purchasers of the stocks
they own. Their participation as nominal shareholders emanated solely from Forrest L.
Cease's gratuitous dole out of his own shares to the benefit of his children and ultimately
his family.
Were we sustain the theory of petitioners that the trial court acted in excess of
jurisdiction or abuse of discretion amounting to lack of jurisdiction in deciding Civil Case No.
6326 as a case for partition when the defendant therein, Tiaong Milling and Plantation
Company, Inc. as registered owner asserted ownership of the assets and properties
involved in the litigation, which theory must necessarily be based on the assumption that
said assets and properties of Tiaong Milling and Plantation Company, Inc. now appearing
under the name of F. L. Cease Plantation Company as Trustee are distinct and separate from
the estate of Forrest L. Cease to which petitioners and respondents as legal heirs of said

Forrest L. Cease are equally entitled share and share alike, then that legal fiction of
separate corporate personality shall have been used to delay and ultimately deprive and
defraud the respondents of their successional rights to the estate of their deceased father.
For Tiaong Milling and Plantation Company shall have been able to extend its corporate
existence beyond the period of its charter which lapsed in June, 1958 under the guise and
cover of F. L. Cease Plantation Company, Inc. as Trustee which would be against the law,
and said Trustee shall have been able to use the assets and properties for the benefit of the
petitioners, to the great prejudice and defraudation of private respondents. Hence, it
becomes necessary and imperative to pierce that corporate veil.
Under the third assigned error, petitioners claim that the decision of the lower
court in the partition case is not interlocutory but rather final for it consists of final and
determinative dispositions of the contentions of the parties. We find no merit in petitioners'
stand.
Under the 1961 pronouncement and ruling of the Supreme Court in Vda. de
Zaldarriaga vs. Enriquez, 1 SCRA 1188 (and the sequel case of Vda. de Zaldarriaga vs.
Zaldarriaga 2 SCRA 356), the lower court's dismissal of petitioners' proposed appeal from
its December 27, 1969 judgment as affirmed by the Court of Appeals on the ground of
prematurity in that the judgment was not final but interlocutory was in order. As was said in
said case: prcd
"It is true that in Africa vs. Africa, 42 Phil. 934 and other
cases it was held contrary to the rule laid down in Ron vs. Mojica, 8
Phil. 328; Rodriguez vs. Ravilan, 17 Phil. 63 that in a partition case
where defendant relies on the defense of exclusive ownership, the
action becomes one for title and the decision or order directing
partition is final, but the ruling to this effect has been expressly
reversed in the Fuentebella case which, in our opinion, expresses the
correct view, considering that a decision or order directing partition is
not final because it leaves something more to be done in the trial court
for the complete disposition of the case, namely, the appointment of
commissioners, the proceedings to be had before them, the
submission of their report which, according to law, must be set for
hearing. In fact, it is only after said hearing that the court may render
a final judgment finally disposing of the action (Rule 71, section 7,
Rules of Court)." (1 SCRA at page 1193)
It should be noted, however, that the said ruling in Zaldarriaga as based on
Fuentebella vs. Carrascoso, XIV Lawyers Journal 305 (May 27, 1942), has been expressly
abandoned by the Court in Miranda vs. Court of Appeals, 71 SCRA 295; 331-333 (June 18,
1976) wherein Mr. Justice Teehankee, speaking for the Court, laid down the following
doctrine:
"The Court, however, deems it proper for the guidance of
the bench and bar to now declare as is clearly indicated from the
compelling reasons and considerations herein above stated:
that the Court considers the better rule to be that stated
in H. E. Heacock Co. vs. American Trading Co., to wit, that where the
primary purpose of a case is to ascertain and determine who between
plaintiff and defendant is the true owner and entitled to the exclusive
use of the disputed property, 'the judgment . . . rendered by the lower
court [is] a judgment on the merits as to those questions, and [that]
the order of the court for an accounting was based upon, and is
incidental to the judgment on the merits. That is to say, that the
judgment . . . [is] a final judgment . . .; that in this kind of a case an
accounting is a mere incident to the judgment; that an appeal lies from
the rendition of the judgment as rendered . . .' (as is widely held by a
great number of judges and members of the bar, as shown by the
cases so decided and filed and still pending with the Court) for the
fundamental reasons therein stated that 'this is more in harmony with
the administration of justice and the spirit and intent of the [Rules]. If
on appeal the judgment of the lower court is affirmed, it would not in
the least work an injustice to any of the legal rights of [appellee]. On
the other hand, if for any reason this court should reverse the
judgment of the lower court, the accounting would be a waste of time
and money, and might work a material injury to the [appellant]; and
that accordingly, the contrary ruling in Fuentebella vs.
Carrascoso which expressly reversed the Heacock case and a line of
similar decisions and ruled that such a decision for recovery of
property with accounting 'is not final but merely interlocutory and
therefore not appealable' and subsequent cases adhering to the same
must be now in turn abandoned and set aside.

"Fuentebella adopted instead the opposite line of

conflicting decisions mostly in partition proceedings and exemplified
by Ron vs. Mojica, 8 Phil. 928 (under the old Code of Civil Procedure)
that an order for partition of real property is not final and appealable
until after the actual partition of the property as reported by the courtappointed commissioners and approved by the court in its judgment
accepting the report. It must be especially noted that such rule
governing partitions is now so expressly provided and spelled out in
Rule 69 of the Rules of Court, with special reference to Sections 1, 2, 3,
6, 7 and 11, to wit, that there must first be a preliminary order for
partition of the real estate (section 2) and where the par ties-coowners cannot agree, the court-appointed commissioners make a plan
of actual partition which must first he passed upon and accepted by
the trial court and embodied in a judgment to be rendered by it
(sections 6 and 11). In partition cases, it must be further borne in mind
that Rule 69, section 1 refers to 'a person having the right to compel
the partition of real estate,' so that the general rule of partition that an
appeal will not lie until the partition or distribution proceedings are
terminated will not apply where appellant claims exclusive ownership
of the whole property and denies the adverse party's right to any
partition, as was the ruling in Villanueva vs. Capistrano and Africa vs.
Africa supra, Fuentebella's express reversal of these cases must
likewise be deemed now also abandoned in view of the Court's
expressed preference for the rationale of the Heacock case.
"The Court's considered opinion is that imperative
considerations of public policy and of sound practice in the courts and
adherence to the constitutional mandate of simplified, just, speedy
and inexpensive determination of every action call for considering
such judgments for recovery of property with accounting as final
judgments which are duly appealable (and would therefore become
final and executory if not appealed within the reglementary period)
with the accounting as a mere incident of the judgment to be rendered
during the course of the appeal as provided in Rule 39, section 4 or to
be implemented at the execution stage upon final affirmance on
appeal of the judgment (as in Court of Industrial Relations unfair labor
practice cases ordering the reinstatement of the worker with
accounting, computation and payment of his backwages less earnings
elsewhere during his layoff) and that the only reason given in
Fuentebella for the contrary ruling, viz, `the general harm that would
follow from throwing the door open to multiplicity of appeals in a single
case' is of lesser import and consequence." (Emphasis copied)
The Miranda ruling has since then been applied as the new rule by a unanimous
Court in Valdez vs. Bagasao, 82 SCRA 22 (March 8, 1978).
If there were a valid genuine claim of exclusive ownership of the inherited
properties on the part of petitioners to respondents' action for partition, then under the
Miranda ruling, petitioners would be sustained, for as expressly held therein "the general
rule of partition that an appeal will not lie until the partition or distribution proceedings are
terminated will not apply where appellant claims exclusive ownership of the whole property
and denies the adverse party's right to any partition."
But this question has now been rendered moot and academic for the very issue
of exclusive ownership claimed by petitioners to deny and defeat respondents' right to
partition which is the very core of their rejected appeal has been squarely resolved
herein against them, as if the appeal had been given due course. The Court has herein
expressly sustained the trial court's findings, as affirmed by the Court of Appeals, that the
assets or properties of the defunct company constitute the estate of the deceased
proprietor (supra at page 7) and the defunct company's assertion of ownership of the
properties is a legal contradiction and would but thwart the liquidation and final distribution
and partition of the properties among the parties hereof as children of their deceased father
Forrest L. Cease. There is therefore no further hindrance to effect the partition of the
properties among the parties in implementation of the appealed judgment. LexLib
One last consideration. Parties are brothers and sisters, legal heirs of their
deceased father, Forrest L. Cease. By all rights in law and jurisprudence, each is entitled to
share and share alike in the estate, which the trial court correctly ordained and sustained
by the appellate court. Almost 20 years have lapsed since the filing of Special Proceedings
No. 3893 for the administration of the Estate of Forrest L. Cease and Civil Case No. 6326 for
liquidation and partition of the assets of the defunct Tiaong Milling and Plantation Co., Inc. A
succession of receivers were appointed by the court to take, keep in possession, preserve
and manage properties of the corporation which at one time showed an income of
P386,152.90 and expenses of P308,405:01 for the period covering January 1, 1960 to

August 31, 1967 as per Summary of Operations of Commissioner for Finance appointed by
the Court (Brief for Respondents, p. 38). In the meantime, ejectment cases were filed by
and against the heirs in connection with the properties involved, aggravating the already
strained relations of the parties. A prudent and practical realization of these circumstances
ought and must constrain the parties to give each one his due in law and with fairness and
dispatch that their basic rights be enjoyed. And by remanding this case to the court a quo
for the actual partition of the properties, the substantial rights of everyone of the heirs have
not been impaired, for in fact, they have been preserved and maintained.
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is
hereby AFFIRMED with costs against the petitioners.
SO ORDERED.
FIRST DIVISION
[G.R. No. L-33172. October 18, 1979.]
ERNESTO CEASE, CECILIA CEASE, MARION CEASE, TERESA CEASE-LACEBAL, and the F.L. CEASE
PLANTATION CO., INC. as Trustee of properties of the defunct TIAONG MILLING & PLANTATION
CO., petitioners, vs. HONORABLE COURT OF APPEALS, (Special Seventh Division), HON.
MANOLO L. MADDELA, Presiding Judge, Court of First Instance of Quezon, BENJAMIN CEASE and
FLORENCE CEASE, respondents.The Solicitor General for petitioner.
Demaree J.B. Raval and Luis K. Lokin, Jr. for private respondent.
SYNOPSIS
The Presidential Commission on Good Government (PCGG) filed in the Sandiganbayan on July 22, 1987 a
civil case for reconveyance, reversion, accounting, restitution and damages against Manuel H. Nieto, Jose
L. Africa, Roberto S. Benedicto, Potenciano Ilusorio, Juan Ponce Enrile, and Ferdinand Marcos, Jr. alleging, in
substance, that said defendants acted as "dummies" of the late strongman and devised "schemes" and
"stratagems" to monopolize the telecommunications industry. Annexed to the complaint is a listing of the
assets of defendants Nieto and Africa, among which are their shares of stock in private respondent
Aerocom Investors and Managers, Inc. (Aerocom). Almost a year later, the PCGG sought to sequester
Aerocom under a writ of sequestration dated June 15, 1988. Aerocom filed a civil complaint against the
PCGG urging the Sandiganbayan to nullify the same on the ground that it was served on Aerocom beyond
the eighteen (18)-month period from the ratification of the 1987 Constitution as provided for in Section 26,
Article XVIII thereof. In its answer, the PCGG alleged that Aerocom has no cause of action against it since
the issuance of the writ of sequestration on June 15, 1988 was well within the 18-month constitutional
deadline. During the pendency of the reconveyance case, Aerocom filed a Manifestation and Motion
praying that the Sandiganbayan direct the PCGG to release and distribute the dividends pertaining to the
shares of Aerocom in all corporations where it owns shares of stock. The Sandiganbayan acted favorably
on Aerocom's motion and thus ordered the PCGG to release the dividends except the dividends on the
sequestered shares of stock registered in the names of Manuel Nieto and Jose Africa. After reconsideration
was denied by the Sandiganbayan, the PCGG filed the present petition for certiorari assailing the
Sandiganbayan for ordering the release of the dividends as having been issued with grave abuse of
discretion.
The Supreme Court dismissed the petition. The Court found merit in the initial point amplified by Aerocom
in its comment that the instant certiorari proceedings brought by the PCGG is an improper remedy under
the circumstances. The Sandiganbayan's finding to the effect that Aerocom's complaint was not validly
sequestered, clearly, was a final adjudication on the merits which is reviewable by the appellate court only
through an appeal under Rule 45 of the Rules of Court. The Court also ruled that the service of the writ of
sequestration within the 18-month period is an imperative measure to guard against the employment of
subterfuge by the PCGG to validate what may in fact be a purely whimsical, unfounded and an
"afterthought" takeover of corporate property. HEDaTA
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; A REMEDY DESIGNED FOR THE CORRECTION OF
ERRORS OF JURISDICTION AND NOT ERRORS OF JUDGMENT; CASE AT BAR; PROPER REMEDY IS AN APPEAL
UNDER RULE 45 OF THE RULES OF COURT. There is merit in the initial point amplified by Aerocom in its
comment that the instant certiorari proceedings brought by the PCGG is an improper remedy under the
circumstances. From a reading of its January 31, 1996 Resolution granting Aerocom's Manifestation and
Motion, (as heretofore quoted) as well as the May 7, 1996 Resolution denying the motion for
reconsideration, the Sandiganbayan has virtually passed upon the pivotal issue involved in Aerocom's
complaint for the declaration of nullity of the writ of sequestration (Civil Case No. 0044) i.e., whether or
not Aerocom's sequestration was in order. That court's finding to the effect that Aerocom was not validly
sequestered, clearly, was a final adjudication on the merits which is reviewable by the appellate court only
through an appeal under Rule 45 of the Rules of Court. The PCGG should have availed of the remedy of
appeal filed within the statutory fifteen (15)-day period and not a petition for certiorari, as the arguments
the PCGG propounds in support of its challenge on the Sandiganbayan Resolutions would amount to a
digging into the merits and unearthing errors of judgment. At this juncture, "[i]t must emphatically be
reiterated," to borrow the words of Mr. Justice Regalado in Purefoods Corp. vs. NLRC, "since so often is it
overlooked, that the special civil action for certiorari is a remedy designed for the correction of errors of
jurisdiction and not errors of judgment. The reason for the rule is simple. When a court exercise its
jurisdiction, an error committed while so engaged does not deprive it of the jurisdiction being exercised
when the error is committed. If it did, every error committed by a court would deprive it of its jurisdiction
and every erroneous judgment would be a void judgment. This cannot be allowed. The administration of

justice would not survive such a rule. Consequently, an error of judgment that the court may commit in the
exercise of its jurisdiction is not correctable through the original civil action of certiorari ." Equally worth
recalling is that certiorari is not and cannot be made a substitute for an appeal where the latter remedy is
available but was lost thru the fault or negligence of petitioner, as in this case. Even if we disregard such
procedural flaw, the substantial contentions of the PCGG fail to invite judgment in its favor. HDTISa
2. POLITICAL LAW; TRANSITORY PROVISIONS; AUTHORITY TO ISSUE SEQUESTRATION OR FREEZE ORDERS;
SERVICE OF THE WRIT OF SEQUESTRATION WITHIN THE 18-MONTH PERIOD IS AN IMPERATIVE MEASURE.
The obvious intendment behind the 18-month period, as well as the six (6)-month time-limit for the filing of
the corresponding judicial action, is to ensure the protection of property rights and to serve as a necessary
safeguard against an overzealous exercise by the State, acting as "bounty-hunters" so to speak, of its
power of sequestration which, as described by Justice Ameurfina Melencio-Herrera in her concurring
opinion in BASECO vs. PCGG, is an "extra-ordinary, harsh and severe remedy." For this reason, "(I)t should
be confined," J. Herrera continues, "to its lawful parameters and exercised, with due regard, in the words of
its enabling laws, to the requirements of fairness, due process, and Justice." The probable evil of
governmental abuse is best avoided and the dictates of "fairness," "due process" and "Justice" are truly
heeded under an interpretation of Section 26, Article XVIII as requiring both the issuance of the writ and
notification to, or more precisely, the acquisition of jurisdiction over the entity/entities to be sequestered
via valid service thereof, to be effected within the 18-month period. A writ of sequestration, therefor, runs
the risk of being struck down as invalid if and when the twin requirements of issuance and service are not
satisfied within the deadline. Such is the fate of the subject writ of sequestration, unfortunately. Whether
the 18-month period expired on July 26, 1988 (as claimed by Aerocom, in line with the computation of time
under Article 13 of the Civil Code and the ruling in "National Marketing Corp. v. Tecson," 29 SCRA 70) or on
August 2, 1988 (the PCGG's position), the fact remains that service of the writ on Aerocom on August 3,
1988 was made beyond these dates. The PCGG's theory that the mere issuance of the writ within the 18month deadline will suffice, is just too dangerous to accept. Imagine a scenario where the PCGG may have
actually tarried in the issuance of the sequestration order to the prejudice of the would be sequestered
entity, and all that the PCGG has to do to cover its mistake is to conveniently ante-date the writ so as to
feign timely compliance That would, in effect, be allowing the PCGG to employ a subterfuge to validate
what may in fact be a purely whimsical, unfounded and an "afterthought" takeover of corporate property.
The Constitution does not and can never tolerate such a deceptive maneuver. Service of the writ of
sequestration within 18-month period, then, is an imperative measure to guard against this kind of
mischief, for it will certainly give the assurance that the writ was genuinely issued within that
constitutional deadline.
3. ID.; ID.; ID.; THE FILING OF CIVIL CASE NO. 0009 AGAINST THE "NIETO, AFRICA, ET AL. GROUP" IS NOT
ENOUGH COMPLIANCE WITH THE "JUDICIAL COMPLIANCE" REQUIREMENT. The PCGG cannot justify its
failure, as found by the Sandiganbayan, to file corresponding judicial action against Aerocom within six (6)month period as provided for under the same constitutional provision in focus (Section 26, Article XVIII,
second paragraph) by the fact that Aerocom was mentioned in the complaint of the PCGG in Civil Case No.
0009 (the Nieto, Africa, et al. case) and in Annex "A" thereof notwithstanding that aerocom was not
impleaded as party-defendant, and on the argument that the filing of Civil Case No. 0009 against the
"Nieto, Africa, et al. group" is enough compliance with the "judicial action" requirement.
DECISION
MARTINEZ, J p:
In its continuing search for "ill-gotten wealth", herein petitioner Presidential Commission on Good
Government (PCGG) filed in the Sandiganbayan on July 22, 1987 a case (Civil Case No. 0009) for
reconveyance, reversion, accounting, restitution and damages against Manuel H. Nieto, Jose L. Africa,
Roberto S. Benedicto, Potenciano Ilusorio, Juan Ponce Enrile and Ferdinand Marcos, Jr. alleging, in
substance, that said defendants acted as "dummies" of the late strongman and devised "schemes" and
"stratagems" to monopolize the telecommunications industry. Annexed to the complaint is a listing of the
assets of defendants Nieto and Africa, among which are their shares of stock in private respondent
Aerocom Investors and Managers, Inc. (Aerocom). 1
Almost a year later, the PCGG sought to sequester Aerocom under a writ of sequestration dated June 15,
1988, 2 which was served on and received "under protest" by Aerocom's president on August 3, 1988, 3
Seven (7) days after receipt of the sequestration order, Aerocom on August 10, 1988 filed a complaint
against the PCGG (docketed as Civil Case No. 0044) 4 urging the Sandiganbayan to nullify the same on the
ground that it was served on Aerocom beyond the eighteen (18)-month period from the ratification of the
1987 Constitution as provided for in Section 26 Article XVIII thereof which reads: LLphil
"Sec. 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated
March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain
operative for not more than eighteen months after the ratification of this
Constitution. However, in the national interest, as certified by the President, the
Congress may extend said period.
"A sequestration or freeze order shall be issued only upon showing of a prima facie case. The
order and the list of the sequestered or frozen properties shall forthwith be
registered with the proper court. For orders issued, before the ratification of this
Constitution, the corresponding judicial action or proceeding shall be filed within
six months from its ratification. For those issued after such ratification, the
judicial action or proceeding shall be commenced within six months from the

issuance thereof.
"The sequestration or freeze order is deemed automatically lifted if no judicial action or
proceeding is commenced as herein provided."
In its amended answer dated May 19, 1992, 5 the PCGG specifically alleged that Aerocom has no cause of
action against it since the issuance of the writ of sequestration on June 15, 1988 was well-within the 18month constitutional deadline counted from February 2, 1987, the date when the people, in a plebiscite,
overwhelmingly ratified the 1987 Constitution.
During the pendency of Civil Case No. 0044, Aerocom filed on July 5, 1995 a Manifestation and Motion 6
praying that the Sandiganbayan direct the PCGG to release and distribute the dividends pertaining to the
shares of Aerocom in all corporations where it owns shares of stock. Commenting thereon, 7 the PCGG
opposed the release of the dividends on the argument that "the fact that plaintiff (Aerocom) is mentioned
in Annex "A" of the complaint filed in Civil Case No. 0009 is a clear indication that the shares thereof are
likewise sequestered."
The Sandiganbayan in its Resolution promulgated on January 31, 1996 8 acted favorably on Aerocom's
Manifestation and Motion and thus ordered the PCGG to release the dividends pertaining to Aerocom
except the dividends on the sequestered shares of stock registered in the names of Manuel Nieto and Jose
Africa in POTC, ETPI and Aerocom, on the following findings:
"A close scrutiny of Annex 'A' of the complaint in Civil Case No. 0009, entitled 'Republic of the
Philippines vs. Jose L. Africa, Manuel H. Nieto, Jr., and Roberto S. Benedicto',
does not show, that herein plaintiff Aerocom Investors & Managers, Inc., as a
corporation, was itself sequestered. What was sequestered are the shares of
stock of Manuel H. Nieto, Jr. and Jose L. Africa in Aerocom Investors & Managers,
Inc.
"Defendant PCGG is under estoppel from denying that it has in fact recognized and confirmed
the non-sequestration status of herein plaintiff, as a corporation, by releasing
the cash dividends due to the plaintiff from Philippine Overseas
Telecommunications Corporation (POTC for short) per its Resolutions dated June
29, 1993 and May 6, 1994. The said PCGG Resolution, dated June 29, 1993
(Annex "A", Manifestation and Motion, p. 330, record) refers to its approval to
release the POTC cash dividends declared in 1989 and 1991 pertaining to the
shares of herein plaintiff Aerocom Investors & Managers, Inc. in Philippine
Overseas Telecommunications Corporation. On the other hand; PCGG Resolution
No. 94-066 dated May 6, 1994 refers to its approval releasing the POTC cash
dividends declared in 1993 and 'accruing to the shares of stocks in POTC,
registered under the name of Aerocom Investors & Managers, Inc., except cash
dividends pertaining to the personal shares of Mr. Manuel H. Nieto, Jr. in POTC
and likewise his shares of stocks in Aerocom Investors & Managers, Inc.' (Annex
'B', Manifestation and Motion, p. 331, record).
"There is no dispute that herein plaintiff, as a corporation, has a juridical personality separate
and distinct from its stockholders."
After a motion for reconsideration thereof was denied by the Sandiganbayan per Resolution promulgated
on May 7, 1996, 9 the PCGG filed the present petition for certiorari on August 16, 1996 assailing the
Sandiganbayan order for the release of the dividends as having been issued with grave abuse of discretion.
In compliance with the Resolution of this Court dated September 2, 1996 10 which also granted the
temporary restraining order prayed for by the PCGG, Aerocom filed its comment on the petition on
September 11, 1996 11 to which, the PCGG on November 21, 1996 filed a reply. 12
The petition must fail.
There is merit in the initial point amplified by Aerocom in its comment that the instant certiorari
proceedings brought by the PCGG is an improper remedy under the circumstances. From a reading of its
January 31, 1996 Resolution granting Aerocom's Manifestation and Motion, (as heretofore quoted), as well
as the May 7, 1996 Resolution denying the motion for reconsideration, the Sandiganbayan has virtually
passed upon the pivotal issue involved in Aerocom's complaint for the declaration of nullity of the writ of
sequestration (Civil Case No. 00.44) i.e., whether or not Aerocom's sequestration was in order. That
court's finding to the effect that Aerocom was not validly sequestered, clearly, was a final adjudication on
the merits which is reviewable by the appellate court only through an appeal under Rule 45 of the Rules of
Court. The PCGG should have availed of the remedy of appeal filed within the statutory fifteen (15)-day
period and not a petition for certiorari, as the arguments the PCGG propounds in support of its challenge
on the Sandiganbayan Resolutions would amount to a digging into the merits and unearthing errors of
judgment. 13 At this juncture, "[it] must emphatically be reiterated," to borrow the words of Mr. Justice
Regalado in Purefoods Corp. vs. NLRC, 14 "since so often is it overlooked, that the special civil action for
certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment. The
reason for the rule is simple. When a court exercises its jurisdiction, an error committed while so engaged
does not deprive it of the jurisdiction being exercised when the error is committed. If it did, every error
committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void
judgment. This cannot be allowed. The administration of justice would not survive such a rule.
Consequently, an error of judgment that the court may commit in the exercise of its jurisdiction is not
correctable through the original civil action of certiorari."
Equally worth recalling is that certiorari is not and cannot be made a substitute for an appeal where the
latter remedy is available 15 but was lost thru the fault or negligence of petitioner, 16 as in this case.

Even if we disregard such procedural flaw, the substantial contentions of the PCGG fail to invite judgment
in its favor.
First. We cannot subscribe to the PCGG's theory that, as the first paragraph of Section 26, Article XVIII of
the Constitution speaks only of "The authority to issue . . .", then there is faithful compliance with the 18month constitutional deadline by the mere issuance of the writ of sequestration within that time-frame
(June 15, 1988) even if service thereof on Aerocom was effected thereafter (August 3, 1988).
The obvious intendment behind the 18-month period, as well as the six (6)-month time-limit for the filing of
the corresponding judicial action, is to ensure the protection of property rights and to serve as a necessary
safeguard against an overzealous exercise by the State, acting as "bounty-hunters" so to speak, of its
power of sequestration which, as described by Justice Ameurfina Melencio-Herrera in her concurring
opinion in BASECO v. PCGG, 17 is an "extraordinary, harsh and severe remedy." For this reason, "(I)t
should be confined", J. Herrera continues, "to its lawful parameters and exercised, with due regard, in the
words of its enabling laws, to the requirements of fairness, due process, and Justice." The probable evil of
governmental abuse is best avoided and the dictates of "fairness", "due process" and "Justice" are truly
heeded under an interpretation of Section 26, Article XVIII as requiring both the issuance of the writ and
notification to, or more precisely, the acquisition of jurisdiction over the entity/entities to be sequestered
via valid service thereof, to be effected within the 18-month period. A writ of sequestration, therefore, runs
the risk of being struck down as invalid if and when the twin requirements of issuance and service are not
satisfied within the deadline.
Such is the fate of the subject writ of sequestration, unfortunately. Whether the 18-month period expired
on July 26, 1988 (as claimed by Aerocom, in line with the computation of time under Article 13 of the Civil
Code and the ruling in "National Marketing Corp. v. Tecson," 29 SCRA 70) or on August 2, 1988 (the PCGG's
position), the fact remains that service of the writ on Aerocom on August 3, 1988 was made beyond these
dates. The PCGG's theory that the mere issuance of the writ within the 18-month deadline will suffice, is
just too dangerous to accept. Imagine a scenario where the PCGG may have actually tarried in the
issuance of the sequestration order to the prejudice of the would-be sequestered entity, and all that the
PCGG has to do to cover its mistake is to conveniently ante-date the writ so as to feign timely compliance.
That would, in effect, be allowing the PCGG to employ a subterfuge to validate what may in fact be a
purely whimsical, unfounded and an "afterthought" takeover of corporate property. The Constitution does
not and can never tolerate such a deceptive maneuver. Service of the writ of sequestration within the 18month period, then, is an imperative measure to guard against this kind of mischief, for it will certainly
give the assurance that the writ was genuinely issued within that constitutional deadline.
Second. The PCGG cannot justify its failure, as found by the Sandiganbayan, 18 to file the corresponding
judicial action against Aerocom within the six (6)-month period as provided for under the same
constitutional provision in focus (Section 26, Article XVIII, second paragraph) by the fact that Aerocom was
mentioned in the complaint of the PCGG in Civil Case No. 0009 (the Nieto, Africa, et al. case) and in Annex
"A" thereof notwithstanding that Aerocom was not impleaded as party-defendant, and on the argument
that the filing of Civil Case No. 0009 against the "Nieto, Africa, et al. group" is enough compliance with the
"judicial action" requirement. The case of Republic v. Sandiganbayan, 240 SCRA 376, January 23, 1995,
relied upon by the PCGG has no rightful application, inasmuch as this Court's pronouncements therein, in
answer to this crucial question:
"DOES INCLUSION IN THE COMPLAINTS FILED BY THE PCGG BEFORE THE SANDIGANBAYAN OF
SPECIFIC ALLEGATIONS OF CORPORATIONS BEING 'DUMMIES' OR UNDER THE
CONTROL OF ONE OR ANOTHER OF THE DEFENDANTS NAMED THEREIN AND
USED AS INSTRUMENTS FOR ACQUISITION, OR AS BEING DEPOSITARIES OR
PRODUCTS, OF ILL-GOTTEN WEALTH; OR THE ANNEXING TO SAID COMPLAINTS
OF A LIST OF SAID FIRMS, BUT WITHOUT ACTUALLY IMPLEADING THEM AS
DEFENDANTS, SATISFY THE CONSTITUTIONAL REQUIREMENT THAT IN ORDER TO
MAINTAIN A SEIZURE EFFECTED IN ACCORDANCE WITH EXECUTIVE ORDER NO.
1, s. 1986, THE CORRESPONDING 'JUDICIAL ACTION OR PROCEEDING' SHOULD
BE FILED WITHIN THE SIX-MONTH PERIOD PRESCRIBED IN SECTION 26, ARTICLE
XVIII, OF THE (1987) CONSTITUTION?",
presuppose a valid and existing sequestration of the unimpleaded corporation/s concerned. Thus
"1) Section 26, Article XVIII of the Constitution does not, by its terms or any fair interpretation
thereof, require that corporations or business enterprises alleged to be
repositories of ill-gotten wealth,' as the term is used in said provision, be
actually and formally impleaded in the actions for the recovery thereof, in order
to maintain in effect existing sequestrations thereof ;
"2) complaints for the recovery of ill-gotten wealth which merely identify and/or allege said
corporations or enterprises to be the instruments, repositories or the fruits of illgotten wealth, without more, come within the meaning of the phrase
'corresponding judicial action or proceeding' contemplated by the constitutional
provision referred to; the more so, that normally, said corporations, as
distinguished from their stockholders or members, are not generally suable for
the latter's illegal or criminal actuations in the acquisition of the assets invested
by them in the former; LLphil
"3) even assuming the impleading of said corporations to be necessary and proper so that
judgment may comprehensively and effectively be rendered in the actions,

amendment of the complaints to implead them as defendants may, under

existing rules of procedure, be done at any time during the pendency of the
actions thereby initiated, and even during the pendency of an appeal to the
Supreme Court a procedure that, in any case, is not inconsistent with or
proscribed by the constitutional time limits to the filing of the corresponding
complaints 'for' i.e., with regard or in relation to, in respect of, or in
connection with, or concerning orders of, sequestration freezing, or
provisional takeover.". . . (emphasis supplied)
There is no existing sequestration to talk about in this case, as the writ issued Aerocom, to repeat, is
invalid for reasons hereinbefore stated. Ergo, the suit in Civil Case No. 0009 against Mr. Nieto and Mr. Africa
as shareholders in Aerocom is not and cannot ipso facto be a suit against the unimpleaded Aerocom itself
without violating the fundamental principle that a corporation has a legal personality distinct and separate
from its stockholders. Such is the ruling laid down in PCGG v. Interco 19 reiterated anew in a case of more
recent vintage Republic v. Sandiganbayan, Sipalay Trading Corp. and Allied Banking Corp. 20 where this
Court, speaking through Mr. Justice Ricardo. J. Francisco, 21 hewed to the lone dissent of Mr. Justice
Teodoro R. Padilla 22 in the very same Republic v. Sandiganbayan case herein invoked by the PCGG, to wit:
". . . failure to implead these corporations as defendants and merely annexing a list of such
corporations to the complaints is a violation of their right to due process for it
would in effect be disregarding their distinct and separate personality without a
hearing.
"In cases where stocks of a corporation were allegedly the fruits of ill-gotten wealth, it should
be remembered that in most of these cases the stocks involved constitute a
substantial if not controlling interest in the corporations. The basic tenets of fair
play demand that these corporations be impleaded as defendants since a
judgment in favor of the government will undoubtedly substantially and
decisively affect the corporations as distinct entities. The judgment could strip
them of everything without being previously heard as they are not parties to the
action in which the judgment is rendered.
". . . Holding that the 'corresponding judicial action or proceeding' contemplated by the
Constitution is any action concerning or involving the corporation under
sequestration is oversimplifying the solution, the result of which is antagonistic
to the principles of justice and fair play.
". . . the actions contemplated by the Constitution should be those which include the
corporation not as a mere annex to the complaint but as defendant. This is the
minimum requirement of the due process guarantee. Short of being impleaded,
the corporation has no standing in the judicial action. It cannot adequately
defend itself. It may not even be heard.
"On the . . . opinion that alternatively the corporations can be impleaded as defendants by
amendment of the complaint, Section 26, Article XVIII of the Constitution would
appear to preclude this procedure, for allowing amendment of the complaint to
implead theretofore unimpleaded corporations would in effect allow complaints
against the corporation to be filed beyond the periods fixed by said Section 26.
xxx xxx xxx
"While government efforts to recover illegally amassed wealth should have support from all its
branches, eagerness and zeal should not be allowed to run berserk, overriding
in the process the very principles that it is sworn to uphold. In our legal system,
the ends do not always justify the means. Wrongs are never corrected by
committing other wrongs, and as above-discussed the recovery of ill-gotten
wealth does not and should never justify unreasonable intrusions into
constitutionally forbidden grounds. . . ."
The last area of discussion touches on the doctrine of estoppel. Let us rewind the events for a clear
understanding of the issue involved.
During the pendency of the Aerocom complaint against the PCGG, the latter approved the release of the
cash dividends declared in the years 1989, 1991 and 1993 accruing to the shares of stock of Aerocom in
the Philippine Overseas Telecommunications Co. (POTC) per PCGG Certification dated June 29, 1993 23 and
Resolution No. 94-066 dated May 6, 1994 which read, respectively:
Taking into account these documents, the Sandiganbayan thus found the PCGG to be in estoppel from
denying the non-sequestered status of Aerocom and from refusing the release of cash dividends in favor of
the latter. The PCGG takes exception to this finding on the claim that the State should not be held
vulnerable to estoppel for the acts of past officials.
The PCGG's contention is not persuasive under the attendant circumstances. While we agree with the
statement that the State is immune from estoppel, this concept, as clarified by this Court thru Mr. Justice
Melo in Republic v. Sandiganbayan, et al. 25 "is understood to refer to acts and mistakes of its officials
especially those which are irregular." 26 Here, other than its bare assertion that Atty. Sanchez's "Opinion"
is "illegal and prejudicial", the PCGG has not presented convincing evidence to prove irregularity or
negligence on the part of Atty. Sanchez in rendering his "Opinion" favorable to Aerocom. In fact, no less
than PCGG Chairman Magtanggol Gunigundo and the rest of the Commissioners clearly heeded the
recommendation of Atty. Sanchez by affixing their signatures on Resolution No. 94-066 allowing the release
of the cash dividends declared in 1993 accruing to Aerocom's shares of stack in POTC. Elementary notions

of consistency and fair play call upon the PCGG to honor the release of the cash dividends presently
requested by Aerocom, after a similar commitment has been collectively confirmed by its commissioners in
black and white. "A ruling to the contrary", in the erudite language of Justice Escareal of the
Sandiganbayan as adopted in Republic v. Sandiganbayan, 226 SCRA 314, "is not only illogical and
irrational, but inequitable and pernicious as well, for it may open the door for capricious adventurism on
the part of the policy-makers of the land, and disregard for the majesty of the law, which could, ultimately
bring about the citizenry's loss of faith and confidence in the sincerity of the government in its dealings
with the governed."
WHEREFORE, the instant petition is hereby DISMISSED. The assailed Resolutions of the Sandiganbayan
promulgated on January 31, 1996 and May 7, 1996 are AFFIRMED in their entirety.
SO ORDERED.
SECOND DIVISION
[G.R. No. L-56763. December 15, 1982.]
JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION, petitioners, vs. TYSON ENTERPRISES,
INC., JUDGE GREGORIO G. PINEDA of the Court of First Instance of Rizal, Pasig Branch XXI and
COURT OF APPEALS, respondents.
Abraham D. Caa for petitioners.
Alberto A. Domingo for private respondent.
SYNOPSIS
Private respondent, a corporation doing business in Binondo, Manila filed a
complaint for collection with the Court of First Instance of Rizal, against petitioners Sy and
Universal Parts Supply Corporation, residing and doing business, respectively, in Bacolod
City. The complaint was filed in Rizal as, it was the address of in president and general
manager at San Juan, Rizal and not the address of the plaintiff corporation which was
alleged in the complaint. Petitioners filed a motion for extension of time to file their answer
and subsequently a motion for a bill of particulars. When the latter motion was denied,
petitioners filed a motion to dismiss on the ground of improper venue, invoking the
provision of Section 2 (b), Rule 4 of the Rules of Court and the stipulation found in the sales
invoice that all legal actions arising from their transaction shall be filed with the Courts of
the City of Manila. The trial court denied the motion on the wound that the petitioners
waived their objection on improper venue when they filed a motion for bill of particulars.
Petitioners then filed with the Court of Appeals a petition for certiorari and prohibition. The
Court of Appeals dismissed the petition and ruled that the parties did not intend Manila as
the exclusive venue of actions arising under their transaction. Hence, this petition.
The Supreme Court held that venue was improperly laid; and that under Section
4, Rule 4 of the present Rules of Court, the filing of a motion for a bill of particulars before
the filing of a motion to dismiss does not constitute a waiver of the objection to the venue.
Decision reversed and set aside.
SYLLABUS
1. REMEDIAL LAW; CIVIL ACTIONS; VENUE; CASE AT BAR IMPROPERLY LAID. There is no
question that the venue was improperly laid in this case. The place of business of plaintiff Tyson
Enterprises, Inc., which for purposes of venue is considered as its residence (18 C.J.S. 583; Clavecilla
Radio System vs. Antillon, L-22238, February 18, 1967), is in Manila and not in Rizal. The residence of
its president is not the residence of the corporation because a corporation has a personality separate
and distinct from that of its officers and stockholders.
2. ID.; SPECIAL CIVIL ACTIONS; PROHIBITION; PROPER TO RESTRAIN PROCEEDINGS OF
IMPROPERLY LAID CASE. We hold that the trial court and the Court of Appeals erred in ruling that
the defendants, now the petitioners, waived their objection to the improper venue. As the trial court
proceeded in defiance of the Rules of Court in not dismissing the case, prohibition lies to restrain it
from acting in the case (Enriquez vs. Macadaeg, 84 Phil. 674).
3. ID.; CIVIL ACTIONS; MOTION TO DISMISS; GROUND; IMPROPER VENUE; FILING OF BILL
OF PARTICULARS BEFORE FILING OF MOTION TO DISMISS, NOT WAIVER THEREOF; CASE AT BAR. In
this case, the petitioners. before filing their answer, filed a motion to dismiss based on improper
venue. That motion was seasonably filed (Republic vs. Court of First Instance of Manila, L-30839,
November 28, 1975, 68 SCRA 231, 239). The fact that they filed a motion for a bill of particulars
before they filed their motion to dismiss did not constitute a waiver of their objection to the venue.
4. ID.; ID.; ID.; ID.; ID.; HOW INTERPOSED. What Section 4 of Rule 4 of the Rules of
Court provides is that the objection to improper venue should be raised in a motion to dismiss
seasonably filed and, if not so raised, then the said objection is waived. Section 4 does not provide
that the objection based on improper venue should be interposed by means of a special appearance
or before any pleading is filed.
5. ID.; ID.; PURPOSE OF PROCEDURE. As perspicaciously observed by Justice Moreland,
the purpose of procedure is not to restrict the court's jurisdiction over the subject matter but to give
it effective facility "in righteous action," "to facilitate and promote the administration of justice" or to
insure "just judgments" by means of a fair hearing. If that objective is not achieved, then "the
administration of justice becomes incomplete and unsatisfactory and lays itself open to grave
criticism." (Manila Railroad Co. vs. Attorney General, 20 Phil, 523).
DE CASTRO, J., concurring:

REMEDIAL LAW; CIVIL ACTIONS; MOTION TO DISMISS; GROUND; IMPROPER

VENUE; DEEMED WAIVED BY FILING OF A MOTION FOR BILL OF PARTICULAR. Since the
residence of the plaintiff is not alleged in the complaint, the fact of improper venue is,
therefore, not manifest on the face of the complaint, and the defendant may not be
deemed to have waived objection to improper venue. Were it so manifest, however, the
filing of a motion for a bill of particulars by defendants would constitute a waiver of the
objection to improper venue.
ESCOLIN, J., dissenting:
REMEDIAL LAW; CIVIL ACTIONS; MOTION TO DISMISS; GROUND; IMPROPER
VENUE; FILING OF BILL OF PARTICULARS, CONSTITUTES WAIVER THEREOF. Petitioners, by
filing a motion for a bill of particulars, had submitted themselves to the jurisdiction of the
respondent court, and has thus waived their objection to the venue of action.
DECISION
AQUINO, J p:
This is a case about the venue of a collection suit. On August 29, 1979, Tyson
Enterprises, Inc. filed against John Sy and Universal Parts Supply Corporation in the Court of
First Instance of Rizal, Pasig Branch XXI, a complaint for the collection of P288,534.58 plus
interest, attorney's fees and litigation expenses (Civil Case No. 34302).
It is alleged in the complaint that John Sy, doing business under the tradename,
Universal Parts Supply, is a resident of Fuentebella Subdivision, Bacolod City and that his
codefendant, Universal Parts Supply Corporation, allegedly controlled by Sy, is doing
business in Bacolod City.
Curiously enough, there is no allegation in the complaint as to the office or
place of business of plaintiff Tyson Enterprises, Inc., a firm actually doing business at 1024
Magdalena, now G. Masangkay Street, Binondo, Manila (p. 59, Rollo).
What is alleged is the postal address or residence of Dominador Ti, the
president and general manager of plaintiff firm, which is at 26 Xavier Street, Greenhills
Subdivision, San Juan, Rizal. The evident purpose of alleging that address and not
mentioning the place of business of plaintiff firm was to justify the filing of the suit in Pasig,
Rizal instead of in Manila.
Defendant Sy and Universal Parts Supply Corporation first filed a motion for
extension of time to file their answer and later a motion for a bill of particulars. The latter
motion was denied. Then, they filed a motion to dismiss on the ground of improper venue.
They invoked the provision of section 2(b), Rule 4 of the Rules of Court that
personal actions "may be commenced and tried where the defendant or any of the
defendants resides or may be found, or where the plaintiffs or any of the plaintiffs resides,
at the election of the plaintiff."
To strengthen that ground, they also cited the stipulation in the sales invoice
that "the parties expressly submit to the jurisdiction of the Courts of the City of Manila for
any legal action arising out of" the transaction which stipulation is quoted in paragraph 4 of
plaintiff's complaint.
The plaintiff opposed the motion to dismiss on the ground that the defendants
had waived the objection based on improper venue because they had previously filed a
motion for a bill of particulars which was not granted.
The trial court denied the motion to dismiss on the ground that by filing a
motion for a bill of particulars the defendants waived their objection to the venue. That
denial order was assailed in a petition for certiorari and prohibition in the Court of Appeals
which issued on July 29, 1980 a restraining order, enjoining respondent judge from acting
on the case. He disregarded the restraining order (p. 133, Rollo).
The Appellate Court in its decision of October 6, 1980 dismissed the petition. It
ruled that the parties did not intend Manila as the exclusive venue of the actions arising
under their transactions and that since the action was filed in Pasig, which is near Manila,
no useful purpose would be served by dismissing the same and ordering that it be filed in
Manila (Sy vs. Pineda, CA-G. R. No. SP-10775). That decision was appealed to this Court.
There is no question that the venue was improperly laid in this case. The place
of business of plaintiff Tyson Enterprises, Inc., which for purposes of venue is considered as
its residence (18 C.J.S. 583; Clavecilla Radio system vs. Antillon, L-22238, February 18,
1967, 19 SCRA 379), is in Manila and not in Rizal. The residence of its president is not the
residence of the corporation because a corporation has a personality separate and distinct
from that of its officers and stockholders.
Consequently, the collection suit should have been filed in Manila, the
residence of plaintiff corporation and the place designated in its sales invoice, or it could
have been filed also in Bacolod City, the residence of defendant Sy.
We hold that the trial court and the Court of Appeals erred in ruling that the
defendants, now the petitioners, waived their objection to the improper venue. As the trial
court proceeded in defiance of the Rules of Court in not dismissing the case, prohibition lies
to restrain it from acting in the case (Enriquez vs. Macadaeg, 84 Phil. 674).
Section 4, Rule 4 of the Rules of Court provides that "when improper venue is
not objected to in a motion to dismiss, it is deemed waived" and it can no longer be

pleaded as an affirmative defense in the answer (Sec. 5, Rule 16).

In this case, the petitioners, before filing their answer, filed a motion to dismiss
based on improper venue. That motion was seasonably filed (Republic vs. Court of First
Instance of Manila, L-30839, November 28, 1975, 68 SCRA 231, 239). The fact that they
filed a Motion for a bill of particulars before they filed their motion to dismiss did not
constitute a waiver of their objection to the venue.
It should be noted that the provision of Section 377 of the Code of Civil
Procedure that "the failure of a defendant to object to the venue of the action at the time of
entering his appearance in the action shall be deemed a waiver on his part of all objection
to the place or tribunal in which the action is brought" is not found in the Rules of Court.
And the provision of section 4, Rule 5 of the 1940 Rules of Court that "when
improper venue is not objected to prior to the trial, it is deemed waived" is not reproduced
in the present Rules of Court.
To repeat, what section 4 of Rule 4 of the present Rules of Court provides is that
the objection to improper venue should be raised in a motion to dismiss seasonably filed
and, if not so raised, then the said objection is waived. Section 4 does not provide that the
objection based on improper venue should be interposed by means of a special appearance
or before any pleading is filed.
The rules on venue, like the other procedural rules, are designed to insure a just
and orderly administration of justice or the impartial and evenhanded determination of
every action and proceeding. Obviously, this objective will not be attained if the plaintiff is
given unrestricted freedom to choose the court where he may file his complaint or petition.
The choice of venue should not be left to the plaintiff's whim or caprice. He may
be impelled by some ulterior motivation in choosing to file a case in a particular court even
if not allowed by the rules on venue.
As perspicaciously observed by Justice Moreland, the purpose of procedure is
not to restrict the court's jurisdiction over the subject matter but to give it effective facility
"in righteous action", "to facilitate and promote the administration of justice" or to insure
"just judgments" by means of a fair hearing. If that objective is not achieved, then "the
administration of justice becomes incomplete and unsatisfactory and lays itself open to
grave criticism." (Manila Railroad Co. vs. Attorney General, 20 Phil. 523, 530.).
The case of Marquez Lim Cay vs. Del Rosario, 55 Phil. 962, does not sustain the
trial court's order of denial because in that case the defendants, before filing a motion to
dismiss on the ground of improper venue, interposed a demurrer on the ground that the
complaint does not state a cause of action. Then, they filed a motion for the dissolution of
an attachment, posted a bond for its dissolution and later filed a motion for the assessment
of the damages caused by the attachment. All those acts constituted a submission to the
trial court's jurisdiction and a waiver of the objection based on improper venue under
section 377 of the Code of Civil Procedure.
The instant case is similar to Evangelista vs. Santos, 86 Phil. 387, where the
plaintiffs sued the defendant in the Court of First Instance of Rizal on the assumption that
he was a resident of Pasay City because he had a house there. Upon receipt of the
summons, the defendant filed a motion to dismiss based on improper venue. He alleged
under oath that he was a resident of Iloilo City.
This Court sustained the dismissal of the complaint on the ground of improper
venue, because the defendant was really a resident of Iloilo City. His Pasay City residence
was used by his children who were studying in Manila. Same holding in Casilan vs. Tomassi,
90 Phil. 765; Corre vs. Corre, 100 Phil. 321; Calo vs. Bislig Industries, Inc., L-19703, January
30, 1967, 19 SCRA 173; Adamos vs. J. M. Tuason, Co., Inc., L-21957, October 14, 1968, 25
SCRA 529.
Where one Cesar Ramirez, a resident of Quezon City, sued in the Court of First
Instance of Manila Manuel F. Portillo, a resident of Caloocan City, for the recovery of a sum
of money, the trial court erred in not granting Portillo's motion to dismiss the complaint on
the ground of improper venue. This Court issued the writ of prohibition to restrain the trial
court from proceeding in the case (Portillo vs. Judge Reyes and Ramirez, 113 Phil. 288).
WHEREFORE, the decision of the Court of Appeals and the order of respondent
judge denying the motion to dismiss are reversed and set aside. The writ of prohibition is
granted. Civil Case No. 34302 should be considered dismissed without prejudice to refiling it
in the Court of First Instance of Manila or Bacolod City at the election of plaintiff which
should be allowed to withdraw the documentary evidence submitted in that case. All the
proceedings in said case, including the decision, are also get aside. Costs against Tyson
Enterprises, Inc.
SO ORDERED.
EN BANC
[G.R. No. 42420. November 20, 1936.]
WALTER A. SMITH CO., INC., plaintiff-appellee, vs. J. W. FORD, defendant-appellant.
J.W. Ferrier for appellant.

Anatolio G. Alcoba for appellee.

SYLLABUS
1. ALLEGATIONS; JURISDICTION; WAIVER OF RIGHT TO OBJECT TO VENUE. Even
granting that the plaintiff company had no branch in the City of Manila at the time of the filing of the
complaint, the existence thereof not having been proven, the Court of First Instance of Manila did not
thereby lack jurisdiction to take cognizance of said complaint because when said defendant's
demurrer had been overruled and he was ordered to answer the complaint, he filed an answer
wherein, aside from denying generally and specifically the allegations contained in each and every
paragraph of the complaint in question, he interposed two special defenses. This is equivalent to a
waiver of his right to object to the jurisdiction of the court a quo over his person and a submission to
the jurisdiction of said court (67 Corpus Juris, 131).
2. ID.; SUFFICIENCY OF EVIDENCE IN SUPPORT OF THE COMPLAINT. It having been
proven that all the lumber the value of which is claimed by the plaintiff company was invoiced in the
defendant's name or delivered at his address, the mere answer that he neither knew nor
remembered whether or not some of those who signed the receipts for delivery thereof were his
employees cannot overcome the evidence for the plaintiff.
DECISION
VILLA-REAL, J p:
The defendant J.W. Ford appeals to this court from the judgment of the Court of First
Instance of Manila the dispositive part of which reads:
"Wherefore, the court orders the herein defendant to pay to the
plaintiff Walter A. Smith Co., Inc., the sum of two thousand four hundred eightynine pesos and ninety-two centavos (P2,489.92), with interest thereon at 1 per
cent a month from the dates of the invoices in question, with costs. So ordered."
In support of his appeal, the appellant assigns the following alleged errors as committed
by the court a quo in its decision in question, to wit:
"1. In overruling defendant's demurrer and motion to dismiss.
"2. In declaring that defendant had not only failed to deny but had
admitted that he had received all the merchandise described in the inovices.
"3. In condemning the defendant to pay plaintiff the sum of
P2,489.92 with interest thereon at 1 per cent per annum from the respective
dates of the invoices, and to pay the costs.
"4. In not absolving the defendant from the complaint particularly
for the reason that plaintiff no longer has any claim against said defendant.
"5. In denying defendant's motion for a new trial."
From the record the following facts may be inferred:
By resolution of December 31, 1931, of the board of directors of the corporation, Walter
A. Smith Co., Inc., with official residence in Iloilo, Iloilo, the president thereof, Walter A. Smith, was
authorized to open and he did open a branch of the corporation in the City of Manila. From December
6, 1927, to May 17, 1930, both dates inclusive, there were delivered on different dates at the
defendant's address in Iloilo, Iloilo, various kinds of lumber the total value of which amounted to
P2,489.92 (Exhibits A, A-3, B, B-3, C, C-2, C-4, D, E, E- 2, E-4, F, F-3, G, H, I, J, J-3, K, K-3, K-6 and L-1),
the corresponding receipts having been signed as follows: Exhibit A-1 by Nicolas Dignadice, Exhibit
A-4 by Manuel Solatorio, Exhibit B-1 by Manuel Solatorio, Exhibit B-4 by Geo. G. Martin, Exhibit C-1
by J.W. Ford, Exhibit C-3 by a person the signature of which is illegible, Exhibit C-5 by Andres Velez,
Exhibits D-1, E-1, and E-3 by J.W. Ford himself, Exhibit F-5 by Cornelio Flores, Exhibit H-1 by J.W. Ford
himself, Exhibit I-1 by Thick Ford, Exhibit I-2 by Frank F. Ford, Exhibits J-1 and EJ-4 by Gabino Pullantis,
Exhibit K by Frank Ford, Exhibit K-4 by Juan Salazar, Exhibit K-7 by Mariano Moquera, Exhibit L-1 by
Mrs. Marcela Ford. Some of said receipts, those signed by the defendant J. W. Ford, bear under the
signature thereof the words "on account" (Exhibit E-1), "Act. Loan & Asia Lumber Co." (Exhibit E-3),
"On Act." (Exhibit F-1), "On Act. Note from Asia Lumber Co." (Exhibit H-1). The value of said lumber
had not yet been paid either totally or partially on the date of the filing of the amended complaint.
The defendant J.W. Ford denies having received all said lumber. He admits having
received only that appearing in Exhibits A-1 signed by Nicolas Dignadice; A-4 signed by Manuel
Solatario; B-1 also signed by Manuel Solatario; B-4 signed by Geo G. Martin; C-1 signed by J.W. Ford;
C-5 signed by Andres Velez; D-1, E-1 and E-3 signed by J.W. Ford; E-5 signed by Frank Ford; F-1
signed by J.W. Ford; F-2 signed by Frank Ford; F-4 signed by J.W. Ford; F-5 signed by Cornelio Flores;
H- 1 signed by J.W. Ford; I-2 signed by Frank F. Ford; J-1 signed by Gabino Pullantis; K signed by Frank
Ford; K-7 signed by Mariano Moquera; L-1 signed by Marcela de Ford. The lumber consigned in the
receipts Exhibits C-3 with an illegible signature; G and G-1 which are unsigned; J-3 also unsigned; J-4
signed by Gabino Pullantis, and K-3 and K-4 signed by Juan Salazar, was not received by him
inasmuch as he does not know the persons whose signatures appear in said receipts. Upon being
questioned by his attorney regarding the signature of Nicolas Dignadice in Exhibit A-1, the defendant
J.W. Ford stated that he did not remember said name but that it must be that of one of his
employees. With respect to Manuel Solatario whose signature appears in the receipt Exhibit A-4, Geo.
G. Martin whose signature appears in the receipt Exhibit B-4; and Andres Velez whose signature
appears in Exhibit C-5, the defendant J.W. Ford, upon being asked if he had employees by those
names, answered that he did not know or that he did not remember.
In view of the foregoing facts, the first question to be decided is that procedural question

raised by the appellant in his first assignment of alleged error, consisting in that the court a quo
erred in overruling the demurrer filed by him and denying his motion to dismiss on the ground of
improper venue.
Even granting that the plaintiff company had no branch in the City of Manila at the time
of the filing of the complaint, the existence thereof not having been conclusively proven, the Court of
First Instance of Manila did not thereby lack jurisdiction to take cognizance of said complaint because
when said defendant's demurrer had been overruled and he was ordered to answer the complaint,
he filed an answer wherein, aside from denying generally and specifically the allegations contained
in each and every paragraph of the complaint in question, he interposed two special defenses one of
which is that all the items enumerated in said complaint, with the exception of the last two
amounting to P278.40, have already prescribed; the other being that Walter A. Smith, the biggest
stockholder of the plaintiff corporation was indebted and continued to be indebted to the defendant
for a considerable amount of money the total of which is very much more than that claimed by the
plaintiff entity, which amount must be applied to the payment of Walter A. Smith's debt to said
defendant, and he prays for the dismissal of the complaint. All of this is equivalent to a waiver of his
right to object to the jurisdiction of the court a quo over his person and a submission to the
jurisdiction of said court (67 Corpus Juris, 131). The facts of the case of Cohen and Cohen vs.
Benguet Commercial Co. (34 Phil., 526), cited by the appellant, are that the defendant company
appeared specially and objected to the jurisdiction of the Court of First Instance of Manila over the
company in question and the subject matter of the action on the ground that the venue had been
improperly laid by the plaintiff as the trial, under the provisions of the Code of Civil Procedure, must
take place in the province where either the plaintiff or the defendant resided or was found at the
time the summons was served. The prayer of the motion was that the above entitled cause be
dismissed. The motion was denied by the court on the ground that the motion, especially the prayer,
constituted a voluntary general appearance in the action, and that such an appearance was a waiver
of the objection to the venue. The motion filed by the defendant company, Benguet Commercial Co.,
Ltd., reads: "Now come the undersigned attorneys appearing specially in behalf of the defendant in
the above entitled case for the sole purpose of objecting to the venue of the action." This court,
through Justice Moreland, said:
"This limited the character of the appearance in that motion unless,
by some subsequent act, the defendant waived the limitation or exceeded it by
acts which constitute a general appearance. The mere fact that the prayer of
the motion was for a dismissal of the action is not sufficient to constitute such
waiver, or even a general appearance, having in mind the limitation stated in
the body of the motion. A prayer in a motion, like a prayer in a complaint, is not
conclusive as to the character of the motion. Indeed, under the Code of Civil
Procedure dismissal of the action is one of the remedies for an improper venue.
Improper venue is a ground of demurrer and it may be made the basis of a plea
in abatement; and, as the ordinary effect of sustaining a demurrer is to dismiss
the complaint, if it is not amended, and, as the result of a plea in abatement is
to terminate the action, it necessarily follows that the remedy prayed for was
one of the remedies to which defendant was entitled if its motion was proper.
"Section 377 provides that the defendant may enter a general
appearance in the action without waiving his rights, even where the venue is
improperly laid, provided he, at the same time, files an objection to the venue.
The distinction between a general and special appearance does not seem to
have been preserved, at least in words, by the Code of Civil Procedure, it
appearing to have been the purpose of the legislature, in enacting section 377,
to require the courts to look at the intent and purpose of the appearing party
and to deal with him accordingly, leaving out of account all technicalities which
would deprive him of that which he really desired to secure by his appearance.
Furthermore, there does not seem to be any provision in the Code of Civil
Procedure with respect to change of venue in cases like the present, the remedy
appearing to be a dismissal of the action on the ground that the jurisdiction, if
any, which the court obtained over the person of the defendant by the service
of the summons within the jurisdiction of the court, is divested by objection in
conformity with the provisions of section 377."
It will be seen that in said case the defendant company only appeared specially to object
to the jurisdiction of the court as to the place where the complaint was filed and its person. It neither
filed any answer, not set up any defense whether general or special with a prayer for relief. In the
present case the defendant answered the complaint by denying generally and specifically all the
allegations contained therein and interposed special defenses praying that the plaintiff company's
claim against him be compensated by what the manager of the company, Walter A. Smith, owed
him. In the case of Marquez Lim Cay vs. Del Rosario (55 Phil., 962), this court laid down the following
doctrine:
"The filing of a demurrer on the ground that the complaint does not
allege facts sufficient to constitute a cause of action; the filing of a motion
praying for the dissolution of an attachment without objecting to the jurisdiction

of the court over the place where the property is situated, by means of a special
appearance; the giving of a bond for the dissolution of said attachment; and the
filing of a motion praying for the assessment of damages caused by the undue
and unjust issuance of said attachment, imply a submission to the jurisdiction of
the court and a waiver of the privilege to impugn such jurisdiction. (Manila
Railroad Company vs. Attorney-General, 20 Phil., 523.)" (See also Samson vs.
Carratala, 50 Phil., 647.)
As to the second assignment of alleged error, while it is true that not all the receipts for
delivery of lumber were signed by the defendant, upon being asked by his own attorney whether
those who signed the other receipts of delivery were his employees, he answered that he did not
know or that he did not remember. It having been proven that all the lumber the value of which is
claimed by the plaintiff company was invoiced in the name of the defendant or delivered at his
address, the mere answer that he neither knew nor remembered whether or not some of those who
signed the receipts for delivery thereof were his employees cannot overcome the evidence for the
plaintiff.
With respect to the question whether or not the defendant is entitled to the
compensation of the amount claimed by the plaintiff company by the alleged indebtedness to him of
the president and manager thereof, Walter A. Smith, it not appearing that the amounts which the
defendant claims Walter A. Smith owes him were invested or used in connection with the business of
said corporation, the corporation cannot be held responsible for the payment thereof as the mere
fact that Walter A. Smith is president and manager of Walter A. Smith Co., Inc., does not make the
latter responsible for any personal obligation contracted by said manager.
As to the question raised in the fourth assignment of alleged error that the court a quo
erred in not absolving the defendant from the complaint inasmuch as said plaintiff no longer has any
claim against said defendant, Exhibit LL provides that the Manila Lumber Inc. would take charge of
collecting certain accounts due Walter A. Smith Co., Inc., with official residence in the City of Iloilo, on
condition that said Manila Lumber Inc. should defray all expenses incurred in the collection of the
accounts delivered to it for collection and that 10 per cent of the amount collected, after deducting
all the expenses for collection including costs, sheriff's fees and attorney's fees, would be delivered
to said Walter A. Smith Co., Inc., said Manila Lumber Inc., retaining 90 per cent of the net amount
collected. It will be seen that under said contract Walter A. Smith Co., Inc., has not transferred its
rights over its uncollected accounts to the Manila Lumber Inc., but simply entrusted the collection
thereof from its debtors. The fact that the Manila Lumber Inc. retained 90 per cent of the net amount
of the collections, delivering only 10 per cent thereof to Walter A. Smith, Inc., has nothing to do with
Walter A. Smith's personal debt which, as already stated, cannot be imputed to Walter A. Smith Co.,
Inc., on the ground that Walter A. Smith's personality is separate from and independent of the
juridical personality of Walter A. Smith Co., Inc., notwithstanding the fact that Walter A. Smith is the
biggest stockholder of the corporation.
In view of the foregoing considerations, and not finding any error in the appealed
judgment, it is affirmed in toto with costs to the appellant. So ordered.
EN BANC
[G.R. No. L-22973. January 30, 1968.]
MAMBULAO LUMBER COMPANY, plaintiff-appellant, vs. PHILIPPINE NATIONAL BANK and
ANACLETO HERADO, ETC., defendants-appellees.
Ernesto P. Villar and Arthur Tordesillas for plaintiff-appellant.
Tomas Besa, and Jose B. Galang for defendants-appellees.
SYLLABUS
1.CONTRACTS; LOAN; INTEREST; COMPOUNDED; WHEN SHALL IT BE RECKONED. In computing the
interest on any obligation, promissory note or other instrument or contract, compound interest shall not be
reckoned, except by agreement, or in default thereof, whenever the debt is judicially claimed. Interest due
shall earn legal interest only from the time it is judicially demanded. Interest due and unpaid shall not earn
interest. The parties may, by stipulation, capitalize the interest due and unpaid, which as added principal,
shall earn new interest; but such stipulation is nowhere to be found in terms of the promissory note
involved in this case. Clearly, therefore, the trial court fell into error when it awarded interest on accrued
interests, without any agreement to that effect and before they had been judicially demanded.
2.ID.; MORTGAGE; EXTRA-JUDICIAL FORECLOSURE SALE; EXPENSES. The fees enumerated under
paragraphs k and n, Section 7, of Rule 130 (now Rule 141) are demandable only by a sheriff serving
processes of the court in connection with judicial foreclosure of mortgages, under Rule 68 of the new Rules,
and not in cases of extra-judicial foreclosure of mortgages under Act 3135. The law applicable is Section 4
of Act 3135 which provides that the officer conducting the sale is entitled to collect a fee of P5.00 for each
day of actual work performed in addition to his expenses in connection with foreclosure sale. The PNB
failed to prove that it actually spent any amount in connection with the said foreclosure sale. In the
absence of evidence to show at least the number of working days the sheriff concerned actually spent in
connection with the extra-judicial foreclosure sale, the most that he may be entitled to, would be the
amount of P10.00 as a reasonable allowance for two day's work. Obviously, therefore, the award of amount
of P298.54 as expenses of the sale should be set aside.
3.ID.; ID.; ID.; ATTORNEY'S FEES. Where the contract of mortgage clearly stipulates that the mortgagor
agrees that in all cases (extra- judicial or judicial foreclosure), attorney's fees is fixed at ten percent (10%)

of the total indebtedness then unpaid, which in no case shall be less than P100 exclusive of all fees
allowed by law, and the expenses of collections shall be the obligation of the mortgagor and shall with
priority, be paid to the mortgagee out of any sums realized from the proceeds of the sale of said property
the said stipulation to pay attorney's fees is clear enough to cover both cases of foreclosure sale, i.e.,
judicially or extrajudicially. While the phrase "in all cases" appears to be part of the second sentence, a
reading of the whole context of the stipulation would readily show that it logically refers to extra-judicial
foreclosure found in the first sentence, and to judicial foreclosure mentioned in the next sentence. The
ambiguity by reason of faulty sentence construction should not be made to defeat the otherwise clear
intention of the parties in the agreement.
4.ID.; ID.; EXTENT OF AUTHORITY OF MORTGAGEE TO SELL PROPERTY MORTGAGED. While the law
grants power and authority to the mortgagee to sell the mortgaged property at a public place in the
municipality where the mortgagor resides, or where the property is situated, the sale of a mortgaged
chattel may be made in a place other than that where it is found, provided that the owner thereof consents
thereto; or that there is an agreement to this effect between the mortgagor and the mortgagee. But when
the parties agreed to have the property mortgaged sold at the residence of the mortgagor, the mortgagee
can not retain that power and authority to select from among the places provided for in the law and place
designated in their agreement, over the objection of the mortgagor.
5.ID.; ID.; CHATTEL MORTGAGE; SALE OF PROPERTY; DUTY OF SHERIFFS. Section 14, of Act 1508, as
amended, provides that the officer making the sale should make a return of his doings which shall
particularly describe the articles sold and the amount received from each article. From this, it is clear that
the law requires that sale be made article by article, otherwise, it would be impossible for him to state the
amount received for each item. This requirement was totally disregarded by the Deputy Sheriff of
Camarines Norte when he sold the chattels in question in bulk, notwithstanding the fact that the said
chattels consisted of no less than twenty different items as shown in the bill of sale. This makes the sale of
the chattels manifestly objectionable. And in the absence of any evidence to show that the mortgagor had
agreed or consented to such sale in gross, the same should be set aside.
6.ID.; ID.; CHATTEL MORTGAGE; SALE OF PROPERTY NOT IN ACCORDANCE WITH TERMS OF CONTRACT;
LIABILITY OF MORTGAGEE. The mortgagee is guilty of conversion when he sells under the mortgage but
not in accordance with its terms, or where the proceedings as to the sale or foreclosure do not comply with
the statute. This rule applies squarely to the facts of this case where, as earlier shown, herein appellee
bank insisted, and the appellee deputy sheriff of Camarines Norte proceeds with the sale of the mortgaged
chattels at Jose Panganiban, Camarines Norte, in utter disregard of the valid objection of the mortgagor
thereto for the reason that it is not the place of sale agreed upon in the mortgage contract; and the said
deputy sheriff sold all the chattels (among which were a skagit with caterpillar engine, three GMC 6x6
trucks, a Herring Hall Safe, and Sawmill equipment consisting of a 150 HP Murply Engine, plainer, large
circular saws, etc.) as a single lot in violation of the requirement of the law to sell the same article by
article. The PNB has resold the chattels to another buyer with whom it appears to have actively cooperated
in subsequently taking possession of and removing the chattels from appellant's compound by force, as
shown by the circumstance that they had to take along PC soldiers and municipal policemen of Jose
Panganiban who placed the chief security officer of the premises in jail to deprive herein appellant of its
possession thereof. To exonerate itself of any liability for the breach of peace thus committed, the PNB
would want us to believe that it was the subsequent buyer alone, who is not a party to this case, that was
responsible for the forcible taking of the property; but assuming this to be so, still PNB cannot escape
liability for the conversion of the mortgaged chattels by parting with its interest in the property. Neither
would its claim that it afterwards gave a chance to herein appellant to repurchase or redeem the chattels,
improve its position, for the mortgagor is not under obligation to take affirmative steps to repossess the
chattels that were converted by the mortgagee. As a consequence of the said wrongful acts of the PNB and
the Deputy Sheriff of Camarines Norte, therefore, We have to declare that herein appellant is entitled to
collect from them jointly and severally, the full value of the chattels in question at the time they were
illegally sold by them. To this effect was the holding of this Court in a similar situation.
7.ID.; ID.; CHATTEL MORTGAGE; SALE OF PROPERTY NOT IN ACCORDANCE WITH CONTRACT; EXEMPLARY
DAMAGES AND ATTORNEY'S FEES. But for the wrongful acts of herein appellee bank and the deputy
sheriff of Camarines Norte in proceeding with the sale in utter disregard of the agreement to have the
chattels sold in Manila as provided for in mortgage contract, to which their attentions were timely called by
herein appellant and in disposing of the chattels in gross for the miserable amount of P4,201.00, herein
appellant should be awarded exemplary damages in the sum of P10,000.00. The circumstances of the case
also warrant the award of P3,000.00 as attorney's fees for herein appellant.
8.ATTORNEY'S FEES; RULE OF QUANTUM MERUIT. This Court has invariably fixed counsel fees on a
quantum meruit basis whenever the fees stipulated appear excessive, unconscionable, or unreasonable,
because a lawyer is primarily a court officer charged with the duty of assisting the court in administering
impartial justice between the parties. The fees should be subject to judicial control. Sound public policy
demands that courts disregard stipulations for counsel fees, whenever they appear to be a source of
speculative profit at the expense of the debtor or mortgagor.
9.ID.; CIRCUMSTANCES TO CONSIDER. In determining the compensation of an attorney, the following
circumstances should be considered: the amount and character of the services rendered; the responsibility
imposed; the amount of money or the value of the property affected by the controversy or involved in the
employment; the skill and experience called for in the performance of the service; the professional
standing of the attorney; the results secured; and whether or not the fee is contingent or absolute, it being
a recognized rule that an attorney may properly charge a much larger fee when it is to be contingent than

when it is not.
10.DAMAGES; MORAL DAMAGES; AWARD OF DAMAGE TO JURIDICAL PERSONS. Herein appellant's claim
for moral damages however, seems to have no legal or factual basis. Obviously, an artificial person like
herein appellant corporation cannot experience physical sufferings, mental anguish, fright, serious anxiety,
wounded feelings, moral shock or social humiliation which are the basis of moral damages. A corporation
may have a good reputation which, if besmirched, may also be a ground for the award of moral damages.
The same cannot be considered under the facts of this case, however, not only because it is admitted that
herein appellant had already ceased in its business operation at the time of the foreclosure sale of the
chattels, but also for the reason that whatever adverse effect the foreclosure sale of the chattels, could
have upon its reputation or business standing would undoubtedly be the same whether the sale was
conducted at Jose Panganiban, Camarines Norte, or in Manila which is the place agreed upon by the parties
in the mortgage contract.
DECISION
ANGELES, J p:
An appeal from a decision, dated April 2, 1964, of the Court of First Instance of Manila in Civil case No.
52089, entitled "Mambulao Lumber Company, plaintiff, vs. Philippine National Bank and Anacleto Heraldo,
defendants," dismissing the complaint against both defendants and sentencing the plaintiff to pay to
defendant Philippine National Bank (PNB for short) the sum of P3,582.52 with interest thereon at the rate
of 6% per annum from December 22, 1961 until fully paid, and the costs of suit.
In seeking the reversal of the decision, the plaintiff advances several propositions in its brief which may be
restated as follows:
1.That its total indebtedness to the PNB as of November 21, 1961, was only P56,485.87 and not
P58,213.51 as concluded by the court a quo; hence, the proceeds of the foreclosure sale of its real
property alone in the amount of P56,908.00 on that date, added to the sum of P738.59 it remitted to the
PNB thereafter was more than sufficient to liquidate its obligation, thereby rendering the subsequent
foreclosure sale of its chattels unlawful;
2.That it is not liable to pay PNB the amount of P5,821.35 for attorney's fees and the additional sum of
P298.54 as expenses of the foreclosure sale;
3.That the subsequent foreclosure sale of its chattels is null and void, not only because it had already
settled its indebtedness to the PNB at the time the sale was effected, but also for the reason that the said
sale was not conducted in accordance with the provisions of the Chattel Mortgage Law and the venue
agreed upon by the parties in the mortgage contract;
4.That the PNB, having illegally sold the chattels, is liable to the plaintiff for its value; and
5.That for the acts of the PNB in proceeding with the sale of the chattels, in utter disregard of plaintiff's
vigorous opposition thereto, and in taking possession thereof after the sale thru force, intimidation,
coercion, and by detaining its "man-in-charge" of said properties, the PNB is liable to plaintiff for damages
and attorney's fees.
The antecedent facts of the case, as found by the trial court, are as follows:
"On May 5, 1956, the plaintiff applied for an industrial loan of P155,000 with the Naga Branch
of defendant PNB and the former offered real estate, machinery, logging and
transportation equipments as collaterals. The application, however, was
approved for a loan of P100,000 only. To secure the payment of the loan, the
plaintiff mortgaged to defendant PNB a parcel of land, together with the
buildings and improvements existing thereon, situated in the poblacion of Jose
Panganiban (formerly Mambulao), province of Camarines Norte, and covered by
Transfer Certificate of Title No. 381 of the land records of said province, as well
as various sawmill equipment, rolling unit and other fixed assets of the plaintiff,
all situated in its compound in the aforementioned municipality.
"On August 2, 1956, the PNB released from the approved loan the sum of P27,500, for which
the plaintiff signed a promissory note wherein it promised to pay to the PNB the
said sum in five equal yearly installments at the rate of P6,528.40 beginning
July 31, 1957, and every year thereafter, the last of which would be on July 31,
1961.
"On October 19, 1956, the PNB made another release of P15,500 as part of the approved loan
granted to the plaintiff and so on the said date, the latter executed another
promissory note wherein it agreed to pay to the former the said sum in five
equal yearly installments at the rate of P3,679.64 beginning July 31, 1957, and
ending on July 31, 1961.
"The plaintiff failed to pay the amortizations on the amounts released to and received by it.
Repeated demands were made upon the plaintiff to pay its obligation but it
failed or otherwise refused to do so. Upon inspection and verification made by
employees of the PNB, it was found that the plaintiff had already stopped
operation about the end of 1957 or early part of 1958.
"On September 27, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines Norte
requesting him to take possession of the parcel of land, together with the
improvements existing thereon, covered by Transfer Certificate of Title No. 381
of the land records of Camarines Norte, and to sell it at public auction in
accordance with the provisions of Act No. 3135, as amended, for the satisfaction

of the unpaid obligation of the plaintiff, which as of September 22, 1961,

amounted to P57,646.59, excluding attorney's fees. In compliance with the
request, on October 16, 1961, the Provincial Sheriff of Camarines Norte issued
the corresponding notice of extra-judicial foreclosure sale and sent a copy
thereof to the plaintiff. According to the notice, the mortgaged property would
be sold at public auction at 10:00 a.m. on November 21, 1961, at the ground
floor of the Court House in Daet, Camarines Norte.
"On November 6, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines Norte
requesting him to take possession of the chattels mortgaged to it by the plaintiff
and sell them at public auction also on November 21, 1961, for the satisfaction
of the sum of P57,646.59, plus 6% annual interest thereon from September 23,
1961, attorney's fees equivalent to 10% of the amount due and the costs and
expenses of the sale. On the same day, the PNB sent notice to the plaintiff that
the former was foreclosing extrajudicially the chattels mortgaged by the latter
and that the auction sale thereof would be held on November 21, 1961,
between 9:00 and 12:00 a.m., in Mambulao, Camarines Norte, where the
mortgaged chattels were situated.
"On November 8, 1961, Deputy Provincial Sheriff Anacleto Heraldo took possession of the
chattels mortgaged by the plaintiff and made an inventory thereof in the
presence of a PC Sergeant and a policeman of the municipality of Jose
Panganiban. On November 9, 1961, the said Deputy Sheriff issued the
corresponding notice of public auction sale of the mortgaged chattels to be held
on November 21, 1961, at 10:00 a.m., at the plaintiffs compound situated in the
municipality of Jose Panganiban, Province of Camarines Norte.
"On November 19, 1961, the plaintiff sent separate letters, posted as registered air mail
matter, one to the Naga Branch of the PNB and another to the Provincial Sheriff
of Camarines Norte, protesting against the foreclosure of the real estate and
chattel mortgages on the grounds that they could not be effected unless a
Court's order was issued against it (plaintiff) for said purpose and that the
foreclosure proceedings, according to the terms of the mortgage contracts,
should be made in Manila. In said letter to the Naga Branch of the PNB, it was
intimated that if the public auction sale would be suspended and the plaintiff
would be given an extension of ninety (90) days, its obligation would be settled
satisfactorily because an important negotiation was then going on for the sale
of its "whole interest" for an amount more than sufficient to liquidate said
obligation.
"The letter of the plaintiff to the Naga Branch of the PNB was construed by the latter as a
request for extension of the foreclosure sale of the mortgaged chattels and so it
advised the Sheriff of Camarines Norte to defer it to December 21, 1961, at the
same time and place. A copy of said advice was sent to the plaintiff for its
information and guidance.
"The foreclosure sale of the parcel of land, together with the buildings and improvements
thereon, covered by Transfer Certificate of Title No. 381, was, however, held on
November 21, 1961, and the said property was sold to the PNB for the sum of
P56,908.00, subject to the right of the plaintiff to redeem the same within a
period of one year. On the same date, Deputy Provincial Sheriff Heraldo
executed a certificate of sale in favor of the PNB and a copy thereof was sent to
the plaintiff.
"In a letter dated December 14, 1961 (but apparently posted several days later), the plaintiff
sent a bank draft for P738.59 to the Naga Branch of the PNB, allegedly in full
settlement of the balance of the obligation of the plaintiff after the application
thereto of the sum of P56,908.00 representing the proceeds of the foreclosure
sale of parcel of land described in Transfer Certificate of Title No. 881. In the
said letter, the plaintiff reiterated its request that the foreclosure sale of the
mortgaged chattels be discontinued on the grounds that the mortgaged
indebtedness had been fully paid and that it could not be legally effected at a
place other than the City of Manila.
"In a letter dated December 16, 1961, the plaintiff advised the Provincial Sheriff of Camarines
Norte that it had fully paid its obligation to the PNB, and enclosed therewith a
copy of its letter to the latter dated December 14, 1961.
"On December 18, 1961, the Attorney of the Naga Branch of the PNB, wrote to the plaintiff
acknowledging the remittance of P738.59 with the advice, however, that as of
that date the balance of the account of the plaintiff was P9,161.76, to which
should be added the expenses of guarding the mortgaged chattels at the rate of
P4.00 a day beginning December 19, 1961. It was further explained in said
letter that the sum of P57,646.59, which was stated in the request for the
foreclosure of the real estate mortgage, did not include the 10% attorney's fees
and expenses of the sale. Accordingly, the plaintiff was advised that the
foreclosure sale scheduled on the 21st of said month would be stopped if a

remittance of P9,161.76, plus interest thereon and guarding fees, would be

made.
"On December 21, 1961, the foreclosure sale of the mortgaged chattels was held at 10:00 a.m.
and they were awarded to the PNB for the sum of P4,200 and the corresponding
bill of sale was issued in its favor by Deputy Provincial Sheriff Heraldo.
"In a letter dated December 26, 1961, the Manager of the Naga Branch of the PNB advised the
plaintiff giving it priority to repurchase the chattels acquired by the former at
public auction. This offer was reiterated in a letter dated January 3, 1962, of the
Attorney of the Naga Branch of the PNB to the plaintiff, with the suggestion that
it exercise its right of redemption and that it apply for the condonation of the
attorney's fees. The plaintiff did not follow the advice but on the contrary it
made known of its intention to file appropriate action or actions for the
protection of its interests.
"On May 24, 1962, several employees of the PNB arrived in the compound of the plaintiff in
Jose Panganiban, Camarines Norte, and they informed Luis Salgado, Chief
Security Guard of the premises, that the properties therein had been auctioned
and bought by the PNB, which in turn sold them to Mariano Bundok. Upon being
advised that the purchaser would take delivery of the things he bought, Salgado
was at first reluctant to allow any piece of property to be taken out of the
compound of the plaintiff. The employees of the PNB explained that should
Salgado refuse, he would be exposing himself to a litigation wherein he could be
held liable to pay big sum of money by way of damages. Apprehensive of the
risk that he would take, Salgado immediately sent a wire to the President of the
plaintiff in Manila, asking advice as to what he should do. In the meantime,
Mariano Bundok was able to take out from the plaintiffs compound two truck
loads of equipment.
"In the afternoon of the same day, Salgado received a telegram from plaintiffs President
directing him not to deliver the 'chattels' without court order, with the
information that the company was then filing an action for damages against the
PNB. On the following day, May 25, 1962, two trucks and men of Mariano
Bundok arrived but Salgado did not permit them to take out any equipment
from inside the compound of the plaintiff. Thru the intervention, however, of the
local police and PC soldiers, the trucks of Mariano Bundok were able finally to
haul the properties originally mortgaged by the plaintiff to the PNB, which were
bought by it at the foreclosure sale and subsequently sold to Mariano Bundok."
Upon the foregoing facts, the trial court rendered the decision appealed from which, as stated in the first
paragraph of this opinion, sentenced the Mambulao Lumber Company to pay to the defendant PNB the
sum of P3,582.52 with interest thereon at the rate of 6% per annum from December 22, 1961 (day
following the date of the questioned foreclosure of plaintiff's chattels) until fully paid, and the costs.
Mambulao Lumber Company interposed the instant appeal.
We shall discuss the various points raised in appellant's brief in seriatim.
The first question Mambulao Lumber Company poses is that which relates to the amount of its
indebtedness to the PNB arising out of the principal loans and the accrued interest thereon. It is contended
that its obligation under the terms of the two promissory notes it had executed in favor of the PNB
amounts only to P56,485.87 as of November 21, 1961, when the sale of real property was effected, and
not P58,213.51 as found by the trial court.
There is merit to this claim. Examining the terms of the promissory note executed by the appellant in favor
of the PNB, we find that the agreed interest on the loan of P43,000.00 P27,500.00 released on August 2,
1956, as per promissory note of even date (Exhibit C-3), and P15,500.00 released on October 19, 1956, as
per promissory note of the same date (Exhibit C-4) was six per cent (6%) per annum from the respective
date of said notes "until paid." In the statement of account of the appellant as of September 22, 1961,
submitted by the PNB, it appears that in arriving at the total indebtedness of P57,646.59 as of that date,
the PNB had compounded the principal of the loan and the accrued 6% interest thereon each time the
yearly amortizations became due, and on the basis of these compounded amounts charged additional
delinquency interest on them up to September 22, 1961; and to this erroneously computed total of
P57,646.59, the trial court added 6% interest per annum from September 23, 1961 to November 21 of the
same year. In effect, the PNB has claimed, and the trial court has adjudicated to it, interest on accrued
interests from the time the various amortizations of the loan became due until the real estate mortgage
executed to secure the loan was extrajudicially foreclosed on November 21, 1961. This is an error. Section
5 of Act No. 2655 expressly provides that in computing the interest on any obligation, promissory note or
other instrument or contract, compound interest shall not be reckoned, except by agreement, or in default
thereof, whenever the debt is judicially claimed. This is also the clear mandate of Article 2212 of the new
Civil Code which provides that interest due shall earn legal interest only from the time it is judicially
demanded, and of Article 1959 of the same code which ordains that interest due and unpaid shall not earn
interest. Of course, the parties may, by stipulation, capitalize the interest due and unpaid, which as added
principal shall earn new interest; but such stipulation is nowhere to be found in the terms of the promissory
notes involved in this case. Clearly therefore, the trial court fell into error when it awarded interest on
accrued interests, without any agreement to that effect and before they had been judicially demanded.

Appellant next assails the award of attorney's fees and the expenses of the foreclosure sale in favor of the
PNB. With respect to the amount of P298.54 allowed as expenses of the extra-judicial sale of the real
property, appellant maintains that the same has no basis, factual or legal, and should not have been
awarded. It likewise decries the award of attorney's fees which, according to the appellant, should not be
deducted from the proceeds of the sale of the real property, not only because there is no express
agreement in the real estate mortgage contract to pay attorney's fees in case the same is extra-judicially
foreclosed, but also for the reason that the PNB neither spent nor incurred any obligation to pay attorney's
fees in connection with the said extra-judicial foreclosure under consideration.
There is reason for the appellant to assail the award of P298.54 as expenses of the sale. In this respect, the
trial court said:
"The parcel of land, together with the buildings and improvements existing thereon covered by
Transfer Certificate of Title No. 381, was sold for P56,908. There was, however,
no evidence how much was the expenses of the foreclosure sale although from
the pertinent provisions of the Rules of Court, the Sheriff's fees would be P1 for
advertising the sale (par. k, Sec. 7, Rule 130 of the Old Rules) and P297.54 as
his commission for the sale (par. n, Sec. 7, Rule 130 of the Old Rules) or a total
of P298.54."
There is really no evidence of record to support the conclusion that the PNB is entitled to the amount
awarded as expenses of the extra- judicial foreclosure sale. The court below committed error in
applying the provisions of the Rules of Court for purposes of arriving at the amount awarded. It is to
be borne in mind that the fees enumerated under paragraphs k and n, Section 7, of Rule 130 (now
Rule 141) are demandable only by a sheriff serving processes of the court in connection with judicial
foreclosure of mortgages under Rule 68 of the new Rules, and not in cases of extra-judicial
foreclosure of mortgages under Act 3135. The law applicable is Section 4 of Act 3135 which provides
that the officer conducting the sale is entitled to collect a fee of P5.00 for each day of actual work
performed in addition to his expenses in connection with the foreclosure sale. Admittedly, the PNB
failed to prove during the trial of the case, that it actually spent any amount in connection with the
said foreclosure sale. Neither may expenses for publication of the notice be legally allowed in the
absence of evidence on record to support it. 1 It is true, as pointed out by the appellee bank, that
courts should take judicial notice of the fees provided for by law which need not be proved; but in the
absence of evidence to show at least the number of working days the sheriff concerned actually
spent in connection with the extra-judicial foreclosure sale, the most that he may be entitled to,
would be the amount of P10.00 as a reasonable allowance for two day's work one for the
preparation of the necessary notices of sale, and the other for conducting the auction sale and
issuance of the corresponding certificate of sale in favor of the buyer. Obviously, therefore, the
award of P298.54 as expenses of the sale should be set aside.
But the claim of the appellant that the real estate mortgage does not provide for attorney's fees in case
the same is extra-judicially foreclosed, cannot be favorably considered, as would readily be revealed by an
examination of the pertinent provision of the mortgage contract. The parties to the mortgage appear to
have stipulated under paragraph (c) thereof, inter alia:
". . . For the purpose of extra-judicial foreclosure, the Mortgagor hereby appoints the
Mortgagee his attorney-in-fact to sell the property mortgaged under Act 3135,
as amended, to sign all documents and to perform all acts requisite and
necessary to accomplish said purpose and to appoint its substitute as such
attorney-in-fact with the same powers as above specified. In case of judicial
foreclosure, the Mortgagor hereby consents to the appointment of the
Mortgagee or any of its employees as receiver, without any bond, to take
charge of the mortgaged property at once, and to hold possession of the same
and the rents, benefits and profits derived from the mortgaged property before
the sale, less the costs and expenses of the receivership; the Mortgagor hereby
agrees further that in all cases, attorney's fees hereby fixed at Ten Per Cent
(10%) of the total indebtedness then unpaid, which in no case shall be less than
P100.00 exclusive of all fees allowed by law, and the expenses of collection
shall be the obligation of the Mortgagor and shall with priority, be paid to the
Mortgagee out of any sums realized as rents and profits derived from the
mortgaged property or from the proceeds realized from the sale of the said
property and this mortgage shall likewise stand as security therefor . . ."
We find the above stipulation to pay attorney's fees clear enough to cover both cases of foreclosure sale
mentioned thereunder, i.e., judicially or extra-judicially. While the phrase "in all cases" appears to be
part of the second sentence, a reading of the whole context of the stipulation would readily show
that it logically refers to extra-judicial foreclosure found in the first sentence and to judicial
foreclosure mentioned in the next sentence. And the ambiguity in the stipulation suggested and
pointed out by the appellant by reason of the faulty sentence construction should not be made to
defeat the otherwise clear intention of the parties in the agreement.
It is suggested by the appellant, however, that even if the above stipulation to pay attorney's fees were
applicable to the extra- judicial foreclosure sale of its real properties, still, the award of P5,821.35 for
attorney's fees has no legal justification, considering the circumstance that the PNB did not actually spend
anything by way of attorney's fees in connection with the sale. In support of this proposition, appellant

cites authorities to the effect: (1) that when the mortgagee has neither paid nor incurred any obligation to
pay an attorney in connection with the foreclosure sale, the claim for such fees should be denied; 2 and (2)
that attorney's fees will not be allowed when the attorney conducting the foreclosure proceedings is an
officer of the corporation (mortgagee) who receives a salary for all the legal services performed by him for
the corporation. 3 These authorities are indeed enlightening; but they should not be applied in this case.
The very same authority first cited suggests that said principle is not absolute, for there is authority to the
contrary. As to the fact that the foreclosure proceedings were handled by an attorney of the legal staff of
the PNB, we are reluctant to exonerate herein appellant from the payment of the stipulated attorney's fees
on this ground alone, considering the express agreement between the parties in the mortgage contract
under which appellant became liable to pay the same. At any rate, we find merit in the contention of the
appellant that the award of P5,821.35 in favor of the PNB as attorney's fees is unconscionable and
unreasonable, considering that all that the branch attorney of the said bank did in connection with the
foreclosure sale of the real property was to file a petition with the provincial sheriff of Camarines Norte
requesting the latter to sell the same in accordance with the provisions of Act 3135.
The principle that courts should reduce stipulated attorney's fees whenever it is found under the
circumstances of the case that the same is unreasonable, is now deeply rooted in this jurisdiction to
entertain any serious objection to it. Thus, this Court has explained:
"But the principle that it may be lawfully stipulated that the legal expenses involved in the
collection of a debt shall be defrayed by the debtor does not imply that such
stipulations must be enforced in accordance with the terms, no matter how
injurious or oppressive they may be. The lawful purpose to be accomplished by
such a stipulation is to permit the creditor to receive the amount due him under
his contract without a deduction of the expenses caused by the delinquency of
the debtor. It should not be permitted for him to convert such a stipulation into
a source of speculative profit at the expense of the debtor.
"Contracts for attorney's services in this jurisdiction stands upon an entirely different footing
from contracts for the payment of compensation for any other services. By
express provision of section 29 of the Code of Civil Procedure, an attorney is not
entitled in the absence of express contract to recover more than a reasonable
compensation for his services; and even when an express contract is made the
court can ignore it and limit the recovery to reasonable compensation of the
amount of the stipulated fee is found by the court to be unreasonable. This is a
very different rule from that announced in section 1091 of the Civil Code with
reference to the obligation of contracts in general, where it is said that such
obligation has the force of law between the contracting parties. Had the plaintiff
herein made an express contract to pay his attorney an uncontingent fee of
P2,115.25 for the services to be rendered in reducing the note here in suit to
judgment, it would not have been enforced against him had he seen fit to
oppose it, as such a fee is obviously far greater than is necessary to remunerate
the attorney for the work involved and is therefore unreasonable. In order to
enable the court to ignore an express contract for an attorney's fees, it is not
necessary to show, as in other contracts, that it is contrary to morality or public
policy (Art. 1255, Civil Code). It is enough that it is unreasonable or
unconscionable." 4
Since then this Court has invariably fixed counsel fees on a quantum meruit basis whenever the fees
stipulated appear excessive, unconscionable, or unreasonable, because a lawyer is primarily a court
officer charged with the duty of assisting the court in administering impartial justice between the
parties, and hence, the fees should be subject to judicial control. Nor should it be ignored that sound
public policy demands that courts disregard stipulations for counsel fees, whenever they appear to
be a source of speculative profit at the expense of the debtor or mortgagor. 5 And it is not material
that the present action is between the debtor and the creditor, and not between attorney and client.
As courts have power to fix the fee as between attorney and client, it must necessarily have the right
to say whether a stipulation like this, inserted in a mortgage contract, is valid. 6
In determining the compensation of an attorney, the following circumstances should be considered: the
amount and character of the services rendered, the responsibility imposed: the amount of money or the
value of the property affected by the controversy, or involved in the employment: the skill and experience
called for in the performance of the service, the professional standing of the attorney; the results secured;
and whether or not the fee is contingent or absolute, it being a recognized rule that an attorney may
properly charge a much larger fee when it is to be contingent than when it is not. 7 From the stipulation in
the mortgage contract earlier quoted, it appears that the agreed fee is 10% of the total indebtedness,
irrespective of the manner the foreclosure of the mortgage is to be effected. The agreement is perhaps fair
enough in case the foreclosure proceedings is prosecuted judicially but, surely, it is unreasonable when, as
in this case, the mortgage was foreclosed extrajudicially, and all that the attorney did was to file a petition
for foreclosure with the sheriff concerned. It is to be assumed though, that the said branch attorney of the
PNB made a study of the case before deciding to file the petition for foreclosure: but even with this in
mind, we believe the amount of P5,821.35 is far too excessive a fee for such services. Considering the
above circumstances mentioned, it is our considered opinion that the amount of P1,000.00 would be more
than sufficient to compensate the work aforementioned.
The next issue raised deals with the claim that the proceeds of the sale of the real properties alone

together with the amount it remitted to the PNB later was more than sufficient to liquidate its total
obligation to herein appellee bank. Again, we find merit in this claim. From the foregoing discussion of the
first two errors assigned, and for purposes of determining the total obligation of herein appellant to the
PNB as of November 21, 1961 when the real estate mortgage was foreclosed, we have the following
illustration in support of this conclusion:
A.
I.Principal Loan
(a)Promissory note dated August 2, 1956P27,500.00(1)Interest at 6% per annum from Aug. 2,
1956 to Nov. 21, 19618,751.78
(b)Promissory note dated October 19, 1956P15,500.00(1)Interest at 6% per annum from Oct.
19, 1956 to Nov. 21, 19614,734.08
II.Sheriff's fees [for two [2]day's work]10.00
III.Attorney's fees1,000.00Total obligation as of Nov. 21, 1961P57,495.86
B.
I.Proceeds of the foreclosure sale of the real estate mortgage on Nov. 21, 196156,908.00.
II.Additional amount remitted to the PNB on Dec. 18, 1961738.59Total amount of
Payment made toPNB as of Dec. 18, 1961P57,646.59
Deduct: Total obligation to the PNBP57,495.86Excess
Payment to the PNBP150.73=======
From the foregoing illustration or computation, it is clear that there was no further necessity to foreclose
the mortgage of herein appellant's chattels on December 21, 1961; and on this ground alone, we may
declare the sale of appellant's chattels on the said date, illegal and void. But we take into consideration the
fact that the PNB must have been led to believe that the stipulated 10% of the unpaid loan for attorney's
fees in the real estate mortgage was legally maintainable, and in accordance with such belief, herein
appellee bank insisted that the proceeds of the sale of appellant's real property was deficient to liquidate
the latter's total indebtedness. Be that as it may, however, we still find the subsequent sale of herein
appellant's chattels illegal and objectionable on other grounds.
That appellant vigorously objected to the foreclosure of its chattel mortgage after the foreclosure of its real
estate mortgage on November 21, 1961, cannot be doubted, as shown not only by its letter to the PNB on
November 19, 1961, but also in its letter to the provincial sheriff of Camarines Norte on the same date.
These letters were followed by another letter to the appellee bank on December 14, 1961, wherein herein
appellant, in no uncertain terms, reiterated its objection to the scheduled sale of its chattels on December
21, 1961 at Jose Panganiban, Camarines Norte for the reasons therein stated that: (1) it had settled in full
its total obligation to the PNB by the sale of the real estate and its subsequent remittance of the amount of
P738.59; and (2) that the contemplated sale at Jose Panganiban would violate their agreement embodied
under paragraph (i) in the Chattel Mortgage which provides as follows:
"(i)In case of both judicial and extra-judicial foreclosure under Act 1508, as amended, the
parties hereto agree that the corresponding complaint for foreclosure or the
petition for sale should be filed with the courts or the sheriff of the City of
Manila, as the case may be; and that the Mortgagor shall pay attorney's fees
hereby fixed at ten per cent (10%) of the total indebtedness then unpaid but in
no case shall it be less than P100.00, exclusive of all costs and fees allowed by
law and of other expenses incurred in connection with the said foreclosure."
[Emphasis supplied]
Notwithstanding the above-quoted agreement in the chattel mortgage contract, and in utter disregard of
the objection of herein appellant to the sale of its chattels at Jose Panganiban, Camarines Norte and not in
the City of Manila as agreed upon, the PNB proceeded with the foreclosure sale of said chattels. The trial
court, however justified said action of the PNB in the decision appealed from in the following rationale:
"While it is true that it was stipulated in the chattel mortgage contract that a petition for the
extra-judicial foreclosure thereof should be filed with the Sheriff of the City of
Manila, nevertheless, the effect thereof was merely to provide another place
where the mortgage chattel could be sold, in addition to those specified in the
Chattel Mortgage Law. Indeed, a stipulation in a contract cannot abrogate much
less impliedly repeal a specific provision of the statute. Considering that Section
14 of Act No. 1508 vests in the mortgagee the choice where the foreclosure sale
should be held, hence, in the case under consideration, the PNB has three
places from which to select, namely: (1) the place of residence of the
mortgagor; (2) the place of the mortgaged chattels were situated; and (3) the
place stipulated in the contract. The PNB selected the second and, accordingly,
the foreclosure sale held in Jose Panganiban, Camarines Norte, was legal and
valid."
To the foregoing conclusion, We disagree. While the law grants power and authority to the mortgagee to
sell the mortgaged property at a public place in the municipality where the mortgagor resides, or where
the property is situated, 8 this Court has said that the sale of a mortgaged chattel may be made in a place
other than that where it is found, provided that the owner thereof consents thereto; or that there is an
agreement to this effect between the mortgagor and the mortgagee. 9 But when, as in this case, the
parties agreed to have the sale of the mortgaged chattels in the City of Manila, which, any way, is the
residence of the mortgagor, it cannot be rightly said that the mortgagee still retained the power and

authority to select from among the places provided for in the law and the place designated in their
agreement, over the objection of the mortgagor. In providing that the mortgaged chattel may be sold at
the place of residence of the mortgagor or the place where it is situated, at the option of the mortgagee,
the law clearly contemplated benefits not only to the mortgagor but to the mortgagee as well. Their rights
arising thereunder, however, are personal to them; they do not affect either public policy or the rights of
third persons. They may validly be waived. So, when herein mortgagor and mortgagee agreed in the
mortgage contract that in cases of both judicial and extra-judicial foreclosure under Act 1508, as amended,
the corresponding complaint for foreclosure or the petition for sale should be filed with the courts or the
Sheriff of Manila, as the case may be, they waived their corresponding rights under the law. The correlative
obligation arising from that agreement have the force of law between them and should be complied with in
good faith. 10
"By said agreement the parties waived the legal venue, and such waiver is valid and legally
effective, because it was merely a personal privilege they waived, which is not
contrary to public policy or to the prejudice of third persons. It is a general
principle that a person may renounce any right which the law gives unless such
renunciation is expressly prohibited or the right conferred is of such nature that
its renunciation would be against public policy." 11
"On the other hand, if a place of sale is specified in the mortgage and statutory requirements
in regard thereto are complied with, a sale is properly conducted in that place.
Indeed, in the absence of a statute to the contrary, a sale conducted at a place
other than that stipulated for in the mortgage is invalid, unless the mortgagor
consents to such sale." 12
Moreover, Section 14 of Act 1508, as amended, provides that the officer making the sale should make a
return of his doings which shall particularly describe the articles sold and the amount received from each
article. From this, it is clear that the law requires that sale be made article by article, otherwise, it would be
impossible for him to state the amount received for each item. This requirement was totally disregarded by
the Deputy Sheriff of Camarines Norte which he sold the chattels in question in bulk, notwithstanding the
fact that the said chattels consisted of no less than twenty different items as shown in the bill of sale. 13
This makes the sale of the chattels manifestly objectionable. And in the absence of any evidence to show
that the mortgagor had agreed or consented to such sale in gross, the same should be set aside.
It is said that the mortgagee is guilty of conversion when he sells under the mortgage but not in
accordance with its terms, or where the proceedings as to the sale or foreclosure do not comply with the
statute. 14 This rule applies squarely to the facts of this case where, as earlier shown, herein appellee
bank insisted, and the appellee deputy sheriff of Camarines Norte proceeded with the sale of the
mortgaged chattels at Jose Panganiban, Camarines Norte, in utter disregard of the valid objection of the
mortgagor thereto for the reason that it is not the place of sale agreed upon in the mortgage contract; and
the said deputy sheriff sold all the chattels (among which were a skagit with caterpillar engine, three GMC
6x6 trucks, a Herring Hall Safe, and Sawmill equipment consisting of a 150 HP Murphy Engine, plainer,
large circular saws, etc.) as a single lot in violation of the requirement of the law to sell the same article by
article. The PNB has resold the chattels to another buyer with whom it appears to have actively cooperated
in subsequently taking possession of and removing the chattels from appellant's compound by force, as
shown by the circumstance that they had to take along PC soldiers and municipal policemen of Jose
Panganiban who placed the chief security officer of the premises in jail to deprive herein appellant of its
possession thereof. To exonerate itself of any liability for the breach of peace thus committed, the PNB
would want us to believe that it was the subsequent buyer alone, who is not a party to this case, that was
responsible for the forcible taking of the property; but assuming this to be so, still the PNB cannot escape
liability for the conversion of the mortgaged chattels by parting with its interest in the property. Neither
would its claim that it afterwards gave a chance to herein appellant to repurchase or redeem the chattels,
improve its position, for the mortgagor is not under obligation to take affirmative steps to repossess the
chattels that were converted by the mortgagee. 15 As a consequence of the said wrongful acts of the PNB
and the Deputy Sheriff of Camarines Norte, therefore, We have to declare that herein appellant is entitled
to collect from them, jointly and severally, the full value of the chattels in question at the time they were
illegally sold by them. To this effect was the holding of this Court in a similar situation. 16
"The effect of this irregularity was in our opinion to make the plaintiff liable to the defendant
for the full value of the truck at the time the plaintiff thus carried it off to be
sold; and of course, the burden is on the defendant to prove the damage to
which he was thus subjected. . . ."
This brings us to the problem of determining the value of the mortgaged chattels at the time of their sale
in 1961. The that court did not make any finding on the value of the chattels in the decision appealed from
and denied altogether the right of the appellant to recover the same. We find enough evidence of record,
however, which may be used as a guide to ascertain their value. The record shows that at the time herein
appellant applied for its loan with the PNB in 1956, for which the chattels in question were mortgaged as
part of the security therefor, herein appellant submitted a list of the chattels together with its application
for the loan with a stated value of P107,115.85. An official of the PNB made an inspection of the chattels in
the same year giving it an appraised value of P42,850.00 and a market value of P85,700.00. 17 The same
chattels with some additional equipment acquired by herein appellant with part of the proceeds of the loan
were reappraised in a reinspection conducted by the same official in 1958, in the report of which he gave
all the chattels an appraised value of P26,850.00 and a market value of P48,200.00. 18 Another
reinspection report in 1959 gave the appraised value as P19,400.00 and the market value of P25,600.00.

19 The said official of the PNB who made the foregoing reports of inspection and reinspections testified in
court that in giving the values appearing in the reports, he used a conservative method of appraisal which,
of course, is to be expected of an official of the appellee bank. And it appears that the values were
considerably reduced in all the reinspection reports for the reason that when he went to herein appellant's
premises at the time, he found the chattels no longer in use with some of the heavier equipment
dismantled with parts thereof kept in the bodega; and finding it difficult to ascertain the value of the
dismantled chattels in such condition, he did not give them anymore any value in his reports. Noteworthy
is the fact, however, that in the last reinspection report he made of the chattels in 1961, just a few months
before the foreclosure sale, the same inspector of the PNB reported that the heavy equipments of herein
appellant were "lying idle and rusty," but were "with a shed, free from rains," 20 showing that although
they were no longer in use at the time, they were kept in a proper place and not exposed to the elements.
The President of the appellant company, on the other hand, testified that its caterpillar (tractor) alone is
worth P35,000.00 in the market, and that the value of its two trucks acquired by it with part of the
proceeds of the loan and included as additional items in the mortgaged chattels were worth no less than
P14,000.00. He likewise appraised the worth of its Murphy engine at P16,000.00 which, according to him,
when taken together with the heavy equipment he mentioned, the sawmill itself and all other equipment
forming part of the chattels under consideration, and bearing in mind the current cost of equipment these
days which he alleged to have increased by about five (5) times, could safely be estimated at P120,000.00.
This testimony, except for the appraised and market values appearing in the inspection and reinspection
reports of the PNB official earlier mentioned, stand uncontroverted in the record; but We are not inclined to
accept such testimony at its par value, knowing that the equipment of herein appellant had been idle and
unused since it stopped operating its sawmill in 1958 up to the time of the sale of the chattels in 1961. We
have no doubt that the value of the chattels was depreciated after all those years of inoperation, although
from the evidence aforementioned, We may also safely conclude that the amount of P4,200.00 for which
the chattels were sold in the foreclosure sale in question was grossly unfair to the mortgagor. Considering,
however, the facts that the appraised value of P42,850.00 and the market value of P85,700.00 originally
given by the PNB official were admittedly conservative; that two 6x6 trucks subsequently bought by the
appellant company had thereafter been added to the chattels; and that the real value thereof, although
depreciated after several years of inoperation, was in a way maintained because the depreciation is off-set
by the marked increase in the cost of heavy equipment in the market, it is our opinion that the market
value of the chattels at the time of the sale should be fixed at the original appraised value of P42,850.00.
Herein appellant's claim for moral damages, however, seems to have no legal or factual basis. Obviously,
an artificial person like herein appellant corporation cannot experience physical sufferings, mental anguish,
fright, serious anxiety, wounded feelings, moral shock or social humiliation which are the basis of moral
damages. 21 A corporation may have a good reputation which, if besmirched, may also be a ground for
the award of moral damages. The same cannot be considered under the facts of this case, however, not
only because it is admitted that herein appellant had already ceased in its business operation at the time
of the foreclosure sale of the chattels, but also for the reason that whatever adverse effect the foreclosure
sale of the chattels could have upon its reputation or business standing would undoubtedly be the same
whether the sale was conducted at Jose Panganiban. Camarines Norte, or in Manila which is the place
agreed upon by the parties in the mortgage contract.
But for the wrongful acts of herein appellee bank and the deputy sheriff of Camarines Norte in proceeding
with the sale in utter disregard of the agreement to have the chattels sold in Manila as provided for in the
mortgage contract, to which their attentions were timely called by herein appellant, and in disposing of the
chattels in gross for the miserable amount of P4,200.00, herein appellant should be awarded exemplary
damages in the sum of P10,000.00. The circumstances of the case also warrant the award of P3,000.00 as
attorney's fees for herein appellant.
Wherefore and considering all the foregoing, the decision appealed from should be, as hereby, it is set
aside. The Philippine National Bank and the Deputy Sheriff of the province of Camarines Norte are ordered
to pay, jointly and severally, to Mambulao Lumber Company the total amount of P56,000.73, broken as
follows: P150.73 overpaid by the latter to the PNB, P42,850.00 the value of the chattels at the time of the
sale with interest at the rate of 6% per annum from December 21, 1961, until fully paid, P10,000.00 in
exemplary damages, and P3,000.00 as attorney's fees. Costs against both appellees.
SECOND DIVISION
[G.R. No. 82797. February 27, 1991.]
GOOD EARTH EMPORIUM INC., and LIM KA PING, petitioners, vs. HONORABLE COURT OF
APPEALS and ROCES-REYES REALTY INC., respondents.
A.E. Dacanay for petitioners.
Antonio Quintos Law Office for private respondent.
DECISION
PARAS, J p:
This is a petition for review on certiorari of the December 29, 1987 decision * of the Court of Appeals in CAG.R. No. 11960 entitled "ROCES-REYES REALTY, INC. vs. HONORABLE JUDGE REGIONAL TRIAL COURT OF
MANILA, BRANCH 44, GOOD EARTH EMPORIUM, INC. and LIM KA PING," reversing the decision of
respondent Judge ** of the Regional Trial Court of Manila, Branch 44 in Civil Case No. 85-30484, which
reversed the resolution of the Metropolitan Trial Court of Manila, Branch 28 in Civil Case No. 09639, ***
denying herein petitioners' motion to quash the alias writ of execution issued against them.

As gathered from the records, the antecedent facts of this case, are as follows:
A Lease Contract, dated October 16, 1981, was entered into by and between ROCES-REYES REALTY, INC.,
as lessor, and GOOD EARTH EMPORIUM, INC., as lessee, for a term of three years beginning November 1,
1981 and ending October 31, 1984 at a monthly rental of P65,000.00 (Rollo, p. 32; Annex "C" of Petition).
The building which was the subject of the contract of lease is a five-storey building located at the corner of
Rizal Avenue and Bustos Street in Sta. Cruz, Manila.
From March 1983, up to the time the complaint was filed, the lessee had defaulted in the payment of
rentals, as a consequence of which, private respondent ROCES-REYES REALTY, INC., (hereinafter
designated as ROCES for brevity) filed on October 14, 1984, an ejectment case (Unlawful Detainer) against
herein petitioners, GOOD EARTH EMPORIUM, INC. and LIM KA PING, hereinafter designated as GEE, (Rollo,
p. 21; Annex "B" of the Petition). After the latter had tendered their responsive pleading, the lower court
(MTC, Manila) on motion of Roces rendered judgment on the pleadings dated April 17, 1984, the dispositive
portion of which states:
"Judgment is hereby rendered ordering defendants (herein petitioners) and all persons claiming
title under him to vacate the premises and surrender the same to the plaintiffs
(herein respondents); ordering the defendants to pay the plaintiffs the rental of
P65,000.00 a month beginning March 1983 up to the time defendants actually
vacate the premises and deliver possession to the plaintiff; to pay attorney's
fees in the amount of P5,000.00 and to pay the costs of this suit." (Rollo, p. 111;
Memorandum of Respondents)
On May 16, 1984, Roces filed a motion for execution which was opposed by GEE on May 28, 1984
simultaneous with the latter's filing of a Notice of Appeal (Rollo, p. 112, Ibid.). On June 13, 1984, the trial
court resolved such motion ruling:
"After considering the motion for the issuance of a writ of execution filed by counsel for the
plaintiff (herein respondents) and the opposition filed in relation thereto and
finding that the defendant failed to file the necessary supersedeas bond, this
court resolved to grant the same for being meritorious." (Rollo, p. 112)
On June 14, 1984, a writ of execution was issued by the lower court. Meanwhile, the appeal was assigned
to the Regional Trial Court (Manila) Branch XLVI. However, on August 15, 1984, GEE thru counsel filed with
the Regional Trial Court of Manila, a motion to withdraw appeal citing as reason that they are satisfied with
the decision of the Metropolitan Trial Court of Manila, Branch XXVIII, which said court granted in its Order of
August 27, 1984 and the records were remanded to the trial court (Rollo, p. 32; CA Decision). Upon an exparte Motion of ROCES, the trial court issued an Alias Writ of Execution dated February 25, 1985 (Rollo, p.
104; Annex "D" of Petitioner's Memorandum), which was implemented on February 27, 1985. GEE thru
counsel filed a motion to quash the writ of execution and notice of levy and an urgent Ex-parte
Supplemental Motion for the issuance of a restraining order, on March 7, and 20, 1985, respectively. On
March 21, 1985, the lower court issued a restraining order to the sheriff to hold the execution of the
judgment pending hearing on the motion to quash the writ of execution (Rollo, p. 22; RTC Decision). While
said motion was pending resolution, GEE filed a Petition for Relief from judgment before another court,
Regional Trial Court of Manila, Branch IX, which petition was docketed as Civil Case No. 8530019, but the
petition was dismissed and the injunctive writ issued in connection therewith set aside. Both parties
appealed to the Court of Appeals; GEE on the order of dismissal and Roces on denial of his motion for
indemnity, both docketed as CA-G.R. No. 15873-CV. Going back to the original case, the Metropolitan Trial
Court after hearing and disposing some other incidents, promulgated the questioned Resolution, dated
April 8, 1985, the dispositive portion of which reads as follows:
"Premises considered, the motion to quash the writ is hereby denied for lack of merit.
The restraining orders issued on March 11 and 23, 1985 are hereby recalled, lifted and set
aside." (Rollo, p. 20, MTC Decision)
GEE appealed and by coincidence, was raffled to the same Court, RTC Branch IX. Roces moved to dismiss
the appeal but the Court denied the motion. On certiorari, the Court of Appeals dismissed Roces' petition
and remanded the case to the RTC. Meantime, Branch IX became vacant and the case was re-raffled to
Branch XLIV.
On April 6, 1987, the Regional Trial Court of Manila, finding that the amount of P1 million evidenced by
Exhibit "I" and another P1 million evidenced by the pacto de retro sale instrument (Exhibit "2") were in full
satisfaction of the judgment obligation, reversed the decision of the Municipal Trial Court, the dispositive
portion of which reads:
"Premises considered, judgment is hereby rendered reversing the Resolution appealed from
quashing the writ of execution and ordering the cancellation of the notice of
levy and declaring the judgment debt as having been fully paid and/or
liquidated." (Rollo, p. 29).
On further appeal, the Court of Appeals reversed the decision of the Regional Trial Court and reinstated the
Resolution of the Metropolitan Trial Court of Manila, the dispositive portion of which is as follows:
"WHEREFORE, the judgment appealed from is hereby REVERSED and the Resolution dated April
8, 1985, of the Metropolitan Trial Court of Manila Branch XXXIII is hereby
REINSTATED. No pronouncement as to costs." (Rollo, p. 40).
GEE's Motion for Reconsideration of April 5, 1988 was denied (Rollo, p. 43). Hence, this petition.
The main issue in this case is whether or not there was full satisfaction of the judgment debt in favor of
respondent corporation which would justify the quashing of the Writ of Execution.
A careful study of the common exhibits (Exhibits 1/A and 2/B) shows that nowhere in any of said exhibits

was there any writing alluding to or referring to any settlement between the parties of petitioners'
judgment obligation (Rollo, pp. 45-48).
Moreover, there is no indication in the receipt, Exhibit "1", that it was in payment, full or partial, of the
judgment obligation. Likewise, there is no indication in the pacto de retro sale which was drawn in favor of
Jesus Marcos Roces and Marcos V. Roces and not the respondent corporation, that the obligation embodied
therein had something to do with petitioners' judgment obligation with respondent corporation. llcd
Finding that the common exhibit, Exhibit 1/A had been signed by persons other than judgment creditors
(Roces-Reyes Realty, Inc.) coupled with the fact that said exhibit was not even alleged by GEE and Lim Ka
Ping in their original motion to quash the alias writ of execution (Rollo, p. 37) but produced only during the
hearing (Ibid.) which production resulted in petitioners having to claim belatedly that there was an
"overpayment" of about half a million pesos (Rollo, pp. 25-27) and remarking on the utter absence of any
writing in Exhibits "1/A" and "2/B" to indicate payment of the judgment debt, respondent Appellate Court
correctly concluded that there was in fact no payment of the judgment debt. As aptly observed by the said
court:
"What immediately catches one's attention is the total absence of any writing alluding to or
refering to any settlement between the parties of private respondents'
(petitioners') judgment obligation. In moving for the dismissal of the appeal Lim
Ka Ping who was then assisted by counsel simply stated that defendants (herein
petitioners) are satisfied with the decision of the Metropolitan Trial Court
(Records of CA, p. 54).
"Notably, in private respondents' (petitioners') Motion to Quash the Writ of Execution and
Notice of Levy dated March 7, 1985, there is absolutely no reference to the
alleged payment of one million pesos as evidenced by Exhibit 1 dated
September 20, 1984. As pointed out by petitioner (respondent corporation) this
was brought out by Linda Panutat, Manager of Good Earth only in the course of
the latter's testimony." (Rollo, p. 37)
Article 1240 of the Civil Code of the Philippines provides that:
"Payment shall be made to the person in whose favor the obligation has been constituted, or
his successor in interest, or any person authorized to receive it."
In the case at bar, the supposed payments were not made to Roces-Reyes Realty, Inc. or to its successor in
interest nor is there positive evidence that the payment was made to a person authorized to receive it. No
such proof was submitted but merely inferred by the Regional Trial Court (Rollo, p. 25) from Marcos Roces
having signed the Lease Contract as President which was witnessed by Jesus Marcos Roces. The latter,
however, was no longer President or even an officer of Roces-Reyes Realty, Inc. at the time he received the
money (Exhibit "1") and signed the sale with pacto de retro (Exhibit "2"). He, in fact, denied being in
possession of authority to receive payment for the respondent corporation nor does the receipt show that
he signed in the same capacity as he did in the Lease Contract at a time when he was President for
respondent corporation (Rollo, p 20, MTC decision).
On the other hand, Jesus Marcos Roces testified that the amount of P1 million evidenced by the receipt
(Exhibit "1") is the payment for a loan extended by him and Marcos Roces in favor of Lim Ka Ping. The
assertion is borne by the receipt itself whereby they acknowledged payment of the loan in their names and
in no other capacity.
A corporation has a personality distinct and separate from its individual stockholders or members. Being
an officer or stockholder of a corporation does not make one's property also of the corporation, and viceversa, for they are separate entities (Traders Royal Bank v. CA, G.R. No. 78412, September 26, 1989; Cruz
v. Dalisay, 152 SCRA 482). Shareowners are in no legal sense the owners of corporate property (or credits)
which is owned by the corporation as a distinct legal person (Concepcion Magsaysay-Labrador v. CA, G.R.
No. 58168, December 19, 1989). As a consequence of the separate juridical personality of a corporation,
the corporate debt or credit is not the debt or credit of the stockholder, nor is the stockholder's debt or
credit that of the corporation (Prof. Jose Nolledo's "The Corporation Code of the Philippines, p. 5, 1988
Edition, citing Professor Ballantine).
The absence of a note to evidence the loan is explained by Jesus Marcos Roces who testified that the IOU
was subsequently delivered to private respondents (Rollo, pp. 97-98). Contrary to the Regional Trial Court's
premise that it was incumbent upon respondent corporation to prove that the amount was delivered to the
Roces brothers in the payment of the loan in the latter's favor, the delivery of the amount to and the
receipt thereof by the Roces brothers in their names raises the presumption that the said amount was due
to them. There is a disputable presumption that money paid by one to the other was due to the latter (Sec.
5(f), Rule 131, Rules of Court). It is for GEE and Lim Ka Ping to prove otherwise. In other words, it is for the
latter to prove that the payments made were for the satisfaction of their judgment debt and not vice versa.
The fact that at the time payment was made to the two Roces brothers, GEE was also indebted to
respondent corporation for a larger amount, is not supportive of the Regional Trial Court's conclusions that
the payment was in favor of the latter, especially in the case at bar where the amount was not receipted
for by respondent corporation and there is absolutely no indication in the receipt from which it can be
reasonably inferred, that said payment was in satisfaction of the judgment debt. Likewise, no such
inference can be made from the execution of the pacto de retro sale which was not made in favor of
respondent corporation but in favor of the two Roces brothers in their individual capacities without any
reference to the judgment obligation in favor of respondent corporation. prLL
In addition, the totality of the amount covered by the receipt (Exhibit "1/A") and that of the sale with pacto

de retro (Exhibit "2/B") all in the sum of P2 million, far exceeds petitioners' judgment obligation in favor of
respondent corporation in the sum of P1,560,000.00 by P440,000.00, which militates against the claim of
petitioner that the aforesaid amount (P2M) was in full payment of the judgment obligation.
Petitioners' explanation that the excess is interest and advance rentals for an extension of the lease
contract (Rollo, pp. 25-28) is belied by the absence of any interest awarded in the case and of any
agreement as to the extension of the lease nor was there any such pretense in the Motion to Quash the
Alias Writ of Execution.
Petitioners' averments that the respondent court had gravely abused its discretion in arriving at the
assailed factual findings as contrary to the evidence and applicable decisions of this Honorable Court are
therefore, patently unfounded. Respondent court was correct in stating that it "cannot go beyond what
appears in the documents submitted by petitioners themselves (Exhibits "1" and "2") in the absence of
clear and convincing evidence" that would support its claim that the judgment obligation has indeed been
fully satisfied which would warrant the quashal of the Alias Writ of Execution.
It has been an established rule that when the existence of a debt is fully established by the evidence
(which has been done in this case), the burden of proving that it has been extinguished by payment
devolves upon the debtor who offers such a defense to the claim of the plaintiff creditor (herein
respondent corporation) (Chua Chienco v. Vargas, 11 Phil. 219; Ramos v. Ledesma, 12 Phil. 656; Pinon v. e
Osorio, 30 Phil. 365). For indeed, it is well-entrenched in Our jurisprudence that each party in a case must
prove his own affirmative allegations by the degree of evidence required by law (Stronghold Insurance Co.
v. CA, G.R. No. 83376, May 29, 1989; Tai Tong Chuache & Co. v. Insurance Commission, 158 SCRA 366). llcd
The appellate court cannot, therefore, be said to have gravely abused its discretion in finding lack of
convincing and reliable evidence to establish payment of the judgment obligation as claimed by petitioner.
The burden of evidence resting on the petitioners to establish the facts upon which their action is premised
has not been satisfactorily discharged and therefore, they have to bear the consequences.
PREMISES CONSIDERED, the petition is hereby DENIED and the Decision of the Respondent court is hereby
AFFIRMED, reinstating the April 8, 1985 Resolution of the Metropolitan Trial Court of Manila.
SO ORDERED.